Options issued to consultants:

During the six month period ended June 30, 2020, the Company granted 13,500 options to consultants. No such options were exercised and 8,338 options expired.

The total stock option compensation expense during the six and three month period ended June 30,March 31, 2021 and 2020 and 2019 which was recorded under sales and marketing was $5, $1, $59$7 and $6$4, respectively and under general and administrative was $12,$0 and $6, $55 and $27, respectively.

MY SIZE, INC. AND ITS SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

Note 4 - Stock Based Compensation (Cont.)

Warrants issued to consultants:

In addition to the fees above, the Company issued to the placement agent warrants on substantially the same terms as the investors in the offering in an amount equal to 6% of the aggregate number of shares of common stock sold in the offering, or 30,888 shares of common stock, at an exercise price of $4.8563 per share and a term expiring on January 15, 2025.

The warrants were measured at fair value of $52.

In addition to the fees above, the Company issued to the placement agent warrants on substantially the same terms as the investors in the offering in an amount equal to 6% of the aggregate number of shares of common stock sold in the offering, or 272,727 shares of common stock, at an exercise price of $1.375 per share and a term expiring on May 6, 2025.

The warrants were measured at fair value of $160.

Pursuant to the anti-dilution adjustment provisions in outstanding warrants to purchase 144,277 shares of common stock, the per share exercise price was reduced to $0.9289, following the issuance of the securities in the public offering. 

In March 2020, warrants to purchase up to 66,667 shares of common stock of the Company that were not exercised expired.

Stock Option Plan for Employees:

In March 2017, the Company adopted a stock option planthe My Size, Inc. 2017 Equity Incentive Plan (the “Plan”“2017 Employee 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, iswas initially limited to 200,000 options.shares of common stock. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the grant date. . InAs further described below, in August 2020, the Company’s shareholders approved an increase in the number of shares available for issuance under the Plan to 1,450,000 (see note 7 below).1,450,000.

On May 25, 2020, the Compensation Committeecompensation committee of the Board of Directors of the Company reduced the exercise price of outstanding options of employees and directors of the Company for the purchase of an aggregate of 140,237 shares of common stock of the Company (with exercise prices ranging between $18.15 and $9.15) to $1.04 per share, which was the closing price for the Company’s common stock on May 22, 2020, and extended the term of the foregoing options for an additional one year from the original date of expiration. The incremental compensation cost resulting from the repricing was $53, and the expenses during both the six and three months ended June 30,March 31, 2021 and 2020 were $43.$1 and $0, respectively.

On August 10, 2020, the Company’s shareholders approved an increase in the shares available for issuance under the 2017 Employee Plan from 200,000 to 1,450,000 shares. As a result and pursuant to approval of the Company’s compensation committee that was contingent on the foregoing shareholder approval, the number of shares available for issuance under the Company’s 2017 Consultant Incentive Plan was reduced from 466,667 to 216,667 shares.

During the six and three month period ended June 30, 2020, there were no grants ofMarch 31, 2021, the Company did not grant any stock options under the 2017 Employee Plan, no such options were exercised and options to purchase 22,000 and 21,66721,610 shares of common stock expired, respectively. In August 2020, the Company granted options to purchase an aggregate of up to 917,000 shares of common stock to directors, officers and employees of the Company (see note 7 below).expired.

The total stock option compensation expense during the six and three month period ended June 30,March 31, 2021 and 2020 and 2019 which was recorded was $103$136 and $42, and $311 and $294,$60, respectively.

MY SIZE, INC. AND ITS SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

Note 5 - Contingencies and Commitments

MY SIZE, INC. AND ITS SUBSIDIARIES

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

Note 6 - Significant Events During the Reporting Period

Note 7 - Events Subsequent to the balance sheet date

Note 7 – Events Subsequent To The Reporting Period

On August 10, 2020, the Company’s shareholders approved an increase in the shares available for issuance under the Plan from 200,000 to 1,450,000 shares.

As a result and pursuant to approval of the Company’s compensation committee that was contingent on the foregoing shareholder approval, the following occurred on August 10, 2020: (i) the number of shares available for issuance under the Company’s 2017 Consultant Incentive Plan reduced from 466,667 to 216,667 shares: (ii) the Company to the Company’s Chief Executive Officer (A) five-year options to purchase up to 160,000 ordinary shares at an exercise price of $1.04 per share. One quarter of such options vest on November 26, 2020, one quarter vest on May 26, 2021, one quarter vest on November 26, 2021 and one quarter vest on May 26, 2022, and (B) 80,000 performance-based restricted stock units, each representing the right to receive one share of common stock, which vest (x) upon the Company generating revenue of at least $50,000 in the Russian Federation during the year ending 2020, or (y) upon the Company generating revenue of at least $500,000 in the Russian Federation during the year ending 2021; (iii) the Company granted five-year options to purchase up to 130,000 ordinary shares to the Company’s Chief Financial Officer at an exercise price of $1.04 per share. One quarter of such options vest on November 26, 2020, one quarter vest on May 26, 2021, one quarter vest on November 26, 2021 and one quarter vest on May 26, 2022; (iv) the Company granted five-year options to purchase up to 130,000 ordinary shares to the Company’s Chief Operating Officer and Chief Product Officer at an exercise price of $1.04 per share. One quarter of such options vest on November 26, 2020, one quarter vest on May 26, 2021, one quarter vest on November 26, 2021 and one quarter vest on May 26, 2022; (v) the Company granted five-year options to purchase up to 325,893 ordinary shares to other employees of the Company at an exercise price of $1.04 per share. One quarter of such options vest on November 26, 2020, one quarter vest on May 26, 2021, one quarter vest on November 26, 2021 and one quarter vest on May 26, 2022; and (vi) the Company granted five-year options to purchase up to 30,000 ordinary shares to each of the Company’s non-employee board members at an exercise price of $1.04 per share. These options vest on November 26, 2020.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our results of operations and financial condition for the periods described. This discussion should be read together with our condensed consolidated interim financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form 10-Q. This information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, filed with the Securities and Exchange Commission on March 19, 2020,29, 2021, or the Annual Report, including the consolidated annual financial statements as of December 31, 20192020 and their accompanying notes included therein.

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.

Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report on Form 10-Q. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to:

The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits to the Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this Quarterly Report on Form 10-Q is accurate as of the date hereof. Because the risk factors referred to on page 12 of our Annual Report, could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.

Unless the context otherwise requires, all references to “we,” “us,” “our” or “the Company” in this Quarterly Report on Form 10-Q are to My Size, Inc. a Delaware corporation, and its subsidiaries, including MySize Israel 2014 Ltd.Ltd, Topspin Medical (Israel) Ltd and My Size LLC. taken as a whole.

Overview

We are a creator of mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals, including the e-commerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms within our proprietary technology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase revenue for businesses across the globe.

Our solutions can be utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone, the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then automatically sent to a cloud-based server where the dimensions are calculated through our proprietary algorithms, and the accurate measurements (+ or - 2 centimeters) are then sent back to the user’s mobile device. We believe that the commercial applications for this technology are significant in many areas.

Currently, we are mainly focusing on the e-commerce fashion/apparel industry. In addition, our solutions address the shipping/parcel and DIY uses markets.

We are in the commercialization phase of our products, although we have only generated minimal revenues to date. MySizeID has been incorporated into a number of major retailers including DeMoulin, U.S. Polo Assn., Slam and Refrigiwear, and MySizeID is also available on leading e-commerce websites including WooCommerce, Shopify and Lightspeed. In recent months, we announced an increase in online apparel sales and reduction in returns of online orders of Penti customers utilizing MySizeID; we reported that in June 2020 that we generated over 1.2 million size recommendations; we opened a subsidiary in Russia; two French retail brands, La Pièce and Habillez-moi, are integrating MySizeID into their e-commerce websites; we integrated MySizeID into Sweet Fit, a virtual fitting mirror; we received a notice of allowance from the USPTO for our patent application, titled: “A system for and a method of measuring a path length using a handheld electronic device”; we hired two new sales executives in France; we developed a contactless shopping feature for the MySizeID application; we released the new OneClick feature for the BoxSize application; and we received a notice of allowance from the Russian Patent & Trademark Office for our patent application, titled: “A system for and a method of measuring a path length using a handheld electronic device.”

While we rollout our products to major retailers and apparel companies, there is a lead time for new customers to ramp up before we can recognize revenue. This lead time varies between customers, especially when the customer is a tier 1 retailer, where the integration process may take longer. Generally, first we integrate our product into a customer’s online platform, which is followed by piloting and implementation, and, assuming we are successful, commercial roll-out, all of which takes time before we expect it to impact our financial results in a meaningful way. While we have begun generating initial sales revenue, we do not expect to generate meaningful revenue during the upcoming quarters. In addition, the coronavirus outbreak has resulted in work stoppages and disruptions and our marketing and sales activities have been adversely affected. For example, we have three ongoing pilots with international retailers that have been halted, we are unable to participate in industry conferences and our ability to meet with potential customers is limited. Because of the numerous risks and uncertainties associated with the coronavirus outbreak, the success of our market penetration and our dependence on the extent to which MySizeID is adopted and utilized, we are unable to predict the extent to which we will recognize revenue. We may be unable to successfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and any revenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.

We recently entered into a non-binding letter of intent with Logystico LLC, or Logystico, a third party logistics fulfillment company that specializes in automating the order fulfillment process, to form a joint venture. Under the terms of the letter of intent, the joint venture will exclusively operate and manage micro-fulfilment centers using our BoxSize platform for retail vendors in the United States and we will initially have a 68% stake and Logystico will initially have a 32% stake in the joint venture entity. Establishment of the joint venture is subject to the entry into a definitive binding agreement.

Important Information about COVID-19

In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it has now spread to Israel and the United States, and infections have been reported globally. Many countries around the world, including in Israel, have from time to time significant governmental measures implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures have resulted in work stoppages and other disruptions. We implemented remote working and work place protocols for our employees in accordance with Israeli government requirements. In addition, while we have seen an increased demand for MySizeID, certainthe COVID-19 pandemic has had a particularly adverse impact on the retail industry and this has resulted in an adverse impact on our marketing and sales activities have been adversely affected by the coronavirus outbreak.activities. For example, we have three ongoing pilots with international retailers that have been halted, we are unable to participate physically in industry conferences, and our ability to meet with potential customers is limited.limited, and in certain instances sales processes have been delayed or cancelled. The extent to which the coronavirus impactsCOVID-19 continues to impact our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain the coronavirusCOVID-19 or treat its impact. In particular, the continued spread of the coronavirus globally, could have a material adverse impact on our operations and workforce, including our marketing and sales activities and ability to raise additional capital, which in turn could have a material adverse impact on our business, financial condition and results of operation. 

May 2020 Public Offering

On May 8, 2020, we completed a public offering of (i) 1,925,001 units, each unit consisting of one share of common stock and one warrant to purchase one share of common stock at a price of $1.10, and (ii) 2,620,453 pre-funded units, each pre-funded unit consisting of one pre-funded warrant to purchase one share of common stock and one warrant, at a price of $1.099 per pre-funded unit. In connection with the public offering, we issued warrants to purchase an aggregate of 4,545,454 shares of common stock. The warrants have an exercise price of $1.10 per share of common stock, are exercisable upon issuance and will expire five years from the date of issuance. The exercise price of the warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the warrants.

The pre-funded warrants were immediately exercisable and was exercisable at a nominal consideration of $0.001 per share of common stock any time until all of the pre-funded warrants are exercised in full. During May 2020, all pre-funded warrants were exercised. A holder will not have the right to exercise any portion of the warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in such percentage shall not be effective until 61 days after such notice.

The net proceeds from the public offering were approximately $4.3 million, after deducting placement agent’s fees and other estimated offering expenses payable by us.

In connection with the public offering, we paid the placement agent a fees and expenses of $517,900 and issued to the placement agent’s designees placement agent warrants to purchase up to 272,727 shares of common stock. The placement agent warrants are substantially the same terms as the warrants, except they have an exercise price equal to 125% of the per share purchase price, or $1.375 per share, and expire on the five year anniversary of the effective date of the registration statement.

Pursuant to the anti-dilution adjustment provisions in outstanding warrants to purchase 144,277 shares of common stock, the per share exercise price was reduced to $0.9289, following the issuance of the securities in the public offering.

Nasdaq Continued Listing Deficiency

On January 22, 2019, we were notified by the Nasdaq Stock Market, LLC, or Nasdaq, that we were not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notification provided that we had 180 calendar days, or until July 22, 2019, to regain compliance with Nasdaq Listing Rule 5550(a)(2). 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. We did not regain compliance with the Rule by July 22, 2019, and, as a result, on July 23, 2019, we received notice from the Staff that, based upon our continued non-compliance with the Rule, the Staff had determined to delist our common stock from Nasdaq unless we timely request a hearing before the Nasdaq Hearings Panel, or the Panel.

On October 1, 2019, the Panel granted our request to continue the listing of our common stock on the Nasdaq Capital Market, subject to our satisfaction of certain conditions including, among other things, compliance with the minimum $1.00 bid price requirement by no later than January 20, 2020. In order to satisfy the minimum $1.00 bid price requirement and to make our common stock more attractive to certain institutional investors and thereby strengthen our investor base, we implemented a 1-for-15 reverse stock split of our outstanding shares of common stock. The reverse stock split was effective for Nasdaq Capital Market purposes at the open of business on November 19, 2019. Additionally, on November 19, 2019, we received formal notice from Nasdaq of our non-compliance with the minimum $2.5 million stockholders’ equity requirement, as set forth in Nasdaq Listing Rule 5550(b)(1). In accordance with the Nasdaq Listing Rules, we subsequently presented our plan to regain compliance with the stockholders’ equity rule for the Panel’s consideration. On February 7, 2020, we received a notification from the Staff that the Panel granted our request for continued listing on the Nasdaq Stock Market until May 18, 2020. On May 12, 2020, we received written notice from Nasdaq informing us that we have regained compliance with the continued listing requirements under the stockholders’ equity rule, and this matter is now closed. 

Reverse Stock Split

We implemented a 1-for-15 reverse stock split of our outstanding shares of common stock that was effective for Nasdaq Capital Market purposes at the open of business on November 19, 2019. All share and related option and warrant information presented in this prospectus supplement have been retroactively adjusted to reflect the reduced number of shares and the increase in the share price which resulted from this action.

Results of Operations

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

Six and Three Months Ended June 30, 2020March 31, 2021 Compared to Six and Three Months Ended June 30, 2019March 31, 2020

Revenues

From inception through December 31, 2018, we did notWe started to generate any revenue from operationsin 2019 and we continue to expect to incur additional losses to increase our sales and marketing efforts and to perform further research and development activities. We started to generate revenues only in 2019. Our revenues for the six months ended June 30, 2020 amounted to $51,000 compared to $25,000 for the six months ended June 30, 2019.

Our revenues for the three months ended June 30, 2020March 31, 2021 amounted to $21,000$27,000 compared to $5,000$30,000 for the three months ended June 30, 2019. The increase from both the six and three month corresponding period primarily resulted from increase in traffic, as measured by the MySizeID engine per the license agreements.March 31, 2020.

Research and Development Expenses

Our research and development expenses for the sixthree months ended June 30, 2020March 31, 2021 amounted to $688,000$373,000 compared to $671,000 for the six months ended June 30, 2019. The increase from the corresponding period primarily resulted from the hiring of new employees offset by expenses associated with share-based payments to our employees.

Our research and development expenses$348,000 for the three months ended June 30, 2020 amounted to $340,000 compared to $379,000 for the three months ended June 30, 2019.March 31, 2020. The decrease fromincrease in comparison with the corresponding period primarily resulted from decreasewas mainly due to an increase in expenses associated with share-based payments to our employees.shared based expenses.

Sales and Marketing Expenses

Our sales and marketing expenses for the sixthree months ended June 30, 2020March 31, 2021 amounted to $1,077,000$546,000 compared to $861,000$625,000 for the sixthree months ended June 30, 2019.March 31, 2020. The decrease in comparison with the corresponding period was mainly due to a decrease in digital marketing and a decrease in travel expenses.

General and Administrative Expenses

Our general and administrative expenses for the three months ended March 31, 2021 amounted to $624,000 compared to $516,000 for the three months ended March 31, 2020. The increase in comparison with the corresponding period was mainly due to an increase in payments to marketing consultants and hiring new sales consultants.

Our sales and marketing expenses for the three months ended June 30, 2020 amounted to $452,000 compared to $479,000 for the three months ended June 30, 2019. The decrease in comparison with the corresponding period was mainly due to a decrease in shared based payments and in travel expenses offset by an increase in payments to consultants and hiring new sales consultants and increase in marketing.

General and Administrative Expenses

Our general and administrative expenses for the six months ended June 30, 2020 amounted to $1,078,000 compared to $1,318,000 for the six months ended June 30, 2019. The decrease in comparison with the corresponding period was mainly due to a decrease in payroll expenses and share-based payments, offset by an increase in insurance expenses.

Our generalprofessional services and administrative expenses for the three months ended June 30, 2020 amounted to $562,000 compared to $710,000 for the three months ended June 30, 2019. The decrease in comparison with the corresponding period was mainly due to a decrease in payroll expenses and share-based payments offset by an increase in insurance expenses.

Operating Loss

As a result of the foregoing, for the six months ended June 30, 2020, our operating loss was $2,793,000, a decrease of $33,000, or 1%, compared to our operating loss for the six months ended June 30, 2019 of $2,826,000.

As a result of the foregoing, for the three months ended June 30, 2020,March 31, 2021, our operating loss was $1,333,000, a decrease$1,516,000, an increase of $230,000,$56,000, or 15%3.8%, compared to our operating loss for the three months ended June 30, 2019March 31, 2020 of $1,563,000.$1,460,000.

Financial Income, (Expenses), Net

Our financial income, net for the six months ended June 30, 2020 amounted to $30,000 as opposed to financial expenses of $67,000 for the six months ended June 30, 2019. During the six months ended June 30, 2020, we had financial income mainly from hedging activities and revaluation of investment in marketable securities whereas in the corresponding period we had financial expenses of $67,000 primarily due to exchange rate differences and revaluation of warrants. 

Our financial income, net for the three months ended June 30, 2020March 31, 2021 amounted to $29,000$59,000 compared to financial income of $197,000$1,000 for the three months ended June 30, 2019. During the three months ended June 30, 2020, we had financial income mainly from hedging activities whereasMarch 31, 2020. The increase in comparison with the corresponding period we had financial income primarilywas mainly due to the revaluation of warrants and revaluation of investment in marketable securities.

Net Loss

As a result of the foregoing research and development, sales and marketing, general and administrative expenses initialnet of revenues, and financial expenses, our net loss for the six months ended June 30, 2020 was $2,763,000, compared to net loss of $2,893,000 for the six months ended June 30, 2019, the decrease in the net loss was mainly due to the reasons mentioned above.

As a result of the foregoing research and development, sales and marketing, general and administrative expenses initial revenues, and financial expenses,income, our net loss for the three months ended June 30, 2020March 31, 2021 was $1,304,000,$1,457,000, compared to net loss of $1,366,000$1,459,000 for the three months ended June 30, 2019, the decrease in the net loss was mainly due to the reasons mentioned above.

March 31, 2020.

Liquidity and Capital Resources

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

As of June 30, 2020,March 31, 2021, we had cash, cash equivalents, restricted cash and restricted deposits of $4,824,000$6,023,000 compared to $1,466,000$1,958,000 of cash, cash equivalents and restricted cash as of December 31, 2019.2020. This increase primarily resulted from the registered directpublic offerings that we completed in January and March 2021 and proceeds from warrants that were exercised, as further described below.

On March 25, 2021, we completed an underwritten public offering and concurrent private placement resulting inof our common stock pursuant to which we issued 2,618,532 shares of our common stock at a public offering price of $1.26 per share for gross proceeds of approximately $3,300,000. We received net proceeds of $1,694,000 that was conductedapproximately $2,872,000, after deducting the underwriting discounts and commissions and estimated offering expenses. On May 7, 2021, we closed on the sale of an additional 392,780 shares of our common stock in January 2020 andconnection with the full exercise of the underwriters’ underwriter’s overallotment option granted in the March 2021 public offering. These additional shares were sold to the underwriter at a public offering price of $1.26 per share, resulting in additional net proceeds, after deducting the underwriting discount, of approximately $460,260.

Prior to that, resulted inon January 8, 2021, we completed an underwritten public offering of our common stock pursuant to which we issued 1,569,179 shares of our common stock at a public offering price of $1.28 per share for gross proceeds of approximately $2,008,000. We received net proceeds of $4,300,000 that was conductedapproximately $1,700,000, after deducting the underwriting discounts and commissions and estimated offering expenses. Furthermore, in May 2020 offset by our operating activities.

On September 13, 2019, we entered into an At the Market Offering Agreement with H.C Wainwright, LLC or Wainwright. AccordingJanuary and February 2021, a holder of warrants exercised warrants to the agreement, we may offer and sell, from time to time, our shares of common stock having an aggregate offering price of up to $5.5 million through Wainwright or the ATM Prospectus Supplement. From September 13, 2019 until January 15, 2020, we issued 87,756 shares of common stock at an average price of $4.77 per share through the ATM Prospectus Supplement, resulting in net proceeds of $418,524. We paid a commission equal to 3% of the gross proceeds from the salepurchase 725,000 of our ordinary shares of common stock under the ATM Prospectus Supplement. On January 15, 2020, we terminated the ATM Prospectus Supplement, but the offering agreement remains in full force and effect.exchange for $797,000.

Cash used in operating activities amounted to $2,625,000$1,271,000 for the sixthree months ended June 30, 2020,March 31, 2021, compared to $2,424,000$1,436,000 for the sixthree months ended June 30, 2019.March 31, 2020. The increasedecrease in cash used in operating activities was mainly due to stock based compensation offset by revaluation of warrantsinvestment in marketable securities, share based payments and derivatives.working capital.

Net cash provided byused in investing activities was $200,000$3,000 for the sixthree months ended June 30, 2020,March 31, 2021, compared to cash used in investing activities of $1,366,000$27,000 for the sixthree months ended June 30, 2019.March 31, 2020. The changedecrease from the corresponding period was mainly due to increaseinvestment in restricted deposits compared with proceeds from restricted deposits and from short term depositsright-of-use asset in the corresponding period compared to no investment in the current period.

Net cash provided by financing activities was $6,011,000$5,369,000 for the sixthree months ended June 30, 2020,March 31, 2021, compared to none$1,694,000 for the sixthree months ended June 30, 2019.March 31, 2020. The cash flow from financing activities for the sixthree months ended June 30, 2020March 31, 2021 resulted from the registered direct offering and concurrent private placement of our securitiespublic offerings that occurred in January 20202021 and the public offering of our securities in May 2020.March 2021 and from proceeds that were received from an investor for warrants that were exercised.

We do not have any material commitments for capital expenditures during the next twelve months.

We expect to continue to generate losses and negative cash flows from operations for the foreseeable future and expect to need to obtain additional funds in the future. Based on the projected cash flows and cash balances as of June 30, 2020,March 31, 2021, management is of the opinion that our existing cash will be sufficient to fund operations until the end of second quarter 2021.March 2022. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. However, 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:

Current conditions in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available only on unfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, the coronavirus outbreak,COVID-19 pandemic, economic conditions and a number of other factors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us. If we cannot raise additional capital when needed, it may have a material adverse effect on our business, results of operations and financial condition.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result in substantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the terms of such financings. In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we may need may not be available on terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to sell assets, perhaps on unfavorable terms, or we may have to cease our operations, which would have a material adverse effect on our business, results of operations and financial condition.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

Functional Currency

We reassessed our functional currency and determined to change its functional currency to the U.S. dollar from the NIS as of January 1, 2020. The change in functional currency was accounted for prospectively from that date. In 2019, we went through a strategic shift which involved a significant change in our business model, that clearly indicates that the functional currency has changed, beginning January 2020. In previous years, we acted as a platform to fund our operational subsidiary, My Size Israel, which conducts our research and development activities in NIS. Accordingly, we has not been substantially focused on our operating activities for that period. By the end of 2018, we transitioned to a new business model (B2B2C) and concluded that the main market that we should focus on would be the apparel market in the US. Consequently, we established marketing and distribution channels in the US along with having a new pricing model denominated in USD. Throughout 2019, we hired sales personnel which are based in the US and signed agreements with customers for which we began generating revenue in USD for the first time since it began its operations. Accordingly, by the end of 2019, we are no longer considered a ‘holding company’ for the matter of determining its functional currency under ASC 830 based on the currency of its operating entities. As a result of being an operational company that enters into operational agreements and generates revenues on an ongoing basis, our management has concluded that as of January 1 2020, the currency that most faithfully portrays the economic results of our operations is the U.S. dollar. 

My Size Israel functional currency remains the NIS.

Our presentation currency of the financial statements was and will remain U.S. dollar.

Application of Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this report, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.

Revenue from Contracts with Customers

The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09,Company implemented ASC 606, Revenue from ContractsContract with Customers (Topic 606) (ASU 2014-09), an updated standard on revenue recognition and issued subsequent amendments to the initial guidance in March 2016, April 2016, May 2016 and December 2016 within ASU 2016-08, 2016-10, 2016-12 and 2016-20, respectively (collectively, “ASC 606”). The core principle of the new standard is for companies to recognize revenue to depict the transfer of services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods and services. The Company has adopted the standard effective January 1, 2018.Customers.

To recognize revenue under ASC 606, the Company applies the following five steps:

The Company’s revenue is derived from the sale of cloud-enabled software subscriptions, associated software maintenance and support.

Revenue is recognized when a contract exists between the Company and a customer (business) and upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which may be capable of being distinct and accounted for as separate performance obligations. In case of offerings such as cloud-enabled subscription, other service elements in the contract are generally delivered concurrently with the subscription services and therefore revenue is recognized in a similar manner as the subscription services.

Product, Subscription and Services Offerings

Such performance obligations includes cloud-enabled subscriptions, software maintenance, training and technical support.

Fully hosted subscription services (SaaS) allow customers to access hosted software during the contractual term without taking possession of the software. Cloud-hosted subscription services are sold on a fee-per-subscription that is based on consumption or usage (per fit recommendation).

We recognize revenue ratably over the contractual service term for hosted services that are priced based on a committed number of transactions where the delivery and consumption of the benefit of the services occur evenly over time, beginning on the date the services associated with the committed transactions are first made available to the customer and continuing through the end of the contractual service term. Over-usage fees and fees based on the actual number of transactions are billed in accordance with contract terms as these fees are incurred and are included in the transaction price of an arrangement as variable consideration. Fees based on a number of transactions or impressions per month, are allocated to the period in which the transactions occur. Revenue for subscriptions sold as a fee per period is recognized ratably over the contractual term as the customer simultaneously receives and consumes the benefit of the underlying service.

Equity-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 option pricing-model.

We recorded stock options issued to non-employees at fair value, remeasured to reflect the current fair value at each reporting period and recognized expenses over the service period. The Company elected to early implement ASU 2018-07, Stock Compensation: Improvements to Nonemployee stock-Based Payment Accounting, from October 1, 2018.

In accordance with ASU 2018-07, we measured stock options at the implementation date and reclassified the stock based payments from a liability stock-based payments awards to equity stock-based payments awards. The fair value as of the implementation date will be recognized over the remaining service period. We estimate share option grant date fair value using the Binomial option-pricing model.

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. 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

Not required for a smaller reporting company.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2020.March 31, 2021. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, 2020March 31, 2021 were effective.

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Changes in Internal Controls

During the most recent fiscal quarter, no change has occurred in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

On August 7, 2018, we commenced an action against North Empire LLC, or North Empire, in the Supreme Court of the State of New York, County of New York for breach of a Securities Purchase Agreement or Agreement in which we are seeking damages in an amount to be determined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against us, also in the same Court, in which they allege damages in an amount of $11.4 million 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 us against them, alleging that we failed to deliver stock certificates to North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a third-party complaint against our CEO and now former Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, our 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. TheDiscovery has been completed and both parties are now engaging in discoveryhave filed motions for summary judgment in connection with the claims and counterclaims. We intend to vigorously defend any claims made by North Empire. 

Item 1A. Risk Factors.

Not required

We are substantially dependent on assets we purchased from a former related party, and if we lose the rights to such assets or the assets are repurchased for any reason, our ability to develop existing and new applications based upon these assets would be significantly harmed, and our business, results of operations and financial condition would be materially and adversely affected.

In February 2014, we entered into a Purchase Agreement with a former related party, Shoshana Zigdon, or the Seller, pursuant to which we acquired certain rights related to the collection of data for measurement purposes including rights in the venture, the method and a patent application that had been filed by the Seller (PCT/IL2013/050056), or the Assets. Our business is substantially dependent upon the Assets we acquired pursuant to the Purchase Agreement. Therefore, our ability to develop and commercialize our applications depends upon the effectiveness and continuation of the Purchase Agreement. If we lose the rights, including the rights to the patent that comprise the Assets, our ability to develop existing and new applications would be harmed. In consideration for the sale of the Assets, we agreed to pay to Ms. Zigdon, 18% of our operating profit, directly or indirectly connected with the Assets together with value-added tax in accordance with the Israeli tax law for a smaller reporting company.period of seven years from the end of the development period of the aforementioned venture.

The Purchase Agreement may be terminated by either party in the event of an uncured material breach. The Purchase Agreement further provides that the Seller is entitled to repurchase the Assets from us upon the occurrence of one or more of the following events: (a) in the case of liquidation or bankruptcy of the Company; or (b) if on the seventh anniversary of the execution of the Purchase Agreement, the amount of our income, directly and/or indirectly derived from the Assets is less than NIS 3.6 million (approximately $1 million). As of the date of this Quarterly Report on Form 10-Q, we have only generated limited revenue and as a consequence of the passage of seven years since execution of the Purchase Agreement, Ms. Zigdon, has a right to repurchase the Assets until June 16, 2021 at the market price of the Assets as determined by a third party independent valuation. In accordance with the Purchase Agreement, on March 7, 2021, we notified Ms. Zigdon that the amount of our income, directly and/or indirectly derived from the Assets is less than NIS 3.6 million. We are currently negotiating the waiver of Ms. Zigdon’s right to repurchase of the Assets and in consideration of such waiver expect to pay cash or issue shares of common stock and/or common stock equivalents, or a combination of both. At this stage, we are unable to estimate the amount or form of consideration that we will expect to pay or other terms to which we would agree in consideration of the waiver. To the extent that we pay cash, this could materially reduce the amount of cash available for working capital and other purposes and to the extent we issue any equity this could result in substantial dilution to you and our then current stockholders. There is no assurance that we will reach agreement with Ms. Zigdon regarding the waiver. If Ms. Zigdon exercises her right to repurchase the Assets, our ability to develop and commercialize our products would be significantly harmed and we may cease operations.

Our business could be negatively affected as a result of a potential proxy contest for the election of directors at our annual meeting or other stockholder activism.

In May 2021, we received notice from a purported stockholder of its intention to nominate four candidates to stand for election to our Board of Directors at our 2021 annual meeting of stockholders. If this purported stockholder or any other stockholder engages in a proxy contest or other stockholder activism, we could incur significant legal fees and proxy solicitation expenses, and such actions would require significant time and attention by management and our Board of Directors. The potential of a proxy contest or other stockholder activism could interfere with our ability to execute our strategic plan, give rise to perceived uncertainties as to our future direction, adversely affect our relationships with key business partners, result in the loss of potential business opportunities or make it more difficult to attract and retain qualified personnel, any of which could materially and adversely affect our business and operating results. The market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties related to any such stockholder activism.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In June 2020, we entered into a consulting agreement with a consultant pursuant to which we agreed upon the three-month anniversary of the agreement to issue a warrant to purchase up to 7,500 shares of our common stock. The warrants are exercisable at $1.30 per share and have a term of 18 months from the date of issuance. The securities above were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering. None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

29