Item
1. Financial Statements.
My
Size Inc. and Subsidiaries
Condensed
Consolidated
Interim
Financial
Statements
As
of March 31, 2023
(unaudited)
U.S.
Dollars in Thousands
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Financial Statements as of March 31, 2023 (Unaudited)
Contents
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Balance Sheets (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
(*) | Adjusted to give retroactive effect of 1:25 reverse stock split, see Note 1 (b) |
The
accompanying notes are an integral part of the condensed consolidated interim financial statements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Statements of Comprehensive Loss (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
(*) |
During the three month ended March 31, 2023, the Company recorded an inventory write-down of $643 due to the fire that occurred in its warehouse (see Note 7(a)) |
(**) |
Adjusted
to give retroactive effect of 1:25 reverse stock split, see Note 1(b) |
The
accompanying notes are an integral part of the interim condensed consolidated financial statements
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Statements of Changes in Stockholders’ Equity (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
(*) |
Represents an amount less than $1 |
(**) |
See Note 6(a). |
| |
Common stock | | |
Additional paid-in | | |
Accumulated other comprehensive | | |
Accumulated | | |
Total stockholders’ | |
| |
Number | | |
Amount | | |
capital | | |
loss | | |
deficit | | |
equity | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of January 1, 2022 | |
| 959,300 | | |
| 1 | | |
| 56,453 | | |
| (406 | ) | |
| (45,191 | ) | |
| 10,857 | |
Stock-based compensation related to options granted to employees and consultants | |
| - | | |
| - | | |
| 114 | | |
| - | | |
| - | | |
| 114 | |
Issuance of shares in Business Combination | |
| 55,801 | | |
| * | | |
| 457 | | |
| - | | |
| - | | |
| 457 | |
Total comprehensive loss | |
| - | | |
| - | | |
| - | | |
| 58 | | |
| (2,130 | ) | |
| (2,072 | ) |
Balance as of March 31, 2022 | |
| 1,015,101 | | |
| 1 | | |
| 57,024 | | |
| (348 | ) | |
| (47,321 | ) | |
| 9,356 | |
(*) |
Represents
an amount less than $1 |
| |
Common stock | | |
Additional paid-in | | |
Accumulated other comprehensive | | |
Accumulated | | |
Total stockholders’ | |
| |
Number | | |
Amount | | |
capital | | |
loss | | |
deficit | | |
equity | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Balance as of December 31, 2021 | |
| 959,300 | | |
| 1 | | |
| 56,453 | | |
| (406 | ) | |
| (45,191 | ) | |
| 10,857 | |
Balance | |
| 959,300 | | |
| 1 | | |
| 56,453 | | |
| (406 | ) | |
| (45,191 | ) | |
| 10,857 | |
Stock-based compensation related to options and restricted shares granted to employees and consultants | |
| 176,000 | | |
| *- | | |
| 455 | | |
| - | | |
| - | | |
| 455 | |
Issuance of shares in Business Combination (*)
(**) | |
| 295,802 | | |
| *- | | |
| 1,446 | | |
| - | | |
| - | | |
| 1,446 | |
Issuance of shares post Business Combination (*)
(**) | |
| 20,924 | | |
| *- | | |
| 319 | | |
| - | | |
| - | | |
| 319 | |
Effect of reverse stock split (Note 10 (b) | |
| 12,091 | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total comprehensive loss | |
| - | | |
| - | | |
| - | | |
| (231 | ) | |
| (8,310 | ) | |
| (8,541 | ) |
Balance as of December 31, 2022 | |
| 1,464,117 | | |
| 1 | | |
| 58,673 | | |
| (637 | ) | |
| (53,501 | ) | |
| 4,536 | |
Balance | |
| 1,464,117 | | |
| 1 | | |
| 58,673 | | |
| (637 | ) | |
| (53,501 | ) | |
| 4,536 | |
(*) |
Represents
an amount less than $1 |
The
accompanying notes are an integral part of the interim condensed consolidated financial statements
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Statements of Cash Flows (Unaudited)
U.S.
dollars in thousands
(*) |
$6311
relates to change in cash and cash equivalents and, $2 to change in restricted cash. |
The
accompanying notes are an integral part of the interim condensed consolidated financial statements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
1 - General
|
a. |
My
Size, Inc. is developing unique measurement technologies based on algorithms with applications
in a variety of areas, from the apparel e-commerce market to the courier services market
and to the Do It Yourself smartphone and tablet apps market. The technology is driven by
proprietary algorithms which are able to calculate and record measurements in a variety of
novel ways.
Following
the acquisition of Naizfit Bespoke Technologies, S.L (“Naizfit”) in October 2022, the Company expanded its offering outreach
and customer base.
Following
the acquisition of Orgad International Marketing Ltd. (“Orgad”) in February 2022, the Company also operates an omnichannel
e-commerce platform.
The
Company has five subsidiaries, My Size Israel 2014 Ltd (“My Size Israel”), Topspin Medical (Israel) Ltd., and Orgad all
of which are incorporated in Israel, My Size LLC which was incorporated in the Russian Federation, and Naiz Bespoke Technologies,
S.L., a limited liability company incorporated under the laws of Spain. References to the Company include the subsidiaries
unless the context indicates otherwise. |
|
|
|
|
b. |
During
the three-month period ended March 31, 2023, the Company has incurred significant losses
and negative cash flows from operations and has an accumulated deficit of $56,155. The Company
has financed its operations mainly through fundraising from various investors.
The
Company’s management expects that the Company will continue to generate losses and negative cash flows from operations for
the foreseeable future. Based on the projected cash flows and cash balances as of March 31, 2023, management is of the opinion that
its existing cash will be sufficient to fund operations for a period less than 12 months. As a result, there is substantial doubt
about the Company’s ability to continue as a going concern.
Management’s
plans include the continued commercialization of the Company’s products and securing sufficient financing through the sale
of additional equity securities, debt or capital inflows from strategic partnerships. Additional funds may not be available when
the Company needs them, on terms that are acceptable to it, or at all. If the Company is unsuccessful in commercializing its products
and securing sufficient financing, it may need to cease operations.
The
financial statements include no adjustments for measurement or presentation of assets and liabilities, which may be required should
the Company fail to operate as a going concern. |
Note
2 - Significant Accounting Policies
|
a. |
Unaudited
condensed consolidated financial statements: |
|
|
|
|
|
The
accompanying unaudited condensed consolidated interim financial statements included herein have been prepared by the Company in accordance
with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited condensed
consolidated financial statements are comprised of the financial statements of the Company. In management’s opinion, the interim
financial data presented includes all adjustments necessary for a fair presentation. All intercompany accounts and transactions have
been eliminated. Certain information required by U.S. generally accepted accounting principles (“GAAP”) has been condensed
or omitted in accordance with rules and regulations of the SEC. Operating results for the three months ended March 31, 2023 are not
necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2023. |
|
|
|
|
|
These
unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial
statements and the notes thereto for the year ended December 31, 2022. |
|
b. |
Significant
Accounting Policies: |
|
|
|
|
|
The
significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are
identical to those applied in the preparation of the latest annual financial statements. |
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
3 - Financial Instruments
The
carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, other receivables, trade payables and accounts
payable approximate their fair value due to the short-term maturities of such instruments.
The
Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publicly traded
company on the OTCQB.
Due
to sales restrictions on the sale of the iMine shares, the fair value of the shares was measured on the basis of the quoted market price
for an otherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the
effect of the sales restrictions and is therefore, ranked as Level 2 assets.
Schedule of Significant Assets and Liabilities Measured at Fair Value on Recurring Basis
| |
March 31, 2023 | |
| |
Fair value hierarchy | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Financial assets | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Investment in marketable securities (*) | |
| - | | |
| 33 | | |
| - | |
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
3 - Financial Instruments (Cont.)
| |
December 31, 2022 | |
| |
Fair value hierarchy | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Financial assets | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Investment in marketable securities (*) | |
| - | | |
| 47 | | |
| - | |
financial assets (**) | |
| | | |
| 10 | | |
| | |
(*) |
For
the three-month periods ended March 31, 2023 and 2022, the Company recognized gain (loss) (based on quoted market prices with a
discount due to security restrictions on iMine shares) of the marketable securities was ($14) and $(14), respectively. |
(**) |
The
financial asset includes in other receivables. |
| |
December 31, 2022 | |
| |
Fair value hierarchy | |
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Financial liabilities | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | |
Derivatives | |
| - | | |
| 9 | | |
| - | |
Note
4 - Stock Based Compensation
The
stock-based expense equity awards recognized in the financial statements for services received is related to Cost of Revenues, Research
and Development, Sales and Marketing and General and Administrative expenses as shown in the following table:
Schedule
of Stock Based Compensation Expenses
| |
2023 | | |
2022 | |
| |
Three months ended March 31, | |
| |
2023 | | |
2022 | |
| |
| | |
| |
Stock-based compensation expense – Cost of revenues | |
| 9 | | |
| 21 | |
Stock-based compensation expense - Research and development | |
| 23 | | |
| 12 | |
Stock-based compensation expense - Sales and marketing | |
| 40 | | |
| 39 | |
Stock-based compensation expense - General and administrative | |
| 64 | | |
| 42 | |
| |
| | | |
| | |
Stock-based compensation
expense | |
| 136 | | |
| 114 | |
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
4 - Stock Based Compensation (Cont.)
Stock
Option Plan for Employees:
In
March 2017, the Company adopted the My Size, Inc. 2017 Equity Incentive Plan (the “2017 Employee Plan”) pursuant to which
the Company’s Board of Directors may grant stock options to officers and key employees. The total number of options which may be
granted to directors, officers, employees under this plan, is limited to 289,000 options. Stock options can be granted with an exercise
price equal to or less than the stock’s fair market value at the date of grant.
On
December 7, 2022, the Company’s stockholders approved an increase in the shares available for issuance under the 2017 Equity Incentive
Plan from 230,800 shares to 289,000 shares.
On
September 29, 2022, the Compensation Committee of the Company approved grants of restricted share awards under the Company’s 2017
Equity Incentive Plan to Ronen Luzon (CEO), Or Kles (CFO), Billy Pardo (COO), Ilia Turchinsky (CTO) and Ezequiel Javier Brandwain (CCO),
pursuant to which were issued 100,000 restricted shares, 24,000 restricted shares, 24,000 restricted shares, 16,000 restricted shares
and 12,000 restricted shares, respectively. Each restricted share awarded under section 102 Capital Gain Restricted Stock Award Agreement. The restricted shares vest in three equal installments on January 1, 2023, January 1, 2024 and January
1, 2025 for Ronen Luzon, Or Kles, Billy Pardo and Ilia Turchinsky and on January 27, 2023, January 27, 2024 and January 27, 2025 for
Ezequiel Javier Brandwain, conditioned upon continuous employment with the Company, and subject to accelerated vesting upon a change
in control of the Company.
On
the same day, the Company granted five-year options to purchase up to 10,000 ordinary shares to other employees of the Company at an
exercise price of $5.25 per share. The options vest in over three years in three equal portions from the vesting commencement date.
During
the three-month period ended March 31, 2023, the Company did not grant any stock options under the 2017 Employee Plan, no options
were exercised and options to purchase 26,600 shares of common stock expired.
The
total stock option compensation expense during the three-month period ended March 31, 2023 and 2022 which was recorded was $101 and $234,
respectively.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
5 - Contingencies and Commitments
|
a. |
On
August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”)
in the Supreme Court of the State of New York, County of New York for breach of a Securities
Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount
to be determined at trial, but in no event less than $616,000. On August 2, 2018, North Empire
filed a Summons with Notice against the Company, also in the same Court, in which they allege
damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On
September 6, 2018 North Empire filed a Notice of Discontinuance of the action it had filed
on August 2, 2018. On September 27, 2018, North Empire filed an answer and asserted counterclaims
in the action commenced by the Company against them, alleging that the Company failed to
deliver stock certificates to North Empire causing damage to North Empire in the amount of
$10,958,589. North Empire also filed a third-party complaint against the Company’s
CEO and now former Chairman of the Board asserting similar claims against them in their individual
capacities. On October 17, 2018, the Company filed a reply to North Empire’s counterclaims.
On November 15, 2018, the Company’s CEO and now former Chairman of the Board filed
a motion to dismiss North Empire’s third-party complaint. On January 6, 2020, the Court
granted the motion and dismissed the third-party complaint. Discovery has been completed
and both parties have filed motions for summary judgment in connection with the claims and
counterclaims. On December 30, 2021, the Court denied both the Company and North Empire’s
motions for summary judgment, arguing there were factual issues to be determined at trial.
On January 26, 2022, the Company filed a notice of appeal of the summary judgment decision.
The appeal must be fully perfected and filed by July 26, 2022. On February 3, 2022, the Company
filed a motion to reargue the Court’s decision denying the Company’s motion for
summary judgment. North Empire will file its opposition papers on or before March 31, 2022,
and the Company will file reply papers on April 29, 2022. On or about September 12, 2022,
the Court issued its Decision and Order denying the Company’s motion to reargue. North
Empire filed its opposing brief on December 7, 2022. Both sides were given an opportunity
to file a reply brief. The Company filed our reply brief on January 4, 2023 and North Empire
filed its reply brief on January 13, 2023. The Appellate Court has scheduled oral argument
for the appeal for February 7, 2023. Oral argument was held before the Appellate Court on
February 7, 2023. On or about February 28, 2023, the Appellate Court filed its Decision and
Order, which affirmed the lower court’s decisions regarding both the Company and North
Empire’s motions for summary judgment and sent the case back to the Supreme Court.
On
or about March 13, 2023, the Supreme Court referred the case to its Alternative Dispute Program and ordered the cases to mediate.
A date for the mediation has not yet been set. The Company intends to vigorously defend any claims made by North Empire.
The
Company believes it is more likely than not that the counterclaims will be denied. |
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (Unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
6 – Operating Segments
As
a result of the business combination in the reporting period (see Note 6), the Company has three reportable segments: (i) fashion and
equipment e-commerce platform, and (ii) SaaS based innovative artificial intelligence driven measurement solutions and (iii) Naiz SaaS
based innovative artificial intelligence driven measurement solutions and. The fashion and equipment e-commerce platform which represent
Orgad’s activity that was acquired by the Company, mainly operates on Amazon. The SaaS based innovative artificial intelligence driven measurement solutions, or SaaS Solutions
operating segment consists of My Size Inc and My Size Israel and My Size LLC.
Information
related to the operations of the Company’s reportable operating segments is set forth below:
Schedule
of Reportable Operating Segments
| |
Fashion
and equipment e-commerce platform | | |
SaaS Solutions | | |
Naiz | | |
Total | |
As
of the three month ended March 31, 2023 | |
| | | |
| | | |
| | | |
| | |
Revenues
from external customers | |
| 578 | | |
| 56 | | |
| 86 | | |
| 720 | |
Operating
(loss) income | |
| (825 | ) | |
| (1,527 | ) | |
| (140 | ) | |
| (2,492 | ) |
| |
Fashion
and equipment e-commerce platform | | |
Saas Solution | | |
Naiz | |
As
of March 31, 2023: | |
| | | |
| | | |
| | |
Assets | |
| 2,181 | | |
| 5,543 | | |
| 2,722 | |
| |
Fashion
and equipment e-commerce platform | | |
SaaS Solutions | | |
Naiz | | |
Total | |
As
of the year ended December 31, 2022 | |
| | | |
| | | |
| | | |
| | |
Revenues
from external customers | |
| 4,132 | | |
| 224 | | |
| 103 | | |
| 4,459 | |
Operating
(loss) income | |
| (591 | ) | |
| (7,181 | ) | |
| (338 | ) | |
| (8,110 | ) |
| |
Fashion
and equipment e-commerce platform | | |
Saas Solution | | |
Naiz | |
As
of December 31, 2022: | |
| | | |
| | | |
| | |
Assets | |
| 2,022 | | |
| 5,966 | | |
| 1,691 | |
Note
7 – Significant events during the reporting period
|
a. |
On January 2, 2023, Orgad experienced a fire at its warehouse in Israel.
The Company is not aware of any casualties or injuries associated with the fire. The Company shifted Orgad’s operation to its headquarters.
The value of the inventory that was in the warehouse was approximately $640,000. The Company believes that this incident did not affect
the future sales results of Orgad for the year of 2023. The inventory was not insured, the Company and lessor signed an agreement to settle
the issue in which the Company paid to the lessor an amount of $50,000 to cover his loss. |
|
|
|
|
b. |
On
January 10, 2023, the Company entered into a securities purchase agreement pursuant to which
the Company sold an aggregate of 162,000 of the Company’s shares of common stock and
pre-funded warrants to purchase up to 278,899 shares of common stock and, in a concurrent
private placement, unregistered warrants to purchase up to 883,798 shares of common stock,
consisting of Series A warrants to purchase up to 441,899 shares of common stock and Series
B warrants to purchase up to 441,899 shares of common stock, at an offering price of $3.055
per share of common stock and associated Series A and Series B warrants and an offering price
of $3.054 per pre-funded warrant and associated Series A and Series B warrants.
In
addition, the Company entered into a securities purchase agreement pursuant to which the Company agreed to sell and issue in a private
placement an aggregate of up to 540,098 unregistered pre-funded warrants and unregistered warrants to purchase up to an aggregate
of 1,080,196 shares of common stock, consisting of Series A warrants to purchase up to 540,098 shares of common stock and Series
B warrants to purchase up to 540,098 shares of common stock at an offering price of $3.054 per pre-funded warrant and associated
Series A and Series B warrants.
As
of March 31,2023, all the pre funded warrants were exercised by the investor. |
Note
8 – Subsequent events
During
May 2023, the Company initiated a transfer of the support, development and customer success operations to its recently acquired
Spanish entity, Naiz Fit, that is intended to improve efficiency and lower costs between the Company’s operations in Israel
and Naiz Fit. As part of this, the Company reduced headcount by 13 persons in Israel, including the termination of its Chief
Commercial Officer, Ezequiel Javier Brandwain.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results
of operations and financial condition for the periods described. This discussion should be read together with our condensed consolidated
interim financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q. This
information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December
31, 2022, filed with the Securities and Exchange Commission on April 14, 2023, or the Annual Report, including the consolidated annual
financial statements as of December 31, 2022 and their accompanying notes included therein.
This
Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements in this Quarterly
Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical
facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as
“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,”
“plan” and “would.” For example, statements concerning financial condition, possible or assumed future results
of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management
and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve
known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements
to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.
Any
forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report
on Form 10-Q. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include but are not limited to:
|
● |
our
history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable
terms, or at all; |
|
|
|
|
● |
risks
related to our ability to continue as a going concern; |
|
|
|
|
● |
the
new and unproven nature of the measurement technology markets; |
|
|
|
|
● |
our
ability to achieve customer adoption of our products; |
|
|
|
|
● |
our
ability to realize the benefits of our acquisitions of Orgad and Naiz; |
|
|
|
|
● |
our
dependence on assets we purchased from a related party; |
|
|
|
|
● |
our
ability to enhance our brand and increase market awareness; |
|
|
|
|
● |
our
ability to introduce new products and continually enhance our product offerings; |
|
|
|
|
● |
the
success of our strategic relationships with third parties; |
|
|
|
|
● |
information
technology system failures or breaches of our network security; |
|
|
|
|
● |
competition
from competitors; |
|
|
|
|
● |
our
reliance on key members of our management team; |
|
|
|
|
● |
current
or future litigation; |
|
|
|
|
● |
current
or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated
liquidity risk; and |
|
|
|
|
● |
the
impact of the political and security situation in Israel on our business. |
The
foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking
statements. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits
to the Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different
from what we expect. You should assume that the information appearing in this Quarterly Report on Form 10-Q is accurate as of the date
hereof. Because the risk factors referred to on page 18 of our Annual Report, could cause actual results or outcomes to differ materially
from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking
statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to
update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will
arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information
presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.
Unless
the context otherwise requires, all references to “we,” “us,” “our” or “the Company”
in this Quarterly Report on Form 10-Q are to MySize, Inc., a Delaware corporation, and its subsidiaries, including MySize Israel 2014
Ltd. My Size LLC, Orgad International Marketing Ltd., or Orgad, and Naiz Bespoke Technologies, S.L, or Naiz, taken as a whole.
References
to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS”
are to New Israeli Shekels. Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this Quarterly Report on
Form 10-Q for three months ended on March 31, 2023 are translated using the rate of NIS 3.615 to $1.00.
All
information in this Quarterly Report on Form 10-Q relating to shares or price per share reflects the 1-for-25 reverse stock split effected
by us on December 8, 2022.
Overview
We
are an omnichannel e-commerce platform and provider of AI-driven apparel sizing and digital experience solutions that drive revenue growth
and reduce costs for our business clients for online shopping and physical stores.
Our
flagship innovative tech products, MySizeID, enables shoppers to generate highly accurate measurements of their body to find the accurate
fitting apparel by using our application on their mobile phone or through MySizeID Widget: a simple questionnaire which uses a database
collected over the years.
MySizeID
syncs the user’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application,
and only presents items for purchase that match their measurements to ensure a correct fit.
We
are positioning ourselves as a consolidator of sizing solutions and new digital experience due to new developments for the fashion industry
needs. Our other product offerings include First Look Smart Mirror for physical stores and Smart Catalog to empower brand design teams,
which are designed to increase end consumer satisfaction, contributing to a sustainable world and reduce operation costs.
Recent
Developments
Warehouse
Fire
On
January 2, 2023, Orgad experienced a fire at its warehouse in Israel. We are not aware of any casualties or injuries associated with
the fire. We shifted Orgad’s operation to its headquarters. The value of the inventory that was in the warehouse was
approximately $640,000. We believe that this incident did not affect the future sales results of Orgad for the year of 2023. The
inventory was not insured and we and the lessor signed an agreement to settle the issue in which we paid to the lessor an amount of
$50,000 to cover his loss.
January
2023 Financing
On
January 10, 2023, we entered into a securities purchase agreement, or the RD Purchase Agreement, pursuant to which we agreed to sell
and issue in the RD Offering an aggregate of 162,000 of our shares of common stock, or the RD Shares, and pre-funded warrants, or the
Pre-funded Warrants, to purchase up to 279,899 shares of common stock and, in a concurrent private placement, unregistered warrants to
purchase up to 883,798 shares of common stock, or the RD Warrants, consisting of Series A warrants, or Series A Warrants, to purchase
up to 441,899 shares of common stock and Series B warrants, or Series B Warrants, to purchase up to 441,899 shares of common stock, at
an offering price of $3.055 per RD Share and associated Series A and Series B Warrants and an offering price of $3.054 per Pre-funded
Warrant and associated Series A and Series B Warrants.
In
addition, we entered into a securities purchase agreement, or the PIPE Purchase Agreement, and together with the RD Purchase Agreement,
the Purchase Agreements, pursuant to which we agreed to sell and issue in the PIPE Offering an aggregate of up to 540,098 unregistered
Pre-funded Warrants and unregistered warrants to purchase up to an aggregate of 1,080,196 shares of common stock, or the PIPE Warrants
and together with the RD Warrants, the Warrants, consisting of Series A Warrants to purchase up to 540,098 shares of common stock and
Series B Warrants to purchase up to 540,098 shares of common stock at an offering price of $3.054 per Pre-funded Warrant and associated
Series A and Series B Warrants.
The
Pre-funded Warrants are immediately exercisable at an exercise price of $0.001 per share and will not expire until exercised in full.
The Warrants are immediately exercisable upon issuance at an exercise price of $2.805 per share, subject to adjustment as set forth therein.
The Series A Warrants have a term of five and one-half years from the date of issuance and the Series B Warrants have a term of 28 months
from the date of issuance. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering
the shares underlying the warrants.
In
connection with the PIPE Purchase Agreement, we entered into a registration rights agreement, or the Registration Rights Agreement. Pursuant
to the Registration Rights Agreement, we are required to file a resale registration statement, or the Registration Statement, with the
Securities and Exchange Commission, or the SEC, to register for resale the shares issuable upon exercise of the unregistered Pre-funded
Warrants and the Series A and Series B Warrants, within 20 days of the signing date of the PIPE Purchase Agreement, or the Signing Date,
and to have such Registration Statement declared effective within 60 days after the Signing Date in the event the Registration Statement
is not reviewed by the SEC, or 90 days of the Signing Date in the event the Registration Statement is reviewed by the SEC. we will be
obligated to pay certain liquidated damages if we fail to maintain the effectiveness of the Registration Statement.
The
Purchase Agreements and the Registration Rights Agreements also contain representations, warranties, indemnification and other provisions
customary for transactions of this nature. In addition, subject to limited exceptions, the Purchase Agreements provide that for a period
of one year following the closing of the Offerings, we will not effect or enter into an agreement to effect a “variable rate transaction”
as defined in the Purchase Agreements.
Aggregate
gross proceeds to the Company in respect of the Offerings was approximately $3.0 million, before deducting fees payable to the placement
agent and other offering expenses payable by the Company.
We
also entered into a letter agreement, or the Engagement Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which
Wainwright agreed to serve as the exclusive placement agent for the Company in connection with the Offerings. We paid Wainwright a cash
placement fee equal to 7% of the aggregate gross proceeds raised in the Offerings, a management fee of 1% of the aggregate gross proceeds
raised in the Offerings, a non-accountable expense allowance of $85,000 and clearing fees of $15,950. Wainwright also received placement
agent warrants, or the Placement Agent Warrants, with substantially the same terms as the Series A Warrants issued in the Offering in
an amount equal to 7% of the aggregate number of Shares and Pre-funded Warrants sold in the Offerings, or 68,740 shares, at an exercise
price of $3.8188 per share and a term expiring on January 10, 2028.
Reduction
in Workforce to Increase Operational Efficiency
During
May 2023, we initiated a transfer of the support, development and customer success operations to our recently acquired Spanish entity,
Naiz Fit, that is intended to improve efficiency and lower costs between our operations in Israel and Naiz Fit. As part of this, we reduced headcount by 13 persons in Israel, including the termination of our Chief Commercial Officer, Ezequiel Javier Brandwain.
Operations
in Russia
In addition to our Israel operations, we have operations
in Russia through our wholly owned subsidiary, My Size LLC. Specifically, we undertake some of our sales and marketing using personnel
located in Russia. To date, mainly due to the invasion of Ukraine by Russia and the ongoing sanctions, we scaled back and we expect to
close down our subsidiary operations in the near future.
Results
of Operations
The
table below provides our results of operations for the periods indicated.
| |
Three months ended March 31 | |
| |
2023 | |
|
2022 | |
| |
(dollars in thousands) | |
Revenues | |
$ | 720 | |
|
$ | 404 | |
Cost of revenues | |
| (1,147 | ) |
|
| (251 | ) |
Gross profit | |
| (427 | ) |
|
| 153 | |
Research and development expenses | |
| (342 | ) |
|
| (412 | ) |
Sales and marketing | |
| (679 | ) |
|
| (959 | ) |
General and administrative | |
| (1,044 | ) |
|
| (887 | ) |
Operating loss | |
| (2,492 | ) |
|
| (2,105 | ) |
Financial expenses, net | |
| (146 | ) |
|
| (83 | ) |
Equity accounted losses | |
| (34 | ) |
|
| - | |
Tax income | |
| 18 | |
|
| - | |
Net loss | |
$ | (2,654 | ) |
|
$ | (2,188 | ) |
Three
Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022
Revenues
From
inception through December 31, 2018, we did not generate any revenue from operations and we continue to expect to incur additional
losses to perform further research and development activities. We started to generate revenues only in 2019. Our revenues for the
three months ended March 31, 2023 amounted to $720,000 compared to $404,000 for the three months ended March 31, 2022. The increase
from the corresponding period primarily attributable to Orgad that was consolidated for 3 months as opposed to 2 months in the
corresponding period and revenue generated from the Naiz. In addition, the increase from the corresponding period results from an
increase in revenues generated by My Size.
Cost
Of Revenues
Our cost
of revenues expenses for the three months ended March 31, 2023 amounted to $1,147 compared to $251,000 for the three months ended March
31, 2022. The increase in comparison with the corresponding period was mainly due to an inventory mark-down of $643,000 due to the fire
that occurred in its warehouse during January 2023.
Research
and Development Expenses
Our research and development expenses
for the three months ended March 31, 2023 amounted to $342,000 compared to $412,000 for the three months ended March 31, 2022. The decrease
from the corresponding period primarily resulted decrease in subcontractor expenses.
Sales
and Marketing Expenses
Our sales and marketing expenses
for the three months ended March 31, 2023 amounted to $679,000 compared to $959,000 for the three months ended March 31, 2022. The decrease
primarily resulted from a decrease in consultants expenses, Travel and marketing expenses offset by an increase in Amazon fees.
General
and Administrative Expenses
Our general and administrative
expenses for the three months ended March 31, 2023 amounted to $1,044,000 compared to $887,000 for the three months ended March 31, 2022.
The increase compared to the corresponding period was mainly due to an increase in employee salaries mainly due to the Orgad and Naiz
acquisitions and an increase in professional expenses.
Operating
Loss
As a result of the foregoing,
for the three months ended March 31, 2023, our operating loss was $2,492,000 an increase of $387,000 or 18.3%, compared to our operating
loss for the three months ended March 31, 2022 of $2,105,000.
Financial
Income (Expenses), Net
Our financial expense, net for
the three months ended March 31, 2023 amounted to $146,000 compared to financial expense of $83,000 for the three months ended March 31,
2022 The increase compared to the corresponding period was mainly due to an increase in financial expenses exchange rate differences.
Net
Loss
As
a result of the foregoing, our net loss for the three months ended March 31, 2023 was $2,654,000, compared to net loss of $2,188,000
for the three months ended March 31, 2022. The increase in net loss was mainly due an increase in cost of sales and an
inventory mark-down of $643,000 due to the fire that occurred in its warehouse during January 2023 and the reasons mentioned above.
Liquidity
and Capital Resources
Since
our inception, we have funded our operations primarily through public and private offerings of debt and equity in the State of Israel
and in the U.S.
As
of March 31, 2023, we had cash, cash equivalents, and restricted cash of $2,676,000 compared to $2,363,000 of cash, cash equivalents
and restricted cash as of December 31, 2022. This increase primarily resulted from a public and private offerings that we completed
in January 2023 offset by our operating activities, the acquisition of Orgad and Naiz Fit, and resources that were deployed to grow
of both businesses.
Cash
used in operating activities amounted to $2,313,000 for the three months ended March 31, 2023, compared to $2,579,000 for the three
months ended March 31, 2022. The decrease in cash used in operating activity is derived mainly from a decrease in trade payables and
inventory offset by an increase in the net loss.
We did not have net cash used
in investing activities for the three months ended March 31, 2023, compared to cash used in investing activities of $321,000 for the three
months ended March 31, 2022.
Net cash provided by financing
activities was $2,676,000 for the three months ended March 31, 2023, compared to $7,000 for the three months ended March 31, 2022. The
cash flow from financing activities for the three months ended March 31, 2023 resulted from the public and private offering that occurred
in January 2023.
We expect
that we will continue to generate losses and negative cash flows from operations for the foreseeable future. Based on the projected cash
flows and cash balances as of March 31, 2023, , we believe our existing cash will not be sufficient to fund operations for a period of
more than 12 months. As a result, there is substantial doubt about our ability to continue as a going concern. We will need to raise additional
capital, which may not be available on reasonable terms or at all. Additional capital would be used to accomplish the following:
|
● |
finance
our current operating expenses; |
|
|
|
|
● |
pursue
growth opportunities; |
|
|
|
|
● |
hire
and retain qualified management and key employees; |
|
|
|
|
● |
respond
to competitive pressures; |
|
|
|
|
● |
comply
with regulatory requirements; and |
|
|
|
|
● |
maintain
compliance with applicable laws. |
Current
conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available
only on unfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic
conditions, the Russian invasion of Ukraine, and a number of other factors, many of which are outside our control, and on our financial
performance. Accordingly, we cannot assure you that we will be able to successfully raise additional capital at all or on terms that are
acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business, results of
operations and financial condition.
To
the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities
could result in substantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions
may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative
securities, which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional
shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring
or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising or
other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may
cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of
such financings. In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees,
legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required
to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely
impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be available on terms favorable
to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities
and growth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have
a material adverse effect on our business, results of operations and financial condition.
We
have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests,
derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other
obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk
support.
Critical
Accounting Estimates
Our
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which we have prepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards
Board, or FASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as
well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions
or conditions.
Our
significant accounting policies were revenue from contracts with customers which are more fully described in the notes to our financial
statements included herein. We believe these accounting policies discussed below are critical to our financial results and to the understanding
of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and
assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not
available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the
estimate could have a material impact on our financial condition or results of operations.