My Size Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
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Notes to Condensed Consolidated Interim Financial Statements
Note 1 -General
| a. | My Size, Inc. (the “Company”) is developing unique measurement technologies based on algorithms with applications in a variety of areas, including the apparel e-commerce market, the courier services market and 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, the Company expanded its offering outreach and customer base. Following the acquisition of Orgad International Marketing Ltd. (“Orgad”) in February 2022, 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 is incorporated in the Russian Federation, and Naiz, a limited liability company incorporated under the laws of Spain. 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. On July 25, 2016, the Company’s common stock began publicly trading on the Nasdaq Capital Market under the symbol “MYSZ”. From September 1, 2005 to March 27, 2024, the Company’s common stock was traded on the Tel Aviv Stock Exchange. |
| b. | Since inception, the Company has incurred significant losses and negative cash flows from operations and had an accumulated deficit of $63,161. 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 September 30, 2024, management is of the opinion that its 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 the Company’s ability to continue as a going concern. Management’s plans include the continued commercialization of the Company’s products, reduction in its operating expenses and net losses 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. |
| c. | 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. In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and on other fronts from various extremist groups in region, such as the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. Israel has carried out a number of targeted strikes on sites belonging to these terror organizations and in October 2024, Israel began limited ground operations against Hezbollah in Lebanon. In addition, Iran recently launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel and is widely believed to be developing nuclear weapons. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. Such clashes may escalate in the future into a greater regional conflict. |
| The security situation in Israel 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 in 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 is expected to close down its subsidiary, My Size LLC, but due to technical reasons it is expected to occur in the near future; therefore, the impact from the current situation is very limited. |
Note 2 -Significant Accounting Policies
| a. | Unaudited condensed consolidated financial statements: |
| The accompanying unaudited condensed consolidated interim financial statements included herein have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements are comprised of the financial statements of the Company. In management’s opinion, the interim financial data presented includes all adjustments necessary for a fair presentation. All intercompany accounts and transactions have been eliminated. Operating results for the three months and nine months ended September 30, 2024, and 2023 and cash flows for the nine months ended September 30, 2024, and 2023 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2024. | |
| These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2023. | |
| b. | Significant Accounting Policies: |
| The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements. | |
| c. | Critical accounting estimates: |
| ASC 350 requires goodwill to be tested for impairment at the reporting unit level at least annually, or between annual tests under 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. | |
| An impairment charge of $631 was recorded 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 Solution segment for three months ended September 30, 2024. See note 6- Goodwill. | |
| d. | Recent adopted accounting pronouncements: |
| 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. The ASU do not have a material impact on the Company consolidated financial statements. | |
| In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard became effective for the Company beginning on January 1, 2024. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company adopted this guidance effective January 1, 2024, and the adoption of this standard did not have a material impact on its consolidated financial statements. |
| e. | Recently issued accounting standards not yet adopted: |
| In November 2024, the FASB issued ASU No. 2024-03 Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The ASU improves the disclosures about a public business entity’s expenses and provides more detailed information about the types of expenses in commonly presented expense captions. The amendments require that at each interim and annual reporting period an entity will, inter alia, disclose amounts of purchases of inventory, employee compensation, depreciation and amortization included in each relevant expense caption (such as cost of sales, SG&A and research and development). | |
| The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures. |
Note 3 –Financial Instruments
The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, other receivables, trade payables, accounts payable and short and long term loans approximate their fair value due to the short-term maturities of such instruments.
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 assets.
| Fair value hierarchy | |||
|---|---|---|---|
| Level 1 | Level 2 | Level 3 | |
| Financial assets | |||
| Investment in marketable securities (*) | - | 7 | - |
Note 3 - Financial Instruments (Cont.)
| Fair value hierarchy | |||
|---|---|---|---|
| Level 1 | Level 2 | Level 3 | |
| Financial assets | |||
| Investment in marketable securities (*) | - | 6 | - |
| (*) | For the nine and three-month periods ended September 30, 2024 and 2023, the Company recognized gain (loss) (based on quoted market prices with a discount due to security restrictions on iMine shares) of the marketable securities was $1, $(21), $(3) and $(7), respectively. |
|---|
Note 4 -Stock Based Compensation
The stock-based expense equity awards recognized in the financial statements for services received is related to Cost of Revenues, Research and Development, Sales and Marketing and General and Administrative expenses as shown in the following table:
| Nine months ended September 30, | Three months ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Stock-based compensation expense – Cost of revenues | 1 | 19 | - | 4 |
| Stock-based compensation expense - Research and development | 45 | 51 | 16 | 22 |
| Stock-based compensation expense - Sales and marketing | 37 | 71 | 13 | 16 |
| Stock-based compensation expense - General and administrative | 226 | 149 | 60 | 26 |
| Stock-based compensation expense | 309 | 290 | 89 | 68 |
Note 4 - Stock Based Compensation (Cont.)
Stock Option Plan for Employees:
In March 2017, the Company adopted the My Size, Inc. 2017 Equity Incentive Plan (the “2017 Employee Plan”) pursuant to which the Company’s Board of Directors may grant stock options and other equity awards to officers and key employees. The total number of shares of common stock which may be granted to directors, officers, employees under this plan, is limited to 130,000 shares. 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.
On December 27, 2023, the Company’s stockholders approved an increase in the shares available for issuance under the 2017 Equity Incentive Plan from 36,125 shares to 130,000 shares.
On February 14, 2024, the Compensation Committee of the Company granted restricted common stock awards under the Company’s 2017 Equity Incentive Plan to Ronen Luzon, Or Kles and Billy Pardo, pursuant to which they were issued 37,500 restricted shares,18,750 restricted shares and 18,750 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 10,000 restricted stock units (“RSUs”) to its directors that will vest on January 1, 2025 andfive-years options to purchase up to 6,875 shares of common stock to other employees of the Company at an exercise price of $3.832 per share. The option vesting period is over three years in three equal portions from the vesting commencement date.
The compensation cost resulting from the grant is approximately $314 and is expected to be recognized over a period of 3 years.
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
| 2024 Grants | |
|---|---|
| Dividend yield | 0% |
| Expected volatility | 86.22% |
| Risk-free interest | 4.3% |
| Contractual term | 2.0-2.8 |
During the nine and three-month periods ended September 30, 2024, the Company granted options, restricted stock and RSUs to purchase 91,875 and 0 shares of common stock under the 2017 Employee Plan (as described above), respectively. Nooptions were exercised and 6,657 options expired.
The total stock option compensation expense for employees during the nine and three-month periods ended September 30, 2024 and 2023 was $235, $214, $89 and $52, respectively.
The total stock option compensation expense relating to the Orgad acquisition during the nine and three-month periods ended September 30, 2024 and 2023 was $3, $0, $76 and $16, respectively.
Options issued to consultants:
In July 2023, the Company entered into a six month agreement (the “Consultant Agreement”) with a consultant (the “Consultant”) to provide services to the Company, including assisting the Company to promote, market and sell the Company’s technology to potential customers and make strategic introductions and inquiries with interested parties in the financial community. Pursuant to the Consultant Agreement and in partial consideration for such consulting services, the Company issued to the Consultant(i) 5,000 shares of restricted common stock of the Company, (ii) a warrant to purchase 12,500 shares of common stock at an exercise price of $4.00 per share and exercisable for a term of 36 months from the date of issuance, and (iii) a warrant to purchase 12,500 shares of common stock at an exercise price of $6.00 per share and exercisable for a term of 36 months from the date of issuance.
The issuance was approved by the Company’s board of directors in February 2024.
During the nine and three-month periods ended September 30, 2024, the Company recorded $71 and $0, respectively, as stock-based equity awards with respect to the Consultant. No expenses were recorded in the fiscal year ended December 31, 2023 with respect to the Consultant.
Note 5 -Contingencies and Commitments
| a. | 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. 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. In October, 2024, the parties agreed on settlement terms and are finalizing the settlement documents, including a global settlement with a third party with related claims. The Company recognized a loss of approximately $40 from the settlement agreement. After the parties sign the settlement agreement, the Company will file the stipulation to discontinue. |
| b. | In July 2024, the Company was served with a legal complaint filed by Shimon Shukron in the Magistrate’s Court in Herzliya for a monetary award in an amount of NIS 1,895,345 (approximately $510). The plaintiff alleges that due to the fire that broke out at Orgad’s warehouse in January 2023, the fire spread to the plaintiff’s business and caused heavy damage to the structure and contents, inventory of the business and loss of profits. The Company filed its statement of defense in September 2024. At this preliminary stage, the plaintiff did not provide sufficient documents to support his claims regarding the extent of the alleged damage. The Company is working on its damage evaluation analysis. As such, the Company cannot evaluate the chances of the claim to succeed. |
Note 6 -Goodwill
As of September 30, 2024, the Company has experienced a triggering event in the reporting period due to sustained decreases in the Company’s share price and a decline in actual and forecasted operating results, prompting impairment assessments of goodwill and long-lived assets including definite-lived intangibles.
The table below indicates changes in the most significant inputs to the Company’s impairment analysis on each testing date since its last annual test for the SaaS based innovative artificial intelligence driven measurement solutions segment.
| Discount rate | Terminal growth rate | Revenue growth rate | |
|---|---|---|---|
| Testing dates | |||
| December 31, 2023 | 25% | 3% | 15%-70% |
| September 30, 2024 | 25% | 3% | 4%-32% |
In September 2024, the Company updated the forecasted future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect current conditions. Other changes in valuation assumptions included selection of lower revenue growth rates based upon an assessment of current market conditions. As a result of this review, the Company did not identify an impairment to its definite-lived intangible assets or other long-lived assets, but the Company recorded a $631 non-deductible goodwill impairment charge for the quarter ended September 30, 2024 (level 3 fair value measurement).
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 nine months ended September 30, 2024.
The table below indicates changes in the most significant inputs to the Company’s impairment analysis on each testing date since its last annual test for Fashion and equipment e-commerce platform segment.
| Discount rate | Terminal growth rate | Revenue growth rate | |
|---|---|---|---|
| Testing dates | |||
| December 31, 2023 | 21.5% | 3% | 12.4%-50% |
| September 30, 2024 | 22% | 3% | 7.5%-36.5% |
In September 2024, the Company updated the forecasted future cash flows used in the impairment assessment, including revenues, margin, and capital expenditures to reflect current conditions. Other changes in valuation assumptions included selection of lower revenue growth rates based upon an assessment of current market conditions. As a result of this review, the Company did not identify an impairment to its definite-lived intangible assets or other long-lived assets or for its goodwill for the quarter ended September 30, 2024 (level 3 fair value measurement).
After the restructuring, the aggregate carrying amounts of goodwill allocated to each reporting unit are as follows:
| 2024 | 2023 | |
|---|---|---|
| SaaS Solutions | - | 1,273 |
| Fashion and equipment e-commerce platform | 131 | 128 |
| Total | 131 | 1,401 |
Note 7 –Operating Segments
Effective July 1, 2023, the Company merged its two SaaS segments into one segment, reducing its reportable segments from three to the followingtwo 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.
Information related to the operations of the Company’s reportable operating segments is set forth below:
| Fashion and equipment e-commerce platform | SaaS Solutions | Total | |
|---|---|---|---|
| Revenues from external customers | 6,290 | 512 | 6,802 |
| Operating loss | (2,155) | (1,099) | (3,254) |
| Fashion and equipment e-commerce platform | Saas Solution | |
|---|---|---|
| As of September 30, 2024: | 5,109 | 1,923 |
| Assets | ||
| Fashion and equipment e-commerce platform | SaaS Solutions | Total | |
|---|---|---|---|
| Revenues from external customers | 3,732 | 434 | 4,166 |
| Operating loss | (2,936) | (2,215) | (5,151) |
Note 7 – Operating Segments (Cont.)
| Fashion and equipment e-commerce platform | SaaS Solutions | Total | |
|---|---|---|---|
| Revenues from external customers | 1,667 | 172 | 1,839 |
| Operating loss | (1,113) | (193) | (1,306) |
| Fashion and equipment e-commerce platform | SaaS Solutions | Total | |
|---|---|---|---|
| Revenues from external customers | 1,994 | 162 | 2,156 |
| Operating loss | (440) | (665) | (1,105) |
| Fashion and equipment e-commerce platform | SaaS Solutions | Total | |
|---|---|---|---|
| Revenues from external customers | 6,367 | 629 | 6,996 |
| Operating loss | (3,356) | (3,385) | (6,741) |
| Fashion and equipment e-commerce platform | SaaS Solutions | |
|---|---|---|
| As of December 31, 2023: | ||
| Assets | 6,352 | 2,639 |
Note 8 –Significant events during the reporting period
| a. | Further to note 16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on April 1, 2024, the Company agreed to pay to the former owners of Orgad on the two-year and the three-year anniversary of the closing of the transaction pursuant to which the Company acquired 100% of the shares and voting interests in Orgad, $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. In February 2024, the amount of $700 was fully paid to the former owners of Orgad net of a settlement amount of $275. |
| b. | On January 8, 2024, the Company provided a notice of six month termination to the lessor that the office lease agreement will end on July 8, 2024 instead of August 20, 2025. |
| As a result the Company reduced its “Right of use asset” against current liabilities as “Operating lease liability” and in the non-current liabilities as “Operating lease liability – long term” on the Company’s September 30, 2024 consolidated balance sheets in an amount of $181. | |
| c. | During February 2024, the Company received a loan from a commercial lender in an amount of $500. The loan bears interest at a fix rate of 6% of the principal and payable in installments during six month term. The Company repaid the loan in full by August 2024. |
| d. | On April 19, 2024, the Company effected a one-for-eight reverse stock split of its common stock (the “Reverse Stock Split”) with the Company’s shares beginning trading on a post-split basis on the Nasdaq Capital Market on April 23, 2024. Upon the effectiveness of the Reverse Stock Split, every eight shares of the Company’s issued and outstanding common stock was automatically converted into one share of common stock, without any change in the par value per share. In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding options and warrants entitling the holders to purchase common stock. Any fraction of a share of common stock that would otherwise have resulted from the Reverse Stock Split was rounded up to the next whole number. |
| e. | 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) (the “Rule”) for continued listing on the Nasdaq. The Notification Letter provided that the Company had 180 calendar days, or until May 1, 2024, to regain compliance with the Rule. To regain compliance, the bid price of the Company’s common stock must have had a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. On May 7, 2024, the Company received a letter from Nasdaq that, for the 10 consecutive business days from April 23, 2024 to May 6, 2024, the closing bid price of the Company’s common stock had been at $1.00 per share or greater. Accordingly, the Company has regained compliance with Nasdaq Listing Rule 5550(a)(2) and Nasdaq considers the prior bid price deficiency matter now closed. |
| f. | On May 16, 2024, 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) 326,514 shares of the Company’s common stock issued on August 28, 2023 with a twenty-eight month term at an exercise price of $16.72 per share and (ii) 344,475 shares of the Company’s common stock issued on August 28, 2023 with a five and one-half year term at an exercise price of $16.72 per share, ((i) and (ii) collectively, the “Existing Warrants). Pursuant to the Inducement Letter, the Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 670,989 shares of the Company’s common stock at a reduced exercise price of $4.86 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 1,341,978 shares of the Company’s common stock, at an exercise price of $4.61 per share. The Company received aggregate gross proceeds of approximately $3.26 million from the exercise of the Existing Warrants by the Holder, before deducting placement agent fees and other offering expenses payable by the Company. As of September 30, 2024, the Company issued to the Holder 452,989 of the shares exercised with the remaining 218,000 share held in abeyance. The Company engaged H.C. Wainwright & Co., LLC (the “Placement Agent”) to act as its exclusive placement agent in connection with the transactions contemplated by the Inducement Letter and paid the Placement Agent a cash fee equal to 7.0% of the aggregate gross proceeds received from the Holder’s exercise of the Existing Warrants, as well as a management fee equal to 1.0% of the gross proceeds from the exercise of the Existing Warrants. Upon exercise for cash of any New Warrants, the Company has agreed in certain circumstances to pay the Placement Agent a cash fee of 7.0% of the aggregate gross exercise price paid in cash with respect the exercise of the New Warrants, and a management fee of 1.0 % of the aggregate gross exercise price paid in cash with respect to the New Warrants. The Company also issued to the Placement Agent or its designees warrants (the “Placement Agent Warrants”) to purchase up to 46,969 shares of common stock (representing 7.0% of the Existing Warrants being exercised), which have the same terms as the New Warrants except the Placement Agent Warrants have an exercise price equal to $6.075 per share (125% of the reduced exercise price of the Existing Warrants). Similar to the New Warrants, the Placement Agent Warrants were immediately exercisable from the date of issuance until the five and one-half year anniversary of such date. In addition, the Company paid the Placement Agent up to $85 for non-accountable expenses and other out-of-pocket expenses and $16 for clearing fees. |
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