Business Context and Reporting Period
This Form 8-K, filed on October 7, 2022, by My Size, Inc. (MYSZ), reports the entry into a Material Definitive Agreement and the completion of an asset acquisition. The Company, incorporated in Delaware with principal offices in Israel, acquired 100% of the equity of Naiz Bespoke Technologies, S.L. ("Naiz"), a Spanish limited liability company. The acquisition closed on October 11, 2022.
Key Financial Metrics and Transaction Structure
The total consideration for the acquisition of Naiz consists of equity and cash components, subject to performance targets and employment conditions.
- Equity Consideration: 6,000,000 shares of My Size, Inc. common stock issued at closing, representing approximately 19.9% of issued and outstanding shares pre-issuance.
- Cash Consideration: Up to US$2,050,000 payable in five installments.
- Shortfall Payment: An additional cash payment of US$459,240 is required because the equity value averaged over the 10 trading days prior to closing was less than US$1,650,000. This is payable within 45 days of receiving Naiz's 2025 audited financial statements, subject to revenue targets.
Cash Payment Schedule:
- US$500,000 paid at closing.
- Up to US$500,000 within 45 days of Naiz's 2022 audited financial statements (subject to revenue targets).
- Up to US$350,000 within 45 days of Naiz's unaudited financial statements for the six months ended June 30, 2023 (subject to revenue targets).
- Up to US$350,000 within 45 days of Naiz's unaudited financial statements for the six months ended December 31, 2023 (subject to revenue targets).
- Up to US$350,000 within 45 days of Naiz's 2024 audited financial statements (subject to revenue targets).
Installments 2 through 5 are further contingent on the continued employment or involvement of Key Persons (Borja Cembrero Saralegui and Aritz Torre Garcia) with Naiz.
Material Changes and Agreements
The filing details several material agreements executed in connection with the acquisition:
- Lock-Up Agreements: Sellers are restricted from selling or transferring shares for six months post-closing. A subsequent three-month "dribble-out" period limits sales to the average daily trading volume of the prior 30 days.
- Voting Agreements: Sellers Whitehole, Twinbel, and EGI have granted irrevocable proxies to a designee of My Size's board of directors. The agreement ensures the proxy does not vote more than 19.9% of the voting power on any item unless other stockholders vote proportionally.
- Employment and Non-Compete: Key Persons entered into employment agreements, and all Sellers are subject to non-competition and non-solicitation provisions.
Guidance, Risks, and Contingencies
The filing does not provide specific financial guidance or outlook for the combined entity. However, it highlights significant contingencies regarding the cash consideration:
- Revenue Targets: Four of the five cash installments are contingent upon Naiz meeting specific revenue targets.
- Key Person Retention: Future cash payments depend on the continued employment of the founders (Borja and Aritz).
- Financial Reporting: The Company intends to file the required financial statements of the acquired business and pro forma financial information within 71 days of the filing date.
Investor Verification Checklist
- Verify the exact number of shares outstanding post-issuance to confirm the 19.9% dilution impact.
- Monitor the upcoming 2022 audited financial statements of Naiz to determine the eligibility for the second cash installment.
- Review the specific revenue targets defined in the Share Purchase Agreement (Exhibit 10.1) to assess the likelihood of future cash payments.
- Confirm the status of the Key Persons' employment to evaluate the risk of forfeiting future earn-out payments.
- Check for the filing of the amendment containing Naiz's financial statements and pro forma information within the 71-day window.