|
|
Filed pursuant to Rule 424(b)(3)
Registration No. 333-269467
|
My
Size, Inc.
2,572,832
Shares of Common Stock
This
prospectus relates to the resale, by the selling stockholders
identified in this prospectus, of up to an aggregate of up to
2,572,832 shares of common stock, par value $0.001 per share of My
Size, Inc. consisting of (i) 441,899 shares of common stock
issuable upon the exercise of Series A warrants and 441,899 shares
of common stock issuable upon the exercise of Series B warrants
issued in a private placement concurrently with a registered direct
offering in January 2023, or the RD Offering, (ii) 540,098 shares
of common stock issuable upon the exercise of pre-funded warrants
issued in a private placement to the same purchaser as in the RD
Offering, or the PIPE Offering, (iii) 540,098 shares of common
stock issuable upon the exercise of Series A warrants and 540,098
shares of common stock issuable upon the exercise of Series B
warrants issued in connection with the PIPE Offering, and (iv)
68,740 shares of common stock issuable upon the exercise of
placement agent warrants issued in connection with the RD Offering
and PIPE Offering, or the Offerings.
The
selling stockholders are identified in the table commencing on page
32. We will not receive any proceeds from the sale of the shares of
common stock by the selling stockholders. All net proceeds from the
sale of the shares of common stock covered by this prospectus will
go to the selling stockholders. However, we may receive the
proceeds from any exercise of warrants if the holders do not
exercise the warrants on a cashless basis. See “Use of
Proceeds.”
The
selling stockholders may sell all or a portion of the shares of
common stock from time to time in market transactions through any
market on which our shares of common stock are then traded, in
negotiated transactions or otherwise, and at prices and on terms
that will be determined by the then prevailing market price or at
negotiated prices directly or through a broker or brokers, who may
act as agent or as principal or by a combination of such methods of
sale. See “Plan of Distribution”.
Our
common stock is listed on the Nasdaq Capital Market under the
symbol “MYSZ” and on the Tel Aviv Stock Exchange, or the TASE,
under the symbol “MYSZ”. On February 8, 2023, the last reported
sale price of our common stock on the Nasdaq Capital Market was
$1.88 per share.
Investing
in our securities involves a high degree of risk. You should read
this prospectus supplement and the accompanying prospectus as well
as the information incorporated herein and therein by reference
carefully before you make your investment decision. See “Risk
Factors” beginning on page 7 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or
passed upon the accuracy or adequacy of this prospectus supplement.
Any representation to the contrary is a criminal
offense.
The
date of this prospectus is February 10, 2023.
TABLE
OF CONTENTS
About This Prospectus
This
prospectus is part of a registration statement that we filed with
the SEC. As permitted by the rules and regulations of the SEC, the
registration statement filed by us includes additional information
not contained in this prospectus. You may read the registration
statement and the other reports we file with the SEC at the SEC’s
website or its offices described below under the heading “Where You
Can Find More Information”.
You
should rely only on the information that is contained in this
prospectus. We have not authorized anyone to provide you with
information that is in addition to or different from that contained
in this prospectus. If anyone provides you with different or
inconsistent information, you should not rely on it.
We
are not offering to sell or solicit any security other than the
shares of common stock offered by this prospectus. In addition, we
are not offering to sell or solicit any securities to or from any
person in any jurisdiction where it is unlawful to make this offer
to or solicit an offer from a person in that jurisdiction. The
information contained in this prospectus is accurate as of the date
on the front of this prospectus only, regardless of the time of
delivery of this prospectus or of any sale of our shares of common
stock. Our business, financial condition, results of operations and
prospects may have changed since that date.
This
prospectus contains summaries of certain provisions contained in
some of the documents described herein, but reference is made to
the actual documents for complete information. All of the summaries
are qualified in their entirety by the actual documents. Copies of
some of the documents referred to herein have been filed as
exhibits to the registration statement, and you may obtain copies
of those documents as described below under the section entitled
“Where You Can Find More Information.”
Our
financial statements are prepared and presented in accordance with
United States generally accepted accounting principles, or U.S.
GAAP. Our historical results do not necessarily indicate our
expected results for any future periods.
Market
data and certain industry data and forecasts used throughout this
prospectus were obtained from sources we believe to be reliable,
including market research databases, publicly available
information, reports of governmental agencies and industry
publications and surveys. We have relied on certain data from
third-party sources, including internal surveys, industry forecasts
and market research, which we believe to be reliable based on our
management’s knowledge of the industry. Forecasts are particularly
likely to be inaccurate, especially over long periods of time. In
addition, we do not necessarily know what assumptions regarding
general economic growth were used in preparing the third-party
forecasts we cite. Statements as to our market position are based
on the most currently available data. While we are not aware of any
misstatements regarding the industry data presented in this
prospectus, our estimates involve risks and uncertainties and are
subject to change based on various factors, including those
discussed under the heading “Risk Factors” in this
prospectus.
Certain
figures included in this prospectus have been subject to rounding
adjustments. Accordingly, figures shown as totals in certain tables
may not be an arithmetic aggregation of the figures that precede
them.
We
implemented a 1-for-25 reverse stock split of our outstanding
shares of common stock that was effective for Nasdaq Capital Market
purposes at the open of business on December 8, 2022. All share and
related option and warrant information presented in this prospectus
have been retroactively adjusted to reflect the reduced number of
shares and the increase in the share price which resulted from this
action.
PROSPECTUS SUMMARY
The
following summary highlights certain information contained
elsewhere in or incorporated by reference into this prospectus.
Because this is only a summary, however, it does not contain all
the information you should consider before investing in our
securities and it is qualified in its entirety by, and should be
read in conjunction with, the more detailed information included
elsewhere in or incorporated by reference into this prospectus.
Before you make an investment decision, you should read this entire
prospectus carefully, including the risks of investing in our
securities discussed under the section of this prospectus entitled
“Risk Factors” and similar headings in the other documents that are
incorporated by reference into this prospectus. You should also
carefully read the information incorporated by reference into this
prospectus, including our financial statements, and the exhibits to
the registration statement of which this prospectus is a
part.
Unless
the context otherwise requires, references to “we,” “our,” “us,”
“My Size” or the “Company” in this prospectus mean My Size, Inc. on
a consolidated basis with its wholly-owned subsidiaries, My Size
(Israel) 2014 Ltd., Orgad International Marketing Ltd, and Naiz
Bespoke Technologies, S.L., as applicable.
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
Orgad
Acquisition
On
February 7, 2022, My Size Israel 2014 Ltd, or My Size Israel,
entered into a Share Purchase Agreement, or the Orgad Agreement,
with Amar Guy Shalom and Elad Bretfeld, or the Orgad Sellers,
pursuant to which the Orgad Sellers agreed to sell to My Size
Israel all of the issued and outstanding equity of Orgad
International Marketing Ltd., or Orgad.
Orgad
operates an omnichannel e-commerce platform engaged in online
retailing in the global market. It operates as a third-party seller
on Amazon.com, eBay and others. Orgad currently manages more than
1,000 stock-keeping units, or SKUs, mainly in fashion, apparel and
shoes.
The
Orgad Sellers are the sole title and beneficial owners of 100% of
the shares of Orgad. In consideration of the shares of Orgad, the
Orgad Sellers are entitled to receive (i) up to $1,000,000 in cash,
or the Orgad Cash Consideration, (ii) an aggregate of 2,790,049
shares, or the Orgad Equity Consideration, of our common stock, and
(iii) earn-out payments of 10% of the operating profit of Orgad for
the years 2022 and 2023. The transaction closed on the same
day.
The
Orgad Cash Consideration is payable to the Orgad Sellers in three
installments, according to the following payment schedule: (i)
$300,000 which we paid upon closing, (ii) $350,000 payable on the
two-year anniversary of the closing, and (iii) $350,000 payable on
the three-year anniversary of the closing, provided that in the
case of the second and third installments certain revenue targets
are met and subject further to certain downward post-closing
adjustment.
The
Equity Consideration is payable to the Orgad Sellers according to
the following payment schedule: (i) 1,395,025 shares were issued at
closing, and (ii) 1,395,024 shares will be issued in eight equal
quarterly installments until the lapse of two years from closing,
subject to certain downward post-closing adjustment.
The
payment of the second and third cash installments, the equity
installments and the earn out are further subject in each case to
the Orgad Sellers being actively engaged with Orgad at the date
such payment is due (except if the Orgad Sellers resign due to
reasons relating to material reduction of salary or adverse change
in their position with Orgad or its affiliates).
In
connection with the Orgad Agreement, each of the Orgad Sellers
entered into employment agreements with Orgad and six-month lock-up
agreements with us.
Naiz
Acquisition
On October 7, 2022, we entered into a Share Purchase Agreement, or
the Naiz Agreement, with Borja Cembrero Saralegui, or Borja, Aritz
Torre Garcia, or Aritz, Whitehole, S.L., or Whitehole, Twinbel,
S.L., or Twinbel and EGI Acceleration, S.L., or EGI. Each of Borja,
Aritz, Whitehole, Twinbel and EGI shall be referred to as the Naiz
Sellers herein. Pursuant to the Naiz Agreement, the Naiz Sellers
agreed to sell to My Size all of the issued and outstanding equity
of Naiz Bespoke Technologies, S.L., or Naiz, a limited liability
company incorporated under the laws of Spain. The acquisition of
Naiz was completed on October 11, 2022.
In consideration of the purchase of the shares of Naiz, the Naiz
Agreement provided that the Naiz Sellers are entitled to receive
(i) an aggregate of 6,000,000 shares, or the Naiz Equity
Consideration, of My Size common stock, or the Shares, representing
in the aggregate, immediately prior to the issuance of such shares
at the closing of the transaction, not more than 19.9% of the
issued and outstanding Shares and (ii) up to $2,050,000 in cash,
the Naiz Cash Consideration.
The Naiz Equity Consideration was issued to the Naiz Sellers at
closing of the transaction of which 2,365,800 shares of My Size
common stock were issued to Whitehole constituting 6.6% of our
outstanding shares following such issuance. The Naiz Agreement also
provides that, in the event that the actual value of the Naiz
Equity Consideration (based on the average closing price of the
Shares on the Nasdaq Capital Market over the 10 trading days prior
to the closing of the transaction, or the Equity Value Averaging
Period) is less than $1,650,000, My Size shall make an additional
cash payment, or the Shortfall Value to the Naiz Sellers within 45
days of our receipt of Naiz’s 2025 audited financial statements;
provided that certain revenue targets are met. Following the Equity
Value Averaging Period, it was determined that the Shortfall Value
is $459,240.
The Naiz Cash Consideration is payable to the Naiz Sellers in five
installments, according to the following payment schedule: (i)
US$500,000 at closing, (ii) up to US$500,000 within 45 days of My
Size’s receipt of Naiz’s 2022 audited financial statements, (iii)
up to US$350,000 within 45 days of My Size’s receipt of Naiz’s
unaudited financial statements for the six months ended June 30,
2023, (iv) up to $350,000 within 45 days of My Size’s receipt of
Naiz’s unaudited financial statements for the six months ended
December 31, 2023, and (v) up to $350,000 within 45 days of My
Size’s receipt of Naiz’s 2024 audited financial statements;
provided that in the case of the second, third, fourth and fifth
installments certain revenue targets are met.
The payment of the second, third, fourth and fifth cash
installments are further subject to the continuing employment or
involvement of Borja and Aritz, or the Key Persons, by or with Naiz
at the date such payment is due (except if a Key Person is
terminated from Naiz due to a Good Reason (as defined in the Naiz
Agreement).
The Naiz Agreement contains customary representations, warranties
and indemnification provisions. In addition, the Naiz Sellers are
subject to non-competition and non-solicitation provisions pursuant
to which they agree not to engage in competitive activities with
respect to My Size’s business.
In connection with the Naiz Agreement, (i) each of the Naiz Sellers
entered into six-months lock-up agreements, or the Lock-Up
Agreement, with My Size, (ii) Whitehole, Twinbel and EGI entered
into a voting agreement, or the Voting Agreement, with My Size and
(iii) each of the Key Persons entered into employment agreements
and services agreements with Naiz.
The Lock-Up Agreement provides that each Naiz Seller will not, for
the six-months period following the closing of the transaction, (i)
offer, pledge, sell, contract to sell, sell any option, warrant or
contract to purchase, purchase any option, warrant or contract to
sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any Shares or any
securities convertible into or exercisable or exchangeable for
Shares in each case, that are currently or hereafter owned of
record or beneficially (including holding as a custodian) by such
Naiz Seller, or publicly disclose the intention to make any such
offer, sale, pledge, grant, transfer or disposition; or (ii) enter
into any swap, short sale, hedge or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership
of such Naiz Seller’s Shares regardless of whether any such
transaction described in clause (i) or this clause (ii) is to be
settled by delivery of Shares or such other securities, in cash or
otherwise. The Lock-Up Agreement also contains an additional
three-months “dribble-out” provision that provides following the
expiration of the initial six-months lock-up period, without My
Size’s prior written consent (which My Size shall be permitted to
withhold at its sole discretion), each Naiz Seller shall not sell,
dispose of or otherwise transfer on any given day a number of
Shares representing more than the average daily trading volume of
the Shares for the rolling 30 day trading period prior to the date
on which such Seller executes a trade of the Shares.
The Voting Agreement provides that the voting of any Shares held by
each of Whitehole, Twinbel and EGI, or the Naiz Acquisition
Stockholders, will be exercised exclusively by a proxy designated
by My Size’s board of directors from time to time, or the Proxy,
and that each Naiz Acquisition Stockholder will irrevocably
designate and appoint the then-current Proxy as its sole and
exclusive attorney-in-fact and proxy to vote and exercise all
voting right with respect to the Shares held by each Naiz
Acquisition Stockholder. The Voting Agreement also provides that,
if the voting power held by the Proxy, taking into account the
proxies granted by the Naiz Acquisition Stockholders and the Shares
owned by the Proxy, represents 20% or more of the voting power of
My Size’s stockholders that will vote on an item, or the Voting
Power, then the Proxy shall vote such number of Shares in excess of
19.9% of the Voting Power in the same proportion as the Shares that
are voted by My Size’s other stockholders. The Voting Agreement
will terminate on the earliest to occur of (i) such time that such
Naiz Acquisition Stockholder no longer owns the Shares, (ii) the
sale of all or substantially all of the assets of My Size or the
consolidation or merger of My Size with or into any other business
entity pursuant to which stockholders of My Size prior to such
consolidation or merger hold less than 50% of the voting equity of
the surviving or resulting entity, (iii) the liquidation,
dissolution or winding up of the business operations of My Size,
and (iv) the filing or consent to filing of any bankruptcy,
insolvency or reorganization case or proceeding involving My Size
or otherwise seeking any relief under any laws relating to relief
from debts or protection of debtors.
Reverse
Stock Split
On December 7, 2022, our board approved a 1-for-25 reverse stock
split of our issued and outstanding shares of common stock, or the
Reverse Stock Split, and on the same day, we filed with the
Secretary of State of the State of Delaware a Certificate of
Amendment to our Certificate of Incorporation to effect the Reverse
Stock Split. The Reverse Stock Split became effective on December
8, 2022.
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 are working to assess the damage and to determine
when operations may be resumed at this warehouse or potentially
shifted to another location. From a preliminary estimation,
we believe that the value of the inventory that was in the
warehouse was approximately $450,000. As of the date of this
prospectus, it is too early to determine the potential impact of
this incident on our results of operations and financial condition
or the scope of insurance coverage related to this incident.
However, we do not believe that this incident will affect the
future sales results of Orgad.
January 2023 Financing
On
January 10, 2023, we entered into a securities purchase agreement,
or the RD Purchase Agreement, pursuant to which the Company agreed
to sell and issue in the RD Offering an aggregate of 162,000 of the
Company’s 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, the Company entered into a securities purchase agreement,
or the PIPE Purchase Agreement, and together with the RD Purchase
Agreement, the Purchase Agreements, pursuant to which the Company
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, the Company entered
into a registration rights agreement, or the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the
Company is 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. The Company will
be obligated to pay certain liquidated damages if the Company fails
to file the Registration Statement when required, fails to cause
the Registration Statement to be declared effective by the SEC when
required, of if the Company fails 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, the Company will
not effect or enter into an agreement to effect a “variable rate
transaction” as defined in the Purchase Agreements. In addition,
pursuant to the Purchase Agreements, the Company agreed to abide by
certain customary standstill restrictions for a period of sixty
(60) days following the closing of the offering.
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. The Company 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.
Company
Information
We
were incorporated in the State of Delaware and commenced operations
in September 1999 under the name Topspin Medical, Inc. In December
2013, we changed our name to Knowledgetree Ventures Inc.
Subsequently, in February 2014, we changed our name to My Size,
Inc. Our principal executive offices are located at 4 Hayarden, pob
1026, Airport City, Israel 7010000, and our telephone number is
+972-3-600-9030. Our website address is www.MySizeID.com. The
information on our website is not part of this prospectus. We have
included our website address as a factual reference and do not
intend it to be an active link to our website.
The
Offering
Shares Offered |
|
Up to
2,572,832 shares of common stock, par value $0.001 per share of My
Size Inc., consisting of (i) 441,899 shares of common stock
issuable upon the exercise of Series A warrants and 441,899 shares
of common stock issuable upon the exercise of Series B warrants
issued in a private placement concurrently with the RD Offering,
(ii) 540,098 shares of common stock issuable upon the exercise of
pre-funded warrants issued in a private placement to the same
purchasers as in the RD Offering, (iii) 540,098 shares of common
stock issuable upon the exercise of Series A warrants and 540,098
shares of common stock issuable upon the exercise of Series B
warrants issued in connection with the PIPE Offering, and (iv)
68,740 shares of common stock issuable upon the exercise of
placement agent warrants issued in connection with the RD Offering
and PIPE Offering, or the Offerings. The selling stockholders are
identified in the table commencing on page 32. |
|
|
|
Shares of Common Stock Outstanding at January 27,
2023 |
|
1,626,117
shares of common stock. |
|
|
|
Use of proceeds |
|
We
will not receive any proceeds from the sale of the shares of common
stock by the selling stockholders. All net proceeds from the sale
of the shares of common stock covered by this prospectus will go to
the selling stockholders. However, we may receive the proceeds from
any exercise of Pre-funded Warrants, Warrants and Placement Agent
Warrants if the holders do not exercise the warrants on a cashless
basis. See the section of this prospectus titled “Use of
Proceeds.” |
|
|
|
Nasdaq Capital Market Symbol |
|
MYSZ |
|
|
|
Risk factors |
|
Before
investing in our securities, you should carefully read and consider
the “Risk Factors” beginning on page 7 of this
prospectus. |
Unless
otherwise indicated, the number of shares of common stock
outstanding prior to and after this offering is based on 1,626,117
shares of common stock outstanding as of January 27, 2023, and
excludes as of such date:
|
● |
42,339
shares of common stock issuable upon exercise of outstanding
options under our 2017 Equity Incentive Plan at a weighted exercise
price of $22.18; |
|
|
|
|
● |
1,890
shares of common stock issuable upon exercise of outstanding
options under our 2017 Consultant Equity Incentive Plan and
non-plan options at a weighted exercise price of
$74.88; |
|
|
|
|
● |
76,793
shares of common stock reserved for potential future issuance
pursuant to our 2017 Equity Incentive Plan and 2017 Consultant
Incentive Plan, combined;
|
|
● |
270,063 shares of common stock issuable upon the exercise of
warrants outstanding at a weighted exercise price of $30.21 per
share, prior to giving effect to the price-based anti-dilution
adjustment of warrants to purchase an aggregate of 3,682 shares of
common stock as a result of the Offerings, under which the exercise
price of such warrants will be decreased to a price per share that
is equal to the lower of (x) the offering price per share and (y)
the lowest volume weighted average price of our common stock on any
trading day during the four trading day period immediately
following the public announcement of the Offerings; and |
|
|
|
|
● |
279,899
shares of common stock issuable upon the exercise of pre-funded
warrants outstanding at a weighted exercise price of $0.001 per
share. |
Unless
otherwise indicated, all information in this prospectus (i) assumes
no exercise of the outstanding options or warrants described above,
and (ii) gives retroactive effect to the 1-for-25 reverse stock
split effected on December 8, 2022.
RISK FACTORS
An
investment in our securities involves a high degree of risk. Before
making an investment decision, you should carefully consider these
risks as well as other information we include in this prospectus.
The risks and uncertainties not presently known to us or that we
currently deem immaterial may also materially harm our business,
operating results and financial condition and could result in a
complete loss of your investment.
Summary
Risk Factors
The
principal factors and uncertainties that make investing in our
ordinary shares risky, include, among others:
Risks Related to Our Financial Position and Capital
Requirements
|
● |
We
have historically incurred significant losses and there can be no
assurance when, or if, we will achieve or maintain
profitability. |
|
● |
Our
limited operating history makes it difficult to evaluate our
business and prospects. |
|
● |
We
will need to raise additional capital to meet our business
requirements in the future, which is likely to be challenging,
could be highly dilutive and may cause the market price of our
common stock to decline. |
|
● |
The
report of our independent registered public accounting firm
contains an explanatory paragraph regarding substantial doubt about
our ability to continue as a going concern. |
Risks Related to Our Company and Our Business
|
● |
The
market for our measurement technology is new and unproven, may
experience limited growth and is highly dependent on U.S. retailers
and online third-party resellers adopting our flagship product,
MySizeID. |
|
● |
Our
business may be adversely affected by the impact of the COVID-19
pandemic. |
|
● |
Failure
to effectively develop and expand our sales and marketing
capabilities could harm our ability to grow our business and
achieve broader market acceptance of our products. |
|
● |
We
expect our sales cycle to be long and unpredictable and require
considerable time and expense before executing a customer
agreement, which may make it difficult to project when, if at all,
we will obtain new customers and when we will generate revenue from
those customers. |
|
● |
We
recently acquired Orgad and Naiz and may in the future engage in
additional acquisitions, joint ventures or collaborations which may
increase our capital requirements, dilute our shareholders, cause
us to incur debt or assume contingent liabilities, and subject us
to other risks. We may not realize the benefits of these
acquisitions, joint ventures or collaborations. |
|
● |
If we
are not able to enhance our brand and increase market awareness of
our company and products, then our business, results of operations
and financial condition may be adversely affected. |
|
● |
If we
do not develop enhancements to our products and introduce new
products that achieve market acceptance, our business, results of
operations and financial condition could be adversely
affected. |
|
● |
The
mobile technology industry is subject to rapid technological change
and, to compete, we must continually enhance our mobile device
applications and custom development services. |
|
● |
Our
growth depends, in part, on the success of our strategic
relationships with third parties. |
|
● |
Changes
in economic conditions could materially affect our business,
financial condition and results of operations. |
|
● |
We
rely upon third parties to provide distribution for our
applications, and disruption in these services could harm our
business. |
|
● |
We
rely on third-party hosting and cloud computing providers to
operate certain aspects of our business. Any failure, disruption or
significant interruption in our network or hosting and cloud
services could adversely impact our operations and harm our
business. |
|
● |
Real
or perceived errors, failures, or bugs in our products could
adversely affect our operating results and growth
prospects. |
|
● |
We
could be harmed by improper disclosure or loss of sensitive or
confidential company, employee, or customer data, including
personal data. |
|
● |
A
material breach in security relating to our information systems and
regulation related to such breaches could adversely affect
us. |
|
● |
Our
products and our business are subject to a variety of U.S. and
international laws and regulations, including those regarding
privacy, data protection and information security, and our
customers may be subject to regulations related to the handling and
transfer of certain types of sensitive and confidential
information. Any failure of our products to comply with or enable
our customers to comply with applicable laws and regulations would
harm our business, results of operations and financial
condition. |
|
● |
We
may not be able to adequately protect our intellectual property,
which, in turn, could harm the value of our brands and adversely
affect our business. |
|
● |
We
may face intense competition and expect competition to increase in
the future, which could limit us in developing a customer base and
generating revenue. |
|
● |
Our
business operations and future development could be significantly
disrupted if we lose key members of our management
team. |
|
● |
If we
are able to expand our operations, we may be unable to successfully
manage our future growth. |
Risks Related to Our
Operations in Israel and Russia
|
● |
Our
headquarters and most of our operations are located in Israel, and
therefore, political conditions in Israel may affect our operations
and results. |
|
● |
Russia’s
invasion of Ukraine and sanctions brought against Russia could
disrupt our operations in Russia. |
Risks Related to Our
Common Stock
|
● |
A
more active, liquid trading market for our common stock may not
develop, and the price of our common stock may fluctuate
significantly. |
|
● |
Sales
by our stockholders of a substantial number of shares of our common
stock in the public market could adversely affect the market price
of our common stock. |
|
● |
Our
securities are traded on more than one market which may result in
price variations. |
|
● |
We
are a former “shell company” and as such are subject to certain
limitations not generally applicable to other public
companies. |
Risks Related to Our Financial Position and Capital
Requirements
We have historically incurred significant losses and there can be
no assurance when, or if, we will achieve or maintain
profitability.
We
realized a net loss of approximately $5.9 million for the nine
months ended September 30, 2022, $10.5 million and $6.2 million for
the years ended December 31, 2021 and 2020, respectively, and had
an accumulated deficit of $51.1 million as at September 30, 2022.
Because of the numerous risks and uncertainties associated with the
development and commercialization of our products and business, we
are unable to predict the extent of any future losses or when we
will become profitable, if at all. Expected future operating losses
will have an adverse effect on our cash resources, shareholders’
equity and working capital. Our failure to become and remain
profitable could depress the value of our stock and impair our
ability to raise capital, expand our business, maintain our
development efforts, or continue our operations. A decline in our
value could also cause you to lose all or part of your investment
in us.
Our limited operating history makes it difficult to evaluate our
business and prospects.
We
have only been developing our measurement technology since 2014.
Since then, our operating history has been primarily limited to
research and development, pilot studies, raising capital, and more
recently sales and marketing efforts. Therefore, it may be
difficult to evaluate our business and prospects. We have not yet
demonstrated an ability to commercialize our products.
Consequently, any predictions about our future performance may not
be accurate, and you may not be able to fully assess our ability to
complete development and/or commercialize our products, and any
future products.
We will need to raise additional capital to meet our business
requirements in the future, which is likely to be challenging,
could be highly dilutive and may cause the market price of our
common stock to decline.
Based
on our projected cash flows and the cash balances as of the date of
this prospectus, our existing cash will be sufficient to fund
operations for a period less than 12 months. As a result, there is
substantial doubt about our ability to continue as a going concern.
In order to meet our business objectives in the future, 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 pressure; |
|
● |
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, 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.
The report of our independent registered public accounting firm
contains an explanatory paragraph regarding substantial doubt about
our ability to continue as a going concern.
We
have incurred significant losses and negative cash flows from
operations and have an accumulated deficit that raises substantial
doubt about its ability to continue as a going concern. Our audited
consolidated financial statements for the year ended December 31,
2021 were prepared under the assumption that we would continue our
operations as a going concern. Our independent registered public
accounting firm has included a “going concern” explanatory
paragraph in its report on our financial statements for the year
ended December 31, 2021. If we are unable to improve our liquidity
position, by, among other things, raising capital through public or
private offerings or reducing our expenses, we may exhaust our cash
resources and will be unable to continue our operations. If we
cannot continue as a viable entity, our shareholders would likely
lose most or all of their investment in us.
Risks Related to Our
Company and Our Business
The market for our measurement technology is new and unproven, may
experience limited growth and is highly dependent on U.S. retailers
and online third-party resellers adopting our flagship product,
MySizeID.
The
market for our measurement technology is relatively new and
unproven and is subject to a number of risks and uncertainties. We
believe that our future success will depend in large part on market
adoption of our flagship product, MySizeID, by U.S.
retailers and online third-party resellers. In order to grow our
business, we intend to focus on educating retailers and resellers
and other potential customers about the benefits of our measurement
technology, expanding the functionality of our products and
bringing new products to market to increase market acceptance and
use of our technology. Our ability to develop and expand the market
that our products address depends upon a number of factors,
including the cost savings, performance and perceived value
associated with such products. The market for our products could
fail to develop or there could be a reduction in interest or demand
for our products as a result of a lack of consumer acceptance,
technological challenges, competing products and services,
weakening economic conditions and other causes. We may never
successfully commercialize our products and if our products fail to
achieve market acceptance, this would have a material adverse
effect on our business, results of operations and financial
condition.
Our business may be adversely affected by the impact of COVID-19
pandemic.
Public
health epidemics or outbreaks could adversely impact our business.
In late 2019, a novel strain of COVID-19, also known as
coronavirus, was reported in Wuhan, China. While initially the
outbreak was largely concentrated in China, it has now spread to
Israel and the United States, and infections have been reported
globally. Many countries around the world, including in Israel,
have implemented significant governmental measures to control the
spread of the virus, including temporary closure of businesses,
severe restrictions on travel and the movement of people, and other
material limitations on the conduct of business. These measures
have resulted in work stoppages and other disruptions. We
implemented remote working and work place protocols for our
employees in accordance with Israeli government requirements. In
addition, while we have seen an increased demand for MySizeID, the
COVID-19 pandemic has had a particularly adverse impact on the
retail industry and this has resulted in an adverse impact on our
marketing and sales activities.
In
particular, the continued spread of COVID-19 in Israel and globally
could adversely impact our operations, including among others, our
sales and marketing efforts and our ability to raise additional
funds, and accordingly, the impact of coronavirus could have an
adverse impact on our business and our financial
results.
Failure to effectively develop and expand our sales and marketing
capabilities could harm our ability to grow our business and
achieve broader market acceptance of our
products.
Our
ability to achieve customer adoption, especially among U.S.
retailers will depend, in part, on our ability to effectively
organize, focus and train our sales and marketing personnel. We
have limited experience selling to U.S. retailers and only recently
established a U.S. sales force. We believe that there is
significant competition for experienced sales professionals with
the skills and industry knowledge that we require. Our ability to
achieve significant revenue growth in the future will depend, in
part, on our ability to recruit, train and retain a sufficient
number of experienced sales professionals, particularly those with
experience selling to U.S. retailers. In addition, even if we are
successful in hiring qualified sales personnel, new hires require
significant training and experience before they achieve full
productivity, particularly for sales efforts targeted at U.S.
retailers and new markets. Because we only recently started sales
efforts, we cannot predict whether, or to what extent, our sales
efforts will be successful.
We expect our sales cycle to be long and unpredictable and require
considerable time and expense before executing a customer
agreement, which may make it difficult to project when, if at all,
we will obtain new customers and when we will generate revenue from
those customers.
In
this market segment, the decision to adopt our products may require
the approval of multiple technical and business decision makers,
including security, compliance, procurement, operations and IT. In
addition, while U.S. retailers may be willing to deploy our
products on a limited basis, before they will commit to deploying
our products at scale, they often require extensive education about
our products and significant customer support time, engage in
protracted pricing negotiations and seek to secure readily
available development resources. As a result, it is difficult to
predict when we will obtain new customers and begin generating
revenue from these customers. As part of our sales cycle, we may
incur significant expenses before executing a definitive agreement
with a prospective customer and before we are able to generate any
revenue from such agreement. We have no assurance that the
substantial time and money spent on our sales efforts will generate
significant revenue. If conditions in the marketplace generally or
with a specific prospective customer change negatively, it is
possible that no definitive agreement will be executed, and we will
be unable to recover any of these expenses. If we are not
successful in targeting, supporting and streamlining our sales
processes and if revenue expected to be generated from a
prospective customer is not realized in the time period expected or
not realized at all, our ability to grow our business, and our
operating results and financial condition may be adversely
affected. If our sales cycles lengthen, our future revenue could be
lower than expected, which would have an adverse impact on our
operating results and could cause our stock price to
decline.
We recently acquired Orgad and Naiz and may in the future engage in
additional acquisitions, joint ventures or collaborations which may
increase our capital requirements, dilute our shareholders, cause
us to incur debt or assume contingent liabilities, and subject us
to other risks. We may not realize the benefits of these
acquisitions, joint ventures or collaborations.
In
order to reduce time to market and obtain complementary
technologies, we are seeking to acquire technologies and businesses
that are synergistic to our product offering. For example, we
recently acquired Orgad which operates an omnichannel e-commerce
platform and Naiz which provides SaaS technology solutions that
solve size and fit issues for fashion ecommerce companies. We
evaluate from time to time various acquisitions and collaborations,
including licensing or acquiring complementary technologies,
intellectual property rights, or businesses. The process for
acquiring a company may take from several months up to a year and
costs can vary greatly. We may also compete with others to acquire
companies, and such competition may result in decreased
availability of, or an increase in price for, suitable acquisition
candidates. In addition, we may not be able to consummate
acquisitions or investments that we have identified as crucial to
the implementation of our strategy for other commercial or economic
reasons. As a result, it may be more difficult for us to identify
suitable acquisition or investment targets or to consummate
acquisitions or investments on acceptable terms or at all. If we
are not able to execute on any acquisition, we may not be able to
achieve a future growth strategy and may lose market
share.
In addition, the acquisition of Orgad, Naiz and any potential
future acquisition, joint venture or collaboration may entail
numerous potential risks, including:
|
● |
increased
operating expenses and cash requirements; |
|
● |
the
assumption of additional indebtedness or contingent
liabilities; |
|
● |
assimilation
of operations, intellectual property and products of an acquired
company, including difficulties associated with integrating new
personnel; |
|
● |
the
diversion of our management’s attention from our existing programs
and initiatives in pursuing such a strategic merger or
acquisition; |
|
● |
retention
of key employees, the loss of key personnel, and uncertainties in
our ability to maintain key business relationships; |
|
● |
risks
and uncertainties associated with the other party to such a
transaction, including the prospects of that party and their
existing technologies; and |
|
● |
our
inability to generate revenue from acquired technologies or
products sufficient to meet our objectives in undertaking the
acquisition or even to offset the associated acquisition and
maintenance costs. |
All
of the foregoing risks may be magnified as the cost, size or
complexity of an acquisition or acquired company increases, or
where the acquired company’s products, market or business are
materially different from ours, or where more than one integration
is occurring simultaneously or within a concentrated period of
time. We may not be able to obtain the necessary regulatory
approvals, including those of antitrust authorities and foreign
investment authorities, in countries where we seek to consummate
acquisitions or make investments. For those and other reasons, we
may ultimately fail to consummate an acquisition, even if we
announce the intended acquisition.
In
addition, we may require significant financing to complete an
acquisition or investment, whether through bank loans, raising of
equity or debt or otherwise. We cannot assure you that such
financing options will be available to us on reasonable terms, or
at all. If we are not able to obtain such necessary financing, it
could have an impact on our ability to consummate a substantial
acquisition or investment and execute a future growth strategy.
Alternatively, we may issue a significant number of shares as
consideration for an acquisition, which would have a dilutive
effect on our existing shareholders. For example, in partial
consideration for the acquisition of Orgad, we agreed to issue up
to 111,602 shares of our
common stock and in the Naiz acquisition we issued 240,000 shares
of our common stock. Furthermore, if we undertake
acquisitions, we may incur large one-time expenses and acquire
intangible assets that could result in significant future
amortization expense.
If we are not able to enhance our brand and increase market
awareness of our company and products, then our business, results
of operations and financial condition may be adversely
affected.
We
believe that enhancing the “MySize” brand identity and increasing
market awareness of our company and products, particularly among
U.S. retailers, is critical to achieving widespread acceptance of
our products. Our ability to successfully develop new retailers may
be adversely affected by a lack of awareness or acceptance of our
brand. To the extent that we are unable to foster name recognition
and affinity for our brand, our growth may be significantly delayed
or impaired. The successful promotion of our brand will depend
largely on our continued marketing efforts, market adoption of our
products, and our ability to successfully differentiate our
products from competing products and services. Our brand promotion
may not be successful or result in revenue generation. Any incident
that erodes consumer affinity for our brand could significantly
reduce our brand value and damage our business. If consumers
perceive or experience a reduction in quality, or in any way
believe we fail to deliver a consistently positive experience, our
brand value could suffer and our business may be adversely
affected.
In
particular, adverse weather conditions can impact guest traffic at
our retailers, and, in more severe cases, cause temporary retail
closures, sometimes for prolonged periods. Our business is subject
to seasonal fluctuations, with retail sales typically higher during
certain months, such as December. Adverse weather conditions during
our most favorable months or periods may exacerbate the effect of
adverse weather on consumer traffic and may cause fluctuations in
our operating results from quarter-to-quarter within a fiscal
year.
If we do not develop enhancements to our products and introduce new
products that achieve market acceptance, our business, results of
operations and financial condition could be adversely
affected.
Our
ability to attract new customers depends in part on our ability to
enhance and improve our existing products, increase adoption and
usage of our products and introduce new products. The success of
any enhancements or new products depends on several factors,
including timely completion, adequate quality testing, actual
performance quality, and overall market acceptance. Enhancements
and new products that we develop may not be introduced in a timely
or cost-effective manner, may contain errors or defects, may have
interoperability difficulties with our platform or other products
or may not achieve the broad market acceptance necessary to
generate significant revenue. Furthermore, our ability to increase
the usage of our products depends, in part, on the development of
new use cases for our products and may be outside of our control.
If we are unable to successfully enhance our existing products to
meet evolving customer requirements, increase adoption and usage of
our products, develop new products, then our business, results of
operations and financial condition would be adversely
affected.
The mobile technology industry is subject to rapid technological
change and, to compete, we must continually enhance our mobile Apps
and custom development services.
We
must continue to enhance and improve the performance, functionality
and reliability of our products. The mobile technology industry is
characterized by rapid technological change, changes in user
requirements and preferences, frequent new product and services
introductions embodying new technologies and the emergence of new
industry standards and practices that could render our products
obsolete. Our success will depend, in part, on our ability to both
internally develop and enhance our existing products, develop new
products that address the increasingly sophisticated and varied
needs of our customers, and respond to technological advances and
emerging industry standards and practices on a cost-effective and
timely basis. The development of our technology involves
significant technical and business risks. We may fail to use new
technologies effectively or to adapt our proprietary technology and
systems to customer requirements or emerging industry standards. If
we are unable to adapt to changing market conditions, customer
requirements or emerging industry standards, we may not be able to
increase our revenue and expand our
business.
Changes in economic conditions could materially affect our
business, financial condition and results of
operations.
Because
our primary target customers include U.S. retailers , we,
together with the rest of the fashion/apparel industry, will depend
upon consumer discretionary spending. Increases in unemployment
rates, reductions in home values, increases in home foreclosures,
investment losses, personal bankruptcies and reductions in access
to credit and reduced consumer confidence, may impact consumers’
ability and willingness to spend discretionary dollars. In
addition, volatile economic conditions may repress consumer
confidence and discretionary spending. Any of the foregoing may
have a material adverse effect on our business, financial condition
and results of operations.
Our growth depends, in part, on the success of our strategic
relationships with third parties.
To
grow our business, we anticipate that we will continue to depend on
relationships with third parties, such as our customers and
third-party platforms. Identifying partners, and negotiating and
documenting relationships with them, requires significant time and
resources. If we are unsuccessful in establishing or maintaining
our relationships with third parties, our ability to compete in the
marketplace or to grow our revenue could be impaired, and our
results of operations may suffer. Even if we are successful, we
cannot assure you that these relationships will result in increased
customer usage of our products or increased revenue.
We rely upon third parties to provide distribution for our
applications, and disruption in these services could harm our
business.
We
currently utilize, and plan on continuing to utilize over the
current fiscal year, third-party networking providers and
distribution through companies including, but not limited to, Apple
and Google as well as Shopify, WooCommerce and, Datalogic,
Honeywell and Zebra to distribute our technologies. If disruptions
or capacity constraints occur, we may have no means of replacing
these services, on a timely basis or at all. This could cause a
material adverse condition for our operations and financial
earnings.
We rely on third-party hosting and cloud computing providers to
operate certain aspects of our business. Any failure, disruption or
significant interruption in our network or hosting and cloud
services could adversely impact our operations and harm our
business.
Our
technology infrastructure is critical to the performance of our
products and customer satisfaction. Our products run on a complex
distributed system, or what is commonly known as cloud computing.
We own, operate and maintain elements of this system, but
significant elements of this system are operated by third-parties
that we do not control and which would require significant time to
replace. We expect this dependence on third-parties to continue. In
particular, a significant portion, if not almost all data storage,
data processing and other computing services and systems is hosted
by cloud computing providers. Any disruptions, outages and other
performance problems relating to such services, including
infrastructure changes, human or software errors and capacity
constraints, could adversely impact our business, financial
condition or results of operations.
Real or perceived errors, failures, or bugs in our products could
adversely affect our operating results and growth
prospects.
We
update our products on a frequent basis. Despite efforts to test
our updates, errors, failures or bugs may not be found in our
products until after they are deployed to a customer. We have
discovered and expect we will continue to discover errors, failures
and bugs in our products and anticipate that certain of these
errors, failures and bugs will only be discovered and remediated
after deployment. Real or perceived errors, failures or bugs in our
platform could result in negative publicity, government inquiries,
loss of or delay in market acceptance of our products, loss of
competitive position, or claims by customers for losses sustained
by them. In such an event, we may be required, or may choose, for
customer relations or other reasons, to expend additional resources
in order to help correct the problem.
We could be harmed by improper disclosure or loss of sensitive or
confidential company, employee, or customer data, including
personal data.
In
connection with the operation of our business, we store, process
and transmit data, including personal and payment information,
about our employees and customers, a portion of which is
confidential and/or personally sensitive. Unauthorized disclosure
or loss of sensitive or confidential data may occur through a
variety of methods. These include, but are not limited to, systems
failure, employee negligence, fraud or misappropriation, or
unauthorized access to or through our information systems, whether
by our employees or third parties, including a cyberattack by
computer programmers, hackers, members of organized crime and/or
state-sponsored organizations, who may develop and deploy viruses,
worms or other malicious software programs. Such disclosure, loss
or breach could harm our reputation and subject us to government
sanctions and liability under our contracts and laws that protect
sensitive or personal data and confidential information, resulting
in increased costs or loss of revenues. It is possible that
security controls over sensitive or confidential data and other
practices we and our third-party vendors follow may not prevent the
improper access to, disclosure of, or loss of such information. The
potential risk of security breaches and cyberattacks may increase
as we introduce new products and offerings. Further, data privacy
is subject to frequently changing rules and regulations, which
sometimes conflict among the various jurisdictions in which we
provide services. Any failure or perceived failure to successfully
manage the collection, use, disclosure, or security of personal
information or other privacy related matters, or any failure to
comply with changing regulatory requirements in this area, could
result in legal liability or impairment to our reputation in the
marketplace.
A material breach in security relating to our information systems
and regulation related to such breaches could adversely affect
us.
Information
security risks have generally increased in recent years, in part
because of the proliferation of new technologies and the use of the
Internet, and the increased sophistication and activity of
organized crime, hackers, terrorists, activists, cybercriminals and
other external parties, some of which may be linked to terrorist
organizations or hostile foreign governments. For example, a
cybercriminal could use cybersecurity threats to gain access to
sensitive information about another company or to alter or disrupt
news or information to be distributed by PR Newswire. Cybersecurity
attacks are becoming more sophisticated and include malicious
software, ransomware, attempts to gain unauthorized access to data
and other electronic security breaches that could lead to
disruptions in critical systems, unauthorized release of
confidential or otherwise protected information and corruption of
data, substantially damaging our reputation. Any person who
circumvents our security measures could steal proprietary or
confidential customer information or cause interruptions in our
operations. We incur significant costs to protect against security
breaches, and may incur significant additional costs to alleviate
problems caused by any breaches. Our failure to prevent security
breaches, or well-publicized security breaches affecting the
Internet in general, could significantly harm our reputation and
business and financial results.
Our products and our business are subject to a variety of U.S. and
international laws and regulations, including those regarding
privacy, data protection and information security, and our
customers may be subject to regulations related to the handling and
transfer of certain types of sensitive and confidential
information. Any failure of our products to comply with or enable
our customers to comply with applicable laws and regulations would
harm our business, results of operations and financial
condition.
We
and our customers that use our products may be subject to privacy-
and data protection-related laws and regulations that impose
obligations in connection with the collection, processing and use
of personal data, financial data, health or other similar data. The
U.S. federal and various state and foreign governments have adopted
or proposed limitations on, or requirements regarding, the
collection, distribution, use, security and storage of personally
identifiable information of individuals. The U.S. Federal Trade
Commission and numerous state attorneys general are applying
federal and state consumer protection laws to impose standards on
the online collection, use and dissemination of data, and to the
security measures applied to such data.
Similarly,
many foreign countries and governmental bodies, including the EU
member states, have laws and regulations concerning the collection
and use of personally identifiable information obtained from
individuals located in the EU or by businesses operating within
their jurisdiction, which are often more restrictive than those in
the United States. Laws and regulations in these jurisdictions
apply broadly to the collection, use, storage, disclosure and
security of personally identifiable information that identifies or
may be used to identify an individual, such as names, telephone
numbers, email addresses and, in some jurisdictions, IP addresses
and other online identifiers.
For
example, the GDPR, which took full effect on May 25, 2018. The GDPR
enhances data protection obligations for businesses and requires
service providers (data processors) processing personal data on
behalf of customers to cooperate with European data protection
authorities, implement security measures and keep records of
personal data processing activities. Noncompliance with the GDPR
can trigger fines equal to or greater of €20 million or 4% of
global annual revenues. In addition, the CCPA, effective as of
January 1, 2020, gives California residents expanded rights to
access and require deletion of their personal information, opt out
of certain personal information sharing, and receive detailed
information about how their personal information is used. The CCPA
provides for civil penalties for violations, as well as a private
right of action for data breaches, that is expected to increase
data breach litigation. Further, failure to comply with the Israeli
Privacy Protection Law of 1981, and its regulations, as well as the
guidelines of the Israeli Privacy Protection Authority, may expose
us to administrative fines, civil claims (including class actions)
and in certain cases criminal liability. Current pending
legislation may result in a change of the current enforcement
measures and sanctions. There are also additional laws and
regulations in additional jurisdictions around the world which
govern the protection of consumers and of electronic
communications. If our efforts to comply with GDPR, CCPA or other
applicable laws and regulations are not successful, we may be
subject to penalties and fines that would adversely impact our
business and results of operations, and our ability to conduct
business could be significantly impaired.
Additionally,
although we endeavor to have our products comply with applicable
laws and regulations, these and other obligations may be modified,
they may be interpreted and applied in an inconsistent manner from
one jurisdiction to another, and they may conflict with one
another, other regulatory requirements, contractual commitments or
our internal practices. We also may be bound by contractual
obligations relating to our collection, use and disclosure of
personal, financial and other data or may find it necessary or
desirable to join industry or other self-regulatory bodies or other
privacy- or data protection-related organizations that require
compliance with their rules pertaining to privacy and data
protection.
We
expect that there will continue to be new proposed laws, rules of
self-regulatory bodies, regulations and industry standards
concerning privacy, data protection and information security in the
United States, the European Union and other jurisdictions, and we
cannot yet determine the impact such future laws, rules,
regulations and standards may have on our business. Moreover,
existing U.S. federal and various state and foreign privacy- and
data protection-related laws and regulations are evolving and
subject to potentially differing interpretations, and various
legislative and regulatory bodies may expand current or enact new
laws and regulations regarding privacy- and data protection-related
matters. Because global laws, regulations and industry standards
concerning privacy and data security have continued to develop and
evolve rapidly, it is possible that we or our products or platform
may not be, or may not have been, compliant with each such
applicable law, regulation and industry standard and compliance
with such new laws or to changes to existing laws may impact our
business and practices, require us to expend significant resources
to adapt to these changes, or to stop offering our products in
certain countries. These developments could adversely affect our
business, results of operations and financial condition.
We may not be able to adequately protect our intellectual property,
which, in turn, could harm the value of our brands and adversely
affect our business.
Our
ability to implement our business plan successfully depends in part
on our ability to build brand recognition using our trademarks,
service marks and other proprietary intellectual property,
including our names and logos. We currently have no registered
trademarks. While we plan to register a number of our trademarks;
however, no assurance can be given that our trademark applications
will be approved. As of December 31, 2022, we own 18 issued
patents: six in Europe, four in the U.S., three in each of Russia
and Japan and one in each of Canada and Israel which expire between
January 20, 2033 and August 18, 2036, and we have two additional
patent applications in process. As of such date, we do not have any
registered trademarks., No assurance can be given that our patent
applications which are in process will be approved. If our patent
applications are not approved, our ability to expand or develop our
business may be negatively affected.
Third
parties may also oppose our trademark or patent applications, or
otherwise challenge our use of the trademarks or patents. In the
event that our trademarks or patents are successfully challenged,
we could be forced to rebrand our goods and services or redesign
our technology, which could result in loss of brand recognition,
and could require us to devote resources to advertising and
marketing new brands and products.
If
our efforts to register, maintain and protect our intellectual
property are inadequate, or if any third-party misappropriates,
dilutes or infringes on our intellectual property, the value of our
brands may be harmed, which could have a material adverse effect on
our business and might prevent our brands from achieving or
maintaining market acceptance. We may also face the risk of claims
that we have infringed third parties’ intellectual property rights.
If third parties claim that we infringe upon their intellectual
property rights, our operating profits could be adversely affected.
Any claims of intellectual property infringement, even those
without merit, could be expensive and time consuming to defend,
require us to rebrand our services, if feasible, divert
management’s attention and resources or require us to enter into
royalty or licensing agreements in order to obtain the right to use
a third-party’s intellectual property.
Any
royalty or licensing agreements, if required, may not be available
to us on acceptable terms or at all. A successful claim of
infringement against us could result in our being required to pay
significant damages, enter into costly license or royalty
agreements, or stop the sale of certain products or services, any
of which could have a negative impact on our operating profits and
harm our future prospects.
We may face intense competition and expect competition to increase
in the future, which could prohibit us from developing a customer
base and generating revenue.
We
face significant competition in every aspect of our business. Our
competitors include True Fit, Virtusize, EasyMeasure, AR
MeasureKit, Smart Measure and 3DLook. These companies may
already have an established market in our industry. Most of these
companies have significantly greater financial and other resources
than us and have been developing their products and services longer
than we have been developing ours.
In
addition, some of our larger competitors have substantially broader
product offerings and leverage their relationships based on other
products or incorporate functionality into existing products to
gain business in a manner that discourages potential customers from
purchasing our products. Potential customers may also prefer to
purchase from their existing solution providers rather than a new
solution provider regardless of product performance or features.
These larger competitors often have broader product lines and
market focus and will therefore not be as susceptible to downturns
in a particular market. Conditions in our market could change
rapidly and significantly as a result of technological
advancements, partnering by our competitors or continuing market
consolidation. New start-up companies that innovate and large
competitors that are making significant investments in research and
development may invent similar or superior products and
technologies that compete with our products. In addition, some of
our competitors may enter into new alliances with each other or may
establish or strengthen cooperative relationships. Any such
consolidation, acquisition, alliance or cooperative relationship
could lead to pricing pressure and our loss of any future market
share and could result in a competitor with greater financial,
technical, marketing, service and other resources, all of which
could harm our ability to compete. Furthermore, organizations may
be more willing to incrementally add solutions to their existing
infrastructure from competitors than to replace their existing
infrastructure with our products. Any failure to meet and address
these factors could harm our business, results of operations and
financial condition.
Our business operations and future development could be
significantly disrupted if we lose key members of our management
team.
The
success of our business continues to depend to a significant degree
upon the continued contributions of our senior officers and key
employees, both individually and as a group. Our future performance
will be substantially dependent in particular on our ability to
retain and motivate Ronen Luzon, our Chief Executive Officer, and
certain of our other senior executive officers. The loss of the
services of our Chief Executive Officer, senior officers or other
key employees could have a material adverse effect on our business
and plans for future development. We have no reason to believe that
we will lose the services of any of these individuals in the
foreseeable future; however, we currently have no effective
replacement for any of these individuals due to their experience,
reputation in the industry and special role in our operations. We
also do not maintain any key man life insurance policies for any of
our employees.
If we are able to expand our operations, we may be unable to
successfully manage our future growth.
Our
growth may strain our infrastructure and resources. Any such growth
could place increased strain on our management, operational,
financial and other resources, and we will need to train, motivate,
and manage employees, as well as attract management, sales, finance
and accounting, international, technical, and other professionals.
Any failure to expand these areas and implement appropriate
procedures and controls in an efficient manner and at a pace
consistent with our business objectives could have a material
adverse effect on our business, results of operations and financial
condition.
Our business operations are conducted in multiple languages and
could be disrupted due to miscommunications or translation
errors.
The
success of our business continues to depend on our marketing
efforts in the United States, Europe and Israel, each of which is
conducted in the local language. Miscommunications or inaccurate
foreign language translations could have a material adverse effect
on our business operations and financial conditions. Additionally,
contracts, communications and complex technical information must be
accurately translated into foreign languages.
We will continue to incur costs and be subject to various
obligations as a result of being a public company, listed in the
United States and in Israel.
We
will continue to incur significant legal, accounting and other
expenses as a result of being a public company, listed in the
United States and in Israel. Although we will incur costs each year
associated with being a publicly-traded company, it is possible
that our actual costs of being a publicly-traded company will vary
from year to year and may be different than our estimates. In
estimating these costs, we take into account expenses related to
insurance, legal, accounting and compliance activities.
Furthermore,
the need to maintain the corporate infrastructure demanded of a
public company may divert management’s attention from implementing
our growth strategy, which could prevent us from improving our
business, results of operations and financial condition. We have
made, and will continue to make, changes to our internal controls
and procedures for financial reporting and accounting systems to
meet our reporting obligations as a U.S. publicly traded company.
However, the measures we take may not be sufficient to satisfy our
obligations as a publicly traded company.
Any future or current litigation could have a material adverse
impact on our results of operations, financial condition and
liquidity.
From
time to time, we may be subject to litigation, including, among
others, potential stockholder derivative actions and class actions.
Risks associated with legal liability are difficult to assess and
quantify, and their existence and magnitude can remain unknown for
significant periods of time. Subject to certain exceptions, our
Amended and Restated Certificate of Incorporation, or Certificate
of Incorporation, and Amended and Restated Bylaws, or Bylaws,
require us to indemnify and advance expenses to our officers and
directors involved in legal proceedings. To date we have obtained
directors and officers’ liability, or D&O, insurance to cover
some of the risk exposure for our directors and officers. Such
insurance generally pays the expenses (including amounts paid to
plaintiffs, fines, and expenses including attorneys’ fees) of
officers and directors who are the subject of a lawsuit as a result
of their service to us. There can be no assurance that we will be
able to continue to maintain this insurance at reasonable rates or
at all, or in amounts adequate to cover such expenses should such a
lawsuit occur. Without D&O insurance, the amounts we would pay
to indemnify our officers and directors should they be subject to
legal action based on their service to us could have a material
adverse effect on our financial condition, results of operations
and liquidity. Such lawsuits, and any related publicity, may result
in substantial costs and, among other things, divert the attention
of management and our employees. An unfavorable outcome in any
claim or proceeding against us could have a material adverse impact
on our financial position and results of operations for the period
in which the unfavorable outcome occurs, and potentially in future
periods. Further, any settlement announced by us may expose us to
further claims against us by third parties seeking monetary or
other damages which, even if unsuccessful, would divert management
attention from the business and cause us to incur costs, possibly
material, to defend such matters, which could have a material
adverse impact on our financial position. See “Legal Proceedings”
for more information regarding our involvement in ongoing
litigation matters.
Federal, state and local or Israeli tax rules may adversely impact
our results of operations and financial
position.
We
are subject to federal, state and local taxes in the U.S., as well
as local taxes in Israel in respect to our operations in Israel.
Although we believe our tax estimates are reasonable, if the
Internal Revenue Service or other taxing authority disagrees with
the positions we have taken on our tax returns, we could face
additional tax liability, including interest and penalties. If
material, payment of such additional amounts upon final
adjudication of any disputes could have a material impact on our
results of operations and financial position. In addition,
complying with new tax rules, laws or regulations could impact our
financial condition, and increases to federal or state statutory
tax rates and other changes in tax laws, rules or regulations may
increase our effective tax rate. Any increase in our effective tax
rate could have a material impact on our financial
results.
A significant majority of Orgad’s revenue is from sales of products
on Amazon’s U.S. Marketplace and any change, limitation or
restriction on our ability to operate on Amazon’s platform or any
other marketplace could have a material adverse impact to our
business, results of operations, financial condition and
prospects.
Orgad,
our wholly owned subsidiary, operates an omnichannel e-commerce
platform engaged in online retailing in the global market. It
operates as a third-party seller on Amazon.com, eBay and others. A
substantial percentage of Orgad’s revenue is driven by sales on
Amazon’s U.S. marketplace and Orgad is subject to terms of service
of Amazon and other maketplaces and various other seller policies
and services that apply to third parties selling products on Amazon
and other marketplaces. Generally, a marketplace has the right to
terminate or suspend its agreement with Orgad at any time and for
any reason. Such marketplace may take other actions against Orgad
such as suspending or terminating a seller account or product
listing and withholding payments owed to Orgad indefinitely. For
example, in July 2022, Amazon deactivated Orgad’s Amazon U.S. store
as a result of complaints submitted due to an error in the listed
manufacturer of certain products on Orgad’s store. Although its
account was subsequently reinstated in September 2022, if the
deactivation were to occur in the future for a prolonged period of
time, or if Amazon were to terminate Orgad’s account, this would
have a material adverse effect on our business, results of
operations, financial condition and prospects. While Orgad
endeavors to materially comply with the terms of services of the
marketplaces on which it operates, we can provide no assurance that
these marketplaces will have the same determination with respect to
our compliance.
In
addition, Amazon and other marketplaces can make changes to its
platform that could require Orgad to change the manner in which it
operates, limit its ability to successfully launch new products or
increase its costs to operate and such changes could have an
adverse effect on our business, results of operations, financial
condition and prospects. Examples of changes that could impact us
relate to platform fee charges (i.e., selling commissions),
exclusivity, inventory warehouse availability, excluded products
and limitations on sales and marketing. Any change, limitation or
restriction on our ability to sell on Amazon’s platform or any
other marketplace, even if temporary, could have a material impact
on our business, results of operations, financial condition and
prospects.
Orgad
also relies on services provided by Amazon’s fulfillment platform,
including Prime Certification, which provides for expedited
shipping to the consumer, an important aspect in the buying
decision for consumers. For products that Orgad fulfills itself,
Orgad is qualified to offer our products for sale with Prime
Certification delivery. Any inability to market our products for
sale with expedited delivery provided under Prime Certification
could have a material impact on our business, results of
operations, financial condition and prospects. Failure to remain
compliant with the best fulfillment practices on Amazon’s platform
could have a material impact on our business, results of
operations, financial condition and prospects. In addition, due to
the COVID-19 pandemic, Amazon has changed the amount of inventory
it accepts per product for a period of time. If this were to
continue it could cause us to miss sales and/or pay additional
shipping costs which would harm our business operations and
financial conditions.
Orgad’s business depends on its ability to build and maintain
strong product listings on e-commerce platforms. Orgad may not be
able to maintain and enhance our product listings if it receives
unfavorable customer complaints, negative publicity or otherwise
fails to live up to consumers’ expectations, which could materially
adversely affect our business, results of operations and growth
prospects.
Maintaining
and enhancing Orgad’s product listings is critical in expanding and
growing its business. However, a significant portion of Orgad’s
perceived performance to the customer depends on third parties
outside of its control, including suppliers and third-party
delivery agents as well as online retailers such as Amazon and
eBay. Because Orgad’s agreements with its online retail partners
are generally terminable at will, it may be unable to maintain
these relationships, and our results of operations could fluctuate
significantly from period to period. Because Orgad relies on third
parties to deliver its products, it is subject to shipping delays
or disruptions caused by inclement weather, natural disasters,
labor activism, health epidemics or bioterrorism. It may also
experience shipping delays or disruptions due to other
carrier-related issues relating to their own internal operational
capabilities. Further, Orgad relies on the business continuity
plans of these third parties to operate during pandemics, like the
COVID-19 pandemic, and it has limited ability to influence their
plans, prevent delays, and/or cost increases due to reduced
availability and capacity and increased required safety
measures.
Customer
complaints or negative publicity about its products, delivery
times, or marketing strategies, even if not accurate, especially on
blogs, social media websites and third-party market sites, could
rapidly and severely diminish consumer view of Orgad’s product
listings and result in harm to its brand. Customers may also make
safety-related or other types of claims regarding products sold
through our online retail partners, such as Amazon, which may
result in an online retail partner removing the product from its
marketplace. We also use and rely on other services from third
parties, such as our telecommunications services, and those
services may be subject to outages and interruptions that are not
within our control.
Orgad faces risks related to successfully optimizing and operating
its fulfillment and customer service operations.
Failures
to adequately predict customer demand or otherwise optimize and
operate its fulfillment and customer service operations
successfully from time to time result in excess or insufficient
fulfillment or customer service capacity, increased costs, and
impairment charges, any of which could materially harm our
business. As Orgad continues to add fulfillment and customer
service capability or add new businesses with different
requirements, its fulfillment and customer service operations
become increasingly complex and operating them becomes more
challenging. There can be no assurance that Orgad will be able to
operate our operations effectively.
In
addition, failure to optimize inventory in our fulfillment
operations increases net shipping cost by requiring long-zone or
partial shipments. Orgad may be unable to adequately staff its
fulfillment and customer service operations. Orgad’s failure to
properly handle such inventory or to accurately forecast product
demand may result in it being unable to secure sufficient storage
space or to optimize its fulfillment operations or cause other
unexpected costs and other harm to our business and
reputation.
Orgad
relies on a limited number of shipping companies to deliver
inventory to it and completed orders to our customers. The
inability to negotiate acceptable terms with these companies or
performance problems or other difficulties experienced by these
companies could negatively impact our operating results and
customer experience. In addition, Orgad’s ability to receive
inbound inventory efficiently and ship completed orders to
customers also may be negatively affected by natural or man-made
disasters, extreme weather, geopolitical events and security
issues, labor or trade disputes, and similar events.
The variability in Orgad’s retail business places increased strain
on its operations.
Demand
for Orgad’s product listings can fluctuate significantly for many
reasons, including as a result of seasonality, promotions, product
launches, or unforeseeable events, such as in response to natural
or man-made disasters, extreme weather, or geopolitical events. For
example, Orgad expects a disproportionate amount of our retail
sales to occur during our fourth quarter. Failure to stock or
restock popular products in sufficient amounts such that Orgad
fails to meet customer demand could significantly affect our
revenue and our future growth. If too many customers access the
websites on which Orgad engages in online retailing within a short
period of time due to increased demand, Orgad may experience system
interruptions that make the websites unavailable or prevent us from
efficiently fulfilling orders, which may reduce the volume of goods
its offers or sell and the attractiveness of its products. In
addition, Orgad may be unable to adequately staff for fulfillment
of orders and customer service during these peak periods and
delivery and other fulfillment companies and customer service
co-sourcers may be unable to meet the seasonal demand.
Our business is subject to the risks of earthquakes, fire, power
outages, floods, health risks and other catastrophic events, and to
interruption by man-made problems such as
terrorism.
Natural
disasters, such as fire or floods, a significant power outage,
telecommunications failure, terrorism, an armed conflict,
cyberattacks, epidemics and pandemics such as COVID-19, or other
geo-political unrest could affect our supply chain, manufacturers,
logistics providers, channel partners, or end-customers or the
economy as a whole and such disruption could impact us and the
shipments and sales. These risks may be further increased if the
disaster recovery plans for us and our suppliers prove to be
inadequate. To the extent that any of the above should result in
delays or cancellations of customer orders, the loss of customers,
or the delay in the deployment or shipment of products, our
business, financial condition, and operating results would be
adversely affected.
For
example, in January 2022, our subsidiary, Orgad, experienced a fire
at its warehouse in Israel. From a preliminary estimation,
we believe that the
value of the inventory that was in the warehouses was approximately
$450,000. While it is too early to determine the potential
impact of this incident on our results of operations and financial
condition or the scope of insurance coverage related to this
incident, we are working to assess the damage and to determine when
operations may be resumed at this warehouse or potentially shifted
to another location and whether this incident will affect the
future sales of Orgad.
Our business could be negatively impacted by unsolicited
takeover proposals, by shareholder activism or by proxy contests
relating to the election of directors or other matters.
Our business could be negatively affected as a result of an
unsolicited takeover proposal, by shareholder activism or a proxy
contest. During 2021, an activist shareholder sought to make
changes to our board of directors, among other matters, which
ultimately resulted in us entering into a settlement agreement with
the activist shareholder and another shareholder, and for which
considerable costs were incurred and absorbed significant time and
attention by management and the board of directors. A future proxy
contest, unsolicited takeover proposal, or other shareholder
activism relating to the election of directors or other matters
would most likely require us to incur significant legal fees and
proxy solicitation expenses and require significant time and
attention by management and our Board of Directors. The potential
of a proxy contest, unsolicited takeover proposal, or other
shareholder activism could interfere with our ability to execute
our strategic plan, give rise to perceived uncertainties as to our
future direction, result in the loss of potential business
opportunities or make it more difficult to attract and retain
qualified personnel, any of which could materially and adversely
affect our business and operating results.
Risks Related to Our
Operations in Russia
Russia’s invasion of Ukraine and sanctions brought against Russia
could disrupt our 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 and we engage two software developers through a third
party who are based in Ukraine. On February 24, 2022, Russia
invaded Ukraine. The outbreak of hostilities between the two
countries could result in more widespread conflict and could have a
severe adverse effect on the region. Following
Russia’s actions, various countries, including the U.S., Canada,
the United Kingdom, Germany and France, as well as the European
Union, issued broad-ranging economic sanctions against Russia. Such
sanctions included, among other things, a prohibition on doing
business with certain Russian companies, officials and oligarchs; a
commitment by certain countries and the European Union to remove
selected Russian banks from the Society for Worldwide Interbank
Financial Telecommunications (SWIFT) electronic banking network
that connects banks globally; and restrictive measures to prevent
the Russian Central Bank from undermining the impact of the
sanctions. In response to sanctions, the Russian Central Bank
raised its interest rates and banned sales of local securities by
foreigners. Russia may take additional counter measures or
retaliatory actions in the future. While diplomatic efforts have
been ongoing, the conflict between Russia and Ukraine is currently
unpredictable and has the potential to result in broadened military
actions. The duration of ongoing hostilities and such sanctions and
related events cannot be predicted. Uncertainty as to future
relations between Russia and the U.S. and other countries in the
west, or between Russia and other eastern European countries, may
have a negative impact on our operations.
Such international sanctions and potential responses to such
sanctions, including those that may limit or restrict transfer
funds into Russia, may in the future significantly affect our
ability to conduct our activities in Russia including paying our
personnel. To
date, the conflict has had minimal impact on operations .
Nevertheless, we have no way to predict the progress or outcome of
the situation in Ukraine, as the conflict and governmental
reactions are rapidly developing and beyond our control. Prolonged
unrest, intensified military activities or more extensive sanctions
impacting the region could have a material adverse effect on our
operations, results of operations, financial condition, liquidity
and business outlook.
Political, military conditions or other risks in Russia could
adversely affect our business.
Russia
is a federative state consisting of 85 constituent entities, or
“subjects.” The Russian Constitution reserves some governmental
powers for the Russian Government, some for the subjects and some
for areas of joint competence. In addition, eight “federal
districts” (“federal’nye okruga”), which are overseen by a
plenipotentiary representative of the President, supplement the
country’s federal system. The delineation of authority among and
within the subjects is, in many instances, unclear and contested,
particularly with respect to the division of tax revenues and
authority over regulatory matters. For these reasons, the Russian
political system is vulnerable to tension and conflict between
federal, subject and local authorities. This tension creates
uncertainties in the operating environment in Russia, which may
prevent us from carrying out our strategy effectively. The risks
associated with these events or potential events could materially
and adversely affect the investment environment and overall
consumer and entrepreneurial confidence in Russia, and our
business, prospects, financial condition, hiring ability, and
results of operations could be materially and adversely
affected.
Furthermore,
high levels of corruption reportedly exist in Russia, including the
bribing of officials for the purpose of initiating investigations
by government agencies. Corruption and other illegal activities
could disrupt our ability to conduct our business effectively, and
claims that the we are involved in such corruption or illegal
activities could generate negative publicity, of which could harm
our development, financial condition, results of operations or
prospects.
Economic and other risks in Russia could adversely affect our
business.
Operating
a business in an emerging market such as Russia can involve a
greater degree of risk than operating a business in more developed
markets.
Over
the last two decades, the Russian economy has experienced or
continues to experience at various times:
|
● |
significant
volatility in its GDP; |
|
● |
the
impact of international sanctions; |
|
● |
high
levels of inflation; |
|
● |
increases
in, or high, interest rates; |
|
● |
sudden
price declines in oil and other natural resources; |
|
● |
instability
in the local currency market; |
|
● |
the
continued operation of loss-making enterprises due to the lack of
effective bankruptcy proceedings; |
|
● |
significant
increases in poverty rates, unemployment and
underemployment. |
The
Russian economy has been subject to abrupt downturns in the past,
including as a result of the invasion of Ukraine, global financial
crisis, and, as an emerging market, remains particularly vulnerable
to further external shocks and any future fluctuations in the
global markets. Any further deterioration in the general economic
conditions in Russia (whether or not as a result of the events
mentioned above) could have a material adverse effect on the
Russian economy and may result in hiring and operational
difficulties, as well as potential flight of human capital, which
could have a material adverse effect on our business, product
development and results of operations.
Legal risks in Russia could materially adversely affect our
operations and Russian tax legislation is subject to frequent
change.
Among
the risks of the Russian legal system are: inconsistencies among
laws, presidential decrees, and government and ministerial orders
and resolutions; conflicting local, regional and federal laws and
regulations; the untested nature of the independence of the
judiciary and its sensitivity to economic or political influences;
substantial gaps in the regulatory structure due to the delay or
absence of implementing legislation; a high degree of discretion on
the part of governmental authorities; reported corruption within
governmental entities and other governmental authorities; the
relative inexperience of judges and courts in interpreting laws
applicable to complex transactions; and the unpredictability of
enforcement of foreign judgments and foreign arbitral awards. Many
Russian laws and regulations are construed in a way that provides
for significant administrative discretion in application and
enforcement. Unlawful, selective or arbitrary actions of the
Russian Government have reportedly included the denial or
withdrawal of licenses, sudden and unexpected tax audits, criminal
prosecutions, and civil claims. Any of the above events may have a
material adverse effect on our product development and results of
operations.
Despite
certain improvements in the taxation system made by the Russian
Government over the past decade, Russian tax legislation is still
subject to frequent change, varying interpretations, and
inconsistent and selective enforcement. There are currently no
clear rules for distinguishing between lawful tax optimization and
tax evasion. In addition, Russian tax laws do not contain detailed
rules on the taxation in Russia of foreign companies. As such,
taxpayers often have to resort to court proceedings to defend their
position against the Russian tax authorities. However, in the
absence of consistent court practice or binding precedents, there
is inconsistency amongst court decisions. Further, the possibility
exists that the Russian Federation would impose arbitrary or
onerous taxes and penalties in the future, which could have a
material adverse effect on our product development and results of
operations.
Risks Related to Our Operations in
Israel
Our headquarters and most of our operations are located in Israel,
and therefore, political conditions in Israel may affect our
operations and results.
Our
headquarters and most of our operations are located in central
Israel and our key employees, officers and directors are residents
of Israel. Accordingly, political, economic and military conditions
in Israel and the surrounding region may directly affect our
business. Since the establishment of the State of Israel in 1948, a
number of armed conflicts have taken place between Israel and its
Arab neighbors. Any hostilities involving Israel or the
interruption or curtailment of trade within Israel or between
Israel and its trading partners could adversely affect our
operations and results of operations and could make it more
difficult for us to raise capital. During the winter of 2008,
winter of 2012 and the summer of 2014, Israel was engaged in an
armed conflict with Hamas, a militia group and political party
operating in the Gaza Strip, and during the summer of 2006, Israel
was engaged in an armed conflict with Hezbollah, a Lebanese
Islamist Shiite militia group and political party. Israel faces
political tension with respect to its relationships with Turkey,
Iran and certain Arab neighbor countries. In addition, recent
conflicts involved missile strikes against civilian targets in
various parts of Israel, and negatively affected business
conditions in Israel. Recent political uprisings and social unrest
in various countries in the Middle East and North Africa are
affecting the political stability of those countries. This
instability may lead to deterioration of the political
relationships that exist between Israel and these countries, and
have raised concerns regarding security in the region and the
potential for armed conflict. Any armed conflicts, terrorist
activities or political instability in the region could adversely
affect business conditions and could harm our results of
operations. For example, any major escalation in hostilities in the
region could result in a portion of our employees and service
providers being called up to perform military duty for an extended
period of time. Parties with whom we do business have sometimes
declined to travel to Israel during periods of heightened unrest or
tension, forcing us to make alternative arrangements when
necessary. In addition, the political and security situation in
Israel may result in parties with whom we have agreements involving
performance in Israel claiming that they are not obligated to
perform their commitments under those agreements pursuant to force
majeure provisions in such agreements. Any future deterioration in
the political and security situation in Israel will negatively
impact our business.
Our
commercial insurance does not cover losses that may occur as a
result of events associated with the security situation in the
Middle East. Although the Israeli government currently covers the
reinstatement value of direct damages that are caused by terrorist
attacks or acts of war, we cannot assure you that this government
coverage will be maintained. Any losses or damages incurred by us
could have a material adverse effect on our business. Any armed
conflicts or political instability in the region would likely
negatively affect business conditions and could harm our results of
operations.
Further,
in the past, the State of Israel and Israeli companies have been
subjected to an economic boycott. Several countries still restrict
business with the State of Israel and with Israeli companies. These
restrictive laws and policies may have an adverse impact on our
operating results, financial condition or the expansion of our
business.
The
legislative power of the State resides in the Knesset, a unicameral
parliament that consists of 120 members elected by nationwide
voting under a system of proportional representation. Israel’s most
recent general elections were held on April 9, 2019, September 17,
2019 and March 2, 2020. The uncertainty surrounding the results of
the recent elections may continue. Actual or perceived political
instability in Israel or any negative changes in the political
environment, may individually or in the aggregate adversely affect
the Israeli economy and, in turn, our business, financial
condition, results of operations and prospects.
Some of our employees are obligated to perform military reserve
duty in Israel.
Many
Israeli citizens, including our employees are obligated to perform
one month, and in some cases more, of annual military reserve duty
until they reach the age of 40 (or older, for reservists with
certain occupations) and, in the event of a military conflict, may
be called to active duty. In response to increases in terrorist
activity, there have been periods of significant call-ups of
military reservists. It is possible that there will be military
reserve duty call-ups in the future. Our operations could be
disrupted by such call-ups. Such disruption could materially
adversely affect our business, results of operations and financial
condition.
It may be difficult to enforce a non-Israeli judgment against the
Company or its officers and directors.
The
operating subsidiary of ours is incorporated in Israel. All of our
executive officers and directors are not residents of the United
States, and a substantial portion of our assets and the assets of
our executive officers and directors are located outside the United
States. Therefore, a judgment obtained against us, or any of these
persons, including a judgment based on the civil liability
provisions of the U.S. federal securities laws, may not be
collectible in the United States and may not necessarily be
enforced by an Israeli court. It also may be difficult to affect
service of process on these persons in the United States or to
assert U.S. securities law claims in original actions instituted in
Israel. Additionally, it may be difficult for an investor, or any
other person or entity, to initiate an action with respect to U.S.
securities laws in Israel. Israeli courts may refuse to hear a
claim based on an alleged violation of U.S. securities laws
reasoning that Israel is not the most appropriate forum in which to
bring such a claim. In addition, even if an Israeli court agrees to
hear a claim, it may determine that Israeli law and not U.S. law is
applicable to the claim. If U.S. law is found to be applicable, the
content of applicable U.S. law often involves the testimony of
expert witnesses, which can be a time consuming and costly process.
Certain matters of procedure will also be governed by Israeli law.
There is little binding case law in Israel that addresses the
matters described above. As a result of the difficulty associated
with enforcing a judgment against us in Israel, it may be
impossible to collect any damages awarded by either a U.S. or
foreign court.
Our international operations could expose us to additional risks,
including exchange rate fluctuations, legal regulations and
political or economic instability that could harm our business and
operating results.
Our
international operations expose us to the following risks which may
have a material adverse effect on our business and operating
results:
|
● |
devaluations and fluctuations in currency exchange rates including
fluctuations between the U.S. dollar and the NIS and the Russian
Ruble; |
|
● |
costs
of compliance with local laws, including labor laws and
intellectual property laws; |
|
● |
compliance
with domestic and foreign government policies, including compliance
with Israeli securities laws and TASE; |
|
● |
changes
in trade regulations and procedures affecting approval, production,
pricing, marketing, reimbursement for and access to, our
products; |
|
● |
compliance
with applicable foreign anti-corruption laws,
anti-trust/competition laws, anti-Boycott Israel law and anti-money
laundering laws; and |
|
● |
economic
and geopolitical developments and conditions, including ongoing
instability in global economies and financial markets,
international hostilities, acts of terrorism and governmental
reactions, inflation, outbreaks of contagious disease (e.g., the
COVID-19 pandemic) and military and political
alliances. |
Risks Related to Our Common Stock
A more active, liquid trading market for our common stock may not
develop, and the price of our common stock may fluctuate
significantly.
Although
our common stock is listed on the Nasdaq Capital Market, it has
only been traded on the Nasdaq Capital Market since July 25, 2016.
There has been relatively limited trading volume in the market for
our common stock, and a more active, liquid public trading market
may not develop or may not be sustained. Limited liquidity in the
trading market for our common stock may adversely affect a
stockholder’s ability to sell its shares of common stock at the
time it wishes to sell them or at a price that it considers
acceptable. If a more active, liquid public trading market does not
develop, we may be limited in our ability to raise capital by
selling shares of common stock and our ability to acquire other
companies or assets by using shares of our common stock as
consideration. In addition, if there is a thin trading market or
“float” for our stock, the market price for our common stock may
fluctuate significantly more than the stock market as a whole.
Without a large float, our common stock would be less liquid than
the stock of companies with broader public ownership and, as a
result, the trading prices of our common stock may be more volatile
and it would be harder for you to liquidate any investment in our
common stock. Furthermore, the stock market is subject to
significant price and volume fluctuations, and the price of our
common stock could fluctuate widely in response to several factors,
including:
|
● |
our quarterly or annual operating results; |
|
● |
changes
in our earnings estimates; |
|
● |
investment
recommendations by securities analysts following our business or
our industry; |
|
● |
additions
or departures of key personnel; |
|
● |
changes
in the business, earnings estimates or market perceptions of our
competitors; |
|
● |
our
failure to achieve operating results consistent with securities
analysts’ projections; |
|
● |
changes
in industry, general market or economic conditions; |
|
● |
announcements
of legislative or regulatory changes; and |
|
● |
natural
disasters (including for example, the recent fire in the Orgad
warehouse) and political and economic instability, including wars,
terrorism, political unrest, results of certain elections and
votes, emergence of a pandemic, or other widespread health
emergencies (or concerns over the possibility of such an emergency,
including for example, the recent the COVID-19 pandemic), boycotts,
adoption or expansion of government trade restrictions, and other
business restrictions. |
The
stock market has experienced extreme price and volume fluctuations
in recent years that have significantly affected the quoted prices
of the securities of many companies. The changes often appear to
occur without regard to specific operating performance. The price
of our common stock could fluctuate based upon factors that have
little or nothing to do with us and these fluctuations could
materially reduce our stock price.
Sales by our stockholders of a substantial number of shares of our
common stock in the public market could adversely affect the market
price of our common stock.
If
any of our shareholders were to decide to sell large amounts of
stock over a short period of time (presuming such sales were
permitted) such sales could cause the market price of our common
stock to drop significantly, even if our business is doing well.
Further, the market price of our common stock could decline as a
result of the perception that such sales could occur. These sales,
or the possibility that these sales may occur, also might make it
more difficult for us to sell equity securities in the future at a
time and price that we deem appropriate.
Our securities are traded on more than one market which may result
in price variations.
Our
securities have been trading on the Nasdaq Capital Market since
July 2016 and on TASE since September 2005. Trading in our
securities on such exchanges occurs in different currencies (U.S.
dollars on the Nasdaq Capital Market and NIS on the TASE), and at
different times (due to different time zones, trading days and
public holidays in the United States and Israel). The trading
prices of our securities on the two exchanges may differ due to the
foregoing and other factors. Any decrease in the price of our
shares on the TASE could cause a decrease in the trading price of
our shares on the Nasdaq Capital Market and vice versa.
We are a smaller reporting company and, as a result of the reduced
disclosure and governance requirements applicable to such
companies, our common stock may be less attractive to
investors.
We
are a smaller reporting company, (i.e. a company with “public
float” held by non-affiliates with a market value of less than $250
million) and we are eligible to take advantage of certain
exemptions from various reporting requirements applicable to other
public companies. We have elected to adopt these reduced disclosure
requirements. We cannot predict if investors will find our common
stock less attractive as a result of our taking advantage of these
exemptions. If some investors find our common stock less attractive
as a result of our choices, there may be a less active trading
market for our common stock and our stock price may be more
volatile.
We do not expect to pay any cash dividends in the foreseeable
future.
We
have never declared or paid cash dividends on our common stock. We
intend to retain our future earnings, if any, in order to reinvest
in the development and growth of our business and, therefore, do
not intend to pay dividends on our common stock for the foreseeable
future. Any future determination to pay dividends will be at the
discretion of our board of directors and will depend on our
financial condition, results of operations, capital requirements,
and such other factors as our board of directors deems relevant.
Investors should not purchase our common stock expecting to receive
cash dividends. Because we do not pay dividends, and there may be
limited trading, investors may not have any manner to liquidate or
receive any payment on their investment. Therefore, our failure to
pay dividends may cause investors to not see any return on
investment even if we are successful in our business operations. In
addition, because we do not pay dividends we may have trouble
raising additional funds, which could affect our ability to expand
our business operations.
We can sell additional shares of common stock without consulting
stockholders and without offering shares to existing stockholders,
which would result in dilution of shareholders’ interests in the
company and could depress our stock price.
Our
Certificate of Incorporation currently authorizes 250,000,000
shares of common stock, of which 1,626,117 are currently
outstanding as of January 27, 2023 and our board of directors is
authorized to issue additional shares of our common stock. Although
our board of directors intends to utilize its reasonable business
judgment to fulfil its fiduciary obligations to our then existing
stockholders in connection with any future issuance of our capital
stock, the future issuance of additional shares of our capital
stock could cause immediate, and potentially substantial, dilution
to our existing stockholders, which could also have a material
effect on the market value of the shares. Further, other than
certain participation rights that we have granted in a past
offering, our shares do not have preemptive rights, which means we
can sell shares of our capital stock to other persons without
offering purchasers in this offering the right to purchase their
proportionate share of such offered shares. Therefore, any
additional sales of stock by us could dilute your ownership
interest in our Company.
A number of our outstanding warrants contain anti-dilution
provisions that, if triggered, could cause substantial dilution to
our then-existing stockholders and adversely affect our stock
price.
A
number of our outstanding warrants contain anti-dilution
provisions. As a result, if we, in the future, issue or grant any
rights to purchase any of our common stock or other securities
convertible into our common stock, for a per share price less than
the exercise price of certain of our warrants, the exercise price
will be reduced, subject to certain exceptions. To the extent that
we issue or are or deemed to have issued securities for
consideration that is less than the exercise price of those
warrants, holders of our common stock may experience dilution,
which may be substantial and which could lower the market price of
our securities. Further, the potential application of such
anti-dilution rights may prevent us from seeking additional
financing, which would adversely affect our ability to finance our
operations and continue to support our growth
initiatives.
Our quarterly operating results may fluctuate
significantly.
We
expect our operating results to be subject to quarterly
fluctuations. Our net loss and other operating results will be
affected by numerous factors, including:
|
● |
variations
in the level of expenses related to our research and
development; |
|
● |
any
lawsuits in which we may become involved; |
|
● |
regulatory
developments affecting our products; and |
|
● |
our
execution of any collaborative, licensing or sales agreements, and
the timing of payments under these arrangements. |
If
our quarterly operating results fall below the expectations of
investors or securities analysts, the price of our common stock
could decline substantially. Furthermore, any quarterly
fluctuations in our operating results may, in turn, cause the price
of our common stock to fluctuate substantially.
If we fail to comply with the rules under the Sarbanes Oxley Act of
2002 related to accounting controls and procedures or if we
discover material weaknesses and deficiencies in our internal
control and accounting procedures, our stock price could decline
significantly and raising capital could be more
difficult.
If we
fail to comply with the rules under the Sarbanes-Oxley Act of 2002
related to disclosure controls and procedures, or, if we discover
material weaknesses and other deficiencies in our internal control
and accounting procedures, our stock price could decline
significantly and raising capital could be more difficult. Section
404 of the Sarbanes-Oxley Act requires annual management
assessments of the effectiveness of our internal control over
financial reporting and, if we are no longer a non-accelerated
filer, a report by our independent auditors addressing these
assessments. If material weaknesses or significant deficiencies are
discovered or if we otherwise fail to achieve and maintain the
adequacy of our internal control, we may not be able to ensure that
we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404 of
the Sarbanes-Oxley Act. Moreover, effective internal controls are
necessary for us to produce reliable financial reports and are
important to helping prevent financial fraud. If we cannot provide
reliable financial reports or prevent fraud, our business and
operating results could be harmed, investors could lose confidence
in our reported financial information, and the trading price of our
common stock could drop significantly.
Our Certificate of Incorporation, Bylaws and Delaware law may have
anti-takeover effects that could discourage, delay or prevent a
change in control, which may cause our stock price to
decline.
Our
Certificate of Incorporation, Bylaws and Delaware law could make it
more difficult for a third-party to acquire us, even if closing
such a transaction would be beneficial to our stockholders.
Provisions of our Certificate of Incorporation, Bylaws and Delaware
law also could have the effect of discouraging potential
acquisition proposals or making a tender offer or delaying or
preventing a change in control, including changes a stockholder
might consider favorable. Such provisions may also prevent or
frustrate attempts by our stockholders to replace or remove our
management. In particular, the Certificate of Incorporation, Bylaws
and Delaware law, as applicable, among other things:
|
● |
provide
the board of directors with the ability to alter the Bylaws without
stockholder approval; |
|
● |
the
classification of our board of directors; |
|
● |
place
limitations on the removal of directors; |
|
● |
provide
that vacancies on the Board of Directors may be filled by a
majority of directors in office, although less than a
quorum; |
|
● |
require
that stockholder actions must be affected at a duly called
stockholder meeting and generally prohibiting stockholder actions
by written consent; |
|
● |
eliminate
the ability of stockholders to call a special meeting of
stockholders; and |
|
● |
establish
advance notice requirements for nominations for election to the
Board of Directors or for proposing matters that can be acted upon
at duly called stockholder meetings. |
We are subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits “business
combinations” between a publicly-held Delaware corporation and an
“interested stockholder,” which is generally defined as a
stockholder who becomes a beneficial owner of 15% or more of a
Delaware corporation’s voting stock for a three-year period
following the date that such stockholder became an interested
stockholder. These provisions are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of us to first
negotiate with our board. These provisions may delay or prevent
someone from acquiring or merging with us, which may cause the
market price of our common stock and the value of our securities to
decline.
If we fail to comply with the continued listing requirements
of the Nasdaq Capital Market, our common stock may be delisted and
the price of our common stock and our ability to access the capital
markets could be negatively impacted.
Nasdaq
has established certain standards for the continued listing of a
security on the Nasdaq Capital Market. The standards for continued
listing include, among other things, that the minimum bid price for
the listed securities not fall below $1.00 per share for a period
of 30 consecutive trading days and that we maintain a minimum of
$2,500,000 in shareholders’ equity.
On
January 3, 2022, we were notified, or the Notification Letter, by
the Nasdaq Listing Qualifications that we are not in compliance
with the minimum bid price requirements set forth in Nasdaq Listing
Rule 5550(a)(2), or the Rule, for continued listing on The Nasdaq
Capital Market. In accordance with the Nasdaq Listing Rules, the
Company was provided with a grace period, through July 5, 2022, to
regain compliance with the Rule. The Company did not regain
compliance with the Rule by July 5, 2022. Nasdaq granted the
Company an extension of the grace period, until January 2, 2023, to
regain compliance with the Rule. On December 23, 2022, the Company
received a letter from Nasdaq that, for the 10 consecutive business
days from December 9, 2022 to December 22, 2022, the closing bid
price of the Company’s common stock had been at $1.00 per share or
greater. Accordingly, the Company has regained compliance with
Nasdaq Listing Rule 5550(a)(2) and Nasdaq considers the prior bid
price deficiency matter now closed.
No assurance can be given that we will continue to be in compliance
with the Rule. Failure to meet applicable Nasdaq continued listing
standards could result in a delisting of our common stock. A
delisting of our common stock from Nasdaq could materially reduce
the liquidity of our common stock and result in a corresponding
material reduction in the price of our common stock. In addition,
delisting could harm our ability to raise capital through
alternative financing sources on terms acceptable to us, or at all,
and may result in the potential loss of confidence by investors,
employees and fewer business development opportunities.
The exercise of outstanding warrants and stock options will have a
dilutive effect on the percentage ownership of our capital stock by
existing stockholders.
As of
January 27, 2023, we had outstanding warrants to acquire 270,063
shares of our common stock and stock options to purchase 1,890
shares of our common stock, which warrants and options are
exercisable for prices ranging between $23.2 and $375. The
expiration of the term of such options and warrants range from 0.07
years to 3.76 years. If a significant number of such warrants and
stock options are exercised by the holders, the percentage of our
common stock owned by our existing stockholders will be
diluted.
Were our common stock to become subject to the penny stock rules
then this could result in U.S. broker-dealers becoming discouraged
from effecting transactions in shares of our common
stock.
Rule
15g-9 under the Exchange Act establishes the definition of a “penny
stock,” for the purposes relevant to us, as any equity security
that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain
exceptions. If we do not retain a listing on the Nasdaq Capital
Market or do not meet certain net tangible asset or average revenue
requirements and if the price of our common stock is less than
$5.00, our common stock will be deemed a penny stock. For any
transaction involving a penny stock, unless exempt, the rules
require: (a) that a broker or dealer approve a person’s account for
transactions in penny stocks; and (b) the broker or dealer receive
from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be
purchased.
In
order to approve a person’s account for transactions in penny
stocks, the broker or dealer must: (a) obtain financial information
and investment experience objectives of the person and (b) make a
reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks. The broker or dealer must
also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny
stock market, which: (a) sets forth the basis on which the broker
or dealer made the suitability determination; and (b) confirms that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction. Generally, brokers may be less
willing to execute transactions in securities subject to the “penny
stock” rules. This may make it more difficult for investors to
dispose of our common stock and cause a decline in the market value
of our common stock.
Disclosure
also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading and about the
commissions payable to both the broker or dealer and the registered
representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in
penny stock transactions. Finally, monthly statements have to be
sent disclosing recent price information for the penny stock held
in the account and information on the limited market in penny
stocks.
Sales of our currently issued and outstanding stock may become
freely tradable pursuant to Rule 144 and may dilute the market for
your shares and have a depressive effect on the price of the shares
of our common stock.
A
portion of our outstanding shares of common stock are “restricted
securities” within the meaning of Rule 144 under the Securities Act
of 1933, as amended, or the Securities Act. As restricted shares,
these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or
other applicable exemptions from registration under the Securities
Act and as required under applicable state securities laws. Rule
144 provides in essence that an affiliate (as such term is defined
in Rule 144(a)(1)) of an issuer who has held restricted securities
for a period of at least six months (one year after filing Form 10
information with the SEC for shell companies and former shell
companies) may, under certain conditions, sell every three months,
in brokerage transactions, a number of shares that does not exceed
the greater of 1% of a company’s outstanding shares of common stock
or the average weekly trading volume during the four calendar weeks
prior to the sale (the four calendar week rule does not apply to
companies quoted on the OTC Markets). Rule 144 also permits, under
certain circumstances, the sale of securities, without any
limitation, by a person who is not an Affiliate of the Company and
who has satisfied a one-year holding period. A sale under Rule 144
or under any other exemption from the Securities Act, if available,
or pursuant to subsequent registrations of our shares of common
stock, may have a depressive effect upon the price of our shares of
common stock in any active market that may develop.
We are a former “shell company” and as such are subject to certain
limitations not applicable to other public companies
generally.
Prior
to our suspension of reporting in 2012, we were a public reporting
“shell company,” as defined in Rule 12b-2 under the Exchange Act.
Although we are no longer a “shell company,” we are subject to
certain restrictions under the Securities Act for the resale of
securities issued by issuers that have been at any time previously
a shell company. Specifically, the Rule 144 safe harbor available
for the resale of our restricted securities is only available to
our stockholders if we have filed all reports and other materials
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934, as amended, or the Exchange Act, as
applicable, during the preceding twelve months, other than current
reports on Form 8-K, at the time of the proposed sale, regardless
of whether the restricted securities were initially issued at the
time we were a shell company or subsequent to termination of such
status. Accordingly, holders of our “restricted securities” within
the meaning of Rule 144 will be subject to the conditions set forth
in Rule 144 with respect to our company. Other reporting companies
that are not former shell companies and have been reporting for
more than twelve months are not subject to this same reporting
threshold for non-affiliate reliance on Rule 144. Accordingly, any
restricted securities we have sold or sell in the future or issue
to consultants or employees, in consideration for services rendered
or for any other purpose, may not be resold unless such securities
are registered with the SEC or the requirements of Rule 144 have
been satisfied. As a result, it may be harder for us to fund our
operations and pay our employees and consultants with our
securities instead of cash. Furthermore, it may be harder for us to
raise funding through the sale of debt or equity securities unless
we agree to register such securities with the SEC, which could
cause us to expend additional resources in the future. Our prior
status as a “shell company” could prevent us in the future from
raising additional funds, engaging employees and consultants, and
using our securities to pay for any acquisitions, which could cause
the value of our securities, if any, to decline in value or become
worthless.
The sale of a substantial amount of our shares of common stock
including resale of the shares being registered hereunder in the
public market could adversely affect the prevailing market price of
our common stock.
We
are registering for resale 2,572,832 shares of common stock. Sales
of substantial amounts of shares of our shares of common stock in
the public market, or the perception that such sales might occur,
could adversely affect the market price of our shares of common
stock, and the market value of our other securities. We cannot
predict if and when selling stockholders may sell such shares in
the public markets. Furthermore, in the future, we may issue
additional shares of common stock or other equity or debt
securities convertible into shares of common stock. Any such
issuance could result in substantial dilution to our existing
shareholders and could cause our stock price to decline.
SPECIAL NOTE REGARDING FORWARD LOOKING
STATEMENTS
This
prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Any statements in this prospectus 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 in this prospectus or in
our Annual Report on Form 10-K that is incorporated by reference
herein. 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; |
|
|
|
|
● |
risk
related to the COVID-19 pandemic; |
|
● |
the
new and unproven nature of the measurement technology
markets; |
|
● |
our
ability to achieve customer adoption of our products; |
|
● |
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 acquisitions and 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; 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 prospectus and the
documents that we reference herein and have filed as exhibits to
the Annual Report on Form 10-K, 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 prospectus is accurate as of the date
hereof. Because the risk factors referred to in this prospectus or
in our Annual Report on Form 10-K, 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 prospectus, and particularly our
forward-looking statements, by these cautionary
statements.
USE OF PROCEEDS
We
will not receive any proceeds from the sale of the shares of common
stock by the selling stockholders. All net proceeds from the sale
of the shares of common stock covered by this prospectus will go to
the selling stockholders. We expect that the selling stockholders
will sell their shares of common stock as described under “Plan of
Distribution.”
We
may receive proceeds from the exercise of the Pre-funded Warrants,
Warrants and Placement Agent Warrants and issuance of the
underlying warrant shares to the extent that these warrants are
exercised for cash. The Warrants and Placement Agent Warrants,
however, are exercisable on a cashless basis under certain
circumstances. If all of the warrants mentioned above were
exercised for cash in full, the proceeds would be approximately
$5.8 million. We intend to use the net proceeds of such warrant
exercise, if any, for general corporate purposes and working
capital.
Pending
any use, as described above, we intend to invest the net proceeds
in high-quality, short-term, interest-bearing securities. We can
make no assurances that any of the warrants and placement agent
warrants will be exercised, or if exercised, that they will be
exercised for cash, the quantity which will be exercised or in the
period in which they will be exercised.
SELLING STOCKHOLDERS
The
shares of common stock being offered by the selling stockholders
are those shares of common stock issuable upon exercise of the
Pre-funded Warrants in the PIPE Offering, and those shares of
common stock issuable upon exercise of Warrants and Placement Agent
Warrants previously issued in connection with both the RD Offering
and PIPE Offering. For additional information regarding the
issuance of those shares of common stock and warrants, see
“Prospectus Summary – January 2023 Financing” above. We are
registering the shares of common stock in order to permit the
selling stockholders to offer the shares of common stock for resale
from time to time. Other than with respect to Wainwright, which
acted as our placement agent in each of the January 2023, October
2021, the January 2020, May 2020 financings and our former
at-the-market offering
facility that was established in September 2019, except for
the ownership of the Warrants and Placement Agent Warrants issued,
and the shares of common stock issued and issuable pursuant to
prior financings, the selling stockholders have not had any
material relationship with us within the past three
years.
The
table below lists the selling stockholders and other information
regarding the beneficial ownership of the shares of common stock by
each of the selling stockholders. The second column lists the
number the shares of common stock beneficially owned by each
selling stockholder, based on its ownership of the shares of common
stock and Warrants or Placement Agent Warrants to purchase the
shares of common stock, as of January 27, 2023, assuming exercise
of the Warrants or Placement Agent Warrants held by the selling
stockholders on that date, without regard to any limitations on
conversions or exercises. The third column lists the maximum number
of the shares of common stock being offered in this prospectus by
the selling stockholders. The fourth and fifth columns list the
amount of the shares of common stock owned after the offering, by
number of the shares of common stock and percentage of outstanding
the shares of common stock (assuming for the purpose of such
percentage, 1,626,117 shares outstanding as of January 27, 2023)
assuming in both cases the sale of all of the shares of common
stock offered by the selling stockholders pursuant to this
prospectus, and without regard to any limitations on conversions or
exercises.
Under
the terms of the Warrants and Placement Agent Warrants issued in
the Offerings, a selling stockholder may not exercise the warrants
to the extent such exercise would cause such selling stockholder,
together with its affiliates, to beneficially own a number of
shares of common stock which would exceed 4.99% or 9.99%, as
applicable, of our then outstanding shares of common stock
following such exercise, excluding for purposes of such
determination shares of common stock not yet issuable upon exercise
of the warrants and placement agent warrants which have not been
exercised. The number of shares does not reflect this limitation.
The selling stockholders may sell all, some or none of their shares
of common stock or warrants or placement agent warrants in this
offering. See “Plan of Distribution.”
Selling Stockholder |
|
Number of Shares of Common Stock Owned Prior to Offering |
|
|
Maximum Number of Shares of Common Stock to be Sold Pursuant to
this Prospectus |
|
|
Number of Shares of Common Stock Owned After the Offering |
|
|
Percentage of Shares of Common Stock Owned After the Offering |
Armistice Capital Master
Fund Ltd. (1) |
|
|
2,991,966 |
(2) |
|
|
2,504,092 |
(3) |
|
|
487,874 |
(4) |
|
* |
Michael Vasinkevich (5) |
|
|
63,155 |
(6) |
|
|
44,079 |
(7) |
|
|
19,076 |
(8) |
|
* |
Noam Rubinstein (5) |
|
|
31,025 |
(9) |
|
|
21,654 |
(10) |
|
|
9,371 |
(11) |
|
* |
Craig Schwabe (5) |
|
|
3,324 |
(12) |
|
|
2,320 |
(13) |
|
|
1,004 |
(14) |
|
* |
Charles Worthman (5) |
|
|
984 |
(15) |
|
|
687 |
(16) |
|
|
297 |
(17) |
|
* |
* |
Denotes
less than 1% |
|
|
(1) |
The
shares of common stock are directly held by Armistice Capital
Master Fund Ltd., a Cayman Islands exempted company (the “Master
Fund”), and may be deemed to be indirectly beneficially owned by:
(i) Armistice Capital, LLC, or Armistice Capital, as the investment
manager of the Master Fund; and (ii) Steven Boyd, as the Managing
Member of Armistice Capital. Armistice Capital and Steven Boyd
disclaim beneficial ownership of the securities except to the
extent of their respective pecuniary interests therein. Of the
shares of common stock held by the Master Fund, 333,917 are
issuable only upon the exercise of warrants, which are subject to a
beneficial ownership limitation preventing the Master Fund from
exercising any portion of the warrants if such exercise would
result in the Master Fund owning greater than 4.99% or 9.99% (in
the case of the Pre-funded Warrants) of our outstanding shares of
common stock following such exercise. The address of the Master
Fund is c/o Armistice Capital, LLC, 510 Madison Ave, 7th Floor, New
York, NY 10022. |
|
|
(2) |
Represents
(i) 6,865 shares of common stock issuable upon exercise of warrants
issued in our January 2020 private placement, (ii) 18,861 shares of
common stock issuable upon exercise of warrants issued in the
October 2021 registered direct offering, (iii) 28,292 shares of
common stock issuable upon exercise of warrants issued in the
October 2021 private placement, (iv) 153,957 shares issued in the
RD Offering, (v) 279,899 shares of common stock issuable upon
exercise of Pre-funded Warrants issued in the RD Offering, (vi)
441,899 shares of common stock issuable upon exercise of Class A
Warrants issued in the RD Offering, (vii) 441,899 shares of common
stock issuable upon exercise of Class B Warrants issued in the RD
Offering, (viii) 540,098 shares of common stock issuable upon
exercise of Pre-funded Warrants issued in the PIPE Offering, (ix)
540,098 shares of common stock issuable upon exercise of Series A
Warrants issued in the PIPE Offering, and (x) 540,098 shares of
common stock issuable upon exercise of Series B Warrants issued in
the PIPE Offering. |
|
|
(3) |
Represents
(i) 441,899 shares of common stock issuable upon exercise of Series
A Warrants issued in the RD Offering, (ii) 441,899 shares of common
stock issuable upon exercise of Series B Warrants issued in the RD
Offering, (iii) 540,098 shares of common stock issuable upon
exercise of Pre-funded Warrants in the PIPE Offering, (iv) 540,098
shares of common stock issuable upon exercise of Series A Warrants
issued in the PIPE Offering, and (v) 540,098 shares of common stock
issuable upon exercise of Series B Warrant issued in the PIPE
Offering. |
|
|
(4) |
Represents
(i) 6,865 shares of common stock issuable upon exercise of warrants
issued in our January 2020 private placement, (ii) 18,861 shares of
common stock issuable upon exercise of warrants issued in the
October 2021 registered direct offering, (iii) 28,292 shares of
common stock issuable upon exercise of warrants issued in the
October 2021 private placement, (iv) 153,957 shares issued in the
RD Offering, and (v) 279,899 shares of common stock issuable upon
exercise of Pre-funded Warrants issued in the RD
Offering. |
|
|
(5) |
Referenced
person is affiliated with Wainwright, a registered broker dealer.
Wainwright is a registered broker-dealer and acted as our placement
agent in the Offerings and our January 2020, May 2020 and October
2021 financings and has acted as sales agent in our at-the-market
equity offering. |
|
|
(6) |
Represents
(i) 792 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
6,995 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, (iii) 11,288 shares
of common stock issuable upon exercise of placement agent warrants
issued in our October 2021 offering, and (iv) 44,079 shares of
common stock issuable upon exercise of Placement Agent Warrants
issued in connection with the Offerings. |
|
|
(7) |
Represent
44,079 shares of common stock issuable upon exercise of Placement
Agent Warrants issued in connection with the Offerings. |
|
|
(8) |
Represents
(i) 792 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
6,995 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, and (iii) 11,288
shares of common stock issuable upon exercise of placement agent
warrants issued in our October 2021 offering. |
|
|
(9) |
Represents
(i) 389 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
3,436 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, (iii) 5,545 shares
of common stock issuable upon exercise of placement agent warrants
issued in our October 2021 offering, and (iv) 21,654 shares of
common stock issuable on exercise of Placement Agent Warrants
issued in connection with the Offerings. |
(10) |
Represent
21,654 shares of common stock issuable upon exercise of Placement
Agent Warrants issued in connection with the Offerings. |
|
|
(11) |
Represents
(i) 389 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
3,436 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, and (iii) 5,545
shares of common stock issuable upon exercise of placement agent
warrants issued in our October 2021 offering. |
|
|
(12) |
Represents
(i) 42 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
368 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, (iii) 594 shares of
common stock issuable upon exercise of placement agent warrants
issued in our October 2021 offering, and (iv) 2,320 shares of
common stock issuable upon exercise of our Placement
Agent Warrants issued in connection with the Offerings. |
|
|
(13) |
Represent
2,320 shares of common stock issuable upon exercise of Placement
Agent Warrants issued in connection with the Offerings. |
|
|
(14) |
Represents
(i) 42 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
368 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, and (iii) 594
shares of common stock issuable upon exercise of placement agent
warrants issued in our October 2021 offering. |
|
|
(15) |
Represents
(i) 12 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
109 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, (iii) 176 shares of
common stock issuable upon exercise of placement agent warrants
issued in our October 2021 offering, and (iv) 687 shares of common
stock issuable upon exercise of Placement Agent Warrants issued in
connection with the Offerings. |
|
|
(16) |
Represent
687 shares of common stock issuable upon exercise of Placement
Agent Warrants issued in connection with the Offerings. |
|
|
(17) |
Represents
(i) 12 shares of common stock issuable upon exercise of placement
agent warrants issued in our January 2020 private placement, (ii)
109 shares of common stock issuable upon exercise of placement
agent warrants issued in our May 2020 offering, and (iii) 176
shares of common stock issuable upon exercise of placement agent
warrants issued in our October 2021 offering. |
DESCRIPTION OF THE OFFERED SECURITIES
The
selling stockholders may, from time to time, sell, transfer, or
otherwise dispose of any or all of their shares of common stock or
interests in shares of common stock on any stock exchange, market,
or trading facility on which the shares are traded or in private
transactions at fixed prices, at prevailing market prices at the
time of sale, at prices related to the prevailing market price, at
varying prices determined at the time of sale, or at negotiated
prices. This prospectus provides you with a general description of
the common stock the selling stockholders may offer.
As of
January 27, 2023, our authorized share capital consists of
250,000,000 shares of common stock, $0.001 par value per share, of
which 1,626,117 are outstanding. Our authorized but unissued shares
of common stock will be available for future issuance without your
approval. We may use additional shares for a variety of purposes,
including future public offerings to raise additional capital, to
fund acquisitions and as employee compensation. The existence of
authorized but unissued shares of common stock could render more
difficult or discourage an attempt to obtain control of us by means
of a proxy contest, tender offer, merger or otherwise. Unless
approval of our stockholders is so required, our board of directors
does not intend to seek stockholder approval for the issuance and
sale of our common stock.
The
description below is intended as a summary, and is qualified in its
entirety by reference to our amended and restated certificate of
incorporation, or our Certificate of Incorporation, and amended and
restated bylaws, or our Bylaws.
We
implemented a 1-for-25 reverse stock split of our outstanding
shares of common stock that was effective for Nasdaq Capital Market
purposes at the open of business on December 8, 2022. All share and
related option and warrant information presented in this prospectus
supplement have been retroactively adjusted to reflect the reduced
number of shares and the increase in the share price which resulted
from this action.
Common
Stock
Holders
of our common stock are entitled to one vote per share. Our
Certificate of Incorporation does not provide for cumulative
voting. Holders of our common stock are entitled to receive ratably
such dividends, if any, as may be declared by our board of
directors out of legally available funds. However, the current
policy of our board of directors is to retain earnings, if any, for
the operation and expansion of our company. Upon liquidation,
dissolution or winding-up, the holders of our common stock are
entitled to share ratably in all of our assets which are legally
available for distribution, after payment of or provision for all
liabilities. The holders of our common stock have no preemptive,
subscription, redemption or conversion rights.
Pre-Funded
Warrants
The
following summary of certain terms and provisions of the pre-funded
warrants is not complete and is subject to, and qualified in its
entirety by, the provisions of the pre-funded warrants, the form of
which was filed with the SEC by us as an exhibit to a Current
Report on Form 8-K on January 12, 2023. Prospective investors
should carefully review the terms and provisions of the form of
Private Placement Pre-Funded Warrant for a complete description of
the terms and conditions of the pre-funded warrants.
Duration
and Exercise Price. Each pre-funded warrant has an initial
exercise price per share equal to $0.001. The pre-funded warrants
are immediately exercisable and may be exercised at any time until
the pre-funded warrants are exercised in full. The exercise price
and number of shares of common stock issuable upon exercise is
subject to appropriate adjustment in the event of stock dividends,
stock splits, reorganizations, or similar events affecting our
common stock and the exercise price. The pre-funded warrants will
be issued separately and may be transferred separately immediately
thereafter.
Exercisability.
The pre-funded warrants are exercisable, at the option of each
holder, in whole or in part, by delivering to us a duly executed
exercise notice accompanied by payment in full for the number of
shares of our common stock purchased upon such exercise (except in
the case of a cashless exercise as discussed below). The purchaser
of the pre-funded warrants in this offering may elect to deliver
its exercise notice following the pricing of the offering and prior
to the issuance of the pre-funded warrants at closing to have its
pre-funded warrants exercised immediately upon issuance and receive
shares of common stock underlying the pre-funded warrants upon
closing of this offering. A holder (together with its affiliates)
may not exercise any portion of the pre-funded warrant to the
extent that the holder would own more than 4.99% of the outstanding
common stock immediately after exercise, which percentage may be
changed at the holder’s election to a lower percentage at any time
or to a higher percentage not to exceed 9.99% upon 61 days’ notice
to us. The purchaser of pre-funded warrants in this offering may
also elect prior to the issuance of the pre-funded warrants to have
the initial exercise limitation set at 9.99% of our outstanding
common stock. No fractional shares of common stock will be issued
in connection with the exercise of the pre-funded warrants. In lieu
of fractional shares, at our election, we will either round up to
the nearest whole number or we will pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction
multiplied by the exercise price.
Cashless
Exercise. A holder may elect to receive upon exercise of its
pre-funded warrants (either in whole or in part) the net number of
shares of common stock determined according to a formula set forth
in the pre-funded warrants in lieu of making the cash payment
otherwise contemplated to be made to us upon such exercise in
payment of the aggregate exercise price.
Transferability.
Subject to certain transfer restrictions, a pre-funded warrant may
be transferred at the option of the holder upon surrender of the
pre-funded warrants to us together with the appropriate instruments
of transfer.
Exchange
Listing. There is no trading market available for the
pre-funded warrants on any securities exchange or nationally
recognized trading system. We do not intend to list the pre-funded
warrants on any securities exchange or nationally recognized
trading system.
Right
as a Stockholder. Except as otherwise provided in the
pre-funded warrants or by virtue of such holder’s ownership of
shares of our common stock, the holders of the pre-funded warrants
do not have the rights or privileges of holders of our common
stock, including any voting rights, until they exercise their
pre-funded warrants.
Fundamental
Transaction. In the event of any fundamental transaction, as
described in the pre-funded warrants and generally including any
merger with or into another entity, sale of all or substantially
all of our assets, tender offer or exchange offer, reclassification
of our common stock, or purchase agreement or other business
combination pursuant to which another person or group of persons
acquires more than 50% of the outstanding shares of our common
stock, then upon any subsequent exercise of a pre-funded warrant,
the holder will have the right to receive as alternative
consideration, for each share of our common stock that would have
been issuable upon such exercise immediately prior to the
occurrence of such fundamental transaction, the number of shares of
common stock of the successor or acquiring corporation or of our
company, if it is the surviving corporation, and any additional
consideration receivable upon or as a result of such transaction by
a holder of the number of shares of our common stock for which the
pre-funded warrant is exercisable immediately prior to such
event.
Warrants
The
following summary of certain terms and provisions of the Series A
and Series B warrants and placement agent warrants is not complete
and is subject to, and qualified in its entirety by, the provisions
of the Series A and Series B warrants and Placement Agent warrants,
the form of which were filed with the SEC by us as an exhibit to a
Current Report on Form 8-K on January 12, 2023. Prospective
investors should carefully review the terms and provisions of the
form of Series A and Series B Warrant for a complete description of
the terms and conditions of the Series A and Series B warrants and
Placement Agent warrants.
Duration
and Exercise Price. Each Warrant Placement Agent Warrant is
immediately exercisable and has an initial exercise price per share
equal to $2.805 in the case of Warrants and $3.8188 in the case of
Placement Agent Warrants. The Series A Warrants have a term of five
and one-half years from the date of the issuance and the Series B
Warrants have a term of 28 months from the date of issuance and the
Placement Agent Warrants have a term of five years, expiring on
January 10, 2028. The exercise price and number of shares of common
stock issuable upon exercise is subject to appropriate adjustment
in the event of stock dividends, stock splits, reorganizations, or
similar events affecting our common stock and the exercise
price.
Exercisability.
The Warrants and Placement Agent Warrants are exercisable, at the
option of each holder, in whole or in part, by delivering to us a
duly executed exercise notice accompanied by payment in full for
the number of shares of our common stock purchased upon such
exercise (except in the case of a cashless exercise as discussed
below). A holder (together with its affiliates) may not exercise
any portion of the Warrants to the extent that the holder would own
more than 4.99% of the outstanding common stock immediately after
exercise, which percentage may be changed at the holder’s election
to a lower percentage at any time or to a higher percentage not to
exceed 9.99% upon 61 days’ notice to us. No fractional shares of
common stock will be issued in connection with the exercise of the
Warrants. In lieu of fractional shares, at our election, we will
either round up to the nearest whole number or we will pay a cash
adjustment in respect of such final fraction in an amount equal to
such fraction multiplied by the exercise price.
Cashless
Exercise. A holder may elect to receive upon exercise of its
Warrants and Placement Agent Warrants (either in whole or in part)
the net number of shares of common stock determined according to a
formula set forth in the Warrants in lieu of making the cash
payment otherwise contemplated to be made to us upon such exercise
in payment of the aggregate exercise price.
Transferability.
Subject to certain transfer restrictions, the Warrants and
Placement Agent Warrants may be transferred at the option of the
holder upon surrender of the Warrants and Placement Agent Warrants
to us together with the appropriate instruments of
transfer.
Exchange
Listing. There is no trading market available for the Warrants
and Placement Agent Warrants on any securities exchange or
nationally recognized trading system. We do not intend to list the
Warrants and Placement Agent Warrants on any securities exchange or
nationally recognized trading system.
Right
as a Stockholder. Except as otherwise provided in the Warrants
and Placement Agent Warrants or by virtue of such holder’s
ownership of shares of our common stock, the holders of the
Warrants and Placement Agent Warrants do not have the rights or
privileges of holders of our common stock, including any voting
rights, until they exercise their Warrants and Placement Agent
Warrants.
Fundamental
Transaction. In the event of any fundamental transaction, as
described in the Warrants and Placement Agent Warrants and
generally including any merger with or into another entity, sale of
all or substantially all of our assets, tender offer or exchange
offer, reclassification of our common stock, or purchase agreement
or other business combination pursuant to which another person or
group of persons acquires more than 50% of the outstanding shares
of our common stock, then upon any subsequent exercise of a
Warrant, the holder will have the right to receive as alternative
consideration, for each share of our common stock that would have
been issuable upon such exercise immediately prior to the
occurrence of such fundamental transaction, the number of shares of
common stock of the successor or acquiring corporation or of our
company, if it is the surviving corporation, and any additional
consideration receivable upon or as a result of such transaction by
a holder of the number of shares of our common stock for which the
Warrant or Placement Agent Warrant is exercisable immediately prior
to such event. In the event of a fundamental transaction,
upon the holder’s option, our company or any successor entity will
purchase the Warrant or Placement Agent Warrant from the holder by
paying an amount of cash equal to the Black Scholes Value (as
defined in the Warrants and Placement Agent Warrants) of the
remaining unexercised portion of the Warrant or Placement Agent
Warrant on the date of the consummation of such fundamental
transaction.
Anti-Takeover
Effects of Certain Provisions of our Certificate of Incorporation,
Bylaws and the DGCL
Certain
provisions of our Certificate of Incorporation and our Bylaws,
which are summarized in the following paragraphs, may have the
effect of discouraging potential acquisition proposals or making a
tender offer or delaying or preventing a change in control,
including changes a stockholder might consider favorable. Such
provisions may also prevent or frustrate attempts by our
stockholders to replace or remove our management. In particular,
our Certificate of Incorporation and our Bylaws and Delaware law,
as applicable, among other things:
|
● |
provide
the board of directors with the ability to alter the Bylaws without
stockholder approval; |
|
|
|
|
● |
the
classification of our board of directors; |
|
|
|
|
● |
place
limitations on the removal of directors; |
|
|
|
|
● |
provide
that vacancies on the board of directors may be filled by a
majority of directors in office, although less than a
quorum; |
|
|
|
|
● |
require
that stockholder actions must be affected at a duly called
stockholder meeting and generally prohibiting stockholder actions
by written consent; |
|
|
|
|
● |
eliminate
the ability of stockholders to call a special meeting of
stockholders; and |
|
|
|
|
● |
establish
advance notice requirements for nominations for election to the
board of directors or for proposing matters that can be acted upon
at duly called stockholder meetings. |
These
provisions are expected to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of us to first negotiate with
its board. These provisions may delay or prevent someone from
acquiring or merging with us, which may cause our market price of
our common stock to decline.
Advance
Notice Bylaws. Our Bylaws contain an advance notice procedure
for stockholder proposals to be brought before any meeting of
stockholders, including proposed nominations of persons for
election to our Board of Directors. Stockholders at any meeting
will only be able to consider proposals or nominations specified in
the notice of meeting or brought before the meeting by or at the
direction of our Board of Directors or by a stockholder who was a
stockholder of record on the record date for the meeting, who is
entitled to vote at the meeting and who has given our corporate
secretary timely written notice, in proper form, of the
stockholder’s intention to bring that business before the meeting.
Although the Bylaws do not give our Board of Directors the power to
approve or disapprove stockholder nominations of candidates or
proposals regarding other business to be conducted at a special or
annual meeting, the Bylaws may have the effect of precluding the
conduct of certain business at a meeting if the proper procedures
are not followed or may discourage or deter a potential acquirer
from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of
us.
Interested
Stockholder Transactions. We are subject to Section 203 of the
Delaware General Corporation Law, or DGCL, which, subject to
certain exceptions, prohibits “business combinations” between a
publicly-held Delaware corporation and an “interested stockholder,”
which is generally defined as a stockholder who becomes a
beneficial owner of 15% or more of a Delaware corporation’s voting
stock for a three-year period following the date that such
stockholder became an interested stockholder.
Forum
Selection
Our
Bylaws provide that unless we consent in writing to the selection
of an alternative forum, the Court of Chancery of the State of
Delaware (or, if the Court of Chancery does not have jurisdiction,
another state court or a federal court located within the State of
Delaware) will, to the fullest extent permitted by applicable law
and subject to applicable jurisdictional requirements, be the sole
and exclusive forum for any stockholder (including a beneficial
owner) to bring claims, including claims in the right of the
Company, (i) that are based upon a violation of a duty by a current
or former director, officer, employee or stockholder in such
capacity, or (ii) as to which the DGCL confers jurisdiction upon
the Court of Chancery.
Limitations
on Liability, Indemnification of Officers and Directors and
Insurance
The
DGCL authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for
monetary damages for breaches of directors’ fiduciary duties as
directors and Certificate of Incorporation will include such an
exculpation provision. Our Certificate of Incorporation and Bylaws
will include provisions that indemnify, to the fullest extent
allowable under the DGCL, the personal liability of directors or
officers for monetary damages for actions taken as a director or
officer of us, or for serving at our request as a director or
officer or another position at another corporation or enterprise,
as the case may be. Our Certificate of Incorporation and Bylaws
will also provide that we must indemnify and advance reasonable
expenses to our directors and officers, subject to our receipt of
an undertaking from the indemnified party as may be required under
the DGCL. Our Certificate of Incorporation will expressly authorize
us to carry directors’ and officers’ insurance to protect us, our
directors, officers and certain employees for some liabilities. The
limitation of liability and indemnification provisions in our
Certificate of Incorporation and Bylaws may discourage stockholders
from bringing a lawsuit against directors for breach of their
fiduciary duty. These provisions may also have the effect of
reducing the likelihood of derivative litigation against our
directors and officers, even though such an action, if successful,
might otherwise benefit us and our stockholders. However, these
provisions do not limit or eliminate our rights, or those of any
stockholder, to seek non-monetary relief such as injunction or
rescission in the event of a breach of a director’s duty of care.
The provisions will not alter the liability of directors under the
federal securities laws. In addition, your investment may be
adversely affected to the extent that, in a class action or direct
suit, we pay the costs of settlement and damage awards against
directors and officers pursuant to these indemnification
provisions. There is currently no pending material litigation or
proceeding against any of our directors, officers or employees for
which indemnification is sought.
Transfer
Agent and Registrar
The
Transfer Agent and Registrar for our common stock is VStock
Transfer, LLC, 18 Lafayette Place, Woodmere, New York 11598. The
telephone number of VStock Transfer, LLC is (212)
828-8436.
Listing
Our
common stock is listed on the Nasdaq Capital Market under the
symbol “MYSZ” and on the TASE under the symbol “MYSZ”.
PLAN OF DISTRIBUTION
Each
selling stockholder, or the Selling Stockholders, of the securities
and any of their pledgees, assignees and successors-in-interest
may, from time to time, sell any or all of their securities covered
hereby on the Nasdaq Capital Market or any other stock exchange,
market or trading facility on which the securities are traded or in
private transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may use any one or more of the
following methods when selling securities:
|
● |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers; |
|
● |
block
trades in which the broker dealer will attempt to sell the
securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction; |
|
● |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its account; |
|
● |
an
exchange distribution in accordance with the rules of the
applicable exchange; |
|
● |
privately
negotiated transactions; |
|
● |
settlement
of short sales; |
|
● |
in
transactions through broker-dealers that agree with the Selling
Stockholders to sell a specified number of such securities at a
stipulated price per security; |
|
● |
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise; |
|
● |
a
combination of any such methods of sale; or |
|
● |
any
other method permitted pursuant to applicable law. |
The
Selling Stockholders may also sell securities under Rule 144 or any
other exemption from registration under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the purchaser of securities, from
the purchaser) in amounts to be negotiated, but, except as set
forth in a supplement to this Prospectus, in the case of an agency
transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2121; and in the case of a principal
transaction a markup or markdown in compliance with FINRA Rule
2121.
In
connection with the sale of the securities or interests therein,
the Selling Stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn
engage in short sales of the securities in the course of hedging
the positions they assume. The Selling Stockholders may also sell
securities short and deliver these securities to close out their
short positions, or loan or pledge the securities to broker-dealers
that in turn may sell these securities. The Selling Stockholders
may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or
more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered
by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as
supplemented or amended to reflect such transaction).
The
Selling Stockholders and any broker-dealers or agents that are
involved in selling the securities may be deemed to be
“underwriters” within the meaning of the Securities Act in
connection with such sales. In such event, any commissions received
by such broker-dealers or agents and any profit on the resale of
the securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling
Stockholder has informed us that it does not have any written or
oral agreement or understanding, directly or indirectly, with any
person to distribute the securities.
We are required
to pay certain fees and expenses incurred by us incident to the
registration of the securities. We have agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities
Act.
We
agreed to keep this prospectus effective until the earlier of (i)
the date on which the securities may be resold by the Selling
Stockholders without registration and without regard to any volume
or manner-of-sale limitations by reason of Rule 144, without the
requirement for us to be in compliance with the current public
information under Rule 144 under the Securities Act or any other
rule of similar effect or (ii) all of the securities have been sold
pursuant to this prospectus or Rule 144 under the Securities Act or
any other rule of similar effect. The resale securities will be
sold only through registered or licensed brokers or dealers if
required under applicable state securities laws. In addition, in
certain states, the resale securities covered hereby may not be
sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or
qualification requirement is available and is complied
with.
Under
applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not
simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined
in Regulation M, prior to the commencement of the distribution. In
addition, the Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations
thereunder, including Regulation M, which may limit the timing of
purchases and sales of the common stock by the Selling Stockholders
or any other person. We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or
prior to the time of the sale (including by compliance with Rule
172 under the Securities Act).
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULT OF OPERATIONS
The following discussion of our results of operations and
financial condition should be read in conjunction with our
consolidated financial statements and related notes included
elsewhere in this prospectus. The discussion and analysis should
also be read together with our unaudited pro forma financial
information for the year ended December 31, 2021 and the nine
months ended September 30, 2022. This discussion contains
forward-looking statements based upon our current expectations,
estimates and projections that involve risks and uncertainties.
Actual results could differ materially from those anticipated in
these forward-looking statements due to, among other
considerations, the matters discussed under “Risk Factors” and
“Cautionary Note Regarding Forward-Looking Statements.” This
discussion contains forward-looking statements based upon our
current expectations, estimates and projections that involve risks
and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements due to, among
other considerations, the matters discussed under “Risk Factors”
and “Cautionary Note Regarding Forward-Looking
Statements.”
Unless
the context otherwise requires, for purposes of this Management’s Discussion and
Analysis, all references to “we,” “us,” “our” or “the
Company” are to My Size, Inc. a Delaware corporation, and its
subsidiaries, including MySize Israel 2014 Ltd, Topspin Medical
(Israel) Ltd, Orgad International Marketing Ltd., or Orgad, My Size
LLC and Naiz Bespoke Technologies, S.L taken as a
whole.
Overview
MySize
is 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
device or through MySizeID Widget: a simple questionnaire which was
uses a database collected over the years.
MySizeID
synchronizes the user’s measurement data to a sizing chart
integrated through a retailer’s (or a white labeled) mobile
application, and only presents items available for purchase that
match their measurements to ensure a correct fit.
MySize
is positioning itself 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 empowering brand design
teams, which are designed to increase end consumer satisfaction,
contributing to a sustainable world and reduce operation
costs.
Orgad
Acquisition
On
February 7, 2022, My Size Israel 2014 Ltd, or My Size Israel,
entered into a Share Purchase Agreement, or the Orgad Agreement,
with Amar Guy Shalom and Elad Bretfeld, or the Orgad Sellers,
pursuant to which the Orgad Sellers agreed to sell to My Size
Israel all of the issued and outstanding equity of
Orgad.
Orgad
operates an omnichannel e-commerce platform engaged in online
retailing in the global market. It operates as a third-party seller
on Amazon.com, eBay and others. Orgad currently manages more than
1,000 stock-keeping units, or SKUs, mainly in fashion, apparel and
shoes.
The
Orgad Sellers are the sole title and beneficial owners of 100% of
the shares of Orgad. In consideration of the shares of Orgad, the
Orgad Sellers are entitled to receive (i) up to $1,000,000 in cash,
or the Orgad Cash Consideration, (ii) an aggregate of 2,790,049
shares, or the Orgad Equity Consideration, of our common stock, and
(iii) earn-out payments of 10% of the operating profit of Orgad for
the years 2022 and 2023. The transaction closed on the same
day.
The
Orgad Cash Consideration is payable to the Orgad Sellers in three
installments, according to the following payment schedule: (i)
$300,000 which we paid upon closing, (ii) $350,000 payable on the
two-year anniversary of the closing, and (iii) $350,000 payable on
the three-year anniversary of the closing, provided that in the
case of the second and third installments certain revenue targets
are met and subject further to certain downward post-closing
adjustment.
The
Equity Consideration is payable to the Orgad Sellers according to
the following payment schedule: (i) 1,395,025 shares were issued at
closing, and (ii) 1,395,024 shares will be issued in eight equal
quarterly installments until the lapse of two years from closing,
subject to certain downward post-closing adjustment.
The
payment of the second and third cash installments, the equity
installments and the earn out are further subject in each case to
the Orgad Sellers being actively engaged with Orgad at the date
such payment is due (except if the Orgad Sellers resign due to
reasons relating to material reduction of salary or adverse change
in their position with Orgad or its affiliates).
In
connection with the Orgad Agreement, each of the Orgad Sellers
entered into employment agreements with Orgad and six-month lock-up
agreements with us.
Naiz
Acquisition
On October 7, 2022, we entered into a Share Purchase Agreement, or
the Naiz Agreement, with Borja Cembrero Saralegui, or Borja, Aritz
Torre Garcia, or Aritz, Whitehole, S.L., or Whitehole, Twinbel,
S.L., or Twinbel and EGI Acceleration, S.L., or EGI. Each of Borja,
Aritz, Whitehole, Twinbel and EGI shall be referred to as the Naiz
Sellers herein. Pursuant to the Naiz Agreement, the Naiz Sellers
agreed to sell to My Size all of the issued and outstanding equity
of Naiz Bespoke Technologies, S.L., or Naiz, a limited liability
company incorporated under the laws of Spain. The acquisition of
Naiz was completed on October 11, 2022.
In consideration of the purchase of the shares of Naiz, the Naiz
Agreement provided that the Naiz Sellers are entitled to receive
(i) an aggregate of 6,000,000 shares, or the Naiz Equity
Consideration, of My Size common stock, or the Shares, representing
in the aggregate, immediately prior to the issuance of such shares
at the closing of the transaction, not more than 19.9% of the
issued and outstanding Shares and (ii) up to $2,050,000 in cash,
the Naiz Cash Consideration.
The Naiz Equity Consideration was issued to the Naiz Sellers at
closing of the transaction of which 2,365,800 shares of My Size
common stock were issued to Whitehole constituting 6.6% of our
outstanding shares following such issuance. The Naiz Agreement also
provides that, in the event that the actual value of the Naiz
Equity Consideration (based on the average closing price of the
Shares on the Nasdaq Capital Market over the 10 trading days prior
to the closing of the transaction, or the Equity Value Averaging
Period) is less than $1,650,000, My Size shall make an additional
cash payment, or the Shortfall Value to the Naiz Sellers within 45
days of our receipt of Naiz’s 2025 audited financial statements;
provided that certain revenue targets are met. Following the Equity
Value Averaging Period, it was determined that the Shortfall Value
is $459,240.
The Naiz Cash Consideration is payable to the Naiz Sellers in five
installments, according to the following payment schedule: (i)
US$500,000 at closing, (ii) up to US$500,000 within 45 days of My
Size’s receipt of Naiz’s 2022 audited financial statements, (iii)
up to US$350,000 within 45 days of My Size’s receipt of Naiz’s
unaudited financial statements for the six months ended June 30,
2023, (iv) up to $350,000 within 45 days of My Size’s receipt of
Naiz’s unaudited financial statements for the six months ended
December 31, 2023, and (v) up to $350,000 within 45 days of My
Size’s receipt of Naiz’s 2024 audited financial statements;
provided that in the case of the second, third, fourth and fifth
installments certain revenue targets are met.
The payment of the second, third, fourth and fifth cash
installments are further subject to the continuing employment or
involvement of Borja and Aritz, or the Key Persons, by or with Naiz
at the date such payment is due (except if a Key Person is
terminated from Naiz due to a Good Reason (as defined in the Naiz
Agreement).
The Naiz Agreement contains customary representations, warranties
and indemnification provisions. In addition, the Naiz Sellers are
subject to non-competition and non-solicitation provisions pursuant
to which they agree not to engage in competitive activities with
respect to My Size’s business.
In connection with the Naiz Agreement, (i) each of the Naiz Sellers
entered into six-months lock-up agreements, or the Lock-Up
Agreement, with My Size, (ii) Whitehole, Twinbel and EGI entered
into a voting agreement, or the Voting Agreement, with My Size and
(iii) each of the Key Persons entered into employment agreements
and services agreements with Naiz.
The Lock-Up Agreement provides that each Naiz Seller will not, for
the six-months period following the closing of the transaction, (i)
offer, pledge, sell, contract to sell, sell any option, warrant or
contract to purchase, purchase any option, warrant or contract to
sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any Shares or any
securities convertible into or exercisable or exchangeable for
Shares in each case, that are currently or hereafter owned of
record or beneficially (including holding as a custodian) by such
Naiz Seller, or publicly disclose the intention to make any such
offer, sale, pledge, grant, transfer or disposition; or (ii) enter
into any swap, short sale, hedge or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership
of such Naiz Seller’s Shares regardless of whether any such
transaction described in clause (i) or this clause (ii) is to be
settled by delivery of Shares or such other securities, in cash or
otherwise. The Lock-Up Agreement also contains an additional
three-months “dribble-out” provision that provides following the
expiration of the initial six-months lock-up period, without My
Size’s prior written consent (which My Size shall be permitted to
withhold at its sole discretion), each Naiz Seller shall not sell,
dispose of or otherwise transfer on any given day a number of
Shares representing more than the average daily trading volume of
the Shares for the rolling 30 day trading period prior to the date
on which such Seller executes a trade of the Shares.
The Voting Agreement provides that the voting of any Shares held by
each of Whitehole, Twinbel and EGI, or the Naiz Acquisition
Stockholders, will be exercised exclusively by a proxy designated
by My Size’s board of directors from time to time, or the Proxy,
and that each Naiz Acquisition Stockholder will irrevocably
designate and appoint the then-current Proxy as its sole and
exclusive attorney-in-fact and proxy to vote and exercise all
voting right with respect to the Shares held by each Naiz
Acquisition Stockholder. The Voting Agreement also provides that,
if the voting power held by the Proxy, taking into account the
proxies granted by the Naiz Acquisition Stockholders and the Shares
owned by the Proxy, represents 20% or more of the voting power of
My Size’s stockholders that will vote on an item, or the Voting
Power, then the Proxy shall vote such number of Shares in excess of
19.9% of the Voting Power in the same proportion as the Shares that
are voted by My Size’s other stockholders. The Voting Agreement
will terminate on the earliest to occur of (i) such time that such
Naiz Acquisition Stockholder no longer owns the Shares, (ii) the
sale of all or substantially all of the assets of My Size or the
consolidation or merger of My Size with or into any other business
entity pursuant to which stockholders of My Size prior to such
consolidation or merger hold less than 50% of the voting equity of
the surviving or resulting entity, (iii) the liquidation,
dissolution or winding up of the business operations of My Size,
and (iv) the filing or consent to filing of any bankruptcy,
insolvency or reorganization case or proceeding involving My Size
or otherwise seeking any relief under any laws relating to relief
from debts or protection of debtors.
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, the invasion of Ukraine by Russia has not had a
material impact on our business.
Results
of Operations
The
table below provides our results of operations for the periods
indicated.
|
|
Three
months ended
September
30
|
|
|
Nine
months ended
September
30
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(dollars in thousands) |
|
|
(dollars in thousands) |
|
Revenues |
|
$ |
726 |
|
|
$ |
31 |
|
|
$ |
1,931 |
|
|
$ |
88 |
|
Cost of revenues |
|
|
(877 |
) |
|
|
- |
|
|
|
(1,607 |
) |
|
|
- |
|
Gross profit |
|
|
(151 |
) |
|
|
31 |
|
|
|
324 |
|
|
|
88 |
|
Research and development expenses |
|
|
(350 |
) |
|
|
(462 |
) |
|
|
(1,152 |
) |
|
|
(3,842 |
) |
Sales and marketing |
|
|
(672 |
) |
|
|
(521 |
) |
|
|
(2,526 |
) |
|
|
(1,798 |
) |
General and administrative |
|
|
(802 |
) |
|
|
(1,074 |
) |
|
|
(2,378 |
) |
|
|
(2,303 |
) |
Operating loss |
|
|
(1,975 |
) |
|
|
(2,026 |
) |
|
|
(5,732 |
) |
|
|
(7,855 |
) |
Financial
income (expenses), net |
|
|
(51 |
) |
|
|
18 |
|
|
|
(198 |
) |
|
|
50 |
|
Net loss |
|
$ |
(2,026 |
) |
|
$ |
(2,008 |
) |
|
$ |
(5,930 |
) |
|
$ |
(7,805 |
) |
|
|
Year ended
December 31 |
|
|
|
2021 |
|
|
2020 |
|
|
|
(dollars in
thousands) |
|
Revenues |
|
|
131 |
|
|
|
142 |
|
Cost of revenues |
|
|
- |
|
|
|
(2 |
) |
Gross profit |
|
|
131 |
|
|
|
140 |
|
Research and development expenses |
|
|
(4,248 |
) |
|
|
(1,523 |
) |
Sales and marketing |
|
|
(2,336 |
) |
|
|
(2,196 |
) |
General and administrative |
|
|
(4,124 |
) |
|
|
(2,567 |
) |
Operating loss |
|
|
(10,577 |
) |
|
|
(6,146 |
) |
Financial
income (expenses), net |
|
|
57 |
|
|
|
(11 |
) |
Net loss |
|
$ |
(10,520 |
) |
|
$ |
(6,157 |
) |
Revenues
We
started to generate revenue in 2019 and we expect to incur
additional losses to increase our sales and marketing efforts and
to perform further research and development activities. Our
revenues for the nine months ended September 30, 2022 amounted to
$1,931,000 compared to $88,000 for the nine months ended September
30, 2021. Our revenues for the three months ended September 30,
2022 amounted to $726,000 compared to $31,000 for the three months
ended September 30, 2021. The increase was primarily attributable
to $1,797,000 in revenue generated from Orgad from February 7,
2022, the date of closing of the Orgad acquisition, or the
Acquisition Date, through to the end of the third quarter 2022 and
to $685,000 in revenue generated from Orgad for the three months
ended September 30, 2022.
From
inception through December 31, 2018, we did not generate any
revenue from operations and we expect to continue to incur
additional losses to perform further research and development
activities. We started to generate revenues only in 2019. Our
revenues for the year ended December 31, 2021 amounted to $131,000
compared to $142,000 for year ended December 31, 2020. The decrease
from the corresponding period primarily resulted from fees from
customer projects in the corresponding period compared to none,
offset by increase in recurring revenues generated by traffic, as
measured by the MySizeID engine per its license
agreements.
Cost Of Revenues
Our
cost of revenues for the nine and three months ended September 30,
2022 amounted to $1,607,000 and $877,000, respectively, compared to
none for the nine and three months ended September 30, 2021. The
cost of revenues includes cash and equity liabilities expenses in
the amount of $149,000 and $89,000 for the nine and three months
ended September 30, 2022 respectively. The increase in comparison
with the corresponding period was due to the cost of goods of the
revenues generated from Orgad’s operations. Our cost of revenues
for the year ended December 31, 2021 was $0 compared to $2,000 for
the year ended December 31, 2020.
Research and Development Expenses
Our
research and development expenses for the nine months ended
September 30, 2022 amounted to $1,152,000 compared to $3,842,000
for the nine months ended September 30, 2021. The decrease in
comparison with the corresponding period primarily resulted from
share-based payment in the amount of $2,618,000 that was recorded in the
corresponding period attributed to the share issuance to Shoshana
Zigdon under the Amendment to Purchase Agreement dated May 26,
2021, and a decrease in shared based expenses to
employees.
Our
research and development expenses for the three months ended
September 30, 2022 amounted to $350,000 compared to $462,000 for
the three months ended September 30, 2021. The decrease in
comparison with the corresponding period primarily resulted from
share-based payment to employees.
Our
research and development expenses for the year ended December 31,
2021 amounted to $4,248,000 an increase of $2,725,000, or
approximately 179%, compared to $1,523,000 for the year ended
December 31, 2020. The increase from the corresponding period
primarily resulted from share based payment in amount of $2,618,000
attributed to the share issuance to Shoshana Zigdon under the
Amendment to Purchase Agreement dated May 26, 2021 offset by a
reduction in share based payment expenses to employees.
Sales and Marketing Expenses
Our
sales and marketing expenses for the nine months ended September
30, 2022 amounted to $2,526,000 compared to $1,798,000 for the nine
months ended September 30, 2021. The increase in comparison with
the corresponding period was mainly due to the hiring of new
employees and expenses associated with Orgad activities,
offset by a reduction in
share-based payment expenses to employees and
consultants.
Our
sales and marketing expenses for the three months ended September
30, 2022 amounted to $672,000 compared to $521,000 for the three
months ended September 30, 2021. The increase in comparison with
the corresponding period was mainly due to expenses associated with
Orgad activities, offset by a
reduction in share-based payment expenses to employees and
consultants.
Our
sales and marketing expenses for the year ended December 31, 2021
amounted to $2,336,000, an increase of $140,000, 6.4%, compared to
$2,196,000 for the year ended December 31, 2020. The increase in
comparison with the corresponding period was mainly due to an
increase in payments to consultants.
General and Administrative Expenses
Our
general and administrative expenses for the nine months ended
September 30, 2022 amounted to $2,378,000 compared to $2,303,000
for the nine months ended September 30, 2021. The increase in
comparison with the corresponding period was mainly due to expenses
associated with Orgad activities offset by a decrease in insurance
expenses and professional services expenses.
Our
general and administrative expenses for the three months ended
September 30, 2022 amounted to $802,000 compared to $1,074,000 for
the three months ended September 30, 2021. The decrease in
comparison with the corresponding period was mainly due to a
decrease in insurance offset by an increase in expenses associated
with Orgad activities.
Our
general and administrative expenses for the year ended December 31,
2021 amounted to $4,124,000, an increase of $1,557,000, 60.6%,
compared to $2,567,000 for the year ended December 31, 2020. The
increase in comparison with the corresponding period was mainly due
to an increase in professional expenses, mainly attributed to
shareholder activism including settlement expenses offset by a
decrease in shared-based payments. During 2021, we had an expense
of $98,000 in respect of stock-based payments, compared to an
expense of $276,000 in 2020.
Operating Loss
As a
result of the foregoing, for the nine months ended September 30,
2022, our operating loss was $5,732,000 a decrease of $2,123,000
compared to our operating loss for the nine months ended September
30, 2021 of $7,855,000.
As a
result of the foregoing, for the three months ended September 30,
2022, our operating loss was $1,975,000 a decrease of $51,000
compared to our operating loss for the three months ended September
30, 2021 of $2,026,000.
As a
result of the foregoing, for the year ended December 31, 2021, our
operating loss was $10,577,000, an increase of $4,431,000, or 72%,
compared to our operating loss for the year ended December 31, 2020
of $6,146,000.
Financial Income (Expenses), Net
Our
financial income (expense), net for the nine months ended September
30, 2022 amounted to $198,000 compared to financial income of
$50,000 for the nine months ended September 30, 2021. During the
nine months ended September 30, 2022, we had financial expenses
mainly from exchange rate differences and revaluation of investment
in marketable securities whereas in the corresponding period we had
financial income primarily due revaluation of investment in
marketable securities.
Our
financial income (expense), net for the three months ended
September 30, 2022 amounted to $51,000 compared to financial income
of $18,000 for the three months ended September 30, 2021. During
the three months ended September 30, 2022, we had financial income
mainly from exchange rate differences and revaluation of investment
in marketable securities whereas in the corresponding period we had
financial expenses primarily due revaluation of investment in
marketable securities and exchange rate differences offset in
income from revaluation of derivative.
Our
financial income (expense), net for the year ended December 31,
2021 amounted to $57,000 as opposed to financial expenses, net of
$11,000 for the year ended December 31, 2020. In 2021, we had
financial income mainly derived from revaluation of investment in
marketable securities whereas in the corresponding period we had
financial expenses mainly from exchange rate differences offset by
income from revaluation of investment in marketable
securities.
Net Loss
As a
result of the foregoing, our net loss for the nine months ended
September 30, 2022 was $5,930,000, compared to a net loss of
$7,805,000 for the nine months ended September 30, 2021. The
decrease in the net loss was mainly due to the reasons mentioned
above.
As a
result of the foregoing, our net loss for the three months ended
September 30, 2022 was $2,026,000, compared to a net loss of
$2,008,000 for the three months ended September 30, 2021. The
decrease in the net loss was mainly due to the reasons mentioned
above.
As a
result of the foregoing, research and development, marketing
general and administrative expenses, and initial revenues, our net
loss for the year ended December 31, 2021 was $10,520,000 compared
to net loss of $6,157,000 for the year ended December 31, 2020. The
increase in the net loss was mainly due to 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
September 30, 2022, we had cash, cash equivalents, and restricted
cash of $4,622,000 compared to $10,943,000 of cash, cash
equivalents and restricted cash as of December 31, 2021. During
January 2023, we completed a financing resulting in gross proceeds
of approximately $3 million. This decrease primarily resulted from
our operating activities, the acquisition of Orgad, and resources
that were deployed to grow Orgad’s business.
Cash
used in operating activities amounted to $5,858,000 for the nine
months ended September 30, 2022, compared to $3,984,000 for the
nine months ended September 30, 2021. The increase in cash used in
operating activities was mainly due to the acquisition of Orgad and
working capital.
Net
cash used in financing activities was $39,000 for the nine months
ended September 30, 2022, compared to cash provided by financing
activities of $5,857,000 for the nine months ended September 30,
2021. The cash flow from financing activities for the nine months
ended September 30, 2021 resulted from the public offerings that
occurred in January 2021 and March 2021 and from proceeds that were
received from an investor for warrants that were
exercised.
Net
cash used in investing activities was $327,000 for the nine months
ended September 30, 2022, compared to cash provided by investing
activities of $172,000 for the nine months ended September 30,
2021. The increase from the corresponding period was mainly due to
the acquisition of Orgad offset by changes in restricted deposits
that occurred in the nine months ended September 30,
2022.
Net
cash used in operating activities was $7,297,000 for the year ended
December 31, 2021 compared to $5,679,000 for the year ended
December 31, 2020. The increase in cash used in operating activity
is derived mainly from increase in the net loss.
Net
cash provided by investing activities for the year ended December
31, 2021 was $161,000 as opposed to net cash used in investing
activities of $211,000 for the year ended December 31, 2020. The
net cash provided by investing activities for the year ended
December 31, 2021 was mainly attributed to proceeds from short term
restricted deposits as opposed to investment in short-term
restricted deposits during the year ended December 31,
2020.
We
had positive cash flow from financing activities net of issuance
costs of $16,292,000 for the year ended December 31, 2021 compared
to $6,094,000 for the year ended December 31, 2020. The cash flow
from financing activities for the year ended December 31, 2021 was
due to the proceeds from public offerings of our securities and
proceeds from the exercise of outstanding warrants.
We do
not have any material commitments for capital expenditures during
the next twelve months.
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 September 30, 2022,
together with the proceeds from the January 2023 financing, we
believe our existing cash will be sufficient to fund operations for
a period less 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
acquisitions and 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 impact of the COVID-19
pandemic, 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 and Policies
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 that these
accounting policies discussed 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.
Accounting
for Business Combinations—we allocate the purchase price of
acquired companies to the tangible and intangible assets acquired
and liabilities assumed, based upon their estimated fair values at
the acquisition date. These fair values are typically estimated
with assistance from independent valuation specialists.
The
purchase price allocation process requires us to make significant
estimates and assumptions, especially at the acquisition date with
respect to intangible assets, contractual support obligations
assumed, contingent consideration arrangements, and pre-acquisition
contingencies.
Although
we believe the assumptions and estimates we have made in the past
have been reasonable and appropriate, they are based in part on
historical experience and information obtained from the management
of the acquired companies and are inherently uncertain.
Examples
of critical estimates in valuing certain of the intangible assets
we have acquired or may acquire in the future include but are not
limited to:
● future
expected cash flows from product sales or other customer
contracts;
● expected
costs of fulfillment including marketing, warehousing and product
sales;
● the acquired company’s brand and competitive position, as well as
assumptions about the period of time the acquired brand will
continue to be used in the combined company’s product
portfolio;
●
cost of capital and discount rates; and
●
estimating the useful lives of acquired assets as well as the
pattern or manner in which the assets will amortize.
Refer
to Note 6 – business combination to our Condensed Consolidated
Interim Financial Statements for the nine months ended September
2022 for more information
Quantitative
and Qualitative Disclosures About Market Risk
As a “smaller reporting company” as defined by Item 10 of
Regulation S-K, we are not required to provide this
information.
BUSINESS
Overview
MySize
is 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
device or through MySizeID Widget: a simple questionnaire which was
uses a database collected over the years.
MySizeID
synchronizes the user’s measurement data to a sizing chart
integrated through a retailer’s (or a white labeled) mobile
application, and only presents items available for purchase that
match their measurements to ensure a correct fit.
MySize
is positioning itself 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 empowering brand design
teams, which are designed to increase end consumer satisfaction,
contributing to a sustainable world and reduce operation
costs.
Recent
Developments
Orgad Share Purchase Agreement
On
February 7, 2022, My Size Israel 2014 Ltd, or My Size Israel,
entered into a Share Purchase Agreement, or the Orgad Agreement,
with Amar Guy Shalom and Elad Bretfeld, or the Orgad Sellers,
pursuant to which the Orgad Sellers agreed to sell to My Size
Israel all of the issued and outstanding equity of Orgad
International Marketing Ltd., a company incorporated under the laws
of the State of Israel, or Orgad. Orgad operates an omnichannel
e-commerce platform. The Orgad Sellers are the sole title and
beneficial owners of 100% of the shares of Orgad. In consideration
of the shares of Orgad, the Orgad Sellers are entitled to receive
(i) up to $1,000,000 in cash, or the Orgad Cash Consideration, (ii)
an aggregate of 111,602 shares, or the Orgad Equity Consideration,
of the our common stock, and (iii) earn-out payments of 10% of the
operating profit of Orgad for the years 2022 and 2023. The
transaction closed on the same day.
The
Orgad Cash Consideration is payable to the Orgad Sellers in three
installments, according to the following payment schedule: (i)
$300,000 which we paid upon closing, (ii) $350,000 payable on the
two-year anniversary of the closing, and (iii) $350,000 payable on
the three-year anniversary of the closing; provided that in the
case of the second and third installments certain revenue targets
are met and subject further to certain downward post-closing
adjustment.
The Equity Consideration is payable to the Orgad Sellers according
to the following payment schedule: (i) 55,801 shares were issued at
closing, and (ii) and 55,801 shares will be issued in eight equal
quarterly installments until the lapse of two years from closing,
subject to certain downward post-closing adjustment.
The
payment of the second and third cash installments, the equity
installments and the earn out are further subject in each case to
the Orgad Sellers being actively engaged with Orgad at the date
such payment is due (except if the Orgad Sellers resign due to
reasons relating to material reduction of salary or adverse change
in their position with Orgad or its affiliates).
In
connection with the Orgad Agreement, each of the Orgad Sellers
entered into employment agreements with Orgad and six-months
lock-up agreements with us.
Naiz Acquisition
On
October 7, 2022, we entered into the Naiz Agreement with the Naiz
Sellers, pursuant to which the Naiz Sellers agreed to sell to us
all of the issued and outstanding equity of Naiz. The acquisition
of Naiz was completed on October 11, 2022.
In
consideration of the purchase of the shares of Naiz, the Naiz
Agreement provided that the Naiz Sellers are entitled to receive
(i) ) the Naiz Equity
Consideration and (ii) up the Naiz Cash
Consideration.
The Naiz Equity Consideration was issued to the Naiz Sellers at
closing of the transaction of which 94,632 shares of My Size common
stock were issued to Whitehole constituting 6.6% of our outstanding
shares following such issuance. The Naiz Agreement also provides
that, in the event that the actual value of the Naiz Equity
Consideration (based on the Equity Value Averaging Period) is less
than $1,650,000, My Size shall pay the Shortfall Value to the Naiz
Sellers within 45 days of our receipt of Naiz’s 2025 audited
financial statements; provided that certain revenue targets are
met. Following the Equity Value Averaging Period, it was determined
that the Shortfall Value is $459,240.
The Naiz Cash Consideration is payable to the Naiz Sellers in five
installments, according to the following payment schedule: (i)
US$500,000 at closing, (ii) up to US$500,000 within 45 days of My
Size’s receipt of Naiz’s 2022 audited financial statements, (iii)
up to US$350,000 within 45 days of My Size’s receipt of Naiz’s
unaudited financial statements for the six months ended June 30,
2023, (iv) up to $350,000 within 45 days of My Size’s receipt of
Naiz’s unaudited financial statements for the six months ended
December 31, 2023, and (v) up to $350,000 within 45 days of My
Size’s receipt of Naiz’s 2024 audited financial statements;
provided that in the case of the second, third, fourth and fifth
installments certain revenue targets are met.
The payment of the second, third, fourth and fifth cash
installments are further subject to the continuing employment or
involvement of Borja and Aritz, or the Key Persons, by or with Naiz
at the date such payment is due (except if a Key Person is
terminated from Naiz due to a Good Reason (as defined in the Naiz
Agreement)).
The Naiz Agreement contains customary representations, warranties
and indemnification provisions. In addition, the Naiz Sellers are
subject to non-competition and non-solicitation provisions pursuant
to which they agree not to engage in competitive activities with
respect to My Size’s business.
In connection with the Naiz Agreement, (i) each of the Naiz Sellers
entered into the Lock-Up Agreement with My Size, (ii) Whitehole,
Twinbel and EGI entered into the Voting Agreement with My Size and
(iii) each of the Key Persons entered into employment agreements
and services agreements with Naiz.
The Lock-Up Agreement provides that each Naiz Seller will not, for
the six-month period following the closing of the transaction, (i)
offer, pledge, sell, contract to sell, sell any option, warrant or
contract to purchase, purchase any option, warrant or contract to
sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any Shares or any
securities convertible into or exercisable or exchangeable for
Shares in each case, that are currently or hereafter owned of
record or beneficially (including holding as a custodian) by such
Naiz Seller, or publicly disclose the intention to make any such
offer, sale, pledge, grant, transfer or disposition; or (ii) enter
into any swap, short sale, hedge or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership
of such Naiz Seller’s Shares regardless of whether any such
transaction described in clause (i) or this clause (ii) is to be
settled by delivery of Shares or such other securities, in cash or
otherwise. The Lock-Up Agreement also contains an additional
three-month “dribble-out” provision that provides following the
expiration of the initial six-month lock-up period, without My
Size’s prior written consent (which My Size shall be permitted to
withhold at its sole discretion), each Naiz Seller shall not sell,
dispose of or otherwise transfer on any given day a number of
Shares representing more than the average daily trading volume of
the Shares for the rolling 30 day trading period prior to the date
on which such Seller executes a trade of the Shares.
The Voting Agreement provides that the voting of any Shares held by
each of Whitehole, Twinbel and EGI, or the Naiz Acquisition
Stockholders, will be exercised exclusively by a proxy designated
by My Size’s board of directors from time to time, or the Proxy,
and that each Naiz Acquisition Stockholder will irrevocably
designate and appoint the then-current Proxy as its sole and
exclusive attorney-in-fact and proxy to vote and exercise all
voting right with respect to the Shares held by each Naiz
Acquisition Stockholder. The Voting Agreement also provides that,
if the voting power held by the Proxy, taking into account the
proxies granted by the Naiz Acquisition Stockholders and the Shares
owned by the Proxy, represents 20% or more of the voting power of
My Size’s stockholders that will vote on an item, or the Voting
Power, then the Proxy shall vote such number of Shares in excess of
19.9% of the Voting Power in the same proportion as the Shares that
are voted by My Size’s other stockholders. The Voting Agreement
will terminate on the earliest to occur of (i) such time that such
Naiz Acquisition Stockholder no longer owns the Shares, (ii) the
sale of all or substantially all of the assets of My Size or the
consolidation or merger of My Size with or into any other business
entity pursuant to which stockholders of My Size prior to such
consolidation or merger hold less than 50% of the voting equity of
the surviving or resulting entity, (iii) the liquidation,
dissolution or winding up of the business operations of My Size,
and (iv) the filing or consent to filing of any bankruptcy,
insolvency or reorganization case or proceeding involving My Size
or otherwise seeking any relief under any laws relating to relief
from debts or protection of debtors.
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 are working to assess the damage and to determine
when operations may be resumed at this warehouse or potentially
shifted to another location. From a preliminary estimation,
we believe that the
value of the inventory that was in the warehouse was approximately
$450,000. As of the date of this prospectus, it is too early to
determine the potential impact of this incident on our results of
operations and financial condition or the scope of insurance
coverage related to this incident. However, we do not believe that
this incident will affect the future sales results of
Orgad.
Our
Solutions
Our
cloud-based software platform provides highly accurate sizing and
measurement with broad applications including the online
fashion/apparel industry, logistics and courier services and home
DIY. Currently, we are mainly focusing on the e-commerce
fashion/apparel industry. This proprietary technology is driven by
several patented algorithms which are able to calculate and record
measurements in a variety of novel ways. Although specific
functionality varies by product, we believe that our core solutions
address the need for highly accurate measurements in a variety of
consumer friendly, every day uses.
We
have developed three products, MySizeID for the
fashion/apparel industry, BoxSize for the logistics and
courier services market and SizeUp for the home DIY
market.
|
● |
MySizeID
enables shoppers to generate highly accurate measurements of their
body to find proper fitting clothes and accessories, through the
use of our application on their mobile phone or through a simple
questionnaire if the user decides not to download the application.
MySizeID syncs the user’s measurement data to a sizing chart
and presents items for purchase that match their measurements to
ensure a correct fit. MySizeID is available for license by
retailers and accessable by consumers through a web
page. |
|
|
|
|
● |
BoxSize
enables customers to quickly and easily measure the size and volume
of a parcel to accurately calculate shipping fees. It also offers
shipping companies a variety of precise logistical data for more
efficiently managing their supply chain, providing them with an
accurate way to compare the physical package with what is in the
shipping manifest. BoxSize solution is available for license
on both iOS and Android operating systems. BoxSize is
available on the Honeywell Marketplace and in August 2019 was
approved for Honeywell’s Independent Software Vendor Program, and
MySize was granted an independent software vendor (ISV) status on
the Zebra Technologies and on DataLogic platforms. |
|
|
|
|
● |
SizeUp
is a digital tape measure that allows users to measure length,
width and height of a surface by moving their smartphone from point
to point of an object or space. SizeUp is a value-add for
DIY and home improvement retailers whose customers struggle to find
the appropriately sized items (like blinds or curtains) for their
homes or projects due to inaccurate measurements. SizeUp
also is designed to replace rulers, tape measures and other
measuring tools used for DIY projects. SizeUp is available
for consumer download on both iOS and Android operating
systems. |
The
following are some select key features of our solutions:
|
● |
Integration Capability. We design our solutions to be
flexible and configurable, allowing our clients to match their use
of our algorithms and software with their specific business
processes and workflows. Our platform has been organically
developed from a common code base, data structure and user
interface, providing a consistent user experience with powerful
features that are easily adaptable to our clients’ needs. The
MySizeID widget can be integrated via one-line JavaScript code, or
through RESTful API; |
|
|
|
|
● |
Intuitive user experience. Our intuitive, easy-to-use
interface is based on current technology, multiple focus groups and
automatically adapts to users’ devices, including mobile platforms,
thereby significantly increasing accessibility of our
solutions; |
|
|
|
|
● |
Big Data Generation. While we supply to the user the
information he/she requires, we gather certain vital information
such as body measurement and package volume which can be used
anonymously to help the retailer acquire predictive size
information on stocking, operations and consumers that may be in
between sizes. All the information is being gathered and stored on
our servers where it can be used by retailers; |
|
|
|
|
● |
Non-Invasive. In taking measurements using our solution,
the smartphone camera is not utilized; instead, the measurements
are captured by scanning the smartphone over the consumer’s body or
package, thus ensuring greater privacy. |
Our
Growth Strategy
We
aim to drive revenue primarily through penetration of the U.S. and
Europe markets through a business to business to consumer (B2B2C)
model in the verticals we are targeting. We are pursuing the
following growth strategies:
|
● |
Sign Additional Commercial Agreements with U.S. Retailers.
During 2022, we expanded our commercial agreements with Levi’s,
introducing North America (U.S. and Canada) and Latin America
regions, and by extension Levis’ native apps in EU and U.S.
regions. We also entered into commercial agreements with Baby
Fresh, Galax, Punto Blanco, GEF France, Diesel, Gaala, Superdry,
Uniontex Industries, and Temperlay London among others. We are in
various stages of discussions with U.S. and foreign retailers for
the deployment of our measurement technology with a view to
entering into additional commercial agreements. |
|
|
|
|
● |
Pursue a Two-Pronged Commercialization Strategy. We are
seeking to accelerate adoption of our solutions both through direct
partnerships with e-commerce websites as well as through
third-party platform websites. While we seek to directly enter into
partnerships with companies maintaining e-commerce websites in the
apparel, courier and DIY markets, we are also seeking to deploy our
solutions on third-party platforms. Furthermore, with the expansion
of MySizeID through the release of our FirstLook Smart
Mirror, which we are offering to brick and mortar stores to
digitize the physical stores, MySizeID is now available for
online retailers utilizing the WooCoomerce, Shopify, Lightspeed,
PrestaShop, Bitrix and Wix platforms and to brick and mortar stores
through GK Software POS solution while BoxSize is available
on the Honeywell Marketplace, Zebra Technologies and
Datalogic. |
|
|
|
|
● |
Ongoing Investment in our Technology Platform. We continue
to invest in building new software capabilities and extending our
platform to bring the power of accurate measurement to a broader
range of applications. In particular, we seek not only to deliver
size recommendations but to provide a robust, end-to-end,artificial
intelligence, or AI-driven platform that inspires consumer
confidence and drives revenue growth by providing a superior
consumer journey to both online and the brick and mortar
stores. |
|
● |
Grow our database. As the usage of our measurement apps
increases, our database of information including user behaviour and
body measurements generates valuable statistics. Such data can be
used in the big data market for targeted advertising and for blind
consumer data mining. |
|
|
|
|
● |
Identify and acquire synergistic businesses. In order to
reduce our time to market and obtain complementary technologies, we
are seeking to acquire technologies and businesses that are
synergistic to our product offering. We recently completed an
acquisition of Orgad which operates an omnichannel e-commerce
platform and Naiz which provides SaaS technology solutions that
solve size and fit issues for fashion ecommerce
companies. |
|
|
|
|
● |
Partnerships and cooperation. In order to bring a wider
solution for the retail market we are working to partner and
integrate our technology with partners that can increase our
penetration and offering to the market. |
Market
Opportunity
E-commerce’s
meteoric rise has been a boon to retailers who can offer shoppers a
simple customer experience through desktop or mobile devices. The
global e-commerce market was US $5.7 trillion in 2022, and the
industry is expected to grow significantly in the coming years with
no signs of slowing down. Market specialists expect a compound
annual growth rate of 27.43% from 2023 to 2028: according to data
from Statista, the market is expected to reach US $6.5 trillion in
2023. While many sectors have found ways to increase revenue
through e-commerce, e-commerce is still plagued by issues that cut
into profits and negatively impact the bottom line, such as
customer returns, low consumer conversion, and associated
restocking and shipping costs.
Fashion/Apparel
Since
the onset of the COVID-19 pandemic, an immense shift to digital was
recorded, with 85.9% growth vs. pre-pandemic, according to
Mastercard, and over 2 billion people worldwide who shop online,
according to data from Oberlo. In November 2022, online shoppers
broke records with $11.3 billion in spending on Cyber Monday,
driving 5.8% year-over-year growth and making the day the biggest
online shopping day of all time, according to Adobe
Analytics.
In
2021, fashion companies invested between 1.6% and 1.8% of their
revenues in technology, according to Mckinsey, and are expected to
double the investment by 2030 in order to keep up with digital
natives and keep a competitive edge. Personalization in e-commerce
and hybrid connectivity in brick-and-mortar retail are two key
themes in the future of fashtech, according to Mckinsey’s 2022
State of Fashion Technology.
In
the upcoming years, inflation is expected to impact the fashion
world. As prices for goods increase, the challenge will be to
inspire confidence in consumers, via different smart digital tools.
Brands will need to embrace creative digital tools and new channels
to deepen customer relationships, and as Mckinsey forecasts in
their State of Fashion report for 2023, they will need to execute
on priorities such as sustainability and digital
acceleration.
The
global fashion e-commerce market size is expected to grow from
$744.4 billion in 2022 to $821.19 billion in 2023 at a compound
annual growth rate of 10.3%. In 2027, the market size is expected
to grow to $1,222.32 billion, at a compound annual growth rate of
10.5%, according to BRC.
Based
on the importance which shoppers attribute to free shipping - 50%
of cart abandonment rate is due to extra shipping costs (Baymard
Institute) - the need for fashion retailers to substantiate the
optimal size for a customer, thus minimizing returns, has never
been more crucial.
As
brands move online or significantly expand their online presence,
we believe that developing innovative ways to connect with
shoppers, both online and offline, has become a top
priority.
Shipping/Parcel
According
to Pitney Bowes, parcel revenue in 13 major countries around the
world increased by 22% year over year from $351 billion in 2019
(reflecting 103 billion parcels) to $430 billion in 2020
(reflecting 131 billion parcels). In the shipping/parcel industry,
the dimensions of a package are critical. It is not merely the
measurement of a package or box – but rather the amount of space
that the package or box will take up on a truck, airplane, or ship
that will be transporting the package or box. Far too often,
retailers use unfit packaging for their items, adding additional
costs in materials and shipping fees.
DIY
Similar
to issues in the apparel and fashion market, big box, hardware,
furniture, and DIY stores are plagued by returns due to incorrect
fit and measurements. In an industry where precise measurement for
projects is an absolute necessity, e-commerce has not grown as
quickly as in other industries which we believe is due to lack of
consumer confidence in measurements at home and buying the correct
item online.
MySizeID
We
have released the MySizeID app for both iOS and Android
which assists consumers to take highly accurate measurement of
their own body in order to size clothing in the best way possible
without the need to try the clothes on before purchasing.
MySizeID is designed to simplify the process of purchasing
clothes online and significantly reduce the rate of returns of
poor-fitting clothing. During 2021, MySizeID delivered over 21
million size recommendations.
The
application is the result of a research and development effort that
combines:
|
● |
anthropometric
research – analyses of information pertaining to body measurements
derived from a survey and the subsequent determination of
correlations between body parts; |
|
|
|
|
● |
body
measurement algorithm research – an algorithm created by us to
measure body parts; and |
|
|
|
|
● |
retailers
size chart analyses – adopting a deep understanding of the size
charts of retailers and the corresponding “body to garment
size.” |
MySizeID
allows consumers to create a secure, online profile of their
personal measurements, which can then be utilized, with partnered
online retailers, to ensure that no matter the manufacturer or size
chart, they will get the right fit. MySizeID operates based
on the use of existing sensors in smart phones which enable,
through a specific purpose application, the measurement of the body
of any consumer by moving the smartphone along his or her body. The
MySizeID application does not rely on user photographs or
any additional hardware; all a user needs to do is scan their body
with their smartphone and the application records their
measurements. The measurements can then be saved in our database in
the cloud, enabling the user to search for clothes in various
retailer websites without worrying about size. When a search is
made, the retailer will connect to our cloud database, and then
provide results based on the user’s measurements and other
parameters as he or she may have defined. This data is also saved
for use when a customer enters a brick-and-mortar store to help
serve the customer more efficiently and to provide a better
shopping experience.

Figure
1: Screenshot of MySizeID on smartphone and e-commerce
website
As
part of the integration process, we offer to the retailer five main
components:
|
● |
Mobile App. MySizeID comes in the form of a native
app or website. Our native app can be used “as is” integrated into
the retailer’s e-commerce website. The website users can build a
body profile on the app and receive size recommendations for their
profile both in the app and on a widget integrated with their
website. |

|
● |
Widget. When a consumer enters into the retailer’s website
and looks for a specific item, he or she can click on the
MySizeID widget which will inform the consumer of his or her
recommended size, based on his or her actual measurements, as
measured using the app and the item he or she is looking
at. |
The
widget has two features:
AI
Wizard mode - allows the user to obtain size from the following
parameters: gender, height, weight, belly shape, hip shape and bra
size only. The gender, height and weight questions are mandatory,
while the body shape questions are optional and can be added to
increase accuracy for specific apparel categories.
Guest
mode - allows a user that does not wish to sign up to
MySizeID as a user to obtain size recommendations as
well.
|
● |
Analytic Pixel. MySizeID analytic pixel allows retailer to
track and analyze the widget usage. By adding the pixel to the
retailer’s website, MySizeID BI team can track engagement, order,
and return data and provide retailers with tools to understand the
advantages and benefits of MySizeID. |
Use
your own device - using MySizeID instore solution, shoppers can
receive size recommendations for all store items, when shopping in
the offline stores. The shoppers can build their body profile using
an easy to use 3 to 6 questions form, scan an item barcode and
receive a size recommendation for the scanned item based on their
body profile and the item’s size chart.
Another
feature we added is the “in-between sizing” feature. Our system can
detect a user that has body dimensions that place the user
in-between the clothes sizes being offered and lets the user know
that. A user can then choose between the two sizes according to the
user’s fit preference (tight/loose/average).
In
addition, we have recently released our Instant-App feature which
allows shoppers to generate their body measurements directly from
our widget, without the need to download our mobile app. Using this
technology, the shoppers can create their online profile of their
personal measurements and complete a purchase faster and easier
with minimum distractions.
The
body profile can be created while shoppers are viewing the page
from their mobile phone, or by scanning a QR code on desktop that
will open the same page on the mobile phone.

Screenshot
of Instant-App widget on desktop on yumyumfashion
website
|
● |
MyDash Platform. The MyDash platform is a smart
back-office system where the retailer enters all the information
regarding its size charts that correlates to every product in its
e-commerce site, and where the retailer can access the information
on its users. This system is customizable based on the retailer’s
needs. In 2021, we changed the MyDash system to increase the
system’s accessibility, added walkthroughs, user guides and changed
the user interface and much more for the ease of use. We added the
option to use our generic size charts, added the option upload size
chart files instead of typing the size charts values manually,
added more widget styling options and changed the pairing mechanism
between the size chart and the products to be more
user-friendly. |

Figure
3: Screenshot of Back-Office System
|
● |
FirstLook Smart Mirror. The Smart Mirror provides an
interactive, mirror-like touch display that allows brands to
provide in-store customers with an enhanced, online shopping
experience, contactless checkout and obtains the recommended size.
The MySizeID FirstLook Smart Mirror can be placed in
numerous locations throughout a retail store, including the fitting
rooms (without cameras) or other high-traffic locations of the
store. Highlight capabilities of the FirstLook Smart Mirror include
a 3D “Try-it-on” interactive avatar experience, personalized and
highly accurate size recommendations by MySizeID,
third-party point of sale systems integration, styling
recommendations and contactless “select and collect” at the
register feature. |

Illustration
of MySizeID “first look” smart mirror in a fashion
store
We
are currently offering MySizeID technology to retailers
through either a pay-per-use model or a monthly subscription model.
In our pay-per-use business model, every time the consumer obtains
a recommended size, the retailer is charged for the
usage.
BoxSize
BoxSize
is a parcel measurement application that can provide real-time
logistic data on package volumes and transportation, resulting in
improved operational efficiency and reduced operating expenses. In
addition, BoxSize allows customers to easily measure the
size of their parcel with their smartphone, calculate shipping
costs and arrange for a convenient pick-up time for the package.
BoxSize is available both on iOS and Android.
In
2020 we released the “One Click” feature on BoxSize that
enables the user to measure a package with just one swipe of the
handheld device. Previously, measurements through BoxSize
would require three separate swipes.

Figure
4: Screenshot of BoxSize
Our
BoxSize mobile measurement solution is available on the
Honeywell Marketplace. In addition, BoxSize was approved for
Honeywell’s Global Vendor Program, and is available to provide
highly accurate mobile measurement solutions for thousands of
Honeywell clients. We also developed a new dashboard for the
courier companies to have all the required data about each package
in one place. It includes package dimensions, pictures, scan geo
location and more. The dashboard also let the courier use Webhooks,
which allows him to get the information from his own
system.
In
2020, we announced our partnership with Datalogic, a company
focused on the automatic data capture and process automation
markets. The partnership makes our BoxSize measurement
solution available to thousands of Datalogic customers in the
Transportation and Logistics vertical.
Agreement with Delhivery Private Limited, India
We
entered into an agreement with Delhivery Private Limited, one of
the largest courier pickup, delivery, and online shipping services
in India. Delhivery’s reputation as a front-runner in delivery and
logistics tech makes its decision to select Boxsize a
particularly strong testament to the value the solution provides.
BoxSize provides Delhivery’s employees on the B2B side with
critical information that will allow them to effortlessly optimize
loading efficiency and add even more real-time visibility to
operations.
SizeUp
We
are working on additional consumer applications, including a DIY
application. Our SizeUp application is a smart tape measure
for the business to consumer market which allows users to utilize
their smartphone as a tape measure. The application provides
measurements with an accuracy of within two centimeters. Through
the use of SizeUp, users will be able to visualize how an
object or a piece of furniture will fit in an existing room in
their home or office. During 2020, we expanded availability of
SizeUp to more than 68 different iOS and Android smartphone
models worldwide. It also added Google Vision for image content
analysis, object detection, and title suggestions.
Currently
the SizeUp app for Android and iOS is available for free for
the first 30 days, after which a user will be required to register
via e-mail and pay a one-time fee of $1.99 to continue using the
application. To date, revenues from downloads have been
minimal.

Research
and Development
Our
research and development team are responsible for the research,
algorithm, design, development, and testing of all aspects of our
measurement platform technology. We invest in these efforts to
continuously improve, innovate, and add new features to our
solutions.
We
incurred research and development expenses of approximately $4.25
million in 2021 and $1.5 million in 2020, relating to the
development of its applications and technologies. The increase from
the corresponding period primarily resulted from share based
payment in the amount of $2.6 million attributed to the share
issuance to Ms. Zigdon under that certain Amendment to Purchase
Agreement dated May 26, 2021. We intend to continue to invest in
our research and development capabilities to extend our platform
and bring our measurement technology to a broader range of
applications.
In
2022, the R&D department experienced significant success in
their efforts to improve the performance of their size
recommendation system. Through a combination of optimized
algorithms and the incorporation of cutting-edge technologies, the
team was able to achieve a threefold increase in the system’s
speed. This breakthrough not only makes the system one of the
fastest and most accurate on the market, but also reduced the
operation costs, making it more cost-effective for businesses to
use. Additionally, the solution is now highly scalable, allowing it
to easily adapt to the needs of businesses of any size. The R&D
team is now focused on further improving the system and exploring
new applications for the technology.
Sales
and Marketing
In
2019, we launched a commercialization strategy that directs our
sales efforts toward both sales to e-commerce players in specific
vertical markets such as fashion/apparel and shipping/delivery as
well as to e-commerce third-party platform providers. As of January
27, 2023, we have nine sales offices in the following countries:
US, UK, France, Netherlands, Turkey, Russia, Germany, Israel and
Italy, generating customer leads, building out a sales pipeline,
and developing customer relationships.
We
believe an effective method to market our suite of products is for
users to actively use and explore its capabilities. We encourage
free trials of one or more of our products in order to successfully
convert those accounts to paid subscriptions.
Proprietary
Rights
We
rely on a combination of patent, copyright, trademark and trade
secret laws in the United States and other jurisdictions, as well
as contractual protections, to protect our proprietary
technology.
As of
December 31, 2022, we owned 18 issued patents: six in Europe, four
in the U.S., three in each of Russia and Japan and one in each of
Canada and Israel which expire between January 20, 2033 and August
18, 2036, and we have two additional patent applications in
process. As of such date, we do not have any registered
trademarks.
We
cannot provide any assurance that our proprietary rights with
respect to our products will be viable or have value in the future
since the validity, enforceability and type of protection of
proprietary rights in software-related industries are uncertain and
still evolving.
Despite
our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized
use of our products is difficult, and while we are unable to
determine the extent to which piracy of our software products
exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the
United States, and effective copyright, trademark, trade secret and
patent protection may not be available in those jurisdictions. Our
means of protecting our proprietary rights may not be adequate to
protect us from the infringement or misappropriation of such rights
by others.
Further,
in recent years, there has been significant litigation in the
United States involving patents and other intellectual property
rights, particularly in the software and Internet-related
industries. We can become subject to intellectual property
infringement claims as the number of our competitors grows and our
products and services overlap with competitive offerings. These
claims, even if not meritorious, could be expensive to defend and
could divert management’s attention from operating our business. If
we become liable to third parties for infringing their intellectual
property rights, we could be required to pay a substantial award of
damages and to develop non-infringing technology, obtain a license
or cease selling the products that contain the infringing
intellectual property. We may be unable to develop non-infringing
technology or obtain a license on commercially reasonable terms, if
at all.
Government
Regulation
We
are subject to a number foreign and domestic laws and regulations
that involve matters central to our business. These laws and
regulations may involve privacy, data protection, intellectual
property, or other subjects. Many of the laws and regulations to
which we are subject are still evolving and being tested in courts
and could be interpreted in ways that could harm our business. In
addition, the application and interpretation of these laws and
regulations often are uncertain, particularly in the new and
rapidly evolving industry in which we operate. Because global laws
and regulations have continued to develop and evolve rapidly, it is
possible that we, our products, or our platform may not be, or may
not have been, compliant with each such applicable law or
regulation.
In
particular, we are subject to a variety of federal, state and
international laws and regulations governing the processing of
personal data. Many U.S. states have passed laws requiring
notification to data subjects when there is a security breach of
personally identifiable data. There are also a number of
legislative proposals pending before the U.S. Congress, various
state legislative bodies and foreign governments concerning data
protection. In addition, data protection laws in Europe and other
jurisdictions outside the United States can be more restrictive
than those within the United States, and the interpretation and
application of these laws are still uncertain and in
flux.
For
example, the General Data Protection Regulation, or GDPR, which
took effect on May 25, 2018, enhances data protection obligations
for entities that process personal data about individuals,
including obligations to cooperate with European data protection
authorities, implement security measures and keep records of
personal data processing activities. Noncompliance with the GDPR
can trigger fines equal to the greater of €20 million or 4% of
global annual revenue. In addition, the California Consumer Privacy
Act of 2018, or CCPA, effective as of January 1, 2020, gives
California residents expanded rights to access and require deletion
of their personal information, opt out of certain personal
information sharing, and receive detailed information about how
their personal information is used. The CCPA provides for civil
penalties for violations, as well as a private right of action for
data breaches, that is expected to increase data breach litigation.
Further, failure to comply with the Israeli Privacy Protection Law
of 1981, and its regulations, as well as the guidelines of the
Israeli Privacy Protection Authority, may expose us to
administrative fines, civil claims (including class actions) and in
certain cases criminal liability. Current pending legislation may
result in a change of the current enforcement measures and
sanctions. Given the breadth and depth of changes in data
protection obligations, meeting the requirements of GDPR and other
applicable laws and regulations has required significant time and
resources, including a review of our technology and systems
currently in use against the requirements of GDPR and other
applicable laws and regulations. We have taken various steps to
prepare for complying with GDPR and other applicable laws and
regulations however there can be no assurance that these steps are
sufficient to assure compliance. Further, additional EU laws and
regulations (and member states’ implementations thereof) further
govern the protection of individuals and of electronic
communications. If our efforts to comply with GDPR or other
applicable laws and regulations are not successful, we may be
subject to penalties and fines that would adversely impact our
business and results of operations, and our ability to use personal
data of individuals could be significantly impaired.
Competition
We
operate in a highly competitive industry that is characterized by
constant change and innovation. Changes in the applications and the
programing languages used to develop applications, devices,
operating systems, and technology landscape result in evolving
customer requirements. Our competitors include True Fit, Fit
analytics and 3DLook.
The
principal competitive factors in our market include the
following:
|
● |
High
Accuracy Size Recommendations: the highest accuracy and the
lowest margin of error by combining patented technology including
AI and ML, size chart or spec data, and MySizeID property body data
measurement; |
|
○ |
Fast
1 week integration including size chart size chart review and
product mapping |
|
○ |
Easy
1 line of “all included” script implementation |
|
○ |
Very
small library that weights ±50kb (minimum widget loading time on
product page) |
|
○ |
Ultra-Fast
loading and size recommendation presenting |
|
○ |
Restful
API option (API integration with any website or app) |
|
○ |
Adjustments
of size charts based on performance |
|
○ |
Widget
usage analysis by FashTech and BI teams |
|
○ |
Automatic
pairing of size charts with products/collections |
|
○ |
Easy
to use interface (10-15 seconds to receive size
recommendations) |
|
○ |
Option
to add/deduct questions to/from widget wizards |
|
○ |
Users
automatically receive size recommendations on all products after
initial sign up |
|
● |
Product
and platform features, architecture, reliability, privacy and
security, performance, effectiveness, and supported
environments; |
|
● |
Product
extensibility and ability to integrate with other technology
infrastructures; |
|
● |
Digital
operations expertise; |
|
● |
Ease
of use of products and platform capabilities; |
|
● |
Total
cost of ownership; |
|
● |
Adherence
to industry standards and certifications; |
|
● |
Strength
of sales and marketing efforts; |
|
● |
Brand
awareness and reputation; and |
|
● |
Focus
on customer success |
We
believe we generally compete favorably with our competitors on the
basis of these factors. We expect competition to increase as other
established and emerging companies enter our markets, as customer
requirements evolve, and as new products and technologies are
introduced. We expect this to be particularly true as we offer a
smartphone-based offering that does not need to utilize the
smartphone’s camera, and our competitors may also seek to repurpose
their existing offerings to provide similar solutions. Many of our
competitors have substantially greater financial, technical, and
other resources, greater name recognition, larger sales and
marketing budgets, broader distribution, and larger and more mature
intellectual property portfolios.
Human
Capital Management
As of January 27, 2023, we had a total of 37 employees, of which 33
were full-time employees, including 14 in sales and marketing, 12
in technology and development and 7 in administration and
finance.
None of our employees are represented by a collective bargaining
agreement, nor have we experienced any work stoppage. We consider
our relationship with our employees to be good. Our future success
depends on our continuing ability to attract and retain highly
qualified engineers, sales and marketing, account management, and
senior management personnel.
We also believe we have built a strong sales team focused on
expanding into new markets through the recruitment of our CCO
and our Sales Development Representatives.
We
believe that our future success will depend, in part, on our
continued ability to attract, hire and retain qualified personnel.
In particular, we depend on the skills, experience and performance
of our senior management and research personnel. We compete for
qualified personnel with other hi-tech companies, as well as
universities and non-profit research institutions.
We
provide competitive compensation and benefits programs to help meet
the needs of our employees. In addition to salaries, these programs
(which vary by country/region and employment classification)
include incentive compensation plan, pension, and insurance
benefits, paid time off, , among others. We also use targeted
equity-based grants with vesting conditions to facilitate retention
of personnel, particularly for our key employees.
The
success of our business is fundamentally connected to the
well-being of our people. Accordingly, we implemented an hybrid
work policy in which the employees can work from home twice a
week.
We
consider our employees to be a key factor to our success and we are
focused on attracting and retaining the best employees at all
levels of our business. Inclusion and diversity is a strategic,
business priority. We employ people based on relevant
qualifications, demonstrated skills, performance and other
job-related factors. We do not tolerate unlawful discrimination
related to employment, and strive to ensure that employment
decisions related to recruitment, selection, evaluation,
compensation, and development, among others, are not influenced by
race, color, religion, gender, age, ethnic origin, nationality,
sexual orientation, marital status, or disability. Continuous
monitoring to ensure pay equity has been a focus in 2022. We have
continued to improve gender balance in 2022 with a focus on
increasing the representation of women hired as new college
graduates. We are committed to creating a trusting environment
where all ideas are welcomed and employees feel comfortable and
empowered to draw on their unique experiences and
backgrounds.
We
consider our relations with our employees to be good.
Company
Information
Our
principal executive offices are located at HaYarden 4 St., POB
1026, Airport City, Israel 7010000, and our telephone number is
+972-3-600-9030. Our website address is www.mysizeid.com.
Any information contained on, or that can be accessed through, our
website is not incorporated by reference into, nor is it in any way
a part of, this Annual Report on Form 10-K.
We
use our website (www.mysizeid.com) as a channel of
distribution of Company information. The information we post
through this channel may be deemed material. Accordingly, investors
should monitor our website, in addition to following our press
releases, SEC filings and public conference calls and webcasts. The
contents of our website are not, however, a part of this Annual
Report on Form 10-K.
Corporate
History
We
were incorporated in the State of Delaware on September 20, 1999
under the name Topspin Medical, Inc. In December 2013, we changed
our name to Knowledgetree Ventures Inc. Subsequently, in February
2014, we changed our name to MySize, Inc. In 2020, we created a
subsidiary in the Russian Federation, My Size LLC.
From
inception through 2012, we were engaged in research and development
of a medical magnetic resonance imaging, or MRI, technology for
interventional cardiology and in the development of MRI technology
for use in the diagnosis and treatment of prostate cancer. In
January 2012, we acquired Metamorefix Ltd., or Metamorefix.
Metamorefix was incorporated in 2007, and was engaged in the
development of innovative solutions for the rehabilitation of
tissues, particularly skin tissues. By the end of 2012, we ceased
operations and in January 2013, we sold our entire ownership
interest in Metamorefix.
In
September 2013, Ronen Luzon, our Chief Executive Officer, acquired
control of the Company from Asher Shmuelevitch, according to which
Mr. Luzon purchased 70,238 shares of common stock from Mr.
Shmuelevitch, which shares represented approximately 40% of the
issued and outstanding capital stock of the Company at such time,
thus becoming a controlling shareholder of the Company. In
connection with the acquisition, Mr. Luzon reached a settlement
with our then creditors pursuant to which the main creditor, Mr.
Shmuelevitch, was paid a total sum of approximately $140,000 in
consideration for a full and final waiver of any and all his claims
that he may have relating to any monetary indebtedness of the
Company to the creditors.
In
February 2014, My Size Israel, our wholly owned subsidiary, entered
into a Purchase Agreement, or the Purchase Agreement, with Shoshana
Zigdon, who at the time was a beneficial owner of more than 20% of
our outstanding shares, with respect to the acquisition by us of
certain rights related to the collection of data for measurement
purposes including rights in the venture, the method and a patent
application that had been filed by the Seller (PCT/IL2013/050056),
or the Assets. In consideration for the sale of the Assets, we
agreed to pay to Ms. Zigdon, 18% of our operating profit, directly
or indirectly connected with the Assets together with value-added
tax in accordance with the law for a period of seven years from the
end of the development period of the aforementioned venture. In
addition to the foregoing, the Purchase Agreement provided that all
developments, improvements, knowledge and know-how developed and/or
accumulated by us after the execution of the Purchase Agreement
will be owned by us. Further, Ms. Zigdon agreed not to compete,
directly or indirectly, with us in any matter relating to the
Assets for a period of seven years from the end of the development
period of the venture.
On
May 26, 2021, we, My Size Israel, and Ms. Zigdon entered into an
Amendment to Purchase Agreement, or the Amendment, which made
certain amendments to the Purchase Agreement. Pursuant to the
Amendment, Ms. Zigdon agreed to irrevocably waive (i) the right to
repurchase certain assets related to the collection of data for
measurement purposes that My Size Israel acquired from Ms. Zigdon
under the Purchase Agreement and upon which our business is
substantially dependent, or the Assets, and (ii) all past, present
and future rights in any of the intellectual property rights sold,
transferred and assigned to My Size Israel under the Purchase
Agreement and any modifications, amendments or improvements made
thereto, including, without limitation, any compensation, reward or
any rights to royalties or to receive any payment or other
consideration whatsoever in connection with such intellectual
property rights, or the Waiver. In consideration of the Waiver, we
issued 100,000 shares of common stock to Ms. Zigdon.
In
September 2005, we commenced trading on the Tel Aviv Stock
Exchange, or TASE. Between 2007 and 2012 we reported as a public
company with the SEC. In August 2012, we suspended our reporting
obligations. In mid-2015 we resumed reporting as a public company.
On July 25, 2016, our common stock began publicly trading on the
Nasdaq Capital Market under the symbol “MYSZ”.
Properties
We currently lease 1,660 square feet of office space at 4 HaYarden
Street, Airport City, Israel. The lease term is for 36 months
beginning on August 20, 2019 and ending on August 20, 2022, with an
option to extend for an additional 36 months. Monthly rent
payments, including utilities, amount to approximately $14,000 per
month. We extended the
lease period until August 20, 2025.
LEGAL PROCEEDINGS
From
time to time, we may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business.
However, litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm our business.
North Empire LLC
On
August 7, 2018, we commenced an action against North Empire LLC, or
North Empire, in the Supreme Court of the State of New York, County
of New York for breach of a Securities Purchase Agreement or
Agreement in which we are 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 us, 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 us against them, alleging that we 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 our CEO and now former Chairman of
the Board asserting similar claims against them in their individual
capacities. On October 17, 2018, we filed a reply to North Empire’s
counterclaims. On November 15, 2018, our 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 My Size 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. We 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. We intend to vigorously defend any claims made by North
Empire.
MANAGEMENT
Directors
and Executive Officers
The
following table provides information regarding our executive
officers and members of our Board of Directors as of the date of
this prospectus:
Name |
|
Age |
|
Position(s) |
Ronen
Luzon |
|
52 |
|
Chief
Executive Officer and Class III Director |
Or
Kles |
|
39 |
|
Chief
Financial Officer |
Billy
Pardo |
|
47 |
|
Chief
Operating Officer and Chief Product Officer |
Ilia
Turchinsky |
|
35 |
|
Chief
Technology Officer |
Ezequiel
Javier Brandwain |
|
53 |
|
Chief
Commercial Officer |
Arik
Kaufman* |
|
41 |
|
Class
I Director |
Oren
Elmaliah* |
|
38 |
|
Class
I Director |
Oron
Branitzky* |
|
63 |
|
Class
II Director |
Guy
Zimmerman* |
|
53 |
|
Class
II Director |
*
Independent as that term is defined by the rules of the Nasdaq
Stock Market.
The
following is a brief biography of each executive officer and
director.
Ronen
Luzon — Founder, Director & Chief Executive
Officer
Ronen
Luzon has served as our Chief Executive Officer and a member of our
board of directors since September 2013. Since 2006, Mr. Luzon has
additionally served as Chief Executive Officer and founder of
Malers Ltd., a company in the global security solutions market
which provides technological solutions for integrated communication
infrastructures, security and control systems. Prior to Malers, he
held several senior marketing, sales management and professional
services positions in a variety of international high tech
companies including VP marketing of GA Tech and Professional
Services Manager of Eldat Communication. Mr. Luzon graduated from
Middlesex University in London with a B.S. in IT and Business
Information Systems. We believe that Mr. Luzon is qualified to
serve as a member of our board of directors because of his more
than 20 years of experience in the technology sector.
Or
Kles — Chief Financial Officer
Or
Kles has served as our Chief Financial Officer since May 2016. He
is a certified public accountant with a broad, diverse financial
background. From May 2013 until April 2016 he served as Assistant
Controller of Shikun and Binui-Solel Boneh Infrastructure Ltd. and
from December 2010 until May 2013 he served as an Associate at
KPMG. Mr. Kles holds an MBA and a B.A. in Business Management and
Accounting (specializing in financing) from The College of
Management Academic Studies. Mr. Kles is a certified public
accountant in Israel.
Billy
Pardo — Chief Operating Officer and Chief Product
Officer
Billy
Pardo has served as our Chief Product Officer since May 2014 and
Chief Operating Officer since April 2019. From April 2010 until
August 2013, Ms. Pardo served as Senior Director of Product
Management of Fourier Education. Among her areas of expertise are
launching products from concept to successful delivery in various
methodologies, including Fourier Education’s award-winning
einstein™ Science Tablet. Prior to that Ms. Pardo served in various
product management positions including, Project Manager of Time to
Know, Product Marketing Manager of RiT Technologies, Product
Manager of Pricer AB and R&D Team Leader at Pricer AB. Ms.
Pardo previously served as Software Engineer at Eldat Communication
Ltd., and QA Engineer at NICE Systems. Ms. Pardo received an MBA
from The Interdisciplinary Center and a B.A. in Computer Science
from The Academic College of Tel-Aviv-Yaffo.
Ilia
(Eli) Turchinsky — Chief Technology Officer
Ilia
Turchinsky has served as our Chief Technology Officer since April
2019 and from July 2018 until April 2019 as our Director of
Technology. Prior to joining us, from 2013 until 2018, Mr.
Turchinsky served in various roles, most recently Chief Technology
Officer, at MonkeyTech Ltd., a company that provides design,
development and characterization of mobile applications. Prior to
that, Mr. Turchinsky served in various roles including development
course instructor at IQLine, was a founder of Arnavsoft and was a
software developer for MintLab and a political party. Mr.
Turchinsky holds a B.Sc. from the Ben Gurion University in Computer
Science and an M.Sc. from the Open University of Israel in Computer
Science.
Ezequiel
Javier Brandwain — Chief Commercial Officer
Ezequiel
Javier Brandwain has served as our Chief Commercial Officer since
February 2022. Mr. Brandwain brings more than two decades of global
experience in retail and the fashion industry, mainly in business
development, operations, and international markets. Before joining
the Company, Mr. Brandwain held positions of increasing
responsibility at several companies, including between June 2017
and November 2020, at 7 For All Mankind International, where he
served as Director, Latin America and Caribbean, managing business
development and operations across Latin America and the Caribbean.
Before that, between May 2016 and June 2017, Mr. Brandwain served
as Chief Business Development Officer at Replay – Fashion Box SPA,
where he oversaw business development and operations, expansion and
control in the Americas, the Caribbean, and North-East Asia. Prior
this role, between September 2015 and May 2016, he served as the
Replay’s Managing Director in Latin America and the Caribbean,
leading the company’s international expansion in these regions.
Prior to that, between April 2015 and September 2015, Mr. Brandwain
served as Managing Director, Latin America and Caribbean at
Authentic Brands Group LLC, where he led that company’s operations,
business developments and international expansion within these
regions, and served as the direct liaison with the company’s
headquarters in New York. Prior to that, between April 2015 and
September 2015, Mr. Brandwain served as Chief Operating Officer,
Latin America and Caribbean at Flemingo International Ltd.,
overseeing operations, as well as projected operations in the
travel retail field across these regions. Prior to that, between
December 2010 and February 2014, Mr. Brandwain served as Regional
Director, Southern Hemisphere at Calvin Klein, where he was
responsible for defining and implementing the operational and
commercial strategy for Southern Hemisphere, as well as overseeing
the retail, travel retail, concession, and wholesale businesses of
the company. During his tenure at Calvin Klein, Mr. Brandwain also
served as Travel Retail Director, Latin America, where he built the
travel retail business and developed operations. Prior to that,
between July 2010 and November 2010, Mr. Brandwain served as
Business Director, Latin America and Caribbean at Givenchy Latin
America, and between January 2010 and June 2010 he served as
Commercial Director, Latin America and Caribbean at Nautica Latin
America. During December 2004 and December 2009, Mr. Brandwain
served as Vice President, International Business Development at
Report Collection/Modextil, Inc., where he was in charge of
business and operational expansion, global growth, and brand
extensions. Prior to that, between 2003 and October 2004, Mr.
Brandwain served as General Manager at Andrew Koenig International,
Inc. Between September 2019 and November 2020, Mr. Brandwain served
as a member of the Board of Directors of 7 For All Mankind Brazil
Importacao, Comercio E Distribuicao S.A. Mr. Brandwain earned a
Bachelor degree in architecture from the University of the Republic
(Uruguay).
Arik
Kaufman – Director
Arik
Kaufman has served as a member of our board of directors since June
2017. Mr. Kaufman is an attorney specializing in the fields of
commercial law, corporate law and capital markets and since 2016
runs his own law office in Israel. He has vast experience in the
fields of financial reporting and financial regulation. Mr. Kaufman
serves as the Chief Executive Officer of Steakholder Foods since
January 2022. From September 2017 until January 2022, Mr. Kaufman
served as VP Business Development of Mor Research Applications. Mr.
Kaufman holds an LLB in Law from the Interdisciplinary Center,
Herzliya, and is admitted to the Israeli Bar. We believe that Mr.
Kaufman is qualified to serve as a member of our board of directors
based upon his experience of assisting with the completion of
numerous venture capital financings, mergers, acquisitions, and
strategic relationships. In addition, he has served as a member of
the board of various publicly traded companies, including companies
that operate in the same industry as us.
Oren Elmaliah –
Director
Oren
Elmaliah, has served as a member of our board of directors since
May 2017. In September 2015, Oren Elmaliah founded Accounting Team
IL and has acted as Account Manager since then. Accounting Team IL
is a financial consultancy and service provider to public companies
traded in Israel and abroad. Since February 2017, Mr. Elmaliah has
served as controller of Enlivex Therapeutics Ltd., and since
January 2017 he has served as Chief Financial Officer of Presstek
Israel. In addition, since September 2015, Mr. Elmaliah has served
as an Israel Authorities Reporting Officer of LG Electronics Israel
and since September 2015 he has served as Local Financial Report
Consultant of Chiasma. From July 2011 until August 2015, Mr.
Elmaliah served as CPA, Financial Director of CFO Director Ltd and
from June 2010 until July 2011 he served as Risk Management
Consultant of RSM International Limited. Mr. Elmaliah holds a B.A.
in Accounting/Economics and a Msc. in Finance/Accounting from Tel
Aviv University, Israel. He is a licensed Certified Public
Accountant in Israel. We believe that Mr. Elmaliah is qualified to
serve as a member of our board of directors because of his vast
finance experience and public company management and administration
in the fields of finance, accounting, and financial
regulation.
Oron
Branitzky – Director
Oron
Branitzky has served as a member of our board of directors since
March 2017. Mr. Barnitzky has vast experience in retail technology.
Since November 2017, Mr. Branitzky has served as Global Retail
Business Development at Superup, and from January 2007 until
December 2014 he served as Vice President of Sales and Marketing at
Pricer AB. Prior to that, Mr. Branitzky has served as VP Marketing
and Sales at Eldat Communication and Sarin Technologies Ltd. Since
January 2015, Mr. Branitzky has served as chairman of the board of
directors of WiseShelf Ltd. and from May 2015 until March 2016, Mr.
Branitzky served as an advisory board member of ciValue. Mr.
Branitzky received a B.S. from the Hebrew University of Jerusalem
and an MBA in International Marketing from Tel Aviv University. We
believe that Mr. Branitzky is qualified to serve as a member of our
board of directors because of his more than 20 years of experience
in managing the sales of hi-tech solutions to retailers across the
globe.
Guy
Zimmerman – Director
Guy
Zimmerman, has served as a member of our board of directors since
August 2021. Previously, Mr. Zimmerman served as Founder and CEO of
ManuFuture, an online b2b engineering market place, since February
2021. Prior to that from 2017 to 2021, Mr. Zimmerman acted as a
consultant to several technology start-ups and was a founding
partner of a business travel online platform. From 2013 to 2017,
Mr. Zimmerman served as EVP of Marketing and Business Development
of Kornit Digital and was part of the IPO leadership. Prior to
that, Mr. Zimmerman served as VP of Global Sales and Business
Development at Tefron Ltd., a provider of seamless garment
technology, where he led the $100m sales and sales support
organization serving global retail and fashion brands. Prior to
that he served as Vice President of Strategy and Business
Development at Tnuva Group, Israel’s largest food manufacturer and
spent eight years at McKinsey & Company. Mr. Zimmerman
previously led a software startup in the field of operational
healthcare management systems. Mr. Zimmerman holds a B.Sc. in
Industrial Engineering from Tel Aviv University in Israel. We
believe that Mr. Zimmerman is qualified to serve as a member of our
board of directors because of his experience in business
development in the technology and retail sectors.
Family
Relationships
Ronen
Luzon, the Chief Executive Officer and a member of our board of
directors, and Billy Pardo, the Chief Product Officer and Chief
Operating Officer, are husband and wife. There are no other family
relationships among any of our current or former directors or
executive officers.
Involvement
in Certain Legal Proceedings
We
are not aware of any of our directors or officers being involved in
any legal proceedings in the past ten years relating to any matters
in bankruptcy, insolvency, criminal proceedings (other than traffic
and other minor offenses), or being subject to any of the items set
forth under Item 401(f) of Regulation S-K.
Arrangements
between Officers and Directors
To
our knowledge, there is no arrangement or understanding between any
of our officers and any other person, including directors, pursuant
to which the officer was selected to serve as an
officer.
Board of Directors
There
are no agreements with respect to the election of
directors.
On
January 6, 2022, we filed with the Secretary of State of Delaware a
Certificate of Amendment to our Amended and Restated Certificate of
Incorporation providing for a classified Board. Following filing of
the Certificate of Amendment, members of our board are now
classified into three classes with staggered three-year terms (with
the exception of the expiration of the initial Class I and Class II
directors), as follows:
|
● |
Class
I, comprised of two directors, initially Arik Kaufman and Oren
Elmaliah (with their initial terms expiring at our 2022 annual
meeting of stockholders and members of such class serving
successive three-year terms); |
|
● |
Class
II, comprised of two directors, initially Oron Branitzky and Guy
Zimmerman (with their initial terms expiring at our 2023 annual
meeting of stockholders and members of such class serving
successive three-year terms); and |
|
● |
Class
III, comprised of one director, initially Ronen Luzon (with his
initial term expiring at our 2024 annual meeting of stockholders
and members of such class serving successive three-year
terms). |
To
preserve the classified Board structure, a director elected by the
Board of Directors to fill a vacancy holds office until the next
election of the class for which such director has been chosen, and
until that director’s successor has been elected and qualified or
until his or her earlier death, resignation, retirement or
removal.
Our
board of directors has reviewed the materiality of any relationship
that each of our directors has with us, either directly or
indirectly. Based upon this review, we believe that Arik Kaufman,
Oren Elmaliach, Oron Branitzky and Guy Zimmerman qualify as
independent directors in accordance with the standards set by the
Nasdaq and Rule 10A-3 promulgated under the Exchange
Act.
Committees of the Board
Audit Committee
Our audit committee is comprised of Oron Branitzky, Oren Elmaliah
and Arik Kaufman. Mr. Elmaliah serves as chairman of the audit
committee. The audit committee is responsible for retaining and
overseeing our independent registered public accounting firm,
approving the services performed by our independent registered
public accounting firm and reviewing our annual financial
statements, accounting policies and our system of internal
controls. The audit committee acts under a written charter, which
more specifically sets forth its responsibilities and duties, as
well as requirements for the audit committee’s composition and
meetings. The audit committee charter is available on our
website www.mysizeid.com.
The Board of Directors has determined that each member of the audit
committee is “independent,” as that term is defined by applicable
SEC rules. In addition, the Board of Directors has determined that
each member of the audit committee is “independent,” as that term
is defined by the rules of the Nasdaq Stock Market.
The Board of Directors has determined that Oren Elmaliah is an
“audit committee financial expert” serving on its audit committee,
and is independent, as the SEC has defined that term in Item 407 of
Regulation S-K.
Compensation Committee
Our compensation committee consists of Oron Branitzky, Oren
Elmaliah and Arik Kaufman. Mr. Branitzky serves as chairman of the
compensation committee.
The compensation committee’s roles and responsibilities include
making recommendations to the Board of Directors regarding the
compensation for our executives, the role and performance of our
executive officers, and appropriate compensation levels for our
CEO, which are determined without the CEO present, and other
executives. Our compensation committee also administers our 2017
Equity Incentive Plan and our 2017 Consultant Equity Incentive
Plan. The compensation committee acts under a written charter,
which more specifically sets forth its responsibilities and duties,
as well as requirements for the compensation committee’s
composition and meetings. The compensation committee charter is
available on our website www.mysizeid.com.
Our Board of Directors has determined that all of the members of
the compensation committee are “independent” as that term is
defined by the rules of the Nasdaq Stock Market.
Nominating and Corporate Governance Committee
The members of the nominating and corporate governance committee
are Oron Branitzky, Oren Elmaliah and Arik Kaufman. Mr. Kaufman
serves as chairman of the corporate governance and nominations
committee. The nominating and corporate governance committee acts
under a written charter, which more specifically sets forth its
responsibilities and duties, as well as requirements for the
nominating and corporate governance committee’s composition and
meetings. The nominating and corporate governance committee charter
is available on our website www.mysizeid.com.
The nominating and corporate governance committee develops,
recommends and oversees implementation of corporate governance
principles for us and considers recommendations for director
nominees. The nominating and corporate governance committee also
considers stockholder recommendations for director nominees that
are properly received in accordance with applicable rules and
regulations of the SEC. Our stockholders that wish to nominate a
director for election to the Board of Directors should follow the
procedures set forth in our bylaws.
The nominating and corporate governance committee will consider
persons identified by its members, management, stockholders,
investment bankers and others. The guidelines for selecting
nominees, which are specified in the nominating committee charter,
generally provide that persons to be nominated:
|
● |
should
be accomplished in his or her field and have a reputation, both
personal and professional, that is consistent with our image and
reputation; |
|
● |
should
have relevant experience and expertise and would be able to provide
insights and practical wisdom based upon that experience and
expertise; and |
|
● |
should
be of high moral and ethical character and would be willing to
apply sound, objective and independent business judgment, and to
assume broad fiduciary responsibility. |
The nominating and corporate governance committee will consider a
number of qualifications relating to management and leadership
experience, background and integrity and professionalism in
evaluating a person’s candidacy for membership on the Board of
Directors. The nominating and corporate governance committee may
require certain skills or attributes, such as financial or
accounting experience, to meet specific Board needs that arise from
time to time and will also consider the overall experience and
makeup of its members to obtain a broad and diverse mix of Board of
Directors members. The nominating and corporate governance
committee will not distinguish among nominees recommended by
stockholders and other persons.
Our Board of Directors has determined that all of the members of
the nominating and corporate governance committee are “independent”
as that term is defined by the rules of the Nasdaq Stock
Market.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and
executive officers, and persons who own more than 10% of a
registered class of our equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of
our common stock and other equity securities. Officers, directors
and greater than 10% stockholders are required by SEC regulations
to furnish us with copies of all Section 16(a) forms they file.
Based solely upon a review of copies of Section 16(a) reports and
representations received by us from reporting persons, a Form 3
filed by Shoshana Zigdon was filed late.
Code of Conduct and Ethics
We have a Code of Business Conduct and Ethics that applies to all
our employees. The text of the Code of Business Conduct and Ethics
is publicly available on our website at www.mysizeid.com.
Information contained on, or that can be accessed through, our
website does not constitute a part of this report and is not
incorporated by reference herein. Disclosure regarding any
amendments to, or waivers from, provisions of the code of conduct
and ethics that apply to our directors, principal executive and
financial officers will be posted on the “Investors-Corporate
Governance” section of our website at www.mysizeid.com or
will be included in a Current Report on Form 8-K, which we will
file within four business days following the date of the amendment
or waiver.
Change in Procedures for Recommending Directors
There have been no material changes to the procedures by which our
stockholders may recommend nominees to our Board of Directors from
those procedures set forth in our Proxy Statement for our 2021
Annual Meeting of Stockholders, filed with the SEC on June 15,
2021.
Security
Ownership of Certain Beneficial Owners and
Management
The
following table sets forth certain information regarding beneficial
ownership of shares of our common stock as of January 27, 2023 by
(i) each person known to beneficially own more than 5% of our
outstanding common stock, (ii) each of our directors, (iii) each of
our executive officers, and (iv) all of our directors and executive
officers as a group. Except as otherwise indicated, the persons
named in the table below have sole voting and investment power with
respect to all shares beneficially owned, subject to community
property laws, where applicable.
Beneficial
Owner(1) |
|
Shares of
Common Stock
Beneficially
Owned
|
|
|
Percentage(2) |
|
More than 5%
Holders |
|
|
|
|
|
|
|
|
Whitehole, S.L. |
|
|
94,632 |
|
|
|
5.8 |
% |
Executive officers
and directors: |
|
|
|
|
|
|
|
|
Ronen Luzon |
|
|
143,578 |
(3) |
|
|
7.9 |
% |
Or Kles |
|
|
29,854 |
(4) |
|
|
1.8 |
% |
Billy Pardo |
|
|
143,578 |
(5) |
|
|
7.9 |
% |
Ezequiel Javier Brandwain |
|
|
12,000 |
(6) |
|
|
* |
|
Ilia Turchinsky |
|
|
18,313 |
(7) |
|
|
1.1 |
% |
Arik Kaufman |
|
|
1,294 |
(8) |
|
|
* |
|
Oren Elmaliah |
|
|
1,294 |
(9) |
|
|
* |
|
Oron Branitzky |
|
|
1,294 |
(10) |
|
|
* |
|
Guy Zimmerman |
|
|
- |
|
|
|
- |
|
All Executive Officers and Directors
as a Group (9 persons) |
|
|
207,626 |
|
|
|
11.1 |
% |
*
Less than 1%
(1)
The address of each person is c/o My Size, Inc., 4 HaYarden St.,
P.O.B. 1026, Airport City, Israel 7010000 unless otherwise
indicated herein.
(2)
The calculation in this column is based upon 1,626,117 shares of
common stock outstanding on January 27, 2023. Beneficial ownership
is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to the subject
securities. Shares of common stock that are currently exercisable
or exercisable within 60 days of January 27, 2023 are deemed to be
beneficially owned by the person holding such securities for the
purpose of computing the percentage beneficial ownership of such
person, but are not treated as outstanding for the purpose of
computing the percentage beneficial ownership of any other
person
(3)
Consists of (i) 100,000 shares of restricted stock granted under
the 2017 Plan, (ii) 4,683 shares of common stock, (iii) options to
purchase up to 8,451 shares of our common stock, and (iv) 24,000
shares of restricted stock and options to purchase up to 6,494
shares of our common stock which are held by Billy Pardo, Ronen
Luzon’s spouse. Mr. Luzon may be deemed to beneficially hold the
securities of us held by Ms. Pardo.
(4)
Consists of (i) 24,000 shares of restricted stock granted under the
2017 Plan, and (ii) an option to purchase 5,854 shares of our
common stock. Does not include an aggregate of 119,760 shares of
restricted stock over which Mr. Kles has been designated the
initial proxy to vote such shares pursuant to a voting agreement
entered into between Whitehole S.L., Twinbel S.L. and EGI
Acceleration, S.L.
(5)
Consists of (i) 24,000 shares of restricted stock granted under the
2017 Plan, (ii) options to purchase up to 6,494 shares of our
common stock, (iii) 100,000 shares of restricted stock which are
held by Ronen Luzon, Billy Pardo’s spouse (iii) 8,451 shares of
common stock which are held by Mr. Luzon, and (iii) options to
purchase up to 4,683 shares of our common stock which are held by
Mr. Luzon. Ms. Pardo may be deemed to beneficially hold the
securities of the Company held by Mr. Luzon.
(6)
Consists of 12,000 shares of restricted stock granted under the
2017 Plan.
(7)
Consists of (i) 16,000 shares of restricted stock granted under the
2017 Plan, and (ii) options to purchase up to 58,671 shares of our
common stock.
(8)
Consists of options to purchase up to 1,294 shares of our common
stock.
(9)
Consists of options to purchase up to 1,294 shares of our common
stock.
(10)
Consists of options to purchase up to 1,294 shares of our common
stock.
EXECUTIVE COMPENSATION
Summary
Compensation Table
The following sets forth the compensation paid by us to our named
executive officers, during the years ended December 31, 2022 and
2021.
Name and Principal Position |
|
Year |
|
|
Salary
($) (1) |
|
|
Bonus
($) |
|
|
Stock
Awards
($) |
|
|
Option
Awards
($) (2) |
|
|
All Other
Compensation
($) |
|
|
Total
($) |
|
Ronen Luzon |
|
2022 |
|
|
|
173,000 |
|
|
|
- |
|
|
|
223,000 |
|
|
|
8,000 |
|
|
|
126,000 |
|
|
|
530,000
|
|
Chief
Executive Officer |
|
2021 |
|
|
|
194,000 |
|
|
|
5,000 |
|
|
|
- |
|
|
|
23,000 |
|
|
|
97,000 |
|
|
|
319,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Or Kles |
|
2022 |
|
|
|
123,000
|
|
|
|
- |
|
|
|
53,000 |
|
|
|
7,000 |
|
|
|
71,000 |
|
|
|
254,000 |
|
Chief Financial
Officer |
|
2021 |
|
|
|
123,000 |
|
|
|
8,000 |
|
|
|
- |
|
|
|
30,000 |
|
|
|
61,000 |
|
|
|
222,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Billy Pardo |
|
2022 |
|
|
|
134,000 |
|
|
|
- |
|
|
|
53,000 |
|
|
|
7,000 |
|
|
|
100,00 |
|
|
|
294,000 |
|
Chief Operating
Officer |
|
2021 |
|
|
|
162,000 |
|
|
|
7,000 |
|
|
|
- |
|
|
|
18,000 |
|
|
|
74,000 |
|
|
|
261,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ilia (Eli) Turchinsky
|
|
2022 |
|
|
|
130,000
|
|
|
|
- |
|
|
|
36,000 |
|
|
|
3,000
|
|
|
|
63,000
|
|
|
|
232,000
|
|
Chief Technology
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ezequiel Javier Brandwain |
|
2022 |
|
|
|
136,000
|
|
|
|
- |
|
|
|
27,000 |
|
|
|
-
|
|
|
|
63,000
|
|
|
|
226,000
|
|
Chief Commercial
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Salary for the years 2022 and 2021 are based on average US$/NIS
representative exchange rates of NIS 3.358 and NIS 3.11
respectively.
(2)
Amounts in this column represent the grant date fair value of
options granted to the named executive officers during 2022 and
2021, computed in accordance with FASB ASC Topic 718. These amounts
do not necessarily correspond to the actual value that may be
realized by the named executive officers. The assumptions made in
valuing the options reported in this column are discussed in Note
11 to our audited financial statements for the year ended December
31, 2021 and Note 4 to our condensed consolidated interim financial
statements for the quarterly period ended September 30,
2022.
All
Other Compensation Table
The
“All Other Compensation” amounts set forth in the Summary
Compensation Table above consist of the following:
Name |
|
Year |
|
|
Automobile-
Related
Expenses
($) |
|
|
Manager’s
Insurance*
($) |
|
|
Education
Fund*
($) |
|
|
Other social benefits**
($) |
|
|
Total
($) |
|
Ronen Luzon |
|
2022 |
|
|
|
32,000 |
|
|
|
31,000 |
|
|
|
15,000 |
|
|
|
48,000 |
|
|
|
126,000 |
|
|
|
2021 |
|
|
|
33,000 |
|
|
|
33,000 |
|
|
|
15,000 |
|
|
|
16,000 |
|
|
|
97,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Or Kles |
|
2022 |
|
|
|
15,000 |
|
|
|
21,000 |
|
|
|
10,000 |
|
|
|
25,000 |
|
|
|
71,000 |
|
|
|
2021 |
|
|
|
14,000 |
|
|
|
19,000 |
|
|
|
9,000 |
|
|
|
19,000 |
|
|
|
61,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Billy Pardo |
|
2022 |
|
|
|
16,000 |
|
|
|
25,000 |
|
|
|
13,000 |
|
|
|
46,000 |
|
|
|
100,000 |
|
|
|
2021 |
|
|
|
17,000 |
|
|
|
24,000 |
|
|
|
12,000 |
|
|
|
21,000 |
|
|
|
74,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ilia (Eli) Turchinsky |
|
2022 |
|
|
|
11,000
|
|
|
|
20,000
|
|
|
|
10,000
|
|
|
|
22,000
|
|
|
|
63,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ezequiel Javier
Brandwain |
|
2022 |
|
|
|
16,000
|
|
|
|
22,000
|
|
|
|
4,000
|
|
|
|
21,000
|
|
|
|
63,000
|
|
*
Manager’s insurance and education funds are customary benefits
provided to employees based in Israel. Manager’s insurance is a
combination of severance savings (in accordance with Israeli law),
defined contribution tax-qualified pension savings and disability
insurance premiums. An education fund is a savings fund of pre-tax
contributions to be used after a specified period of time for
educational or other permitted purposes.
**
Other social benefits for 2022 and 2021 for all named individuals
includes tax payments in respect of social benefits.
Agreements
with Named Executive Officers
Ronen
Luzon
On
November 18, 2018, My Size Israel, our wholly owned subsidiary,
entered into an employment agreement with Ronen Luzon, or the Luzon
Employment Agreement, pursuant to which Mr. Luzon will serve as our
Chief Executive Officer. Pursuant to the terms of the Luzon
Employment Agreement, Mr. Luzon receives NIS 55,000 per month as
his base salary and shall be eligible to receive such bonus as
determined by us. In addition, Mr. Luzon shall be entitled social
benefits and to other benefits, including, but not limited to,
contributions towards an education fund, pension scheme, manager’s
insurance, insurance coverage, including insurance in case of
disability, annual vacation days, sick leave and expense
reimbursement. Pursuant to the terms of the Luzon Employment
Agreement and subject to certain conditions, payments made by the
Company to the pension fund or manager’s insurance fund shall be
made in lieu of severance payments due to Mr. Luzon. The term of
the Luzon Employment Agreement shall be effective as of September
1, 2018 and shall continue until such time either party provides
written notice to the other party at least 75 days in advance of
the termination of such agreement. We may also terminate Mr.
Luzon’s employment without prior written notice (or payment in lieu
of such notice) for Cause (as defined in the Luzon Employment
Agreement).
Or
Kles
On November 18, 2018, My Size Israel entered into an employment
agreement with Or Kles, or the Kles Employment Agreement, pursuant
to which Mr. Kles will serve as our Chief Financial Officer.
Pursuant to the terms of the Kles Employment Agreement, Mr. Kles
receives NIS 38,000 per month as his base salary and shall be
eligible to receive such bonus as determined by us. In addition,
Mr. Kles shall be entitled to social benefits and other benefits,
including, but not limited to, contributions towards an education
fund, pension scheme, manager’s insurance, insurance coverage,
including insurance in case of disability, annual vacation days,
sick leave and expense reimbursement. Pursuant to the terms of the
Kles Employment Agreement and subject to certain conditions,
payments made by us to the pension fund or the manager’s insurance
fund shall be made in lieu of severance payments due to Mr. Kles.
The term of the Kles Employment Agreement shall be effective as of
September 1, 2018 and shall continue until such time either party
provides written notice to the other party at least 75 days in
advance of the termination of such agreement. We may also terminate
Mr. Kles’s employment without prior written notice (or payment in
lieu of such notice) for Cause (as defined in the Kles Employment
Agreement).
Billy
Pardo
On November 18, 2018, My Size Israel entered into an employment
agreement with Billy Pardo, or the Pardo Employment Agreement,
pursuant to which Ms. Pardo will serve as our Chief Product
Officer. Pursuant to the terms of the Pardo Employment Agreement,
Ms. Pardo receives NIS 47,500 per month as her base salary and
shall be eligible to receive such bonus as determined by us. In
addition, Ms. Pardo shall be entitled to social benefits and other
benefits, including, but not limited to, contributions towards an
education fund, pension scheme, manager’s insurance, insurance
coverage, including insurance in case of disability, annual
vacation days, sick leave and expense reimbursement. Pursuant to
the terms of the Pardo Employment Agreement and subject to certain
conditions, payments made by us to the pension fund or the
manager’s insurance fund shall be made in lieu of severance
payments due to Ms. Pardo. The term of the Pardo Employment
Agreement shall be effective as of September 1, 2018 and shall
continue until such time either party provides written notice to
the other party at least 75 days in advance of the termination of
such agreement. We may also terminate Ms. Pardo’s employment
without prior written notice (or payment in lieu of such notice)
for Cause (as defined in the Pardo Employment
Agreement).
Outstanding
Equity Awards at Fiscal Year-End
The
following table provides information regarding options held by each
of our named executive officers that were outstanding as of
December 31, 2022.
|
|
Option Awards |
|
|
|
|
Stock Awards |
|
Name and Principal Position |
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
Equity
incentive
plan
awards:
Number
of
Unearned
Shares
that Have
Not
Vested |
|
|
Equity
incentive
plan
awards:
Market
Value of
Unearned
Shares,
That
Have Not
Vested |
|
Ronen
Luzon - Chief Executive Officer |
|
|
400 |
(1) |
|
|
- |
|
|
$ |
26 |
(8) |
|
7/24/2023 |
|
|
- |
|
|
|
- |
|
|
|
|
1,601 |
(2) |
|
|
- |
|
|
$ |
26 |
(8) |
|
5/29/2025 |
|
|
- |
|
|
|
- |
|
|
|
|
6,400 |
(3) |
|
|
- |
|
|
$ |
26 |
|
|
8/10/2025 |
|
|
- |
|
|
|
- |
|
|
|
|
100,000 |
(9) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
100,000 |
|
|
$ |
511,250 |
|
Or
Kles – Chief Financial Officer |
|
|
227 |
(4) |
|
|
- |
|
|
$ |
26 |
(8) |
|
7/24/2023 |
|
|
- |
|
|
|
- |
|
|
|
|
427 |
(5) |
|
|
- |
|
|
$ |
26 |
(8) |
|
5/29/2025 |
|
|
- |
|
|
|
- |
|
|
|
|
5,200 |
(6) |
|
|
- |
|
|
$ |
26 |
|
|
8/10/2025 |
|
|
- |
|
|
|
- |
|
|
|
|
24,000 |
(10) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
24,000 |
|
|
$ |
122,700 |
|
Billy
Pardo- Chief Operating Officer |
|
|
400 |
(1) |
|
|
- |
|
|
$ |
26 |
(8) |
|
7/24/2023 |
|
|
- |
|
|
|
- |
|
|
|
|
894 |
(7) |
|
|
- |
|
|
$ |
26 |
(8) |
|
5/29/2025 |
|
|
- |
|
|
|
- |
|
|
|
|
5,200 |
(6) |
|
|
- |
|
|
$ |
26 |
|
|
8/10/2025 |
|
|
- |
|
|
|
- |
|
|
|
|
24,000 |
(11) |
|
|
- |
|
|
|
- |
|
|
- |
|
|
24,000 |
|
|
$ |
122,700 |
|
(1)
The option has a grant date of July 24, 2017 and vested in full on
January 24, 2018.
(2)
The option has a grant date of May 29, 2019. 267 options vested
immediately upon grant, 445 options vested on January 24, 2019, 445
options vested on January 24, 2020 and 444 options vested on
January 24, 2021.
(3)
The option has a grant date of October 8, 2020, 1,600 options
vested on November 26, 2020, 1,600 options vested on May 26, 2021,
1,600 options vested on November 26, 2021, and 1,600 options vested
on May 26, 2022.
(4)
The option has a grant date of July 24, 2017. 76 options vested
immediately upon grant, 76 options vested on May 1, 2018 and 75
options vested on May 1, 2019.
(5)
The option has a grant date of May 29, 2019. 160 options vested
immediately upon grant, 445 options vested on May 1, 2020, 445
options vested on May 21, 2021 and 444 options vested on May 1,
2022 .
(6)
The option has a grant date of October 8, 2020, 1,300 options
vested on November 26, 2020, 1,300 options vested on May 26, 2021,
1,300 options vested on November 26, 2021, and 1,300 options vested
on May 26, 2022 .
(7)
The option has a grant date of May 29, 2019. 214 options vested
immediately upon grant, 227 options vested on January 24, 2019, 227
options vested on January 24, 2020 and 226 options vested on
January 24, 2021 .
(8)
On May 25, 2020, the compensation committee of the Board of
Directors of the Company reduced the exercise price of outstanding
options of employees and directors of the Company for the purchase
of an aggregate of 5,610 shares of common stock of the Company
(with exercise prices ranging between $453.75 and $228.75) to $26
per share, which was the closing price for the Company’s common
stock on May 22, 2020, and extended the term of the foregoing
options for an additional one year from the original date of
expiration.
(9)
The restricted share awards has a grant date of September 29,2022
and shall vest in three equal installments on January 1,2023,
January 1,2024 and January 1,2025.
(10)
The restricted share awards has a grant date of September 29,2022
and shall vest in three equal installments on January 1,2023,
January 1,2024 and January 1,2025.
(11)
The restricted share awards has a grant date of September 29,2022
and shall vest in three equal installments on January 1,2023,
January 1,2024 and January 1,2025.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Other than the compensation agreements and other arrangements
described under “Executive Compensation” and the transactions
described below, since January 1, 2021 ,
we did not participate in any transaction, and we are not currently
participating in any proposed transaction, or series of
transactions, in which the amount involved exceeded the lesser of
$120,000 or one percent of the average of our total assets at year
end for the last two completed fiscal years, and in which, to our
knowledge, any of our directors, officers, five percent beneficial
security holders, or any member of the immediate family of the
foregoing persons had, or will have, a direct or indirect material
interest.
Employment Agreements
We have entered into written employment agreements with each of our
executive officers. These agreements generally provide for notice
periods of varying duration for termination of the agreement by us
or by the relevant executive officer, during which time the
executive officer will continue to receive base salary and
benefits. We have also entered into customary non-competition,
confidentiality of information and ownership of inventions
arrangements with our executive officers. However, the
enforceability of the noncompetition provisions may be limited
under applicable law.
Options
Since our inception we have granted options to purchase our common
stock to our officers and directors. Such option agreements may
contain acceleration provisions upon certain merger, acquisition,
or change of control transactions.
Restricted Stock Grants
On September 29, 2022, our compensation committee approved grants
of restricted share awards under our 2017 Plan to Ronen Luzon, Or
Kles, Billy Pardo, Ilia Turchinsky and Ezequiel Javier Brandwain,
pursuant to which they were issued 100,000 restricted shares,
24,000 restricted shares, 24,000 restricted shares, 16,000
restricted shares and 12,000 restricted shares, respectively. The
restricted shares shall vest in three equal installments on January
1, 2023, January 1, 2024 and January 1, 2025, conditioned upon
continuous employment with the Company, and subject to accelerated
vesting upon a change in control of the Company.
Indemnification
Agreements and Directors’ and Officers’ Liability
Insurance
We
have entered into indemnification agreements with each of our
directors and executive officers. These agreements, among other
things, require us to indemnify these individuals and, in certain
cases, affiliates of such individuals, to the fullest extent
permitted by Delaware law against liabilities that may arise by
reason of their service to us or at our direction, and to advance
expenses incurred as a result of any proceedings against them as to
which they could be indemnified. We also maintain an insurance
policy that insures our directors and officers against certain
liabilities, including liabilities arising under applicable
securities laws.
Director
Independence
See
“Directors and Executive Officers” above for information regarding
the independence of the members of our board of
directors.
Shareholder Activism
In May 2021, we received notice from Custodian Ventures, LLC, or
Custodian, of its intention to nominate four candidates to stand
for election to our Board of Directors at our 2021 annual meeting
of stockholders. Custodian subsequently made a book and records
request and has made public statements calling for changes to our
management.
On September 22, 2021, Custodian, commenced an action in the Court
of Chancery of the State of Delaware captioned, Custodian
Ventures, LLC v. Mysize, Inc., C.A. No. 2021-0817-LWW, or the
Delaware Action. In the Delaware Action, Custodian sought an order
from the Court of Chancery pursuant to Section 211 of the General
Corporation Law of the State of Delaware compelling us to hold an
annual meeting. As further described below, on November 4, 2021, we
entered into a settlement agreement, or the Settlement Agreement,
with Custodian, Activist Investing LLC, David Aboudi, Partick Loney
and David Natan, collectively, the Lazar Parties, settling and
dismissing the Delaware Action.
On October 19, 2021, we commenced an action in the United States
District Court for the Southern District of New York captioned My
Size, Inc. v. David Lazar, Custodian Ventures LLC, Activist
Investing LLC, Milton C. Ault III, Ault Alpha LP, Ault Alpha GP
LLC, Ault Capital Management LLC, Ault & Company Inc., David
Aboudi, Patrick Loney and David Nathan, Civil Action No,
1:21-cv-08585, pursuant to Sections 13(d) and 14(a) of the
Securities Exchange Act of 1934, and certain rules promulgated
thereunder, or the SDNY Action. The complaint sought, among other
things, declaratory and injunctive relief related to defendants’
efforts to nominate a slate of directors for election at our next
annual meeting. The complaint alleged that the defendants formed an
undisclosed “group” for purposes of Section 13 (d) and has
misrepresented its true purpose in purchasing My Size, Inc. stock
in filings made with the SEC. In addition, the complaint alleged
that the defendants engaged in an unlawful solicitation of
investors in violation of the Exchange Act proxy rules in
connection with their efforts to elect a slate of directors to our
Board of Directors. On October 20, 2021, the Court signed an order
granting a hearing on an anticipated motion for a preliminary
injunction and expedited scheduling and discovery in aid thereof,
and scheduled that hearing for December 2, 2021. As further
described below, on November 4, 2021, we entered into the
Settlement Agreement with the Lazar Parties settling and dismissing
the claims asserted in the SDNY Action and the Delaware Action
against one another. On November 8, 2021, the remaining defendants
in the SDNY Action filed and answer and counterclaim asserting a
claim against us pursuant to New York Civil Rights Law Section
70-a, also known as New York’s anti-SLAPP statute.
On November 4, 2021, we entered into the Settlement Agreement, or
the Lazar Settlement Agreement, with the Lazar Parties. Pursuant to
the Lazar Settlement Agreement, we and the Lazar Parties agreed to
compromise and settle the Delaware Action and SDNY Action. In
addition, pursuant to the Lazar Settlement Agreement, we reimbursed
Custodian for out of pocket expenses and in consideration for the
dismissal and release of claims against the Company an aggregate
amount equal to $275,000. With respect to our 2021 annual meeting
of stockholders, Custodian agreed to, among other things, withdraw
or rescind (i) its May 12, 2021 notice of stockholder nominations
of four director candidates with respect to our 2021 annual meeting
of stockholders, (ii) the notice dated October 28, 2021 submitted
by Custodian to us notifying us of Custodian’s continued intent to
bring its nomination of four director candidates before our
stockholders at the 2021 annual meeting, and (iii) any and all
related materials and notices submitted to us in connection
therewith or related thereto and to not take any further action in
connection with the solicitation of any proxies in connection with
us. Custodian also agreed to cease any and all solicitation and
other activities in connection with the 2021 annual meeting. In
addition, Custodian agreed to certain customary standstill
provisions for a period of five years beginning on the effective
date of the Agreement, or the Standstill Period. The Lazar
Settlement Agreement also provides that during the Standstill
Period, the Lazar Parties will vote all shares of our common stock
it beneficially owns in accordance with any proposal or
recommendation made by us or our Board of Directors that is
submitted to our stockholders, unless to do so would violate
applicable law and except with respect to certain extraordinary
transactions. The Lazar Settlement Agreement also contains
non-disparagement and confidentiality provisions, subject to
certain exceptions.
On December 9, 2021, we subsequently entered into a Settlement
Agreement, or the Ault Settlement Agreement, with Milton C. Ault
III, Ault Alpha LP, Ault Alpha GP LLC, Ault Capital Management LLC,
Ault & Company Inc., collectively the Ault Parties, which we
agreed to withdraw the SDNY Action against the Ault Parties and the
Ault Parties agreed to withdraw the counterclaim that they asserted
in that action against the Company. In addition, pursuant to the
Settlement Agreement, we paid $70,000 to the Ault Parties in
consideration for the releases and other good and valuable
consideration as set forth in the Ault Settlement Agreement.
Naiz
Bespoke Technologies Acquisition
On
October 7, 2022, we entered into the Naiz Agreement with the Naiz
Sellers, pursuant to which the Naiz Sellers agreed to sell to us
all of the issued and outstanding equity of Naiz. The acquisition
of Naiz was completed on October 11, 2022.
In
consideration of the purchase of the shares of Naiz, the Naiz
Agreement provided that the Naiz Sellers are entitled to receive
(i) ) the Naiz Equity
Consideration and (ii) up the Naiz Cash
Consideration.
The Naiz Equity Consideration was issued to the Naiz Sellers at
closing of the transaction of which 2,365,800 shares of My Size
common stock were issued to Whitehole constituting 6.6% of our
outstanding shares following such issuance. The Naiz Agreement also
provides that, in the event that the actual value of the Naiz
Equity Consideration (based on the Equity Value Averaging Period)
is less than $1,650,000, My Size shall pay the Shortfall Value to
the Naiz Sellers within 45 days of our receipt of Naiz’s 2025
audited financial statements; provided that certain revenue targets
are met. Following the Equity Value Averaging Period, it was
determined that the Shortfall Value is $459,240.
The Naiz Cash Consideration is payable to the Naiz Sellers in five
installments, according to the following payment schedule: (i)
US$500,000 at closing, (ii) up to US$500,000 within 45 days of My
Size’s receipt of Naiz’s 2022 audited financial statements, (iii)
up to US$350,000 within 45 days of My Size’s receipt of Naiz’s
unaudited financial statements for the six months ended June 30,
2023, (iv) up to $350,000 within 45 days of My Size’s receipt of
Naiz’s unaudited financial statements for the six months ended
December 31, 2023, and (v) up to $350,000 within 45 days of My
Size’s receipt of Naiz’s 2024 audited financial statements;
provided that in the case of the second, third, fourth and fifth
installments certain revenue targets are met.
The payment of the second, third, fourth and fifth cash
installments are further subject to the continuing employment or
involvement of Borja and Aritz, or the Key Persons, by or with Naiz
at the date such payment is due (except if a Key Person is
terminated from Naiz due to a Good Reason (as defined in the Naiz
Agreement)).
The Naiz Agreement contains customary representations, warranties
and indemnification provisions. In addition, the Naiz Sellers will
be subject to non-competition and non-solicitation provisions
pursuant to which they agree not to engage in competitive
activities with respect to My Size’s business.
In connection with the Naiz Agreement, (i) each of the Naiz Sellers
entered into the Lock-Up Agreement with My Size, (ii) Whitehole,
Twinbel and EGI entered into the Voting Agreement with My Size and
(iii) each of the Key Persons entered into employment agreements
and services agreements with Naiz.
The Lock-Up Agreement provides that each Naiz Seller will not, for
the six-month period following the closing of the transaction, (i)
offer, pledge, sell, contract to sell, sell any option, warrant or
contract to purchase, purchase any option, warrant or contract to
sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any Shares or any
securities convertible into or exercisable or exchangeable for
Shares in each case, that are currently or hereafter owned of
record or beneficially (including holding as a custodian) by such
Naiz Seller, or publicly disclose the intention to make any such
offer, sale, pledge, grant, transfer or disposition; or (ii) enter
into any swap, short sale, hedge or other agreement that transfers,
in whole or in part, any of the economic consequences of ownership
of such Naiz Seller’s Shares regardless of whether any such
transaction described in clause (i) or this clause (ii) is to be
settled by delivery of Shares or such other securities, in cash or
otherwise. The Lock-Up Agreement also contains an additional
three-month “dribble-out” provision that provides following the
expiration of the initial six-month lock-up period, without My
Size’s prior written consent (which My Size shall be permitted to
withhold at its sole discretion), each Naiz Seller shall not sell,
dispose of or otherwise transfer on any given day a number of
Shares representing more than the average daily trading volume of
the Shares for the rolling 30 day trading period prior to the date
on which such Seller executes a trade of the Shares.
The Voting Agreement provides that the voting of any Shares held by
each of Whitehole, Twinbel and EGI, or the Naiz Acquisition
Stockholders, will be exercised exclusively by a proxy designated
by My Size’s board of directors from time to time, or the Proxy,
and that each Naiz Acquisition Stockholder will irrevocably
designate and appoint the then-current Proxy as its sole and
exclusive attorney-in-fact and proxy to vote and exercise all
voting right with respect to the Shares held by each Naiz
Acquisition Stockholder. The Voting Agreement also provides that,
if the voting power held by the Proxy, taking into account the
proxies granted by the Naiz Acquisition Stockholders and the Shares
owned by the Proxy, represents 20% or more of the voting power of
My Size’s stockholders that will vote on an item, or the Voting
Power, then the Proxy shall vote such number of Shares in excess of
19.9% of the Voting Power in the same proportion as the Shares that
are voted by My Size’s other stockholders. The Voting Agreement
will terminate on the earliest to occur of (i) such time that such
Naiz Acquisition Stockholder no longer owns the Shares, (ii) the
sale of all or substantially all of the assets of My Size or the
consolidation or merger of My Size with or into any other business
entity pursuant to which stockholders of My Size prior to such
consolidation or merger hold less than 50% of the voting equity of
the surviving or resulting entity, (iii) the liquidation,
dissolution or winding up of the business operations of My Size,
and (iv) the filing or consent to filing of any bankruptcy,
insolvency or reorganization case or proceeding involving My Size
or otherwise seeking any relief under any laws relating to relief
from debts or protection of debtors.
MARKET INFORMATION
Our stock currently is listed on the Tel Aviv Stock Exchange and
the Nasdaq Capital Market under the symbol “MYSZ”. Our stock has
been traded on the Nasdaq Capital Market since July 25,
2016.
HOLDERS
As of
January 27, 2023, we had 71 shareholders of record . The
actual number of stockholders is greater than this number of record
holders and includes stockholders who are beneficial owners but
whose shares are held in street name by brokers and other
nominees.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock.
We intend to retain our future earnings, if any, in order to
reinvest in the development and growth of our business and,
therefore, do not intend to pay dividends on our common stock for
the foreseeable future. Any future determination to pay dividends
will be at the discretion of our Board of Directors and will depend
on our financial condition, results of operations, capital
requirements, and such other factors as our Board of Directors
deems relevant.
LEGAL MATTERS
The
validity of the shares of common stock offered hereby will be
passed upon for us by Greenberg Traurig, LLP, New York, New York.
If the securities are distributed in an underwritten offering,
certain legal matters will be passed upon for the underwriters by
counsel identified in the applicable prospectus
supplement.
EXPERTS
The
consolidated financial statements of My Size, Inc. and subsidiaries
as of December 31, 2021 and 2020, and for each of the years in the
two-year period ended December 31, 2021, have been included herein
and in the registration statement in reliance upon the report of
Somekh Chaikin, a member firm of KPMG International, independent
registered public accounting firm, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and
auditing.
The
financial statements of Naiz Bespoke Technologies, S.L. as of
December 31, 2021 and 2020, and for each of the years in the
two-year period ended December 31, 2021, have been included herein
in reliance upon the report of Airen Auditores SLP, accounts
auditor, registered in the ROAD with no. S-2566, and upon the
authority of said firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
This
prospectus is part of the registration statement on Form S-1 we
filed with the SEC, under the Securities Act, and does not contain
all the information set forth in the registration statement.
Whenever a reference is made in this prospectus to any of our
contracts, agreements or other documents, the reference may not be
complete, and you should refer to the exhibits that are a part of
the registration statement or the exhibits to the reports or other
documents incorporated by reference into this prospectus for a copy
of such contract, agreement or other document. You may inspect a
copy of the registration statement, including the exhibits and
schedules, without charge, at the SEC’s public reference room
mentioned below, or obtain a copy from the SEC upon payment of the
fees prescribed by the SEC.
Because
we are subject to the information and reporting requirements of the
Exchange Act, we file annual, quarterly and special reports, proxy
statements and other information with the SEC. Our SEC filings are
available to the public over the Internet at the SEC’s website at
www.sec.gov.
We
also maintain a web site at www.MySizeID.com, through which you can
access our SEC filings. The information set forth on our web site
is not part of this prospectus supplement.
INDEX TO CONSOLIDATED FINANCIAL INFORMATION
MY
SIZE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2021
U.S.
DOLLARS IN THOUSANDS
INDEX
Report of Independent Registered Public Accounting
Firm
To
the Shareholders and Board of Directors
My
Size, Inc.:
Opinion
on the Consolidated Financial Statements
We
have audited the accompanying consolidated balance sheets of My
Size, Inc. and subsidiaries (the Company) as of December 31, 2021
and 2020, the related consolidated statements of comprehensive
loss, shareholders’ equity, and cash flows for each of the years in
the two-year period ended December 31, 2021, and the related notes
(collectively, the consolidated financial statements). In our
opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and
its cash flows for each of the years in the two-year period ended
December 31, 2021, in conformity with U.S. generally accepted
accounting principles.
Going
Concern
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
discussed in Note 1d to the consolidated financial statements, the
Company has incurred significant losses and negative cash flows
from operations and has an accumulated deficit that raises
substantial doubt about its ability to continue as a going concern.
Management’s plans in regard to these matters are also described in
Note 1d. The consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits. We
are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due
to error or fraud. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation
of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
Critical
Audit Matters
Critical
audit matters are matters arising from the current period audit of
the consolidated financial statements that were communicated or
required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the
consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. We determined that
there are no critical audit matters.
/s/
Somekh Chaikin |
|
|
|
Member
Firm of KPMG International |
|
We
have served as the Company’s auditor since 2017. |
Tel
Aviv, Israel |
|
|
|
March
18, 2022, except as to Note 16b which is as of January 30,
2023 |
MY
SIZE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S.
dollars in thousands (except share data)
|
|
Note |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
December
31, |
|
|
|
Note |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
3 |
|
|
|
10,670 |
|
|
|
1,689 |
|
Restricted
cash |
|
|
|
|
|
|
273 |
|
|
|
85 |
|
Inventory, net |
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
deposit |
|
|
|
|
|
|
- |
|
|
|
184 |
|
Accounts
receivable |
|
|
|
|
|
|
40 |
|
|
|
28 |
|
Other
receivables and prepaid expenses |
|
|
4 |
|
|
|
579 |
|
|
|
482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets |
|
|
|
|
|
|
11,562 |
|
|
|
2,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long
term deposit |
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
|
5 |
|
|
|
112 |
|
|
|
128 |
|
Right-of-use
asset |
|
|
6 |
|
|
|
776 |
|
|
|
911 |
|
Intangible asset |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in marketable securities |
|
|
8 |
|
|
|
108 |
|
|
|
59 |
|
Total non-current asset |
|
|
|
|
|
|
996 |
|
|
|
1,098 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets |
|
|
|
|
|
|
12,558 |
|
|
|
3,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders’ equity |
|
|
|
|
|
|