My Size, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2021. Financial statement amounts are in U.S. dollars; unless noted, dollar figures below are in millions. My Size develops mobile-device measurement technology, with a primary focus on e-commerce apparel and additional shipping and DIY applications.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0.030 | $0.021 | $0.057 | $0.051 |
| Gross profit | $0.030 | $0.021 | $0.057 | $0.050 |
| Operating expenses | $4.343 | $1.354 | $5.886 | $2.843 |
| Operating loss | $4.313 | $1.333 | $5.829 | $2.793 |
| Net loss | $4.340 | $1.304 | $5.797 | $2.763 |
| Basic and diluted loss per share | $0.33 | $0.25 | $0.51 | $0.72 |
Cost of revenue was zero in Q2 2021; reported gross profit therefore equaled revenue. Revenue was about $5.1 million? No: the filing reports $30,000 for Q2 and $57,000 for the first half. Management attributed the increases versus 2020 to greater MySizeID engine traffic under license agreements.
For the six months, operating cash use was $2.669 million, investing activities provided $0.172 million, and financing activities provided $5.832 million. Cash, cash equivalents and restricted cash totaled $5.093 million at June 30, 2021, including $4.824 million of unrestricted cash and cash equivalents. Cash and cash equivalents were $1.689 million at December 31, 2020. The filing gives no quarterly cash-flow figures.
Total assets were $6.357 million and total liabilities $1.412 million at June 30, 2021. Liabilities included $0.651 million of operating lease obligations; the filing reports no conventional borrowings. Current assets were $5.330 million and current liabilities $0.891 million. Accumulated deficit was $40.468 million.
Material changes versus the comparable period
- Q2 revenue increased $9,000 year over year; first-half revenue increased $6,000.
- Operating loss rose 223% in Q2 and 109% for the first half. Net loss more than tripled in Q2 and more than doubled for the first half.
- The main expense driver was a $2.618 million noncash charge recorded in R&D for 2.5 million restricted shares issued to Shoshana Zigdon in exchange for a waiver of repurchase rights and all claims to specified measurement-related intellectual property. The company said the acquired assets are substantially important to its business.
- Sales and marketing costs increased, attributed to consultant payments, hiring and share-based compensation, partly offset by lower travel and marketing costs. General and administrative costs rose, primarily due to insurance expense.
- Financing raised cash but increased the share count: January and March public offerings and the May overallotment generated approximately $5.035 million net proceeds; warrant exercises provided $0.797 million. Shares outstanding increased from 7.233 million at year-end 2020 to 15.038 million at June 30, 2021.
Outlook, risks and unusual items
- Going concern: Management expects continuing losses and negative operating cash flows and estimates existing cash will fund operations only through the end of March 2022. The filing states there is substantial doubt about the company’s ability to continue as a going concern. Additional financing may be unavailable or unfavorable; failure to secure funds could force curtailment or cessation of operations. Further equity or convertible financing could substantially dilute shareholders.
- Commercial outlook: Management said customer integration, piloting and rollout can take time, particularly for large retailers, and it does not expect meaningful revenue in upcoming quarters. The filing provides no quantified revenue or earnings guidance.
- COVID-19: Although management reported increased MySizeID demand, retail disruption adversely affected sales and marketing. Three international-retailer pilots were halted, and customer meetings, conferences and sales processes were delayed or cancelled.
- Legal contingencies: The North Empire dispute includes company claims seeking at least $616,000 and counterclaims alleging $10.959 million in damages; summary-judgment motions were filed, and the company believed the counterclaims were more likely than not to be denied. A separate complaint filed July 5, 2021 seeks NIS 1.437 million and other relief; the company said it could not assess the claim’s prospects at this preliminary stage.
- Other risks: A purported stockholder notified the company in May of an intention to nominate four directors, creating potential proxy-contest and business-disruption costs. Other cited risks include uncertain customer adoption and markets, competition, cybersecurity, dependence on key personnel, Israel-related conditions and access to capital.
- Subsequent events: On August 11, 2021, the board expanded to five members and appointed Guy Zimmerman. On August 16, the compensation committee approved salary increases for the CEO, CFO and COO, effective August 1.
- Management reported disclosure controls and procedures were effective as of June 30, 2021, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether cash use and financing availability support the stated runway only through March 2022, and what funding actions or dilution may follow.
- Progress, conversion and revenue contribution from halted and other retail pilots, customer integrations and MySizeID adoption.
- The terms and continuing implications of the 2.5 million-share IP waiver, including confirmation of the rights secured.
- Developments and potential financial exposure in the North Empire and Fidelity Venture Capital/Dror Atzmon litigation.
- Share-count changes, warrant activity and any subsequent capital raises; the filing reports 15,042,155 shares outstanding as of August 11, 2021.