Nexera Technologies Ltd 6-K, filed Sep 30, 2024
Nexera Technologies Ltd (NEXR)
About this 6-K
Nexera Technologies Ltd filed this 6-K on September 30, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For the month of September
Commission file number:
(Translation of registrant’s name into English)
7 Mezada St.
Bnei Brak, Israel 5126112
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
CONTENTS
This Report of Foreign Private Issuer on Form 6-K (this “Form 6-K”) consists of Jeffs’ Brands Ltd’s (the “Company”): (i) Unaudited Condensed Consolidated Financial Statements as of, and for the six months ended, June 30, 2024, which are attached hereto as Exhibit 99.1; and (ii) Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2024, which is attached hereto as Exhibit 99.2.
This Form 6-K is incorporated by reference into the Company’s Registration Statement on Form F-3 (File No. 333-277188) and Registration Statements on Form S-8 (File No. 333-269119 and File No. 333-280459), to be a part thereof from the date on which this Form 6-K is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
1
EXHIBIT INDEX
| Exhibit No. | ||
| 99.1 | Jeffs’ Brands Ltd’s Unaudited Condensed Consolidated Financial Statements as of, and for the six months ended, June 30, 2024. | |
| 99.2 | Jeffs’ Brands Ltd’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2024. | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
2
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.
| Jeffs’ Brands Ltd | ||
| Date: September 30, 2024 | By: | /s/ Ronen Zalayet |
| Ronen Zalayet | ||
| Chief Financial Officer | ||
3
Exhibit 99.1
JEFFS’ BRANDS LTD
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Page | |
| Condensed Consolidated Financial Statements as of, and for the six months ended, June 30, 2024 | |
| Condensed Consolidated Balance Sheets (unaudited) | 2 |
| Condensed Consolidated Statements of Operations (unaudited) | 3 |
| Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) | 4 |
| Condensed Consolidated Statements of Cash Flows (unaudited) | 5 |
| Notes to the Condensed Consolidated Financial Statements | 6 |
1
JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||||
| Note | 2024 | 2023 | ||||||||
| Unaudited | ||||||||||
| USD in thousands | ||||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | ||||||||||
| Restricted deposit | ||||||||||
| Trade receivables | ||||||||||
| Other receivables | ||||||||||
| Related party receivables | 9 | |||||||||
| Inventory | ||||||||||
| Total current assets | ||||||||||
| NON-CURRENT ASSETS: | ||||||||||
| Property and equipment, net | ||||||||||
| Investment accounted for using the equity method | ||||||||||
| Investment at fair value | ||||||||||
| Intangible assets, net | 5 | |||||||||
| Deferred taxes | ||||||||||
| Operating lease right-of-use assets | ||||||||||
| Total non-current assets | ||||||||||
| TOTAL ASSETS | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Trade payables | ||||||||||
| Other payables | ||||||||||
| Related party payables | 9 | |||||||||
| Total current liabilities | ||||||||||
| NON-CURRENT LIABILITIES: | ||||||||||
| Derivative liabilities | 7 | |||||||||
| Operating lease liabilities | ||||||||||
| Total non-current liabilities | ||||||||||
| TOTAL LIABILITIES | ||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||
| Ordinary shares, par value per share - Authorized: | ||||||||||
| Additional paid-in-capital | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
2
JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Six months ended June 30, |
||||||||||||
| U.S. dollars in thousands (*) | ||||||||||||
| Unaudited | ||||||||||||
| Note | 2024 | 2023 | ||||||||||
| Revenues | ||||||||||||
| Cost of sales | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Sales and marketing | ||||||||||||
| General and administrative | ||||||||||||
| Equity losses | ||||||||||||
| Other income | ( | ) | ( |
) | ||||||||
| Operating loss | ( | ) | ( |
) | ||||||||
| Financial expenses (income), net | 8 | ( |
) | |||||||||
| Loss before taxes | ( | ) | ( |
) | ||||||||
| Tax expenses | ||||||||||||
| Net loss for the period | ( | ) | ( |
) | ||||||||
| Loss per ordinary share (basic and diluted) | ( | ) | ( |
)(**) | ||||||||
| Weighted-average ordinary shares used in computing net loss per share, basic and diluted | (**) | |||||||||||
| (*) | |
| (**) |
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
3
JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY
Six Months Ended June 30, 2024 (Unaudited)
| Ordinary Shares | Additional paid-in- | Accumulated | ||||||||||||||||||
| Number | Amount | capital | deficit | Total | ||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | ( | ) | ||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| Issuance of ordinary shares pre-funded warrants and warrants, net (note 4a.) | ||||||||||||||||||||
| Exercise of Series B Warrants (note 4a.) | ||||||||||||||||||||
| Exercise of Pre-Funded Warrants (note 4a.) | ||||||||||||||||||||
| BALANCE AT JUNE 30, 2024 | ( | ) | ||||||||||||||||||
Six Months Ended June 30, 2023 (Unaudited)
| Ordinary Shares | Additional paid-in- | Accumulated | ||||||||||||||||||
| Number | Amount | capital | deficit | Total | ||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | ( | ) | ||||||||||||||||||
| Net loss for the period | - | ( | ) | ( | ) | |||||||||||||||
| Issuance of ordinary shares to SciSparc Ltd. (see note 3b.) | ||||||||||||||||||||
| BALANCE AT JUNE 30, 2023 | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
4
JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Unaudited | ||||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES: | ||||||||
| Net loss for the period | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash from (used in) operating activities: | ||||||||
| Exchange differences on cash and cash equivalent | ||||||||
| Finance expenses on lease liabilities | ( | ) | ||||||
| Amortization of intangible assets | ||||||||
| Depreciation | ||||||||
| Loss from change in the fair value of a financial asset at fair value | ||||||||
| Equity losses | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Changes in deferred taxes, net | ( | ) | ( | ) | ||||
| Issuance costs of financial instruments classified as derivative liabilities | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in trade receivables | ||||||||
| Increase in related parties balance | ( | ) | ( | ) | ||||
| Decrease (increase) in operating lease right-of-use assets | ( | ) | ||||||
| Increase (decrease) in operating lease liabilities | ( | ) | ||||||
| Decrease in other receivables | ||||||||
| Increase in inventory | ( | ) | ( | ) | ||||
| Increase (decrease) in accounts payable and other payables | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of investment accounted for using the equity method (see note 3.a) | ( | ) | ( | ) | ||||
| Purchase of intangible asset (see note 5) | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | ||||||||
| Short term loan repaid | ( | ) | ||||||
| Issuance of ordinary shares, pre-funded warrants and warrants, net | ||||||||
| Net cash from (used in) financing activities | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD | ||||||||
| LOSSES FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENTS AT END OF THE PERIOD | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Taxes paid | ||||||||
| Interest paid | ||||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Issuance of ordinary shares to SciSparc Ltd. in consideration for ordinary shares (see note 3.b) | ||||||||
| Consideration payable to sellers of Fort Products Ltd. included in other payables | ||||||||
| Consideration payable to seller of SciSparc Nutraceuticals Inc. shares included in other payables | ||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
5
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — GENERAL INFORMATION
| a. | General |
Jeffs’ Brands Ltd (the “Company”
or “Jeffs’ Brands”) was incorporated in Israel on
References to the Company hereinafter, unless the context otherwise provides, include Jeffs’ Brands and the Subsidiaries on a consolidated basis.
Smart Pro, a corporation incorporated under the laws of the State of California, was established on December 20, 2017, and commenced its operations in June 2019. As of June 30, 2024, Smart Pro operated four Brands on the Amazon website.
In April 2021, Top Rank, an Israeli company, was incorporated as a wholly owned subsidiary of Jeffs’ Brands.
On February 23, 2023, Jeffs’ Brands Holdings was incorporated and registered under the laws of the State of Delaware as a wholly owned subsidiary of Jeffs’ Brands.
On February 23, 2023, the Company purchased
approximately
On March 9, 2023, the Company purchased all of the issued and outstanding share capital of Fort, a company incorporated under the laws of England and Wales. For additional information see note 5.
On April 23, 2023, Fort US was incorporated and registered under the laws of the State of Delaware as a wholly owned subsidiary of Jeffs’ Brands Holdings.
| b. | Concentration Risk |
The Group’s activities are mainly conducted through Amazon’s commercial platform. Any material change, whether temporary or permanent, including changes in Amazon’s terms of use and/or its policies, may affect sales performance, and may have a material effect on the Group’s financial position and the results of its operations.
In addition, the Group is engaged with a small number of suppliers as part of the production process of its brands. Any material changes in the supply process, whether temporary or permanent, may affect sales performance, and may have a material effect on the Group’s financial position and the results of its operations.
6
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — GENERAL INFORMATION (cont.)
| c. | Liquidity |
During the six months ended June 30,
2024, the Group incurred a net loss of $
The Group intends to continue to finance its operating activities through the sale of products via the Brands and through raising additional capital, as needed.
On January 29, 2024, the Company completed
a private placement transaction (the “Private Placement”), pursuant to a Securities Purchase Agreement with certain
institutional investors for aggregate gross proceeds of approximately $
The Company’s negative cash flow from operations resulted, among
other things, from purchase of inventory of $
NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
| a. | Unaudited Interim Financial Statements |
The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2023.
| b. | Principles of Consolidation |
The accompanying condensed consolidated financial statements include the accounts of the Group. All intercompany balances and transactions have been eliminated in consolidation.
7
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)
| c. | Use of estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment, derivative liability, useful lives of intangible assets, intangible assets impairment as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates.
In the preparation of these condensed consolidated financial statements, the significant judgments exercised by management in the application of the Group’s accounting policies and the uncertainty involved in the key sources of those estimates were identical to the ones used in the Group’s consolidated financial statements for the year ended December 31, 2023.
| d. | 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 Group’s financial statements for the year ended December 31, 2023.
| e. | Recent Accounting Pronouncements not yet adopted |
In December 2023, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disclosure of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold. The ASU also includes other changes to improve the effectiveness of income tax disclosures, including further disaggregation of income taxes paid for individually significant jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024. Adoption of this ASU should be applied on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly reviewed by the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU also allows, in addition to the measure that is most consistent with U.S. GAAP, the disclosure of additional measures of segment profit or loss that are used by the CODM in assessing segment performance and deciding how to allocate resources. The ASU is effective for the Company’s Annual Report on Form 20F for the fiscal year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.
8
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 — INVESTMENT IN AFFILIATE
| a. | On February
23, 2023, the Company and Jeffs’ Brands Holdings entered into a stock purchase agreement (as amended on March 22, 2023, the “Wellution
Agreement”), with SciSparc Ltd. (“SciSparc”), pursuant to which, on March 22, 2023, Jeffs’ Brands
Holdings acquired from SciSparc |
In connection with the closing of the
Wellution Agreement, on March 22, 2023, the Company entered into a consulting agreement with SciSparc U.S. (the “SciSparc Consulting
Agreement”), pursuant to which the Company will provide management services to SciSparc U.S. for the Wellution brand for a monthly
fee of $
Jeffs’ Brands Holdings owns
The Company did not obtain any substantive processes, assembled workforce, or employees capable of producing outputs in connection with the acquisition. Therefore, the transaction was accounted for as an asset acquisition, as the acquired assets did not meet the definition of a business as defined by ASC 805, Business Combinations.
| January 1, 2024 – June 30, 2024 | ||||
| USD in thousands | ||||
| Balance as of January 1, 2024 | ||||
| Equity losses | ( | ) | ||
| Balance as of June 30, 2024 | ||||
9
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 — INVESTMENT IN AFFILIATE (cont.)
Summarized financial information:
| January 1, 2024 – June 30, 2024 | February 23, 2023 – June 30, 2023 | |||||||
| USD in thousands | ||||||||
| Revenues | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| b. | Pursuant to the Wellution Agreement, in connection with the closing of the Wellution Agreement, on March 22, 2023, the Company issued |
The investment in SciSparc was accounted for as financial asset through profit and loss.
| January 1, 2024 – June 30, 2024 | ||||
| USD in thousands | ||||
| Balance as of January 1, 2024 | ||||
| Revaluation losses | ( | ) | ||
| Balance as of June 30, 2024 | ||||
10
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 — SIGNIFICANT EVENTS DURING THE PERIOD
| a. | On January 25, 2024, the Company entered into
a Securities Purchase Agreement with certain institutional investors for aggregate gross proceeds of $
As part of the Securities Purchase Agreement, the Company issued an
aggregate of (i)
L.I.A. Pure Capital Ltd. (“Pure Capital”) participated
in the private placement as a purchaser and purchased securities in the amount of $
The number of Ordinary Shares issuable under the Series A and Series B Warrant was subject to an adjustment determined by the trading price of the Ordinary Shares following the effectiveness of a resale registration statement (the “Resale Registration Statement”) (see below) that the Company undertook to file, subject to a pricing floor of $
Following the effectiveness of the Resale Registration Statement, on
March 11, 2024 (i) Series A Warrants are exercisable into a total number of |
As of the date of these consolidated
financial statements, pre-funded warrants to purchase
In connection with the Private Placement,
the Company also entered into a placement agent agreement (the “Placement Agent Agreement”) with Aegis Capital Corp.
(“Aegis”) dated January 25, 2024, pursuant to which Aegis agreed to serve as the exclusive placement agent for the
Company in connection with the Private Placement. The Company agreed to pay Aegis a cash placement fee equal to
| b. | On April 25, 2024, the Company received a written notification from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”), notifying that the Company was not in compliance with the minimum bid price requirement for continued listing on Nasdaq, as set forth under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), because the closing bid price of the Ordinary Shares was below $
In the event that the Company does not regain compliance after the initial 180-day period, the Company may then be eligible for an additional 180-day compliance period if the Company meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq. |
11
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 — INTANGIBLE ASSETS
| June 30, 2024 | ||||||||||||
| Gross Amount | Accumulated Amortization | Net Balance | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Brands | ( | ) | ||||||||||
| December 31, 2023 | ||||||||||||
| Gross Amount | Accumulated Amortization | Net Balance | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Brands | ( | ) | ||||||||||
Amortization expense was $
| a. | On March 2, 2023, the Company entered into a share purchase agreement (the “Fort SPA”), with the holders (the “Sellers”), of all of the issued and outstanding share capital of Fort, a company incorporated under the laws of England and Wales and engaged in the sale of pest control products primarily through Amazon.uk, pursuant to which on March 9, 2023, the Company acquired all of the issued and outstanding share capital of Fort, for approximately £ |
On February 29, 2024, the Company entered
into a side letter to the Fort SPA with the Sellers, pursuant to which the Company agreed to increase certain adjustment amount payments
to the Sellers by approximately £
On March 9, 2023, the Company recognized the amount of $
As part of the Fort SPA, the employment of these employees was terminated within three months, with all termination costs to be borne by the Sellers.
Also, in connection with the
closing of the Fort Acquisition, on March 9, 2023, Fort and the Sellers entered into a consulting agreement, pursuant to which the
Sellers will provide the Company with consultancy services for a period of six months following the closing, at a monthly fee of
£
The Company did not obtain any substantive processes, assembled workforce, or employees capable of producing outputs in connection with the acquisition. Therefore, the transaction was accounted for as an asset acquisition, as the acquired assets did not meet the definition of a business as defined by ASC 805, Business Combinations.
12
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 — OTHER PAYABLES
| June 30, 2024 | December 31, 2023 | |||||||
| USD in thousands | ||||||||
| Government institutions | ||||||||
| Employees and related benefits | ||||||||
| Operating lease liabilities | ||||||||
| Liability to sellers | (*) | |||||||
| Revenue Sharing Payment payable | ||||||||
| Accrued expenses and other payables | ||||||||
| (*) |
NOTE 7 — DERIVATIVE LIABILITIES
Additional Warrants
On November 28, 2022, the Company issued additional
warrants (the “Additional Warrants”), following certain adjustments pursuant to the terms of the warrants issued as
part of the Company’s Initial Public Offering (the “IPO Warrants”), to purchase up to
Additionally, the revenue forecast over the life of the Additional Warrants is a significant input in determining the price of the Additional Warrants as of June 30, 2024.
Series A Warrants
As part of the Private Placement, the Company issued Series A Warrants
to purchase up to an aggregate of
The Company determined that the Series A Warrants
preclude equity classification due to the anti-dilutive protection feature. As such, the Series A Warrants were classified as a derivative
liability. The derivative liability is recorded at fair value and amounted to $
13
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 — DERIVATIVE LIABILITIES (cont.)
| Series A Warrants | Additional Warrants | Total | ||||||||||
| Balance as of December 31, 2023 | ||||||||||||
| Issuance on January 29, 2024 | ||||||||||||
| Change in fair value | ( | ) | ||||||||||
| Balance as of June 30, 2024 | ||||||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | |||||||
| Share price | $ | |||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | ||||||||
| Expected life | ||||||||
| Weighted average cost of capital (WACC) | % | % | ||||||
| June 30, 2024 | ||||
| Expected volatility | % | |||
| Exercise price | $ | |||
| Share price | $ | |||
| Risk-free interest rate | % | |||
| Dividend yield | ||||
| Expected life | ||||
NOTE 8 — FINANCIAL EXPENSES (INCOME), NET
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Exchange rate differences | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| Issuance costs of financial instruments classified as derivative liabilities | ||||||||
| Revaluation of securities -fair value through profit or loss | ||||||||
| Other finance expenses | ||||||||
| ( | ) | |||||||
14
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — RELATED PARTIES — TRANSACTIONS AND BALANCES
| a. |
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Labor cost and related expenses (included in general and administrative) (c1) | ||||||||
| Inventory storage (included in cost of sale) (c2) | ||||||||
| Consulting fees (included in general and administrative) (c2) | ||||||||
| Consulting fees (included in general and administrative) (c3) | ||||||||
| Other income (c4) | ( | ) | ( | ) | ||||
| Revenue Sharing Payment (included in general and administrative) (c5) | ||||||||
| b. |
| Period ended | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| ASSETS: | ||||||||
| Related parties (c4) | ||||||||
| LIABILITIES: | ||||||||
| Related parties (c7) | ||||||||
| Chief executive officer salary (included in other account payable) (c1) | ||||||||
| Revenue Sharing Payment (included in other account payable) (c5) | ||||||||
| Liability to SciSparc (included in other account payable) (c6) | ||||||||
| Liability to Xylo (included in other account payable) (c3) | ||||||||
| Liability to supplier (included in trade payable) (c2) | ||||||||
| Liability to consultant (included in other account payable and trade payable) (c2) | ||||||||
| c. | Additional information: |
| 1. |
15
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — RELATED PARTIES — TRANSACTIONS AND BALANCES (cont.)
| 2. | On October 26, 2022, the Company and Pure Capital entered into a consulting agreement (the “Pure Capital Consulting Agreement”) pursuant to which Pure Capital will provide consultancy services to the Company for a monthly fee of NIS |
On February 5, 2024, the Company paid
Pure Capital $
On September, 4, 2024, the Company and
Pure Capital signed an amendment to the Pure Capital Consulting Agreement. According to the amendment Pure Capital will be entitled to
a special bonus upon the consummation of an offering of securities of the Company, including proceeds received from exercise of warrants
issued, according to the below distribution, which is based on gross proceeds:
| 3. |
| 4. |
16
JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 9 — RELATED PARTIES — TRANSACTIONS AND BALANCES (cont.)
| 5. |
| 6. |
| 7. |
NOTE 10 — SUBSEQUENT EVENTS
| a. | On July 1, 2024, Fort entered into a lease agreement for a new warehouse in the UK. The lease agreement is for a period of five years and the annual rent fees £ | |
| b. | On July 17, 2024, the shareholders of the Company approved at the annual general meeting the following: (i) the re-election of the directors Liron Carmel and Eliyahu Yoresh until the close of the annual general meeting to be held in 2027, or earlier by resignation or removal, as applicable, (ii) the adoption of a new compensation policy for the Company’s executive officers and directors, (iii) the amendment to the articles of association of the Company, adoption of new compensation terms to each of the chairman and the chief executive officer of the Company, (iv) a reverse split of the Company’s issued and outstanding Ordinary Shares in a range between |
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Exhibit 99.2
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Six Months Ended June 30, 2024.
Cautionary Note Regarding Forward-Looking Statements
Certain information included herein may be deemed to be “forward-looking statements”. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.
These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.
Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:
| ● | our ability to raise capital through the issuance of additional securities; | |
| ● | our belief that our existing cash and cash equivalents as of June 30, 2024, will be sufficient to fund our operations through the next twelve months; | |
| ● | our ability to adapt to significant future alterations in Amazon’s policies; | |
| ● | our ability to sell our existing products and grow our brands and product offerings, including by acquiring new brands and expanding into new territories; | |
| ● | our ability to meet our expectations regarding the revenue growth and the demand for e-commerce; | |
| ● | our ability to enter into definitive agreements for our current letters of intent and term sheet; | |
| ● | the overall global economic environment; | |
| ● | the impact of competition and new e-commerce technologies; | |
| ● | general market, political and economic conditions in the countries in which we operate; | |
| ● | projected capital expenditures and liquidity; | |
| ● | the impact of competition and new e-commerce technologies; | |
| ● | our ability to retain key executive members; | |
| ● | the impact of possible changes in Amazon’s policies and terms of use; |
| ● | projected capital expenditures and liquidity; |
| ● | our expectations regarding our tax classifications; | |
| ● | how long we will qualify as an emerging growth company or a foreign private issuer; | |
| ● | interpretations of current laws and the passages of future laws; | |
| ● | changes in our strategy; | |
| ● | general market, political and economic conditions in the countries in which we operate including those related to recent unrest and actual or potential armed conflict in Israel and other parts of the Middle East, such as the Israel-Hamas war; and | |
| ● | litigation. |
The foregoing list is intended to identify only certain of the principal factors that could cause actual results to differ. For a more detailed description of the risks and uncertainties affecting our company, reference is made to our Annual Report on Form 20-F for the year ended December 31, 2023, or our Annual Report, filed with the Securities and Exchange Commission, or the SEC, on April 1, 2024, and the other risk factors discussed from time to time by our company in reports filed or furnished to the SEC.
Except as otherwise required by law, we undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
General
Introduction
Unless indicated otherwise by the context, all references in this report to “Jeffs’ Brands”, the “Company”, “we”, “us” or “our” are to Jeffs’ Brands Ltd. When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:
| ● | “dollars” or “$” means United States dollars; and | |
| ● | “NIS” means New Israeli Shekels. |
You should read the following discussion and analysis in conjunction with our unaudited consolidated financial statements for the six months ended June 30, 2024, and notes thereto, and together with our audited consolidated financial statements for the year ended December 31, 2023 and notes thereto included in our Annual Report filed with the SEC.
Unless otherwise indicated, dollars are in thousands.
Overview
We are an e-commerce consumer products goods, or CPG, company, operating primarily on Amazon. We were incorporated in Israel in March 2021, under the name Jeffs’ Brands Ltd. Together with five of our wholly-owned subsidiaries – Smart Repair Pro, Top Rank Ltd, or Top Rank, Fort Products LLC, or Fort, and Jeffs’ Brands Holdings Inc., or Jeffs’ Brands Holdings, we operate online stores for the sale of various consumer products on the Amazon marketplace online marketplace, or Amazon, utilizing the fulfillment by Amazon, or the FBA model.
In addition to executing the FBA business model, we utilize internal methodologies to analyze sales data and patterns on Amazon in order to identify existing stores, niches and products that have the potential for development and growth, and for maximizing sales of existing proprietary products. We also use our own skills, know-how and profound familiarity with the Amazon algorithm and all the tools that the FBA platform FBA has to offer. In some circumstances we scale the products and improve them.
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Comparison of the Six Months Ended June 30, 2024, and 2023
Results of Operations
The following table summarizes our results of operations for the periods presented:
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Revenues | 6,198 | 3,871 | ||||||
| Cost of sales | 5,441 | 3,498 | ||||||
| Gross profit | 757 | 373 | ||||||
| Sales and marketing | 603 | 342 | ||||||
| General and administrative | 2,413 | 2,067 | ||||||
| Equity losses | 245 | 89 | ||||||
| Other income, net | (60 | ) | (158 | ) | ||||
| Operating loss | (2,444 | ) | (1,967 | ) | ||||
| Financial expenses (income), net | 1,367 | (148 | ) | |||||
| Tax expenses | 64 | 9 | ||||||
| Net loss for the period | (3,875 | ) | (1,828 | ) | ||||
Revenues
Our revenues consist of revenue which mainly derived from sales on Amazon marketplace.
Our revenues for the six months ended June 30, 2024, were $6,198 compared to $3,871 for the six months ended June 30, 2023. This represents an increase of $2,327 or 60%. The increase was primarily attributable to the increase in revenues generated by Fort of approximately $2,410, during the six months ended June 30, 2024, compared to the period beginning on March 9, 2023 (the date on which we acquired Fort) until June 30, 2023, partially offset by a decrease in revenues of $85 for our remaining brands.
Cost of goods sold
Our cost of goods sold consist of the purchase of finished goods, freight, cost of commissions to Amazon and other e-commerce platforms, salary and change in inventory.
The following table sets forth the breakdown of cost of goods sold for the periods set forth below:
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Purchases of finished goods and changes in inventory | $ | 1,971 | $ | 1,270 | ||||
| Freight | 310 | 158 | ||||||
| Storage | 264 | 363 | ||||||
| Salaries | 71 | 48 | ||||||
| Cost of commissions | 2,825 | 1,659 | ||||||
| Total | 5,441 | 3,498 | ||||||
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Our cost of goods sold for the six months ended June 30, 2024, was $5,441 compared to $3,498 for the six months ended June 30, 2023. This represents an increase of $1,943 or 58%. The increase was primarily attributable to: (i) an increase in purchases of finished goods and changes in inventory of $701, associated with the increase in revenues generated by Fort during the six months ended June 30, 2024, compared to the period beginning on March 9, 2023 (the date on which we acquired Fort) until June 30, 2023; (ii) a decrease in storage expenses of $99 due to a decrease in inventory kept in warehouses; (iii) an increase in cost of commissions, mainly paid to Amazon, of $1,166 due to an increase in sales; (iv) an increase in freight charges of $152 attributable to purchases of inventory from suppliers abroad by Fort; and (v) an increase in shipment costs as a result of the attacks conducted by the Houthi movement in Yemen against marine vessels traversing the Red Sea and thought to either be in route towards Israel or to be partly owned by Israeli businessmen.
Gross Profit
Our gross profit for the six months ended June 30, 2024 was $757 compared to gross profit of $373 for the six months ended June 30, 2023. This represents an increase of $384, or 102.9%. The increase was primarily due to an increase in revenues offset by increase in cost of sales, as described above.
Operating Expenses, net
Our current operating expenses consist of four components: marketing and sales expenses: general and administrative expenses; equity losses; and other income.
Marketing and Sales Expenses
Our marketing and sales expenses consist primarily of Amazon marketing fees, consultant fees and other marketing and sales expenses.
The following table sets forth the breakdown of marketing and sales expenses for the periods set forth below:
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Advertising | $ | 567 | $ | 330 | ||||
| Other | 36 | 12 | ||||||
| Total | 603 | 342 | ||||||
Our marketing and sales expenses for the six months ended June 30, 2024 were $603 compared to expenses of $342 for the six months ended June 30, 2023, representing an increase of $261, or 76%. The increase was primarily attributable to the increase in our advertising costs on Amazon.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and related expenses, professional service fees, legal, amortization of intellectual property assets and other general and administrative expenses.
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The following table sets forth the breakdown of our general and administrative expenses for the periods set forth below:
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Payroll and related expenses | $ | 641 | $ | 500 | ||||
| Subcontractors | 7 | 46 | ||||||
| Professional services and consulting fees | 731 | 547 | ||||||
| Director fees | 143 | 158 | ||||||
| Rent and office maintenance | 99 | 71 | ||||||
| Amortization of intangible assets | 390 | 350 | ||||||
| Insurance | 136 | 196 | ||||||
| Other expenses | 266 | 199 | ||||||
| Total | 2,413 | 2,067 | ||||||
Our general and administrative expenses for the six months ended June 30, 2024 were $2,413 compared to $2,067 for the six months ended June 30, 2023, representing an increase of $346, or 16.7%. The increase was primarily attributable to an increase in the number of employees of the Company, payments to consultants and increase in revenue sharing costs due to an increase in the Company’s revenue.
Other Income
Our other income for the six months ended June 30, 2024 was $60 compared to $158 for the six months ended June 30, 2023. The decrease is primarily attributable to a decrease in management fees paid to SciSparc Nutraceuticals Inc. from $20 to $10, effective as of November 2023, pursuant to the amendment, dated as of September 4, 2024 to our existing agreement with SciSparc Nutraceuticals Inc.
Share of Losses Accounted for at Equity
Our share of losses accounted for as equity for the six months ended June 30, 2024 was $245 compared to $89 for the six months ended June 30, 2023. The increase was attributable to losses derived from our investment in SciSparc Nutraceuticals Inc.
Operating Loss
Our operating loss for the six months ended June 30, 2024 was $2,444, compared to operating loss of $1,967 for the six months ended June 30, 2023, an increase of $477, or 24%. The increase was attributable to the changes in revenues, cost of sales and operating expenses, as described above.
Financial expenses (income), net
Our financial expenses, net was $1,367 for the six months ended June 30, 2024, compared to financial income, net of $148 for the six months ended June 30, 2023, an increase of $1,515. The increase in financial expenses, net was primarily attributable to an increase in losses mainly in connection with the January 2024 PIPE (as defined below), Series A Warrants revaluation losses of approximately $1,071, issuance cost on derivative liabilities of $603 offset by an increase of $56 in interest from short term deposit, and a decrease in exchange rate fluctuations of $82, mainly attributed to lower amounts of NIS held in bank accounts.
Net loss for the period
Our net loss for the six months ended June 30, 2024 was $3,875, compared to net loss of $1,828 for the six months ended June 30, 2023, an increase of $2,047, or 112%. The increase was primarily attributable to an increase in operating expenses and a decrease in gross profit, as described above.
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Critical Accounting Estimates
We describe our significant accounting policies more fully in Note 2 to our unaudited financial statements for the six months ended June 30, 2024. There have been no material changes to our critical accounting policies as described in our Annual Report other than as described in Note 2 to our unaudited consolidated financial statements for the six months ended June 30, 2024. We believe that the accounting policies described below and in Note 2 to unaudited financial statements for the six months ended June 30, 2024, are critical in order to fully understand and evaluate our financial condition and results of operations.
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates.
Liquidity and Capital Resources
Overview
Since Jeffs’ Brands’ inception in March 2021 to date, we have financed our operations primarily through funds we received from loans and proceeds from sales on Amazon (after deducting FBA fees and advertising fees) and the issuance of ordinary shares, no par value per share, or Ordinary Shares, and warrants. As of June 30, 2024 and 2023, we had approximately $2,815 and $2,153, respectively, in cash and cash equivalents.
The table below presents our cash flow for the periods indicated:
| Six Months Ended June 30, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Net cash used in operating activities | $ | (3,534 | ) | $ | (1,169 | ) | ||
| Net cash used in investing activities | (436 | ) | (4,683 | ) | ||||
| Net cash from (used in) financing activities | 6,255 | (86 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 2,285 | (5,938 | ) | |||||
We expect that for the foreseeable future we will finance our activities using the proceeds from sales of our existing and future brands.
Operating Activities
Our net cash used in operating activities was $3,534 for the six months ended June 30, 2024, compared to net cash from operating activities of $1,169 for the six months ended June 30, 2023, representing an increase of $2,365, or 239%. The increase was primarily attributable to an increase in net loss for the period of $2,047, an increase in inventory of $1,216, a decrease in accounts payable and other payables in the amount of $777, partially offset by an increase in change in fair value of derivative liabilities of $1,071 and issuance cost on derivative liabilities of $603.
Investing Activities
Our net cash used in investing activities was $436 for the six months ended June 30, 2024, compared to net cash used in financing activities of $4,683 for the six months ended June 30, 2023, representing a decrease of $4,247. The decrease was primarily attributable to the acquisition of an interest in SciSparc Nutraceuticals Inc. for $2,993 and the acquisition of Fort for $1,682 during the six months ended June 30, 2023, compared to payments related to the acquisition of an interest in SciSparc Nutraceuticals Inc. for $98 and the acquisition of Fort for $330 during the six months ended June 30, 2024.
Financing Activities
Our net cash used in financing activities was $6,255 for the six months ended June 30, 2024, compared to net cash provided by investing activities of $86 for the six months ended June 30, 2023, representing an increase of $6,341. The change was attributable to the proceeds from the January 2024 PIPE, net of issuance costs, offset by the repayment of loan in the aggregate amount of $86 during the six months ended June 30, 2023.
Financial Arrangements
On January 29, 2024, we completed a private placement transaction, or the January 2024 PIPE, in which we issued Ordinary Shares; Pre-Funded Warrants to purchase Ordinary Shares; Series A Warrants to purchase Ordinary Shares and Series B Warrants to purchase Ordinary Shares, for aggregate gross proceeds of approximately $7.275 million, before deducting fees to the placement agent and other expenses payable by the Company in connection with the January 2024 PIPE.
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The Pre-Funded Warrants were immediately exercisable at an exercise price of $0.00001 per Ordinary Share and do not expire until exercised in full. The Series A Warrants were immediately exercisable, have an exercise price of $2.69 per whole Ordinary Share (subject to certain anti-dilution and share combination event protections) and have a term of sixty-six (66) months from the date of issuance. The Series B Warrants will be exercisable following the Reset Date (as defined below), have an exercise price of $0.00001 per Ordinary Share and have a term of sixty-six (66) months from the date of issuance. The exercise price and number of Ordinary Shares issuable under the Series A Warrants are subject to adjustment and the number of Ordinary Shares issuable under the Series B Warrant will be determined following the reset date, or the Reset Date, which is the earliest to occur of: (i) the date on which a resale registration statement covering the resale of all registrable securities has been declared effective for 30 consecutive trading days, (ii) the date on which the selling shareholders may sell the registrable securities pursuant to Rule 144 under the Securities Act of 1933, as amended for a period of 30 consecutive trading days, and (iii) 12 months and 30 days following the issuance date of the Series B Warrant, to be determined pursuant to the lowest daily average trading price of the Ordinary Shares during a period of 20 trading days, subject to a pricing floor of $0.68, or Pricing Floor. As our Ordinary Shares are currently trading at a price per share lower than the Pricing Floor, on the Reset Date: (i) the Series A Warrants will be exercisable into a total number of 13,373,177 Ordinary Shares, subject to certain anti-dilution and share combination event mechanisms, at an exercise price of $0.68, and (ii) the Series B Warrants will be exercisable into a total number of 7,904,181 Ordinary Shares. As of September 30, 2024, the date our consolidated financial statements for the six months period ended June 30, 2024 were issued, Pre-Funded Warrants to purchase up to 820,000 Ordinary Shares and Series B Warrants to purchase up to 5,257,127 had been exercised for an aggregate issuance of 6,077,127 Ordinary Shares.
Current Outlook
We have financed our operations to date primarily through proceeds from our initial public offering, the January 2024 PIPE and proceeds from sales on the different Amazon platforms (after FBA fees and advertising fees).
As of June 30, 2024, our cash and cash equivalents were $2,815. We expect that our existing cash and cash equivalents as of June 30, 2024, will be sufficient to fund our current operations for the next twelve months. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including:
| ● | the progress and costs of purchasing new brands and their development plans; |
| ● | the costs of manufacturing and shipment of our products; |
| ● | the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; |
| ● | the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and |
| ● | the magnitude of our general and administrative expenses. |
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of U.S. dollar to NIS exchange rates and U.S. dollar to GBP, which is discussed in detail in the following paragraph.
Impact of Inflation and Currency Fluctuations
Our functional and reporting currency is U.S. dollar. We incur some of our income and expenses in other currencies. As a result, we are exposed to the risk that the rate of inflation in countries in which we are active other than the United States will exceed the rate of devaluation of such countries’ currencies in relation to the dollar or that the timing of any such devaluation will lag behind inflation in such countries.
Global inflation has risen in 2024. To date, we have not been subject to inflationary pressures. We cannot assure you that we will not be adversely affected in the future.
As of June 30, 2024, the annual rate of inflation in Israel was 2.90%. The NIS revaluated against the U.S. dollar by approximately 3.64% for the period ended June 30, 2024 and 5.14% for the period ended June 30, 2023.
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