My Size, Inc. — Q2 2022 Form 10-Q
Business context and period. This unaudited report covers the quarter and six months ended June 30, 2022. My Size develops mobile-device measurement technology and, following its February 7 acquisition of Orgad International Marketing, also operates an omnichannel e-commerce business selling primarily through online marketplaces.
Financial performance
Amounts below are in U.S. dollars, thousands, except per-share data.
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $801 | $30 | $1,205 | $57 |
| Gross profit | $322 | $30 | $475 | $57 |
| Gross margin | 40.2% | 100.0% | 39.4% | 100.0% |
| Operating expenses | $1,974 | $4,343 | $4,232 | $5,886 |
| Operating loss | $(1,652) | $(4,313) | $(3,757) | $(5,829) |
| Net loss | $(1,716) | $(4,340) | $(3,904) | $(5,797) |
| Basic and diluted loss per share | $(0.07) | $(0.33) | $(0.16) | $(0.51) |
Orgad contributed $752 of Q2 revenue and $1,112 from acquisition through June 30. The SaaS measurement-solutions segment generated $49 of Q2 revenue and $93 for the six-month period; its operating losses were $1,650 and $3,828, respectively. Orgad's segment operating result was a $2 loss in Q2 and $71 income for the six months.
Six-month operating cash use was $4,070, versus $2,669 in 2021. Investing activities used $325, including $300 net cash paid to acquire Orgad; financing activities used $24, compared with $5,832 provided in 2021, largely from equity offerings and warrant exercises. Cash, cash equivalents and restricted cash totaled $6,725 at June 30, down from $10,943 at year-end 2021. Unrestricted cash and equivalents were $6,462.
Total assets were $10,666 and stockholders’ equity was $7,695 at June 30. Current liabilities were $2,382; total liabilities were $2,971. Bank overdraft and short-term loans were $178 and long-term loans were $97. Lease liabilities totaled $590, including current and long-term portions. The filing reports no material capital-expenditure commitments for the next 12 months.
Material changes and notable items
- Revenue increased sharply versus 2021, principally because Orgad was consolidated beginning in February 2022. The acquired retail business also introduced cost of goods sold, inventory and marketplace exposure.
- Net loss narrowed year over year, mainly reflecting lower research and development expense. The prior-year comparison included $2,618 of share-based expense related to shares issued to a shareholder. Sales and marketing and general and administrative expenses increased in 2022, partly due to Orgad-related activity.
- Orgad acquisition consideration included $300 cash and 1,395,025 shares issued at closing. Further consideration includes up to $700 in cash installments subject to revenue targets and other conditions, 1,395,024 shares in quarterly installments, and earn-outs based on Orgad operating profit. The purchase-price allocation remained preliminary; acquired intangible assets included a selling platform valued at $378, with a three-year useful life.
- Common shares outstanding increased from 23,982,503 at December 31, 2021 to 25,551,906 at June 30, 2022. The filing also provides for additional acquisition shares, subject to stated conditions.
Outlook, risks and contingencies
- Going concern: The company reported substantial doubt about its ability to continue as a going concern. It expects continuing losses and negative operating cash flows and estimated that June 30 cash would fund operations for less than 12 months. Management plans to commercialize products and seek additional equity, debt or strategic-partner funding, but says financing may not be available on acceptable terms or at all. Failure to obtain funding could require curtailing activities or ceasing operations.
- Revenue outlook: Management said customer integration, piloting and rollout can take time and it did not expect meaningful revenue from its measurement business in upcoming quarters. The filing provides no quantified revenue or earnings guidance.
- Amazon exposure: In July 2022, Amazon deactivated Orgad’s U.S. store following complaints about listed product manufacturers. Orgad resolved the complaints and was seeking reinstatement. The filing warns that prolonged deactivation or loss of marketplace access could materially harm results; a significant majority of Orgad revenue depends on Amazon’s U.S. marketplace.
- Litigation: In the North Empire dispute, the company seeks at least $616 in damages and faces counterclaims alleging approximately $10,959 in damages. Summary-judgment motions were denied; the company’s motion to reargue was awaiting a decision, and it had filed an appeal notice. Management believes the counterclaims are more likely than not to be denied. A separate Israeli claim was dismissed without prejudice, and the plaintiffs were ordered to pay the company NIS 15,000 in costs.
- Other disclosed risks include the need for capital and possible shareholder dilution, uncertain adoption of measurement technology, competition, dependence on key personnel and third parties, fulfillment and inventory risks, potential litigation, COVID-19 effects, and political and security conditions in Israel. The company said the Ukraine invasion had not materially affected its business to date. Disclosure controls were assessed as effective as of June 30, 2022.
Investor verification checklist
- Check subsequent filings for cash runway, financing activity and progress toward addressing the going-concern uncertainty.
- Verify whether Orgad’s Amazon U.S. account was reinstated, and assess marketplace concentration and Orgad’s post-acquisition sales and margins.
- Review actual operating cash burn against the six-month $4,070 use, including Orgad working-capital and inventory needs.
- Track remaining acquisition cash, stock and earn-out obligations, purchase-price-allocation adjustments, and potential share dilution.
- Monitor the North Empire case, including the reargument and appeal status and any change to the company’s assessment of the counterclaims.