What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-04-14 compared with 2022-03-18 · 260 added, 135 removed, 75 unchanged (84% of the section changed)

5 unchanged sentences

those expressed in, or implied by, these forward-looking statements.

are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple

verticals, including the e-commerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries.

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.

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 the 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.

we are mainly focusing on the e-commerce fashion/apparel industry.

In addition, our solutions address the shipping/parcel and DIY uses

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

This lead time varies between customers, especially when the customer is a tier 1 retailer, where the integration process may

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

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.

In February 2022, we completed the acquisition

of Orgad, which operates an omnichannel e-commerce platform (see “Item 1.

Business-Recent Developments-Orgad Share Purchase Agreement”).

We expect our revenues and corresponding expenses to increase as result of the Orgad acquisition however we are unable to predict the

extent to which we will recognize revenue.

The ultimate success of this acquisition will depend, in part, on our ability to realize the

anticipated synergies and growth opportunities from integrating the Orgad business into our existing business.

Since the acquisition

occurred after fiscal year end, our consolidated financial statements for the years ended December 31, 2021 and 2020 do not reflect the

results of operation of Orgad.

is an omnichannel e-commerce platform and provider of AI-driven apparel sizing and digital experience solutions that drive revenue growth

and reduce costs for our business clients for online shopping and physical stores.

flagship innovative tech products, MySizeID, enables shoppers to generate highly accurate measurements of their body to find the accurate

fitting apparel by using our application on their mobile device or through MySizeID Widget:

a simple questionnaire which was uses a database

collected over the years.

synchronizes the user’s measurement data to a sizing chart integrated through a retailer’s (or a white labeled) mobile application,

and only presents items available for purchase that match their measurements to ensure a correct fit.

is positioning itself as a consolidator of sizing solutions and new digital experience due to new developments for the fashion industry

Our other product offerings include First Look Smart Mirror for physical stores and Smart Catalog to empowering brand design teams,

which are designed to increase end consumer satisfaction, contributing to a sustainable world and reduce operation costs.

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.

operates an omnichannel e-commerce platform engaged in online retailing in the global market.

It operates as a third-party seller on

Amazon.com, eBay and others.

Orgad currently manages more than 1,000 stock-keeping units, or SKUs, mainly in fashion, apparel and shoes.

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 111,682 shares, or

the Orgad Equity Consideration, of 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.

Orgad Cash Consideration is payable to the Orgad Sellers in three installments, according to the following payment schedule:

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.

Equity Consideration is payable to the Orgad Sellers according to the following payment schedule:

(i) 55,801 shares were issued at closing,

and (ii) 55,801 shares will be issued in eight equal quarterly installments until the lapse of two years from closing, subject to certain

downward post-closing adjustment.

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).

connection with the Orgad Agreement, each of the Orgad Sellers entered into employment agreements with Orgad and six-month lock-up agreements

October 7, 2022, we entered into a Share Purchase Agreement, or the Naiz Agreement, with Borja Cembrero Saralegui, or Borja, Aritz Torre

Garcia, or Aritz, Whitehole, S.L., or Whitehole, Twinbel, S.L., or Twinbel and EGI Acceleration, S.L., or EGI.

Each of Borja, Aritz,

Whitehole, Twinbel and EGI shall be referred to as the Naiz Sellers herein.

Pursuant to the Naiz Agreement, the Naiz Sellers agreed to

sell to My Size all of the issued and outstanding equity of Naiz Bespoke Technologies, S.L., or Naiz, a limited liability company incorporated

under the laws of Spain.

The acquisition of Naiz was completed on October 11, 2022.

consideration of the purchase of the shares of Naiz, the Naiz Agreement provided that the Naiz Sellers are entitled to receive (i) an

aggregate of 240,000 shares, or the Naiz Equity Consideration, of My Size common stock, or the Shares, representing in the aggregate,

immediately prior to the issuance of such shares at the closing of the transaction, not more than 19.9% of the issued and outstanding

Shares and (ii) up to $2,050,000 in cash, the Naiz Cash Consideration.

Naiz Equity Consideration was issued to the Naiz Sellers at closing of the transaction of which 2,365,800 shares of My Size common stock

were issued to Whitehole constituting 6.6% of our outstanding shares following such issuance.

The Naiz Agreement also provides that,

in the event that the actual value of the Naiz Equity Consideration (based on the average closing price of the Shares on the Nasdaq Capital

Market over the 10 trading days prior to the closing of the transaction, or the Equity Value Averaging Period) is less than $1,650,000,

My Size shall make an additional cash payment, or the Shortfall Value to the Naiz Sellers within 45 days of our receipt of Naiz’s

2025 audited financial statements;

provided that certain revenue targets are met.

Following the Equity Value Averaging Period, it was

determined that the Shortfall Value is $459,240.

Naiz Cash Consideration is payable to the Naiz Sellers in five installments, according to the following payment schedule:

(i) US$500,000

at closing, (ii) up to US$500,000 within 45 days of My Size’s receipt of Naiz’s 2022 audited financial statements, (iii)

up to US$350,000 within 45 days of My Size’s receipt of Naiz’s unaudited financial statements for the six months ended June

30, 2023, (iv) up to $350,000 within 45 days of My Size’s receipt of Naiz’s unaudited financial statements for the six months

ended December 31, 2023, and (v) up to $350,000 within 45 days of My Size’s receipt of Naiz’s 2024 audited financial statements;

provided that in the case of the second, third, fourth and fifth installments certain revenue targets are met.

payment of the second, third, fourth and fifth cash installments are further subject to the continuing employment or involvement of Borja

and Aritz, or the Key Persons, by or with Naiz at the date such payment is due (except if a Key Person is terminated from Naiz due to

a Good Reason (as defined in the Naiz Agreement).

Naiz Agreement contains customary representations, warranties and indemnification provisions.

In addition, the Naiz Sellers are subject

to non-competition and non-solicitation provisions pursuant to which they agree not to engage in competitive activities with respect

to My Size’s business.

connection with the Naiz Agreement, (i) each of the Naiz Sellers entered into six-months lock-up agreements, or the Lock-Up Agreement,

with My Size, (ii) Whitehole, Twinbel and EGI entered into a voting agreement, or the Voting Agreement, with My Size and (iii) each of

the Key Persons entered into employment agreements and services agreements with Naiz.

Lock-Up Agreement provides that each Naiz Seller will not, for the six-months period following the closing of the transaction, (i) offer,

pledge, sell, contract to sell, sell any option, warrant or contract to purchase, purchase any option, warrant or contract to sell, grant

any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible

into or exercisable or exchangeable for Shares in each case, that are currently or hereafter owned of record or beneficially (including

holding as a custodian) by such Naiz Seller, or publicly disclose the intention to make any such offer, sale, pledge, grant, transfer

or disposition;

or (ii) enter into any swap, short sale, hedge or other agreement that transfers, in whole or in part, any of the economic

consequences of ownership of such Naiz Seller’s Shares regardless of whether any such transaction described in clause (i) or this

clause (ii) is to be settled by delivery of Shares or such other securities, in cash or otherwise.

The Lock-Up Agreement also contains

an additional three-months “dribble-out” provision that provides following the expiration of the initial six-months lock-up

period, without My Size’s prior written consent (which My Size shall be permitted to withhold at its sole discretion), each Naiz

Seller shall not sell, dispose of or otherwise transfer on any given day a number of Shares representing more than the average daily

trading volume of the Shares for the rolling 30 day trading period prior to the date on which such Seller executes a trade of the Shares.

Voting Agreement provides that the voting of any Shares held by each of Whitehole, Twinbel and EGI, or the Naiz Acquisition Stockholders,

will be exercised exclusively by a proxy designated by My Size’s board of directors from time to time, or the Proxy, and that each

Naiz Acquisition Stockholder will irrevocably designate and appoint the then-current Proxy as its sole and exclusive attorney-in-fact

and proxy to vote and exercise all voting right with respect to the Shares held by each Naiz Acquisition Stockholder.

The Voting Agreement

also provides that, if the voting power held by the Proxy, taking into account the proxies granted by the Naiz Acquisition Stockholders

and the Shares owned by the Proxy, represents 20% or more of the voting power of My Size’s stockholders that will vote on an item,

or the Voting Power, then the Proxy shall vote such number of Shares in excess of 19.9% of the Voting Power in the same proportion as

the Shares that are voted by My Size’s other stockholders.

The Voting Agreement will terminate on the earliest to occur of (i)

such time that such Naiz Acquisition Stockholder no longer owns the Shares, (ii) the sale of all or substantially all of the assets of

My Size or the consolidation or merger of My Size with or into any other business entity pursuant to which stockholders of My Size prior

to such consolidation or merger hold less than 50% of the voting equity of the surviving or resulting entity, (iii) the liquidation,

dissolution or winding up of the business operations of My Size, and (iv) the filing or consent to filing of any bankruptcy, insolvency

or reorganization case or proceeding involving My Size or otherwise seeking any relief under any laws relating to relief from debts or

protection of debtors.

addition to our Israel operations, we had operations in Russia through our wholly owned subsidiary, My Size LLC.

Specifically, we

undertake some of our sales and marketing using personnel located in Russia.

To date, mainly due to the invasion of Ukraine by

Russia and the ongoing sanctions we stopped most of our efforts in Russia and will probably close the subsidiary in the

of Operations

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Ended December 31, 2022 Compared to Year Ended December 31, 2021

inception through December 31, 2018, we did not generate any revenue from operations and we expect to continue to incur additional

losses to perform further research and development activities.

We started to generate revenues only in 2019.

Our revenues for the year

ended December 31, 2021 amounted to $131,000 compared to $142,000 for year ended December 31, 2020.

The decrease from the corresponding

period primarily resulted from fees from customer projects in the corresponding period compared to none, offset by increase in recurring

revenues generated by traffic, as measured by the MySizeID engine per its license agreements.

inception through December 31, 2018, we did not generate any revenue from

operations and we continue to expect to incur additional losses to perform further research and development activities.

We started to

generate revenues only in 2019.

Our revenues for the year ended December 31, 2022 amounted to $4,459,000 compared to $131,000 for year

ended December 31, 2021.

The increase from the corresponding period primarily attributable to $4,132,000 in revenue generated from Orgad

from February 7, 2022, the date of closing of the Orgad acquisition, or the Acquisition Date and revenue generated from the Naiz Acquisition

from October 11, 2022, the date of closing of the Naiz acquisition.

In addition, the increase from the corresponding period results from an

increase in revenues generated by My Size.

cost of revenues expenses for the year ended December 31, 2022 amounted to $3,825,000, compared to none for the year ended December 31,

The cost of revenues includes cash and equity liabilities expenses in the amount of $194,000.

The increase in comparison with the corresponding

period was due to the cost of goods of the revenues generated from Orgad’s operations.

and Development Expenses

research and development expenses for the year ended December 31, 2021 amounted to $4,248,000 an increase of $2,725,000, or approximately

research and development expenses for the year ended December 31, 2022 amounted to $1,701,000 a decrease of $2,547,000, or approximately

60.0%, compared to $4,248,000 for the year ended December 31, 2021.

The increase from the corresponding period primarily resulted from

share based payment in amount of $2,618,000 attributed to the share issuance to Shoshana Zigdon under the Amendment to

Purchase Agreement dated May 26, 2021 offset by a reduction in share based payment expenses to employees.

The decrease from the corresponding period primarily resulted from

share based payment in amount of $2,618,000 attributed to the share issuance to Shoshana Zigdon under the Amendment to Purchase Agreement

dated May 26, 2021.

and Marketing Expenses

sales and marketing expenses for the year ended December 31, 2021 amounted to $2,336,000, an increase of $140,000, 6.4%, compared

to $2,196,000 for the year ended December 31, 2020.

The increase in comparison with the corresponding period was mainly due to an increase

in payments to consultants.

sales and marketing expenses for the year ended December 31, 2022 amounted

to $3,143,000 an increase of $807,000, or 34.55%, compared to $2,336,000 for the year ended December 31, 2021.

The increase primarily

resulted from an increase in employees expenses mainly due to Orgad and Naiz acquisitions, increase in Amazon fees, increase in cash

and equity liabilities expenses attributed to the Orgad acquisition and an increase in share based payments offset by a decrease in payments

to consultants.

and Administrative Expenses

general and administrative expenses for the year ended December 31, 2021 amounted to $4,124,000, an increase of $1,557,000, 60.6%, compared

to $2,567,000 for the year ended December 31, 2020.

The increase in comparison with the corresponding period was mainly due to an increase

in professional expenses, mainly attributed to shareholder activism including settlement expenses with the Lazar Parties

offset by a decrease in shared-based payments.

During 2021, we had an expense of $98,000 in respect of stock-based payments, compared

to an expense of $276,000 in 2020.

a result of the foregoing, for the year ended December 31, 2021, our operating loss was $10,577,000, an increase of $4,431,000, or 72%,

general and administrative expenses for the year ended December 31, 2022

amounted to $3,900,000, a decrease of $224,000, or 5.43%, compared to $4,124,000 for the year ended December 31, 2021.

The decrease compared

to the corresponding period was mainly due to a decrease in professional expenses, mainly attributed to shareholder activism including

settlement expenses with the Lazar Parties offset by an increase in shared-based payments and an increase in employees expenses mainly

due to the Orgad and Naiz acquisitions.

a result of the foregoing, for the year ended December 31, 2022, our operating loss was $8,110,000, a decrease of $2,467,000 or

23.32%, compared to our operating loss for the year ended December 31, 2021 of $10,577,000.

Income (Expenses), net

financial income, net for the year ended December 31, 2021 amounted to $57,000 as opposed to financial expenses, net of $11,000 for the

year ended December 31, 2020.

In 2021, we had financial income mainly derived from revaluation of investment in marketable securities

whereas in the corresponding period we had financial expenses mainly from exchange rate differences offset by income from revaluation

of investment in marketable securities.

a result of the foregoing, research and development, marketing general and administrative expenses, and initial revenues, our net loss

financial (expense) income, net for the year ended December 31, 2022 amounted to $236,000 compared to financial income, $57,000 for

the year ended December 31, 2021.

In 2022, we had financial expenses exchange rate differences offset by an income from fair value revaluation

of investment in marketable securities whereas in 2021 we had financial income from the fair value revaluation of warrants offset by

expenses from exchange rate differences and expenses from fair value revaluation of investment in marketable securities.

a result of the foregoing, our net loss

for the year ended December 31, 2022 was $8,310,000 compared to net loss of $10,520,000 for the year ended December 31, 2021.

increase in the net loss was mainly due to the reasons mentioned above.

in net loss was mainly due increase in sales and marketing expenses and financial expenses as opposed to financial income in the corresponding

period offset by a decrease in research and development expenses in amount of $2,618,000 attributed to the share issuance to Shoshana

Zigdon under the Amendment to Purchase Agreement dated May 26, 2021.

and Capital Resources

our inception, we have funded our operations primarily through public and private offerings of debt and equity in Israel and in the U.S.

of December 31, 2021, we had cash, cash equivalents and restricted cash of $10,943,000 compared to $1,774,000 cash, cash equivalents,

restricted cash as of December 31, 2020 and 184,000 short-term restricted deposit as of December 31, 2020.

This increase primarily resulted

from public offerings that we completed in January and March 2021, including the overallotment that closed in May 2021, private and public

offerings that we completed in October 2021 and proceeds from warrants that were exercised, as further described below.

October 26, 2021, holders of warrants exercised an aggregate of 2,625,908 shares of common stock in consideration for $2,889,000.

on October 26, 2021, we entered into the RD Purchase Agreements with the Purchasers, pursuant to which the Company agreed to sell and

issue an aggregate of 2,514,800 RD Shares, and, in a concurrent private placement, an aggregate of 1,886,100 RD Warrants, at an offering

price of $1.352 per share and associated warrant.

In addition, we entered into the PIPE Purchase Agreements, with the Purchasers pursuant

to which we agreed to sell and issue in a PIPE Offering an aggregate of 3,772,208 PIPE Shares, and 2,829,156 PIPE Warrants at the same

purchase price as in the RD Offering.

Business-Recent Developments-October 2021 Financing” for more information regarding

this transaction.

addition, on March 25, 2021, we completed an underwritten public offering of our common stock pursuant to which we issued 2,618,532 shares

of our common stock at a public offering price of $1.28 per share for gross proceeds of $3,300,000.

We received net proceeds of approximately

$2,904,000, after deducting the underwriting discounts and commissions and estimated offering expenses.

Subsequently on May 7, 2021,

we issued an additional 392,780 shares of our common stock in connection with the full exercise of the underwriter’s overallotment

option from the March 2021 public offering resulting in additional net proceeds of approximately $463,000, after deducting underwriting

discounts and commissions.

Prior to that, on January 8, 2021, we completed an underwritten public offering of our common stock pursuant

to which we issued 1,569,179 shares of our common stock at a public offering price of $1.28 per share for gross proceeds of $2,008,000.

We received net proceeds of approximately $1,700,000, after deducting the underwriting discounts and commissions and estimated offering

Furthermore, in January and February 2021, a holder of warrants exercised warrants to purchase 725,000 of our ordinary shares

in exchange for $0.8 million.

cash used in operating activities was $7,297,000 for the year ended December 31, 2021 compared to $5,679,000 for the year ended December

The increase in cash used in operating activity is derived mainly from increase in the net loss.

cash provided by investing activities for the year ended December 31, 2021 was $161,000 as opposed to net cash used in investing activities

of December 31, 2022, we had cash, cash equivalents and restricted cash

of $2,363,000 compared to $10,943,000 cash, cash equivalents, restricted cash as of December 31, 2021.

During January 2023, we completed

a registered direct and concurrent private placement offering resulting in gross proceeds of approximately $3 million.

This decrease primarily

resulted from our operating activities, the acquisition of Orgad and Naiz Fit, and resources that were deployed to grow of both businesses.

cash used in operating activities was $7,290,000 for the year ended December

31, 2022 compared to $7,297,000 for the year ended December 31, 2021.

The decrease in cash used in operating activity is derived mainly

from an increase in share based payments and increase in account receivables mainly from the Orgad and Naiz fit acquisitions offset by

a decrease in the net loss.

cash used in investing activities for the year ended December 31, 2022

was $993,000 as opposed to net cash provided by investing activities of $161,000 for the year ended December 31, 2021.

The net cash used

in investing activities for the year ended December 31, 2022 was mainly from the acquisition of Orgad and Naiz as opposed to proceeds

from short-term deposits and restricted deposits during the year ended December 31, 2021.

had a negative cash flow from financing activities of $67,000 for the year ended December 31, 2022 compared to positive cash flow

of $16,292,000 for the year ended December 31, 2021.

The net cash provided by investing activities for the year ended December 31, 2021

was mainly attributed to proceeds from short term restricted deposits as opposed to investment in short-term restricted deposits during

the year ended December 31, 2020.

had positive cash flow from financing activities net of issuance costs of $16,292,000 for the year ended December 31, 2021 compared

to $6,094,000 for the year ended December 31, 2020.

The cash flow from financing activities for the year ended December 31, 2021 was

due to the proceeds from public offerings of our securities and proceeds from the exercise of outstanding warrants.

We do not have

any material commitments for capital expenditures during the next twelve months.

Taking into account the proceeds from warrant

exercises and our financing in October 2021, managements believes that cash on hand will be sufficient to meet its obligations.

Nevertheless, due to the recent acquisition of Orgad (see “Item 1.

Business-Recent

Developments Orgad Share Purchase Agreement”) there is uncertainty regarding the expected cash burn in the foresee future, and as

such there is substantial doubt about our ability to continue as a going concern.

The negative cash flow from financing activities for the year ended December

31, 2022 was mainly due to repayment of loans and interest and payments for leases as opposed to proceeds from issuance of shares and from exercise

of warrants for the year ended December 31, 2021.

expect that we will continue to generate losses and negative cash flows

from operations for the foreseeable future.

Based on the projected cash flows and cash balances as of December 31, 2022, together with

the proceeds from the January 2023 financing, we believe our existing cash will not be sufficient to fund operations for a period of more

than 12 months.

As a result, there is substantial doubt about our ability to continue as a going concern.

We will need to raise additional

capital, which may not be available on reasonable terms or at all.

Additional capital would be used to accomplish the

Additional capital would be used to accomplish the following:

our current operating expenses;

4 unchanged sentences

compliance with applicable laws.

conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available

only on unfavorable terms.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic

conditions, the impact of the COVID-19 pandemic, the Russian invasion of Ukraine, and a number of other factors, many of which

are outside our control, and on our financial performance.

Accordingly, we cannot assure you that we will be able to successfully raise

additional capital at all or on terms that are acceptable to us.

If we cannot raise additional capital when needed, it may have a material

adverse effect on our business, results of operations and financial condition.

conditions in the capital markets are such that traditional sources of

capital may not be available to us when needed or may be available only on unfavorable terms.

Our ability to raise additional capital,

if needed, will depend on conditions in the capital markets, economic conditions, the Russian invasion of Ukraine, the impact of any resurgence

of the COVID-19 pandemic and a number of other factors, many of which are outside our control, and on our financial performance.

we cannot assure you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us.

cannot raise additional capital when needed, it may have a material adverse effect on our business, results of operations and financial

the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities

27 unchanged sentences

Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Accounting Estimates

Sheet Arrangements

have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests,

derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other

obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk

of Critical Accounting Policies and Estimates

management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,

7 unchanged sentences

or conditions.

significant accounting policies were revenue

from contracts with customers which are more fully described in the notes to our financial statements appearing elsewhere in this

Annual Report on Form 10-K.

We believe that these accounting policies discussed are critical to our financial results

and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s

estimates and assumptions.

significant accounting policies were revenue from contracts with customers which are more fully described in the notes to our financial

statements included herein.

We believe these accounting policies discussed below are critical to our financial results and to the understanding

of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and

We consider an accounting estimate to be critical if:

(1) it requires us to make assumptions because information

was not available at the time or it included matters that were highly uncertain at the time we were making our estimate;

and (2) changes

in the estimate could have a material impact on our financial condition or results of operations.

(1) it requires us to make assumptions because information was not

available at the time or it included matters that were highly uncertain at the time we were making our estimate;

and (2) changes in the

estimate could have a material impact on our financial condition or results of operations.

for business combinations

allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed, based upon

their estimated fair values at the acquisition date.

These fair values are typically estimated with assistance from independent valuation

purchase price allocation process requires us to make significant estimates and assumptions, especially at the acquisition date with

respect to intangible assets, contractual support obligations assumed, contingent consideration arrangements, and pre-acquisition contingencies.

we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based in part on historical

experience and information obtained from the management of the acquired companies and are inherently uncertain.

of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited

future expected cash flows from product sales or other customer contracts;

expected costs of fulfillment including marketing, warehousing and product sales;

the acquired company’s brand and competitive position, as well as assumptions about the period of time the acquired brand will

continue to be used in the combined company’s product portfolio;

cost of capital and discount rates;

estimating the useful lives of acquired assets as well as the pattern or manner in which the assets will amortize.

to Note 16, Business Combination, to the consolidated financial statements included in “Item 8.

Financial Statements and Supplementary

Data” of this Annual Report on Form 10-K.

from contracts with customers

Our revenues are comprised of two main categories:

(1) selling products to customers, and (2) licensing cloud-enabled software

subscriptions, associated software maintenance and support.

We recognize revenue in accordance with ASC Topic 606, Revenues from Contracts with Customers (“ASC 606”).

with a customer exists only when:

the parties to the contract have approved it and are committed to perform their respective obligations,

we can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”),

we can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and

it is probable that we will collect the consideration to which we will be entitled in exchange for the goods or services that

will be transferred to the customer.

from sale of products is recognized at the time the related performance obligation is satisfied by transferring a promised good to a

Revenue is recognized net of allowances for refunds and any taxes collected from customers, which are subsequently remitted

to governmental authorities.

Refunds are estimated at contract inception and updated at the end of each reporting period if additional

information becomes available.

Revenue is recognized when control of the product is transferred to the customer.

We maintain a returns policy that allows our customers to return product within a specified period of time.

The estimate of the

provision for returns is based upon historical experience with actual returns.

versus Agent Considerations

We follow the guidance provided in ASC 606 for determining whether we are a principal or an agent in arrangements with customers,

by assessing whether the nature of our promise is a performance obligation to provide the specified goods (principal)

or to arrange for those goods to be provided by the other party (agent).

With regard to products being sold by Orgad through Amazon,

this determination involves judgment.

We determine it is the principle when it has control over the promised product before it

is transferred to the end customers.

and Services Offerings

performance obligations include cloud enabled subscriptions, software maintenance and technical support.

hosted subscription services (SaaS) allow customers to access hosted software during the contractual term without taking possession

of the software.

Cloud hosted subscription services are sold on a fee per subscription that is based on consumption or usage (per

fit recommendation).

We recognize revenue ratably over the contractual service term for hosted services that are priced based on a committed number

of transactions where the delivery and consumption of the benefit of the services occur evenly over time, beginning on the date the services

associated with the committed transactions are first made available to the customer and continuing through the end of the contractual

service term.

Over usage fees and fees based on the actual number of transactions are billed in accordance with contract terms as these

fees are incurred and are included in the transaction price of an arrangement as variable consideration.

Fees based on a number of transactions

or impressions per month, are allocated to the period in which the transactions occur.

Revenue for subscriptions sold as a fee per period

is recognized ratably over the contractual term as the customer simultaneously receives and consumes the benefit of the underlying service.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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Item 7. Management’s Discussion and Analysis