My Size, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results of operations and financial condition for the periods described. This discussion should be read together with our condensed consolidated interim financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q. This information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on April 14, 2023, or the Annual Report, including the consolidated annual financial statements as of December 31, 2022 and their accompanying notes included therein. This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements in this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. 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: ● our history of losses and needs for additional capital to fund our operations and our inability to obtain additional capital on acceptable terms, or at all; ● risks related to our ability to continue as a going concern; ● the new and unproven nature of the measurement technology markets; ● our ability to achieve customer adoption of our products; ● our ability to realize the benefits of our acquisitions of Orgad and Naiz; ● our dependence on assets we purchased from a related party; ● our ability to enhance our brand and increase market awareness; ● our ability to introduce new products and continually enhance our product offerings; ● 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; ● current or future unfavorable economic and market conditions and adverse developments with respect to financial institutions and associated liquidity risk; and ● the impact of the political and security situation in Israel on our business. 16 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 Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits to the Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q is accurate as of the date hereof. Because the risk factors referred to on page 18 of our Annual Report, 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 Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements. Unless the context otherwise requires, all references to “we,” “us,” “our” or “the Company” in this Quarterly Report on Form 10-Q are to MySize, Inc., a Delaware corporation, and its subsidiaries, including MySize Israel 2014 Ltd. My Size LLC, Orgad International Marketing Ltd., or Orgad, and Naiz Bespoke Technologies, S.L, or Naiz Fit, 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 Quarterly Report on Form 10-Q for three months ended on September 30, 2023 are translated using the rate of NIS 3.824 to $1.00. All information in this Quarterly Report on Form 10-Q relating to shares or price per share reflects the 1-for-25 reverse stock split effected by us on December 8, 2022. Overview We are an omnichannel e-commerce platform and provider of AI-driven SaaS measurement solutions, including MySizeID and our recently acquired subsidiaries, Naiz Fit, which provides SaaS technology solutions that solve size and fit issues and AI solutions for smarter design through data driven decisions for fashion ecommerce companies, and Orgad, an online retailer operating in the global markets. To date, we have generated almost all our revenue as a third-party seller on Amazon. Our advanced software and solutions assists us in supply chain, identifying products that can drive growth and provides a user-friendly experience and best customer service. Our 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 phone or through the MySizeID Widget: a simple questionnaire which uses a database collected over the years. 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. We are positioning ourselves as a consolidator of sizing solutions and a provider of a new digital experience due to recent technological developments for the fashion industry needs. Our other product offerings include First Look Smart Mirror for physical stores and Smart Catalog to empower brand design teams, which are designed to increase end consumer satisfaction, contributing to a sustainable world and reducing operation costs. Recent Developments Warehouse Fire On January 2, 2023, Orgad experienced a fire at its warehouse in Israel. We are not aware of any casualties or injuries associated with the fire. We shifted Orgad’s operation to its headquarters. The value of the inventory that was in the warehouse was approximately $640,000. We believe that this incident did not affect the future sales results of Orgad for the year of 2023. The inventory was not insured, we and the lessor signed an agreement to settle the issue in which we paid to the lessor an amount of $50,000 to cover his loss. 17 January 2023 Financing On January 10, 2023, we entered into a securities purchase agreement, or the RD Purchase Agreement, pursuant to which we agreed to sell and issue in the RD Offering an aggregate of 162,000 of our shares of common stock, or the RD Shares, and pre-funded warrants, or the Pre-funded Warrants, to purchase up to 279,899 shares of common stock and, in a concurrent private placement, unregistered warrants to purchase up to 883,798 shares of common stock, or the RD Warrants, consisting of Series A warrants, or Series A Warrants, to purchase up to 441,899 shares of common stock and Series B warrants, or Series B Warrants, to purchase up to 441,899 shares of common stock, at an offering price of $3.055 per RD Share and associated Series A and Series B Warrants and an offering price of $3.054 per Pre-funded Warrant and associated Series A and Series B Warrants. In addition, we entered into a securities purchase agreement, or the PIPE Purchase Agreement, and together with the RD Purchase Agreement, the Purchase Agreements, pursuant to which we agreed to sell and issue in the PIPE Offering an aggregate of up to 540,098 unregistered Pre-funded Warrants and unregistered warrants to purchase up to an aggregate of 1,080,196 shares of common stock, or the PIPE Warrants and together with the RD Warrants, the Warrants, consisting of Series A Warrants to purchase up to 540,098 shares of common stock and Series B Warrants to purchase up to 540,098 shares of common stock at an offering price of $3.054 per Pre-funded Warrant and associated Series A and Series B Warrants. The Pre-funded Warrants are immediately exercisable at an exercise price of $0.001 per share and will not expire until exercised in full. The Warrants are immediately exercisable upon issuance at an exercise price of $2.805 per share, subject to adjustment as set forth therein. The Series A Warrants have a term of five and one-half years from the date of issuance and the Series B Warrants have a term of 28 months from the date of issuance. 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. Pursuant to the Registration Rights Agreement, we are 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 upon exercise of the unregistered Pre-funded Warrants and the Series A and Series B 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. we will be obligated to pay certain liquidated damages if we fail to maintain the effectiveness of the Registration Statement. The Purchase Agreements and the Registration Rights Agreements also contain representations, warranties, indemnification and other provisions customary for transactions of this nature. In addition, subject to limited exceptions, the Purchase Agreements provide that for a period of one year following the closing of the Offerings, we will not effect or enter into an agreement to effect a “variable rate transaction” as defined in the Purchase Agreements. Aggregate gross proceeds to the Company in respect of the Offerings was approximately $3.0 million, before deducting fees payable to the placement agent and other offering expenses payable by the Company. 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 the Company in connection with the Offerings. We paid Wainwright a cash placement fee equal to 7% of the aggregate gross proceeds raised in the Offerings, a management fee of 1% of the aggregate gross proceeds raised in the Offerings, a non-accountable expense allowance of $85,000 and clearing fees of $15,950. Wainwright also received placement agent warrants, or the Placement Agent Warrants, with substantially the same terms as the Series A Warrants issued in the Offering in an amount equal to 7% of the aggregate number of Shares and Pre-funded Warrants sold in the Offerings, or 68,740 shares, at an exercise price of $3.8188 per share and a term expiring on January 10, 2028. Strategic Operational Changes During May 2023, we initiated a transfer of the support, development and customer success operations to our recently acquired Spanish entity, Naiz Fit, that is intended to improve efficiency and lower costs between the Company’s operations in Israel and Naiz Fit. As part of this, we reduced headcount by 13 persons in Israel, including the termination of its Chief Commercial Officer, Ezequiel Javier Brandwain. This restructuring did not have a material impact on the Company’s results. The Company expects it to lower future operating costs without significant impact on revenues. 18 In addition, during 2023, Orgad made a strategic shift to utilizing Fulfillment by Amazon (FBA) rather than fulfilling directly, reducing exposure to inventory risk and contributing to operating efficiencies. Option Repricing On July 13, 2023, the compensation committee of our board of directors reduced the exercise price of outstanding options of certain officers and directors for the purchase of an aggregate of 23,575 shares of common stock (with exercise prices of $26.00 per share) to $1.09 per share, which was the closing price for our shares of common stock on the Nasdaq Capital Market on July 13, 2023. The exercise price reduction includes options held by, among others, our named executive officers with respect to the following number of shares: (i) Ronen Luzon, the Company’s Chief Executive Officer and director: 8,001 shares, (ii) Or Kles, the Company’s Chief Financial Officer: 5,760 shares, and (iii) Billy Pardo, the Company’s Chief Operating Officer and Chief Product Officer: 6,094 shares. Warrant Repricing On August 24, 2023, we entered into an inducement offer letter agreement, or the Inducement Letter, with a certain holder, or the Holder, of certain of our existing warrants to purchase up to (i) 1,963,994 shares of our common stock issued on January 12, 2023 at an exercise price of $2.805 per share, or the January 2023 Warrants, (ii) 6,864 shares of our common stock issued on January 17, 2020 at an exercise price of $94.00 per share, or the January 2020 Warrants, and (ii) 47,153 shares of our common stock issued on October 28, 2021 at an exercise price of $31.50 per share, having terms ranging from 28 months to five and one-half years, or the October 2021 Warrants and together with the January 2023 Warrants and the January 2020 Warrants, the Existing Warrants. Pursuant to the Inducement Letter, the Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 2,018,012 shares of our common stock at a reduced exercise price of $2.09 per share in consideration of our agreement to issue new common stock purchase warrants, or the New Warrants, as described below, to purchase up to an aggregate of 5,367,912 shares of our common stock, or the New Warrant Shares, at an exercise price of $2.09 per share. We received aggregate gross proceeds of approximately $4.2 million from the exercise of the Existing Warrants by the Holder, before deducting placement agent fees and other offering expenses payable by us. The closing of the transaction contemplated by the Inducement Letter closed on August 28, 2023. We also engaged Wainwright, or the Placement Agent, to act as our exclusive placement agent in connection with the transactions contemplated by the Inducement Letter. We also issued to the Placement Agent warrants, or the Placement Agent Warrants, to purchase up to 141,261 shares of our common stock (representing 7.0% of the Existing Warrants that were exercised), which will have the same terms as the New Warrants except the Placement Agent Warrants will have an exercise price equal to $2.6125 per share (125% of the reduced exercise price of the Existing Warrants). Similar to the New Warrants, the Placement Agent Warrants will be immediately exercisable on or after the Stockholder Approval Date (as defined in the New Warrants). The issuance of the New Warrant Shares is subject to stockholder approval under applicable rules and regulations of The Nasdaq Capital Market, or the Stockholder Approval. The Stockholder Approval has been included as an agenda item at our upcoming annual meeting of stockholders to be held on December 27, 2023, or the 2023 Annual Meeting, and is further described in our preliminary proxy statement with respect to the 2023 Annual Meeting as filed with the U.S. Securities and Exchange Commission on November 14 2023. If the event that the Stockholder Approval is not approved by our stockholders at the 2023 Annual Meeting, we have agreed to call a meeting every 90 days thereafter to seek Stockholder Approval until the earlier of the date on which Stockholder Approval is obtained or the Inducement Warrants are no longer outstanding. Upon any exercise for cash of any New Warrants, we have agreed to issue the Placement Agent warrants representing 7.0% of the shares of common stock underlying such New Warrants. Hamas-Israel War In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on the Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in thousands of deaths and injuries, and Hamas additionally kidnapped many Israeli civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against Hamas and other terrorist organizations in parallel to their continued rocket and terror attacks. We cannot currently predict the intensity or duration of Israel’s war against Hamas, nor can we predict how this war will ultimately affect our business and operations or Israel’s economy in general. Operations in Russia In addition to our Israel operations, we have 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 scaled back and we expect to close down our subsidiary operations in the near future. 19 Results of Operations The table below provides our results of operations for the periods indicated. Three months ended September 30 Nine months ended September 30 2023 2022 2023 2022 (dollars in thousands) (dollars in thousands) Revenues $ 2,156 $ 726 $ 4,166 $ 1,931 Cost of revenues (780 ) (877 ) (2,698 ) (1,607 ) Gross profit (loss) 1,376 (151 ) 1,468 324 Research and development expenses (242 ) (350 ) (811 ) (1,152 ) Sales and marketing (952 ) (672 ) (2,598 ) (2,526 ) General and administrative (1,287 ) (802 ) (3,210 ) (2,378 ) Operating loss (1,105 ) (1,975 ) (5,151 ) (5,732 ) Financial income (expenses), net 22 (51 ) (78 ) (198 ) Equity accounted losses (9 ) - (48 ) - Tax income (40 ) - 200 - Net loss $ (1,132 ) $ (2,026 ) $ (5,077 ) $ (5,930 ) Nine and Three Months Ended September 30, 2023 Compared to Nine and Three Months Ended September 30, 2022 Revenues Our revenues for the nine months ended September 30, 2023 amounted to $4,166,000 compared to $1,931,000 for the nine months ended September 30, 2022. Our revenues for the three months ended September 30, 2023 amounted to $2,156,000 compared to $726,000 for the three months ended September 30, 2022. The increase in the nine months ended September 30, 2023 from the corresponding period is primarily attributable to (i) revenue generated from Orgad that was consolidated for the full nine months in 2023 as opposed to just eight months in the corresponding period in 2022, and (ii) revenue generated from Naiz Fit that was acquired in October 2022. The increase in the three months ended September 30, 2023 from the corresponding period is primarily attributable to an increase in Orgad sales and revenue generated from Naiz Fit. Cost Of Revenues Our cost of revenues expenses for the nine months ended September 30, 2023 amounted to $2,698,000 compared to $1,607,000 for the nine months ended September 30, 2022. The increase in comparison with the corresponding period was mainly due to an inventory mark-down of $643,000 due to the fire that occurred in Orgad’s warehouse during January 2023 and an increase in revenues as described above. Our cost of revenues expenses for the three months ended September 30, 2023 amounted to $780,000 compared to $877,000 for the three months ended September 30, 2022. The increase in comparison with the corresponding period was mainly due an increase in revenues as described above. Research and Development Expenses Our research and development expenses for the nine months ended September 30, 2023 amounted to $811,000 compared to $1,152,000 for the nine months ended September 30, 2022. The decrease from the corresponding period was mainly due to a decrease in salaries expenses due to reduced headcount and a decrease in subcontractor expenses. Our research and development expenses for the three months ended September 30, 2023 amounted to $242,000 compared to $350,000 for the three months ended September 30, 2022. The decrease from the corresponding period was mainly due to a decrease in salaries expenses due to reduced headcount and a decrease in subcontractor expenses. 20 Sales and Marketing Expenses Our sales and marketing expenses for the nine months ended September 30, 2023 amounted to $2,598,000 compared to $2,526,000 for the nine months ended September 30, 2022. The increase primarily resulted from an increase in Amazon fees due to the increase in sales offset by a decrease in salary expenses due to reduced headcount, consultant expenses, travel and marketing expenses. Our sales and marketing expenses for the three months ended September 30, 2023 amounted to $952,000 compared to $672,000 for the three months ended September 30, 2022. The increase primarily resulted from an increase in Amazon fees due to the increase in sales offset by a decrease in salary expenses due to reduced headcount, consultant expenses, travel and marketing expenses. General and Administrative Expenses Our general and administrative expenses for the nine months ended September 30, 2023 amounted to $3,210,000 compared to $2,378,000 for the nine months ended September 30, 2022. The increase compared to the corresponding period was mainly due to an increase in employee salaries mainly due to the Orgad and Naiz acquisitions and an increase in professional expenses. Our general and administrative expenses for the three months ended September 30, 2023 amounted to $1,287,000 compared to $802,000 for the three months ended September 30, 2022. The increase compared to the corresponding period was mainly due to an increase in employee salaries mainly due to the Orgad and Naiz acquisitions and an increase in professional expenses. Operating Loss As a result of the foregoing, for the nine months ended September 30, 2023, our operating loss was $5,151,000, a decrease of $581,000 or 10.1%, compared to our operating loss for the nine months ended September 30, 2022 of $5,732,000. As a result of the foregoing, for the three months ended September 30, 2023, our operating loss was $1,105,000 a decrease of $870,000 or 44%, compared to our operating loss for the three months ended September 30, 2022 of $1,975,000. Financial Income (Expenses), Net Our financial expenses, net for the nine months ended September 30, 2023, amounted to $78,000 compared to financial expense of $198,000 for the nine months ended September 30, 2022. The increase compared to the corresponding period was mainly due to an increase in financial expenses exchange rate differences. Our financial income, net for the three months ended September 30, 2023, amounted to $22,000 as opposed to financial expense of $51,000 for the three months ended September 30, 2022. The increase compared to the corresponding period was mainly due to an increase in financial expenses exchange rate differences. Net Loss As a result of the foregoing, our net loss for the nine months ended September 30, 2023, was $5,077,000, compared to net loss of $5,930,000 for the nine months ended September 30, 2022. As a result of the foregoing, our net loss for the three months ended September 30, 2023 was $1,132,000, compared to net loss of $2,026,000 for the three months ended September 30, 2022. The decrease in net loss was mainly due to the reasons mentioned above. 21 Liquidity and Capital Resources Since our inception, we have funded our operations primarily through public and private offerings of debt and equity in the State of Israel and in the U.S. As of September 30, 2023, we had cash, cash equivalents, and restricted cash of $3,767,000 compared to $2,363,000 of cash, cash equivalents and restricted cash as of December 31, 2022. This increase primarily resulted from the public and private offerings that we completed in January 2023 and the offering that was completed in August 2023 offset by our operating activities, the acquisition of Orgad and Naiz Fit, and resources that were deployed to grow both businesses. Cash used in operating activities amounted to $4,910,000 for the nine months ended September 30, 2023, compared to $5,858,000 for the nine months ended September 30, 2022. The decrease in cash used in operating activity is derived mainly from a decrease in trade payables, account receivables and a decrease in the net loss offset by an increase in inventory and the net loss. There was no net cash used in investing activities compared to cash used in investing activities of $327,000 for the nine months ended September 30, 2022. Net cash provided by financing activities was $6,230,000 for the nine months ended September 30, 2023, as opposed to net cash used in financing activities of $39,000 for the nine months ended September 30, 2022. The cash flow from financing activities for the nine months ended September 30, 2023, resulted from the public and private offerings that occurred in January and August 2023. We 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 September 30, 2023, 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 following: ● finance our current operating expenses; ● pursue growth opportunities; ● hire and retain qualified management and key employees; ● respond to competitive pressures; ● comply with regulatory requirements; and ● maintain compliance with applicable laws. Current 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, 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. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in substantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect on our business, results of operations and financial condition. We 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 support. 22 Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board, or FASB. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions. Our 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 assumptions. 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. Item 3. Quantitative and Qualitative Disclosure About Market Risk. Not required for a smaller reporting company.