UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year
ended December 31, 2021
☐TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition
period from ________ to _________
Commission file number
001-37370
MY
SIZE, INC.
(Exact name of registrant
as specified in charter)
(Address of principal executive offices) (Zip code)
+972-3- 6009030
(Registrant’s
telephone number, including area code)
Securities registered
pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share MYSZ The Nasdaq Capital Market
Securities registered
pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the
registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth
company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller Reporting Company ☒
Emerging Growth Company ☐
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined by Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☐
The aggregate market value of voting and
non-voting common equity held by non-affiliates of the registrant as of June 30, 2021, the last business day of the registrant’s
most recently completed second fiscal quarter, was approximately $22,979,000.
Number of shares of common stock outstanding
as of March 14, 2022 was 25,377,528.
Documents Incorporated by Reference: None.
Table
of Contents
Part I
Item 1. Business 2
Item 1A. Risk Factors 18
Item 1B. Unresolved Staff Comments 38
Item 2. Properties 38
Item 3. Legal Proceedings 38
Item 4. Mine Safety Disclosures 38
Part II
Item 6. [Reserved] 40
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 44
Item 8. Financial Statements and Supplementary Data F-1
Item 9A. Controls and Procedures 45
Item 9B. Other Information 45
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 45
Part III
Item 10. Directors, Executive Officers and Corporate Governance 46
Item 11. Executive Compensation 51
Item 14. Principal Accounting Fees and Services 57
Part IV
Item 15. Exhibits, Financial Statement Schedules 57
Signatures 61
i
PART
I
In
this Annual Report on Form 10-K, unless the context requires otherwise, the terms “we,” “our,” “us,”
or “the Company” refer to MySize, Inc., a Delaware corporation, and its subsidiaries, including MySize Israel 2014 Ltd. taken
as a whole.
References
to “U.S. dollars” and “$” are to currency of the United States of America, and references to “NIS”
are to New Israeli Shekels. Unless otherwise indicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form
10-K for the year ended on December 31, 2021 are translated using the rate of NIS 3.11 to $1.00.
CAUTIONARY
NOTE ON FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Any statements in Annual Report on Form 10-K about our expectations, beliefs, plans, objectives, assumptions
or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always,
made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,”
“estimate,” “intend,” “plan” and “would.” For example, statements concerning financial
condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management,
markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements
are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results,
levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements
expressed or implied by any forward-looking statement.
Any
forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Annual Report on
Form 10-K. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections
contained in the forward-looking statements include but are not limited to:
● risks related to our ability to continue as a going concern;
● risks related to the COVID-19 pandemic;
● the new and unproven nature of the measurement technology markets;
● our ability to achieve customer adoption of our products;
● our ability to enhance our brand and increase market awareness;
● the success of our strategic relationships with third parties;
● information technology system failures or breaches of our network security;
● competition from competitors;
● our reliance on key members of our management team;
● current or future litigation; and
● the impact of the political and security situation in Israel on our business.
The
foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking
statements. You should read this Annual Report on Form 10-K and the documents that we reference herein and have filed as exhibits to
the Annual Report on Form 10-K, completely and with the understanding that our actual future results may be materially different from
what we expect. You should assume that the information appearing in this Annual Report on Form 10-K is accurate as of the date hereof.
Because the risk factors referred to in this Annual Report on Form 10-K, could cause actual results or outcomes to differ materially
from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking
statements.
Further,
any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot
assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this Annual
Report on Form 10-K, and particularly our forward-looking statements, by these cautionary statements.
ITEM
1. BUSINESS
Overview
MySize
is a provider of an innovative artificial intelligence driven measurement solutions that are designed to address shortcomings
in multiple verticals, including the e-commerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Currently,
we are mainly focusing on the e-commerce fashion/apparel industry. Utilizing our sophisticated algorithms within our proprietary
technology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses
across the globe.
Our solutions can be utilized
to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone, the user is
then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent
to a cloud-based server where the dimensions are calculated through our proprietary algorithms, and highly accurate measurements (+ or -
2 centimeters) are then sent back to the user’s mobile device. We believe that the commercial applications for this technology
are significant in many areas.
Our flagship product, MySizeID,
enables shoppers to generate highly accurate measurements of their body to find proper fitting clothes and accessories, through the use
of our application on their mobile phone or through a simple questionnaire if the user decides not to download the application. MySizeID
syncs the user’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application,
and only presents items for purchase that match their measurements to ensure a correct fit. MySizeID is available for license by retailers
and download by consumers on both iOS and Android operating systems.
While we rollout our
products to major retailers and apparel companies, there is a lead time for new customers to ramp up before we can recognize
revenue. This lead time varies between customers, especially when the customer is a tier 1 retailer, where the integration process
may take longer. Generally, first we integrate our product into a customer’s online platform, which is followed by piloting
and implementation, and, assuming we are successful, commercial roll-out, all of which takes time before we expect it to impact our
financial results in a meaningful way. While we have begun generating initial sales revenue, we do not expect to generate meaningful
revenue during 2022 from MySizeID. Because of the numerous risks and uncertainties associated with the success of our market penetration and our
dependence on the extent to which MySizeID is adopted and utilized, we are unable to predict the extent to which we will recognize
revenue. We may be unable to successfully develop or market any of our current or proposed products or technologies, those products
or technologies may not generate any revenues, and any revenues generated may not be sufficient for us to become profitable or
thereafter maintain profitability.
Recent
Developments
Shoshana
Zigdon Agreement
On
May 26, 2021, we, My Size Israel 2014 Ltd, or My Size Israel, and Shoshana Zigdon entered into an Amendment to Purchase Agreement,
or the Amendment, which made certain amendments to a Purchase Agreement between the parties dated February 16, 2014, or the Purchase
Agreement.
Pursuant
to the Amendment, Ms. Zigdon agreed to irrevocably waive (i) the right to repurchase certain assets related to the collection of data
for measurement purposes that My Size Israel acquired from Ms. Zigdon under the Purchase Agreement and upon which our business is substantially
dependent, or the Assets, and (ii) all past, present and future rights in any of the intellectual property rights sold, transferred and
assigned to My Size Israel under the Purchase Agreement and any modifications, amendments or improvements made thereto, including, without
limitation, any compensation, reward or any rights to royalties or to receive any payment or other consideration whatsoever in connection
with such intellectual property rights, or the Waiver. In consideration of the Waiver, we issued 2,500,000 shares of common stock to
Ms. Zigdon.
Under
the Purchase Agreement prior to the Amendment, Ms. Zigdon had a right to repurchase the Assets until June 16, 2021 at the market price
of the Assets as determined by a third party independent valuation. In addition, under the Purchase Agreement prior to the Amendment,
Ms. Zigdon would have had a right to receive 18% of My Size Israel’s operating profit, directly or indirectly connected with the
Assets, together with VAT for a period of seven years from the end of the development period of My Size Israel’s measurement solution.
October
2021 Financing
On
October 26, 2021, holders of warrants exercised an aggregate of 2,625,908 shares of common stock in consideration for $2,889,000. In
addition, on the same day, we entered into securities purchase agreements, or the RD Purchase Agreements with several
institutional investors, or the Purchasers, pursuant to which we agreed to sell and issue in the RD Offering an aggregate of
2,514,800 of our shares of common stock, or the RD Shares, and, in a concurrent private placement, an aggregate of 1,886,100
unregistered warrants to purchase shares of common stock, or the RD Warrants, at an offering price of $1.352 per share and
associated warrant. In addition, we entered into security purchase agreements, or the PIPE Purchase Agreements, and together with
the RD Purchase Agreements, the Purchase Agreements, with the Purchasers pursuant to which we agreed to sell and issue in a PIPE
Offering an aggregate of 3,772,208 unregistered shares of common stock, or the PIPE Shares, and together with the RD Shares, the
Shares, and unregistered warrants to purchase up to an aggregate of 2,829,156 shares of common stock, or the PIPE Warrants and
together with the RD Warrants, the Warrants, at the same purchase price as in the RD Offering. The Offerings closed on October 28,
2021.
The
Warrants are immediately exercisable and expire five years from issuance at an exercise price of $1.26 per share, subject to adjustment
as set forth therein. The Warrants may be exercised on a cashless basis if there is no effective registration statement registering the
shares underlying the warrants.
In
connection with the PIPE Purchase Agreement, we entered into a registration rights agreement, or the Registration Rights Agreement, with
the Purchasers. Pursuant to the Registration Rights Agreement, we will be required to file a resale registration statement, or the Registration
Statement, with the Securities and Exchange Commission, or the SEC, to register for resale the shares issuable in connection with the
PIPE Offering, including shares issuable upon exercise of the Warrants, within 20 days of the signing date of the PIPE Purchase Agreement,
or the Signing Date, and to have such Registration Statement declared effective within 60 days after the Signing Date in the event the
Registration Statement is not reviewed by the SEC, or 90 days of the Signing Date in the event the Registration Statement is reviewed
by the SEC.
Aggregate
gross proceeds to us in respect of the Offerings was approximately $8.5 million, before deducting fees payable to the placement agent
and other estimated offering expenses payable by us.
We
also entered into a letter agreement, or the Engagement Agreement, with H.C. Wainwright & Co., LLC, or Wainwright, pursuant to which
Wainwright agreed to serve as the exclusive placement agent for us in connection with the Offerings. We paid Wainwright a cash placement
fee equal to 7% of the aggregate purchase price for the Shares sold in the Offerings, a management fee of 1% of the aggregate purchase
price for the Shares sold in the Offerings, a non- accountable expense allowance of $35,000, $50,000 for fees and expenses of legal counsel
and clearing expenses of $15,950. Wainwright also received placement agent warrants, or the Placement Agent Warrants, on substantially
the same terms as the Purchasers in the Offering in an amount equal to 7% of the aggregate number of Shares sold in the Offerings, or
440,091 shares, at an exercise price of $1.69 per share and a term expiring on October 26, 2026.
Shareholder
Activism
In
May 2021, we received notice from Custodian Ventures, LLC, or Custodian, of its intention to nominate four candidates to stand for election
to our Board of Directors at our 2021 annual meeting of stockholders. Custodian subsequently made a book and records request and
has made public statements calling for changes to our management.
On
September 22, 2021, Custodian, commenced an action in the Court of Chancery of the State of Delaware captioned, Custodian Ventures,
LLC v. Mysize, Inc., C.A. No. 2021-0817-LWW, or the Delaware Action. In the Delaware Action, Custodian sought an order from the Court
of Chancery pursuant to Section 211 of the General Corporation Law of the State of Delaware compelling us to hold an annual meeting.
As further described below, on November 4, 2021, we entered into a settlement agreement, or the Settlement Agreement, with Custodian,
Activist Investing LLC, David Aboudi, Partick Loney and David Natan, collectively, the Lazar Parties, settling and dismissing the Delaware
Action.
On
October 19, 2021, we commenced an action in the United States District Court for the Southern District of New York captioned My Size,
Inc. v. David Lazar, Custodian Ventures LLC, Activist Investing LLC, Milton C. Ault III, Ault Alpha LP, Ault Alpha GP LLC, Ault Capital
Management LLC, Ault & Company Inc., David Aboudi, Patrick Loney and David Nathan, Civil Action No, 1:21-cv-08585, pursuant to Sections
13(d) and 14(a) of the Securities Exchange Act of 1934, and certain rules promulgated thereunder, or the SDNY Action. The complaint sought,
among other things, declaratory and injunctive relief related to defendants’ efforts to nominate a slate of directors for election
at our next annual meeting. The complaint alleged that the defendants formed an undisclosed “group” for purposes of Section
13 (d) and has misrepresented its true purpose in purchasing My Size, Inc. stock in filings made with the SEC. In addition, the complaint
alleged that the defendants engaged in an unlawful solicitation of investors in violation of the Exchange Act proxy rules in connection
with their efforts to elect a slate of directors to our Board of Directors. On October 20, 2021, the Court signed an order granting
a hearing on an anticipated motion for a preliminary injunction and expedited scheduling and discovery in aid thereof, and scheduled
that hearing for December 2, 2021. As further described below, on November 4, 2021, we entered into the Settlement Agreement with the
Lazar Parties settling and dismissing the claims asserted in the SDNY Action and the Delaware Action against one another. On November
8, 2021, the remaining defendants in the SDNY Action filed and answer and counterclaim asserting a claim against us pursuant to New York
Civil Rights Law Section 70-a, also known as New York’s anti-SLAPP statute.
On
November 4, 2021, we entered into the Settlement Agreement, or the Lazar Settlement Agreement, with the Lazar Parties. Pursuant to the
Lazar Settlement Agreement, we and the Lazar Parties agreed to compromise and settle the Delaware Action and SDNY Action. In addition,
pursuant to the Lazar Settlement Agreement, we reimbursed Custodian for out of pocket expenses and in consideration for the dismissal
and release of claims against the Company an aggregate amount equal to $275,000. With respect to our 2021 annual meeting of stockholders,
Custodian agreed to, among other things, withdraw or rescind (i) its May 12, 2021 notice of stockholder nominations of four director
candidates with respect to our 2021 annual meeting of stockholders, (ii) the notice dated October 28, 2021 submitted by Custodian to
us notifying us of Custodian’s continued intent to bring its nomination of four director candidates before our stockholders at
the 2021 annual meeting, and (iii) any and all related materials and notices submitted to us in connection therewith or related thereto
and to not take any further action in connection with the solicitation of any proxies in connection with us. Custodian also agreed to
cease any and all solicitation and other activities in connection with the 2021 annual meeting. In addition, Custodian agreed to certain
customary standstill provisions for a period of five years beginning on the effective date of the Agreement, or the Standstill Period.
The Lazar Settlement Agreement also provides that during the Standstill Period, the Lazar Parties will vote all shares of our common
stock it beneficially owns in accordance with any proposal or recommendation made by us or our Board of Directors that is submitted
to our stockholders, unless to do so would violate applicable law and except with respect to certain extraordinary transactions. The
Lazar Settlement Agreement also contains non-disparagement and confidentiality provisions, subject to certain exceptions.
On
December 9, 2021, we subsequently entered into a Settlement Agreement, or the Ault Settlement Agreement, with Milton C. Ault III, Ault
Alpha LP, Ault Alpha GP LLC, Ault Capital Management LLC, Ault & Company Inc., collectively the Ault Parties, which we agreed to
withdraw the SDNY Action against the Ault Parties and the Ault Parties agreed to withdraw the counterclaim that they asserted in that
action against the Company. In addition, pursuant to the Settlement Agreement, we paid $70,000 to the Ault Parties in consideration for
the releases and other good and valuable consideration as set forth in the Ault Settlement Agreement.
Nasdaq
Minimum Bid Price Deficiency
On
January 3, 2022, we were notified, or the Notification Letter, by the Nasdaq Listing Qualifications that we are not in compliance with
the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2), or the Rule, for continued listing on The Nasdaq Capital
Market.
The
Notification Letter provides that the Company has 180 calendar days, or until July 5, 2022, to regain compliance with the Rule. To regain
compliance, the bid price of our common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive
business days. In the event we do not regain compliance by July 5, 2022, we may then be eligible for additional 180 days if we meet the
continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital
Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency
during the second compliance period. If we do not qualify for the second compliance period or fail to regain compliance during the second
compliance period, then Nasdaq will notify us of its determination to delist our common stock, at which point we will have an opportunity
to appeal the delisting determination to a Hearings Panel.
Orgad
Share Purchase Agreement
On
February 7, 2022, My Size Israel 2014 Ltd, or My Size Israel, entered into a Share Purchase Agreement, or the Orgad Agreement, with Amar
Guy Shalom and Elad Bretfeld, or the Orgad Sellers, pursuant to which the Orgad Sellers agreed to sell to My Size Israel all of the issued
and outstanding equity of Orgad International Marketing Ltd., a company incorporated under the laws of the State of Israel, or Orgad.
Orgad operates an omnichannel e-commerce platform. The Orgad Sellers are the sole title and beneficial owners of 100% of the shares
of Orgad. In consideration of the shares of Orgad, the Orgad Sellers are entitled to receive (i) up to $1,000,000 in cash, or the Orgad
Cash Consideration, (ii) an aggregate of 2,790,049 shares, or the Orgad Equity Consideration, of the our common stock, and (iii) earn-out
payments of 10% of the operating profit of Orgad for the years 2022 and 2023. The transaction closed on the same day.
The
Orgad Cash Consideration is payable to the Orgad Sellers in three installments, according to the following payment schedule: (i) $300,000
which we paid upon closing, (ii) $350,000 payable on the two-year anniversary of the closing, and (iii) $350,000 payable on the three-year
anniversary of the closing; provided that in the case of the second and third installments certain revenue targets are met and subject
further to certain downward post-closing adjustment.
The
Equity Consideration is payable to the Orgad Sellers according to the following payment schedule: (i) 1,395,025 shares were issued at
closing, and (ii) and 1,395,024 shares will be issued in eight equal quarterly installments until the lapse of two years from closing,
subject to certain downward post-closing adjustment.
The
payment of the second and third cash installments, the equity installments and the earn out are further subject in each case to the Orgad
Sellers being actively engaged with Orgad at the date such payment is due (except if the Orgad Sellers resign due to reasons relating
to material reduction of salary or adverse change in their position with Orgad or its affiliates).
In
connection with the Orgad Agreement, each of the Orgad Sellers entered into employment agreements with Orgad and six-month lock-up agreements
with us.
Our
Solutions
Our
cloud-based software platform provides highly accurate sizing and measurement with broad applications including the online fashion/apparel
industry, logistics and courier services and home DIY. Currently, we are mainly focusing on the e-commerce fashion/apparel industry.
This proprietary technology is driven by several patented algorithms which are able to calculate and record measurements in a variety
of novel ways. Although specific functionality varies by product, we believe that our core solutions address the need for highly
accurate measurements in a variety of consumer friendly, every day uses.
We
have developed three products, MySizeID for the fashion/apparel industry, BoxSize for the logistics and courier services
market and SizeUp for the home DIY market.
The
following are some select key features of our solutions:
Our
Growth Strategy
We
aim to drive revenue primarily through penetration of the U.S. market through a business to business to consumer (B2B2C) model
in the verticals we are targeting. We are pursuing the following growth strategies:
Market
Opportunity
The
mass adoption of mobile technologies such as tablets and smartphones has led to a surge of consumer activity online. Tasks that were
once primarily brick-and-mortar – shopping for clothes, shipping a package, or buying supplies for a DIY home renovation project
– have now shifted to digital, as consumers prefer the convenience of shopping anywhere, anytime.
E-commerce’s
meteoric rise has been a boon to retailers who can offer shoppers a simple customer experience through desktop or mobile devices. According
to Statista, retail e-commerce sales worldwide for 2021 were $5.0 trillion and this figure is forecast to grow by 50 percent
over the next four years, reaching about 7.4 trillion dollars by 2025. While many sectors have found ways to increase revenue through
e-commerce, e-commerce is still plagued by issues that cut into profits and negatively impact the bottom line, such as customer returns,
low consumer conversion, and associated restocking and shipping costs.
Fashion/Apparel
Since
the onset of the COVID-19 pandemic, a large volume of shopping has migrated online. In a report by McKinsey from 2020, the total
global revenue of fashion sales through ecommerce jumped from 16% to 29%. The same year, Shopify recorded that over 150 million
people shopped online for the first time. An online shopping trend has enabled retailers to further re-strategize their shopping models
to gauge the interest of tech-savvy customers.
As
pandemic restrictions slowly begin to ease in the United States and abroad, the shift from online retail back to brick-and-mortar
shopping is revving up.
In addition, according
to analytics from Meticulous Research, AI in the retail market is expected to grow at a compound annual growth rate
of 34.4% from 2020, and is projected to be worth nearly $20 billion by 2027. AI-powered solutions like virtual assistants,
chatbots, virtual try-on, and generated size recommendations can help retailers. The technology extracts accurate customer insight and
provides improved shopping experiences to consumers who visit online stores.
The fashion market is one
of the fastest growing sectors of online retail – what was already estimated to be an approximately $758 billion market in 2021
and is projected to increase to over $1,003 billion by the end of 2025 according to DataFeedWatch. However, conveniences of online shopping,
including simple search filters, the ability to purchase apparel without trying it on, and free returns, have led to returns. One of
the biggest causes for returns are sizing issues, due in part to a generally standardized sizing system that many retailers and clothing
brands have. Despite this universal system, many retailers’ clothes fit differently, which leaves consumers guessing what size
they need or ordering multiple sizes and returning the ones that do not fit, all at the retailer’s expense.
As
brands move online or significantly expand their online presence, we believe that developing innovative ways to connect with shoppers,
both online and offline, has become a top priority.
Shipping/Parcel
According to Pitney Bowes,
parcel revenue in 13 major countries around the world increased by 22% year over year from $351 billion in 2019
(reflecting 103 billion parcels) to $430 billion in 2020 (reflecting 131 billion parcels). In the shipping/parcel
industry, the dimensions of a package are critical. It is not merely the measurement of a package or box – but rather the amount
of space that the package or box will take up on a truck, airplane, or ship that will be transporting the package or box. Far too often,
retailers use unfit packaging for their items, adding additional costs in materials and shipping fees.
DIY
Similar
to issues in the apparel and fashion market, big box, hardware, furniture, and DIY stores are plagued by returns due to incorrect fit
and measurements. In an industry where precise measurement for projects is an absolute necessity, e-commerce has not grown as quickly
as in other industries which we believe is due to lack of consumer confidence in measurements at home and buying the correct item online.
MySizeID
We
have released the MySizeID app for both iOS and Android which assists consumers to take highly accurate measurement of their own
body in order to size clothing in the best way possible without the need to try the clothes on before purchasing. MySizeID
is designed to simplify the process of purchasing clothes online and significantly reduce the rate of returns of poor-fitting
clothing. During 2021, MySizeID delivered over 21 million size recommendations.
The
application is the result of a research and development effort that combines:
MySizeID
allows consumers to create a secure, online profile of their personal measurements, which can then be utilized, with partnered online
retailers, to ensure that no matter the manufacturer or size chart, they will get the right fit. MySizeID operates based on the
use of existing sensors in smart phones which enable, through a specific purpose application, the measurement of the body of any consumer
by moving the smartphone phone along his or her body. The MySizeID application does not rely on user photographs or any additional
hardware; all a user needs to do is scan their body with their smartphone and the application records their measurements. The measurements
can then be saved in our database in the cloud, enabling the user to search for clothes in various retailer websites without worrying
about size. When a search is made, the retailer will connect to our cloud database, and then provide results based on the user’s
measurements and other parameters as he or she may have defined. This data is also saved for use when a customer enters a brick and mortar
store to help serve the customer more efficiently and to provide a better shopping experience.
Figure
1: Screenshot of MySizeID on smartphone and e-commerce website
As
part of the integration process, we offer to the retailer four main components:
During
2021, we introduced a full integration of our e-commerce shoe sizing solution directly to retailers’ websites and added
a three-dimensional, or 3D, “Try-It-On” avatar feature. Furthermore, we launched an application for the Evropeyskiy
Mall in Russia which is designed to streamline in-person shopping from browsing to point of sale.
The
widget has two features:
Manual
mode – which allows the user to obtain size from the following parameters: gender, height and weight only. Thus, we
are able to give a size estimation even without having all the measurements made with the app.
Guest
mode - allows a user that does not wish to sign up to MySizeID as a user, to obtain size recommendations as well.
Another
feature we added is the “in-between sizing” feature. Our system can detect a user that has body dimensions that place
the user in-between the clothes sizes being offered and lets the user know that. That way a user can choose between the two sizes
according to the user’s fit preference (tight/loose/average).
In
addition, we have recently released our Instant-App
feature which allows shoppers to generate their body measurements directly from our widget, without the need to download our mobile
app. Using this technology, the shoppers can create their online profile of their personal measurements and complete a purchase faster
and easier with minimum distractions.
The body profile can be created while shoppers are viewing the page from their mobile phone, or by scanning a QR code on desktop that
will open the same page on the mobile phone.
Screenshot
of Instant-App widget on desktop on yumyumfashion website
Figure
3: Screenshot of Back-Office System
Illustration
of MySizeID “first look” smart mirror in a fashion store
We
are currently offering MySizeID technology
to retailers through either a pay-per-use model or a monthly subscription model. In our pay-per-use business
model, every time the consumer obtains a recommended size, the retailer is charged for the usage.
In
addition, we have developed applications for third party ecommerce platforms so that retailers who use those platforms will find our
application on the platform’s app store and will be able to easily install it in their store. In February 2020, MySizeID became
available for online retailers utilizing the Shopify platform. Fashion and apparel retailers using Shopify can deploy the MySizeID turnkey
solution through the simple integration of the MySizeID widget on their site. During 2020 we also released applications for
Lightspeed and for WooCommerce which are the biggest ecommerce platform in the market allowing more retailers to easily integrate
and use the MySizeID solution.
In
2020, we integrated MySizeID with Wix, PrestaShop and Bitrix, which is the biggest eCommerce platform in Russia.
BoxSize
BoxSize
is a parcel measurement application that can provide real-time logistic data on package volumes and transportation, resulting in
improved operational efficiency and reduced operating expenses. In addition, BoxSize allows customers to easily measure the size
of their parcel with their smartphone, calculate shipping costs and arrange for a convenient pick-up time for the package. BoxSize
is available both on iOS and Android.
In
2020 we released the “One Click” feature on BoxSize that enables the user to measure a package with
just one swipe of the handheld device. Previously, measurements through BoxSize would require three separate swipes.
Figure
4: Screenshot of BoxSize
Our
BoxSize mobile measurement solution is
available on the Honeywell Marketplace. In addition, BoxSize was approved for Honeywell’s Global Vendor Program,
and is available to provide highly accurate mobile measurement solutions for thousands of Honeywell
clients. We also developed a new dashboard for the courier companies to have all the required data about each package in one place. It
includes package dimensions, pictures, scan geo location and more. The dashboard also let the courier use Webhooks, which allows him
to get the information from his own system.
In
2020, we announced our partnership with Datalogic, a company focused on the automatic data capture and process automation markets.
The partnership makes our BoxSize measurement solution available to thousands of Datalogic customers in the Transportation and
Logistics vertical.
Agreement
with Katz Delivery Services, LTD
On
November 20, 2015, we entered into an agreement, or the Katz Agreement, with Katz Deliveries, LTD, or Katz, one of the largest courier
services in Israel. Pursuant to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate MySize
technology with the Katz ERP to monitor the volume of all parcels delivered to it for shipment by its clients. The goal is
for Katz to use our technology to help with planning its distribution routes, thus reducing operational costs by adjusting the distribution
vehicles to the volume of the shipments.
KatzID
was developed for Katz and is to be used to measure packages, boxes and pallets at Katz’ logistics center. The app allows users
to scan the barcode of a package and measure the package dimensions using MySize’s SizeIT technology (described below) and
then subsequently upload the information directly to Katz’s back office.
SizeUp
We
are working on additional consumer applications, including a DIY application. Our SizeUp application is a smart tape measure
for the business to consumer market which allows users to utilize their smartphone as a tape measure. The application provides measurements
with an accuracy of within two centimeters. Through the use of SizeUp users will be able to visualize how an object
or a piece of furniture will fit in an existing room in their home or office. During 2020, we expanded availability of SizeUp
to more than 68 different iOS and Android smartphone models worldwide. It also added Google Vision for image content analysis, object
detection, and title suggestions.
Currently
the SizeUp app for Android and iOS is available for free for the first 30 days, after which a user will be required to register
via e-mail and pay a one-time fee of $1.99 to continue using the application. To date, revenues from downloads have been minimal.
SizeIT
We
have developed SizeIT, a smart measuring tape SDK for both Android and iOS platforms. SizeIT provides users with the ability
to instantly and accurately measure objects with a quick movement of their mobile device. SizeIT, the core technology behind MySizeID,
SizeUp, and BoxSize applications, can be embedded into any company’s existing or white label mobile app in a short
period of time, offering an efficient solution to the escalating costs associated with product sizing issues and returns. SizeIT
enables users to measure objects by moving their mobile device from one side of an object to another side of the object. Our algorithm
utilizes a mobile device’s motion sensors to calculate the travelled distance.
Research
and Development
Our
research and development team are responsible for the research, algorithm, design, development, and testing of all aspects of
our measurement platform technology. We invest in these efforts to continuously improve, innovate, and add new features to our solutions.
We
incurred research and development expenses of approximately $4.25 million in 2021 and $1.5 million in 2020, relating to the development
of its applications and technologies. The increase from the corresponding period primarily resulted from share based payment in the
amount of $2.6 million attributed to the share issuance to Ms. Zigdon under that certain Amendment to Purchase Agreement dated May 26,
2021. We intend to continue to invest in our research and development capabilities to extend our platform and bring our measurement
technology to a broader range of applications.
Sales
and Marketing
In
2019, we launched a commercialization strategy that directs our sales efforts toward both sales to e-commerce players in specific vertical
markets such as fashion/apparel and shipping/delivery as well as to e-commerce third-party platform providers. As of March 18,
2022, we have nine sales offices in the following countries: US, UK, France, Netherlands, Turkey, Russia, Germany, Israel and Italy,
generating customer leads, building out a sales pipeline, and developing customer relationships.
We
believe an effective method to market our suite of products is for users to actively use and explore its capabilities. We encourage free
trials of one or more of our products in order to successfully convert those accounts to paid subscriptions.
Proprietary
Rights
We
rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as
contractual protections, to protect our proprietary technology.
As
of December 31, 2021, we owned eighteen issued patents: six in Europe, four in the US, three in each of Russia and Japan and one each
in Canada and Israel which expire between January 20, 2033 and August 18, 2036, and we have three additional patent applications in process.
As of such date, we do not have any registered trademarks.
We
cannot provide any assurance that our proprietary rights with respect to our products will be viable or have value in the future since
the validity, enforceability and type of protection of proprietary rights in software-related industries are uncertain and still evolving.
Despite
our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use
information that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine
the extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem. In addition,
the laws of some foreign countries do not protect proprietary rights to as great an extent as do the laws of the United States, and effective
copyright, trademark, trade secret and patent protection may not be available in those jurisdictions. Our means of protecting our proprietary
rights may not be adequate to protect us from the infringement or misappropriation of such rights by others.
Further,
in recent years, there has been significant litigation in the United States involving patents and other intellectual property rights,
particularly in the software and Internet-related industries. We can become subject to intellectual property infringement claims as the
number of our competitors grows and our products and services overlap with competitive offerings. These claims, even if not meritorious,
could be expensive to defend and could divert management’s attention from operating our business. If we become liable to third
parties for infringing their intellectual property rights, we could be required to pay a substantial award of damages and to develop
non-infringing technology, obtain a license or cease selling the products that contain the infringing intellectual property. We may be
unable to develop non-infringing technology or obtain a license on commercially reasonable terms, if at all.
Government
Regulation
We
are subject to a number foreign and domestic laws and regulations that involve matters central to our business. These laws and regulations
may involve privacy, data protection, intellectual property, or other subjects. Many of the laws and regulations to which we are subject
are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application
and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which
we operate. Because global laws and regulations have continued to develop and evolve rapidly, it is possible that we, our products, or
our platform may not be, or may not have been, compliant with each such applicable law or regulation.
In
particular, we are subject to a variety of federal, state and international laws and regulations governing the processing of personal
data. Many U.S. states have passed laws requiring notification to data subjects when there is a security breach of personally identifiable
data. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign
governments concerning data protection. In addition, data protection laws in Europe and other jurisdictions outside the United States
can be more restrictive than those within the United States, and the interpretation and application of these laws are still uncertain
and in flux.
For
example, the General Data Protection Regulation, or GDPR, which took effect on May 25, 2018, enhances data protection obligations for
entities that process personal data about individuals, including obligations to cooperate with European data protection authorities,
implement security measures and keep records of personal data processing activities. Noncompliance with the GDPR can trigger fines equal
to the greater of €20 million or 4% of global annual revenue. In addition, the California Consumer Privacy Act of 2018, or CCPA,
effective as of January 1, 2020, gives California residents expanded rights to access and require deletion of their personal information,
opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA
provides for civil penalties for violations, as well as a private right of action for data breaches, that is expected to increase data
breach litigation. Further, failure to comply with the Israeli Privacy Protection Law of 1981, and its regulations, as well as the guidelines
of the Israeli Privacy Protection Authority, may expose us to administrative fines, civil claims (including class actions) and in certain
cases criminal liability. Current pending legislation may result in a change of the current enforcement measures and sanctions. Given
the breadth and depth of changes in data protection obligations, meeting the requirements of GDPR and other applicable laws and regulations
has required significant time and resources, including a review of our technology and systems currently in use against the
requirements of GDPR and other applicable laws and regulations. We have taken various steps to prepare for complying with GDPR and other
applicable laws and regulations however there can be no assurance that these steps are sufficient to assure compliance. Further, additional
EU laws and regulations (and member states’ implementations thereof) further govern the protection of individuals and of electronic
communications. If our efforts to comply with GDPR or other applicable laws and regulations are not successful, we may be subject to
penalties and fines that would adversely impact our business and results of operations, and our ability to use personal data of individuals
could be significantly impaired.
Competition
We
operate in a highly competitive industry that is characterized by constant change and innovation. Changes in the applications and the
programing languages used to develop applications, devices, operating systems, and technology landscape result in evolving customer requirements.
Our competitors include True Fit, Virtusize, EasyMeasure, AR MeasureKit, Smart Measure and 3DLook.
The
principal competitive factors in our market include the following:
● Digital operations expertise;
● Ease of use of products and platform capabilities;
● Total cost of ownership;
● Adherence to industry standards and certifications;
● Strength of sales and marketing efforts;