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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31,
2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ________ to _________
Commission
file number
001-37370
MY SIZE, INC.
(Exact
name of registrant as specified in charter)
Delaware |
|
51-0394637 |
(State
or jurisdiction of
Incorporation or organization) |
|
I.R.S
Employer
Identification No. |
4 Hayarden,
POB 1026,
Airport City,
Israel |
|
7010000 |
(Address
of principal executive offices) |
|
(Zip
code) |
+972-3-
6009030
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of Each Exchange on Which Registered |
Common Stock, par value $0.001 per share |
|
MYSZ |
|
The
Nasdaq Capital Market |
Securities
registered pursuant to Section 12(g) of the Act:
None.
Indicate
by check mark whether the registrant is a well-known seasoned
issuer as defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No ☒
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See definition of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated filer |
☒ |
Smaller
Reporting Company |
☒ |
|
|
Emerging
Growth Company |
☐ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined
by Rule 12b-2 of the Exchange Act) Yes ☐
No ☒
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
If
securities are registered pursuant to Section 12(b) of the Act,
indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an
error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are
restatements that required a recovery analysis of incentive- based
compensation received by any of the registrant’s executive officers
during the relevant recovery period pursuant to §240.10D-1(b).
☐
The
aggregate market value of voting and non-voting common equity held
by non-affiliates of the registrant as of June 30, 2022, the last
business day of the registrant’s most recently completed second
fiscal quarter, was approximately $25,551,906.
Number
of shares of common stock outstanding as of March 31, 2023 was
2,446,780.
Documents
Incorporated by Reference: None.
Table
of Contents
PART I
In
this Annual Report on Form 10-K, unless the context requires
otherwise, the terms “we,” “our,” “us,” or “the Company” refer to
MySize, Inc., a Delaware corporation, and its subsidiaries,
including MySize Israel 2014 Ltd. My Size LLC, Orgad International
Marketing Ltd., or Orgad, and Naiz Bespoke Technologies, S.L, or
Naiz, taken as a whole.
References
to “U.S. dollars” and “$” are to currency of the United States of
America, and references to “NIS” are to New Israeli Shekels. Unless
otherwise indicated, U.S. dollar translations of NIS amounts
presented in this Annual Report on Form 10-K for the year ended on
December 31, 2022 are translated using the rate of NIS 3.358 to
$1.00.
All information in this Annual Report on Form 10-K relating to
shares or price per share reflects the 1-for-25 reverse stock split
effected by us on December 8, 2022.
CAUTIONARY
NOTE ON FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K 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 Annual
Report on Form 10-K about our expectations, beliefs, plans,
objectives, assumptions or future events or performance are not
historical facts and are forward-looking statements. These
statements are often, but not always, made through the use of words
or phrases such as “believe,” “will,” “expect,” “anticipate,”
“estimate,” “intend,” “plan” and “would.” For example, statements
concerning financial condition, possible or assumed future results
of operations, growth opportunities, industry ranking, plans and
objectives of management, markets for our common stock and future
management and organizational structure are all forward-looking
statements. Forward-looking statements are not guarantees of
performance. They involve known and unknown risks, uncertainties
and assumptions that may cause actual results, levels of activity,
performance or achievements to differ materially from any results,
levels of activity, performance or achievements expressed or
implied by any forward-looking statement.
Any
forward-looking statements are qualified in their entirety by
reference to the risk factors discussed throughout this Annual
Report on Form 10-K. 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:
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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; |
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risks
related to our ability to continue as a going concern; |
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the
new and unproven nature of the measurement technology
markets; |
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our
ability to achieve customer adoption of our products; |
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our
ability to realize the benefits of our acquisitions of Orgad and
Naiz; |
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our
dependence on assets we purchased from a related party; |
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our
ability to enhance our brand and increase market
awareness; |
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our
ability to introduce new products and continually enhance our
product offerings; |
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the
success of our strategic relationships with third
parties; |
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information
technology system failures or breaches of our network
security; |
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competition
from competitors; |
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our
reliance on key members of our management team; |
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current or future litigation;
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current or future unfavorable economic and market conditions and
adverse developments with respect to financial institutions and
associated liquidity risk; and |
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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 Annual Report on
Form 10-K 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 Annual Report on Form 10-K is
accurate as of the date hereof. Because the risk factors referred
to in this 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 Annual Report on Form 10-K, and
particularly our forward-looking statements, by these cautionary
statements.
ITEM 1. BUSINESS
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.
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 111,602
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) 55,801 shares were issued at
closing, and (ii) 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-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, 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 240,000 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 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 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.
Warehouse Fire
On
January 2, 2023, Orgad experienced a fire at its warehouse in
Israel. we are not aware of any casualties or injuries associated
with the fire. We shifted Orgad’s operation to its headquarters.
The value of the inventory that was in the warehouse was
approximately $450,000. We believe that this incident did not
affect the future sales results of Orgad for the year of 2023. The
inventory was not insured and it is too early to determine the
potential impact of this incident on the other parties that were
involved in the incident (lessor and others that leased properties
near the warehouse).
January 2023 Financing
On
January 10, 2023, we entered into a securities purchase agreement,
or the RD Purchase Agreement, pursuant to which we agreed to sell
and issue in the RD Offering an aggregate of 162,000 of our shares
of common stock, or the RD Shares, and pre-funded warrants, or the
Pre-funded Warrants, to purchase up to 279,899 shares of common
stock and, in a concurrent private placement, unregistered warrants
to purchase up to 883,798 shares of common stock, or the RD
Warrants, consisting of Series A warrants, or Series A Warrants, to
purchase up to 441,899 shares of common stock and Series B
warrants, or Series B Warrants, to purchase up to 441,899 shares of
common stock, at an offering price of $3.055 per RD Share and
associated Series A and Series B Warrants and an offering price of
$3.054 per Pre-funded Warrant and associated Series A and Series B
Warrants.
In
addition, we entered into a securities purchase agreement, or the
PIPE Purchase Agreement, and together with the RD Purchase
Agreement, the Purchase Agreements, pursuant to which we agreed to
sell and issue in the PIPE Offering an aggregate of up to 540,098
unregistered Pre-funded Warrants and unregistered warrants to
purchase up to an aggregate of 1,080,196 shares of common stock, or
the PIPE Warrants and together with the RD Warrants, the Warrants,
consisting of Series A Warrants to purchase up to 540,098 shares of
common stock and Series B Warrants to purchase up to 540,098 shares
of common stock at an offering price of $3.054 per Pre-funded
Warrant and associated Series A and Series B Warrants.
The
Pre-funded Warrants are immediately exercisable at an exercise
price of $0.001 per share and will not expire until exercised in
full. The Warrants are immediately exercisable upon issuance at an
exercise price of $2.805 per share, subject to adjustment as set
forth therein. The Series A Warrants have a term of five and
one-half years from the date of issuance and the Series B Warrants
have a term of 28 months from the date of issuance. The Warrants
may be exercised on a cashless basis if there is no effective
registration statement registering the shares underlying the
warrants.
In
connection with the PIPE Purchase Agreement, we entered into a
registration rights agreement, or the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, we are
required to file a resale registration statement, or the
Registration Statement, with the Securities and Exchange
Commission, or the SEC, to register for resale the shares issuable
upon exercise of the unregistered Pre-funded Warrants and the
Series A and Series B Warrants, within 20 days of the signing date
of the PIPE Purchase Agreement, or the Signing Date, and to have
such Registration Statement declared effective within 60 days after
the Signing Date in the event the Registration Statement is not
reviewed by the SEC, or 90 days of the Signing Date in the event
the Registration Statement is reviewed by the SEC. we will be
obligated to pay certain liquidated damages if we fail to maintain
the effectiveness of the Registration Statement.
The
Purchase Agreements and the Registration Rights Agreements also
contain representations, warranties, indemnification and other provisions customary for
transactions of this nature. In addition, subject to limited
exceptions, the Purchase Agreements provide that for a period of
one year following the closing of the Offerings, we will not effect
or enter into an agreement to effect a “variable rate transaction”
as defined in the Purchase Agreements.
Aggregate
gross proceeds to the Company in respect of the Offerings was
approximately $3.0 million, before deducting fees payable to the
placement agent and other offering expenses payable by the
Company.
We
also entered into a letter agreement, or the Engagement Agreement,
with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to
which Wainwright agreed to serve as the exclusive placement agent
for the Company in connection with the Offerings. We paid
Wainwright a cash placement fee equal to 7% of the aggregate gross
proceeds raised in the Offerings, a management fee of 1% of the
aggregate gross proceeds raised in the Offerings, a non-accountable
expense allowance of $85,000 and clearing fees of $15,950.
Wainwright also received placement agent warrants, or the Placement
Agent Warrants, with substantially the same terms as the Series A
Warrants issued in the Offering in an amount equal to 7% of the
aggregate number of Shares and Pre-funded Warrants sold in the
Offerings, or 68,740 shares, at an exercise price of $3.8188 per
share and a term expiring on January 10, 2028.
Our
Solution
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.
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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. |
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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. |
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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. |
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following are some select key features of our solutions:
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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; |
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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; |
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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; |
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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:
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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 size recommendation and measurement
technology with a view to entering into additional commercial
agreements. |
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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, Zebra Technologies and Datalogic. |
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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. |
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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. |
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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. |
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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
The
global e-commerce market was $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 $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 17% year over year from $420 billion in 2020
(reflecting 131 billion parcels) to $491 billion in 2021
(reflecting 159 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 2022, MySizeID delivered over 23.5
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; |
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|
● |
body
measurement algorithm research – an algorithm created by us to
measure body parts; and |
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retailers
size chart analyses – adopting a deep understanding of the size
charts of retailers and the corresponding “body to garment
size.” |
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:
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● |
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. |

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● |
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. 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 $1.7
million in 2022 and $4.25 million in 2021, relating to the
development of its applications and technologies. The decrease 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. 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 March
15, 2023, our products are being sold in the following countries:
US, UK, France, Netherlands, Spain, Portugal Turkey, 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:
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● |
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; |
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Fast
1 week integration including size chart size chart review and
product mapping |
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Easy
1 line of “all included” script implementation |
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Very
small library that weighs ±50kb (minimum widget loading time on
product page) |
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Ultra-Fast
loading and size recommendation presenting |
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Restful
API option (API integration with any website or app) |
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Adjustments
of size charts based on performance |
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Widget
usage analysis by FashTech and BI teams |
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Automatic
pairing of size charts with products/collections |
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Easy
to use interface (10-15 seconds to receive size
recommendations) |
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Option
to add/deduct questions to/from widget wizards |
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Users
automatically receive size recommendations on all products after
initial sign up |
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Product
and platform features, architecture, reliability, privacy and
security, performance, effectiveness, and supported
environments; |
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Product
extensibility and ability to integrate with other technology
infrastructures; |
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Digital
operations expertise; |
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Ease
of use of products and platform capabilities; |
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Total
cost of ownership; |
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Adherence
to industry standards and certifications; |
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Strength
of sales and marketing efforts; |
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Brand
awareness and reputation; and |
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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
March 31, 2023, we had a total of 35 employees, of which 30 were
full-time employees, including 9 in sales and marketing, 12 in
technology and development and 9 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 acquisition of Naiz and our current
team.
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”.
ITEM 1A. RISK FACTORS
An
investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other
information in this Annual Report on Form 10-K before investing in
our common stock. Our business and results of operations could be
seriously harmed by any of the following risks. The risks set out
below are not the only risks we face. Additional risks and
uncertainties not currently known to us or that we currently deem
to be immaterial also may materially adversely affect our business,
financial condition and/or operating results. If any of the
following events occur, our business, financial condition and
results of operations could be materially adversely affected. In
such case, the value and trading price of our common stock could
decline, and you may lose all or part 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. |
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|
● |
Our
limited operating history makes it difficult to evaluate our
business and prospects. |
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|
● |
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. |
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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. |
|
● |
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. |
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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. |
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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. |
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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. |
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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. |
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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. |
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Our
growth depends, in part, on the success of our strategic
relationships with third parties. |
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Changes
in economic conditions could materially affect our business,
financial condition and results of operations. |
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We
rely upon third parties to provide distribution for our
applications, and disruption in these services could harm our
business. |
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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. |
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Real
or perceived errors, failures, or bugs in our products could
adversely affect our operating results and growth
prospects. |
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We
could be harmed by improper disclosure or loss of sensitive or
confidential company, employee, or customer data, including
personal data. |
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A
material breach in security relating to our information systems and
regulation related to such breaches could adversely affect
us. |
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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. |
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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. |
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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. |
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Our
business operations and future development could be significantly
disrupted if we lose key members of our management
team. |
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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
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Our
headquarters and most of our operations are located in Israel, and
therefore, political conditions in Israel may affect our operations
and results. |
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Russia’s
invasion of Ukraine and sanctions brought against Russia could
disrupt our operations in Russia. |
Risks Related to Our
Common Stock
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A
more active, liquid trading market for our common stock may not
develop, and the price of our common stock may fluctuate
significantly. |
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Our
business, operating results and growth rates may be adversely
affected by current or future unfavorable economic and market
conditions and adverse developments with respect to financial
institutions and associated liquidity risk; |
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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. |
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Our
securities are traded on more than one market which may result in
price variations. |
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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 $8.3 million and $10.5 million
for the years ended December 31, 2022 and 2021 and had an
accumulated deficit of $53.5 million as at December 31, 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 acquisitions and 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 Annual Report on Form 10-K, our existing cash is insufficient
to fund operations for a period of more than 12 months. As a
result, there is substantial doubt about our ability to continue as
a going concern. 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:
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finance our current operating expenses; |
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pursue
growth opportunities; |
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hire
and retain qualified management and key employees; |
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respond
to competitive pressure; |
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comply
with regulatory requirements; and |
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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.
Management has concluded that there is substantial doubt about our
ability to continue as a going concern which could prevent us from
obtaining new financing on reasonable terms or at
all.
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,
2022 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, 2022. 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.
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:
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increased
operating expenses and cash requirements; |
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the
assumption of additional indebtedness or contingent
liabilities; |
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assimilation
of operations, intellectual property and products of an acquired
company, including difficulties associated with integrating new
personnel; |
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the
diversion of our management’s attention from our existing programs
and initiatives in pursuing such a strategic merger or
acquisition; |
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retention
of key employees, the loss of key personnel, and uncertainties in
our ability to maintain key business relationships; |
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risks
and uncertainties associated with the other party to such a
transaction, including the prospects of that party and their
existing technologies; and |
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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, on January 2, 2023, Orgad experienced a fire at its
warehouse in Israel. We are not aware of any casualties or injuries
associated with the fire. We shifted Orgad’s operation to its
headquarters. The value of the inventory that was in the warehouse
was approximately $450,000. We believe that this incident did not
affect the future sales results of Orgad for the year of 2023. The
inventory was not insured and it is too early to determine the
potential impact of this incident on the other parties that were
involved in the incident (lessor and others that leased properties
near the warehouse).
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.
Environmental, social and corporate governance (ESG) issues,
including those related to climate change and sustainability, may
have an adverse effect on our business, financial condition and
results of operations and damage our reputation.
There is an increasing focus from certain investors, customers,
consumers, employees and other stakeholders concerning ESG matters.
Additionally, public interest and legislative pressure related to
public companies’ ESG practices continue to grow. If our ESG
practices fail to meet regulatory requirements or investor,
customer, consumer, employee or other shareholders’ evolving
expectations and standards for responsible corporate citizenship in
areas including environmental stewardship, support for local
communities, Board of Director and employee diversity, human
capital management, employee health and safety practices, product
quality, supply chain management, corporate governance and
transparency, our reputation, brand and employee retention may be
negatively impacted, and our customers and suppliers may be
unwilling to continue to do business with us.
Customers, consumers, investors and other shareholders are
increasingly focusing on environmental issues, including climate
change, energy and water use, plastic waste and other
sustainability concerns. Concern over climate change may result in
new or increased legal and regulatory requirements to reduce or
mitigate impacts to the environment. Changing customer and consumer
preferences or increased regulatory requirements may result in
increased demands or requirements. Complying with these demands or
requirements could cause us to incur additional manufacturing,
operating or product development costs.
If we do not adapt to or comply with new regulations, including the
SEC’s published proposed rules that would require companies to
provide significantly expanded climate-related disclosures in their
periodic reporting, which may require us to incur significant
additional costs to comply and impose increased oversight
obligations on our management and board of directors, or fail to
meet evolving investor, industry or stakeholder expectations and
concerns regarding ESG issues, investors may reconsider their
capital investment in our company, we may become subject to
penalties, and customers and consumers may choose to stop
purchasing our products, if approved for commercialization, which
could have a material adverse effect on our reputation, business or
financial condition.
Our business, operating results and growth rates may be
adversely affected by current or future unfavorable economic and
market conditions and adverse developments with respect to
financial institutions and associated liquidity risk.
Our business depends on the economic health of the global
economies. If the conditions in the global economies remain
uncertain or continue to be volatile, or if they deteriorate,
including as a result of the impact of military conflict, such as
the war between Russia and Ukraine, terrorism or other geopolitical
events, our business, operating results and financial condition may
be materially adversely affected. Economic weakness, inflation and
increases in interest rates, limited availability of credit,
liquidity shortages and constrained capital spending have at times
in the past resulted, and may in the future result, in challenging
and delayed sales cycles, slower adoption of new technologies and
increased price competition, and could negatively affect our
ability to forecast future periods, which could result in an
inability to satisfy demand for our products and a loss of market
share.
In addition, increases in inflation raise our costs for
commodities, labor, materials and services and other costs required
to grow and operate our business, and failure to secure these on
reasonable terms may adversely impact our financial condition.
Additionally, increases in inflation, along with the uncertainties
surrounding COVID-19, geopolitical developments and global supply
chain disruptions, have caused, and may in the future cause, global
economic uncertainty and uncertainty about the interest rate
environment, which may make it more difficult, costly or dilutive
for us to secure additional financing. A failure to adequately
respond to these risks could have a material adverse impact on our
financial condition, results of operations or cash flows.
More recently, the closures of SVB and Signature Bank and their
placement into receivership with the FDIC created bank-specific and
broader financial institution liquidity risk and concerns. Although
the Department of the Treasury, the Federal Reserve and the FDIC
jointly released a statement that depositors at SVB and Signature
Bank would have access to their funds, even those in excess of the
standard FDIC insurance limits, under a systemic risk exception,
future adverse developments with respect to specific financial
institutions or the broader financial services industry may lead to
market-wide liquidity shortages, impair the ability of companies to
access near-term working capital needs, and create additional
market and economic uncertainty. There can be no assurance that
future credit and financial market instability and a deterioration
in confidence in economic conditions will not occur. Our general
business strategy may be adversely affected by any such economic
downturn, liquidity shortages, volatile business environment or
continued unpredictable and unstable market conditions. If the
current equity and credit markets deteriorate, or if adverse
developments are experienced by financial institutions, it may
cause short-term liquidity risk and also make any necessary debt or
equity financing more difficult, more costly, more onerous with
respect to financial and operating covenants and more dilutive.
Failure to secure any necessary financing in a timely manner and on
favorable terms could have a material adverse effect on our growth
strategy, financial performance and stock price and could require
us to alter our operating plans. In addition, there is a risk that
one or more of our service providers, financial institutions,
manufacturers, suppliers and other partners may be adversely
affected by the foregoing risks, which could directly affect our
ability to attain our operating goals on schedule and on
budget.
Our business may be adversely affected by the impact of any
renewed outbreak of the 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 spread worldwide.
Many countries around the world, including in Israel, 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
haven historically resulted in work stoppages and other
disruptions. If there is a resurgence of the COVID-19 pandemic,
this 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 COVID-19 could have an
adverse impact on our business and our financial 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:
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significant
volatility in its GDP; |
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the
impact of international sanctions; |
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high
levels of inflation; |
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increases
in, or high, interest rates; |
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sudden
price declines in oil and other natural resources; |
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instability
in the local currency market; |
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budget
deficits; |
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the
continued operation of loss-making enterprises due to the lack of
effective bankruptcy proceedings; |
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capital
flight; and |
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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, March 2, 2020 and November 1, 2022. 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:
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devaluations and fluctuations in currency exchange rates including
fluctuations between the U.S. dollar and the NIS and the Russian
Ruble; |
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costs
of compliance with local laws, including labor laws and
intellectual property laws; |
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compliance
with domestic and foreign government policies, including compliance
with Israeli securities laws and TASE; |
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changes
in trade regulations and procedures affecting approval, production,
pricing, marketing, reimbursement for and access to, our
products; |
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compliance
with applicable foreign anti-corruption laws,
anti-trust/competition laws, anti-Boycott Israel law and anti-money
laundering laws; and |
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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:
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our quarterly or annual operating results; |
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changes
in our earnings estimates; |
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investment
recommendations by securities analysts following our business or
our industry; |
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additions
or departures of key personnel; |
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changes
in the business, earnings estimates or market perceptions of our
competitors; |
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our
failure to achieve operating results consistent with securities
analysts’ projections; |
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changes
in industry, general market or economic conditions; |
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announcements
of legislative or regulatory changes; and |
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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 2,446,780 are currently
outstanding as of March 31, 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.
Our quarterly operating results may fluctuate
significantly.
We
expect our operating results to be subject to quarterly
fluctuations. Our net loss and other operating results will be
affected by numerous factors, including:
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variations
in the level of expenses related to our research and
development; |
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any
lawsuits in which we may become involved; |
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regulatory
developments affecting our products; and |
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our
execution of any collaborative, licensing or 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:
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provide
the board of directors with the ability to alter the Bylaws without
stockholder approval; |
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the
classification of our board of directors; |
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place
limitations on the removal of directors; |
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provide
that vacancies on the Board of Directors may be filled by a
majority of directors in office, although less than a
quorum; |
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require
that stockholder actions must be affected at a duly called
stockholder meeting and generally prohibiting stockholder actions
by written consent; |
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eliminate
the ability of stockholders to call a special meeting of
stockholders; and |
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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. We have in the past fallen
below the minimum bid price and minimum shareholders’
equity.
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 March 15, 2023, we had outstanding warrants to acquire
2,299,115 shares of our common stock and stock options to purchase
1,659 shares of our common stock, which warrants and options are
exercisable for prices ranging between $2.81 and $375. The
expiration of the term of such options and warrants range from 0.22
years to 4.83 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. 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.
ITEM 3. 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. On February 3,
2022, the Company filed a motion to reargue the Court’s decision
denying the Company’s motion for summary judgment. 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. Oral
argument was held before the Appellate Court on February 7, 2023.
On or about February 28, 2023, the Appellate Court filed its
Decision and Order, which affirmed the lower court’s decisions
regarding both My Size and North Empire’s motions for summary
judgment and sent the case back to the Supreme Court. On or about
March 13, 2023, the Supreme Court referred the case to its
Alternative Dispute Program and ordered the cases to mediate. A
date for the mediation has not yet been set. We intend to
vigorously defend any claims made by North Empire. We believe it is
more likely than not that the counterclaims will be
denied.
ITEM 4. MINE SAFETY DISCLOSURES
Not
applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
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
March 31, 2023, we had 70 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.
Securities
Authorized for Issuance under Equity Compensation
Plans
Information
about our equity compensation plans is incorporated herein by
reference to “Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters”, of this
Annual Report on Form 10-K.
Recent
Sales of Unregistered Securities
None.
ITEM 6. SELECTED FINANCIAL DATA
As a
“smaller reporting company” as defined by Item 10 of Regulation
S-K, we are not required to provide this information.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULT OF OPERATIONS
You
should read the following discussion along with our financial
statements and the related notes included elsewhere in this Annual
Report on Form 10-K. The following discussion contains
forward-looking statements that are subject to risks, uncertainties
and assumptions, including those discussed under “Risk Factors.”
Our actual results, performance and achievements may differ
materially from those expressed in, or implied by, these
forward-looking statements.
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 111,682
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) 55,801 shares were issued at
closing, and (ii) 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-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 240,000 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 had operations in Russia
through our wholly owned subsidiary, My Size LLC. Specifically, we
undertake some of our sales and marketing using personnel located
in Russia. To date, mainly due to the invasion of Ukraine by Russia
and the ongoing sanctions we stopped most of our efforts in Russia
and will probably close the subsidiary in the near
future.
Results
of Operations
The
table below provides our results of operations for the periods
indicated.
|
|
Year ended
December 31 |
|
|
|
2022 |
|
|
2021 |
|
|
|
(dollars in
thousands) |
|
Revenues |
|
|
4,459 |
|
|
|
131 |
|
Cost of revenues |
|
|
(3,825 |
) |
|
|
- |
|
Gross profit |
|
|
634 |
|
|
|
131 |
|
Research and development expenses |
|
$ |
(1,701 |
) |
|
$ |
(4,248 |
) |
Sales and marketing |
|
|
(3,143 |
) |
|
|
(2,336 |
) |
General and administrative |
|
|
(3,900 |
) |
|
|
(4,124 |
) |
Operating loss |
|
|
(8,110 |
) |
|
|
(10,577 |
) |
Financial income (expenses), net |
|
|
(236 |
) |
|
|
57 |
|
Tax income |
|
|
36 |
|
|
|
- |
|
Net loss |
|
$ |
(8,310 |
) |
|
$ |
(10,520 |
) |
Year
Ended December 31, 2022 Compared to Year Ended December 31,
2021
Revenues
From
inception through December 31, 2018, we did not generate any
revenue from operations and we continue to expect to incur
additional losses to perform further research and development
activities. We started to generate revenues only in 2019. Our
revenues for the year ended December 31, 2022 amounted to
$4,459,000 compared to $131,000 for year ended December 31, 2021.
The increase from the corresponding period primarily attributable
to $4,132,000 in revenue generated from Orgad from February 7,
2022, the date of closing of the Orgad acquisition, or the
Acquisition Date and revenue generated from the Naiz Acquisition
from October 11, 2022, the date of closing of the Naiz
acquisition.
In addition, the increase from the corresponding period results
from an increase in revenues generated by My Size.
Cost Of Revenues
Our
cost of revenues expenses for the year ended December 31, 2022
amounted to $3,825,000, compared to none for the year ended
December 31, 2021. The cost of revenues includes cash and equity
liabilities expenses in the amount of $194,000. The increase in
comparison with the corresponding period was due to the cost of
goods of the revenues generated from Orgad’s operations.
Research and Development Expenses
Our
research and development expenses for the year ended December 31,
2022 amounted to $1,701,000 a decrease of $2,547,000, or
approximately 60.0%, compared to $4,248,000 for the year ended
December 31, 2021. The decrease 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.
Sales and Marketing Expenses
Our
sales and marketing expenses for the year ended December 31, 2022
amounted to $3,143,000 an increase of $807,000, or 34.55%, compared
to $2,336,000 for the year ended December 31, 2021. The increase
primarily resulted from an increase in employees expenses mainly
due to Orgad and Naiz acquisitions, increase in Amazon fees,
increase in cash and equity liabilities expenses attributed to the
Orgad acquisition and an increase in share based payments offset by
a decrease in payments to consultants.
General and Administrative Expenses
Our
general and administrative expenses for the year ended December 31,
2022 amounted to $3,900,000, a decrease of $224,000, or 5.43%,
compared to $4,124,000 for the year ended December 31, 2021. The
decrease compared to the corresponding period was mainly due to a
decrease in professional expenses, mainly attributed to shareholder
activism including settlement expenses with the Lazar Parties
offset by an increase in shared-based payments and an increase in
employees expenses mainly due to the Orgad and Naiz
acquisitions.
Operating Loss
As a
result of the foregoing, for the year ended December 31, 2022, our
operating loss was $8,110,000, a decrease of $2,467,000 or 23.32%,
compared to our operating loss for the year ended December 31, 2021
of $10,577,000.
Financial Income, Net
Our
financial (expense) income, net for the year ended December 31,
2022 amounted to $236,000 compared to financial income, $57,000 for
the year ended December 31, 2021. In 2022, we had financial
expenses exchange rate differences offset by an income from fair
value revaluation of investment in marketable securities whereas in
2021 we had financial income from the fair value revaluation of
warrants offset by expenses from exchange rate differences and
expenses from fair value revaluation of investment in marketable
securities.
Net Loss
As a
result of the foregoing, our net loss for the year ended December
31, 2022 was $8,310,000 compared to net loss of $10,520,000 for the
year ended December 31, 2021. The decrease in net loss was mainly
due increase in sales and marketing expenses and financial expenses
as opposed to financial income in the corresponding period
offset by a decrease in research and development expenses in amount
of $2,618,000 attributed to the share issuance to Shoshana Zigdon
under the Amendment to Purchase Agreement dated May 26, 2021.
Liquidity
and Capital Resources
Since
our inception, we have funded our operations primarily through
public and private offerings of debt and equity in Israel and in
the U.S.
As of
December 31, 2022, we had cash, cash equivalents and restricted
cash of $2,363,000 compared to $10,943,000 cash, cash equivalents,
restricted cash as of December 31, 2021. During January 2023, we
completed a registered direct and concurrent private placement
offering resulting in gross proceeds of approximately $3 million.
This decrease primarily resulted from our operating activities, the
acquisition of Orgad and Naiz Fit, and resources that were deployed
to grow of both businesses.
Net
cash used in operating activities was $7,290,000 for the year ended
December 31, 2022 compared to $7,297,000 for the year ended
December 31, 2021. The decrease in cash used in operating activity
is derived mainly from an increase in share based payments and
increase in account receivables mainly from the Orgad and Naiz fit
acquisitions offset by a decrease in the net loss.
Net
cash used in investing activities for the year ended December 31,
2022 was $993,000 as opposed to net cash provided by investing
activities of $161,000 for the year ended December 31, 2021. The
net cash used in investing activities for the year ended December
31, 2022 was mainly from the acquisition of Orgad and Naiz as
opposed to proceeds from short-term deposits and restricted
deposits during the year ended December 31, 2021.
We
had a negative cash flow from financing activities of $67,000 for
the year ended December 31, 2022 compared to positive cash flow of
$16,292,000 for the year ended December 31, 2021. The negative cash
flow from financing activities for the year ended December 31, 2022
was mainly due to repayment of loans and interest and payments for
leases as opposed to proceeds from issuance of shares and from
exercise of warrants for the year ended December 31,
2021.
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 December 31, 2022,
together with the proceeds from the January 2023 financing, we
believe our existing cash will not be sufficient to fund operations
for a period of more than 12 months. As a result, there is
substantial doubt about our ability to continue as a going concern.
We will need to raise additional capital, which may not be
available on reasonable terms or at all. Additional capital would
be used to accomplish the following:
|
● |
finance
our current operating expenses; |
|
|
|
|
● |
pursue
growth opportunities; |
|
|
|
|
● |
hire
and retain qualified management and key employees; |
|
|
|
|
● |
respond
to competitive pressures; |
|
|
|
|
● |
comply
with regulatory requirements; and |
|
|
|
|
● |
maintain
compliance with applicable laws. |
Current
conditions in the capital markets are such that traditional sources
of capital may not be available to us when needed or may be
available only on unfavorable terms. Our ability to raise
additional capital, if needed, will depend on conditions in the
capital markets, economic conditions, the Russian invasion of
Ukraine, the impact of any resurgence of the COVID-19 pandemic 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.
Recently
Issued Accounting Pronouncements
Certain
recently issued accounting pronouncements are discussed in Note 2,
Significant Accounting Policies, to the consolidated financial
statements included in “Item 8. Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K.
Off-Balance
Sheet Arrangements
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.
Application
of Critical Accounting Policies and Estimates
Our
management’s discussion and analysis of our financial condition and
results of operations is based on our financial statements, which
we have prepared in accordance with U.S. generally accepted
accounting principles issued by the Financial Accounting Standards
Board, or FASB. The preparation of these financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements, as well as the reported expenses during the reporting
periods. Actual results may differ from these estimates under
different assumptions or conditions.
Our
significant accounting policies were revenue from contracts with
customers which are more fully described in the notes to our
financial statements included herein. We believe these accounting
policies discussed below are critical to our financial results and
to the understanding of our past and future performance, as these
policies relate to the more significant areas involving
management’s estimates and assumptions. We consider an accounting
estimate to be critical if: (1) it requires us to make assumptions
because information was not available at the time or it included
matters that were highly uncertain at the time we were making our
estimate; and (2) changes in the estimate could have a material
impact on our financial condition or results of
operations.
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 16, Business Combination, to the consolidated financial
statements included in “Item 8. Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K.
Revenue from contracts with customers
Our
revenues are comprised of two main categories: (1) selling products
to customers, and (2) licensing cloud-enabled software
subscriptions, associated software maintenance and
support.
We
recognize revenue in accordance with ASC Topic 606, Revenues from
Contracts with Customers (“ASC 606”). A contract with a customer
exists only when: the parties to the contract have approved it and
are committed to perform their respective obligations, we can
identify each party’s rights regarding the distinct goods or
services to be transferred (“performance obligations”), we can
determine the transaction price for the goods or services to be
transferred, the contract has commercial substance and it is
probable that we will collect the consideration to which we will be
entitled in exchange for the goods or services that will be
transferred to the customer.
Revenue
from sale of products is recognized at the time the related
performance obligation is satisfied by transferring a promised good
to a customer. Revenue is recognized net of allowances for refunds
and any taxes collected from customers, which are subsequently
remitted to governmental authorities. Refunds are estimated at
contract inception and updated at the end of each reporting period
if additional information becomes available. Revenue is recognized
when control of the product is transferred to the
customer.
We
maintain a returns policy that allows our customers to return
product within a specified period of time. The estimate of the
provision for returns is based upon historical experience with
actual returns.
Principal
versus Agent Considerations
We
follow the guidance provided in ASC 606 for determining whether we
are a principal or an agent in arrangements with customers, by
assessing whether the nature of our promise is a performance
obligation to provide the specified goods (principal) or to arrange
for those goods to be provided by the other party (agent). With
regard to products being sold by Orgad through Amazon, this
determination involves judgment. We determine it is the principle
when it has control over the promised product before it is
transferred to the end customers.
Subscription
and Services Offerings
Such
performance obligations include cloud enabled subscriptions,
software maintenance and technical support.
Fully
hosted subscription services (SaaS) allow customers to access
hosted software during the contractual term without taking
possession of the software. Cloud hosted subscription services are
sold on a fee per subscription that is based on consumption or
usage (per fit recommendation).
We
recognize revenue ratably over the contractual service term for
hosted services that are priced based on a committed number of
transactions where the delivery and consumption of the benefit of
the services occur evenly over time, beginning on the date the
services associated with the committed transactions are first made
available to the customer and continuing through the end of the
contractual service term. Over usage fees and fees based on the
actual number of transactions are billed in accordance with
contract terms as these fees are incurred and are included in the
transaction price of an arrangement as variable consideration. Fees
based on a number of transactions or impressions per month, are
allocated to the period in which the transactions occur. Revenue
for subscriptions sold as a fee per period is recognized ratably
over the contractual term as the customer simultaneously receives
and consumes the benefit of the underlying service.
ITEM 7A. 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
MY
SIZE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
AS
OF DECEMBER 31, 2022
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, 2022
and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and
its cash flows for each of the years in the two-year period ended
December 31, 2022, 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. The communication of
critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.
Acquisition-date
fair value of customer relationships
As
discussed in Note 16 to the consolidated financial statements, on
October 11, 2022, the Company acquired Naiz Bespoke Technologies SL
(“Naiz”). As a result of the transaction, the Company acquired
customer relationships intangible assets (“customer relationships”)
representing the generation of future income from Naiz’s existing
customers. The acquisition date fair value of the customer
relationships was $726 thousand.
We
identified the evaluation of the acquisition-date fair value of the
Naiz customer relationships as a critical audit matter. A high
degree of subjective auditor judgment was required to evaluate the
following internally developed assumptions used to estimate the
fair value of such asset, for which there were limited observable
inputs: (i) forecasted revenues attributable to existing customers,
(ii) forecasted earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) margins for the acquired business, (iii)
estimated annual customer attrition rates and (iv) estimated
discount rate. The determined fair value was sensitive to changes
in these key assumptions. Additionally, specialized skills and
knowledge were needed to evaluate the discount rate
used.
The
primary procedures we performed to address this critical audit
matter included the following. We evaluated the design of certain
internal controls over the Company’s acquisition-date fair value
estimation process, including controls over the development of key
assumptions. We performed a sensitivity analysis to assess the
impact of reasonably possible changes to forecasted revenues,
EBITDA margins, annual customer attrition rates, and the discount
rate. We evaluated the forecasted revenue growth rates from
existing customers by comparing the growth assumptions to those of
the Company’s peers and industry reports. In connection with our
assessment of the forecasts used in the valuation, we compared (1)
forecasted revenue and EBITDA to Naiz’s historical actual results
and (2) estimated annual customer attrition rates to historical
Naiz customer attrition data. We tested the Company’s determined
weighted average cost of capital (“WACC”), which was used to
determine the discount rate, by involving valuation professionals
with specialized skills and knowledge, who assisted in:
|
- |
Evaluating
the selected discount rate by comparing it against a discount rate
range that was independently developed using publicly available
market data for comparable companies, and; |
|
|
|
|
- |
Assessing
the Company’s WACC calculation, by comparing it against an
independently estimated WACC range based on inputs obtained through
published surveys and studies. |
Goodwill
impairment assessment
As
discussed in Note 16 to the consolidated financial statements,
during 2022 the Company recorded goodwill of $1,257 thousand
related to the acquisition of Naiz Bespoke Technologies, S.L.
(“Naiz”). The Company performed an annual quantitative impairment
test of goodwill at the reporting unit level. Based on this
analysis, the Company determined that the fair value of its
reporting unit exceeded its carrying value and no impairment charge
was required.
We
identified the evaluation of the goodwill impairment assessment for
the Naiz reporting unit as a critical audit matter. A high degree
of subjective auditor judgment was required to evaluate the
following assumptions used to estimate the fair value of the
Company’s reporting unit, for which there were limited observable
inputs: (i) forecasted reporting unit cash flows, (ii) long-term
growth rates, and (iii) discount rates. The fair value was
sensitive to changes in these key assumptions. Additionally,
specialized skills and knowledge were needed to evaluate the
discount rates.
The
primary procedures we performed to address this critical audit
matter included the following. We evaluated the design of certain
internal controls over the Company’s goodwill impairment evaluation
process. We performed sensitivity analyses to assess the impact of
reasonably possible changes to forecasted cash flows, long-term
growth rates, and discount rates. We evaluated the Company’s
forecasted growth rates by comparing the growth assumptions to
those of the Company’s peers and industry reports. We compared the
Company’s forecasted revenue, cost of sales, and operating expense
margins to historical actual results to assess the reasonableness
of the forecasts. In addition, we involved valuation professionals
with specialized skills and knowledge, who assisted in:
–
Assessing the Company’s WACC calculation, by comparing it against
an estimated WACC range based on inputs obtained through published
surveys and studies
–
Evaluating the discount rates used by the Company by comparing them
against discount rate ranges that were developed using publicly
available market data for comparable companies, and;
–
Performing an arithmetic recalculation regarding the fair value of
the Company’s reporting unit, using the Company’s cash flow
forecasts and the independently developed discount rates, and
comparing the results to the Company’s fair value
estimates.
/s/
Somekh Chaikin |
|
Somekh Chaikin |
|
|
|
Member
Firm of KPMG International |
|
We
have served as the Company’s auditor since 2017. |
Tel Aviv, Israel |
|
April
14, 2023 |
|
MY
SIZE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
U.S.
dollars in thousands (except share data)
(*) |
Adjusted
to give retroactive effect of 1:25 reverse stock split, see Note 13
(g) |
The
accompanying notes are an integral part of the consolidated
financial statements.
MY SIZE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
U.S.
dollars in thousands (except share data and per share
data)
|
|
Note |
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
Year ended
December 31,
|
|
|
|
Note |
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
4,459 |
|
|
|
131 |
|
Cost of
revenues |
|
|
|
|
(3,825 |
) |
|
|
- |
|
Gross profit |
|
|
|
|
634 |
|
|
|
131 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
(1,701 |
) |
|
|
(4,248 |
) |
Sales and marketing |
|
18 |
|
|
(3,143 |
) |
|
|
(2,336 |
) |
General and
administrative |
|
19
|
|
|
(3,900 |
) |
|
|
(4,124 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses |
|
|
|
|
(8,744 |
) |
|
|
(10,708 |
) |
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
|
|
(8,110 |
) |
|
|
(10,577 |
) |
|
|
|
|
|
|
|
|
|
|
|
Financial
income (expense), net |
|
20 |
|
|
(236 |
) |
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes on income |
|
|
|
|
36 |
|
|
|
- |
|
Net loss for
the year |
|
|
|
|
(8,310 |
) |
|
|
(10,520 |
) |
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation differences |
|
|
|
|
(231 |
) |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive loss |
|
|
|
|
(8,541 |
) |
|
|
(10,502 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted loss per share (*) |
|
|
|
|
(7.47
|
) |
|
|
(17.75 |
) |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted
average number of shares outstanding (*) |
|
|
|
|
1,111,913
|
|
|
|
420,385 |
|
(*) |
Adjusted
to give retroactive effect of 1:25 reverse stock split, see Note 13
(g) |
The
accompanying notes are an integral part of the consolidated
financial statements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
U.S.
dollars in thousands (except share data)
(*) |
Represents
an amount of less than $1. |
(**) |
See
note 16 |
(***) |
See
note 1 b |
The
accompanying notes are an integral part of the consolidated
financial statements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
B)
Aggregate cash flows derived for the Company as a result of the
Orgad acquisition (note 16)
|
|
2022 |
|
|
|
|
|
Noncash or Part Noncash Acquisitions |
|
|
|
|
Trade and other
receivables |
|
|
364 |
|
Inventory |
|
|
864 |
|
Fixed assets |
|
|
55 |
|
Long-term deposits |
|
|
31 |
|
Selling Platform |
|
|
378 |
|
Goodwill |
|
|
152 |
|
Short-term credit |
|
|
(181 |
) |
Trade payables |
|
|
(580 |
) |
Other payables |
|
|
(88 |
) |
Long-term loan |
|
|
(138 |
) |
Long-term provision |
|
|
(13 |
) |
Deferred Tax Liability |
|
|
(87 |
) |
Issuance of shares |
|
|
(457 |
) |
Total
acquisition of subsidiary, net of cash |
|
|
300 |
|
C)
Aggregate cash flows derived for the Company as a result of the
Naiz acquisition (note 16)
|
|
2022 |
|
|
|
|
|
Noncash or Part Noncash Acquisitions |
|
|
|
|
Trade receivables and
other receivables |
|
|
41 |
|
PP&E |
|
|
3 |
|
Long-term financial investment |
|
|
8 |
|
Customer Relationships |
|
|
726 |
|
Technology |
|
|
286 |
|
Trademark |
|
|
77 |
|
Goodwill |
|
|
1,152 |
|
Short Term accruals and deferrals |
|
|
(56 |
) |
Trade payables |
|
|
(46 |
) |
Short-term provision |
|
|
(6 |
) |
Short term debt |
|
|
(155 |
) |
Long term debt |
|
|
(294 |
) |
Deferred Taxes |
|
|
(261 |
) |
Issuance of shares |
|
|
(1,008 |
) |
Total
acquisition of subsidiary, net of cash |
|
|
467 |
|
The
accompanying notes are an integral part of the consolidated
financial statements.
MY SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
1 -
GENERAL
|
a. |
My
Size, Inc. is developing unique measurement technologies based on
algorithms with applications in a variety of areas, from the
apparel e-commerce market, to the courier services market and to
the Do It Yourself (“DIY”) smartphone and tablet apps market. The
technology is driven by proprietary algorithms, which are able to
calculate and record measurements in a variety of novel
ways.
Following the acquisition of Naiz Bespoke Technologies, S.L
(“Naiz”) in October 2022 (see note 16), the Company expanded its
offering outreach and customer base.
Following
the acquisition of Orgad International Marketing Ltd. (“Orgad”) in
February 2022 (see note 16), the Company also operates an
omnichannel e-commerce platform.
|
|
|
|
|
|
The
Company has five subsidiaries, My Size Israel 2014 Ltd (“My Size
Israel”), Topspin Medical (Israel) Ltd., and Orgad all of which are
incorporated in Israel, and My Size LLC which was incorporated in
the Russian Federation and Naiz Bespoke Technologies, S.L., a
limited liability company incorporated under the laws of Spain (see
note 16). References to the Company include the subsidiaries unless
the context indicates otherwise. |
My
Size, Inc., was incorporated and commenced operations in September
1999, as Topspin Medical Inc. (“Topspin”), a private company
registered in the State of Delaware. In December 2013, the Company
changed its name to Knowledgetree Ventures Inc. Subsequently, in
February 2014, the Company changed its name to My Size, Inc.
Topspin was engaged, through its Israeli subsidiary, in research
and development in the field of cardiology and urology.
Since
September 1, 2005, the Company has traded on the Tel Aviv Stock
Exchange (“TASE”).
Between
2007 and 2012 the Company reported as a public company with the
U.S. Securities and Exchange Commission (the “SEC”). In August
2012, the Company suspended its reporting obligations under Section
13(a) and 15(d) of the Securities Exchange Act of 1934. In
mid-2015, the Company resumed reporting as a public
company.
|
b. |
On
January 9, 2014, at the Company’s general meeting of shareholders,
its shareholders approved an engagement with one of the Company’s
investors (the “Seller”) for the purchase of rights in a Venture
(the “Venture”), including the rights to the method and the certain
patent application that had been filed by the Seller (the
“Assets”). The Venture relates to the development of technologies
and applications which will assist the consumer to take his or her
body measurements accurately using a mobile device to ensure the
purchase of clothing with the best possible fit without the need to
try them on. |
In
February 2014, the Company established a wholly owned subsidiary,
My Size (Israel) 2014 Ltd., a company registered in Israel, which
is currently engaged in the development of the Venture described
above.
In
return for purchasing an interest in the Venture, the Company
undertook to pay the Seller 18% of the
Company’s operating profit, direct or indirect, connected to the
Venture for a period of seven years starting
from the end of the Venture’s development period.
As part of the
agreement, the Seller received an option to buy back the Assets for
consideration which will reflect the market fair value at that
time, on the occurrence of the following events: a) if a motion is
filed to liquidate the Company; b) if seven years after signing the
agreement, the Company’s total accumulated revenues, direct or
indirect, from the Venture or the commercialization of the patent
will be lower than NIS 3.6 million.
In
such an event, Seller may repurchase the interest in the Venture at
a market price to be determined by an independent third party
valuation consultant, who shall be chosen by agreement by the
parties, and the audit committee shall conduct the negotiations on
behalf of the Company to determine the identity of the
consultant.
On
May 26, 2021, the Company, My Size Israel and Shoshana Zigdon
entered into an Amendment to Purchase Agreement (the “Amendment”)
which made certain amendments to a Purchase Agreement between the
parties dated February 16, 2014 (the “Purchase Agreement”).
Pursuant to the Amendment, Ms. Zigdon agreed to irrevocably waive
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 the Company’s
business is substantially dependent, and 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 (the “Waiver”). In consideration of the Waiver, the
Company issued 100,000
shares of common stock to Ms. Zigdon in a private
placement.
MY
SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
1 - GENERAL
(Cont.)
|
c. |
On
July 25, 2016, the Company’s common stock began publicly trading on
the Nasdaq Capital Market under the symbol “MYSZ”. The Company’s
shares of common stock are listed both on the Nasdaq Capital Market
and TASE. |
|
d. |
Since
inception, the Company has incurred significant losses and negative
cash flows from operations and has an accumulated deficit of
$53,501. The
Company has financed its operations mainly through fundraising from
various investors. |
The
Company’s management expects that the Company will continue to
generate losses and negative cash flows from operations for the
foreseeable future. Based on the projected cash flows and cash
balances as of December 31, 2022, management is of the opinion that
its existing cash will be sufficient to fund operations for a
period less than 12 months. As a result, there is substantial doubt
about the Company’s ability to continue as a going
concern.
Management’s
plans include the continued commercialization of the Company’s
products and securing sufficient financing through the sale of
additional equity securities, debt or capital inflows from
strategic partnerships. Additional funds may not be available when
the Company needs them, on terms that are acceptable to it, or at
all. If the Company is unsuccessful in commercializing its products
and securing sufficient financing, it may need to cease
operations.
The
financial statements include no adjustments for measurement or
presentation of assets and liabilities, which may be required
should the Company fail to operate as a going concern.
|
e. |
The
Company has three reportable segments: (i) fashion and equipment
e-commerce platform, and (ii) SaaS based innovative artificial
intelligence driven measurement solutions (iii) Naiz SaaS based
innovative artificial intelligence driven measurement solutions.
The fashion and equipment e-commerce platform which represent
Orgad’s activity that was acquired by the Company, mainly operates
on Amazon. The SaaS based innovative artificial intelligence driven
measurement solutions, or SaaS Solutions operating segment consists
of My Size Inc My Size Israel and LLC. |
NOTE
2 -
SIGNIFICANT ACCOUNTING POLICIES
The
consolidated financial statements are prepared according to United
States generally accepted accounting principles (“U.S. GAAP”),
applied on a consistent basis, as follows
The
preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates, judgments and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Information about assumptions made by the Company with respect to
the future and other reasons for uncertainty with respect to
estimates that have a significant risk of resulting in a material
adjustment to carrying amounts of assets and liabilities in the
next financial year are included in the following notes:
Acquisitions of
subsidiaries
The Company measures the fair value of the consideration
transferred (including contingent consideration) and fair value of
the assets acquired and liabilities assumed, in business
combination transactions. For information on details on fair value
measurement in acquisition of subsidiaries, see Note 16 regarding
business combinations.
Estimated impairment of
non-financial assets
The Company examines on an annual basis whether there is an
impairment of goodwill, intangibles and property, plant and
equipment that are allocated to cash generating units, in
accordance with the accounting policy presented in Note 1(h) below.
Recoverable amounts of cash-generating units are determined on the
basis of value-in-use calculations. These calculations require the
use of estimates.
For information on key assumptions used in calculation of the
recoverable amount, see note 7 – Goodwill and other Intangible
assets.
The
currency of the primary economic environment in which the
operations of the Company is conducted is the United States Dollar
and thus it is the Company’s functional currency. The reporting
currency according to which these financial statements are prepared
is the U.S. dollar.
The
currency of the primary economic environment in which the operation
of the Subsidiary, My Size Israel and Orgad International Marketing
Ltd. functional currency is the New Israeli Shekel
(“NIS”).
The
currency of the primary economic environment in which the operation
of the Subsidiary, My Size LLC, functional currency is Russian
Ruble.
The
currency of the primary economic environment in which the operation
of the Subsidiary, Naiz fit, functional currency is
Euro.
MY
SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
2 - SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
c. |
Principles of consolidation: |
The
consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All intercompany
balances and transactions have been eliminated upon
consolidation.
Cash
equivalents are short-term highly liquid investments that are
readily convertible to cash with original maturities of three
months or less at the date acquired.
Restricted
cash are deposits for rent, credit card and for hedging
activities.
Inventories
include finished goods and are measured at the lower of cost or net
realizable value. The cost of inventories comprises of the costs
incurred in bringing the inventories to their present location and
condition. Net realizable value is the estimated selling price in
the ordinary course of business. At the point of the loss
recognition, a new, lower-cost basis for that inventory is
established, and subsequent changes in facts and circumstances do
not result in the restoration or increase in that newly established
cost basis. The costs of purchase of inventories comprise
the purchase price and other costs directly attributable to the
acquisition of finished goods. In 2022, the Company recorded
an inventory mark-down of $48.
|
g. |
Property and equipment: |
Property
and equipment are stated at cost, net of accumulated depreciation.
Depreciation is calculated by the straight-line method over the
estimated useful lives of the assets, at the following annual
rates:
SCHEDULE OF PROPERTY AND EQUIPMENT ANNUAL
RATE
|
|
% |
|
|
|
|
|
Computers and peripheral equipment |
|
|
33 |
|
Office
furniture and equipment |
|
|
7-20 |
|
Leasehold improvements |
|
|
Over the term of the lease or
the useful life of the improvements, whichever is
shorter |
|
|
h. |
Impairment of long-lived assets: |
The
Company’s property and equipment are reviewed for impairment in
accordance with ASC 360, “Property Plant and Equipment”, whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying
amount of an asset to the future undiscounted cash flows expected
to be generated by the assets. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the fair value
of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less selling costs. During the
periods ended December 31, 2022 and 2021, no impairment
losses have been recorded.
|
i. |
Business combinations: |
The
Company applies the provisions of ASC 805, “Business Combination”
and allocates the fair value of purchase consideration to the
tangible assets acquired, liabilities assumed, and intangible
assets acquired based on their estimated fair values. The excess of
the fair value of purchase consideration over the fair values of
these identifiable assets and liabilities is recorded as goodwill.
When determining the fair values of assets acquired and liabilities
assumed, the Company estimated the future expected cash flows from
acquired platform, customer relationships, Technology and trademark
from a market participant perspective, useful lives and discount
rates. In addition, management makes significant estimates and
assumptions, which are uncertain, but believed to be
reasonable.
Acquisition-related
costs are recognized separately from the acquisition and are
expensed as incurred.
MY SIZE, INC. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share data and per share
data)
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Goodwill
represents the excess of the purchase price over the fair value of
the net tangible and intangible assets acquired in a business
combination. Under ASC 350, “Intangible - Goodwill and Other”,
goodwill is not amortized, but rather is subject to an annual
impairment test.
ASC
350 requires goodwill to be tested for impairment at the reporting
unit level at least annually, the fourth quarter, or between annual
tests in certain circumstances, and written down when impaired.
Goodwill is tested for impairment by comparing the fair value of
the reporting unit with it carrying value. Goodwill from Orgad
acquisition was allocated to the fashion and equipment e-commerce
platform segment and Goodwill from the Naiz acquisition was
allocated to Naiz segment based innovative artificial intelligence
driven measurement solutions.
Alternatively,
ASC 350 permits an entity to bypass the qualitative assessment for
any reporting unit and proceed directly to performing the first
step of the goodwill impairment test. There were no impairment
charges to goodwill during the period presented.
Intangible
assets consist of identifiable intangible assets that the Company
has acquired from previous business combinations. Intangible assets
are recorded at costs, net of accumulated amortization. The Company
amortizes its intangible assets reflecting the pattern in which the
economic benefits of the intangible assets are consumed. When a
pattern cannot be reliably determined, the Company uses a
straight-line amortization method. Amortization is calculated by
the straight-line method over the estimated useful lives of the
following assets.
The
estimated useful lives of the company’s intangible assets are as
follows:
SCHEDULE OF INTANGIBLE ASSETS ESTIMATED
USEFUL LIVES
|
|
years |
|
Customer Relationships |
|
7
|
|
Technology |
|
5
|
|
Trademark |
|
5
|
|
Selling Platform |
|
3 |
|
Each
period the Company evaluates the estimated remaining useful lives
of its intangible assets and whether events or changes in
circumstances warrant a revision to the remaining period of
amortization
The
Subsidiary’s liability for severance pay is covered by Section 14
of the Israeli Severance Pay Law (“Section 14”). Under Section 14,
employees in Israel are entitled to have monthly deposits, at a
rate of 8.33% of their monthly
salary, made on their behalf to their insurance funds. Payments in
accordance with Section 14 exempt the Subsidiary from any
additional obligation for these employees. As a result, the
Subsidiary does not recognize any liability for severance pay due
to these employees and the deposits under Section 14 are not
recorded as an asset in the Subsidiary’s balance sheet. These
contributions for compensation represent defined contribution plans
and expenses are recorded based on actual deposits.
Other than the My Size Israel’s liability there are no additional
severance pay liabilities.
MY
SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
2 - SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
m. |
Research and development costs: |
Research
and development costs are charged to the statement of operations,
as incurred. Most of the research and development expenses are for
wages, related expenses and subcontractors.
The
Company accounts for income taxes using the asset and liability
method, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been recognized in the consolidated financial statements or in
the Companies’ tax returns. Deferred taxes are determined based on
the difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect in the
years in which the differences are expected to reverse. The Company
assesses the likelihood that its deferred tax assets will be
recovered from future taxable income and, to the extent it
believes, based upon the weight of available evidence, that it is
more likely than not that all or a portion of deferred tax assets
will not be realized. The Company establishes a valuation
allowance, if necessary, to reduce deferred tax assets to the
amount more likely than not to be realized. As of December 31,
2022, and 2021, a full valuation allowance was established by the
Company.
The
Company implements a two-step approach to recognize and measure the
benefit of its tax positions. The first step is to evaluate the tax
position taken or expected to be taken in a tax return by
determining if the weight of available evidence indicates that it
is more likely than not that, on an evaluation of the technical
merits, the tax position will be sustained on audit, including
resolution of any related appeals or litigation processes. The
second step is to
measure the tax benefit as the largest amount that is greater than
50 percent (cumulative basis) likely to be realized upon
settlement. The
Company believes that its tax positions are all highly certain of
being upheld upon examination. As of December 31, 2022 and 2021 the
Company recorded a liability for unrecognized tax benefits of
$328 and none
respectively.
|
o. |
Accounting for stock-based compensation: |
The
Company accounts for its employees’ stock-based compensation as an
expense in the financial statements based on ASC 718. All awards
are equity classified and therefore such costs are measured at the
grant date fair value of the award and graded vesting attribution
approach to recognize compensation cost over the vesting period.
The Company estimates stock option grant date fair value using the
Binomial and Black Scholes option pricing-model.
The
Company recorded stock options issued to non-employees at the grant
date fair value, and recognizes expenses over the related service
period by using the straight-line attribution approach in
accordance with ASU 2018-07. All awards are equity
classified.
The
expected volatility of the share prices reflects the assumption
that the historical volatility of the share prices is reasonably
indicative of expected future trends.
The
risk-free interest rate for grants with an exercise price
denominated in USD for employees and several consultants is based
on the yield from US treasury zero-coupon bonds with an equivalent
term.
The
Company has historically not paid dividends and has no foreseeable
plans to pay dividends.
MY
SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
2 - SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
p. |
Fair value of financial instruments: |
ASC
820, Fair Value Measurements and Disclosures, relating to fair
value measurements, defines fair value and established a framework
for measuring fair value. The ASC 820 fair value hierarchy
distinguishes between market participant assumptions developed
based on market data obtained from sources independent of the
reporting entity and the reporting entity’s own assumptions about
market participant assumptions developed based on the best
information available in the circumstances. ASC 820 defines fair
value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date, essentially an exit price. In
addition, the fair value of assets and liabilities should include
consideration of non-performance risk, which for the liabilities
described below includes the Company’s own credit risk.
As a
basis for considering such assumptions, ASC 820 establishes a
three-tier value hierarchy, which prioritizes the inputs used in
the valuation methodologies in measuring fair value:
|
Level
1 - |
Valuations
based on quoted prices in active markets for identical assets that
the Company has the ability to access. Valuation adjustments and
block discounts are not applied to Level 1 instruments. Since
valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these
products does not entail a significant degree of
judgment. |
|
|
|
|
Level
2 - |
Valuations
based on one or more quoted prices in markets that are not active
or for which all significant inputs are observable, either directly
or indirectly. |
|
|
|
|
Level
3 - |
Valuations
based on inputs that are unobservable and significant to the
overall fair value measurement. |
The
Company holds share certificates in iMine Corporation (“iMine”)
formerly known as Diamante Minerals, Inc., a publicly-traded
company on the OTCQB.
Due
to sales restrictions on the sale of the iMine shares, the fair
value of the shares was measured on the basis of the quoted market
price for an otherwise identical unrestricted equity instrument of
the same issuer that trades in a public market, adjusted to reflect
the effect of the sales restrictions and is therefore, ranked as
Level 2 asset.
|
q. |
Basic and diluted net loss per share: |
Basic
net loss per share is computed based on the weighted average number
of shares of common stock outstanding during each year. Diluted net
income per share is computed based on the weighted average number
of shares of common stock outstanding during each year plus
dilutive potential equivalent common stock considered outstanding
during the year, in accordance with ASC 260, “Earnings per Share”.
For the years ended December 31, 2022 and 2021, all outstanding
options and warrants have been excluded from the calculation of the
diluted net loss per share since their effect was
anti-dilutive.
|
r. |
Concentrations of credit risk: |
Financial
instruments that potentially subject the Company and its
subsidiaries to concentrations of credit risk consist principally
of cash and cash equivalents.
Cash
and cash equivalents are invested in banks in Israel, Spain and
United States. Such deposits in United States may be in excess of
insured limits and are not insured in other jurisdictions.
Management believes that the financial institutions that hold the
Company’s investments are financially sound and, accordingly,
minimal credit risk exists with respect to these
investments.
The
Company and its subsidiaries have no off-balance-sheet
concentration of credit risk such as foreign exchange contracts,
option contracts or other foreign hedging arrangements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
2 - SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
The
Company’s revenues are comprised of two main categories: (1)
selling products to customers, and (2) licensing cloud-enabled
software subscriptions, associated software maintenance and
support.
The
Company recognizes revenue in accordance with ASC Topic 606,
Revenues from Contracts with Customers (“ASC 606”). A contract with
a customer exists only when: the parties to the contract have
approved it and are committed to perform their respective
obligations, the Company can identify each party’s rights regarding
the distinct goods or services to be transferred (“performance
obligations”), the Company can determine the transaction price for
the goods or services to be transferred, the contract has
commercial substance and it is probable that the Company will
collect the consideration to which it will be entitled in exchange
for the goods or services that will be transferred to the
customer.
Revenue
from sale of products is recognized at the time the related
performance obligation is satisfied by transferring a promised good
to a customer. Revenue is recognized net of allowances for refunds
and any taxes collected from customers, which are subsequently
remitted to governmental authorities. Refunds are estimated at
contract inception and updated at the end of each reporting period
if additional information becomes available. Revenue is recognized
when control of the product is transferred to the
customer.
The
Company maintains a returns policy that allows its customers to
return product within a specified period of time. The estimate of
the provision for returns is based upon historical experience with
actual returns.
Principal
versus Agent Considerations
The
Company follows the guidance provided in ASC 606 for determining
whether it is a principal or an agent in arrangements with
customers, by assessing whether the nature of the Company’s promise
is a performance obligation to provide the specified goods
(principal) or to arrange for those goods to be provided by the
other party (agent). With regard to products being sold by Orgad
through Amazon, this determination involves judgment. The Company
determines it is the principle when it has control over promised
product before it is transferred to the end customers.
Subscription
and Services Offerings
Such
performance obligations include cloud enabled subscriptions,
software maintenance and technical support.
Fully
hosted subscription services (SaaS) allow customers to access
hosted software during the contractual term without taking
possession of the software. Cloud hosted subscription services are
sold on a fee per subscription that is based on consumption or
usage (per fit recommendation).
The
Company recognizes revenue ratably over the contractual service
term for hosted services that are priced based on a committed
number of transactions where the delivery and consumption of the
benefit of the services occur evenly over time, beginning on the
date the services associated with the committed transactions are
first made available to the customer and continuing through the end
of the contractual service term. Over usage fees and fees based on
the actual number of transactions are billed in accordance with
contract terms as these fees are incurred and are included in the
transaction price of an arrangement as variable consideration. Fees
based on a number of transactions or impressions per month, are
allocated to the period in which the transactions occur. Revenue
for subscriptions sold as a fee per period is recognized ratably
over the contractual term as the customer simultaneously receives
and consumes the benefit of the underlying service.
MY
SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
2 - SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
t. |
Contingencies and Commitments |
Liabilities
for loss contingencies arising from claims, assessments,
litigation, fines, and penalties and other sources are recorded
when it is probable that a liability has been incurred and the
amount can be reasonably estimated. Legal costs incurred in
connection with loss contingencies are expensed as
incurred.
|
u. |
Derivative instruments |
The
Company accounts for its derivative instruments as either assets or
liabilities and measures them at fair value through profit or
loss.
The
Company leases include an office space lease agreement for 36
months, with an option to extend for an additional 36 months and 36
months cancelable operating lease agreements on behalf of personnel
vehicles. The lease term includes a non-cancellable period of the
lease plus any additional periods covered by either a Company
option to extend (or not to terminate) the lease that the Company
is reasonably certain to exercise, or an option to extend (or not
to terminate) the lease controlled by the lessor.
ROU
assets represent the Company’s right to use an underlying asset for
the lease term and lease liabilities represent its obligation to
make lease payments arising from the lease. Operating lease ROU
assets and liabilities are recognized at commencement date based on
the present value of lease payments over the lease term. The
company generally use its incremental borrowing rate based on the
estimated rate of interest for collateralized borrowing over a
similar term of the lease payments at commencement date. Lease
expense for lease payments is recognized on a straight-line basis
over the lease term.
For
the office rent lease, the Company has elected to account for the
lease and non-lease maintenance components as a single lease
component. Therefore, the lease payments used to measure the lease
liability include all of the fixed consideration in the contract,
including in-substance fixed payments, owed over the lease
term.
|
w. |
Impact
of recently issued accounting standard |
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments -
Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments”, which requires companies to measure credit
losses of financial instruments, including customer accounts
receivable, utilizing a methodology that reflects expected credit
losses and requires consideration of a broader range of reasonable
and supportable information to inform credit loss estimates.
Subsequent to the issuance of ASU 2016-13, the FASB issued several
additional Accounting Standard Updates to clarify implementation
guidance, provide narrow-scope improvements and provide additional
disclosure guidance. As an Emerging Growth Company, ASU 2016-13 is
effective for fiscal years beginning after December 15, 2022. The
Company does not expect this ASU to have a material impact on its
consolidated financial statements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S.
dollars in thousands (except share data and per share
data)
NOTE
3 -
CASH AND CASH EQUIVALENTS
The
Company’s cash and cash equivalents balance at December 31, 2022
and 2021 is denominated in the following currencies:
SCHEDULE OF CASH AND CASH EQUIVALENT
BALANCE
|
|
2022 |
|
|
2021 |
|
|
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
US Dollars |
|
|
1,651 |
|
|
|
10,184 |
|
New
Israeli Shekels |
|
|
259 |
|
|
|
433 |
|
Other |
|
|
190 |
|
|
|
53 |
|
Cash and cash equivalents |
|
|
2,100 |
|
|
|
10,670 |
|
NOTE
4 -
OTHER RECEIVABLES AND PREPAID EXPENSES
SCHEDULE OF OTHER RECEIVABLES AND PREPAID
EXPENSES
|
|
2022 |
|
|
2021 |
|
|
|
December 31, |
|
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
322 |
|
|
|
429 |
|
Government authorities |
|
|
283 |
|
|
|
17 |
|
Other |
|
|
153 |
|
|
|
133 |
|
Total |
|
|
758 |
|
|
|
579 |
|
NOTE
5 -
PROPERTY AND EQUIPMENT, NET
SCHEDULE OF PROPERTY AND EQUIPMENT,
NET
|
|
Computers
and
peripheral
equipment
|
|
|
Office
furniture
and
equipment
|
|
|
Leasehold
improvements
|
|
|
Total |
|
Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2021 |
|
|
182 |
|
|
|
58 |
|
|
|
60 |
|
|
|
300 |
|
Additions |
|
|
23 |
|
|
|
- |
|
|
|
- |
|
|
|
23 |
|
Business combination |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Translation adjustments |
|
|
7 |
|
|
|
2 |
|
|
|
2 |
|
|
|
11 |
|
Balance as at
December 31, 2021 |
|
|
212 |
|
|
|
60 |
|
|
|
62 |
|
|
|
334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at
January 1, 2022 |
|
|
212 |
|
|
|
60 |
|
|
|
62 |
|
|
|
334 |
|
Additions |
|
|
16 |
|
|
|
11 |
|
|
|
- |
|
|
|
27 |
|
Business
combination |
|
|
40 |
|
|
|
15 |
|
|
|
- |
|
|
|
55 |
|
Translation adjustments |
|
|
(32 |
) |
|
|
(8 |
) |
|
|
(8 |
) |
|
|
(48 |
) |
Balance as at
December 31, 2022 |
|
|
236 |
|
|
|
78 |
|
|
|
54 |
|
|
|
368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at January 1, 2021 |
|
|
146 |
|
|
|
14 |
|
|
|
12 |
|
|
|
|