My Size, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unaudited consolidated financial statements; amounts below are U.S. dollars in thousands except per-share data. My Size develops mobile-device measurement technology, with a primary focus on apparel e-commerce and additional shipping and DIY applications.
Financial performance
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $27 | $30 |
| Gross profit | $27 | $29 |
| Operating expenses | $1,543 | $1,489 |
| Operating loss | $(1,516) | $(1,460) |
| Net loss | $(1,457) | $(1,459) |
| Basic and diluted loss per share | $(0.16) | $(0.58) |
| Cash used in operating activities | $(1,271) | $(1,436) |
Revenue remained very limited. Cost of revenue was reported as zero in 2021 and a $1 credit in 2020. Research and development expense rose to $373, mainly due to share-based expense; sales and marketing fell to $546, primarily from lower digital marketing and travel costs; general and administrative expense rose to $624, reflecting higher share-based payments, professional services and insurance. Net loss was nearly unchanged year over year; financial income increased to $59, mainly from a marketable-securities revaluation gain.
Financial position and funding
- At March 31, 2021, cash and cash equivalents were $5,756; restricted cash was $82 and restricted deposits were $185. These balances total $6,023, versus $1,958 at December 31, 2020.
- Total assets were $7,442 and stockholders’ equity was $6,093. Current assets of $6,381 exceeded current liabilities of $820. Total liabilities were $1,349, including $652 in operating lease liabilities; the balance sheet reports no conventional borrowings.
- Operating cash outflow was $1,271; investing cash outflow was $3; financing cash inflow was $5,369. Financing included net proceeds of approximately $1,700 from a January offering, $2,872 from a March offering, and $797 from warrant exercises.
- Shares outstanding increased from 7,232,836 at December 31, 2020 to 12,145,547 at March 31, 2021. The filing reports 12,538,327 shares outstanding as of May 11, 2021. On May 7, the company received approximately $460 net proceeds from the full exercise of the March offering’s overallotment option.
Outlook, risks and notable items
- Going concern: The company expects ongoing losses and negative operating cash flows. Management estimated that cash on hand at March 31 would fund operations through the end of March 2022, but stated that substantial doubt exists about the company’s ability to continue as a going concern. Additional financing may be needed and may not be available on acceptable terms or at all; failure to obtain funding could force curtailment or cessation of operations.
- Commercial outlook: Management said customer integration, pilots and rollout can take time and that it did not expect meaningful revenue in upcoming quarters. Revenue depends on customer adoption and successful commercialization; the filing gives no quantified revenue or earnings guidance.
- COVID-19: The company reported increased demand for MySizeID but said retail-sector disruption had adversely affected marketing and sales. Three international retailer pilots were halted, and customer meetings and sales processes were delayed or cancelled.
- Asset repurchase risk: A former related party may have a right, through June 16, 2021, to repurchase key measurement-technology assets because revenue derived from them was below the contractual threshold. The company was negotiating a waiver and could pay cash, issue equity or both; consideration was not yet determined. The company warned that loss of the assets could materially harm commercialization and could threaten continued operations.
- Litigation: In the North Empire dispute, the company seeks at least $616,000 while the counterclaim alleges damages of $10,958,589. Discovery was complete and summary-judgment motions had been filed. The company stated it believed the counterclaims were more likely than not to be denied; the outcome remains unresolved.
- Other matters: The company disclosed a May 2021 notice from a purported stockholder of intent to nominate four board candidates, which could lead to a proxy contest. Management reported disclosure controls were effective as of March 31, 2021 and no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Whether actual cash burn and operating milestones support management’s estimated runway through March 2022, and what additional financing may be required.
- Progress converting pilots and integrations into paying customers and revenue, including the status of the three halted retailer pilots.
- Whether the former related party waived or exercised the asset repurchase right, and the cash or dilution cost of any resolution.
- Potential dilution from equity financing, warrants, options and the increase in shares outstanding.
- Developments in the North Empire litigation and any proxy contest or board changes.