My Size, Inc. — Q1 2022 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2022; dollar amounts are in thousands unless stated otherwise. My Size develops mobile measurement and SaaS solutions. Following its February 7, 2022 acquisition of Orgad International Marketing, it also operates an omnichannel e-commerce business. Orgad’s results are included from the acquisition date.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $404 | $27 |
| Cost of revenue | $251 | — |
| Gross profit / margin | $153 / approximately 38% | $27 / 100% |
| Operating expenses | $2,258 | $1,543 |
| Operating loss | $(2,105) | $(1,516) |
| Net loss | $(2,188) | $(1,457) |
| Basic and diluted loss per share | $(0.09) | $(0.16) |
| Operating cash flow | $(2,579) | $(1,271) |
| Investing cash flow | $(321) | $(3) |
| Financing cash flow | $7 | $5,369 |
Orgad contributed $360 of Q1 revenue; the SaaS Solutions segment contributed $44. The filing attributes the revenue increase mainly to Orgad. Sales and marketing expense rose to $959 from $546, general and administrative expense to $887 from $624, and research and development expense to $412 from $373. Management attributes the expense increases primarily to Orgad-related activity, hiring, travel and professional services. Net financial expense was $83, compared with $59 of financial income in the prior-year quarter.
Financial position and material changes
- Cash, cash equivalents and restricted cash were $8,112 at March 31, 2022, down from $10,943 at December 31, 2021. The company reported cash and cash equivalents of $7,841 and restricted cash of $271.
- Total assets were $12,278 and total liabilities were $2,980 at quarter-end. Current liabilities were $2,249; current assets were $10,540.
- Debt included $228 of current bank overdraft and borrowings and $142 of long-term loans. Operating lease liabilities totaled $690, current and non-current combined.
- Stockholders’ equity was $9,298, down from $10,857 at year-end, and accumulated deficit was $47,379. Shares outstanding increased from 23,982,503 at December 31, 2021 to 25,377,528 at March 31, primarily due to 1,395,025 shares issued in the Orgad acquisition.
- Orgad was acquired for initial consideration of $757: $300 cash and 1,395,025 shares valued at $457. The agreement also provides for conditional future cash installments, additional share issuances and operating-profit earn-outs, subject to specified conditions. The purchase-price allocation remained preliminary.
Outlook, risks and unusual items
Management expects continuing losses and negative operating cash flows and stated that cash on hand was expected to fund operations for less than 12 months. The filing therefore identifies substantial doubt about the company’s ability to continue as a going concern. Management plans to commercialize products and seek additional financing through equity, debt or strategic partnerships, but financing may not be available on acceptable terms or at all; equity financing could dilute existing holders. No specific financial guidance was provided. Management said it did not expect meaningful revenue from its measurement business in the upcoming quarters, citing customer integration, pilot and rollout lead times.
COVID-19 had disrupted sales activity, including halted retail pilots and delayed or cancelled sales processes. The company reported that Russia’s invasion of Ukraine had not had a material business impact to date, while identifying the situation as a risk. Other stated risks include customer adoption, competition, technology-market uncertainty, cybersecurity, key-person dependence, litigation and access to capital.
Legal matters include the ongoing North Empire dispute, in which the counterclaim alleges damages of approximately $10.96 million; the company says it believes the counterclaims are more likely than not to be denied. A separate Fidelity Venture Capital / Dror Atzmon claim was dismissed without prejudice, and the court ordered the plaintiffs to pay NIS 15,000 in costs. The filing reports no material capital-expenditure commitments for the next 12 months. Management concluded disclosure controls were effective as of March 31, 2022, with no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Confirm the cash runway, financing needs and any subsequent financing or liquidity developments in later filings.
- Track Orgad’s revenue, profitability, cash requirements, purchase-price adjustments and conditions attached to deferred cash, shares and earn-outs.
- Assess whether MySizeID pilots convert into commercial deployments and recurring revenue, given management’s stated rollout lead times.
- Monitor share issuance and potential dilution, including the remaining acquisition-related share installments.
- Review developments in the North Empire litigation and any change to the company’s assessment of the claim.