My Size, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA MY SIZE, INC. AND ITS SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 U.S. DOLLARS IN THOUSANDS INDEX Page Report of Independent Registered Public Accounting Firm (PCAOB ID: ID 1057 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Comprehensive Loss F-4 Consolidated Statements of Shareholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 - F-32 F- 1 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors My Size, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of My Size, Inc. and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive loss, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1d to the consolidated financial statements, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1d. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Goodwill impairment assessment As discussed in Notes 2j and 7 to the consolidated financial statements, the Company examines on an annual basis whether there is an impairment of goodwill, or between annual tests in certain circumstances. The Company performed its annual quantitative impairment test of goodwill at the reporting unit level using the income approach. Based on this analysis, the Company determined that the carrying value of its SaaS Solutions reporting unit exceeded its fair value and an impairment charge of $671 thousand was recorded. We identified the evaluation of the goodwill impairment assessment for the SaaS Solutions reporting unit as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the assumptions used to estimate the fair value of the Company’s SaaS Solutions reporting unit. Specifically, the following assumptions had limited observable inputs (i) forecasted reporting unit cost of sales and operating expenses (ii) revenue growth rates, and (iii) discount rate. The fair value determined was sensitive to changes in these key assumptions. Additionally, specialized skills and knowledge were needed to evaluate the discount rate. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design of certain internal controls related to the Company’s goodwill impairment evaluation process. We performed sensitivity analyses to assess the impact of reasonably possible changes to the forecasted cost of sales and operating expenses, revenue growth rates, and discount rate assumptions on the Company’s determination of the reporting unit’s fair value. We evaluated the Company’s revenue growth rates by comparing the growth projections to industry reports. We compared the Company’s historical forecasted revenue, cost of sales, and operating expenses to historical actual results to assess the Company’s ability to accurately forecast cash flows. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate by assessing the Company’s inputs to the discount rate as compared to publicly available data for comparable entities. /s/ Somekh Chaikin Somekh Chaikin Member Firm of KPMG International We have served as the Company’s auditor since 2017. Tel Aviv, Israel April 1, 2024 F- 2 MY SIZE, INC. AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands (except share data) Note 2023 2022 December 31, Note 2023 2022 Assets Current assets Cash and cash equivalents 3 2,187 2,100 Restricted cash 77 263 Sort term deposit 22 - Inventory 2,879 997 Account receivables 615 1,940 Other receivables and prepaid expenses 4 847 758 Total current assets 6,627 6,058 Long term deposits 7 28 Property and equipment, net 5 121 140 Operating right-of-use asset 6 351 583 Intangible assets 7 1,097 1,377 Goodwill 7 758 1,395 Investment in JV 8 24 99 Investment in marketable securities 11 6 47 Total non-current assets 2,364 3,669 Total assets 8,991 9,727 Liabilities and shareholders’ equity Current liabilities Operating lease liability 6 158 159 Bank overdraft and short-term loans 9 158 155 Trade payables 2,154 2,487 Liabilities to Related parties 10 605 698 Other payables 803 680 Total current liabilities 3,878 4,179 Long-term loans 9 249 376 Deferred tax liabilities - 328 Operating lease liability 6 129 308 Total non-current liabilities 378 1,012 CONTINGENCIES AND COMMITMENTS 15 - - Total Liabilities 4,256 5,191 Shareholders’ equity 13 Stock capital - Common stock of $ 0.001 par value - Authorized: 250,000,000 shares as of December 31,2023 and 2022; Issued and outstanding: 3,621,792 and 1,464,117 as of December 31,2023 and 2022, respectively 4 1 Additional paid-in capital 65,383 58,673 Accumulated other comprehensive loss ( 771 ) ( 637 ) Accumulated deficit ( 59,881 ) ( 53,501 ) Total shareholders’ equity 4,735 4,536 Total liabilities and shareholders’ equity 8,991 9,727 The accompanying notes are an integral part of the consolidated financial statements. F- 3 MY SIZE, INC. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS U.S. dollars in thousands (except share data and per share data) Note 2023 2022 Year ended December 31, Note 2023 2022 Revenues 6,996 4,459 Cost of revenues ( 4,265 ) ( 3,825 ) Gross profit 2,731 634 Operating expenses Research and development ( 974 ) ( 1,701 ) Sales and marketing 18 ( 3,856 ) ( 3,143 ) General and administrative 19 ( 3,971 ) ( 3,900 ) Impairment of goodwill 7 ( 671 ) - Total operating expenses ( 9,472 ) ( 8,744 ) Operating loss ( 6,741 ) ( 8,110 ) Financial income (expense), net 20 99 ( 236 ) Equity loss of equity method investees ( 71 ) - Loss before income taxes ( 6,713 ) ( 8,346 ) Income tax benefit 12 333 36 Net loss for the year ( 6,380 ) ( 8,310 ) Other comprehensive income (loss): Foreign currency translation differences ( 134 ) ( 231 ) Total comprehensive loss ( 6,514 ) ( 8,541 ) Basic and diluted loss per share ( 2.50 ) ( 7.47 ) Basic and diluted weighted average number of shares outstanding 2,550,779 1,111,913 The accompanying notes are an integral part of the consolidated financial statements. F- 4 MY SIZE, INC. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY U.S. dollars in thousands (except share data) Common stock Additional paid-in Accumulated other comprehensive Accumulated Total stockholders’ Number Amount capital loss Deficit equity Balance as of December 31, 2021 959,300 1 56,453 ( 406 ) ( 45,191 ) 10,857 Stock-based compensation related to options and restricted shares granted to employees and consultants 176,000 - (* ) 455 - - 455 Issuance of shares in Business Combination (*) (**) 295,802 - (* ) 1,446 - - 1,446 Issuance of shares post Business Combination ( * ) ( ** ) 20,924 - (* ) 319 - - 319 Effect of reverse stock split (Note 10 (b) 12,091 - (* ) - - - - Total comprehensive income (loss) - - - ( 231 ) ( 8,310 ) ( 8,541 ) Balance as of December 31, 2022 1,464,117 1 58,673 ( 637 ) ( 53,501 ) 4,536 Balance 1,464,117 1 58,673 ( 637 ) ( 53,501 ) 4,536 Stock-based compensation related to options and restricted shares granted to employees and consultants ( 8,000 ) - 453 - - 453 Issuance of shares, net of issuance cost of $ 959 (***) 432,000 1 6,257 - - 6,258 Issuance of Exercise of warrants and prefunded warrants 1,733,675 2 - - - 2 Total comprehensive income (loss) - - - ( 134 ) ( 6,380 ) ( 6,514 ) Balance as of December 31, 2023 3,621,792 4 65,383 ( 771 ) ( 59,881 ) 4,735 Balance 3,621,792 4 65,383 ( 771 ) ( 59,881 ) 4,735 (*) Represents an amount of less than $1. (**) See note 16 (***) See note 13 The accompanying notes are an integral part of the consolidated financial statements. F- 5 MY SIZE, INC. AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands 2023 2022 Year ended December 31, 2023 2022 Cash flows from operating activities: Net loss ( 6,380 ) ( 8,310 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 27 38 Change in operating lease right-of-use asset 137 135 Amortization of intangible assets 302 155 foreign exchange differences ( 99 ) ( 23 ) Change in liabilities to related parties ( 93 ) 635 Interest on long term liabilities 57 10 Interest paid ( 23 ) ( 10 ) Revaluation of investment in marketable securities 41 62 Deferred tax benefits ( 328 ) ( 36 ) Change in Investment in JV 71 - Stock based compensation 453 774 Change in inventory ( 1,839 ) ( 219 ) Impairment of goodwill 671 - Change in account receivables 1,200 ( 1,863 ) Changes in operating lease liabilities ( 115 ) ( 142 ) Change in other receivables and prepaid expenses ( 84 ) 184 Change in trade payables ( 306 ) 1,315 Change in other payables 202 5 Net cash used in operating activities ( 6,106 ) ( 7,290 ) Cash flows from investing activities: Acquisition of a subsidiary, net of cash acquired - ( 767 ) investing in other receivable - ( 100 ) Investment in equity accounted investee - ( 99 ) Purchase of property and equipment ( 7 ) ( 27 ) Net cash (used in) provided by investing activities ( 7 ) ( 993 ) Cash flows from financing activities: Proceeds from issuance of shares, net of issuance costs 6,258 - Repayment of loans ( 124 ) ( 67 ) Net cash (used in) provided by financing activities 6,134 ( 67 ) Effect of exchange rate fluctuations on cash and cash equivalents ( 120 ) ( 230 ) Change in cash and cash equivalents and restricted cash ( 99 ) ( 8,580 ) Cash and cash equivalents and restricted cash at the beginning of the year 2,363 10,943 Cash and cash equivalents and restricted cash at the end of the year 2,264 2,363 F- 6 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 1 - GENERAL a. My Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas, from the apparel e-commerce market, to the courier services market and to the Do It Yourself (“DIY”) smartphone and tablet apps market. The technology is driven by proprietary algorithms, which are able to calculate and record measurements in a variety of novel ways. Following the acquisition of Naiz Fit Bespoke Technologies, S.L (“Naiz”) in October 2022 (see note 16), the Company expanded its offering outreach and customer base. Following the acquisition of Orgad International Marketing Ltd. (“Orgad”) in February 2022 (see note 16), the Company also operates an omnichannel e-commerce platform. The Company has six subsidiaries, My Size Israel 2014 Ltd (“My Size Israel”), Topspin Medical (Israel) Ltd., Orgad and Rotrade Ltd all of which are incorporated in Israel, My Size LLC which was incorporated in the Russian Federation and Naiz Bespoke Technologies, S.L., a limited liability company incorporated under the laws of Spain (see note 16). References to the Company include the subsidiaries unless the context indicates otherwise. My Size, Inc., was incorporated and commenced operations in September 1999, as Topspin Medical Inc. (“Topspin”), a private company registered in the State of Delaware. In December 2013, the Company changed its name to Knowledgetree Ventures Inc. Subsequently, in February 2014, the Company changed its name to My Size, Inc. Topspin was engaged, through its Israeli subsidiary, in research and development in the field of cardiology and urology. From September 1, 2005 to March 27, 2024, the Company’s common stock traded on the Tel Aviv Stock Exchange (“TASE”). b. 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. The Company cannot currently predict the intensity or duration of Israel’s war against Hamas, nor can predict how this war will ultimately affect the Company’s business and operations or Israel’s economy in general. The war with Hamas has had an immaterial effect on its operations and financial results so far. This is attributable to its global footprint and the offices in Spain which has become a hub for the Company’s sizing solutions business. The majority of Orgad’s inventory utilizes fulfillment by Amazon rather than fulfilling directly. Inventory is now maintained and orders are shipped from regional Amazon warehouses, thereby reducing exposure to inventory risk and contributing to operating efficiencies. On February 24, 2022, Russia invaded Ukraine. The outbreak of hostilities between the two countries could result in more widespread conflict and could have a severe adverse effect on the region. Following Russia’s actions, various countries, issued broad-ranging economic sanctions against Russia. Such sanctions included, among other things, a prohibition on doing business with certain Russian companies, officials and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The Company shut down its operation in Russia and expect to close down the subsidiary in the near future therefore the impact from current situation is very limited. F- 7 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 1 - GENERAL (Cont.) c. On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. The Company’s shares of common stock are listed both on the Nasdaq Capital Market and TASE. d. Since inception, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit of $ 59,881 . The Company has financed its operations mainly through fundraising from various investors. The Company’s management expects that the Company 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, 2023, management is of the opinion that its existing cash will be sufficient to fund operations for a period less than 12 months. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include the continued commercialization of the Company’s products and acquisition of technology, intellectual property or businesses and securing sufficient financing through the sale of additional equity securities, debt or capital inflows from strategic partnerships. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. If the Company is unsuccessful in commercializing its products and securing sufficient financing, it may need to cease operations. The financial statements include no adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern. e. Effective 1, July 2023 the Company merged its two SAAS segments into one segment, hence reducing the reportable segments from three to the following two segments: (i) fashion and equipment e-commerce platform, and (ii) SaaS based innovative artificial intelligence driven measurement solutions. This realignment reflects the way resources are allocated and performance is assessed by the Chief Operating Decision Maker. The fashion and equipment e-commerce platform which represents Orgad’s activity that was acquired by the Company in 2022, mainly operates on Amazon. The SaaS based innovative artificial intelligence driven measurement solutions, or SaaS Solutions operating segment consists of My Size Inc, My Size Israel, My Size LLC and Naiz. In the Company’s financial reporting for December 31, 2023, comparative information for 2022 in the operating segment note was restated to reflect the changes in reportable segments. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements are prepared according to United States generally accepted accounting principles (“U.S. GAAP”), applied on a consistent basis, as follows: a. Use of estimates : The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Information about assumptions made by the Company with respect to the future and other reasons for uncertainty with respect to estimates that have a significant risk of resulting in a material adjustment to carrying amounts of assets and liabilities in the next financial year are included in the following units reporting: Estimated impairment of non-financial assets The Company examines on an annual basis whether there is an impairment of goodwill, intangibles and property, plant and equipment that are allocated to reporting units, in accordance with the accounting policy presented in Note 1 (h) below. The fair value calculations of reporting units require the use of estimates. For information on key assumptions used in calculation of the fair value, see NOTE 7 – Goodwill and other Intangible assets. b. Functional currency : The currency of the primary economic environment in which the operations of the Company is conducted is the United States Dollar and thus it is the Company’s functional currency. The reporting currency according to which these financial statements are prepared is the U.S. dollar. The currency of the primary economic environment in which the operation of the Subsidiary, My Size Israel and Orgad International Marketing Ltd. functional currency is the New Israeli Shekel (“NIS”). The currency of the primary economic environment in which the operation of the Subsidiary, My Size LLC, functional currency is Russian Ruble. The currency of the primary economic environment in which the operation of the Subsidiary, Naiz fit, functional currency is Euro. F- 8 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) c. Principles of consolidation : The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. d. Cash equivalents : Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at the date acquired. e. Restricted cash Restricted cash are deposits for rent, credit card and for hedging activities. f. Inventories : Inventories are measured at the lower of cost or net realizable value. The cost of inventories comprises of the costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. The costs of purchase of inventories comprise the purchase price and other costs directly attributable to the acquisition of finished goods. Net realizable value is the estimated selling price in the ordinary course of business. At the point of the loss recognition, a new, lower-cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established cost basis. In 2023, the company recorded an inventory mark-down of $ 39 . g. Property and equipment : Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets, at the following annual rates: SCHEDULE OF PROPERTY AND EQUIPMENT ANNUAL RATE % Computers and peripheral equipment 33 Office furniture and equipment 7 - 20 Leasehold improvements Over the term of the lease or the useful life of the improvements, whichever is shorter h. Impairment of long-lived assets : The Company’s property and equipment are reviewed for impairment in accordance with ASC 360, “Property Plant and Equipment”, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the periods ended December 31, 2023 and 2022, no impairment losses have been recorded. i. Business combinations : The Company applies the provisions of ASC 805, “Business Combination” and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, the Company estimated the future expected cash flows from acquired platform, customer relationships, Technology and trademark from a market participant perspective, useful lives and discount rates. In addition, management makes significant estimates and assumptions, which are uncertain, but believed to be reasonable. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred. F- 9 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) j. Goodwill : Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired in a business combination. Under ASC 350, “Intangible - Goodwill and Other”, goodwill is not amortized, but rather is subject to an annual impairment test. ASC 350 requires goodwill to be tested for impairment at the reporting unit level at least annually, the fourth quarter, or between annual tests in certain circumstances, and written down when impaired. Goodwill is tested for impairment by comparing the fair value of the reporting unit with it carrying value. ASC 350 allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. If the qualitative assessment does not result in a more likely than not indication of impairment, no further impairment testing is required. If it does result in a more likely than not indication of impairment, the impairment test is performed. Goodwill is not deductible for income tax purposes. Goodwill from the Orgad acquisition was allocated to the fashion and equipment e-commerce platform segment and goodwill from Naiz acquisition was allocated to the Naiz segment based innovative artificial intelligence driven measurement solutions. Alternatively, ASC 350 permits an entity to bypass the qualitative assessment for any reporting unit and proceed directly to performing the first step of the goodwill impairment test. Impairment charge of $ 671 as the carrying value of SaaS Solution reporting segment exceeded its expected fair value, as determined using a discounted cash flow model which is primarily based on management’s future revenue and cost estimates. This impairment charge was recorded within Impairment of goodwill, within the Consolidated Statement of Operations, and within the Entertainment segment for the year ended December 31, 2023. k. Intangible assets : Intangible assets consist of identifiable intangible assets that the Company has acquired from previous business combinations. Intangible assets are recorded at costs, net of accumulated amortization. The Company amortizes its intangible assets reflecting the pattern in which the economic benefits of the intangible assets are consumed. When a pattern cannot be reliably determined, the Company uses a straight-line amortization method. Amortization is calculated by the straight-line method over the estimated useful lives of the following assets. The estimated useful lives of the company’s intangible assets are as follows: SCHEDULE OF INTANGIBLE ASSETS ESTIMATED USEFUL LIVES years Customer Relationships 7 Technology 5 Trademark 5 Selling Platform 3 Each period the Company evaluates the estimated remaining useful lives of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization l. Severance pay : The Subsidiary’s liability for severance pay is covered by Section 14 of the Israeli Severance Pay Law (“Section 14”). Under Section 14, employees in Israel are entitled to have monthly deposits, at a rate of 8.33 % of their monthly salary, made on their behalf to their insurance funds. Payments in accordance with Section 14 exempt the Subsidiary from any additional obligation for these employees. As a result, the Subsidiary does not recognize any liability for severance pay due to these employees and the deposits under Section 14 are not recorded as an asset in the Subsidiary’s balance sheet. These contributions for compensation represent defined contribution plans and expenses are recorded based on actual deposits. F- 10 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) m. Research and development costs : Research and development costs are charged to the statement of operations, as incurred. Most of the research and development expenses are for wages, related expenses and subcontractors. Software development costs also include costs to develop software to be used solely to meet internal needs and cloud-based applications used to deliver our services. The Company capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the function intended. Costs capitalized for developing such software applications were not material for the periods presented and therefore were not capitalized. n. Income taxes : The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Companies’ tax returns. Deferred taxes are determined based on the difference between the financial statement carrying amount and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized. The Company establishes a valuation allowance, if necessary, to reduce deferred tax assets to the amount more likely than not to be realized. As of December 31, 2023, and 2022, a valuation allowance was established by the Company. to reduce the deferred tax assets to the amount supported by future reversals of existing taxable temporary differences. The Company implements a two-step approach to recognize and measure the benefit of its tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on examination, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is greater than 50 percent (cumulative basis) likely to be realized upon settlement. The Company believes that its tax positions are all highly certain of being upheld upon examination. As such, as of December 31, 2023 and 2022 the Company has not recorded any unrecognized tax benefits. o. Accounting for stock-based compensation : The Company accounts for its employees’ stock-based compensation as an expense in the financial statements based on ASC 718. All awards are equity classified and therefore such costs are measured at the grant date fair value of the award and graded vesting attribution approach to recognize compensation cost over the vesting period. The Company estimates stock option grant date fair value using the Binomial and Black Scholes option pricing-model. The Company recorded stock options issued to non-employees at the grant date fair value, and recognizes expenses over the related service period by using the straight-line attribution approach in accordance with ASU 2018-07. All awards are equity classified. The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative of expected future trends. The risk-free interest rate for grants with an exercise price denominated in USD for employees and several consultants is based on the yield from US treasury zero-coupon bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends. F- 11 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) p. Fair value of financial instruments : ASC 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework for measuring fair value. The ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. In addition, the fair value of assets and liabilities should include consideration of non-performance risk, which for the liabilities described below includes the Company’s own credit risk. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1 - Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publicly-traded company on the OTCQB. Due to sales restrictions on the sale of the iMine shares, the fair value of the shares was measured on the basis of the quoted market price for an otherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the sales restrictions and is therefore, ranked as Level 2 asset. q. Basic and diluted net loss per share : Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted net income per share is computed based on the weighted average number of shares of common stock outstanding during each year plus dilutive potential equivalent common stock considered outstanding during the year, in accordance with ASC 260, “Earnings per Share”. For the years ended December 31, 2023 and 2022, all outstanding options and warrants have been excluded from the calculation of the diluted net loss per share since their effect was anti-dilutive. r. Concentrations of credit risk : Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash and cash equivalents. Cash and cash equivalents are invested in banks in Israel, Spain and United States. Such deposits in Israel may be in excess of insured limits and are not insured in other jurisdictions. Management believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments. The Company and its subsidiaries have no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements. F- 12 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) s. Revenue Recognition : The Company’s revenues are comprised of two main categories: (1) selling products to customers, and (2) licensing cloud-enabled software subscriptions, associated software maintenance and support. The Company recognizes revenue in accordance with ASC Topic 606, Revenues from Contracts with Customers (“ASC 606”). A contract with a customer exists only when: the parties to the contract have approved it and are committed to perform their respective obligations, the Company can identify each party’s rights regarding the distinct goods or services to be transferred (“performance obligations”), the Company can determine the transaction price for the goods or services to be transferred, the contract has commercial substance and it is probable that the Company will collect the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer. Revenues from licensing cloud-enabled software subscriptions include subscription fees from customers accessing the Company’s enterprise cloud services. Cloud Services allow customers to use the Company’s software without taking possession of the software. Revenue is generally recognized ratably over the contract term. Substantially all of the Company’s subscription service arrangements are non-cancelable and do not contain refund-type provisions. The Company also sells products directly to customers mainly through its online Amazon stores. Under the Company ’ s standard contract terms, customers have a right of return within 30 until 90 days. For contracts with rights of return, the Company recognizes revenue based on the amount of the consideration which the Company expects to receive for products which are not expected to be returned and recognizes a refund liability for the amount not expected to be received. At the end of each reporting period, the Company updates its estimates of expected product returns and adjusts the refund liabilities with a corresponding adjustment in revenues. The Company recorded an allowance for returns in the amounts of $ 260 thousand and $ 161 thousand as of December 31, 2023, and 2022, respectively. The allowance for returns is recorded as decrease in revenues against other payables. The Company maintains a returns policy that allows its 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. Principal versus Agent Considerations The Company follows the guidance provided in ASC 606 for determining whether it is a principal or an agent in arrangements with customers, by assessing whether the nature of the Company’s 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. The Company determined it is a principal, as it has determined that it controls the promised product before it is transferred to the end customers, it is primarily responsible for fulfilling the promise to provide the goods, and it has discretion in establishing prices. Therefore, the revenues are recorded on a gross basis. F- 13 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Cont.) t. Contingencies and Commitments Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. u. Derivative instruments The Company accounts for its derivative instruments as either assets or liabilities and measures them at fair value through profit or loss. v. Leases The Company leases include an office space lease agreement for 36 months, with an option to extend for an additional 36 months and 36 months cancelable operating lease agreements on behalf of personnel vehicles. The lease term includes a non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The company generally use its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Lease expense for lease payments is recognized on a straight-line basis over the lease term. For the office rent lease, the Company has elected to account for the lease and non-lease maintenance components as a single lease component. Therefore, the lease payments used to measure the lease liability include all of the fixed consideration in the contract, including in-substance fixed payments, owed over the lease term. w. Impact of recently issued accounting standards 1. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, which requires companies to measure credit losses of financial instruments, including customer accounts receivable, utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Subsequent to the issuance of ASU 2016-13, the FASB issued several additional Accounting Standard Updates to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. As an Emerging Growth Company, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022. 2. In June 2022, the FASB issued ASC 2022-03 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The ASU clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value. The ASU also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The ASU also introduces new disclosure requirements for equity securities subject to contractual sale restrictions. As an Emerging Growth Company, the ASU is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the effect that ASU 2022-03 will have on its consolidated financial statements and related disclosures. 3. In December, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The ASU will be effective for fiscal years beginning after December 15, 2024, and allows adoption on a prospective basis, with a retrospective option. The Company is in the process of assessing the impacts and method of adoption. This ASU will impact the Company’s income tax disclosures, but not Consolidated Financial Statements. 4. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this ASU to determine its impact on the Company’s segment disclosures. 5. In March 2024, the SEC adopted new rules relating to the disclosure of a range of climate-hange-related physical and transition risks, data, and opportunities. The adopted rule contains several new disclosure obligations, including, (i) disclosure on how the board of directors and management oversee climate-related risks and certain climate-related governance items, (ii) disclosure of information related to a registrant’s climate-related targets, goals, and/or transition plans, and (iii) disclosure on whether and how climate-related events and transition activities impact line items above a threshold amount on a registrant’s consolidate financial statements, including the impact of the financial estimates and the assumptions used. This new rule will be effective in the Company’s annual disclosures starting from the year ending December 31, 2027. The Company is in the process of assessing the impact on its consolidated financial statements and disclosures. F- 14 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 3 - CASH AND CASH EQUIVALENTS The Company’s cash and cash equivalents balance at December 31, 2023 and 2022 is denominated in the following currencies: SCHEDULE OF CASH AND CASH EQUIVALENT BALANCE 2023 2022 December 31, 2023 2022 US Dollars 1,746 1,651 New Israeli Shekels 375 259 Other 66 190 Cash and cash equivalents 2,187 2,100 NOTE 4 - OTHER RECEIVABLES AND PREPAID EXPENSES SCHEDULE OF OTHER RECEIVABLES AND PREPAID EXPENSES 2023 2022 December 31, 2023 2022 Prepaid expenses and other current assets 65 322 Government authorities 511 283 Loan (*) 75 - Other 196 153 Total 847 758 (*) the loan was given by the Company to a third party in March 2023 and bears annual interest of 9 % per annum. The maturity date of the loan is December 31,2024. NOTE 5 - PROPERTY AND EQUIPMENT, NET SCHEDULE OF PROPERTY AND EQUIPMENT, NET Computers and peripheral equipment Office furniture and equipment Leasehold improvements Total Cost Balance as at January 1, 2022 212 60 62 334 Additions 16 11 - 27 Business combination 40 15 - 55 Translation adjustments ( 32 ) ( 8 ) ( 8 ) ( 4 8 ) Balance as at December 31, 2022 236 78 54 368 Balance as at January 1, 2023 236 78 54 368 Additions 5 2 - 7 Translation adjustments ( 3 ) ( 1 ) - ( 4 ) Balance as at December 31, 2023 238 79 54 371 Accumulated Depreciation Balance as at January 1, 2022 179 20 23 222 Additions 20 9 9 38 Translation adjustments ( 27 ) ( 3 ) ( 2 ) ( 32 ) Balance as at December 31, 2022 172 26 30 228 Balance as at January 1, 2023 172 26 30 228 Additions 15 4 8 27 Translation adjustments ( 1 ) ( 3 ) ( 1 ) ( 5 ) Balance as at December 31, 2023 186 27 37 250 Carrying amounts As at December 31, 2022 64 52 24 140 As at December 31, 2023 52 52 17 121 F- 15 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 6 - LEASES In August 2019, The Company entered into an office space lease agreement. The lease term is for 36 months beginning on August 20, 2019 and ending on August 20, 2022 , with an option to extend for an additional 36 months . The Company extended the lease period until August 20, 2025. On January 8, 2024 the Company provided a notice of six month termination to the lessor that the lease will end on July 8,2024. Monthly rent payments including utilities amounting to approximately USD 14 (NIS 49,500 ) per month. In addition, The Company entered into a three-year cancelable operating lease agreement for cars. These operating leases are included in “Right of use asset” on the Company’s December 31, 2023 consolidated balance sheets, and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligations to make lease payments are included in the current liabilities as “Operating lease liability” and in the non-current liabilities as “Operating lease liability - long term” on the Company’s December 31, 2023 consolidated balance sheets. As of December 31, 2023, right-of-use of asset was $ 351 . operating lease liabilities were $ 158 and non current Operating lease liabilities were $ 129 . Right-of-use asset includes the capitalization of improvements (net of amortization) amounting to $ 63 . Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. The interest rate used to discount future lease payment was 11.95 %. Maturities of lease liabilities as of December 31, 2023 were as follows: SCHEDULE OF MATURITIES OF LEASE LIABILITIES Year Ending: 2024 $ 206 2025 $ 141 Thereafter $ - Less imputed interest: $ ( 60 ) Total lease liabilities $ 287 F- 16 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 7 – Goodwill and other Intangible assets A. Identified intangible assets Schedule of Intangible assets SCHEDULE OF GOODWILL AND INTANGIBLE ASSETS Selling Platform Technology Customer Relationships Other Total Thousands USD Thousands USD Thousands USD Thousands USD Thousands USD Cost As of January 1, 2022 - - - - - Acquisitions through business combinations 378 286 726 77 1,467 Effect of changes in exchange rates ( 32 ) 25 65 7 65 As of December 31, 2022 346 311 791 84 1,532 Goodwill and intangible assets, Cost, beginning balance 346 311 791 84 1,532 Effect of changes in exchange rates ( 13 ) 10 25 2 24 As of December 31, 2023 333 321 - 816 86 1,556 Goodwill and intangible assets, Cost, ending balance 333 321 - 816 86 1,556 Amortization As of January 1, 2022 - - - - - Amortization for the year ( 109 ) ( 15 ) ( 27 ) ( 4 ) ( 155 ) Effect of changes in exchange rates - - - - - As of December 31, 2022 ( 109 ) ( 15 ) ( 27 ) ( 4 ) ( 155 ) Goodwill and intangible assets, Amortization, beginning balance ( 109 ) ( 15 ) ( 27 ) ( 4 ) ( 155 ) Amortization for the year ( 111 ) ( 62 ) ( 112 ) ( 17 ) ( 302 ) Effect of changes in exchange rates 7 ( 3 ) ( 6 ) - ( 2 ) As of December 31, 2023 ( 213 ) ( 80 ) ( 145 ) ( 21 ) ( 459 ) Goodwill and intangible assets, Amortization, ending balance ( 213 ) ( 80 ) ( 145 ) ( 21 ) ( 459 ) Carrying amount As of December 31, 2022 237 296 764 80 1,377 As of December 31, 2023 120 241 671 65 1,097 Goodwill and intangible assets, Carrying amount, ending balance 120 241 671 65 1,097 Amortization Amortization expenses recorded for identified intangible assets in the Consolidated Statements of Operations for each period and were as follows: SCHEDULE OF AMORTIZATION EXPENSES INTANGIBLE ASSETS Line Item December 31, 2023 December 31, 2022 Selling platform Costs of revenues 111 109 Trademark Sales and marketing 17 4 Technology Costs of revenues 62 15 Customer relationships Sales and marketing 112 27 Total amortization expenses 302 155 Future amortization expenses are expected to be as follows: SCHEDULE OF FUTURE AMORTIZATION EXPENSES 2024 2025 2026 2027 2028 Thereafter Total Future amortization expenses 288 186 176 176 119 152 1,097 b. Goodwill The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022 were as follows: SCHEDULE OF GOODWILL Fashion and equipment e-commerce platform SaaS Solutions Total Balance as of December 31, 2021 - - - Changes during the period: Goodwill acquired 152 1,152 1,304 Goodwill impairment - - - Translation differences ( 14 ) 105 91 Balance as of December 31, 2022 138 1,257 1,395 Translation differences ( 4 ) 38 34 Goodwill impairment - ( 671 ) ( 671 ) Balance as of December 31, 2023 134 624 758 The Company operates its business through two reporting segments: (i) fashion and equipment e-commerce platform, and (ii) SaaS based innovative artificial intelligence driven measurement solutions See note 17 for additional segment information. The Company determines the fair value of its reporting units using the income approach. According to the income, the Company uses discounted cash flows to estimate the fair value. Cash flow projections are based on the Company’s estimates of revenue growth rates and operating margins, taking into consideration the industry’s and market’s conditions. The discount rate used is based on the weighted average cost of capital (“WACC”), adjusted for the relevant risk associated with business-specific characteristics. The Company performed a quantitative assessment as of December 31, 2023 for the reporting units’ fair value. The estimated fair value of the Fashion and equipment e-commerce platform reporting unit exceeded its estimated carrying amount by 16.8 % Impairment charge of $ 671 as the carrying value of SaaS Solution reporting segment exceeded its expected fair value, as determined using a discounted cash flow model which is primarily based on management’s future revenue and cost estimates. This impairment charge was recorded within Impairment of goodwill, within the Consolidated Statement of Operations, and within the SaaS based innovative artificial intelligence driven measurement solutions segment for the year ended December 31, 2023. This, based the following assumptions: SCHEDULE OF ESTIMATED FAIR VALUE Fashion and equipment e-commerce platform SaaS Solutions Discount rate 21.5 % 25 % Terminal growth rate 3 % 3 % Revenue growth rate 12.4 %- 50 % 15 %- 70 % If business conditions or expectations were to change materially, it may be necessary to record impairment charges to the Company’s reporting units in the future. F- 17 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 8 - Investment in JV In August 2022, the Company established a joint venture (“JV”) in Brazil with Santista Têxtil. The Company holds 51 % and Santista Têxtil holds 49 % of the JV. The purpose of the JV is to serve the Brazilian market according to the business plan that was set. Both parties agree to make an initial investment in the JV of $ 198 that will be made per the holding percentage of each party. As of the reporting date, the JV is in process of terminating its operations. During the years ended December 31, 2023 and 2022, the Company recognized equity loss from the JV in an amount of $ 71 and $ 0 respectively. NOTE 9 - Financial Liabilities The book value of each of the financial liability categories is an acceptable approximation of fair value. The financial liability maturities during the five years following the end of the financial year are shown below: SCHEDULE OF FINANCIAL LIABILITY MATURITIES Until Until Until Until Until TOTAL 31-12-24 31-12-25 31-12-26 31-12-27 31-12-28 31-12-23 Debts with credit institutions 158 95 90 50 14 407 Loans in an amount of $ 80 is bearing interest between Prime to Prime + 1.5 % and is due between March 2025 to February 2028. Loans in an amount of $ 327 is bearing interest between 0.13 %- 0.8 % and is due between December 2024 and June 2028. NOTE 10 - RELATED PARTY TRANSACTIONS A. Balances with related parties: The following related party payables are included in liability to related parties: SCHEDULE OF RELATED PARTY PAYABLES 2023 2022 December 31, 2023 2022 Officers (*) 22 41 Other related parties (**) 686 739 Other related parties ( 119 ) ( 97 ) Directors 16 15 Due to related parties 605 698 (*) The amount includes the net salary payable. (**) The amount includes the provision created to former owners of Orgad that are entitled to additional cash and equity consideration and former owners of Naiz that entitled to additional cash consideration, see note 16- business combination. B. Related parties benefits: SCHEDULE OF RELATED PARTIES BENEFITS 2023 2022 Year ended December 31, 2023 2022 Salaries and related expenses 1,173 1,440 Share based payments 324 396 Cash liability and equity liability expenses related to acquisitions (**) 155 1,058 Directors 55 58 Related parties benefits 1,707 2,952 (**) The amount includes the expenses for a provision created to former owners of Orgad that are entitled to additional cash and equity consideration and former owners of Naiz that entitled to additional cash consideration, see note 16- business combination. NOTE 11 - FINANCIAL INSTRUMENTS The following tables presents the Company’s significant assets and liabilities that are measured at fair value on recurring basis and their classification within the fair value hierarchy: SCHEDULE OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS December 31, 2023 Fair value hierarchy Level 1 Level 2 Level 3 Financial assets Investment in marketable securities - 6 - December 31, 2022 Fair value hierarchy Level 1 Level 2 Level 3 Financial assets Investment in marketable securities - 47 - Derivatives (*) 10 December 31, 2022 Fair value hierarchy Level 1 Level 2 Level 3 Financial liabilities Warrants derivative - 9 - (*) the derivatives are included in other receivables. F- 18 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 11 - FINANCIAL INSTRUMENTS (Cont.) The carrying amounts of cash and cash equivalents, restricted cash, short term restricted deposit, accounts receivable, other receivables and prepaid expenses, trade payable and accounts payable approximate their fair value due to the short-term maturities of such instruments. At December 31, 2023, the recognized loss and fair value (based on quoted market prices with a discount due to security- restrictions on iMine shares) of the marketable securities were $ 41 and $ 6 , respectively (at December 31, 2022 $ 59 and $ 47 , respectively). NOTE 12 - TAXES ON INCOME a. On December 31, 2023, the Company had U.S. federal net operating loss carryforwards of approximately $ 27,037 available to reduce future taxable income: $ 16,488 will expire from 2030 until 2037 and the remain of $ 10,585 may be carryforward to offset against future income for an indefinite period of time. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions of the Internal Revenue Code of 1986. The U.S. Company has final tax assessments through 2015. The U.S. corporate income tax rate 21%. b. Foreign tax: 1. Tax rates: Presented hereunder are the income tax rates relevant to the Company’s Israeli subsidiaries: SCHEDULE OF TAX RATES RELEVANT TO THE COMPANY'S ISRAELI SUBSIDIARY 2023 - 23 % 2022 - 23 % Presented hereunder are the income tax rates relevant to the Company’s Spanish subsidiary: 2022 - 25 % 2023 - 25 % 2. The Company’s Israeli subsidiaries have estimated total available operating loss carryforwards of approximately $ 66,000 as of December 31, 202 3 . Of these carryforwards, a total of $ 42,000 are owned by Topspin Medical (Israel) Ltd. Topspin’s operating loss carryforwards may be offset only by future income with respect to the same operational activity by which it was incurred for an indefinite period of time. The other operating loss carryforwards are owned by My Size Israel 2014 Ltd and Orgad (subsidiary) may be carryforward to offset against future income for an indefinite period of time. 3. Topspin Medical (Israel) Ltd. and My Size (Israel) 2014 Ltd. has final tax assessments through 2016. 4. Naiz has estimated total available operating loss carryforwards of approximately $ 1,335 as of December 31, 2023. Naiz operating loss carryforward may be used to offset against future income for an indefinite period of time. c. U.S. and foreign components of loss, before income taxes consisted of: SCHEDULE OF COMPONENTS OF LOSS FROM CONTINUING OPERATIONS, BEFORE INCOME TAXES 2023 2022 December 31, 2023 2022 U.S ( 2,375 ) ( 1,180 ) Non-U.S. (foreign) ( 4,338 ) ( 7,166 ) Loss before income taxes ( 6,713 ) ( 8,346 ) F- 19 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 12 - TAXES ON INCOME (Cont.) d. Deferred taxes: Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows: SCHEDULE OF DEFERRED TAX ASSETS December 31, 2023 2022 Deferred tax assets: Operating loss carryforwards 21,172 20,131 Stock based compensation expense 102 145 Investment in marketable securities 419 390 Capitalized research and development expenses 226 586 Other temporary differences 16 203 Total deferred tax assets 21,935 21,455 Valuation allowance ( 21,663 ) ( 21,455 ) Net deferred tax assets after valuation allowance 272 - Deferred tax liabilities: Intangible assets ( 272 ) ( 328 ) Net deferred tax liability - ( 328 ) The following table presents a reconciliation of the beginning and ending valuation allowance: SCHEDULE OF RECONCILIATION OF VALUATION ALLOWANCE 2023 2022 December 31, 2023 2022 Balance at beginning of the year 21,455 21,082 Additions in valuation allowance to the income statement 988 1,758 Additions in valuation allowance due to exchange rate foreign currency translation differences ( 780 ) ( 1,385 ) Net change in the valuation allowance 208 373 Balance at end of the year 21,663 21,455 In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a valuation allowance to reduce deferred tax assets to the amount supported by future reversals of existing taxable temporary differences at December 31, 2023 and 2022. e. Theoretical tax The following presents the adjustment between the theoretical income tax benefit that would result from applying the U.S. federal statutory income tax rate to loss before income taxes amount and the reported income tax benefit included in the financial statements: SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSES BENEFITS 2023 2022 December 31, 2023 2022 Loss before income taxes 6,713 8,346 Statutory income tax rate 21 % 21 % Computed “expected” income tax benefit 1,410 1,752 Foreign tax rate differences 73 149 Exchange rate differences 47 - Nondeductible expenses ( 41 ) ( 107 ) Impairment of goodwill ( 168 ) - Change in valuation allowance ( 988 ) ( 1,758 ) Income tax benefit 333 36 The entire income tax benefit is a deferred tax benefit. F- 20 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 13 - SHAREHOLDERS’ EQUITY a. Common stock confers upon their holders the right to receive notice to participate and vote in general meetings of the Company, and the right to receive dividends if declared. b. On December 7, 2022, the Company’s board of directors approved a 1-for-25 reverse stock split of the Company’s issued and outstanding shares of common stock. The reverse stock split became effective on December 8, 2022. As a result, all shares of common stock, options for shares of common stock, exercise price and net loss per share amounts were adjusted retroactively for all periods presented in these financial statements. c. On January 10, 2023, the Company entered into a securities purchase agreement pursuant to which the Company sold an aggregate of 162,000 of the Company’s shares of common stock and pre-funded warrants to purchase up to 278,899 shares of common stock and, in a concurrent private placement, unregistered warrants to purchase up to 883,798 shares of common stock, consisting of Series A warrants to purchase up to 441,899 shares of common stock and Series B warrants to purchase up to 441,899 shares of common stock, at an offering price of $ 3.055 per share of common stock 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, the Company entered into a securities purchase agreement (the “PIPE Purchase Agreement”) pursuant to which the Company agreed to sell and issue in a private placement 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, 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, the Company entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company is required to file a resale registration statement (the “Registration Statement”), with 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 (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. The Company will be obligated to pay certain liquidated damages if it fails to maintain the effectiveness of the Registration Statement. Aggregate gross proceeds to the Company in respect of the offerings was approximately $ 3,000 , before deducting fees payable to the placement agent and other offering expenses payable by the Company. The net proceeds were approximately $ 2,600 . As of December 31, 2023, all the pre funded warrants were exercised. d. On August 24, 2023, the Company entered into an inducement offer letter agreement (the “Inducement Letter”) with a certain holder (the “Holder”) of certain of the Company’s existing warrants to purchase up to (i) 1,963,994 shares of the Company’s common stock issued on January 12, 2023 at an exercise price of $ 2.805 per share (the “January 2023 Warrants”), (ii) 6,864 shares of the Company’s common stock issued on January 17, 2020 at an exercise price of $ 94.00 per share (the “January 2020 Warrants”), and (ii) 47,153 shares of the Company’s 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 (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 the Company’s common stock at a reduced exercise price of $ 2.09 per share in consideration of the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to an aggregate of 5,367,912 shares of the Company’s common stock (the “New Warrant Shares”), at an exercise price of $ 2.09 per share. The Company 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 the Company. The net proceeds are approximately $ 3.6 million. As of December 31, 2023, the Company issued to the holder 1,183,012 shares and 835,000 in abeyance. F- 21 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 13 - SHAREHOLDERS’ EQUITY (Cont.) c. A summary of the warrant activity during the years ended December 31, 2023 and 2022 is presented below: SCHEDULE OF WARRANT ACTIVITY Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Life in Years Outstanding, December 31, 2021 287,964 31.00 4.35 Issued - - - Expired or exercised ( 17,901 ) - - Outstanding, December 31, 2022 270,063 30.21 3.36 Issued 8,641,803 - - Expired or exercised ( 3,067,572 ) - - Outstanding, December 31, 2023 5,844,294 3.41 3.75 Exercisable, December 31, 2023 5,844,294 3.41 3.75 NOTE 14 - STOCK BASED COMPENSATION The stock-based expense recognized in the financial statements for services received is related to Research and Development, Sales and Marketing and General and Administrative expenses as shown in the following table: SCHEDULE OF STOCK BASED COMPENSATION EXPENSES 2023 2022 Year ended December 31, 2023 2022 Stock-based compensation expense – Cost of goods 20 80 Stock-based compensation expense - Research and development 71 151 Stock-based compensation expense - Sales and marketing 160 238 Stock-based compensation expense - General and administrative 202 305 Stock-based compensation expense 453 774 F- 22 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 14 - STOCK BASED COMPENSATION (Cont.) Options issued to consultants a. In July 2019, the Company entered into a three-year agreement with a consultant (“Consultant14”) to provide services to the Company including assisting the Company to promote, market and sell the Company’s technology to potential customers. Pursuant to such agreement and in partial consideration for such consulting services, the Company agreed to issue to Consultant14 options to purchase up to 107 shares of the Company’s common stock upon execution of the agreement. The options are exercisable at $ 375.00 per share and shall vest in 3 equal instalments every twelve months starting July 2019. Unexercised options shall expire 4 years from the effective date. In addition, the Company agreed to issue to Consultant14 options to purchase up to 890 shares of the Company’s common stock upon execution of the agreement. The options are exercisable at $ 27.00 per share and shall vest in 4 equal instalments every six months starting September 2020. Unexercised options shall expire 5 years from the effective date. b. In March 2023, the Company entered into a two-year agreement with a consultant (“Consultant15”) to provide services to the Company including assisting the Company to promote, market and sell the Company’s technology to potential customers. Pursuant to such agreement and in partial consideration for such consulting services, the Company agreed to issue to Consultant15 options to purchase up to 4,000 shares of the Company’s common stock upon execution of the agreement. The options are exercisable at $ 3.00 per share and shall vest in 2 equal instalments every twelve months starting March 2023. Unexercised options shall expire 3 years from the effective date. During 2023 and 2022, an amount of $ 1 and $ 7 respectively, were recorded by the Company as stock-based equity awards with respect to Consultant 14 and consultant 15. F- 23 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 14 - STOCK BASED COMPENSATION (Cont.) The Company’s outstanding options granted to consultants as of December 31, 2023 are as follows: SCHEDULE OF OPTIONS GRANTED TO CONSULTANTS Issuance date Options for Common stock Weighted Average exercise price per share Options exercisable Expiration date September-October 2020 1,488 USD 27.20 1,488 October 2024- September 2025 March 2023 4,000 USD 3 - March 2026 Total 5,488 1,488 The Company uses the Black Scholes model to measure the fair value of the stock options with the assistance of a third party valuation. The fair value of the Company’s stock options granted to non-employees was calculated using the following weighted average assumptions: SCHEDULE OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS 2023 2022 Grants Grants Dividend yield - - Expected volatility 82.49 % - Risk-free interest 3.96 % - Contractual term of up to (years) 3 - F- 24 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 14 - STOCK BASED COMPENSATION (Cont.) Stock Option Plan for employees In March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stock options to officers and key employees. The total number of options which may be granted to directors, officers, employees under this plan, is limited to 289,000 options. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the date of grant. The fair value of each option award is estimated on the date of grant using the Binomial option-pricing model that used the weighted average assumptions in the following table. The risk free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. SCHEDULE OF FAIR VALUE ASSUMPTIONS OF STOCK OPTIONS 2023 Grants 2022 Grants Dividend yield 0 % 0 % Expected volatility 82.49 % 96.52 % Risk-free interest 3.96 % 4.06 % Contractual term 5 5 In the years ended December 31, 2023 and 2022, 93,000 and 10,000 options, respectively, were granted. On December 27, 2023, the Company’s stockholders approved an increase in the shares available for issuance under the 2017 Equity Incentive Plan from 289,000 shares to 1,040,000 shares. On September 29, 2022, the Compensation Committee of the Company approved grants of restricted share awards under the Company’s 2017 Equity Incentive Plan to Ronen Luzon (CEO), Or Kles (CFO), Billy Pardo (COO), Ilia Turchinsky (CTO) and Ezequiel Javier Brandwain (CCO), pursuant to which were issued 100,000 restricted shares, 24,000 restricted shares, 24,000 restricted shares, 16,000 restricted shares and 12,000 restricted shares, respectively. Each restricted share awarded under section 102 Capital Gain Restricted Stock Award Agreement (the “Agreement”). The restricted shares shall vest in three equal installments on January 1, 2023, January 1, 2024 and January 1, 2025 for Ronen Luzon, Or Kles, Billy Pardo and Ilia Turchinsky and on January 27, 2023, January 27, 2024 and January 27, 2025 for Ezequiel Javier Brandwain, conditioned upon continuous employment with the Company, and subject to accelerated vesting upon a change in control of the Company. On the same day, the Company granted five-years options to purchase up to 10,000 ordinary shares to other employees of the Company at an exercise price of $ 0.21 per share. The options vesting period is over three years in three equal portions from the vesting commencement date. On July 13, 2023, the compensation committee of the board of directors of the Company reduced the exercise price of outstanding options of certain officers and directors of the Company 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 the Company’s shares on July 13, 2023. The exercise price reduction includes options held by, among others, the Company’s 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. The incremental compensation cost resulting from the repricing is approximately $ 10 . in addition, The Company granted five-year options to purchase up to 93,000 ordinary shares to employees of the Company at an exercise price of $ 1.09 per share. On February 14, 2024, the Compensation Committee of the Company granted restricted share awards under the Company’s 2017 Equity Incentive Plan to Ronen Luzon, Or Kles and Billy Pardo, pursuant to which they were issued 300,000 restricted shares, 150,000 restricted shares and 150,000 restricted shares, respectively. The restricted shares shall vest in three equal installments on January 1, 2025, January 1,2026 and January 1, 2027, conditioned upon continuous employment with the Company, and subject to accelerated vesting upon a change in control of the Company. F- 25 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 14 - STOCK BASED COMPENSATION (Cont.) The total stock option compensation expense in the year ended December 31, 2023 amounted to $ 371 as follows: Research and development expenses amounted to $ 71 , sales and marketing expenses amounted to $ 130 and general and administrative expenses amounted to $ 168 . The total stock option compensation expense in the year ended December 31, 2022 amounted to $ 455 as follows: Research and development expenses amounted to $ 151 , sales and marketing expenses amounted to $ 126 and general and administrative expenses amounted to $ 178 . As of December 31, 2023, there was a total of $ 153 unrecognized compensation cost relating to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 2.0 years. Share option activity during 2023 is as follows: SCHEDULE OF SHARES OPTION ACTIVITY 2023 Number of options Weighted average exercise price US$ Outstanding at January 1 41,606 22.48 Granted 93,000 1.09 Exercised - - Expired ( 23,950 ) - Outstanding at year end 110,656 1.11 Vested at year end 48,656 1.10 Share option activity during 2022 is as follows: 2022 Number of options Weighted average Exercise price US$ Outstanding at January 1 35,742 26.5 Granted 10,000 5.25 Exercised - - Expired ( 4,136 ) - Outstanding at year end 41,606 22.48 Vested at year end 33,208 25.17 F- 26 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 15 - CONTINGENCIES AND COMMITMENTS On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York, County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to be determined at trial, but in no event less than $ 616 . On August 2, 2018, North Empire filed a Summons with Notice against the Company, also in the same Court, in which they allege damages in an amount of $ 11,400 arising from an alleged breach of the Agreement. On September 6, 2018 North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answer and asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificates to North Empire causing damage to North Empire in the amount of $ 10,958 . North Empire also filed a third-party complaint against the Company’s CEO and now former Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, the Company filed a reply to North Empire’s counterclaims. On November 15, 2018, the Company’s CEO and now former Chairman of the Board filed a motion to dismiss North Empire’s third-party complaint. On January 6, 2020, the Court granted the motion and dismissed the third-party complaint. Discovery has been completed and both parties have filed motions for summary judgment in connection with the claims and counterclaims. On December 30, 2021, the Court denied both the Company and North Empire’s motions for summary judgment, arguing there were factual issues to be determined at trial. On January 26, 2022, the Company filed a notice of appeal of the summary judgment decision. On February 3, 2022, the Company filed a motion to reargue the Court’s decision denying the Company’s motion for summary judgment. North Empire will file its opposition papers on or before March 31, 2022, and the Company will file reply papers on April 29, 2022. On or about September 12, 2022, the Court issued its Decision and Order denying the Company’s motion to reargue. North Empire filed its opposing brief on December 7, 2022. Both sides were given an opportunity to file a reply brief. The Company filed a reply brief on January 4, 2023 and North Empire filed its reply brief on January 13, 2023. The Appellate Court has scheduled oral argument for the appeal for February 7, 2023. Oral argument was held before the Appellate Court on February 7, 2023. On or about February 28, 2023, the Appellate Court filed its Decision and Order, which affirmed the lower court’s decisions regarding both the Company and North Empire’s motions for summary judgment and sent the case back to the Supreme Court. On March 13, 2023, the Supreme Court referred the case to its Alternative Dispute Program and ordered the cases to mediate. The mediation was held on July 26, 2023 and various settlement options were explored but the mediation did not lead to settlement. On December 21, 2023, a conference with the Court was held and the parties were given dates for various pre-trial filings. The next pre-trial conference is scheduled to be held on May 31, 2024, at which point the Court will schedule the matter for trial on the ultimate claims. The Company intends to vigorously defend any claims made by North Empire. The Company believes it is more likely than not that the counterclaims will be denied. F- 27 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 16 - BUSINESS COMBINATIONS Acquisition of Orgad On February 7, 2022, the Company acquired 100 % of the shares and voting interests in Orgad an omnichannel e-commerce platform. The acquisition was designed to create an additional revenue stream for the Company by becoming a direct e-commerce seller while leveraging the synergies between MySizeID and Orgad’s e-commerce platform. Unaudited pro-forma information The results of operations of Orgad have been included in the consolidated financial statements since the acquisition date of February 7, 2022. Orgad revenues included in the Company’s consolidated statement of operations from February 7, 2022 through December 31, 2022 were $ 4,132 . If the acquisition had occurred on January 1, 2021, management estimates that the consolidated pro forma revenues for the year ended December 31 2022 and 2021 would have been $ 4,662 and $ 2,850 respectively, and the net loss after tax would have been $ 8,519 and $ 10,149 respectively. (a) Consideration transferred The following table summarizes the acquisition date fair value of each major class of consideration: SCHEDULE OF FAIR VALUE OF THE ACQUISITION USD Thousands Cash 300 Issuance of shares of common stock ( 55,801 shares) (*) 457 Total consideration transferred 757 (*) Quoted price as of the acquisition date In addition, the Company agreed to pay to the former owners of Orgad, on the two-year and the three-year anniversary of the closing, $ 350 in each of these years provided that in the case of the second and third instalments certain revenue targets are met and subject further to certain downward post-closing adjustment. Subsequent to the balance sheet date, the amount of $ 700 was fully paid to the former owners of Orgad net of a settlement amount of $ 275 . Furthermore, 55,801 shares of common stock will be issued in eight equal quarterly instalments until the lapse of two years from closing. Additional earn-out payments of 10 % of the operating profit of Orgad for the years 2022 and 2023 will also be paid. All of these payments are subject to the former owners being actively engaged with Orgad at the date such payment is due, and therefore were not taken as part of the consideration for the business combination. During the years ended December 31, 2023 and 2022 an amount of $ 202 , $ 456 $ 82 and $ 319 was recorded in respect of the cash instalments and in respect of stocks issuance, respectively in Cost Of Goods, Sales and Marketing and General and Administrative expenses as shown in the following table: SCHEDULE OF STOCK BASED COMPENSATION EXPENSES 2023 2022 Expenses – Cost of goods 70 194 Expenses - Sales and marketing 100 271 Expenses - General and administrative 114 310 Stock-based compensation expense 284 775 (b) Identifiable assets acquired and liabilities assumed Under the purchase price allocation, the Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the estimates of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of the acquisition. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES Thousands USD Cash and Cash Equivalent - Trade receivables 364 PP&E 55 Inventory 864 Long-term financial investment 31 Selling platform 378 Goodwill 152 Short-term accruals and deferrals ( 181 ) Trade payables ( 668 ) Long term provision ( 13 ) Long-term debt ( 138 ) Deferred tax liabilities ( 87 ) Total net assets acquired 757 F- 28 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 16 - BUSINESS COMBINATION (Cont.) (c) Acquisition-related costs The Company incurred transaction costs of approximately none and $ 40 and during twelve-month period ended December 31, 2023 and 2022 respectively, which were included in general and administrative expenses in the consolidated statements of income (loss). Acquisition of N aiz Bespoke Technologies, S.L. On October 11, 2022, the Company acquired 100 % of the shares and voting interests in Naiz a provider of SaaS technology solutions that solve size and fit issues for fashion ecommerce companies. The acquisition was designed to allow Naiz’s customers benefit from MySize’s deep understanding of the fashion ecommerce retail landscape, while creating an additional revenue stream for the Company. Unaudited pro-forma information The results of operations of Naiz have been included in the consolidated financial statements since the acquisition date of October 11, 2022. Naiz revenues included in the Company’s consolidated statement of operations from October 11, 2022 through December 31, 2022 were $ 103 . If the acquisition had occurred on January 1, 2021, management estimates that the consolidated pro forma revenues for the year ended December 31 2022 and 2021 would have been $ 4,738 and $ 379 respectively and the net loss after tax would have been $ 8,695 and $ 10,717 respectively. (a) Consideration transferred The following table summarizes the acquisition date fair value of each major class of consideration: SCHEDULE OF FAIR VALUE OF THE ACQUISITION USD Thousands Cash 503 Issuance of shares of common stock ( 240,000 shares) (*) 1,008 Total consideration transferred 1,511 (*) Quoted price as of the acquisition date In addition, the Company agreed to pay to the former owners of Naiz, additional cash consideration (up to $ 1,550 ) in four instalments subject to the following conditions: (i) Continuing employment or involvement of the Key Persons of Naiz (as defined in the agreement) by or with Naiz, except if terminated as a result of a Good Reason; and (ii) Naiz’s Revenues reaching or exceeding the respective Target Revenues defined in the agreement. The revenues will be calculated in four periods: (1) January 1, 2022 – December 31, 2022; (2) January 1, 2023 – June 30, 2023; (3) July 1, 2023 – December 31, 2023; (4) January 1, 2024 – December 31, 2024. Former owners of Naiz are entitled to additional cash consideration following December 31, 2025 (up to $1,650) in an event when the actual value of the equity consideration is less than $1,650, subject to completion of a Target Revenue for the period of January 1, 2025 – December 31, 2025 and continuing employment or involvement of the Key Persons of Naiz (as defined in the agreement) by or with Naiz, except if terminated as a result of a Good Reason ; F- 29 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 16 - BUSINESS COMBINATION (Cont.) During the year ended December 31, 2023 and 2022 an amount of ($ 130 ) and $ 283 was recorded in respect of the additional cash consideration respectively. Naiz has reached the Revenues target of (1) period January 1, 2022-December 31,2022 and therefore an amount of $ 125 was paid during the year of 2023. Naiz has not reached the targets of the (2) and (3) periods and therefore the contingent liability was reduced accordingly. (b) Identifiable assets acquired and liabilities assumed Under the purchase price allocation, the Company allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on the estimates of their fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of the acquisition. The following table summarizes the fair value of assets acquired and liabilities assumed as of the acquisition date: SCHEDULE OF FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES Thousands USD Cash and cash equivalent 36 Trade receivables and other receivables 41 PP&E 3 Long-term financial investment 8 Customer Relationships 726 Technology 286 Trademark 77 Goodwill 1,152 Short Term accruals and deferrals ( 56 ) Trade payables ( 46 ) Short-term provision ( 6 ) Short term debt ( 155 ) Long term debt ( 294 ) Deferred tax liabilities ( 261 ) Total net assets acquired 1,511 (c) Acquisition-related costs During 2022, the Company incurred transaction costs of approximately $ 75 which were included in general and administrative expenses in the consolidated statements of income (loss). F- 30 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) Note 17 – Operating Segments Effective 1, July 2023 the Company merged its two SAAS segments into one segment, hence reducing the reportable segments from three to the following two segments: (i) fashion and equipment e-commerce platform, and (ii) SaaS based innovative artificial intelligence driven measurement solutions. This realignment reflects the way resources are allocated and performance is assessed by the Chief Operating Decision Maker. The fashion and equipment e-commerce platform which represents Orgad’s activity that was acquired by the Company in 2022, mainly operates on Amazon. The SaaS based innovative artificial intelligence driven measurement solutions, or SaaS Solutions operating segment consists of My Size Inc, My Size Israel, My Size LLC and Naiz. In the Company’s financial reporting for December 31, 2023, comparative information for 2022 was restated to reflect the changes in reportable segments. Information related to the operations of the Company’s reportable operating segments is set forth below: SCHEDULE OF REPORTABLE OPERATING SEGMENTS Fashion and equipment e-commerce platform SaaS Solutions Total As of the year ended December 31, 2023 Revenues from external customers 6,367 629 6,996 Operating (loss) income ( 3,356 ) ( 3,385 ) ( 6,741 ) Significant non-cash items: Amortization (*) ( 111 ) ( 191 ) ( 302 ) Impairment of goodwill (*) - ( 671 ) ( 671 ) (*) see note 7. Fashion and equipment e-commerce platform Saas Solution As of December 31, 2023: Assets 6,352 2,639 Fashion and equipment e-commerce platform SaaS Solutions Total As of the year ended December 31, 2022 Revenues from external customers 4,132 327 4,459 Operating (loss) income ( 4,197 ) ( 3,913 ) ( 8,110 ) Significant non-cash items: Amortization (*) ( 109 ) ( 46 ) ( 155 ) (*) see note 7. Fashion and equipment e-commerce platform Saas Solution As of December 31, 2022: Assets 6,507 3,220 The Company elected to present geographic information in respect with revenues generated from external customers based on the selling location: Long-lived assets, which includes investment in JV, property, plant and equipment and right of use assets, by geographic region are as follows : SCHEDULE OF CONSOLIDATED ASSETS 2023 2022 Year ended December 31, 2023 2022 Israel 718 1,098 Spain 1,609 2,396 Other 24 100 Total Assets 2,351 3,594 For the year ended December 31, 2023 86.45 % of the Company’s total revenues were generated in the United states, no other foreign destination comprised 10.0% or more of the Company’s total revenues. NOTE 18 - SALES AND MARKETING SCHEDULE OF SALES AND MARKETING 2023 2022 Year ended December 31, 2023 2022 Salaries 877 836 Consultants and subcontractors 139 583 Marketing 375 481 Selling fees 1,858 489 Cash and equity liability expenses related to Orgad acquisition (*) * 100 271 Share based payments for consultants and employees 131 127 Travel 75 211 Other 301 145 Sales and marketing expenses 3,856 3,143 (*) See note 16. NOTE 19 - GENERAL AND ADMINISTRATIVE EXPENSES SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES 2023 2022 Year ended December 31, 2023 2022 Salaries 954 1,007 Professional services 1,322 705 Share based payments for consultants, directors and employees 168 180 Rent, office expenses and communication 349 442 Insurance 463 564 Cash liability and equity liability expenses related to Orgad acquisition (*) * 81 310 Cash liability expenses related to Naiz acquisition (*) ( 52 ) 217 Directors 55 82 Other 631 393 General and administrative expenses 3,971 3,900 (*) See note 16. F- 31 MY SIZE, INC. AND ITS SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS U.S. dollars in thousands (except share data and per share data) NOTE 20 - FINANCIAL INCOME (EXPENSE), NET SCHEDULE OF FINANCIAL INCOME (EXPENSES), NET A. Financial income Year ended December 31, 2023 2022 Exchange rate differences 99 - Other 97 26 Total Financial income 196 26 B. Financial expense Year ended December 31, 2023 2022 Exchange rate differences - 33 Revaluation of loan granted - 100 Revaluation investment in marketable securities 41 62 Other 56 67 Total Financial expense 97 262 NOTE 21 – SIGNIFICANT EVENTS DURING THE REPORTING PERIOD a. On January 2, 2023, Orgad experienced a fire at its warehouse in Israel. The Company is not aware of any casualties or injuries associated with the fire. The Company shifted Orgad’s operation to its headquarters. The value of the inventory that was in the warehouse was approximately $ 640 . The Company believes that this incident did not affect the future sales results of Orgad for the year of 2023. The inventory was not insured and the Company and lessor signed an agreement to settle the issue in which the Company paid to the lessor an amount of $ 50 to cover its loss. The Company recognized the payment to the lessor as a general and administrative expense. During the reporting period, claims by the owners a neighboring warehouse were made of damage caused by the fire. As of the date these financial statements were authorized for issuance, no lawsuit was filed against the Company, and the amount of potential loss, if any, cannot be reasonably estimated. b. During May 2023, the Company initiated a transfer of the support, development and customer success operations to its 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, the Company 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. c. On November 3, 2023, the Company was notified, by the Nasdaq Listing Qualifications that the Company is 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 May 1, 2024, 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, the Company may then be eligible for additional 180 days if the Company 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 the Company’s intention to cure the deficiency during the second compliance period. If the Company does not qualify for the second compliance period or fails to regain compliance during the second compliance period, then Nasdaq will notify the Company of its determination to delist the Company common stock, at which point the Company will have an opportunity to appeal the delisting determination to a Hearings Panel. NOTE 22 - EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE a. On February 14, 2024, the Compensation Committee of the Company granted restricted stock awards under the Company’s 2017 Equity Incentive Plan to Ronen Luzon, Or Kles and Billy Pardo, pursuant to which they were issued 300,000 restricted shares, 150,000 restricted shares and 150,000 restricted shares, respectively. The restricted shares shall vest in three equal installments on January 1, 2025, January 1, 2026 and January 1, 2027, conditioned upon continuous employment with the Company, and subject to accelerated vesting upon a change in control of the Company. On the same day, the Company granted a total of 80,000 RSU (restricted stock units) to its Directors that will vest on January 1,2025 and five -years options to purchase up to 55,000 ordinary shares to other employees of the Company at an exercise price of $ 0.479 per share. The options vesting period is over three years in three equal portions from the vesting commencement date. F- 32 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE There were no disagreements with accountants on accounting and financial disclosure of a type described in Item 304 (a)(1)(iv) or any reportable event as described in Item 304 (a)(1)(v) of Regulation S-K.