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Item 7. Management’s Discussion and Analysis

2025-03-27 compared with 2024-04-01 · 102 added, 125 removed, 182 unchanged (56% of the section changed)

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

are an omnichannel e-commerce platform and provider of AI-driven SaaS measurement solutions, including MySizeID and our recently acquired

subsidiaries, Naiz Fit, which provides SaaS technology solutions that solve size and fit issues and AI solutions for smarter design through

data driven decisions for fashion ecommerce companies, and Orgad, an online retailer operating in the global markets.

To date, we have

generated almost all our revenue as a third-party seller on Amazon.

Our advanced software and solutions assists us in supply chain, identifying

products that can drive growth and provides a user-friendly experience and best customer service.

are currently focused on driving the commercialization of the Naiz Fit technology which enables shoppers to generate highly accurate

measurements of their body to find the accurate fitting apparel by using our Naiz Fit Widget, a simple questionnaire which uses a database

collected over the years and allows buyers to know what size to pick when buying online, reducing returns and increasing conversion rates

Fit syncs the user’s measurement data to a sizing model generated with our proprietary Garment Modelling technology for each item

sold on the ecommerce, and only presents items for purchase that match their measurements to ensure a correct fit.

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

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

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

We also recently

launched True Feedback, a Go-To-market solution that extracts data from our Naiz Community mystery shoppers to fine-tune the customer

experience offered to fashion buyers, both online and offline.

We are an omnichannel e-commerce platform and provider of AI-driven SaaS

measurement solutions and our recently acquired subsidiaries, Naiz Fit, which provides SaaS technology solutions that solve size and fit

issues and AI solutions for smarter design through data driven decisions for fashion ecommerce companies, and Orgad, an online retailer

operating in the global markets.

To date, we have generated almost all our revenue as a third-party seller on Amazon.

Our advanced software

and solutions assists us in supply chain, identifying products that can drive growth and provides a user-friendly experience and best

customer service.

We are currently focused on driving the commercialization of the Naiz Fit

technology which, enables shoppers to generate highly accurate measurements of their body to find the accurate fitting apparel by using

our Naiz Fit Widget, a simple questionnaire which uses a database collected over the years and allows buyers to know what size to pick

when buying online, reducing returns and increasing conversion rates of sellers.

Naiz Fit syncs the user’s measurement data to a sizing model generated

with our proprietary Garment Modelling technology for each item sold on the ecommerce, and only presents items for purchase that match

their measurements to ensure a correct fit.

We are positioning ourselves as a consolidator of sizing solutions and

new digital experience due to new developments for the fashion industry needs.

Our other product offerings include First Look Smart Mirror

for physical stores and Smart Catalog to empower brand design teams, which are designed to increase end consumer satisfaction, contributing

to a sustainable world and reduce operation costs.

We also recently launched True Feedback, a Go-To-market solution that extracts data

from our Naiz Community mystery shoppers to fine-tune the customer experience offered to fashion buyers, both online and offline.

February 7, 2022, My Size Israel 2014 Ltd, or My Size Israel, entered into a Share Purchase Agreement, or the Orgad Agreement, with Amar

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Orgad Sellers are the sole title and beneficial owners of 100% of the shares of Orgad.

In consideration of the shares of Orgad, the

Orgad Sellers are entitled to receive (i) up to $1,000,000 in cash, or the Orgad Cash Consideration, (ii) an aggregate of 111,682

shares, or the Orgad Equity Consideration, of our common stock, and (iii) earn-out payments of 10% of the operating profit of Orgad

for the years 2022 and 2023.

In consideration of the shares of Orgad, the Orgad

Sellers are entitled to receive (i) up to $1,000,000 in cash, or the Orgad Cash Consideration, (ii) an aggregate of 111,682 shares, or

the Orgad Equity Consideration, of our common stock, and (iii) earn-out payments of 10% of the operating profit of Orgad for the years

2022 and 2023.

The transaction closed on the same day.

In February 2024, we paid the remaining $700,000 of the

Orgad Cash Consideration to the Orgad Sellers, net of a settlement amount of $275,000.

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

(i) $300,000,

which we paid upon closing, (ii) $350,000 payable on the two-year anniversary of the closing, and (iii) $350,000 payable on the three-year

anniversary of the closing, provided that in the case of the second and third installments certain revenue targets are met and subject

further to certain downward post-closing adjustment.

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

(i) 55,801 shares were issued

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

to certain downward post-closing adjustment.

payment of the second and third cash installments, the equity installments and the earn out are further subject in each case to the Orgad

In February 2024, we paid the remaining $700,000 of the Orgad Cash Consideration

to the Orgad Sellers, net of a settlement amount of $275,000.

payment of the earn out is further subject in each case to the Orgad

Sellers being actively engaged with Orgad at the date such payment is due (except if the Orgad Sellers resign due to reasons relating

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protection of debtors.

In addition to our Israel operations, we historically had operations in Russia through our wholly owned subsidiary,

To date, mainly due to the invasion of Ukraine by Russia and the ongoing sanctions we ceased most of our efforts in Russia

and expect to dissolve the subsidiary in the near future.

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

mainly due to the invasion of Ukraine by Russia and the ongoing sanctions we ceased most of our efforts in Russia and expect to dissolve

the subsidiary in the near future.

of Operations

table below provides our results of operations for the periods indicated.

Year ended December 31

ended December 31

(dollars in thousands)

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Ended December 31, 2024 Compared to Year Ended December 31, 2023

Our revenues for the year

ended December 31, 2023 amounted to $6,996,000 compared to $4,459,000 for year ended December 31, 2022.

The increase from the

corresponding period is primarily attributable to an increase in Orgad sales and revenue generated from Naiz Fit that was

acquired in October 2022 and therefore were consolidated for three months as opposed to twelve months in 2023 .

cost of revenues expenses for the year ended December 31, 2023 amounted to $4,265,000 compared to $3,825,000 for the year ended

December 31, 2022.

The cost of revenues includes cash and equity liabilities expenses in the amount of $21,000 and an inventory

mark-down of $643,000 due to the fire that occurred in Orgad’s warehouse during January 2023 .

The increase in

comparison with the corresponding period was due to the inventory mark down and increase in sales.

revenues for the year ended December 31, 2024 amounted to $8,257,000 compared to $6,996,000 for year ended December 31, 2023.

from the corresponding period is primarily attributable to Orgad sales.

cost of revenues for the year ended December 31, 2024 amounted to $4,934,000 compared to $4,265,000 for the year ended December

The increase in comparison with the corresponding period was due to due to an increase in revenues described above offset by

an inventory mark-down of $643,000 due to the fire that occurred in Orgad’s warehouse during January 2023.

and Development Expenses

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55.96%, compared to $974,000 for the year ended December 31, 2023.

The decrease from the corresponding period primarily resulted from a decrease in salaries expenses due to reduced headcount and a decrease in subcontractor expenses.

The decrease from the corresponding period primarily resulted from

a decrease in salaries due to reduced headcount and a decrease in subcontractor expenses.

and Marketing Expenses

sales and marketing expenses for the year ended December 31, 2023 amounted to $3,856,000 an increase of $713,000, or 22.7%, compared

sales and marketing expenses for the year ended December 31, 2024 amounted to $3,114,000 a decrease of $742,000, or 19.2%, compared

to $3,856,000 for the year ended December 31, 2023.

The increase primarily resulted from an increase in Amazon fees due to the increase in sales offset by a decrease in salary expenses due to reduced headcount,

consultant expenses, travel and marketing expenses.

The decrease primarily resulted from a decrease in salaries due to reduced

headcount, consultant expenses, travel and marketing expenses offset by an increase in Amazon fees due to an increase in

and Administrative Expenses

general and administrative expenses for the year ended December 31, 2023 amounted to $3,971,000, an increase of $71,000, or 1.8%,

general and administrative expenses for the year ended December 31, 2024 amounted to $3,368 ,000, a decrease of $603,000, or

15.2%, compared to $3,971,000 for the year ended December 31, 2023.

The increase compared to the corresponding period was mainly due to an

increase in professional expenses which includes increase in audit and legal expenses and investor relations, offset by a decrease in cash and equity liabilities expenses attributed to Orgad and Naiz Fit

acquisitions.

goodwill impairment charge of $671,000 recorded in Impairment of goodwill for year ended December 31, 2023.

No impairment was recorded

for the year ended December 31, 2022.

The decrease compared to the corresponding period was mainly due

to a decrease in professional services and insurance expenses.

other income for the year ended December 31, 2024 amounted to $275,000 compared to none for the year ended December 31, 2023.

other income for the year ended December 31, 2024 resulted from certain downward post-closing adjustment that were made in the Orgad

on our analysis, we determined that the carrying value of our SaaS Solutions reporting unit exceeded its fair value and an

impairment charge of $631,000 was recorded for year ended December 31, 2024, compared to $671,000 recorded in impairment of goodwill

for year ended December 31, 2023 for the same reason.

a result of the foregoing, for the year ended December 31, 2024, our operating loss was $3,944,000, a decrease of $2,797 ,000 or 4 1 .5%,

compared to our operating loss for the year ended December 31, 2023 of $6,741,000.

financial income, net for the year ended December 31, 2023 amounted to $99,000 compared to financial expenses of, $236,000 for the year ended

December 31, 2022.

In 2023, we had financial expenses exchange rate differences offset by an income from fair value revaluation of investment

in marketable securities whereas in 2022 we had financial income from the fair value revaluation of warrants offset by expenses from

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

(Expenses) Income, Net

financial expenses, net for the year ended December 31, 2024 amounted to $51,000 compared to financial income of, $99,000 for the year

ended December 31, 2023.

In 2024, we had financial expenses exchange rate differences offset by an income from fair value revaluation

of investment in marketable securities whereas in 2023 we had financial income from the fair value revaluation of warrants offset by

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

a result of the foregoing, our net loss for the year ended December 31, 2024 was $3,9 95 ,000 compared to net loss of $6,380,000 for the

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restricted cash as of December 31, 2023.

In January 2023, we completed a registered direct and concurrent private placement offering

resulting in gross proceeds of approximately $3 million.

In August 2023, we completed a warrant repricing transaction resulting in

gross proceeds of approximately $4.2 million.

This decrease primarily resulted from operating activities, the acquisition of Orgad

and Naiz Fit, and resources that were deployed to grow of both businesses.

cash used in operating activities was $6,106,000 for the year ended December 31, 2023 compared to $7,290,000 for the year ended

December 31, 2022.

The decrease in cash used in operating activity is derived mainly from the decrease in the net loss offset by the

change in inventory and change in account receivable.

Net cash flow from investing activities was $7,000 for the year ended December 31, 2023 compared to net cash provided

by investing activities of $993,000 for the year ended December 31, 2022.

The net cash used in investing activities for the year ended

December 31, 2022 was mainly from Acquisition of a subsidiary and establishing the JVa joint venture in Brazil, which has subsequently

been terminated.

cash provided by financing activities was $6,134,000 for the year ended December 31, 2023 as opposed to negative cash flow of

$67,000 for the year ended December 31, 2022.

The cash flow provided by financing activities for the year ended December 31, 2023

was mainly due to the public and private offerings that occurred in January and August 2023.

This increase primarily resulted from the warrant repricing

transaction that was completed in May 2024 and proceeds from warrants that were exercised in December 2024, offset by payments that

were made to suppliers, resources that were deployed to grow our businesses and payments related to the Orgad acquisition.

January 2025, we entered into an At The Market Offering Agreement, (the “Offering Agreement”)

with ith H.C.

Wainwright & Co., LLC, as agent (“Wainwright”) pursuant to

which we may offer and sell, from time to time through Wainwright shares of our common stock having an aggregate offering price of up

to $4.1 million .

We agreed to pay Wainwright a commission at a fixed rate of 3.0% of the aggregate gross proceeds from each sale

of the shares under the Offering Agreement.

As of the date hereof, we sold 60,589 shares pursuant to the Offering Agreement for aggregate

gross proceeds of approximately $142,000.

cash used in operating activities was $3,092,000 for the year ended December 31, 2024 compared to $6,106,000 for the year ended December

The decrease in cash used in operating activity is derived mainly from decrease in the net loss, change in inventory offset by change in account receivables.

cash flow from investing activities was $53,000 for the year ended December 31, 2024 compared to net cash provided by investing activities

of $7,000 for the year ended December 31, 2023.

The net cash provided by investing activities for the year ended December 31, 2024 was

mainly from proceeds from short term deposits and from investment in a JV.

cash provided by financing activities was $5,594,000 for the year ended December 31, 2024 compared to net cash of $6,134,000 for the

year ended December 31, 2023.

The net cash provided by financing activities for the year ended December 31, 2024 was mainly due to warrant

repricing transaction that was completed in May 2024 and proceeds from warrants that were exercised on December 2024 offset by repayment

of loans in an amount of $735,000.

expect that we will continue to generate losses and negative cash flows from operations for the foreseeable future.

Based on the projected

cash flows and cash balances as of December 31, 2023, we believe our existing cash will not be sufficient to fund operations for a period

of more than 12 months.

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

We will need to raise

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

projected cash flows and cash balances as of December 31, 2024, we believe our existing cash will not be sufficient to fund

operations for a period of more than 12 months.

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

a going concern.

We will need to raise additional capital, which may not be available on reasonable

terms or at all.

Additional capital would be used to accomplish the following:

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

conditions, the Russian invasion of Ukraine, the current war between Israel and Hamas, the impact of the recent resurgence of the COVID-19

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

Accordingly, we cannot

assure you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us.

If we cannot raise

additional capital when needed, it may have a material adverse effect on our business, results of operations and financial condition.

conditions, the Russian invasion of Ukraine, the war between Israel and Hamas, and a number of other factors, many of which are outside our control, and on our financial performance.

Accordingly, we cannot assure

you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us.

If we cannot raise additional

capital when needed, it may have a material adverse effect on our business, results of operations and financial condition.

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

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

for business combinations

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

their estimated fair values at the acquisition date.

These fair values are typically estimated with assistance from independent valuation

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

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

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

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

impairment assessment

determine the fair value of our reporting units using the income approach.

According to the income, we use discounted cash flows to estimate

the fair value.

Cash flow projections require us to make significant 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.

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

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

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

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

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

cost of capital and discount rates;

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

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

Financial Statements and Supplementary

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

Goodwill impairment

We determine the fair value of our reporting units using the income approach.

According to the income, we use discounted

cash flows to estimate the fair value.

Cash flow projections require us to make significant 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.

Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the

future include but are not limited to the discount rate, the terminal growth rate and the revenue growth rate.

Based on our analysis, we determined that the carrying value of our SaaS Solutions reporting unit exceeded its fair

value and an impairment charge of $671 thousand was recorded.

to the discount rate, the terminal growth rate and the revenue growth rate.

on our analysis, we determined that the carrying value of our SaaS Solutions reporting unit exceeded its fair value and an impairment

charge of $631,000 was recorded.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis