Item
1. Financial Statements.
My
Size Inc. and Subsidiaries
Condensed
Consolidated
Interim
Financial
Statements
As
of June 30, 2021
(unaudited)
U.S.
Dollars in Thousands
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Financial Statements as of June 30, 2021 (Unaudited)
Contents
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Balance Sheets
U.S.
dollars in thousands (except share data and per share data)
The
accompanying notes are an integral part of the condensed consolidated interim financial statements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Statements of Comprehensive Loss
U.S.
dollars in thousands (except share data and per share data)
The
accompanying notes are an integral part of the interim condensed consolidated financial statements
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Statements of Changes in Stockholders’ Equity
U.S.
dollars in thousands (except share data and per share data)
|
|
Common stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
other
comprehensive
|
|
|
Accumulated
|
|
|
Total
stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
loss
|
|
|
deficit
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2020
|
|
|
2,085,900
|
|
|
|
2
|
|
|
|
30,102
|
|
|
|
(539
|
)
|
|
|
(28,514
|
)
|
|
|
1,051
|
|
Stock-based compensation related to options granted to employees and consultants
|
|
|
-
|
|
|
|
-
|
|
|
|
163
|
|
|
|
-
|
|
|
|
-
|
|
|
|
163
|
|
Issuance of shares, net of issuance cost of $1,000
|
|
|
2,439,802
|
|
|
|
3
|
|
|
|
5,992
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,995
|
|
Exercise of warrants and pre funded warrants
|
|
|
2,632,134
|
|
|
|
2
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
16
|
|
Liability reclassified to equity
|
|
|
-
|
|
|
|
-
|
|
|
|
328
|
|
|
|
-
|
|
|
|
-
|
|
|
|
328
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
(2,763
|
)
|
|
|
(2,760
|
)
|
Balance as of June 30, 2020
|
|
|
7,157,836
|
|
|
|
7
|
|
|
|
36,599
|
|
|
|
(536
|
)
|
|
|
(31,277
|
)
|
|
|
4,793
|
|
|
|
Common stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
other
comprehensive
|
|
|
Accumulated
|
|
|
Total
stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
loss
|
|
|
deficit
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of April 1, 2021
|
|
|
12,145,547
|
|
|
|
12
|
|
|
|
42,671
|
|
|
|
(462
|
)
|
|
|
(36,128
|
)
|
|
|
6,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation related to options granted to employees and consultants
|
|
|
-
|
|
|
|
-
|
|
|
|
89
|
|
|
|
-
|
|
|
|
-
|
|
|
|
89
|
|
Restricted shares issued to shareholder (*)
|
|
|
2,500,000
|
|
|
|
3
|
|
|
|
2,615
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,618
|
|
Issuance of shares, net of issuance cost of $32
|
|
|
392,780
|
|
|
-
|
**
|
|
|
|
463
|
|
|
|
-
|
|
|
|
-
|
|
|
|
463
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22
|
|
|
|
(4,340
|
)
|
|
|
(4,318
|
)
|
Balance as of June 30, 2021
|
|
|
15,038,327
|
|
|
|
15
|
|
|
|
45,838
|
|
|
|
(440
|
)
|
|
|
(40,468
|
)
|
|
|
4,945
|
|
(*)
|
See
note 1 c.
|
(**)
|
Represents
an amount less than $1
|
|
|
Common stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
other
comprehensive
|
|
|
Accumulated
|
|
|
Total
stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
loss
|
|
|
deficit
|
|
|
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of April 1, 2020
|
|
|
2,600,701
|
|
|
|
3
|
|
|
|
32,193
|
|
|
|
(540
|
)
|
|
|
(29,973
|
)
|
|
|
1,683
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation related to options granted to employees and consultants
|
|
|
-
|
|
|
|
-
|
|
|
|
93
|
|
|
|
-
|
|
|
|
-
|
|
|
|
93
|
|
Issuance of shares, net of issuance cost of $642
|
|
|
1,925,001
|
|
|
|
2
|
|
|
|
4,299
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,301
|
|
Issuance of shares, net of issuance cost
|
|
|
1,925,001
|
|
|
|
2
|
|
|
|
4,299
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,301
|
|
Exercise of warrants and pre funded warrants
|
|
|
2,632,134
|
|
|
|
2
|
|
|
|
14
|
|
|
|
-
|
|
|
|
-
|
|
|
|
16
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4
|
|
|
|
(1,304
|
)
|
|
|
(1,300
|
)
|
Balance as of June 30, 2020
|
|
|
7,157,836
|
|
|
|
7
|
|
|
|
36,599
|
|
|
|
(536
|
)
|
|
|
(31,277
|
)
|
|
|
4,793
|
|
MY
SIZE, INC. AND ITS SUBSIDIARIES
Condensed
Consolidated Interim Statements of Cash Flows
U.S.
dollars in thousands
The
accompanying notes are an integral part of the interim condensed consolidated financial statements.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
1 - General
|
a.
|
My
Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel
e-commerce market, to the courier services market and to the Do It Yourself smartphone and tablet apps market. The technology is
driven by proprietary algorithms which are able to calculate and record measurements in a variety of novel ways.
The
Company has three subsidiaries, My Size Israel 2014 Ltd (“My Size Israel”). and Topspin Medical (Israel) Ltd., both of
which are incorporated in Israel and My Size LLC which was incorporated in Russian Federation. References to the Company include
the subsidiaries unless the context indicates otherwise.
|
|
|
|
|
b.
|
During
the six month period ended June 30, 2021, the Company has incurred significant losses and negative cash flows from operations and
has an accumulated deficit of $40,468. 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 June 30, 2021, management is of the opinion that
its existing cash will be sufficient to fund operations until the end of March 2022. 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.
|
|
|
|
|
c.
|
Further
to Note 1b of the Company’s Annual Report on Form 10-K for the year ended December
31, 2020:
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
2,500,000 shares of common stock to Ms. Zigdon in a private placement.
The
Company measured the fair value of the shares based on the quoted market price of common stock adjusted to reflect the effect of
the sales restrictions.
During
the six and three month period ended June 30, 2021, an amount of $2,618 was recorded in research and development expense.
|
Note
2 - Significant Accounting Policies
a. Unaudited condensed consolidated financial statements:
The
accompanying unaudited condensed consolidated interim financial statements included herein have been prepared by the Company in accordance
with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated
financial statements are comprised of the financial statements of the Company. In management’s opinion, the interim financial data
presented includes all adjustments necessary for a fair presentation. All intercompany accounts and transactions have been eliminated.
Certain information required by U.S. generally accepted accounting principles (“GAAP”) has been condensed or omitted in accordance
with rules and regulations of the SEC. Operating results for the six months ended June 30, 2021 are not necessarily indicative of the
results that may be expected for any future period or for the year ending December 31, 2021.
These
unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial
statements and the notes thereto for the year ended December 31, 2020.
b. Use of estimates:
The
preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the
amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these
estimates.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
3 - Financial Instruments
Fair
value of financial instruments:
Accounting
Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines
fair value and established a framework for measuring fair value. 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.
In
accordance with ASC 820 when measuring the fair value, an entity shall take into account the characteristics of the asset or liability
if a market participant would take those characteristics into account when pricing the asset or liability at the measurement date. Such
characteristics include, for example:
|
a.
|
The
condition and location of the asset.
|
|
b.
|
Restrictions,
if any, on the sale or the use of the asset.
|
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
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
carrying amounts of cash and cash equivalents, accounts receivable, other receivables, trade payables and accounts payable approximate
their fair value due to the short-term maturities of such instruments.
The
Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publicly-traded
company on the OTCQB.
Due
to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price
for an otherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the
effect of the sales restrictions and is therefore, ranked as Level 2 assets.
Schedule of Fair value of Financial Assets and Liabilities
|
|
June 30, 2021
|
|
|
|
Fair value hierarchy
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in marketable securities (*)
|
|
|
-
|
|
|
|
81
|
|
|
|
-
|
|
|
|
June
30, 2021
|
|
|
|
Fair
value hierarchy
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
3 - Financial Instruments (Cont.)
|
|
December
31, 2020
|
|
|
|
Fair
value hierarchy
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in marketable securities (*)
|
|
|
-
|
|
|
|
59
|
|
|
|
-
|
|
(*)
|
For
the six and three month periods ended June 30, 2021 and 2020, the recognized gain (based on quoted market prices with a discount
due to security restrictions on iMine shares) of the marketable securities was $22 and $(27), and $15 and $3, respectively.
|
|
|
December
31, 2020
|
|
|
|
Fair
value hierarchy
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
Note
4 - Stock Based Compensation
The
stock-based expense equity awards recognized in the financial statements for services received is related to Research and Development,
Sales and Marketing and General and Administrative expenses as shown in the following table:
Schedule of Stock Based Expenses
|
|
Six months ended
June 30,
|
|
|
Three months ended
June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense - Research and development
|
|
|
70
|
|
|
|
51
|
|
|
|
9
|
|
|
|
31
|
|
Stock-based compensation expense - Sales and marketing
|
|
|
93
|
|
|
|
46
|
|
|
|
68
|
|
|
|
24
|
|
Stock-based compensation expense - General and administrative
|
|
|
69
|
|
|
|
66
|
|
|
|
12
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232
|
|
|
|
163
|
|
|
|
89
|
|
|
|
93
|
|
Warrants
issued to consultants:
|
a.
|
In May 2021, the Company entered into a
consulting agreement with a consultant pursuant to which the Company agreed upon the three-month anniversary of the agreement to
issue to the consultant a (i) a warrant to purchase up to 50,000
shares of the Company’s common stock exercisable at $1.50
per share and expiring on December
31, 2022, and (ii) a warrant to purchase up to 50,000
shares of the Company’s common stock exercisable at $2.00
per share and expiring on December
31, 2022
During both the six and three month period
ended June 30, 2021, an amount of $38, respectively, was recorded by the Company as stock option compensation expense with respect
to the consultant.
|
|
b.
|
In June 2021, the Company entered into a
consulting agreement with a consultant pursuant to which the Company agreed to issue to the consultant a warrant to purchase up to 50,000
shares of the Company’s common stock exercisable at $1.50
per share and expiring on December
31, 2022.
During both the six and three month period
ended June 30, 2021, an amount of $9, was recorded by the Company as stock option compensation expense with respect to the consultant.
|
|
c.
|
During
the six month period ended June 30, 2021, the Company issued 150,000
warrants to consultants, no such warrants
were exercised and warrants to purchase 3,667
shares expired.
|
The
total stock option compensation expense during the six and three month period ended June 30, 2021 and 2020 which was recorded under sales
and marketing was $60, $53, $5 and $1 respectively and under general and administrative was $0, $0, $12 and $6, respectively.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
4 - Stock Based Compensation (Cont.)
Stock
Option Plan for Employees:
In
March 2017, the Company adopted the My Size, Inc. 2017 Equity Incentive Plan (the “2017 Employee Plan”) pursuant to which
the Company’s Board of Directors may grant stock options to officers and key employees. The total number of options which may be
granted to directors, officers, employees under this plan, was initially limited to 200,000 shares of common stock. Stock options can
be granted with an exercise price equal to or less than the stock’s fair market value at the grant date. As further described below,
in August 2020, the Company’s shareholders approved an increase in the number of shares available for issuance under the Plan to
1,450,000.
On
May 25, 2020, the compensation committee of the Board of Directors of the Company reduced the exercise
price of outstanding options of employees and directors of the Company for the purchase of an aggregate of 140,237 shares of common stock
of the Company (with exercise prices ranging between $18.15 and $9.15) to $1.04 per share, which was the closing price for the Company’s
common stock on May 22, 2020, and extended the term of the foregoing options for an additional one year from the original date of expiration.
The incremental compensation cost resulting from the repricing was $53, and the expenses during the six and three month period ended
June 30, 2021 were $1, $0 and the expenses during both the six and three months ended June 30, 2020 were $43.
On
August 10, 2020, the Company’s shareholders approved an increase in the shares available for issuance under the 2017 Employee Plan
from 200,000 to 1,450,000 shares. As a result and pursuant to approval of the Company’s compensation committee that was contingent
on the foregoing shareholder approval, the number of shares available for issuance under the Company’s 2017 Consultant Incentive
Plan was reduced from 466,667 to 216,667 shares.
During
the six and three month period ended June 30, 2021, the Company granted an aggregate of 97,500 of stock options under the 2017 Employee
Plan, no such options were exercised and options to purchase 40,777 and 19,167 shares of common stock, respectively, expired.
The
total stock option compensation expense during the six and three month period ended June 30, 2021 and 2020 which was recorded was $171
and $35, and $103 and $42, respectively.
MY
SIZE, INC. AND ITS SUBSIDIARIES
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
5 - Contingencies and Commitments
|
a.
|
On
August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the
State of New York, County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is
seeking damages in an amount to be determined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed
a Summons with Notice against the Company, also in the same Court, in which they allege damages in an amount of $11.4 million arising
from an alleged breach of the Agreement. On September 6, 2018 North Empire filed a Notice of Discontinuance of the action it had
filed on August 2, 2018. On September 27, 2018, North Empire filed an answer and asserted counterclaims in the action commenced by
the Company against them, alleging that the Company failed to deliver stock certificates to North Empire causing damage to North
Empire in the amount of $10,958,589. North Empire also filed a third-party complaint against the Company’s CEO and now former
Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Company filed
a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and now former Chairman of the Board
filed a motion to dismiss North Empire’s third-party complaint. On January 6, 2020, the Court granted the motion and dismissed
the third-party complaint. Discovery has been completed and both parties have filed motions for summary judgment in connection with
the claims and counterclaims.
The
Company believes it is more likely than not that the counterclaims will be denied.
|
|
b.
|
On
July 5, 2021, the Company was served with a legal complaint filed by Fidelity Venture Capital Ltd. and Dror Atzmon in the Magistrate’s
Court in Tel Aviv for a monetary award in an amount of NIS 1,436,679
and a declaratory relief. The plaintiffs allege that the Company breached its contractual obligations to pay them for services
allegedly rendered to the Company by the plaintiffs under a certain consulting agreement dated July 2, 2014, in an amount of NIS 819,000.
Additionally, the plaintiffs allege that the Company should compensate them for losses allegedly incurred by them following their investment
in the Company’s shares issued under a certain private offering. In the alternative, the plaintiffs move that the court will declare
the investment agreement void with full restitution of plaintiffs’ original investment in an amount of NIS 1,329,650.
At this preliminary stage, before any fact finding and pre-trial procedures (including disclosure of documents) have been conducted and
before the statement of defense has been prepared and filed, the Company cannot evaluate the chances of the claim to succeed.
|
Note
6 - Significant Events During the Reporting Period
|
a.
|
On
January 8, 2021, the Company conducted a public offering of its securities pursuant to which it issued 1,569,179 shares of its common
stock for gross proceeds of $2,008. The net proceeds to the Company from the offering were approximately $1,700, after deducting
placement agent’s fees and other estimated offering expenses payable by the Company.
|
|
b.
|
In
January and February 2021, a holder of warrants exercised warrants to purchase 725,000 ordinary shares of the Company in exchange
for $797.
|
|
c.
|
On
March 25, 2021, the Company conducted a public offering of its shares of common stock pursuant to which it issued 2,618,532 shares
of its common stock for gross proceeds of $3,300. The net proceeds to the Company from the offering were approximately $2,872, after
deducting placement agent’s fees and other estimated offering expenses payable by the Company.
|
|
|
|
|
d.
|
On
May 7, 2021, the Company issued an additional 392,780 shares of the Company’s common stock in connection with the full exercise
of the underwriter’s overallotment option granted in the Company’s March 2021 public offering. These additional shares
were sold to the underwriter at a public offering price of $1.26 per share, resulting in additional net proceeds to the Company,
net of the underwriting discount, of approximately $463.
|
|
e.
|
On
May 26, 2021, the Company issued 2,500,000 shares of common stock to Ms. Zigdon in consideration of the Waiver. See note 1(c) above.
|
|
|
|
|
f.
|
In
late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was
largely concentrated in China, it has now spread to Israel and the United States, and infections have been reported globally. Many
countries around the world, including in Israel, have from time to time significant governmental measures being implemented to control
the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and
other material limitations on the conduct of business. These measures have resulted in work stoppages and other disruptions. The
Company has implemented remote working and work place protocols for its employees in accordance with government requirements. In
addition, while the Company has seen an increased demand for MySizeID, the COVID-19 pandemic has had a particularly adverse impact
on the retail industry and this has resulted in an adverse impact on the Company’s marketing and sales activities. For example,
the Company has three ongoing pilots with international retailers that have been halted, the Company is unable to participate physically
in industry conferences, its ability to meet with potential customers is limited and in certain instances sales processes have been
delayed or cancelled. The extent to which COVID-19 continues to impact the Company’s operations will depend on future developments,
which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the
actions that may be required to contain COVID-19 or treat its impact.
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results
of operations and financial condition for the periods described. This discussion should be read together with our condensed consolidated
interim financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q. This
information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December
31, 2020, filed with the Securities and Exchange Commission on March 29, 2021, or the Annual Report, including the consolidated annual
financial statements as of December 31, 2020 and their accompanying notes included therein.
This
Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements in this Quarterly
Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical
facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as
“believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,”
“plan” and “would.” For example, statements concerning financial condition, possible or assumed future results
of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management
and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve
known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements
to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.
Any
forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report
on Form 10-Q. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include but are not limited to:
|
●
|
our
history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable
terms, or at all;
|
|
|
|
|
●
|
our
ability to continue as a going concern;
|
|
|
|
|
●
|
risks
related to the COVID-19 pandemic;
|
|
|
|
|
●
|
the
new and unproven nature of the measurement technology markets;
|
|
|
|
|
●
|
our
ability to achieve customer adoption of our products;
|
|
|
|
|
●
|
our
dependence on assets we purchased from a related party and the risk that such assets may in the future be repurchased;
|
|
|
|
|
●
|
our
ability to enhance our brand and increase market awareness;
|
|
|
|
|
●
|
our
ability to introduce new products and continually enhance our product offerings;
|
|
|
|
|
●
|
the
success of our strategic relationships with third parties;
|
|
|
|
|
●
|
information
technology system failures or breaches of our network security;
|
|
|
|
|
●
|
competition
from competitors;
|
|
|
|
|
●
|
our
reliance on key members of our management team;
|
|
|
|
|
●
|
current
or future litigation; and
|
|
|
|
|
●
|
the
impact of the political and security situation in Israel on our business.
|
The
foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking
statements. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits
to the Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different
from what we expect. You should assume that the information appearing in this Quarterly Report on Form 10-Q is accurate as of the date
hereof. Because the risk factors referred to on page 12 of our Annual Report, could cause actual results or outcomes to differ materially
from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking
statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to
update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will
arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information
presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.
Unless
the context otherwise requires, all references to “we,” “us,” “our” or “the Company”
in this Quarterly Report on Form 10-Q are to My Size, Inc. a Delaware corporation, and its subsidiaries, including MySize Israel 2014
Ltd, Topspin Medical (Israel) Ltd and My Size LLC. taken as a whole.
Overview
We
are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple
verticals, including the e-commerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated
algorithms within our proprietary technology, we can calculate and record measurements in a variety of novel ways, and most importantly,
increase revenue for businesses across the globe.
Our
solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to
a smartphone, the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information
is then automatically sent to a cloud-based server where the dimensions are calculated through our proprietary algorithms, and the accurate
measurements (+ or - 2 centimeters) are then sent back to the user’s mobile device. We believe that the commercial applications
for this technology are significant in many areas.
Currently,
we are mainly focusing on the e-commerce fashion/apparel industry. In addition, our solutions address the shipping/parcel and DIY uses
markets.
While
we rollout our products to major retailers and apparel companies, there is a lead time for new customers to ramp up before we can recognize
revenue. This lead time varies between customers, especially when the customer is a tier 1 retailer, where the integration process may
take longer. Generally, first we integrate our product into a customer’s online platform, which is followed by piloting and implementation,
and, assuming we are successful, commercial roll-out, all of which takes time before we expect it to impact our financial results in
a meaningful way. While we have begun generating initial sales revenue, we do not expect to generate meaningful revenue during the upcoming
quarters. Because of the numerous risks and uncertainties associated with the success of our market penetration and our dependence on
the extent to which MySizeID is adopted and utilized, we are unable to predict the extent to which we will recognize revenue. We may
be unable to successfully develop or market any of our current or proposed products or technologies, those products or technologies may
not generate any revenues, and any revenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.
Important
Information about COVID-19
In
late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was largely
concentrated in China, it has now spread to Israel and the United States, and infections have been reported globally. Many countries
around the world, including in Israel, have from time to time significant governmental measures implemented to control the spread of
the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations
on the conduct of business. These measures have resulted in work stoppages and other disruptions. We implemented remote working and work
place protocols for our employees in accordance with Israeli government requirements. In addition, while we have seen an increased demand
for MySizeID, the COVID-19 pandemic has had a particularly adverse impact on the retail industry and this has resulted in an adverse
impact on our marketing and sales activities. For example, we have three ongoing pilots with international retailers that have been halted,
we are unable to participate physically in industry conferences, our ability to meet with potential customers is limited, and in certain
instances sales processes have been delayed or cancelled. The extent to which COVID-19 continues to impact our operations will depend
on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the
outbreak, and the actions that may be required to contain COVID-19 or treat its impact.
Results
of Operations
The
table below provides our results of operations for the periods indicated.
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
(dollars in thousands)
|
|
|
(dollars in thousands)
|
|
Revenues
|
|
$
|
30
|
|
|
$
|
21
|
|
|
$
|
57
|
|
|
$
|
51
|
|
Cost of revenues
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1
|
)
|
Gross profit
|
|
|
30
|
|
|
|
21
|
|
|
|
57
|
|
|
|
50
|
|
Research and development expenses
|
|
|
(3,007
|
)
|
|
|
(340
|
)
|
|
|
(3,380
|
)
|
|
|
(688
|
)
|
Sales and marketing
|
|
|
(731
|
)
|
|
|
(452
|
)
|
|
|
(1,277
|
)
|
|
|
(1,077
|
)
|
General and administrative
|
|
|
(605
|
)
|
|
|
(562
|
)
|
|
|
(1,229
|
)
|
|
|
(1,078
|
)
|
Operating loss
|
|
|
(4,313
|
)
|
|
|
(1,333
|
)
|
|
|
(5,829
|
)
|
|
|
(2,793
|
)
|
Financial income (expenses), net
|
|
|
(27
|
)
|
|
|
29
|
|
|
|
32
|
|
|
|
30
|
|
Net loss
|
|
$
|
(4,340
|
)
|
|
$
|
(1,304
|
)
|
|
$
|
(5,797
|
)
|
|
$
|
(2,763
|
)
|
Six
and Three Months Ended June 30, 2021 Compared to Six and Three Months Ended June 30, 2020
Revenues
We
started to generate revenue in 2019 and we expect to incur additional losses to increase our sales and marketing efforts and to perform
further research and development activities. Our revenues for the six months ended June 30, 2021 amounted to $57,000 compared to $51,000
for the six months ended June 30, 2020.
Our
revenues for the three months ended June 30, 2021 amounted to $30,000 compared to $21,000 for the three months ended June 30, 2020. The
increase from both six and three months corresponding period primarily resulted from increase in traffic, as measured by the MySizeID
engine per the license agreements.
Research
and Development Expenses
Our
research and development expenses for the six months ended June 30, 2021 amounted to $3,380,000 compared to $688,000 for the six months
ended June 30, 2020. The increase from the corresponding period primarily resulted from share based payment in amount of $2,618,000 attributed
to the share issuance to Shoshana Zigdon under that certain Amendment to Purchase Agreement dated May 26, 2021.
Our
research and development expenses for the three months ended June 30, 2021 amounted to $3,007,000 compared to $340,000 for the three
months ended June 30, 2020. The increase from the corresponding period primarily resulted from share based payment in amount of $2,618,000
attributed to the share issuance to Shoshana Zigdon under that certain Amendment to Purchase Agreement dated May 26, 2021.
Sales
and Marketing Expenses
Our
sales and marketing expenses for the six months ended June 30, 2021 amounted to $1,277,000 compared to $1,077,000 for the six months
ended June 30, 2020. The increase in comparison with the corresponding period was mainly due to an increase in payments to consultants,
share-based payments and hiring new sales consultants offset by decrease in travel and marketing expenses.
Our
sales and marketing expenses for the three months ended June 30, 2021 amounted to $731,000 compared to $452,000 for the three months
ended June 30, 2020. The increase in comparison with the corresponding period was mainly due to an increase in payments to consultants,
hiring new sales consultants and increase in share-based payments was offset by decrease in marketing expenses.
General
and Administrative Expenses
Our
general and administrative expenses for the six months ended June 30, 2021 amounted to $1,229,000 compared to $1,078,000 for the six
months ended June 30, 2020. The increase in comparison with the corresponding period was mainly due to an increase in insurance expenses.
Our
general and administrative expenses for the three months ended June 30, 2021 amounted to $605,000 compared to $562,000 for the three
months ended June 30, 2020. The increase in comparison with the corresponding period was mainly due to an increase in insurance expenses.
Operating
Loss
As
a result of the foregoing, for the six month ended June 30, 2021, our operating loss was $5,829,000, an increase of $3,036,000, or
109%, compared to our operating loss for the six month ended June 30, 2020 of $2,793,000. The increase from the corresponding period
primarily resulted from share based payment in amount of $2,618,000 attributed to the share issuance to Shoshana Zigdon under that
certain Amendment to Purchase Agreement dated May 26, 2021.
As
a result of the foregoing, for the three month ended June 30, 2021, our operating loss was $4,313,000, an increase of $2,980,000, or
223%, compared to our operating loss for the three month ended June 30, 2020 of $1,333,000. The increase from the corresponding
period primarily resulted from share based payment in amount of $2,618,000 attributed to the share issuance to Shoshana Zigdon under
that certain Amendment to Purchase Agreement dated May 26, 2021.
Financial
Income, Net
Our
financial income, net for the six months ended June 30, 2021 amounted to $32,000 as opposed to financial income of $30,000 for the six
months ended June 30, 2020. During the six months ended June 30, 2021, financial income derived mainly from investment in marketable
and from exchange rate expenses.
Our
financial expense, net for the three months ended June 30, 2021 amounted to $27,000 compared to financial income of $29,000 for the three
months ended June 30, 2020. During the three months ended June 30, 2021, financial expenses mainly derived from revaluation of investment
in marketable securities whereas in the corresponding period we had financial income mainly from investment in marketable and from exchange
rate expenses.
Net
Loss
As
a result of the foregoing research and development, sales and marketing, general and administrative expenses initial revenues, and financial
expenses, our net loss for the six months ended June 30, 2021 was $5,797,000 compared to net loss of $2,763,000 for the six months ended
June 30, 2020, the increase in the net loss was mainly due to the reasons mentioned above.
As
a result of the foregoing research and development, sales and marketing, general and administrative expenses initial revenues, and financial
expenses, our net loss for the three months ended June 30, 2021 was $4,340,000, compared to net loss of $1,304,000 for the three months
ended June 30, 2020, the increase in the net loss was mainly due to the reasons mentioned above.
Liquidity
and Capital Resources
Since
our inception, we have funded our operations primarily through public and private offerings of debt and equity in the State of Israel
and in the U.S.
As
of June 30, 2021, we had cash, cash equivalents, restricted cash of $5,093,000 compared to $1,774,000 of cash, cash equivalents and restricted
cash as of December 31, 2020. This increase primarily resulted from the public offerings that we completed in January and March 2021,
including the overallotment that closed in May 2021, and proceeds from warrants that were exercised, as further described below.
On
March 25, 2021, we completed an underwritten public offering of our common stock pursuant to which we issued 2,618,532 shares of our
common stock at a public offering price of $1.26 per share for gross proceeds of approximately $3,300,000. We received net proceeds of
approximately $2,872,000, after deducting the underwriting discounts and commissions and estimated offering expenses. On May 7, 2021,
we issued an additional 392,780 shares of our common stock in connection with the full exercise of the underwriter’s overallotment
option granted in the March 2021 public offering. These additional shares were sold to the underwriter at a public offering price of
$1.26 per share, resulting in additional net proceeds, after deducting the underwriting discount, of $463,260.
Prior
to that, on January 8, 2021, we completed an underwritten public offering of our common stock pursuant to which we issued 1,569,179 shares
of our common stock at a public offering price of $1.28 per share for gross proceeds of approximately $2,008,000. We received net proceeds
of approximately $1,700,000, after deducting the underwriting discounts and commissions and estimated offering expenses. Furthermore,
in January and February 2021, a holder of warrants exercised warrants to purchase 725,000 of our ordinary shares in exchange for $797,000.
Cash
used in operating activities amounted to $2,669,000 for the six months ended June 30, 2021, compared to $2,625,000 for the six months
ended June 30, 2020.
Net
cash provided by investing activities was $172,000 for the six months ended June 30, 2021, compared to $200,000 (used in) investing activities
for the six months ended June 30, 2020.
Net
cash provided by financing activities was $5,832,000 for the six months ended June 30, 2021, compared to $6,011,000 for the six months
ended June 30, 2020. The cash flow from financing activities for the six months ended June 30, 2021 resulted from the public offerings
that occurred in January 2021 and March 2021, including the full exercise of the underwriter’s overallotment option that occurred
in May 2021 and from proceeds that were received from an investor for warrants that were exercised.
We
do not have any material commitments for capital expenditures during the next twelve months.
We
expect to continue to generate losses and negative cash flows from operations for the foreseeable future and expect to need to obtain
additional funds in the future. Based on the projected cash flows and cash balances as of June 30, 2021, management is of the opinion
that our existing cash will be sufficient to fund operations until the end of March 2022. As a result, there is substantial doubt about
the Company’s ability to continue as a going concern. However, 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 and exchange rules.
|
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, the
COVID-19 pandemic, economic conditions shareholder activism 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.
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. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual
results may differ from these estimates under different assumptions or conditions.
While
our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this report,
we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and
future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We
consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the
time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could
have a material impact on our financial condition or results of operations.
Revenue
from Contracts with Customers
The
Company implemented ASC 606, Revenue from Contract with Customers.
To
recognize revenue under ASC 606, the Company applies the following five steps:
|
1.
|
Identify
the contract with a customer. A contract with a customer exists when the Company enters into an enforceable contract with a customer
and the Company determines that collection of substantially all consideration for the services is probable.
|
|
|
|
|
2.
|
Identify
the performance obligations in the contract.
|
|
|
|
|
3.
|
Determine
the transaction price. The transaction price is determined based on the consideration to which the Company will be entitled in exchange
for providing the service to the customer.
|
|
|
|
|
4.
|
Allocate
the transaction price to performance obligations in the contract. If a contract contains a single performance obligation, the entire
transaction price is allocated to the single performance obligation.
|
|
|
|
|
5.
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Recognize
revenue when or as the Company satisfies a performance obligation. When the Company provides a service, revenue is recognized over
the service term.
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The
Company’s revenue is derived from the sale of cloud-enabled software subscriptions, associated software maintenance and support.
Revenue
is recognized when a contract exists between the Company and a customer (business) and upon transfer of control of promised products
or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
The Company enters into contracts that can include various combinations of products and services, which may be capable of being distinct
and accounted for as separate performance obligations. In case of offerings such as cloud-enabled subscription, other service elements
in the contract are generally delivered concurrently with the subscription services and therefore revenue is recognized in a similar
manner as the subscription services.
Product,
Subscription and Services Offerings
Such
performance obligations includes cloud-enabled subscriptions, software maintenance, training 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.