My Size, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Financial amounts are in U.S. dollars in thousands unless otherwise noted. My Size develops AI-based measurement and sizing solutions and operates an online retail business through Orgad; it also acquired Naiz Fit in October 2022.
Financial performance
| Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 |
|---|---|---|---|---|
| Revenue | $1,290 | $801 | $2,010 | $1,205 |
| Gross profit | $519 | $322 | $92 | $475 |
| Operating loss | $(1,554) | $(1,652) | $(4,046) | $(3,757) |
| Net loss | $(1,291) | $(1,716) | $(3,945) | $(3,904) |
| Operating cash flow | Not separately presented for Q2 | $(3,640) | $(4,070) |
Q2 gross margin was approximately 40%, compared with approximately 40% a year earlier. H1 gross margin fell to approximately 5% from approximately 39%, primarily reflecting a $643 inventory write-down after the Orgad warehouse fire. Q2 basic and diluted loss per share was $0.53, versus $1.68; H1 loss per share was $1.80, versus $3.88. Per-share data reflects the 1-for-25 reverse stock split.
Liquidity and capital
- At June 30, cash and cash equivalents were $1,127 and restricted cash was $123, versus combined cash and restricted cash of $2,363 at December 31, 2022. H1 cash used in operations was $3,640.
- Current assets were $3,992 and current liabilities $3,107. Total liabilities were $3,861; bank overdraft and short-term loans were $152 and long-term loans $306. Lease liabilities are reported separately.
- January 2023 equity and warrant offerings generated approximately $3.0 million gross proceeds and $2.6 million net proceeds. The company reported that all pre-funded warrants had been exercised by June 30; other warrants may create future dilution.
- Stockholders’ equity was $3,433 at June 30, down from $4,536 at year-end. The company had an accumulated deficit of $57,446.
Changes and operating developments
- Revenue increased 61% in Q2 and 67% in H1 year over year. Management attributed growth to higher Orgad sales and Naiz Fit revenue; H1 also benefited from consolidating Orgad for six months rather than two months in the prior-year period.
- H1 operating loss widened by $289, while Q2 operating loss narrowed by $98. Lower R&D and H1 sales and marketing costs were offset by higher cost of revenue and general and administrative expenses. H1 G&A rose largely due to the Orgad and Naiz acquisitions and professional costs.
- Orgad’s January warehouse fire destroyed approximately $640 of uninsured inventory. The company recorded a $643 inventory write-down and paid the lessor $50; operations shifted to company headquarters. Management said it did not expect the fire to affect Orgad’s 2023 sales.
- In May, the company moved support, development and customer-success operations to Naiz Fit in Spain and reduced Israeli headcount by 13, including its Chief Commercial Officer. Management expects lower future costs without significant revenue impact. Orgad also shifted toward Amazon fulfillment.
Outlook, risks and contingencies
Management expects continuing losses and negative operating cash flows and stated that cash at June 30 is expected to fund operations for less than 12 months. The filing identifies substantial doubt about the company’s ability to continue as a going concern. The company expects to seek additional capital, but availability and terms are uncertain; failure to obtain financing or commercialize products could require curtailing operations or ceasing business. Additional equity or convertible financing could materially dilute existing shareholders. No formal revenue or earnings guidance is provided.
Risks highlighted include adoption of unproven measurement markets, execution and benefits of acquisitions, competition, dependence on financing and key personnel, cybersecurity, litigation, economic and capital-market conditions, and the political and security situation in Israel. The company also said it had scaled back Russian operations and expected to close its Russian subsidiary in the near future.
In the North Empire litigation, the company seeks at least $616 in damages, while North Empire’s counterclaims allege approximately $10,959 in damages. The appellate court affirmed denial of both parties’ summary judgment motions; mediation took place in July 2023, with a second session scheduled for August 14. The company says it believes the counterclaims are more likely than not to be denied and intends to defend them. In July, certain officers’ and directors’ options were repriced from $26 to $1.09 per share, creating approximately $10 of incremental compensation cost.
Important facts for investors to verify
- Cash runway assumptions, financing needs and progress toward obtaining additional capital.
- Whether revenue growth and the expected benefits of Orgad and Naiz acquisitions translate into improved gross margins and lower losses.
- Remaining warrant overhang, potential dilution, and the number of shares outstanding; the filing reports 2,438,780 shares outstanding as of August 1, 2023.
- Developments and potential financial exposure in the North Empire dispute and mediation.
- Implementation and actual cost savings from the restructuring, Russian wind-down and Amazon fulfillment strategy.