Nexera Technologies Ltd 20-F for FY2024
Nexera Technologies Ltd (NEXR)
About this 20-F
Nexera Technologies Ltd filed this 20-F on March 31, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $13.69M
- up 36.8% from $10.01M a year earlier
- Net loss
- $7.8M
- compared with a net loss of $4.6M a year earlier
- Diluted EPS
- -$11.91
- compared with -$50.44 a year earlier
FORM
OR
For the fiscal year ended
OR
OR
Commission File No.:
(Exact name of registrant as specified in its charter)
Translation of registrant’s name into English: Not applicable
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Chief Executive Officer
Tel:
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding
shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act of 1934.
Yes ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer, “accelerated filer,” and emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |
| Emerging growth company | |||||
If an emerging growth company
that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section
13(a) of the Exchange Act.
| † | The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
Indicate by check mark whether
the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report.
If securities are registered
pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
International Financial Reporting Standards as issued by the International Accounting Standards Board ☐
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
☐ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company.
Yes ☐
No
TABLE OF CONTENTS
i
ii
JEFFS’ BRANDS LTD
INTRODUCTION
In this Annual Report on Form 20-F, or this Annual Report, “we,” “us,” “our,” the “Company” and “JFBR” refer to Jeffs’ Brands Ltd.
We are an e-commerce consumer products goods, or CPG, company operating primarily on the Amazon marketplace, or Amazon. We were incorporated in Israel in March 2021, under the name Jeffs’ Brands Ltd to provide various services, such as management, operation and logistics, marketing and financial services to our subsidiaries that operate online stores for the sale of various consumer products on Amazon, utilizing the Fulfillment by Amazon, or FBA, model. As of the date of this Annual Report, we have six wholly owned subsidiaries, held directly by us or through our subsidiaries: Top Rank Ltd., or Top Rank, Fort Products Ltd., or Fort, Smart Repair Pro, Pure NJ Logistics LLC, or Pure Logistics, Jeffs’ Brands Holdings Inc., or Jeffs’ Brands Holdings, and Fort Products LLC. Jeffs’ Brands Holdings also holds a minority interest in SciSparc Nutraceuticals Inc., or SciSparc Nutraceuticals, to whom we provide a variety of professional and business support services.
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 Amazon’s algorithm and all the tools that the FBA platform has to offer. In some circumstances we scale the products and improve them.
On November 29, 2023, we announced that our board of directors resolved to initiate a process to identify potential strategic transactions in the field of advanced technologies, with the goal of maximizing shareholder value, or the Restructuring Plan.
On January 21, 2025, we entered into a non-binding letter of intent, or the Smart Repair LOI, for the sale of Smart Repair Pro to a company listed on the TSX Venture Exchange, or the Acquirer. Pursuant to the Smart Repair LOI and subject to the entry into a binding agreement, we will transfer all of the issued and outstanding capital stock of Smart Repair Pro to the Acquirer, in exchange for up to a 90% equity interest in the Acquiror, on a fully diluted basis, calculated as of immediately following the closing of the transaction. As part of the acquisition, we intend to enter into a stock transfer agreement with Smart Repair Pro, to sell our 5,000 shares of common stock, $0.01 par value per share, of Jeffs’ Brands Holdings, in exchange for shares of common stock of Smart Repair Pro. The completion of the transactions contemplated by the Smart Repair LOI is subject to the successful completion of due diligence by both parties, the execution of binding definitive agreement, which shall include customary closing conditions, compliance with any regulatory approvals, receipt of any necessary consents, final approvals from our board of directors and shareholders, and may be also subject to, among other things, market conditions, tax or other business analyses. See “Item B. Business Overview – Recent Developments – Smart Repair Pro LOI”, for further information.
On February 6, 2025, we entered into a share purchase agreement, or the Purchase Agreement, with Impact Acquisitions Corp, or Impact, a capital pool company listed on the TSX Venture Exchange, pursuant to which, on the terms and subject to the conditions of the Purchase Agreement, Fort will merge with and into Impact, with Impact continuing as the surviving corporation, or the Proposed Fort Merger. Pursuant to the Purchase Agreement, we will sell to Impact, all of the issued and outstanding ordinary shares of Fort, in consideration for 100,000,000 common shares of Impact and up to an additional 66,000,000 common shares of Impact contingent upon the achievement of certain pre-determined milestones, representing a post-closing equity interest in Impact of 75.02% (or up to 83.29% in the event of the full achievement of the milestones). The completion of the Proposed Fort Merger is subject to the satisfaction or waiver of certain conditions precedent. See “Item B. Business Overview – Recent Developments – Share Purchase Agreement with Impact” for further information.
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There can be no assurance regarding the ultimate timing of the pending transactions or any other restructuring plans.
On March 18, 2025, Smart Repair Pro closed the acquisition of Pure Logistics, a New Jersey limited liability company that operates a strategically located an approximately 100,000 square foot logistics center equipped with 20 loading docks in New Jersey, or the Pure Logistics Acquisition. Following the Pure Logistics Acquisition, we anticipate strengthening our supply chain and third-party service offerings. The logistics center is situated near a major port in the United States and in close proximity to Newark Liberty International and John F. Kennedy International Airports and will support our expansion while also offering services to third parties. The financial results of Pure Logistics are not part of our consolidated financial statements for the fiscal year ended December 31, 2024, as the Pure Logistics Acquisition was completed after the reporting period.
Our reporting currency and functional currency is the U.S. dollar. Unless otherwise expressly stated or the context otherwise requires, references in this Annual Report to “NIS” are to New Israeli Shekels, and references to “dollars” or “$” mean U.S. dollars.
Effective as of market open on November 3, 2023, we conducted a reverse share split, or the November 2023 Reverse Split, of our issued and outstanding ordinary shares, no par value, or Ordinary Shares, at a ratio of 1-for-7. Additionally, effective as of as of market open on November 20, 2024, we conducted a reverse share split, or the November 2024 Reverse Split, or together with the November 2023 Reverse Split, the Reverse Splits, of our issued and outstanding Ordinary Shares at a ratio of 1-for-13. All descriptions of our share capital, including share amounts and per share amounts prior to the effective dates of the Reverse Splits in this Annual Report are presented after giving effect to the Reverse Splits.
We report our financial statements in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. Unless derived from our financial statements or otherwise noted, amounts presented in this Annual Report are translated at the rate of NIS 3.647 = USD 1.00, the exchange rate between the NIS and the U.S. dollar, NIS 4.5743=GBP 1.00, the exchange rate between the NIS and the Great British Pound, or GBP, and 0.7981 GBP = USD 1.00, the exchange rate between the GBP and USD, reported by the Bank of Israel as of December 31, 2024.
This Annual Report includes statistical, market and industry data and forecasts which we obtained from publicly available information and independent industry publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness of the information. Although we believe that these sources are reliable, we have not independently verified the information contained in such publications.
All trademarks or trade names referred to in this Annual Report are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Annual Report are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain information included or incorporated by reference in this Annual Report 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.
The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report to reflect events or circumstances after the date of this Annual Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.
Important factors that could cause actual results, developments, and business decisions to differ materially from those anticipated in these forward-looking statements are listed below. The below is also a summary of the risk factors described in Item 3.D “Key Information - Risk Factors” of this Annual Report.
Risks Related to Our Businesses, Strategies, Technology, and Industry
| ● | We have a short operating history in an evolving industry and, as a result, our past results may not be indicative of future operating performance; |
| ● | We may not be able to manage our growth effectively, and such rapid growth may adversely affect our corporate culture ; |
| ● | Our e-commerce operations are reliant on Amazon and FBA and changes to Amazon, Amazon’s services and their terms of use may harm our business; |
| ● | We rely on data provided by third parties, the loss of which could limit the functionality of our platforms, cause us to invest in the wrong product or disrupt our business; |
| ● | We rely on other information technologies and systems to operate our business and to maintain our competitiveness, and any failure to invest in and adapt to technological developments and industry trends could harm our business; |
| ● | If we fail to keep up with rapid technological changes, our future success may be adversely affected; |
| ● | Our business depends on our ability to build and maintain strong product listings on e-commerce platforms. We may not be able to maintain and enhance our product listings if we receive a substantial number of customer complaints, negative publicity or otherwise fail to live up to customers’ expectations, which could materially adversely affect our business, results of operations and growth prospects; |
v
| ● | Our efforts to acquire or retain customers, and our efforts to sell new products or increase sales of our existing products, may not be successful, which could prevent us from maintaining or increasing our sales; |
| ● | If we fail to acquire new customers or retain existing customers, or fail to do so in a cost-effective manner, we may not be able to achieve profitability; |
| ● | Our efforts to expand our business into new brands, products, services, technologies and geographic regions will subject us to additional business, legal, financial and competitive risks and may not be successful; |
| ● | Potential growth of our businesses is based on international expansion, making us susceptible to risks associated with international sales and operations; |
| ● | Use of social media and email may adversely impact our reputation or subject us to fines or other penalties; |
| ● | If our emails are not delivered and accepted or are routed by email providers less favorably than other emails, or our sites or mobile applications are not accessible or are treated disadvantageously by Internet service providers, our business may be substantially harmed; and |
| ● | If we are unable to manage our inventory effectively, our operating results could be adversely affected. |
Risks Related to our Logistics Center Operations
| ● | We may be unable to successfully pursue, integrate, or execute upon the logistics center operations business of Pure Logistics; |
| ● | Our dependence on third parties to provide overseas transportation and domestic distribution services may impact the delivery and quality of our transportation and logistics services, and any disruption to these services could materially and adversely affecting our business, financial condition, and results of operations; |
| ● | Our business may be disrupted by natural disasters causing supply chain disruptions; |
| ● | General economic conditions and other events or occurrences that affect the where we operate our logistics center may impact financial results; and |
| ● | Interruptions at our logistic center and warehouses could materially adversely affect our business. |
Risks Related to Information Technology
| ● | Assertions by third parties of infringement or misappropriation by us of their intellectual property rights or confidential know how could result in significant costs and substantially harm our business and results of operations; |
| ● | Our inability to acquire, use or maintain our marks and domain names for our sites could substantially harm our business and operating results; and |
| ● | Any significant disruption in service on our websites or in our computer systems, a number of which are currently hosted or provided by third-party providers, could materially affect our ability to operate, damage our reputation and result in a loss of customers, which would harm our business and results of operations. |
Risks Related to Legal and Regulatory Matters
| ● | We may be subject to general litigation, regulatory disputes and government inquiries; |
| ● | A failure to comply with current laws, rules and regulations or changes to such laws, rules and regulations and other legal uncertainties may adversely affect our business, financial performance, results of operations or business growth; |
| ● | We are subject to U.S. governmental regulations and other legal obligations related to privacy, data protection and information security. If we are unable to comply with these, we may be subject to governmental enforcement actions, litigation, fines and penalties or adverse publicity; |
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| ● | Increased regulatory scrutiny of nutritional supplements as well as new regulations that are being adopted in some of our markets with respect to nutritional supplements could result in more restrictive regulations and harm our results if our supplements or advertising activities are found to violate existing or new regulations or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations; | |
| ● | Our amended and restated articles of association provide that unless we consent to an alternate forum, the federal district courts of the United States shall be the exclusive forum of resolution of any claims arising under the Securities Act; and | |
| ● | The pest control products sold by Fort are subject to local environmental regulations. Therefore, if we cannot find a licensed supplier of the active ingredient in our pest control products in a country in which we wish to sell our poison products, we will not be able to sell our pest control products there. |
Risks Related to our Operations in Israel
| ● | Conditions in Israel, where our headquarters are located, including Israel’s conflicts with Hamas and other parties in the region, as well as political and economic instability, may adversely affect our operations and limit our ability to market our products, which would lead to a decrease in revenues; and |
| ● | Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings. |
Risks Related to Our Status as a Public Company and Ownership of our Ordinary Shares and Warrants
| ● | Issuance of a significant amount of additional Ordinary Shares due to exercise or conversion of outstanding warrants and/or substantial future sales of our Ordinary Shares may depress our share price; |
| ● | Our internal control over financial reporting may not meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business; |
| ● | Future sales of our Ordinary Shares and Warrants could reduce the market price of our Ordinary Shares and/or Warrants; |
| ● | As a “foreign private issuer” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq Stock Market LLC, or Nasdaq, requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers; |
| ● | The estimates of market opportunity, market size and forecasts of market growth included in our publicly filed documents may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all; |
| ● | We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our securities less attractive to investors; |
| ● | Market volatility may affect the value of an investment in our Ordinary Shares and/or Warrants and could subject us to litigation; and |
| ● | We cannot assure you that our Ordinary Shares and Warrants will remain listed on Nasdaq or any other national securities exchange. |
Risks Related to our Proposed Corporate Restructuring Plan
| ● | The proposed restructuring plan, which may involve transferring our holdings in our subsidiaries to a separate public company, may not be completed in accordance with the expected plans or anticipated timeline, or at all, and may not achieve the expected results; |
| ● | The Restructuring Plan may not achieve the anticipated benefits and may expose us to additional risks; and |
| ● | Following any Restructuring Plan, the trading price of our Ordinary Shares may fluctuate significantly. |
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PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
| A. | [Reserved] |
| B. | Capitalization and Indebtedness |
Not applicable.
| C. | Reasons for the Offer and Use of Proceeds. |
Not applicable.
| D. | Risk Factors. |
Our business faces significant risks. You should carefully consider the risks described below, together with all of the other information in this Annual Report. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer and the price of our securities could decline. This Annual Report also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements, as a result of certain factors including the risks described below and elsewhere in this report and our other Securities and Exchange Commission, or SEC, filings. See “Cautionary Note Regarding Forward-Looking Statements” above.
Risks Related to Our Businesses, Strategies, Technology, and Industry
We have a short operating history in an evolving industry and, as a result, our past results may not be indicative of future operating performance.
We have a short operating history in a rapidly evolving industry that may not develop in a manner favorable to our business. Our relatively short operating history makes it difficult to assess our future performance. You should consider our business and prospects in light of the risks and difficulties we may encounter.
Our future success will depend in large part upon our ability to, among other things:
| ● | manage our inventory and supply chain effectively; |
| ● | successfully develop, retain and expand our consumer product offerings and geographic reach; |
| ● | compete effectively; |
| ● | anticipate and respond to macroeconomic changes; |
| ● | effectively manage our growth; |
| ● | hire, integrate and retain talented people at all levels of our organization; |
| ● | avoid interruptions in our business from information technology downtime, cybersecurity breaches or labor stoppages; |
| ● | maintain the quality of our technology infrastructure; and |
| ● | develop new features to enhance functionality. |
1
We may not be able to manage our growth effectively, and such rapid growth may adversely affect our corporate culture.
We expect to rapidly and significantly expand our operations and anticipate expanding further as we pursue our growth strategies. Such expansion increases the complexity of our business and places a significant strain on our management, operations, technical systems, financial resources and internal control over financial reporting functions. Our current and planned personnel, systems, procedures and controls may not be adequate to support and effectively manage our future operations, especially as we employ personnel in several geographic locations.
We are currently in the process of transitioning certain of our business and financial systems to systems on a scale reflecting the increased size, scope and complexity of our operations, and the process of migrating our legacy systems could disrupt our ability to timely and accurately process information, which could adversely affect our results of operations and cause harm to our reputation. As a result, we may not be able to manage our expansion effectively.
Our entrepreneurial and collaborative culture is important to us, and we believe it has been a major contributor to our success. We may have difficulties maintaining our culture or adapting it sufficiently to meet the needs of our future and evolving operations as we continue to grow, in particular as we grow internationally.
In addition, we are currently in the process of developing and maintaining our culture as a public company, with the attendant changes in policies, practices, corporate governance and management requirements. Failure to successfully develop or maintain such a culture could have a material adverse effect on our business, results of operations, financial condition and prospects.
Our e-commerce operations are reliant on Amazon and FBA and changes to Amazon, Amazon’s services and their terms of use may harm our business.
Our products are sold predominantly on Amazon and orders are fulfilled entirely by Amazon utilizing the FBA model. In order to continue to utilize Amazon and the FBA model, we must comply with the applicable policies and terms of use relating to these services. Such policies and terms of use may be altered or amended at Amazon’s sole discretion, including changes regarding the cost of securing these services, and changes that increase the burden of compliance with its requirements, may cause us to significantly alter our business model or incur additional costs in order to comply, which could negatively impact our results of operations. Non-compliance with applicable terms of use and policies can result in the removal of one or more products from the marketplace and suspension of fulfillment services either of which could have a material adverse effect on our business and results of our operations. Although we exert efforts in order to ensure ongoing compliance and no notices of non-compliance have been received to date, we cannot assure you that events of this kind will not occur in the future.
We rely on other information technologies and systems to operate our business and to maintain our competitiveness, and any failure to invest in and adapt to technological developments and industry trends could harm our business.
We depend on sophisticated information technologies and systems, technology and systems used for websites and apps, customer service, logistics and fulfillment, supplier connectivity, communications and administration. As our operations grow in size, scope and complexity, we will need to continuously improve and upgrade our systems and infrastructure to offer an increasing number of consumer-enhanced services, features and functionalities, while maintaining and improving the reliability and integrity of our systems and infrastructure.
Our future success also depends on our ability to assimilate different analytical tools as well as internal methodologies, including logistics and fulfillment platform which leverages, to meet rapidly evolving e-commerce trends and demands. The emergence of alternative platforms may require us to continue to invest in new and costly technology. We may not be successful, or we may be less successful than our competitors, in adopting technologies that operate effectively across multiple e-commerce platforms, which would negatively impact our business and financial performance. New developments in other areas, such as cloud computing providers, could also make it easier for competitors to enter our markets due to lower up-front technology costs. In addition, we may not be able to maintain our existing systems or replace our current systems or introduce new technologies and systems as quickly or cost effectively as we would like. Failure to invest in and adapt to technological developments and industry trends may have a material adverse effect on our business, results of operations, financial condition and prospects.
2
We rely on data provided by third parties, the loss of which could limit the functionality of our platforms, cause us to invest in the wrong product or disrupt our business.
We use third party software to determine market trends and what markets to enter into. Our ability to successfully use this software depends on our ability to analyze and utilize data, including search engine results, provided by unaffiliated third parties, primarily, Google and Amazon. Some of this data is provided to us pursuant to third-party data sharing policies and terms of use, under data sharing agreements by third-party providers or by customer consent. The majority of this data is sourced for free or for de minimis amounts. These sources of data allow us, along with artificial intelligence (AI) tools to determine trends, performance and consumer sentiment on products and searches within e-commerce platforms. This functionality allows us to help determine which products to market, in some cases manufacture through contract manufacturers, import and sell on e-commerce marketplaces. The connection to multiple e-commerce platforms through application programming interfaces, or APIs, allows us to develop the automation of the purchase of marketing and automate the change of pricing of product listings on those e-commerce platforms.
In the future, any of these third parties could change its data sharing policies, including making them more restrictive, charging fees or altering its algorithms that determine the placement, display and accessibility of search results and social media updates, any of which could result in the loss of, or significant impairment to, our ability to collect useful data. These third parties could also interpret our service providers’, data collection policies or practices as being inconsistent with their policies, which could result in the loss of our ability to collect this data. Privacy concerns may cause end users to resist providing the personal data necessary to allow us to determine market trends as well as our ability to effectively retain existing customers. Privacy advocacy groups and the technology and other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us. Any such changes could impair our ability to use data and could adversely impact select functionality of our proprietary software, impairing our ability to use this data to anticipate customer demand and market trends, as well as adversely affecting our business and our ability to generate revenue.
If we fail to keep up with rapid technological changes, our future success may be adversely affected.
Modern technologies are subject to rapid changes and our technology is yet to be fully automated. Our future success will depend on our ability to respond to rapidly changing technologies, to adapt and further develop our own functionality or our services to our evolving industry and to improve the performance and reliability of our systems. Our failure to adapt to such changes could harm our business.
In addition, the widespread adoption of networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or adapt our products, services or infrastructure. If we fail to keep up with rapid technological changes to remain competitive in our rapidly evolving industry, our future success may be adversely affected.
3
AI presents risks and challenges that can impact our business by posing security risks to our confidential information, proprietary information and personal data.
Issues in the development and use of AI, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to our business operations. As with many technological innovations, AI presents risks and challenges that could impact our business. We utilize AI tools in the provisions of our services and work with vendors that incorporate AI tools into their offerings and we, or the vendors we work with, may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience. If we, our vendors, or our third-party partners experience an actual or perceived breach or privacy or security incident because of the use of generative AI, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed. Further, bad actors around the world use increasingly sophisticated methods, including the use of AI, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. Any of these outcomes could damage our reputation, result in the loss of valuable property and information and adversely impact our business.
Our business depends on our ability to build and maintain strong product listings on e-commerce platforms. We may not be able to maintain and enhance our product listings if we receive a substantial number of customer complaints, negative publicity or otherwise fail to live up to customers’ expectations, any of which could materially adversely affect our business, results of operations and growth prospects.
Maintaining and enhancing our product listings is critical in expanding and growing our business. However, a significant portion of our perceived performance to the customer depends on third parties outside of our control, including suppliers and logistics providers such as FedEx, UPS, postal services and other third-party delivery agents and online retailers, mainly Amazon. Because our agreements with our online retail partners are generally terminable at will, we may be unable to maintain these relationships, and our results of operations could fluctuate significantly from period to period. Because we rely on third party logistics companies, like FedEx, to deliver our products, we are subject to shipping delays or disruptions caused by inclement weather, natural disasters, labor activism, health epidemics or bioterrorism. In addition, because we rely on national, regional and local transportation companies for the delivery of some of our other products, we are also subject to risks of breakage or other damage during delivery by any of these third parties. If these third parties do not meet our or our customers’ expectations, our brands may suffer irreparable damage. In addition, maintaining and enhancing our current and future brands may require us to make substantial investments, and these investments may not yield sufficient returns. If we fail to promote and maintain our brands, or if we incur excessive expenses in this effort, our business, operating results and financial condition may be materially adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to anticipate market trends and customer demand and to provide high quality products to our customers and a reliable, trustworthy and profitable sales channel to our suppliers, which we may not be able to do successfully.
A substantial number of customer complaints or negative publicity about our sites, products, delivery times, customer data handling and security practices or customer support, especially on blogs, social media websites or our sites, could rapidly and severely diminish consumer views of our products and result in harm to our brands. Customers may also make safety-related claims regarding products sold through our online retail partners, such as Amazon, which may result in an online retail partner removing the product from its marketplace. Such removal may materially impact our financial results depending on the product that is removed and the length of time that it is removed. We also use and rely on other services from third parties, such as our telecommunications services, and those services may be subject to outages and interruptions that are not within our control.
4
Our efforts to acquire or retain customers, and our efforts to sell new products or increase sales of our existing products, may not be successful, which could prevent us from maintaining or increasing our sales.
If we do not successfully promote and sustain our new and/or existing product listings and brands through marketing and other tools, we may fail to maintain or increase our sales. Promoting and positioning our brands and product listings will depend largely on the success of our marketing efforts, our ability to attract customers cost effectively and our ability to consistently provide a high-quality product and maintain consumer satisfaction. We also use promotions to drive sales, which may not be effective and may adversely affect our gross margins. Our investments in marketing may not effectively reach potential customers, potential customers may decide not to buy our products or the spending of customers that purchase from us may not yield the intended return on investment, any of which could negatively affect our financial results. The failure of our marketing activities could also adversely affect our ability to promote our product listings and sell our products, and to develop and maintain relationships with our customers, retailers and brands, which may have a material adverse effect on our business, results of operations, financial condition and prospects.
If we fail to acquire new customers or retain existing customers, or fail to do so in a cost-effective manner, we may not be able to achieve profitability.
Our success depends on our ability to acquire and retain customers in a cost-effective manner. In order to expand our customer base, we must appeal to and acquire customers who have historically used other channels to purchase the wide variety of products we offer and may prefer alternatives to our offerings, such as those offered by other vendors on Amazon, traditional brick-and-mortar retailers and the websites of our competitors or our suppliers’ own websites. We expect competition in e-commerce generally to continue to increase. Competitors have introduced lower cost or differentiated products that are perceived to compete with our products. If we are unable to correctly anticipate market trends and customer demand, our ability to sell our products could be impaired. If we fail to deliver quality products, or if customers do not perceive the products we offer to be of high value and quality, we may not be able to acquire new customers. If we are unable to acquire new customers who purchase products in numbers sufficient to grow our business, we may not be able to generate the scale necessary to drive beneficial network effects with our suppliers, our net revenue may decrease and our business, financial condition and operating results may be materially adversely affected.
We believe new customers can originate from word-of-mouth and other non-paid referrals from existing customers. Therefore, we must ensure that our existing customers remain loyal to us in order to continue receiving those referrals. If our efforts to satisfy our existing customers are not successful, we may lose these customers or we may not be able to acquire new customers in sufficient numbers to continue to grow our business, or we may be required to incur significantly higher marketing expenses in order to acquire new customers. For example, since 2016, Amazon has maintained a policy whereby they will purge all reviews they believe are paid for. While we do not ask customers to leave a positive review or change a review, some of our reviews may be purged by Amazon in accordance with this policy if Amazon believes they were questionable or not authentic. If Amazon purges reviews or if we are unable to maintain our positive reviews, it may adversely affect our ability to acquire new customers or retain existing ones.
In addition, we believe that Amazon has, from time to time, placed limitations on the daily volume of reviews that may be provided for any specific product listing. This limitation or others relating to customer engagement with our product listings could impact the success of our product listings, which could adversely impact our financial performance.
If we fail to offer high-quality customer support, our business and reputation may suffer.
High-quality education and training of customer support personnel to deliver high-quality customer support are important for the successful retention of existing customers. Providing this education, training and support requires that our support personnel have specific knowledge and expertise of our products and markets, making it more difficult for us to hire experienced personnel and to scale up our support operations. The importance of high-quality customer support will increase as we expand our business and pursue new customers. If we do not provide effective and timely ongoing support, our ability to retain existing customers may suffer, and our reputation with existing or potential customers may be harmed, which would have a material adverse effect on our business, results of operations, financial condition and prospects.
5
Our efforts to expand our business into new brands, products, services, technologies and geographic regions will subject us to additional business, legal, financial and competitive risks and may not be successful.
Our business success depends to some extent on our ability to expand our consumer offerings by launching new brands, products and services and by expanding our existing offerings into new geographic regions.
Our strategy is to use our skills to determine which markets to enter and optimize the mix of products and services that we offer.
Launching new brands, products and services requires significant upfront investments, including investments in marketing (namely digital marketing and pay per click), information technology and additional personnel. We operate in highly competitive industries with relatively low barriers to entry and must compete successfully in order to grow our business. We may not be able to generate satisfactory revenue from these efforts to offset these costs. Any lack of market acceptance of our efforts to launch new brands, products or services or to expand our existing offerings could have a material adverse effect on our business, prospects, financial condition and results of operations. Further, as we continue to expand our fulfillment capability or add new businesses with different requirements, our logistics networks will become increasingly complex and operating them will become more challenging. There can be no assurance that we will be able to operate our networks effectively.
We have also entered and may continue to enter new markets and provide product offerings in which we have limited or no experience, which may not be successful or appealing to our customers.
The consumer packaged goods, or CPG, industry is subject to evolving standards and practices, as well as changing consumer needs, requirements and preferences. Our ability to attract new customers and increase revenue from existing customers depends, in part, on our ability to enhance and improve our existing tools that enable us to pinpoint new markets and introduce new products. The success of any enhancements or new instruments depends on, in part, market-accepted pricing levels and overall market acceptance. We may not be successful in these efforts, which could result in significant expenditures that could impact our revenue or distract management’s attention from current offerings.
Increased emphasis on the sale of new products could distract us from sales of our existing products in existing markets, negatively affecting our overall sales. We have invested and expect to continue to invest in new businesses, products, features, services and technologies. Such endeavors may involve significant risks and uncertainties, including insufficient revenue from such investments to offset any new liabilities assumed and expenses associated with these new investments, inadequate return of capital on our investments, distraction of management from current operations and unidentified issues not discovered in our due diligence of such investments that could cause us to fail to realize the anticipated benefits of such investments and incur unanticipated liabilities. Because these new strategies and offerings are inherently risky, no assurance can be given that they will be successful. Our new features or enhancements could fail to attain sufficient market acceptance for many reasons, including:
| ● | delays in introducing products in new markets; |
| ● | failure to accurately predict market demand or end consumer preferences; |
| ● | introduction of competing products; |
| ● | poor financial conditions for our customers or poor general macroeconomic conditions; |
| ● | changes in legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our products; |
| ● | failure of our brands and products digital promotion activities or negative publicity about the performance or effectiveness of our existing brands and products; and |
| ● | disruptions or delays in the online retailers and, or in addition to, logistics providers distributing our products. |
There is no assurance that we will successfully identify new opportunities or develop and bring new products to market on a timely basis, which could materially and adversely affect our business and operating results and compromise our ability to generate revenue.
6
Potential growth of our businesses is based on international expansion, making us susceptible to risks associated with international sales and operations.
We have historically mainly sold products in the United States, and since 2021 began selling products in, the United Kingdom and Germany. We intend to expand our operations to reach new markets and localities. For example, in 2024, we expanded the Fort brands to France, Germany, Spain, Italy, Belgium and the Netherlands and have completed the requisite processes in order to offer certain of our products through Amazon in other European countries, Poland and the Czech Republic. We may not be successful in increasing our sales in any or all territories and currently do not have an estimated commencement date for sales in these other major European countries. Conducting international operations subjects us to certain risks, which include localization of solutions and products and adapting them to local practices and regulatory requirements, exchange rate fluctuations and unexpected changes in tax, trade laws, tariffs, governmental controls and other trade restriction. To the extent that we do not succeed in expanding our operations internationally and managing the associated legal and operational risks, our results of operations may be adversely affected.
Use of social media and email may adversely impact our reputation or subject us to fines or other penalties.
We use social media and email as part of our digital marketing efforts. As laws and regulations rapidly evolve to govern the use of these channels, the failure by us, our employees or third parties acting at on our behalf to abide by applicable laws and regulations in the use of these channels could adversely affect our reputation or subject us to fines or other penalties. In addition, our employees or third parties acting on our behalf may knowingly or inadvertently make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure of proprietary, confidential or sensitive personal information of our business, employees, customers or others. Any such inappropriate use of social media or email could also cause reputational damage.
Customers value readily available information concerning retailers and their goods and services and often act on such information without further investigation and with no regard to its accuracy. Our customers may engage with us online through our social media platforms, including Facebook and Instagram, by providing feedback and public commentary about all aspects of our business. Information concerning us or our retailers and brands, whether accurate or not, may be posted on social media platforms at any time and may have a disproportionately adverse impact on our brand, reputation or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse effect on our business, results of operations, financial condition and prospects.
If our emails are not delivered and accepted or are routed by email providers less favorably than other emails, or our sites or mobile applications are not accessible or are treated disadvantageously by Internet service providers, our business may be substantially harmed.
If email providers or Internet service providers, or ISPs, implement new restrictive email or content delivery or accessibility policies, including with respect to net neutrality, or begin enforcement of existing policies, it may become more difficult to deliver emails to our customers or for customers to access our sites, products and services. For example, certain email providers, including Google, categorize our emails as “promotional”, and these emails are directed to an alternate, and less readily accessible, section of a customer’s inbox. If email providers materially limit or halt the delivery of our emails, or if we fail to deliver emails to customers in a manner compatible with email providers’ email handling or authentication technologies, our ability to contact customers through email could be significantly restricted. In addition, if we are placed on “spam” lists or lists of entities that have been involved in sending unwanted, unsolicited emails, our operating results and financial condition could be substantially harmed. Further, if ISPs prioritize or provide superior access to our competitors’ content, our business and results of operations may be negatively impacted.
7
If we are unable to manage our inventory effectively, our operating results could be adversely affected.
To ensure timely delivery of products, we generally enter into purchase orders in advance with manufacturers. As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of product purchases. We rely on our procurement team to order products and we rely on our data analytics to inform the levels of inventory we purchase, including when to reorder items that are selling well and when to write off items that are not selling well. In these instances, we may be unable to always predict the appropriate demand for our products by customers with accuracy, which may result in inventory shortages, inventory write offs and lower gross margins.
If our sales and procurement teams do not predict demand well or if our algorithms do not help us reorder the right products or write off the right products timely, we may not effectively manage our inventory, which could result in inventory excess or shortages, and our operating results and financial condition could be adversely affected.
Our business, including our costs and supply chain, is subject to risks associated with sourcing, importing and warehousing.
We source the products we offer from third-party vendors and, as a result, we may be subject to price fluctuations or demand disruptions. Our operating results could be negatively impacted by increases in the prices of our products, and we have no guarantees that prices will not rise. In addition, as we expand into new categories and types of products, we expect that we may not have strong purchasing power in these new areas, which could lead to higher costs than we have historically seen in our current product categories and types. We may not be able to pass increased costs on to customers, which could adversely affect our operating results.
In addition, we cannot guarantee that products we receive from vendors will be of sufficient quality or free from damage or defects, or that such merchandise will not be damaged during shipping or storage. While we take measures to ensure product quality and avoid damage, including evaluating vendor facilities, operations and product samples, conducting inventory inspections and inspecting returned products, we cannot control merchandise while it is out of our possession or prevent all damage while in our distribution centers. We may incur additional expenses and our reputation could be harmed or if current or potential customers believe that our merchandise is not of high quality or may be damaged.
Risks associated with the suppliers from whom our products are sourced could materially adversely affect our financial performance, as well as our reputation and brand.
We depend on our ability to provide our customers with a wide range of products from high quality suppliers in a timely and efficient manner. Our agreements with most of our suppliers do not provide for the long-term availability of merchandise or the continuation of particular pricing practices, nor do they usually restrict such suppliers from selling products to other buyers or directly themselves. There can be no assurance that our current suppliers will continue to seek to sell us products on current terms or that we will be able to establish new or otherwise extend current supply relationships to ensure product acquisitions in a timely and efficient manner and on acceptable commercial terms. Our ability to develop and maintain relationships with reputable suppliers and offer high quality products to our customers is critical to our success. If we are unable to develop and maintain relationships with suppliers that would allow us to offer a sufficient amount and variety of quality products on acceptable commercial terms, our ability to satisfy our customers’ needs, and therefore our long-term growth prospects, would be materially adversely affected.
8
We also are unable to predict whether any of the countries in which our suppliers’ products are currently manufactured or may be manufactured in the future will be subject to trade restrictions imposed by the U.S. or foreign governments or the likelihood, type or effect of any such restrictions. Any event causing a disruption or delay of imports from suppliers with international manufacturing operations, including the imposition of additional import restrictions, restrictions on the transfer of funds or increased tariffs or quotas, could increase the cost or reduce the supply of merchandise available to our customers and materially adversely affect our financial performance as well as our reputation and brand. Our competitors may have greater existing inventory positions and other advantages that may allow them to price more competitively relative to our products. Furthermore, some or all of our suppliers’ foreign operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds or other trade disruptions.
Manufacturing risks, including risks related to manufacturing in China, may adversely affect our ability to manufacture our products and could reduce our gross margin and our profitability.
We rely on third party manufacturers in China to manufacture our products. As a result, our business is subject to risks associated with doing business in China, including:
| ● | trade protection measures, such as tariff increases, and import and export licensing and control requirements; |
| ● | potentially negative consequences from changes in tax laws; |
| ● | difficulties associated with the Chinese legal system, including increased costs and uncertainties associated with enforcing contractual obligations in China; |
| ● | unexpected or unfavorable changes in regulatory requirements; and |
| ● | changes and volatility in currency exchange rates. |
Economic regulation, trade restrictions, and increasing manufacturing costs in China could adversely impact our business and results of operations.
We contract with manufacturing facilities in the People’s Republic of China. For many years, the Chinese economy has experienced periods of rapid growth. An increase in the cost of labor or taxes on wages in China may lead to an increase in the cost of goods manufactured in China. Significant increases in wages or wage taxes paid by contract manufacturing facilities may increase the cost of goods manufactured in China which could have a material adverse effect on the Company’s profit margins and profitability. Additionally, government trade policies, including the imposition of tariffs, export restrictions, sanctions or other retaliatory measures could limit our ability to source materials and products from China at acceptable prices or at all. For example, both the United States and China have implemented several rounds of tariffs and retaliations with respect to certain products imported from the other country, some of which may impact certain products we import. Moreover, the U.S. Congress passed the Uyghur Forced Labor Prevention Act in an effort to prevent what it views as forced labor and human rights abuses in the Xinjiang Uyghur Autonomous Region, or XUAR. If it is determined that our third-party suppliers and manufacturers mine, produce or manufacture our products wholly or in part from the XUAR, then we could be prohibited from importing such products into the U.S. In addition, Chinese trade regulations are in a state of flux, and we may become subject to other forms of taxation, tariffs and duties in China. We do not currently have arrangements with contract manufacturers in other countries that may be acceptable substitutes. We cannot predict what actions may ultimately be taken with respect to tariffs, export controls, countermeasures, or other trade measures between the U.S. and China or other countries and what products may be subject to such actions. To the extent such actions inhibit our transactions with contract manufacturing facilities and suppliers in China, our business may be materially adversely affected.
9
We are subject to risks from changes to the trade policies and tariff and import/export regulations by the U.S. and/or other foreign governments.
Changes in the import and export policies, including trade restrictions, new or increased tariffs or quotas, embargoes, sanctions and countersanctions, safeguards or customs restrictions by the U.S. and/or other foreign governments, could require us to change the way we conduct business and adversely affect our financial condition, results of operations, reputation and our relationships with merchants or vendors. Likewise, changes in laws and policies governing foreign trade, manufacturing, development and investment in the territories or countries from where we import or to where we import our products or conduct our business, could adversely affect our business.
For example, on February 1, 2025, the U.S. government announced a 25% tariff on product imports from certain countries, including Mexico and Canada, and a 10% tariff on imports from other countries, including China. In response, the government of Canada announced in March 2025 the imposition of 25% tariffs on $29.8 billion worth of goods originating from the U.S., as defined under the Determination of Country of Origin for the Purpose of Marking Goods (CUSMA Countries) Regulations. These tariffs may apply to goods manufactured in or shipped through the U.S., including Chinese-origin products exported from the U.S. to Canada, depending on origin marking rules.
This development may significantly impact our operations, as Amazon and third-party sellers, including our brands, frequently transfer goods between fulfillment centers in the U.S. and Canada. As a result, our cross-border shipment may be subject to additional duties, increasing costs and reducing profit margins. The extent of the impact remains uncertain and will depend on evolving trade policies, regulatory interpretations, and potential exemptions. These changes could reduce the attractiveness of cross-border e-commerce and negatively affect our sales volume and revenue.
Shipping is a critical part of our business and any changes in shipping costs or any interruptions in shipping could adversely affect our operating results.
If we are not able to negotiate acceptable pricing and other terms with vendors or if vendors experience performance problems or other difficulties, it could negatively impact our operating results and our customers’ experience. We are also subject to volatility in ocean freight rates that are driven, in part, by seasonality, capacity availability and other factors, including fuel-related regulations affecting the shipping industry. In addition, our ability to receive inbound inventory efficiently and ship merchandise to clients may be negatively affected by inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war or terrorism and similar factors. We are also subject to risk of damage or loss during delivery by our shipping vendors. If our products are not delivered in a timely fashion or are damaged or lost during the delivery process, our customers could become dissatisfied and cease using our products or services, which would adversely affect our business and operating results.
We depend on highly skilled personnel, including senior management, and if we are unable to retain or motivate key personnel or hire, retain and motivate qualified personnel, our business could be harmed.
We believe our past success has depended, and our future success depends, on the efforts and talents of our senior management and our highly skilled team members. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. The loss of one or more of our key personnel or the inability to promptly identify a suitable successor to a key role could have an adverse effect on our business. In particular, our Founder and Chief Executive Officer has unique and valuable experience leading our Company from our inception through today. If he were to depart or otherwise reduce his focus on our Company, our business may be disrupted.
10
Competition for key personnel is strong, especially in Israel where our headquarters are located, and we cannot be sure that we will be able to attract and retain a sufficient number of qualified personnel in the future, or that the compensation costs of doing so will not adversely affect our operating results. Similarly, competition for well-qualified employees in all aspects of our business is intense globally. We do not have long-term employment or non-competition agreements with any of our employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees and key senior management with the appropriate skills at cost-effective compensation levels, or if changes to our business adversely affect morale or retention, our business, results of operations, financial condition and prospects may be adversely affected.
In addition, in making employment decisions, job candidates often consider the value of the stock options or other equity incentives they are to receive in connection with their employment. If the price of our shares declines, or experiences significant volatility, our ability to attract or retain key employees may be adversely affected. Also, as employee options vest and the lock-up agreements expire, we may have difficulty retaining key employees. If we fail to attract new personnel or fail to retain and motivate our current personnel, our growth prospects could be severely harmed.
We may not accurately forecast revenues, profitability and appropriately plan our expenses.
We base our current and future expense levels on our operating forecasts and estimates of future income and operating results. Income and operating results are difficult to forecast because they generally depend on the volume and timing of orders, which are uncertain. Additionally, our business is affected by general economic and business conditions around the world. A softening in income, whether caused by changes in consumer preferences or a weakening in global economies, may result in decreased net revenue levels, and we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in income. This inability could cause our income (loss) from operations after tax in a given quarter to be lower or higher than expected. We also make certain assumptions when forecasting the amount of expense we expect related to our share-based payments, which includes the expected volatility of our share price, and the expected life of equity awards granted. These assumptions are partly based on historical results. If actual results differ from our estimates, our operating results in a given quarter may be lower than expected.
Our operating results are subject to seasonal fluctuations.
The e-commerce business is seasonal in nature and the fourth quarter is a significant period for our operating results due to the holiday season. As a result, revenue generally declines and loss from operations generally increases in the first quarter sequentially from the fourth quarter of the previous year. Any disruption in our ability to process and fulfill customer orders during the fourth quarter could have a negative effect on our quarterly and annual operating results. For example, if a large number of customers purchase our products in a short period of time due to increased holiday demand, inefficient management of our inventory may prevent us from efficiently fulfilling orders, which may reduce sales and harm our brands.
General economic factors may adversely affect our business, financial performance and results of operations.
Our business, financial performance and results of operations depend significantly on worldwide macroeconomic economic conditions and their impact on consumer spending. Recessionary economic cycles, higher interest rates, volatile fuel and energy costs, inflation, levels of unemployment, conditions in the residential real estate and mortgage markets, access to credit, consumer debt levels, unsettled financial markets and other economic factors that may affect consumer spending or buying habits could materially and adversely affect demand for our products. In addition, volatility in the financial markets has had and may continue to have a negative impact on consumer spending patterns. A reduction in consumer spending or disposable income may affect us more significantly than companies in other industries and companies with a more diversified product offering. In addition, negative national or global economic conditions may materially and adversely affect our suppliers’ financial performance, liquidity and access to capital. This may affect their ability to maintain their inventories, production levels and/or product quality and could cause them to raise prices, lower production levels or cease their operations.
11
Economic factors such as increased commodity prices, shipping costs, higher costs of labor, insurance and healthcare, and changes in or interpretations of other laws, regulations and taxes may also increase our cost of goods sold and our selling, general and administrative expenses, and otherwise adversely affect our financial condition and results of operations.
Any significant increases in costs may affect our business disproportionately compared to our competitors. Changes in trade policies or increases in tariffs, may have a material adverse effect on global economic conditions and the stability of global financial markets and may reduce international trade.
Natural disasters or other unexpected events may adversely affect our operations, particularly our merchandise supply chain and shipping efforts.
Natural disasters, such as earthquakes, hurricanes, tornadoes, floods and other adverse weather and climate conditions; unforeseen public health crises, such as pandemics and epidemics; political crises, such as terrorist attacks, war and other political instability; or other catastrophic events, whether occurring in Israel or internationally, could disrupt our operations in any of our offices and fulfillment centers or the operations of one or more of our third-party providers or vendors. In particular, these types of events could impact our merchandise supply chain, including our ability to ship merchandise to customers from or to the impacted region, and could impact our ability or the ability of third parties to operate our sites and ship merchandise. In addition, these types of events could negatively impact consumer spending in the impacted regions. To the extent any of these events occur, our business and operating results could be adversely affected.
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business, financial condition and results of operations may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.
U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in credit and capital markets.
Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets.
Any of the abovementioned factors could affect our business, prospects, financial condition, and operating results. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this Annual Report.
We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our shareholders and otherwise disrupt our operations and adversely affect our operating results.
Since our initial public offering, or IPO, we have acquired Fort and invested in SciSparc Nutraceuticals and on March 18, 2025, Smart Repair Pro closed the acquisition of Pure Logistics. We may in the future seek to acquire or invest in businesses, features or technologies that we believe could complement or expand our market, enhance our technical capabilities or otherwise offer growth opportunities. The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated. In addition, to the extent that we enter into any term sheets or agreements or otherwise announce any intention to acquire any businesses, features or technologies, any such acquisition would generally be subject to completion of due diligence and required approvals, and there can be no assurance that any such acquisition will occur or be completed in a timely manner, or at all.
12
If we acquire additional businesses, we may not be able to integrate the acquired operations, existing contracts and technologies successfully or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from any future acquired business due to a number of factors, including:
| ● | failure to identify all of the issues, liabilities or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, revenue recognition or other accounting practices, or employee or client issues; |
| ● | difficulty incorporating acquired technology and rights into our existing algorithm and operations and of maintaining quality and security standards consistent with our brands; |
| ● | inability to generate sufficient cashflow to offset acquisition or investment costs; |
| ● | incurrence of acquisition-related costs or equity dilution associated with funding the acquisition; |
| ● | difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; |
| ● | risks of entering new markets or new product categories in which we have limited or no experience; |
| ● | diversion of our management’s attention from other business concerns; |
| ● | adverse effects to our existing business relationships as a result of the acquisition; |
| ● | potential loss of customers, vendors and suppliers from either our current business or an acquired company’s business; |
| ● | use of resources that are needed in other parts of our business; |
| ● | possible write offs or impairment charges relating to acquired businesses; |
| ● | compliance with regulatory matters related to the acquired business or its products; and |
| ● | use of substantial portions of our available cash to consummate the acquisition. |
In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our results of operations.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our operating results. If an acquired business fails to meet our expectations, our business, operating results and financial condition may suffer.
Risks Related to our Logistics Center’s Operations
We may be unable to successfully pursue, integrate, or execute upon the Logistics Center operations business of Pure Logistics.
In March 2025, Smart Repair Pro purchased Pure Logistics, a company that operates a strategically located approximately 100,000 square foot logistics center equipped with 20 loading docks in New Jersey. With this acquisition, we anticipate strengthening our supply chain and third-party service offerings and as well as supporting our expansion of our operations in the U.S.
Our management has limited prior experience in operating a logistics center. There can be no assurance that we will be able to successfully implement our new business ventures or successfully operate within this industry, or achieve in strengthening our supply chain and third party service offerings or succeed in expanding our operations in the U.S. The successful integration of a new business also depends on our ability to manage the new business, realize forecasted synergies and full value from the combined business. Our business, results of operations, financial condition and cash flows could be materially adversely affected if we are unable to successfully integrate Pure Logistics into our existing operations and any inability to do so may also hinder our ability to grow, divert the attention of management and our key personnel, disrupt our business and impair our financial results.
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Our dependence on third parties to provide overseas transportation and domestic distribution services may impact the delivery and quality of our transportation and logistics services, and any disruption to these services could result in a disruption to our business, negative publicity, and a slowdown in the growth of our customer base, materially and adversely affecting our business, financial condition, and results of operations.
As we do not have our own delivery team and networks, our business depends on the services provided by, and relationships with, various independent third parties, to provide truck services and to report certain events to us, including, but not limited to, shipment status information and freight claims . These third-party logistics service providers may not fulfill their obligations to us, which may prevent us from meeting our commitments to our customers. This reliance also could cause delays in reporting certain events, including recognizing claims. In addition, if we are unable to secure sufficient equipment or other transportation services from third parties to meet our commitments to our customers, our operating results could be materially and adversely affected, and our customers could switch to our competitors temporarily or permanently.
Our business may be disrupted by natural disasters causing supply chain disruptions.
Natural disasters such as earthquakes, tsunamis, hurricanes, tornadoes, floods, or other adverse weather and climate conditions, whether occurring in the United States or abroad, could disrupt our operations and could damage or destroy infrastructure necessary to transport products as part of the supply chain. These events could make it difficult or impossible for us to provide logistics services; disrupt or prevent our ability to perform functions at the corporate level; and/or otherwise impede our ability to continue business operations in a continuous manner consistent with the level and extent of business activities prior to the occurrence of the unexpected event, which could adversely affect our business and results of operations.
General economic conditions and other events or occurrences that affect the where we operate our logistics center may impact financial results.
We are exposed to general economic conditions, local, regional, national and international economic conditions and other events and occurrences that affect the market and territory where we operate the logistics center. For example, a strike in the New Jersey port may cause delays or disruptions to the services our logistic center in New Jersey provides, and as a result affect our operations and financial results.
Interruptions at any of our logistic center and warehouses could materially adversely affect our business.
Pure Logistics operates one logistics center in New Jersey that is responsible for storing products as well as fulfilling and shipping orders for our customers or for third party customers. Fort leases two warehouse facilities in the U.K. and we also have contracts with third party warehouses in the United Kingdom and Europe, which are used for storage of inventory prior to their shipment to Amazon’s warehouses, based on availability. The complete or partial loss or temporary shutdown of any of the Company’s or third parties’ warehouse and distribution facilities (including as a result of fire or other casualty or labor or other disturbances) could have a material adverse effect on the Company’s business.
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Risks Related to Information Technology
Assertions by third parties of infringement or misappropriation by us of their intellectual property rights or confidential know how could result in significant costs and substantially harm our business and results of operations.
Our business relies on sophisticated and experienced use and know-how of Amazon’s AI market tracker. Third parties may in the future assert that we have infringed or misappropriated their trademarks, copyrights, confidential know how, trade secrets, patents or other intellectual property rights. We cannot predict whether any such assertions or claims arising from such assertions will substantially harm our business and results of operations, whether or not they are successful. If we are forced to defend against any infringement or other claims relating to the trademarks, copyright, confidential know how, trade secrets, patents or other intellectual property rights of third parties, whether they are with or without merit or are determined in our favor, we may face costly litigation or diversion of technical and management personnel. Furthermore, the outcome of a dispute may be that we would need to cease use of some portion of our systems. Any such assertions or litigation could materially adversely affect our business, results of operations, financial condition and prospects.
The e-commerce industry is characterized by vigorous protection and pursuit of intellectual property rights, which has resulted in protracted and expensive litigation for many companies. Some companies, including some of our competitors, own large numbers of patents, copyrights and trademarks, which they may use to assert claims against us. In addition, because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of the technologies we use.
Certain third parties have substantially greater resources than we have and may be able to sustain the costs of intellectual property litigation for longer periods of time than we can. Even if we were to prevail in such a dispute, any litigation regarding the way we operate and utilize our technologies, could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.
The inability to acquire, use or maintain our marks and domain names for our sites could substantially harm our business and operating results.
We currently have registered trademarks for certain of our brands in numerous jurisdictions and have registered the Internet domain names for Fort’s website. However, we have not registered our trademarks or domain names in all major international jurisdictions. Domain names generally are regulated by Internet regulatory bodies. If we do not have, or cannot obtain on reasonable terms, the ability to use our marks in a particular country or to use or register any of our domain names, we could be forced either to incur significant additional expenses to market our products within that country, including the development of a new brand and the creation of new promotional materials and packaging, or to elect not to sell products in that country. Either result could materially adversely affect our business, financial condition and operating results.
Furthermore, the regulations governing domain names and laws protecting marks and similar proprietary rights could change in ways that block or interfere with our ability to use relevant domains or our current brand names. Furthermore, we might not be able to prevent third parties from registering, using or retaining domain names that interfere with our consumer communications or infringe or otherwise decrease the value of our marks, domain names and other proprietary rights. Regulatory bodies also may establish additional generic or country-code top-level domains or may allow modifications of the requirements for registering, holding or using domain names. As a result, we may not be able to register, use or maintain the domain names that utilize the name Jeffs’ Brands or our other brands in all of the countries in which we currently or intend to conduct business.
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Any significant disruption in service on our websites or in our computer systems, a number of which are currently hosted or provided by third-party providers, could materially affect our ability to operate, damage our reputation and result in a loss of customers, which would harm our business and results of operations.
Our ability to sell and market our products relies on FBA platform whose functionality relies upon a number of third-party related services, including those relating to cloud infrastructure, technology services, servers, open-source libraries and vendor APIs. Any disruption or loss of any of these third-party services could have a negative effect on our business, results of operations, financial condition and prospects. We may experience interruptions in our systems, including server failures that temporarily slow down or interfere with the performance of our platforms and the ability to sell on e-commerce marketplaces.
Interruptions in these systems, whether due to system failures, human input errors, computer viruses or physical or electronic break-ins, and denial-of-service attacks on us, third-party vendors or communications infrastructure, could affect the availability of our services on our platform and prevent or inhibit the ability of selling our products. Volume of traffic and activity on e-commerce marketplaces spikes on certain days, such as during a Black Friday promotion, and any such interruption would be particularly problematic if it were to occur at such a high-volume time. Problems with the reliability of our systems or third-party marketplaces could prevent us from earning revenue and could harm our reputation. Damage to our reputation, any resulting loss of customers, e-commerce confidence and the cost of remedying these problems could negatively affect our business, results of operations, financial condition and prospects.
Our ability to maintain communications, network and computer hardware in the countries in which they are used may in the future be subject to regulatory review and licensing, and the failure to obtain any required licenses could negatively affect our business. Our systems and infrastructure are predominately reliant on third parties. Problems faced by our third-party service providers with the telecommunications network providers with whom they contract or with the systems by which they allocate capacity among their users, including us, could adversely affect the experience of our customers. Our third-party service providers could decide to close their facilities without adequate notice. Any financial difficulties, such as bankruptcy or reorganization, faced by our third-party service providers or any of the service providers with whom they contract may have negative effects on our business, the nature and extent of which are difficult to predict. If our third-party service providers are unable to keep up with our needs for capacity, this could have an adverse effect on our business. Any errors, defects, disruptions or other performance problems with our services could harm our reputation and may have a material adverse effect on our business, results of operations, financial condition and prospects.
Our failure or the failure of third parties to protect our sites, networks and systems against security breaches, or otherwise to protect our confidential information and practices, could damage our reputation and brands and substantially harm our business and operating results.
We collect, maintain, transmit and store data about our customers, brands and others, including personally identifiable information, as well as other confidential information. We also engage third parties that store, process and transmit these types of information on our behalf. We rely on encryption and authentication technology licensed from third parties in an effort to securely transmit confidential and sensitive information, including credit card numbers. Advances in computer capabilities, new technological discoveries or other developments may result in the whole or partial failure of this technology to protect transaction data or other confidential and sensitive information from being breached or compromised. In addition, our brand’s e-commerce websites are often attacked through compromised credentials, including those obtained through phishing and credential stuffing. Our security measures, and those of our third-party service providers, may not detect or prevent all attempts to breach our systems, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks and similar disruptions that may jeopardize the security of information stored in or transmitted by our websites, networks and systems or that we or such third parties otherwise maintain, including payment card systems, which may subject us to fines or higher transaction fees or limit or terminate our access to certain payment methods. We and such third parties may not anticipate or prevent all types of attacks until after they have already been launched. Further, techniques used to obtain unauthorized access to sabotage systems change frequently and may not be known until launched against us or our third-party service providers. In addition, security breaches can occur as a result of non-technical issues, including intentional or inadvertent breaches by our employees or by third parties. These risks may increase over time as the complexity and number of technical systems and applications we use also increases.
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Breaches of our security measures or those of our third-party service providers or cyber security incidents could result in unauthorized access to our sites, networks, systems and accounts; unauthorized access to, and misappropriation of, consumer information, including customers’ personally identifiable information, or other confidential or proprietary information of ourselves or third parties; viruses, worms, spyware or other malware being served from our sites, networks or systems; deletion or modification of content or the display of unauthorized content on our sites; interruption, disruption or malfunction of operations; costs relating to breach remediation, deployment of additional personnel and protection technologies, response to governmental investigations and media inquiries and coverage; engagement of third-party experts and consultants; or litigation, regulatory action and other potential liabilities. In the past, we have experienced social engineering, phishing, malware and similar attacks and threats of denial-of-service attacks; however, such attacks could in the future have a material adverse effect on our operations. If any of these breaches of security should occur, our reputation and brand could be damaged, our business may suffer, we could be required to expend significant capital and other resources to alleviate problems caused by such breaches, and we could be exposed to a risk of loss, litigation or regulatory action and possible liability. We cannot guarantee that recovery protocols and backup systems will be sufficient to prevent data loss. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.
We may experience periodic system interruptions from time to time. In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities or seasonal trends in our business, place additional demands on our marketplace platforms and could cause or exacerbate slowdowns or interruptions. If there is a substantial increase in the volume of traffic on our sites or the number of orders placed by customers, we will be required to further expand and upgrade our technology, transaction processing systems and network infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of our sites or expand and upgrade our systems and infrastructure to accommodate such increases on a timely basis. In order to remain competitive, we must continue to enhance and improve the responsiveness, functionality and features of our sites, which is particularly challenging given the rapid rate at which new technologies, customer preferences and expectations and industry standards and practices are evolving in the e-commerce industry. Accordingly, we redesign and enhance various functions on our sites on a regular basis, and we may experience instability and performance issues as a result of these changes. Our disaster recovery plan may be inadequate, and our business interruption insurance may not be sufficient to compensate us for the losses that could occur.
Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data protection, data security, network and information systems security and other laws and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, results of operations, financial condition and prospects. We continue to devote significant resources to protect against security breaches, or we may need to devote significant resources in the future to address problems caused by breaches, including notifying affected subscribers and responding to any resulting litigation, which in turn, diverts resources from the growth and expansion of our business. To date, we are not aware of any material compromises or breaches of our networks or systems.
Risks Related to Legal and Regulatory Matters
We may be subject to general litigation, regulatory disputes and government inquiries.
As a growing company with expanding operations, we may in the future increasingly face the risk of claims, lawsuits, government investigations and other proceedings involving competition and antitrust, intellectual property, privacy, consumer protection, accessibility claims, securities, tax, labor and employment, commercial disputes, services and other matters. The number and significance of these disputes and inquiries have increased as the political and regulatory landscape changes, and as we have grown larger and expanded in scope and geographic reach, and our services have increased in complexity.
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We cannot predict the outcome of such disputes and inquiries with certainty. Regardless of the outcome, these can have an adverse impact on us because of legal costs, diversion of management resources and other factors. Determining reserves for any litigation is a complex, fact-intensive process that is subject to judgment calls. It is possible that a resolution of one or more such proceedings could require us to make substantial payments to satisfy judgments, fines or penalties or to settle claims or proceedings, any of which could harm our business. These proceedings could also result in reputational harm, criminal sanctions, consent decrees or orders preventing us from offering certain products or services or requiring a change in our business practices in costly ways or requiring development of non-infringing or otherwise altered products or technologies. Litigation and other claims and regulatory proceedings against us could result in unexpected expenses and liabilities, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
A failure to comply with current laws, rules and regulations or changes to such laws, rules and regulations and other legal uncertainties may adversely affect our business, financial performance, results of operations or business growth.
Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to us and our businesses, including those relating to the internet and e-commerce, internet advertising and price display, consumer protection, anti-corruption, antitrust and competition, economic and trade sanctions, energy usage and emissions, tax, banking, data security, network and information systems security, data protection and privacy. As a result, regulatory authorities could prevent or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us if our practices were found not to comply with applicable regulatory or licensing requirements or any binding interpretation of such requirements. Unfavorable changes or interpretations could decrease demand for our products or services, limit marketing methods and capabilities, affect our margins, increase costs or subject us to additional liabilities.
For example, there are, and will likely continue to be, an increasing number of laws and regulations pertaining to the internet and e-commerce that may relate to liability for information retrieved from or transmitted over the internet, display of certain taxes and fees, online editorial and consumer-generated content, user privacy, data security, network and information systems security, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of services. Furthermore, the growth and development of e-commerce may prompt calls for more stringent consumer protection laws and more aggressive enforcement efforts, which may impose additional burdens on online businesses generally.
If our products experience any recalls, product liability claims, or government, customer or consumer concerns about product safety, our reputation and operating results could be harmed.
Our products are subject to regulation by the U.S. Consumer Product Safety Commission, or the CPSC, and similar state and international regulatory authorities, and could be subject to involuntary recalls and other actions by these authorities. Concerns about product safety, including concerns about the safety of products manufactured in developing countries, could lead us to recall selected products. Recalls and government, customer or consumer concerns about product safety could harm our reputation and reduce sales, either of which could have a material adverse effect on our business, results of operations, financial condition and prospects.
We may also be subject to product liability claims if people or property are harmed by the products we sell. Some of the products we sell may expose us to product liability claims and litigation (including class actions) or regulatory action relating to safety, personal injury, death or environmental or property damage.
Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. Some of our agreements with members of our supply chain may not indemnify us from product liability claims for a particular product, and some members of our supply chain may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
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Any failure by us or our vendors to comply with product safety, labor or other laws, or our standard vendor terms and conditions, or to provide safe factory conditions for our or their workers may damage our reputation and brand and harm our business.
The products we sell to our customers are subject to regulation by the CPSC, the Federal Trade Commission, or the FTC, and similar state and international regulatory authorities. As a result, such products could be in the future subject to recalls and other remedial actions. Product safety, labeling and licensing concerns may require us to voluntarily remove selected merchandise from our inventory. Such recalls or voluntary removal of merchandise can result in, among other things, suspension of our seller accounts on Amazon and other online marketplaces, lost sales, diverted resources, potential harm to our reputation and increased client service costs and legal expenses, which could have a material adverse effect on our operating results.
Some of the products we sell may expose us to product liability claims and litigation or regulatory action relating to personal injury or environmental or property damage. Although we maintain liability insurance and implemented a quality assurance program that includes obtaining necessary certifications, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms or at all. In addition, some of our agreements with our vendors may not indemnify us from product liability claims for a particular vendor’s products or our vendors may not have sufficient resources or insurance to satisfy their indemnity and defense obligations.
We are subject to U.S. governmental regulation and other legal obligations related to privacy, data protection and information security. If we are unable to comply with these, we may be subject to governmental enforcement actions, litigation, fines and penalties or adverse publicity.
We collect personally identifiable information and other data from our customers and prospective customers. We collect this info automatically through the automated sales processes with e-commerce marketplaces. We, at times, may use this information to provide, support, expand and improve our business and tailor our digital marketing and advertising efforts.
Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, such as the FTC, and various state, local and foreign agencies. Our data handling also is subject to industry standards.
The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of data relating to individuals, including the use of contact information and other data for digital marketing, advertising and other communications with individuals and businesses. In the United States, various laws and regulations apply to the collection, processing, disclosure and security of certain types of data. Additionally, the FTC and many state attorneys general are interpreting federal and state consumer protection laws as imposing standards for the online collection, use, dissemination and security of data. The laws and regulations relating to privacy and data security are evolving, can be subject to significant change and may result in ever-increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions.
In the United States, federal and various state governments have adopted or are considering laws, guidelines or rules for the collection, distribution, use and storage of personal information collected from or about customers or their devices. This trend began with the California Consumer Privacy Act, or the CCPA, which came into force on January 1, 2020. Since the passing of the CCPA, several US states have passed similar privacy laws regulating the processing of personal data, beginning with the Virginia Consumer Data Protection Act, or the VCDPA, which became effective on January 1, 2023, the Colorado Privacy Act, or the CPA, which became effective on July 1, 2023, the Connecticut Data Privacy Act, or the CDPA, which became effective on July 1, 2023 and the Utah Consumer Privacy Act, or the UCPA, which became effective on December 31, 2023. The most recent data privacy legislation includes the Delaware Personal Data Privacy Act, or the DPDPA, the Iowa Consumer Data Protection Act, or the ICDPA, the Nebraska Consumer Data Privacy Act, or the NCDPA, and the New Hampshire Privacy Act, or the NHPA, all of which came into effect on January 1, 2025, as well as the New Jersey Data Privacy Act, or the NJDPA, which came into effect on January 15, 2025. Similarly to the CCPA, these laws and others like them create numerous privacy and security obligations for businesses and service providers as well as rights for data subjects and individuals Furthermore, some federal laws such as the Controlling the Assault of Non-Solicited Pornography and Marketing Act, the Children’s Online Privacy Protection Act or the FTC Act could also be applicable to some of our activities.
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Numerous data protection regimes apply based on where a customer is located, and as we expand and new laws are enacted or existing laws change, we may be subject to new laws, regulations or standards or new interpretations of existing laws, regulations or standards, which could require us to incur additional costs and restrict our business operations. Any failure or perceived failure by us to comply with rapidly evolving privacy or security laws, policies (including our own stated privacy policies), legal obligations or industry standards or any security incident that results in the unauthorized release or transfer of personally identifiable information or other consumer data may result in governmental enforcement actions, litigation (including consumer class actions), fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have a material adverse effect on our business, results of operations, financial condition and prospects.
Additionally, the use of algorithms to scan and analyze data from websites and/or e-commerce platforms may be subject to applicable laws, regulations, and terms of use. There are currently various unresolved court cases surrounding these practices, making it difficult to assess the impact until those issues are resolved. Our actual or alleged failure to comply with applicable laws and regulations or website terms of use could result in enforcement actions and significant penalties against us, which could lead to negative publicity and costs, subject us to claims, fines or other remedies, and have a material adverse effect on our business, financial condition, and results of operations.
Due to rapid changes in technology and the inconsistent interpretations of privacy and data collection and protection laws and regulations, we may be required to materially change the way we conduct business. The challenges imposed by the ongoing need to remain compliant with such laws and regulations, as well the need to implement any changes required based on newly introduced laws and regulations, may slow our growth, and if we are not able to cope with these challenges as effectively as other companies, we will be competitively disadvantaged. Amazon collects data of users on their platform and any limitation on their ability to collect and utilize data, including personal data, would make it more difficult for us to be able to optimize sales, which could render our products less valuable and potentially result in loss of revenue.
In Europe, where we expanded our business operations as part of our growth, the data privacy and information security regime continues to evolve and is subject to increasing regulatory scrutiny.
The General Data Protection Regulation, or GDPR, implemented more stringent operational requirements for our use of personal data. These more stringent requirements include expanded disclosures to inform our customers about how we may use their personal data, increased controls on profiling customers and increased rights for customers to access, control and delete their personal data. In addition, there are mandatory data breach notification requirements and significantly increased penalties of the greater of €20 million or 4% of global turnover for the preceding financial year.
The U.K.’s Network and Information Systems Regulations 2018, or NIS Regulations, which came into force on May 10, 2018, apply to us as an online marketplace and place additional network and information systems security obligations on us, as well as mandatory security incident notification in certain circumstances with penalties of up to £17 million.
In recent years, U.S. and European lawmakers and regulators have expressed concern over the use of third-party cookies and similar technologies for online behavioral advertising, and laws in this area are also under reform. Such regulations may have a negative effect on businesses, including ours, that collect and use online usage information for consumer acquisition and marketing, may increase the cost of operating a business that collects or uses such information and undertakes online marketing, it may also increase regulatory scrutiny and increase potential civil liability under data protection or consumer protection laws.
These regulations result in significant compliance costs and could result in restricting the growth and profitability of our business by impeding the development of new services. We could incur substantial costs to comply with these regulations. The changes could require significant systems changes, limit the effectiveness of our marketing activities, adversely affect our margins, increase costs and subject us to additional liabilities. Also, it could negatively impact the use or adoption of our services, reduce overall demand for our services, make it more difficult for us to meet expectations from or commitments to our clients, lead to significant fines, penalties, or liabilities for noncompliance, or impact our reputation, any of which could harm our business.
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Our business is conducted through the internet and therefore, among other things, we are subject to the laws and regulations that apply to e-commerce and online businesses around the world. These laws and regulations are becoming more prevalent in the United States, Europe, Israel, the United Kingdom and elsewhere and may impede the growth of the internet and consequently our services. These regulations and laws may cover privacy, data collection and protection, location of data storage and processing, cybersecurity, e-commerce, content, use of “cookies,” access changes, “net neutrality,” pricing, advertising, distribution of “spam” copyright and other intellectual property, libel, marketing, distribution of products, protection of minors, consumer protection, and online payment services. We receive, collect, store, process, transfer and use certain data about how viewers and buyers engaged with content and advertisements and helps us to leverage that data to become a better storyteller and maximize sales in different marketplaces. Our ability to access and utilize such data is crucial.
Amendments to existing tax laws, rules or regulations or enactment of new unfavorable tax laws, rules or regulations could have an adverse effect on our business and financial performance.
Many of the laws, rules or regulations imposing taxes and other similar obligations were established before the growth of the internet and e-commerce. Tax authorities in non-U.S. jurisdictions, including Israel, and at the U.S. federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce and considering changes to existing tax or other laws that could regulate our transmissions and/or levy sales, income, consumption, use or other taxes relating to our activities, and/or impose obligations on us to collect such taxes. For example, in March 2018, the European Commission proposed new rules for taxing digital business activities in the EU. In addition, state and local taxing authorities in the United States and taxing authorities in other countries have identified e-commerce platforms as a means to calculate, collect and remit indirect taxes for transactions taking place over the internet. Multiple U.S. states have enacted related legislation and other states are now considering such legislation. Furthermore, the U.S. Supreme Court held in South Dakota v. Wayfair that a U.S. state may require an online retailer to collect sales taxes imposed by that state, even if the retailer has no physical presence in that state, thus permitting a wider enforcement of such sales tax collection requirements. Such legislation could require us or our retailers and brands to incur substantial costs in order to comply, including costs associated with legal advice, tax calculation, collection, remittance and audit requirements, which could make selling in such markets less attractive and could adversely affect our business.
We cannot predict the effect of current attempts to impose taxes on commerce over the internet. If such tax or other laws, rules or regulations were amended, or if new unfavorable laws, rules or regulations were enacted, the results could increase our tax payments or other obligations, prospectively or retrospectively, subject us to interest and penalties, decrease the demand for our products if we pass on such costs to the consumer, result in increased costs to update or expand our technical or administrative infrastructure or effectively limit the scope of our business activities if we decided not to conduct business in particular jurisdictions. As a result, these changes may have a material adverse effect on our business, results of operations, financial condition and prospects.
We are subject to anti-corruption, anti-bribery, anti-money laundering and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.
Israel Money Laundering and Terror Financing Prohibition Authority, the SEC, the U.S. Department of Justice, the U.S. Treasury Department’s Office of Foreign Assets Controls, or OFAC, the U.S. Department of State, and other foreign regulatory authorities, continue to enforce economic and trade regulations and anti-corruption laws across industries. U.S. trade sanctions relate to transactions with designated foreign countries and territories, including Cuba, Iran, North Korea, Syria and the Crimea region of Ukraine, or Crimea, as well as specifically targeted individuals and entities that are identified on U.S. and other blacklists, and those owned by them or those acting on their behalf.
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Anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, or the FCPA, the U.K. Bribery Act, or the Bribery Act, and Israel Penal Code section 291a, generally prohibit direct or indirect corrupt payments to government officials and, under certain laws, private persons to obtain or retain business or an improper business advantage. Some of our international operations are conducted in parts of the world where it is common to engage in business practices that are prohibited by these laws.
Although we comply with laws and regulations, especially as we expand our operations in existing and new jurisdictions which proportionately adds risks of non-compliance with applicable laws and regulations, our employees, partners or agents could take actions that violate applicable laws or regulations. As regulations continue to develop and regulatory oversight continues to focus on these areas, we cannot ensure compliance at all times with all applicable laws or regulations.
In the event our controls should fail, or we are found to be not in compliance for other reasons, we could be subject to monetary damages, civil and criminal monetary penalties, withdrawal of business licenses or permits, litigation and damage to our reputation and the value of our brand.
As we expand our operations in existing and new jurisdictions internationally, we will need to increase the scope of our compliance programs to address the risks relating to the potential for violations of the FCPA and the Bribery Act and other anti-bribery and anti-corruption laws. Further, the promulgation of new laws, rules and regulations, or the new interpretation of existing laws, rules and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we or our retailers and brands conduct business could require us to change certain aspects of our business, operations and commercial relationships to ensure compliance, which could decrease demand for products or services, reduce net revenue, increase costs or subject us to additional liabilities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years, are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, offering, soliciting or accepting improper payments or other benefits to or from government officials and others in the private sector. As we increase our international sales and business, particularly in countries with a low score on the Corruptions Perceptions Index by Transparency International and increase our use of third-party business partners such as sales agents, distributors, resellers or consultants, our risks under these laws may increase. Under these laws, we could be held liable for the corrupt or other illegal activities of our employees, representatives, contractors, business partners and agents, even if we do not explicitly authorize or have actual knowledge of such activities. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension or debarment from contracting with certain persons, the loss of export privileges, whistle-blower complaints, reputational harm, adverse media coverage and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees.
In certain cases, enforcement authorities may even require us to appoint an independent compliance monitor, which can result in added costs and administrative burdens. Any investigations, actions, sanctions or other previously mentioned harm could have a material negative effect on our business, operating results and financial condition.
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Even following receipt of any regulatory approval for our pest control products, we will continue to be subject to regulation of our advertising practices.
As a seller of pest control products, which include poisonous active ingredients, we are subject to continual government oversight by the U.S. Environmental Protection Agency, or EPA, and other regulatory authorities. The EPA strictly regulates the advertising and promotion of pest control products, and these pest control products may only be marketed or promoted for their EPA approved uses, consistent with the product’s approved labeling. Advertising and promotion of any product candidate that obtains approval in the U.S. will be heavily scrutinized by the EPA, other applicable state regulatory agencies and the public. Violations, including promotion of our products for unapproved or off-label uses, are subject to enforcement actions, inquiries and investigations, and civil, criminal and/or administrative sanctions imposed by the EPA.
Our operations are subject to environmental laws and regulations that may increase costs of operations and impact or limit our business plans.
We are subject to environmental laws and regulations affecting many aspects of our present and potential future operations, including a wide variety of EPA labeling and other state regulatory agency requirements. For example, under the Federal Insecticide, Fungicide, and Rodenticide Act, we are required to register with the EPA and certain state regulatory authorities as a seller of disinfectants, and we are subject to EPA labeling requirements. Compliance with these laws and regulations may result in increased costs and delays as a result of administrative proceedings and certain reporting obligations. Public officials and entities may seek injunctive relief or other remedies to enforce applicable environmental laws and regulations. If we are found to not have complied with these laws and are unable to sell our products, our business and financial results will be negatively impacted.
Increased regulatory scrutiny of nutritional supplements as well as new regulations that are being adopted in some of our markets with respect to nutritional supplements could result in more restrictive regulations and harm our results if our supplements or advertising activities are found to violate existing or new regulations or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations.
There has been an increasing movement in the United States and other markets to increase the regulation of dietary supplements, which could impose additional restrictions or requirements on us and increase the cost of doing business. On February 11, 2019, the U.S. Food and Drug Administration, or FDA, issued a statement from FDA Commissioner, Dr. Scott Gottlieb, regarding the agency’s efforts to strengthen the regulation of dietary supplements. The FDA will be prioritizing and focusing resources on misbranded products bearing unproven claims to treat, cure, or mitigate disease. Commissioner Gottlieb established a Dietary Supplement Working Group tasked with reviewing the agency’s organizational structure, process, procedures, and practices to identify opportunities to modernize the oversight of dietary supplements. Additionally, on December 21, 2015, the FDA created the Office of Dietary Supplements, or ODSP. The creation of this new office elevates the FDA’s program from its previous status as a division under the Office of Nutrition and Dietary Supplements. ODSP will continue to monitor the safety of dietary supplements. In August 2016, the FDA published its revised draft guidance on Dietary Supplements: New Dietary Ingredient Notifications and Related Issues. If a company sells a dietary supplement containing an ingredient that FDA considers either not a dietary ingredient or a new dietary ingredient, or NDI, that needs an NDI notification, the agency may threaten or initiate enforcement against such company. For example, it might send a warning letter that can trigger consumer lawsuits, demand a product recall, or even work with the Department of Justice to bring a criminal action. Our operations could be harmed if new guidance or regulations require us to reformulate products or effect new registrations, if regulatory authorities make determinations that any of our products do not comply with applicable regulatory requirements, if the cost of complying with regulatory requirements increases materially, or if we are not able to effect necessary changes to our products in a timely and efficient manner to respond to new regulations. In addition, our operations could be harmed if governmental laws or regulations are enacted that restrict the ability of companies to market or distribute nutritional supplements or impose additional burdens or requirements on nutritional supplement companies.
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Risks Related to our Operations in Israel
Conditions in Israel, including Israel’s conflicts with Hamas and other parties in the region, as well as political and economic instability, may adversely affect our operations and limit our ability to market our products, which would lead to a decrease in revenues.
Our offices and management team are located in Israel, while our other facilities located overseas and are not exposed to war damage. Accordingly, political, economic, and military conditions in Israel and the surrounding region may directly affect our business and operations.
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. Israel declared war against Hamas and since then, Israel has been involved in military conflicts with Hamas, Hezbollah, a terrorist organization based in Lebanon, and Iran, both directly and through proxies like the Houthi movement in Yemen and armed groups in Iraq and other terrorist organizations. Additionally, following the fall of the Assad regime in Syria, Israel has conducted limited military operations targeting the Syrian army, Iranian military assets and infrastructure linked to Hezbollah and other Iran-supported groups. Although certain ceasefire agreements have been reached, these agreements failed to be upheld and military activity and hostilities continue to exist at varying levels of intensity, and the situation remains volatile, with the potential for escalation into a broader regional conflict involving additional terrorist organizations and possibly other countries. Also, the fall of the Assad regime in Syria may create geopolitical instability in the region. As a result of numerous attacks on marine vessels traversing the Red Sea launched by the Houthi movement we have experienced delays in supplier deliveries, extended lead times, and increased cost of freight, increased insurance costs, purchased materials and manufacturing labor costs. We currently do not experience such delays and the cost of freight is nearly back to the prices prior to the attacks in October 2023, but there is no assurance that we will not experience in the future such delays. The risk of ongoing supply disruptions may further result in delayed deliveries of our products.
The continuation of the war has also led to a deterioration of certain indicators of Israel’s economic standing (including as the result of a downgrade in Israel’s credit rating by certain credit rating agencies), which may have a material adverse effect on the Company and its ability to effectively conduct its operations.
The military hostilities have included and may include terror, missile and drone attacks. our offices have not been damaged during the current war, the hostilities with Hamas, Hezbollah, Iran and its proxies and others have caused and may continue to cause damage to private and public facilities, infrastructure, utilities, and telecommunication networks, and potentially disrupting our operations and supply chains. In addition, Israeli organizations, government agencies and companies have been subject to extensive cyber attacks. This could lead to increased costs, risks to employee safety, and challenges to business continuity, with potential financial losses.
Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that such government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.
The global perception of Israel and Israeli companies, influenced by actions by international judicial bodies, may lead to increased sanctions and other negative measures against Israel, as well as Israeli companies and academic institutions. There is also a growing movement among countries, activists, and organizations to boycott Israeli goods, services and academic research or restrict business with Israel, which could affect business operations. If these efforts become widespread, along with any future rulings from international tribunals against Israel, they could significantly and negatively impact business operations.
Prior to the October 2023 war, the Israeli government pursued changes to Israel’s judicial system and has recently renewed its efforts to effect such changes. In response to the foregoing developments, certain individuals, organizations, and institutions, both within and outside of Israel, voiced concerns that such proposed changes, if adopted, may negatively impact the business environment in Israel. Such proposed changes may also lead to political instability or civil unrest. If such changes to Israel’s judicial system are pursued by the government and approved by the parliament, this may have an adverse effect on our business, results of operations, and ability to raise additional funds, if deemed necessary by our management and board of directors.
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Exchange rate fluctuations between foreign currencies and the U.S. Dollar may negatively affect our earnings.
Our reporting and functional currency is the U.S. dollar. Our revenues are currently primarily payable in GBP and we expect our future revenues to be equally divided between GBP and U.S. Dollar. However, most of our expenses are also in U.S. Dollar, NIS and some in Euro. As a result, we are exposed to the currency fluctuation risks relating to the recording of our expenses in U.S. dollars.
It may be difficult to enforce a judgment of a U.S. court against us and our executive officers and directors and the Israeli experts named in this Annual Report in Israel or the United States, to assert U.S. securities laws claims in Israel or to serve process on our executive officers and directors and these experts.
We are incorporated in Israel. All of our executive officers and directors reside outside of the United States, and all of our assets and most of the assets of these persons are located outside of the United States. Therefore, a judgment obtained against us, or any of these persons, including a judgment based on the civil liability provisions of the U.S. federal securities laws, may not be collectible in the United States and may not be enforced by an Israeli court. It also may be difficult for you to effect service of process on these persons in the United States or to assert U.S. securities law claims in original actions instituted in Israel. Additionally, it may be difficult for an investor, or any other person or entity, to initiate an action with respect to U.S. securities laws in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning that Israel is not the most appropriate forum in which to bring such a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proven as a fact by expert witnesses, which can be a time consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel that addresses the matters described above. As a result of the difficulty associated with enforcing a judgment against us in Israel, you may not be able to collect any damages awarded by either a U.S. or foreign court. See “Enforceability of Civil Liabilities” for additional information on your ability to enforce a civil claim against us and our executive officers or directors named in this Annual Report.
Your rights and responsibilities as a shareholder are governed in key respects by Israeli laws, which differ in some material respects from the rights and responsibilities of shareholders of U.S. companies.
The rights and responsibilities of the holders of our Ordinary Shares are governed by our amended and restated articles of association and by Israeli law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S. companies. In particular, a shareholder of an Israeli company has a duty to act in good faith and in a customary manner in exercising its rights and performing its obligations towards the company and other shareholders, and to refrain from abusing its power in such company, including, among other things, in voting at a general meeting of shareholders on matters such as amendments to a company’s articles of association, increases in a company’s authorized share capital, mergers and acquisitions and related party transactions requiring shareholder approval, as well as a general duty to refrain from discriminating against other shareholders. In addition, a controlling shareholder of an Israeli company or a shareholder who is aware that it possesses the power to determine the outcome of a vote at a meeting of the shareholders or to appoint or prevent the appointment of a director or executive officer in the company, or has other powers, has a duty of fairness towards the company. Israeli law does not define the substance of this duty of fairness. There is limited case law available to assist us in understanding the nature of these duties or the implications of these provisions. These provisions may be interpreted to impose additional obligations and liabilities on holders of our Ordinary Shares that are not typically imposed on shareholders of U.S. companies.
Certain provisions of our amended and restated articles of association may be deemed to have an anti-takeover effect.
Certain provisions of our amended and restated articles of association may make a change in control of us more difficult to effect. Our amended and restated articles of association provide for a staggered board of directors consisting of three classes of directors. Directors of each class are chosen for three-year terms upon the expiration of their current terms and each year one class of our directors will be elected by our shareholders. This classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in a majority of our board of directors. Thus, the classified board provision could increase the likelihood that incumbent directors will retain their positions. The staggered terms of directors may delay, defer or prevent an attempt to change control of us, even though a change in control might be considered by our shareholders to be in their best interest.
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Risks Related to Our Status as a Public Company and Ownership of our Ordinary Shares and Warrants
Issuance of a significant amount of additional Ordinary Shares on exercise or conversion of outstanding warrants and/or substantial future sales of our Ordinary Shares may depress our share price.
The issuance of a significant amount of additional Ordinary Shares on account of outstanding warrants will dilute our current shareholders’ holdings and may depress our share price. If these or other shareholders sell substantial amounts of our Ordinary Shares, including shares issuable upon the exercise or conversion of outstanding warrants or employee options, or if the perception exists that our shareholders may sell a substantial number of our Ordinary Shares, we cannot foresee the impact of any potential sales on the market price of these additional Ordinary Shares, but it is possible that the market price of our Ordinary Shares would be adversely affected. Any substantial sales of our shares in the public market might also make it more difficult for us to sell equity or equity related securities in the future at a time and on terms we deem appropriate. Even if a substantial number of sales do not occur, the mere existence of this “market overhang” could have a negative impact on the market for, and the market price of, our Ordinary Shares.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, results of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting, which could have a material adverse effect on the price of our Ordinary Shares.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Disclosing deficiencies or weaknesses in our internal control, failing to remediate these deficiencies or weaknesses in a timely fashion or failing to achieve and maintain an effective internal control environment may cause investors to lose confidence in our reported financial information, which could have a material adverse effect on the price of our Ordinary Shares. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed
Future sales of our Ordinary Shares and Warrants could reduce the market price of our Ordinary Shares and Warrants.
Substantial sales of our Ordinary Shares and Warrants on Nasdaq, may cause the market price of our Ordinary Shares and/or Warrants to decline. Sales by us or our security holders of substantial amounts of our Ordinary Shares and/or Warrants, or the perception that these sales may occur in the future, could cause a reduction in the market price of our Ordinary Shares and/or Warrants.
The issuance of any additional Ordinary Shares or any securities that are exercisable for or convertible into Ordinary Shares, may have an adverse effect on the market price of our Ordinary Shares and will have a dilutive effect on our existing shareholders and holders of Ordinary Shares.
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We cannot assure you that our Ordinary Shares and Warrants will remain listed on Nasdaq or any other securities exchange.
On April 25, 2024, we received a written notice, or the Notice, from Nasdaq indicating that we were not in compliance with the minimum bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum bid price of $1.00 per share. Under Nasdaq Listing Rule 5810(c)(3)(A), we were granted an initial period of 180 calendar days to regain compliance with the minimum bid price requirement, and thereafter on October 23, 2024 we were granted an additional 180 calendar day period. Although we have since cured this deficiency by, among other things, effecting the November 2024 Reverse Split, and have regained compliance with Nasdaq Listing Rule 5550(a)(2), there is a risk that we could be subject to additional notices of delisting for failure to comply with Nasdaq Listing Rule 5550(a)(2) or other Nasdaq Listing Rules. In addition, on January 17, 2025, the SEC approved an amendment to Nasdaq Listing Rule 5810(c)(3)(A)(iv), according to which, if a company fails to meet the minimum bid price requirement and the company has effected a reverse share split over the prior one-year period, the company would not be eligible for any compliance period and the Listing Qualifications Department will issue a Delisting Determination under Rule 5810 with respect to that company’s securities. This change will apply to a company even if the company was in compliance with the bid price requirement at the time of its prior reverse share split. In addition, if a company’s security fails to meet the bid price requirement and the company has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the company is not eligible for any compliance periods and Nasdaq must issue a Delisting Determination with respect to that security. Accordingly, there is a risk that if within one year of the November 2024 Reverse Split or any other future reverse share splits effected from time to time, our Ordinary Shares trade below $1.00 per share for 30 consecutive business days, we will not be eligible for any compliance period and the Listing Qualifications Department will issue a Delisting Determination for our Ordinary Shares by Nasdaq.
No assurance can be given that we will remain eligible to be listed on Nasdaq. In the event that our Ordinary Shares are delisted from Nasdaq due to our failure to continue to comply with the requirements for continued listing on Nasdaq, and are not eligible for listing on another national securities exchange, trading in our Ordinary Shares and Warrants could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, our Ordinary Shares and Warrants, and it would likely be more difficult to obtain coverage by securities analysts and the news media, which could cause the price of our Ordinary Shares to decline further. Also, it may be difficult for us to raise additional capital if we are not listed on a national exchange.
As a “foreign private issuer” we are permitted, and intend, to follow certain home country corporate governance practices instead of otherwise applicable SEC and Nasdaq requirements, which may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.
Our status as a foreign private issuer also exempts us from compliance with certain SEC laws and regulations and certain regulations of Nasdaq, including the proxy rules, the short-swing profits recapture rules, and certain governance requirements such as independent director oversight of the nomination of directors and executive compensation. In addition, we will not be required under the Exchange Act to file current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be exempt from filing quarterly reports with the SEC. Also, although the Israeli Companies Law, 5759-1999, or the Companies Law, requires us to disclose the annual compensation of our five most highly compensated senior officers on an individual basis (rather than on an aggregate basis), this disclosure will not be as extensive as that required of a U.S. domestic issuer. Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under the Exchange Act.
These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are entitled as an investor.
The determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination will be made with respect to us on June 30, 2023. In the future, we would lose our foreign private issuer status if a majority of our shareholders, directors or management are U.S. citizens or residents and we fail to meet additional requirements necessary to avoid loss of foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic registrant may be significantly higher.
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The estimates of market opportunity, market size and forecasts of market growth included in this Annual Report and our other publicly filed documents may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
Market opportunity, size estimates and growth forecasts included in this Annual Report and our other publicly filed documents are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. For example, several of the reports and data on which our estimates and forecasts are based rely on projections of consumer adoption and incorporate data from secondary sources, such as company websites as well as industry, trade and government publications.
Net revenue and operating results are difficult to forecast because they generally depend on the volume, timing and type of orders we receive, all of which are uncertain. We base our expense levels and investment plans on our estimates of total net revenue and gross margins using human judgment and utilizing internal analytic methodologies to assess market trends. We cannot be sure the same growth rates, trends and other key performance metrics are meaningful predictors of future growth. If our assumptions and calculations prove to be wrong, we may spend more than we anticipate acquiring and retaining customers or may generate less net revenue per active customer than anticipated, any of which could have a negative impact on our business and results of operations.
In addition, as we enter new consumer product markets in the future, we may initially provide discounts to customers to gain market traction, and the amount and effect of these discounts may vary greatly. No such discounts have been given to date.
Finally, we are evaluating our total addressable market with respect to new product offerings and new markets. These estimates of total addressable market and growth forecasts are subject to significant uncertainty, are based on assumptions and estimates that may not prove to be accurate and are based on data published by third parties that we have not independently verified. Even if the market in which we compete meets the size estimates and growth forecasted in this Annual Report, our business could fail to grow at similar rates, if at all.
Our business is also affected by general economic and business conditions in international markets.
In addition, we experience seasonal trends in our business, and our mix of product offerings is highly variable from day-to-day and quarter-to-quarter. This variability makes it difficult to predict sales and could result in significant fluctuations in our net revenue from period-to-period. A significant portion of our expenses is fixed, and as a result, we may be unable to adjust our spending in a timely manner to compensate for any unexpected shortfall in net revenue. Any failure to accurately predict net revenue or gross margins could cause our operating results to be lower than expected, which could materially adversely affect our financial condition and share price.
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We are an emerging growth company and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our Ordinary Shares and Warrants less attractive to investors.
We are an emerging growth company and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including:
| ● | not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act; |
| ● | permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies; and |
| ● | exemptions from the requirements of holding non-binding advisory votes on executive compensation and shareholder approval of any golden parachute payments not previously approved. |
We may take advantage some or all of these and other exemptions until we are no longer an “emerging growth company”. We could be an emerging growth company up to the end of the fiscal year in which the fifth anniversary of the completion of our IPO, or 2027. Our status as an emerging growth company will end as soon as any of the following take place:
| ● | the last day of the fiscal year in which we have more than $1.235 billion in annual revenue; |
| ● | the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; |
| ● | the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; or |
| ● | the last day of the fiscal year ending after the fifth anniversary after we become a public company. |
We cannot predict if investors will find our Ordinary Shares or Warrants less attractive if we choose to rely on any of the exemptions afforded emerging growth companies. If some investors find our Ordinary Shares or Warrants less attractive because we rely on any of these exemptions, there may be a less active trading market for our Ordinary Shares and/or Warrants and the market price of our Ordinary Shares and/or Warrants may be more volatile.
In addition, under the JOBS Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption and, as a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable.
Even after we no longer qualify as an emerging growth company, we may qualify as a “smaller reporting company”, which would allow us to take advantage of many of the same exemptions from disclosure requirements (excluding the exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act) and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. However, as a foreign private issuer we are not eligible to use the requirements for smaller reporting companies unless we use the forms and rules designated for domestic issuers and provide financial statements prepared in accordance with U.S. generally accepted accounting principles. We cannot predict if investors will find our Ordinary Shares and/or Warrants less attractive because we may rely on either of these exemptions. If some investors find our Ordinary Shares and/or Warrants less attractive as a result, there may be a less active trading market for our Ordinary Shares and/or Warrants and our share price may be more volatile.
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The market price of our Ordinary Shares and/or Warrants may be volatile. Market volatility may affect the value of an investment in our Ordinary Shares and/or Warrants and could subject us to litigation.
The market price of our securities is volatile. The price of our securities is and will continue to be subject to wide fluctuations in response to a variety of factors, including the following:
| ● | actual or anticipated fluctuations in our financial condition and operating results; |
| ● | the financial projections we may provide to the public, and any changes in projected operational and financial results; |
| ● | addition or loss of significant customers; |
| ● | changes in laws or regulations applicable to our products; |
| ● | actual or anticipated changes in our growth rate relative to our competitors; |
| ● | announcements of technological innovations or new offerings by us or our competitors; |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital-raising activities or commitments; |
| ● | additions or departures of key personnel; |
| ● | changes in our financial guidance or securities analysts’ estimates of our financial performance; |
| ● | discussion of us or our share price by the financial press and in online investor communities; |
| ● | reaction to our press releases and filings with the SEC; |
| ● | changes in accounting principles; |
| ● | lawsuits threatened or filed against us; |
| ● | fluctuations in operating performance and the valuation of companies perceived by investors to be comparable to us; |
| ● | sales of our Ordinary Shares by us or our shareholders; |
| ● | share price and volume fluctuations attributable to inconsistent trading volume levels of our Ordinary Shares; |
| ● | price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; |
| ● | changes in laws or regulations applicable to our business; |
| ● | changes in our capital structure, such as future issuances of debt or equity securities; |
| ● | short sales, hedging and other derivative transactions involving our shares; |
| ● | the expiration of contractual lock-up periods; |
| ● | other events or factors, including those resulting from war, incidents of terrorism or responses to these events; and |
| ● | general economic and market conditions. |
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Furthermore, in recent years, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, and technology companies in particular. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our Ordinary Shares or Warrants.
In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could also harm our business.
Our investors’ ownership in the Company may be diluted in the future.
In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of ownership interests of our present shareholders. Furthermore, we may issue equity awards to management, employees and other eligible persons in the future under our 2024 Incentive Option Plan, or our 2024 Incentive Plan. Additional Ordinary Shares issued by us in the future will dilute an investor’s investment in the Company. In addition, we may seek shareholder approval to increase the amount of the Company’s authorized shares, which would create the potential for further dilution of current investors.
Our amended and restated articles of association provide that, unless we consent to an alternative forum, the federal district courts of the United States shall be the exclusive forum for resolution of any complaint asserting a cause of action arising under the Securities Act of 1933 as amended, or the Securities Act, which could limit our shareholders’ ability to choose the judicial forum for disputes with us, our directors, shareholders, or other employees. In addition, the agreements governing the Warrants provide that disputes shall be brought in the state and federal courts sitting in the City of New York, Borough of Manhattan, and that a claim under the U.S. federal securities laws may be made in any federal district court.
Section 22 of the Securities Act creates concurrent jurisdiction for U.S. federal and state courts over all such Securities Act actions. Accordingly, both U.S. state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our articles of association provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. This exclusive forum provision will not apply to suits brought to enforce any liability or duty created by the Exchange Act, and our shareholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder as a result of our exclusive forum provision. Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to the foregoing provision of our articles of association.
Similarly, the agreements governing the Warrants provide that, and by purchasing Warrants in our IPO, investors agreed that, all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York, irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any such dispute and irrevocably waive, and agree not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. The warrant agent agreement has similar provisions with respect to the Company and the warrant agent. The agreement governing the Warrants and the warrant agent agreement provide that the foregoing provisions do not limit or restrict the federal district court in which a party may bring a claim under the U.S. federal securities laws.
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However, the enforceability of similar forum provisions (including exclusive federal forum provisions for actions, suits, or proceedings asserting a cause of action arising under the Securities Act) in other companies’ organizational documents and similar agreements has been challenged in legal proceedings, and there is uncertainty as to whether courts would enforce the exclusive forum provision in our articles of association or the agreements governing the Warrants. If a court were to find the exclusive forum provision contained in our articles of association or the agreements governing the Warrants to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially adversely affect our business, financial condition, and results of operations.
Although we believe the exclusive forum provision benefit us by providing increased consistency in the application of U.S. federal securities laws, the Companies Law, or New York law, as applicable, in the types of lawsuits to which they apply, such exclusive forum provision may limit a shareholder’s ability to bring a claim in the judicial forum of their choosing for disputes with us or any of our directors, shareholders, officers, or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, shareholders, officers, or other employees.
If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendations regarding our Ordinary Shares or Warrants adversely, the trading price or trading volume of our Ordinary Shares could decline.
The trading market for our Ordinary Shares and Warrants will be influenced in part by the research and reports that securities or industry analysts may or may not publish about us, our business, our market or our competitors. If one or more of the analysts do not publish research about us or initiate research with an unfavorable rating or downgrade our Ordinary Shares, provide a more favorable recommendation about our competitors or publish inaccurate or unfavorable research about our business, the market prices of our Ordinary Shares would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price or trading volume of our Ordinary Shares to decline.
FINRA sales practice requirements may limit a shareholder’s ability to buy and sell our Ordinary Shares.
The Financial Industry Regulatory Authority, Inc., or FINRA, has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our Ordinary Shares, which may limit the ability of our shareholders to buy and sell our Ordinary Shares and could have an adverse effect on the market for and price of our Ordinary Shares.
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We may become a “passive foreign investment company”, or PFIC, for U.S. federal income tax purposes in the current taxable year or may become one in any subsequent taxable year. There generally would be negative tax consequences for U.S. taxpayers that are holders of the Ordinary Shares if we are or were to become a PFIC.
Based on the projected composition of our income and valuation of our assets, we do not expect to be a PFIC for 2024, and we do not expect to become a PFIC in the future, although there can be no assurance in this regard. The determination of whether we are a PFIC is made on an annual basis and will depend on the composition of our income and assets from time to time. We will be treated as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is “passive income” or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a 25% interest (by value) is taken into account. The tests for determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of the Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become a PFIC in the future. If we are a PFIC in any taxable year during which a U.S. taxpayer holds the Ordinary Shares, such U.S. taxpayer would be subject to certain adverse U.S. federal income tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a “qualified electing fund”, or QEF, or make a “mark-to-market” election, then “excess distributions” to the U.S. taxpayer, and any gain realized on the sale or other disposition of the Ordinary Shares by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer’s holding period for the Ordinary Shares; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers that have held the Ordinary Shares during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. We do not intend to notify U.S. taxpayers that hold the Ordinary Shares if we believe we will be treated as a PFIC for any taxable year in order to enable U.S. taxpayers to consider whether to make a QEF election. In addition, we do not intend to furnish such U.S. taxpayers annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. U.S. taxpayers that hold the Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to the Ordinary Shares in the event that we are a PFIC. See “Taxation - U.S. Federal Income Tax Considerations - Passive Foreign Investment Companies” for additional information.
As a public company in the United States, our management is required to devote substantial time to new compliance initiatives as well as compliance with ongoing U.S. requirements.
As a public company in the United States, we incur additional significant accounting, legal and other expenses that we did not incur before the offering. We also incurred costs associated with corporate governance requirements of the SEC, as well as requirements under Section 404 and other provisions of the Sarbanes-Oxley Act. These rules and regulations increased our legal and financial compliance costs, introduced new costs such as investor relations, stock exchange listing fees and shareholder reporting, and made some activities more time consuming and costly. The implementation and testing of such processes and systems required us to hire outside consultants and incur other significant costs. Any future changes in the laws and regulations affecting public companies in the United States, including Section 404 and other provisions of the Sarbanes-Oxley Act, and the rules and regulations adopted by the SEC, for so long as they apply to us, will result in increased costs to us as we respond to such changes. These laws, rules and regulations could make it more difficult or more costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees, or as executive officers.
We may be subject to securities litigation, which is expensive and could divert management attention.
In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant liabilities.
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Risks Related to our Proposed Corporate Restructuring Plan
The proposed restructuring plan, which may involve transferring our holdings in our subsidiaries to a separate public company, may not be completed in accordance with the expected plans or anticipated timeline, or at all, and may not achieve the expected results.
On November 29, 2023, we announced that our board of directors resolved to initiate a process to identify potential strategic transactions in the field of advanced technologies, with the goal of maximizing shareholder value.
On January 21, 2025, we entered into the Smart Repair LOI, for the sale of Smart Repair Pro to a company listed on the TSX Venture Exchange. Pursuant to the Smart Repair LOI and subject to the entry into a binding agreement, we will transfer all of the issued and outstanding capital stock of Smart Repair Pro to the Acquirer, in exchange for up to a 90% equity interest in the Acquiror, on a fully diluted basis, calculated as of immediately following the closing of the transaction. The completion of the transactions contemplated by the Smart Repair LOI is subject to the successful completion of due diligence by both parties, the execution of binding definitive agreement, which shall include customary closing conditions, compliance with any regulatory approvals, receipt of any necessary consents, final approvals from our board of directors and shareholders, and may be also subject to, among other things, market conditions, tax or other business analyses. See “Item B. Business Overview – Recent Developments – Smart Repair Pro LOI”, for further information.
On February 6, 2025, we entered into the Purchase Agreement with Impact, a capital pool company listed on the TSX Venture Exchange, pursuant to which, on the terms and subject to the conditions of the Purchase Agreement, Fort will merge with and into Impact, with Impact continuing as the surviving corporation. Pursuant to the Purchase Agreement, we will sell to Impact, all of the issued and outstanding ordinary shares of Fort, in consideration for 100,000,000 common shares of Impact and up to an additional 66,000,000 common shares of Impact contingent upon the achievement of certain pre-determined milestones, representing a post-closing equity interest in Impact of 75.02% (or up to 83.29% in the event of the full achievement of the milestones). The completion of the Proposed Fort Merger is subject to the satisfaction or waiver of certain conditions precedent. See “Item B. Business Overview – Recent Developments – Share Purchase Agreement with Impact” for further information.
There can be no assurance regarding the ultimate timing of the pending transactions or any other restructuring plans.
Unanticipated developments or changes, including but not limited to, changes in the general or financial market conditions, possible delays in obtaining various regulatory and tax approvals, changes in the law, and challenges in entering into definitive agreements with respect to the transactions or executing the Proposed Merger or any other restructuring plan could delay or prevent the completion of the Restructuring Plan or cause the Restructuring Plan to occur on terms or conditions that are different or less favorable than initially expected. These or other developments could cause us not to realize some or all of the expected benefits of the Restructuring Plan or to realize them on a different timeline than expected. If the Restructuring Plan does not occur, we could pursue other transactions involving our e-commerce activities.
The Restructuring Plan may not achieve the anticipated benefits and may expose us to additional risks.
We may not realize the anticipated strategic, financial, operational or other benefits of the Restructuring Plan. We cannot predict with certainty when the benefits expected from these transactions will occur or the extent to which they will be achieved. There is no assurance that following the Restructuring Plan that each separate company will be successful. Whether or not all or any portion of the Restructuring Plan is completed, we may face material challenges in connection with the proposed or pending transactions, including but not limited to, the diversion of management time on matters relating to the Restructuring Plan, the impact of having to operate under the terms of any transition service agreements, the impact on our ability to retain talent and potential impacts on our relationships with customers, suppliers, employees and other counterparties. In addition, we will incur one-time costs and ongoing costs in connection with, or as a result of, the Restructuring Plan, including costs of operating as independent, publicly-traded companies that the separate businesses will no longer be able to share. Those costs may exceed our estimates or could negate some of the benefits we expect to realize. If we do not realize the anticipated benefits of the Restructuring Plan it could adversely affect our business, results of operations, cash flows and financial condition.
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Following any Restructuring Plan, the trading price of our Ordinary Shares may fluctuate significantly.
We cannot predict whether the market value of our Ordinary Shares after any Restructuring Plan will be, in the aggregate, less than, equal to or greater than the market value of our Ordinary Shares prior to such transactions. The trading price of our Ordinary Shares may be more volatile around the time of the intended separation.
General Risk Factors
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We have engaged in various acquisitions and may continue to evaluate various acquisition opportunities and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:
| ● | increased operating expenses and cash requirements; |
| ● | the assumption of additional indebtedness or contingent liabilities; |
| ● | the issuance of our equity securities; |
| ● | assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating new personnel; |
| ● | the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or acquisition; |
| ● | retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships; |
| ● | risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and marketing approvals; and |
| ● | our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs. |
We are subject to certain U.S. and foreign anticorruption, anti-money laundering, export control, sanctions and other trade laws and regulations. We can face serious consequences for violations.
Among other matters, U.S. and foreign anticorruption, anti-money laundering, export control, sanctions and other trade laws and regulations, which are collectively referred to as Trade Laws, prohibit companies and their employees, agents, legal counsel, accountants, consultants, contractors and other partners from authorizing, promising, offering, providing, soliciting or receiving, directly or indirectly, corrupt or improper payments or anything else of value to or from recipients in the public or private sector. Violations of Trade Laws can result in substantial criminal fines and civil penalties, imprisonment, the loss of trade privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences. We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities and other organizations. We also expect our non-U.S. activities to increase over time. We can be held liable for the corrupt or other illegal activities of our personnel, agents or partners, even if we do not explicitly authorize or have prior knowledge of such activities.
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Our business and operations might be adversely affected by security breaches, including any cybersecurity incidents.
We depend on the efficient and uninterrupted operation of our computer and communications systems, and those of our consultants, contractors and vendors, which we use for, among other things, sensitive company data, including our intellectual property, financial data and other proprietary business information.
While certain of our operations have business continuity and disaster recovery plans and other security measures intended to prevent and minimize the impact of IT-related interruptions, our IT infrastructure and the IT infrastructure of our consultants, contractors and vendors are vulnerable to damage from cyberattacks, computer viruses, unauthorized access, electrical failures and natural disasters or other catastrophic events. We could experience failures in our information systems and computer servers, which could result in an interruption of our normal business operations and require substantial expenditure of financial and administrative resources to remedy. System failures, accidents or security breaches can cause interruptions in our operations. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur regulatory investigations and redresses.
Even though we believe we carry commercially reasonable business interruption and liability insurance, we might suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies or for which we do not have coverage. For example, we are not insured against terrorist attacks or cyberattacks. Any natural disaster or catastrophic event could have a significant negative impact on our operations and financial results.
Sales of a significant number of our Ordinary Shares in the public markets or significant short sales of our Ordinary Shares, or the perception that such sales could occur, could depress the market price of our Ordinary Shares and impair our ability to raise capital.
Sales of a substantial number of our Ordinary Shares or other equity-related securities in the public markets, could depress the market price of our Ordinary Shares. If there are significant short sales of our Ordinary Shares, the price decline that could result from this activity may cause the share price to decline more so, which, in turn, may cause long holders of the Ordinary Shares to sell their shares, thereby contributing to sales of Ordinary Shares in the market. Such sales also may impair our ability to raise capital through the sale of additional equity securities in the future at a time and price that our management deems acceptable, if at all.
ITEM 4. INFORMATION ON THE COMPANY
| A. | History and Development of the Company |
Jeffs’ Brands was incorporated in March 2021 under the Companies Law in the State of Israel.
Our principal executive offices are located at 7 Mezada Street, Bnei Brak, Israel 5126112. Our telephone number in Israel is +972-3-7713520. Our website address is www.jeffsbrands.com. The information contained on our website or available through our website is not incorporated by reference into and should not be considered a part of this Annual Report, and the reference to our website in this Annual Report is an inactive textual reference only.
Puglisi & Associates is our agent in the United States and its address is 850 Library Avenue, Suite 204, Newark, Delaware 19711. The SEC maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available to the public through the SEC’s website at www.sec.gov.
For a description of our principal capital expenditures and divestitures, see Item 5. “Operating and Financial Review and Prospects.”
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| B. | Business Overview |
We are an e-commerce CPG company operating primarily on Amazon. We were incorporated in Israel in March 2021, under the name Jeffs’ Brands Ltd to provide various services, such as management, operation and logistics, marketing and financial services to our subsidiaries that operate online stores for the sale of various consumer products on Amazon, utilizing the FBA model. As of the date of this Annual Report, we have six wholly owned subsidiaries, held directly by us or through our subsidiaries: Top Rank, Fort, Smart Repair Pro, Pure Logistics, Jeffs’ Brands Holdings and Fort Products LLC. Jeffs’ Brands Holdings also holds a minority interest in SciSparc Nutraceuticals, to whom we provide a variety of professional and business support services.
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 Amazon algorithm and all the tools that the FBA platform FBA has to offer. In some circumstances we scale the products and improve them.
Our Stores, Brands, Products and Services
As of the date of this Annual Report:
| ● | Smart Repair Pro owns and operates two stores on Amazon (i) KnifePlanet with 4 different Brands: KnifePlanet, CC-Exquisite, PetEvo brands and the Wellted brand and (ii) the Whoobli brand. Under the KnifePlanet brand, we offer a complete premium stone knife-sharpening sets, sharpeners and nonslip rubber bases. Under the CC-Exquisite brand, we offer professional steel & soft-tip dart sets and darts holders. Under the PetEvo brand, we offer car door & car seats protectors for pets. Under the Wellted brand, we offer reusable, self-cleansing pet hair removers for cats and dogs. Under the Whoobli brand, we offer punching bag sets and party supply kits for children. | |
| Smart Repair Pro also owns Pure Logistics which operates a strategically located logistics center in New Jersey and provides logistics services to us and to third parties. | ||
| ● | Fort owns and operates the Fort brand, which sells pest control products primarily through Amazon UK. |
| ● | Jeffs’ Brands Holdings owns a minority interest in SciSparc Nutraceuticals, a majority-owned subsidiary of SciSparc Ltd., or SciSparc, that owns and operates Wellution, a brand that sells hemp seed oil-based products on Amazon. |
As of the date of this Annual Report, our material stores on Amazon, brands, products and services, consist of the following:
Whoobli Store
Our revenues from sales on the Whoobli store for the year ended December 31, 2024 were approximately $1,311 thousand, or 9.58%, of our total revenues for such period.
The Whoobli store sells a variety of punching bag sets, including: Whoobli Adjustable Kids Punching Bag with Stand; Whoobli Ninja Inflatable Kids Punching Bag; Whoobli Unicorn Birthday Party Supplies; Whoobli Mermaid Party Supplies; Whoobli Dinosaur Party Supplies; and the Whoobli Construction Birthday Party Supplies.
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KnifePlanet Store
Our revenues from sales on the KnifePlanet store for the year ended December 31, 2024 were approximately $2,377, or 17.37%, of our total revenues for such period.
The KnifePlanet store sells, among others, the following products: CC-Exquisite Professional Steel Tip Darts Set; Premium Knife Sharpening Stone Set; Coarse Flattening Stone; Whetstone Knife Sharpening Stone Set; Leather Strop and Stropping Compound Set; Whetstone Knife Sharpening Stone Set; Honing Guide and Angle Tool Set; CC-Exquisite Professional Steel Tip Darts Set; CC-Exquisite Dart Caddy; Car Door Protector and the Whetstone Knife Sharpening Stone Set.
Wellted Store
Our revenues from sales on the Wellted store for the year ended December 31, 2024, were approximately $123 thousand, or 0.91%, of our total revenues for such period.
The Wellted store sells a pet hair removal product. As of March 2025, we no longer sell products on the Wellted store and the Wellted brand’s products are sold under the KnifePlanet Store.
Fort Store
Our revenues from sales on the Fort store for the year ended December 31, 2024, were approximately $9,876 thousand, or 72.14%, of our total revenues for such period.
The Fort store sells a variety of pest control products, including, among others: rat and mouse poison, rat traps, and tamper proof rodent bait boxes.
Fort has also partnered with digital developers to create an AI-based mobile application designed to identify pests and provide tailored treatment recommendations. The app, expected to launch in the first half of 2025, will offer access to Fort’s products and is intended to strengthen Fort’s position as an innovator in both e-commerce and pest control solutions.
Wellution Store
Our proportional share of the revenues from sales on the Wellution store for the year ended December 31, 2024, was approximately $2,137. We do not consolidate the financial results of SciSparc Nutraceuticals or the sales of the Wellution products in our consolidated financial statements.
Logistics Center
On March 18, 2025, Smart Repair Pro closed the acquisition of Pure Logistics, a New Jersey limited liability company that operates a strategically located approximately 100,000 square foot logistics center equipped with 20 loading docks in New Jersey. Following the Pure Logistics Acquisition, we anticipate strengthening our supply chain and third-party service offerings. The logistics center is situated near a major port in the United States and in close proximity to Newark Liberty International and John F. Kennedy International Airports and will support our expansion while also offering services to third parties. The financial results of Pure Logistics are not part of our consolidated financial statements for the fiscal year ended December 31, 2024, as the Pure Logistics Acquisition was completed after the reporting period.
Reseller Agreement
Pursuant to a reseller agreement, dated December 5, 2024, or the ParaZero Reseller Agreement, we entered into with ParaZero Technologies Ltd., or ParaZero, we received an exclusive worldwide right to distribute certain advanced drone safety systems developed by ParaZero. Such drone safety systems have been available for sale on Amazon U.S. since December 30, 2024, under the KnifePlanet store.
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Our Customers
Our customers are primarily individual online consumers who purchase our products primarily on Amazon U.S., Amazon U.K. and Amazon EU marketplaces, which contributed to our increase in sales year over year.
In each of 2024 and 2023, approximately 96% to 99% of our revenue was through or with Amazon sales platform.
Like any other e-commerce business, we are affected by the high season shopping, which is from October through December. Our business model is to take into consideration this sales cycle and introduce new products right before high season.
Our Competitive Strengths
We believe that our competitive strengths include:
| ● | Senior and experienced management team; |
| ● | Sophisticated know-how regarding use of data analysis technology platforms; |
| ● | Strong logistical capabilities, using sophisticated BI tools to optimize the supply chain management; and |
| ● | Procurement of well targeted products. |
We believe that these strengths, as further described below, differentiate us from our competitors and provide us with numerous advantages:
| ● | Senior and experienced management team: We are led by Mr. Viki Hakmon, our Chief Executive Officer. Mr. Hakmon has vast experience in the retail markets, having served in various capacities over the past 25 years, 15 of which were in U.S. markets. Mr. Hakmon also has a profound understanding and knowledge of developing and discovering products and leveraging their growing market demand. |
Mr. Naor Bergman, our Chief Operating Officer, is responsible for all the operations and logistics of our business. Prior to joining the Company, Mr. Bergman established and led Amazon’s FBA logistics and warehousing department at Unicargo Global Logistic Ltd. and was part of the management team that transformed Unicargo to become a leader in the field of outsourcing Amazon’s FBA warehousing.
In October 2022, we hired Mr. Ronen Zalayet as our Chief Financial Officer effective October 24, 2022. Mr. Zalayet has over 20 years of experience working in financial leadership positions in private and public companies, including in growing fintech and technology companies. Mr. Zalayet holds a B.A. in Economics and Accounting and an MBA from Tel Aviv University, Israel, and is a certified public accountant in Israel.
| ● | Sophisticated know-how of data analysis technology platforms: We believe our use of research data and deep analysis software tools enables us to successfully identify new product opportunities, execute a fast and efficient procurement process and offer and sell our goods at a competitive yet lucrative price. Our deep knowledge of analyzing Amazon is one of our company’s key competitive advantages in the fast-changing online CPG market. We are able to identify product opportunities, including relevant product specifications, based on consumer preferences, product trends and attributes and competitive landscape analysis. We also have profound familiarity with Amazon’s algorithm and all the tools that its FBA platform has to offer. |
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| ● | Strong logistical capabilities, supply chain management as an integral part of our business: Our logistical capabilities were formulated prior to the establishment of our Company. We view the logistical aspect of our business as a main and important factor to our success and we work hard to achieve it. Every product opportunity that we encounter is handled with strong and efficient logistical tools and no opportunity will be neglected due to lack of logistical capabilities or low profitability. In the U.K., Fort leases two warehouses for the storage of its inventory, which streamlines its supply chain management. for faster turnaround times and enhanced efficiency for inventory management and order fulfillment; and supports the expansion of Fort’s operations in the U.S. We plan on expanding Fort’s operations in the U.S. based upon the success of Fort in the U.K., with the logistics center in New Jersey operated by Pure Logistics which we recently acquired. |
| ● | Procurement of well targeted products reduces risk and costs: We believe our approach of identifying products, procuring and handling all logistics fast and efficiently and selling products when they are most desirable reduces risks of not reaching sales targets and also reduces the cost of brand development and the process of introducing a new product to the market. We believe a company like ours should only move forward with products following thorough market research and analysis. |
Industry Overview and Market Opportunity
The global retail e-commerce market is expected to continue growing. According to analysis published by Statista, the global retail e-commerce market is estimated to reach $8.034 trillion in 2027. Revenues are expected to grow from 2023 to 2027 by 39%. According to this analysis, e-commerce continues to attract new consumers. Convenience is the key driver for shoppers around the world to order online, rather than visit a brick-and-mortar store. The global e-commerce growth forecast has two underlying developments. Most global markets are still in the process of increasing internet penetration and digitalization, meaning that the infrastructure required for e-commerce to flourish is still being built. At the same time, the most-developed e-commerce markets are currently profiting from the benefits of AI. New technologies and automation are making the customer journey and order fulfillment process more efficient, turning online retail into a well-oiled machine.
According to IMARC research report, the market is primarily driven by the rising internet penetration. Additionally, the adoption of smartphones and the Internet made it suitable for consumers to shop online, thus influencing the market growth. Moreover, mobile applications and user-friendly websites made the shopping experience seamless and accessible, allowing customers to browse, compare prices, and easily make purchases, thus representing another major growth-inducing factor.
Also, the COVID-19 pandemic accelerated the shift toward online shopping, accelerating the sales demand
We believe, this new normal created a huge opportunity for e-commerce players, such as Jeffs’ Brands, which has the capability to respond to the current demand and market trends.
Moreover, Amazon, which is the primary platform that our business is based on, continues to rise and grow. In 2024, Amazon’s global sales were $637.96 billion, an 11% increase year- over year. Amazon’s sales, however, are not necessarily indicative of our current or future sales, as Amazon sells vast and varied quantities of products on its platforms, whereas we sell only a limited quantity of products on Amazon and are not otherwise affiliated with Amazon. While our sales represent a small fraction of the sales on Amazon, we believe that Amazon provides us with a unique opportunity to grow our sales.
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Annual Net Sales Revenues of Amazon from 2004 to 2024 (in billion U.S. dollars)
Source: Statista - Annual net sales revenues of Amazon from 2004 to 2024
Note that Amazon’s net sales presented in this chart are not necessarily indicative of our current or future sales.
According to Statista, most of Amazon’s revenue is generated through e-retail sales of different categories of products, followed by third-party seller revenues, retail and media subscriptions, and AWS cloud services. Amazon serves as a global platform for third-party sellers (3P), which are independent sellers using Amazon as an e-commerce site to offer their products. 3P sales account for roughly 60% of the total paid units on Amazon. Amazon also provides sellers with end-to-end logistics services. The FBA option includes order picking, packing, shipping, and handling and it is now used to distribute about half of the units sold on Amazon.
We believe that doing business in the online consumer product market requires a profound understating of material trends and factors impacting the market and this can only be done by analyzing massive amounts of data. Adopting new business models that are using high-end technologies for data analysis is considered by us as the only competitive way to succeed in this market. We see our data driven approach combined with our other capabilities and advantages as our strengths in succeeding in this market.
While online shoppers differ greatly depending on their respective regions around the world, there are general indicators that help with understanding basic digital consumer behavior. Leading marketplaces serve as a source of inspiration and the primary place to search for products online before the actual purchase.
Moreover, we are constantly rethinking our efficiency, logistics and fulfillment networks including investments in warehouses and delivery infrastructure.
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Amazon’s algorithm is a crucial factor in the success of CPG companies, and we believe we have a profound understating of it
According to BCG, top-selling brands on Amazon, often differ significantly from top sellers in brick-and-mortar stores. We believe this highlights how distinct Amazon’s market is and how critical it is for CPG companies to understand how Amazon algorithms drive traffic.
We believe our way of analyzing and understanding the consumer trends, searches and preferences enable us to react in the most optimum way. We ensure the availability of the most desired products on the market and we leverage it from buying to selling the product. We are able to do that by analyzing the data and to react to the insights we generate of it in the fastest way possible to us.
Our unique process
We believe in a 3-phase process of our business lifecycle:
| Phase I: Search and Identification | Our sophisticated, know-how use of an advanced software, enables us to search and identify high value products. This analysis includes product history, client trends, etc. | |
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| Phase II: Acquisition of identified products | We then quickly and efficiently acquire identified products using our strong logistical capacities. | |
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Phase III: Sell and Ship |
We then sell the most desired products to our consumers, maximizing our positioning for high profitability (with minimal marketing required, offering the optimum price being both lucrative and competitive). | |
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Below are recent examples of products that were identified by our process and offered to consumers, which contributed to our increase in sales year over year:
| Product Name and Description | Illustration | |
| The Whoobli Store offers the Whoobli punching bag, adjustable stand and boxing gloves for children aged 3-8 years old. |  |
| The KnifePlanet Store offers a complete premium stone knife-sharpening set, which includes flattening stone, bamboo base, and two nonslip rubber bases. |  | |
| The Wellted Store offers the Pet Hair Remover for cats and dogs. It’s reusable, self-cleansing and includes a brush for cleaning furniture, carpets, clothing, car seats, etc. |  | |
| The CC-Exquisite Store offers CC-exquisite professional steel-tip darts sets. |  | |
| The PetEvo Store offers car door protectors in sets of two that fit any vehicle and protects from pet scratches and is also waterproof. |  |
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Strategy
Growth Strategy
The key elements of our growth strategy include:
| ● | High-end search and identification of high value products and expansion into new markets and territories; |
| ● | Frequent introduction of new products to our customers in various geographical markets; |
| ● | Effective use of our competitive advantage - our know-how uses of software-based technology; |
| ● | Leverage of our logistical capabilities and knowledge to reduce costs and increase purchasing power; and |
| ● | Continued monetarization of our competitors to ensure we maintain our competitive differentiation and advantages. |
Our growth, as described above is expected to be generated by the expansion of our current platforms to new territories and by growing our logistical capabilities, which we believe will bolster our competitive advantage. In March 2025, we closed the acquisition of Pure Logistics, a company that operates a strategically located approximately 100,000 square foot logistics center equipped with 20 loading docks in New Jersey. In February 2024, Fort launched its sales on Amazon in France and Germany.
Intellectual Property
As of the date of this Annual Report, we own 13 trademarks: KnifePlanet, CC-Exquisite, Whoobli, PetEvo, Wellted, Roshield, Entopest, Rempro, Birdgo, ProPest, Topperama, Dr Grögel and Seaheaven.
Competition
The consumer goods and e-commerce market are a highly competitive environment. Our competitive landscape consists of various types of companies such as: traditional and non-traditional consumer good companies; discount stores; traditional retailers; independent retail stores; the online platforms of these traditional retail competitors; and e-commerce companies.
Among CPG companies, our competitors include: Thrasio Holdings, Inc.; Aterian, Inc. (Nasdaq: ATER); Amazon; Helen of Troy Ltd., Newell Brands (Nasdaq: NWL); Frigidaire Appliance Company; and Trademark Global Inc. Despite the seemingly harsh competitive landscape, we believe that our technology and experience enable us to successfully compete and achieve our financial goals.
| Category | Companies | |
| Main competition | Thrasio Holdings, Inc., Aterian, Inc. (Nasdaq: ATER) | |
| Other CPG competitors | Helen of Troy Ltd., Newell Brands (Nasdaq: NWL), Frigidaire Appliance Company, Trademark Global Inc., and other CPG players who are operating on Amazon |
We believe that our competitive advantages include:
| ● | Senior and experienced management team; |
| ● | Strong logistical capabilities; |
| ● | Skillful use of sophisticated data analytics software; |
| ● | Fast and proactive approach to changes in the market; and |
| ● | Well targeted products which we believe reduces risk and costs. |
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Development
After executing our procurement process and owning new products and brands, we then invest in additional development of the procured products. Our development is focused on upgrading the existing products and/or adding additional value and features to them, such as additional colors or shapes, new design or version. Our developments remain within the product history ranking and overviews on Amazon, hence, the upgraded products are being promoted under the same brand and its positioning on Amazon.
An example of such product development are the new parts added to our KnifePlanet product:
Third-Party Manufacturing and Logistics
Our products are currently produced by third party manufacturers in China and the United Kingdom pursuant to manufacturing agreements. These agreements generally provide that the manufacturers will manufacture and deliver to us the relevant products in accordance with our orders and subject to our timely payment. The manufacturing services under such contracts are on a non-exclusive basis, provided, however, that the manufacturers are not allowed to manufacture or supply the manufactured product to any third party. The products manufactured thereby are subject to our successful completion of testing and assembly checks before shipment. We may terminate these contracts at any time with an advance notice. We have strong and long-term relationships with these manufacturers and we believe we have a safe and stable supply chain.
As of the date of this Annual Report, we use third party warehouses to fulfill direct-to-consumer orders, through agreements or terms of services.
As of the date of this Annual Report, we have warehousing and distribution agreements with three warehouses in the United States, one in Canada, two in the United Kingdom and one in Germany, which generally provide that the service provider will provide warehousing services at its warehousing facility and distribution services for our products. Through these third parties, we believe we can deliver products within two days of the order being placed on Amazon through ground shipment across approximately 95% of the U.S. market.
Marketing, Distribution Methods and Sales
We believe our marketing expenses are lower and more efficient than our competitors since we are only engaged with well established brands that are already familiar to many of our customers and potential customers on Amazon. In addition, we expect to hire managers to handle our digital marketing and advertising efforts.
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With respect to distribution, we see logistics as a main and important consideration and we prioritize creating an effective and efficient distribution channel. Every product opportunity that we encounter will be handled with strong and efficient logistical tools and no opportunity will be left out due to lack of logistical capabilities or low profitability. Furthermore, we plan to own warehouses in the future in lieu of relying on Amazon or other third-party warehouses, which would improve our distribution channel.
Our sales phase, as further described above, is the third phase after a deep analysis is conducted by our software, identification and procurement process. Using the most advanced software, provides us with all the data needed to launch and to operate our Amazon brands in the highest levels. We believe that this knowledge will bring significant competitive advantages for our products. Our spending and approach on advertising is aimed to be as low as possible given the resources we spent prior to the actual sale on selecting the different products depending on the life cycle of products on our platform.
Government Regulation and Product Approval
We do not anticipate any significant problems in obtaining future required licenses, permits or approvals that are necessary to expand our business.
We are subject to a variety of U.S. federal, state and local laws, as well as international laws.
These laws are defining and governing the legal ways to process payments, consumer protection, the privacy of consumer information and other laws regarding unfair and deceptive trade practices.
The products sold by us in the U.S. are also subject to regulation in the United States by governmental agencies, including the U.S. Consumer Product Safety Commission, the Federal Trade Commission, United States Food and Drug Administration, and similar state and international regulatory authorities. We do not engage in the sale of illegal, unsafe, or other high-risk products that are restricted or strictly prohibited.
As necessary, our carriers impose additional restrictions on dangerous products. Our carriers require compliance with international air regulations, such as the International Air Transport Association (IATA) Dangerous Goods Regulations.
We are also subject to environmental laws, rules and regulations, including but not limited to California’s Proposition 65, Management of Hazardous Wastes Removed from Discarded Appliances and Lead Poisoning Prevention Act. We are subject to state and municipality regulations on plastic bag warning labels. Statements we make on labels, packages and advertisements are truthful, not deceptive or unfair, and evidence-based.
As required by applicable law, we list and register our products with the appropriate governmental authorities and obtain necessary authorizations and approvals therefrom. We require that our foreign and domestic facilities engaged in manufacturing, processing, packing, or warehousing submit additional registration information, such as good manufacturing practice (GMP) and other related quality management requirements. We request certificates and clearances as proof of compliance with the existing laws and regulations. We also declare, certify and conduct testing in reputable or accredited testing laboratories. For some products, we set out written warranties in compliance with the mandatory requirements of the Magnuson-Moss Warranty Act.
Some chemicals pose perceived or real risks to the environment and human health. We require our products that contain chemicals regulated by the EPA to comply with certification reporting and other requirements of imposed by the EPA. Products with emission standards for formaldehyde from wood products are compliant with EPA and California Air Resources Board (CARB).
Moreover, on March 2021, we received an update from Amazon regarding a new EPA regulation. Following the new EPA regulation, Amazon categorized one of our products as a pesticide product. Amazon requires that pesticide products be filed with evidence of an EPA registration number and/or EPA establishment number or certification that the product is exempt from EPA regulation, otherwise the existing listing (of the product) may be subject to removal. The revenue from the sale of these products is immaterial to the Company and the Company does not currently expect to continue to sell such products on Amazon unless they can be sold absent these restrictions and will instead look to sell such products outside of Amazon.
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We do not estimate any significant capital expenditures for environmental control matters either in the current fiscal year or in the near future.
We are also subject to regulations relating to our supply chain. For example, the California Transparency in Supply Chains Act requires retail sellers that do business in California to disclose their efforts to eradicate slavery and human trafficking in their supply chains. As part of our vendor qualification process, we review supplier’s operations with respect to compliance with applicable labor and workplace standards and other applicable laws, including laws prohibiting child labor, forced labor and unsafe working conditions.
Although we have not suffered any material restriction from doing business in the past due to government regulation, legal issues with potential implications may arise in the future as we expand our business.
From time to time, we dispose of obsolete inventory, which is disposed of or destroyed in compliance with applicable laws and regulations, such as extended producer responsibility (EPR) or product stewardship legislation.
China Government Regulation
Regulations Relating to Environmental Protection
China has adopted extensive environmental laws and regulations with national and local standards for emissions control, discharge of wastewater and storage and transportation, treatment and disposal of waste materials. At the national level, the relevant environmental protection laws and regulations include the Chinese Environmental Protection Law, the Chinese Law on the Prevention and Control of Air Pollution, the Chinese Law on the Prevention and Control of Water Pollution, the Chinese Law on the Promotion of Clean Production, the Chinese Law on the Prevention and Control of Noise Pollution, the Chinese Law on the Prevention and Control of Solid Waste Pollution, the Chinese Recycling Economy Promotion Law, the Chinese Law on Environmental Impact Assessment, the Administrative Regulations on the Levy and Use of Discharge Fees and the Measures for the Administration of the Charging Rates for Pollutant Discharge Fees. In recent years, the Chinese Government has introduced a series of new policies designed to generally promote the protection of the environment. For instance, on November 10, 2016, the General Office of the State Council has released the Implementing Plan for the Permit System for Controlling the Discharge of Pollutants, or the Plan. The Plan proposes the need of instituting a system for enterprises and public institutions to control their respective total amount of pollutants discharged, which shall be connected with the environmental impact assessment system organically. The Plan also stipulates that it is necessary to regulate the orderly issuance of pollutant discharge permits, to make a name list to manage the permission of pollutant discharge, to promote the administration of such permission system per industry and to impose severer administration and control over enterprises and public institutions located at such places where environment quality fails to reach relevant standards. Furthermore, the Plan requires that a national pollutant discharge permit management information platform shall be established by 2017 to strengthen the information disclosure and social supervision.
Regulations Relating to Intellectual Property Rights
Patents
Pursuant to the Patent Law of China and its implementation rules, patents in China fall into three categories, namely invention patent, utility model and design patent. Invention patent refers to a new technical solution proposed in respect of a product, method or its improvement; utility model refers to a new technical solution that is practicable for application and proposed in respect of the shape, structure or a combination of both of a product; and design patent refers to the new design of a certain product in shape, pattern or a combination of both and in color, shape and pattern combinations aesthetically suitable for industrial application. Under the Patent Law of China, the term of patent protection starts from the date the patent was filed. Patents relating to inventions are effective for twenty years from the initial date the patent application was filed, and the term for utility model and designed patents is ten years from the initial date the patent application was filed. The Patent Law of China adopts the principle of “first to file,” which means where more than one person files a patent application for the same invention, a patent will be granted to the person who first filed the application.
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Existing patents can become invalid or unenforceable due to a number of factors, including known or unknown prior art, deficiencies in patent application and lack of novelty in technology. In China, a patent must have novelty, innovation and practical application. Under the Patent Law of China, novelty means that before a patent application is filed, no identical invention or utility model has been publicly disclosed in any publication in China or abroad or has been publicly used or made known to the public by any other means, whether in or outside of China, nor has any other person filed with the patent authority an application that describes an identical invention or utility model and is published after the filing date. Patents in China are filed with the State Intellectual Property Office, or SIPO. Normally, the SIPO publishes an application for a pharmaceutical invention 18 months after the application is filed, which may be shortened upon request by the applicant. The applicant must apply to the SIPO for a substantive examination within three years from the date the application is filed.
Article 20 of the Patent Law of China provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the SIPO for a confidential examination. Failure to comply with this requirement will result in the denial of any Chinese patent for the subject invention. This added requirement of confidential examination by the SIPO has raised concerns by foreign companies who conduct research and development activities in China or outsource research and development activities to service providers in China.
Patent Enforcement
Unauthorized use of patents without consent from owners of patents, forgery of the patents belonging to other persons, or engagement in other infringement acts against patent rights, will subject the infringers to tortious liabilities. Serious offences may be subject to criminal penalties.
When a dispute arises as a result of infringement of the patent owner’s patent right, Chinese law requires that the parties first attempt to settle the dispute through consultation between them. However, if the dispute cannot be settled through consultation, the patent owner, or an interested party who believes the patent is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority under the SIPO. A Chinese court may issue a preliminary injunction upon the patent owner’s or an interested party’s request before instituting any legal proceedings or during the proceedings. Damages for infringement are calculated as either the loss suffered by the patent holder arising from the infringement or the benefit gained by the infringer from the infringement. If it is difficult to ascertain damages in this manner, damages may be determined by using a reasonable multiple of the license fee under a contractual license. As in other jurisdictions, with one notable exception, the patent owner in China has the burden of proving that the patent is being infringed. However, if the owner of a manufacturing process patent alleges infringement of its patent, the alleged infringer has the burden of proving that it has not infringed. To our knowledge, there are no disputes as to our infringement of any third party’s patent.
Trade Secrets
According to the Anti-Unfair Competition Law of China, the term “trade secrets” refers to technical information and business information that is unknown to the public, that has utility and may create business interest or profit for its legal owners or holders, and that is maintained as a secret by its legal owners or holders.
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Under this law, business persons are prohibited from employing the following methods to infringe trade secrets: (1) obtaining the trade secrets from the legal owners or holders by any unfair methods such as stealing, solicitation or coercion; (2) disclosing, using or permitting others to use the trade secrets obtained illegally under item (1) above; or (3) disclosing, using or permitting others to use the trade secrets, in violation of any contractual agreements or any requirements of the legal owners or holders to keep such trade secrets in confidence. If a third party knows or should have known of the above-mentioned illegal conduct but nevertheless obtains, uses or discloses trade secrets of others, the third party may be deemed to have committed a misappropriation of the others’ trade secrets. The parties whose trade secrets are being misappropriated may petition for administrative corrections, and regulatory authorities may stop any illegal activities and fine infringing parties in the amount of RMB 10,000 - 200,000. Alternatively, persons whose trade secrets are being misappropriated may file lawsuits in a Chinese court for loss and damages caused by the misappropriation.
The measures to protect trade secrets include oral or written agreements or other reasonable measures to require the employees of, or persons in business contact with, legal owners or holders to keep trade secrets confidential. Once the legal owners or holders have asked others to keep trade secrets confidential and have adopted reasonable protection measures, the requested persons bear the responsibility for keeping the trade secrets confidential.
Recently Issued Policies on the Protection of Intellectual Property Rights
On November 4, 2016, the Central Committee of the Communist Party of China and the State Council jointly issued a Guideline on Improving the Property Rights Protection System and Providing Law-based Protection to Property Rights, or the Guideline, effective on the date of its release. The Guideline proposes that the country will provide equal, comprehensive and law-based protection to all kinds of property rights and requires that the punishment of intellectual property rights violations should be strengthened and the limits on compensation for violating intellectual property rights laws should be increased. In addition, the Guideline proposes to explore the establishment of infringement punitive compensation system for such intellectual property rights as patent and copyright, including allowing for punitive damages for serious malicious tort. The Guideline also stipulates to perfect the foreign-related intellectual property rights enforcement mechanism, and strengthen the international cooperation in criminal case enforcement and investigation in foreign-related intellectual property crimes. On November 28, 2016, the Supreme People’s Court released the Implementation Opinions on Appropriately and Lawfully Handling Long-standing Historical Property Rights Cases and the Opinions on Giving Full Play to Judicial Functions to Enhance Judicial Protection of Property Rights, or the Opinions, effective on the date of their releases. The Opinions stipulate that, among others, efforts shall be made to crack down on intellectual property rights infringement and crimes in accordance with relevant laws and regulations, provide stronger judicial protection to intellectual property rights, introduce judicial interpretations and guiding cases in due time, promote the lawful application of the punitive compensation system, and impose severer punishments on chain-type and industrialized crimes against intellectual property rights.
Foreign Exchange Regulation
The Foreign Exchange Administration Regulations, most recently amended in August 2008, are the principal regulations governing foreign currency exchange in China. Under the Chinese foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, may be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. In contrast, approval from or registration with appropriate government authorities is required when Chinese Renminbi, or RMB, is converted into a foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.
In November 2012, SAFE promulgated the Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment, which substantially amends and simplifies the foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts, such as pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts, the reinvestment of RMB proceeds by foreign investors in China, and remittance of foreign exchange profits and dividends by a foreign-invested enterprise to its foreign shareholders no longer require the approval or verification of SAFE, and multiple capital accounts for the same entity may be opened in different provinces, which was not previously possible. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by the SAFE or its local branches over direct investment by foreign investors in China will be conducted by way of registration, and banks must process foreign exchange business relating to the direct investment in China based on the registration information provided by SAFE and its branches.
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Under the Circular of the SAFE on Further Improving and Adjusting the Policies for Foreign Exchange Administration under Capital Accounts promulgated by the SAFE on January 10, 2014, and effective from February 10, 2014, administration over the outflow of the profits by domestic institutions has been further simplified. In principle, a bank is no longer required to examine transaction documents when handling the outflow of profits of no more than the equivalent of $50,000 by a domestic institution. When handling the outflow of profits exceeding the equivalent of $50,000, the bank, in principle, is no longer required to examine the financial audit report and capital verification report of the domestic institution, provided that it must examine, according to the principle of transaction authenticity, the profit distribution resolution of the board of directors (or the profit distribution resolution of the partners) relating to this profit outflow and the original copy of its tax record-filing form. After each profit outflow, the bank must affix its seal to and endorsements on the original copy of the relevant tax record-filing form to indicate the actual amount of the profit outflow and the date of the outflow.
On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19, which became effective on June 1, 2015. According to SAFE Circular 19, the foreign exchange capital of foreign-invested enterprises may be settled on a discretionary basis, meaning that the foreign exchange capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the foreign-invested enterprise. The proportion of such discretionary settlement is temporarily determined as 100%. The RMB converted from the foreign exchange capital will be kept in a designated account, and if a foreign-invested enterprise needs to make further payment from such account, it still must provide supporting documents and go through the review process with the banks.
Furthermore, SAFE Circular 19 stipulates that the use of capital by foreign-invested enterprises must adhere to the principles of authenticity and self-use within the business scope of enterprises. The capital of a foreign-invested enterprise and capital in RMB obtained by the foreign-invested enterprise from foreign exchange settlement must not be used for the following purposes:
| (1) | directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; |
| (2) | directly or indirectly used for investment in securities, unless otherwise provided by relevant laws and regulations; |
| (3) | directly or indirectly used for granting the entrusted loans in RMB, unless permitted by the scope of business, repaying the inter-enterprise borrowing (including advances by the third party), or repaying the bank loans in RMB that have been sub-lent to the third party; and/or |
| (4) | paying the expenses related to the purchase of real estate that is not for self-use, except for the foreign-invested real estate enterprises. |
On June 9, 2016, SAFE issued the Notice to Reform and Regulate the Administration Policies of Foreign Exchange Capital Settlement to further reform foreign exchange capital settlement nationwide.
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Regulations Relating to Data Privacy and Security
Regulations, legislation or self-regulation relating to privacy, data collection and protection, e-commerce and internet advertising (including, behavioral advertising) and uncertainties regarding the application or interpretation of existing or newly adopted laws and regulations, could harm our business and subject us to significant legal liability for non-compliance. Our ability to either collect or use data could be restricted by new laws or regulations.
Our business is conducted through the internet and therefore, among other things, we are subject to the laws and regulations that apply to e-commerce and online businesses around the world. These laws and regulations are becoming more prevalent in the United States, Europe, Israel and elsewhere and may impede the growth our services. These regulations and laws may cover privacy, data collection and protection, location of data storage and processing, cybersecurity, e-commerce, content, use of “cookies”, pricing, advertising, marketing, distribution of products, consumer protection, taxation and online payment services.
For example, we collect, use, maintain and otherwise process certain data about consumers of our products, partners, candidates and employees, consultants, and leads. Our ability to collect, use, maintain or otherwise process personal data has been, and could be further, restricted by existing and new laws and regulations relating to privacy and data collection and protection. In addition, some countries are considering or have enacted legislation requiring local storage and processing of data that could increase the cost and complexity of delivering our services.
If we were found in violation of any applicable laws or regulations relating to privacy, data protection, or security, in any jurisdiction, including in jurisdictions where we operate remotely (such as by selling to shoppers residing in such jurisdictions), our business may be materially and adversely affected and we would be liable for any damages and regulatory fines and would likely have to change our business practices. In addition, these laws and regulations could impose significant costs on us and could constrain our ability to use and process data in manners that may be commercially desirable.
While it is generally the laws of the jurisdiction in which a business is located that apply, there is a risk that data protection regulators of other countries may seek jurisdiction over our remotely activities in locations in which we process data or serve shoppers but do not have an operating entity. Where the local data protection and privacy laws of a jurisdiction apply, we may be required to register our operations in that jurisdiction or make changes to our business so that shopper data is only collected and processed in accordance with applicable local law. In addition, because our services are accessible worldwide, certain foreign jurisdictions may claim that we are required to comply with their privacy and data protection laws, including jurisdictions where we have no local entity, employees or infrastructure. In such cases, we may require additional legal review and resources to ensure compliance with any applicable privacy or data protection laws and regulations. In addition, in many jurisdictions there may in the future be new legislation that may affect our business and require additional legal review.
We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, in the European Economic Area, or the EEA, we are subject to the GDPR, which imposes stringent operational requirements regarding, among others, data use, sharing and processing, data breach notifications, data subject rights, documentation, and cross-border data transfers for EEA entities as well as non-EEA entities that offer goods or services to, or monitor, individuals in the EEA. Failure to comply with the GDPR could result in penalties for noncompliance (including possible fines of up to the greater of €20 million and 4% of our global annual turnover for the preceding financial year for especially severe violations, as well as the right to compensation for financial or non-financial damages claimed by individuals under Article 82 of the GDPR).
In addition to the GDPR, we are subject to the United Kingdom’s Data Protection Act of 2018, or the U.K. GDPR, that imposes obligations and penalties similar to the GDPR including fines up to the greater of £17.5 million or 4% of global turnover. EEA and U.K. privacy laws are constantly developing, including through case law and regulatory guidance, which increases our compliance costs and regulatory exposure.
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In the EEA and the U.K. under national laws, derived from the Directive 2002/58 on Privacy and Electronic Communications, or the ePrivacy Directive, informed and freely given consent is required for the placement of cookies and similar technologies on shoppers’ devices, website users and imposes restrictions on electronic marketing, subject to some exemptions. The GDPR and U.K. regime also impose conditions on obtaining valid consent for cookies, such as a prohibition on pre-checked consents. Recent European court and regulatory decisions are driving increased attention to cookies and tracking technologies, which could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities.
Additionally, we are or may soon be subject to the CCPA, as amended by the California Privacy Rights Act, which came into effect on January 1, 2020 and, imposes heightened transparency obligations, adds restrictions on the “sale” or “share” of personal information (which it defines broadly), and creates new data privacy rights for California residents and carries significant enforcement penalties for non-compliance. The California Attorney General enforces the CCPA and can seek an injunction and civil penalties up to $7,500 per intentional violation and $2,500 per other violation. The CCPA also provides California consumers a private right of action for certain data breaches where they can recover up to $750 per incident, per consumer or actual damages, whichever is greater, and which is expected to increase data breach litigation. The CCPA may require us to modify our data practices and policies and to incur substantial costs and expenses in order to comply. Additional U.S. states have implemented, or are in the process of implementing, similar new laws or regulation (for example, the VCDPA that went into effect on January 1, 2023; the CPA, which went into effect on July 1, 2023; the CDPA, which went into effect on July 1, 2023; the UCPA, which went into effect on December 31, 2023; and most recently the DPDPA; the ICDPA; the NCDPA; and the NHPA, all of which came into effect on January 1, 2025, as well as the NJDPA which came into effect on January 15, 2025. Over the course of 2025 similar laws imposing new privacy rights and obligations will come into effect, including the Tennessee Information Protection Act on July 1, 2025; the Minnesota Consumer Data Privacy Act on July 31, 2025; and the Maryland Online Data Privacy Act on October. 1, 2025. Further, laws in all 50 states require companies to provide notice to consumers whose personal information has been disclosed or subject to unauthorized access as a result of a data breach. More generally, some observers have noted the trend toward more stringent privacy legislation and judicial action in the US, including similar laws and decisions in other U.S. states and a potential federal privacy law, all of which could increase our potential liability and adversely affect our business.
In addition, we are also subject to the Israeli Privacy Protection Law, 1981, or the Israeli Privacy Law, and its regulations, including but not limited to the Israeli Privacy Protection Regulations (Data Security) 2017, or the Data Security Regulations, that impose obligations with respect to the manner personal data is processed, maintained, transferred, disclosed, accessed and secured, as well as the guidelines of the Israeli Privacy Protection Authority. In addition, in 2023, the Privacy Protection Regulations (Provisions Regarding Information Transferred to Israel from the European Economic Area), 2023 were enacted and consequently provide, in certain cases, additional rights to data subjects from the EEA and Israel. In this respect, the Israeli Privacy Law and its Regulations including the Data Security Regulations may require us to adjust our data protection and data security practices, information security measures, certain organizational procedures, applicable positions (such as an information security manager) and other technical and organizational security measures. Failure to comply with the Israeli Privacy Law, its regulations and guidelines issued by the Privacy Protection Authority, may expose us to enforcement actions, administrative fines and penalties, litigation (including class actions) and in certain cases criminal liability.
Furthermore, on August 5, 2024, the Israeli parliament approved Amendment 13 to the Israeli Privacy Protection Law 1981, which will come into effect on August 14, 2025, or the Amendment. This Amendment enhances data security requirements, expands enforcement powers for the Privacy Protection Authority, introduces guidance for data transfers and imposes additional obligations on organizations handling personal data. The consequences of implementing the requirements under the Amendment could lead to substantial costs, require significant system changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject us to additional liabilities. In addition, to the extent that any administrative supervision procedure is initiated by the Israeli Privacy Protection Authority that reveals certain irregularities with respect to our compliance with the Israeli Privacy Law, in addition to our exposure to administrative fines, civil claims (including class actions) and in certain cases criminal liability, we may also need to take certain remedial actions to rectify such irregularities, which may increase our costs.
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We rely on information technology systems to operate and manage our business and to process, maintain, and safeguard information, including information related to our users, clients, partners, and personnel. This information is stored and managed within our internal information technology infrastructure or, in certain instances, on platforms maintained by third-party service providers. These systems, whether operated internally or externally, may be subject to breaches, failures, or disruptions as a result of, among other things, cyber-attacks, computer viruses, physical security breaches, natural disasters, accidents, power disruptions, telecommunications failures, new system implementations, or acts of terrorism or war. In the current environment, there are numerous and evolving risks to cybersecurity, data and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological errors. High-profile security breaches at other companies and in government agencies have increased in frequency and sophistication in recent years. Moreover, geopolitical tensions, particularly the Hamas-Israel and the Russia-Ukraine conflicts, have contributed to a surge in cyber-attacks targeting Israeli companies and products globally, posing a threat to critical infrastructure.
Any failure or perceived failure by our subsidiaries or by us to comply with our posted privacy policies, cookies policies, our privacy-related obligations to users or other third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection, or data security may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, other obligations, and policies that are applicable to the businesses of our users may limit the adoption and use of, and reduce the overall demand for, our e-commerce platforms and websites. Further, public scrutiny of, or complaints about, technology and e-commerce platform companies or their data handling or data protection practices, even if unrelated to our business, industry, or operations, may lead to increased scrutiny of technology and e-commerce platform companies, including us, and may cause government agencies to enact additional regulatory requirements, or to modify their enforcement or investigation activities, which may increase our costs and risks.
In the United States and internationally, AI is the subject of evolving review by various governmental and regulatory agencies, including the SEC and the FTC, and changes in laws, rules, directives and regulations governing the use of AI may adversely affect the ability of our business to use or rely on AI. For example, on May 17, 2024, Colorado enacted the Colorado AI Act. The Colorado AI Act creates duties for developers and for those that deploy AI. There is a specific focus on bias and discrimination. The Act will go into effect on February 1, 2026.
In Europe, the EU AI Act entered into force on February 2, 2025, with different provisions becoming gradually applicable on different dates. The EU AI Act applies to companies that develop, use and/or provide AI in the EU and includes requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy and general-purpose AI models. Furthermore, it includes fines of the higher of €35,000,000 or up to 7 percent of a company’s total worldwide annual turnover for non-compliance with prohibited AI practices, or the higher of €7,500,000 or up to 1 percent of a company’s total worldwide annual turnover for the supply of incorrect, incomplete, or misleading information to notified bodies and national competent authorities in certain contexts. In addition, on September 28, 2022, the European Commission proposed two Directives seeking to establish a harmonized civil liability regime for AI in the EU, in order to facilitate civil claims in respect of harm caused by AI and to include AI-enabled products within the scope of the EU’s existing strict liability regime. The cost of complying with such laws or regulations could be significant and could increase our operating expenses, require technical changes, development and implementations, which could adversely affect our business, financial condition and results of operations.
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Recent Developments
Pure Logistics Acquisition
On March 10, 2025, we entered into a purchase agreement, or the Pure Logistics Purchase Agreement, with Smart Repair Pro, Pure Logistics, and the current holders of the issued and outstanding equity interests and assets of Pure Logistics, L.I.A. Pure Capital Ltd., Eliyahu Yoresh and Tal Yoresh, or the Sellers, pursuant to which, on March 18, 2025, the Sellers sold to Smart Repair, all of the issued and outstanding equity interests of Pure Logistics, in consideration for a base payment of $2,100,000, which was paid at the closing and a deferred payment of $500,000, or the Deferred Payment.
The Deferred Payment was made through issuance of promissory notes, or the Promissory Notes, in the aggregate principal amount of $500,000 bearing an annual interest rate of 9%, at the closing and to be repaid by Smart Repair in ten monthly installments of $50,000 each, pro-rated to each Seller’s percentage of ownership in Pure Logistics, starting after the sixth month anniversary of the date of the closing.
As security for the full repayment of the outstanding due amounts under the Promissory Notes, at the closing, we issued to the Sellers warrants to purchase up to 81,819 Ordinary Shares, at an exercise price per share initially equal to $2.75 per Ordinary Share, or the Pure Logistics Warrants. The Pure Logistics Warrants will only become exercisable upon the occurrence of an Event of Default (as defined in the Promissory Notes). Upon an Event of Default, the number of Ordinary Shares underlying the Pure Logistics Warrants will be adjusted to reflect the outstanding amount due by Smart Repair Pro to each Seller under his Promissory Note, or the Outstanding Amount, such that the number of the Ordinary Shares underlying the Pure Logistics Warrant will be equal to the Outstanding Amount divided by the New Exercise Price then in effect, minus the amount of underlying ordinary shares already exercised (if any), rounded up to the nearest whole number. The “New Exercise Price” will be equal to 135% of the closing price of the Ordinary Shares on the Nasdaq Capital Market as of the date of Event of Default. The exercise price of the Pure Logistics Warrants and the number of Ordinary Shares underlying the Pure Logistics Warrants are also subject to certain anti-dilution and share combination event protections, as set forth in the Pure Logistics Warrants. The exercise of the Pure Logistics Warrants is the Sellers’ sole recourse against non-payment of the principal amount and any due interest. Effective as of March 11, 2025, in connection with the partial conversion of the January 2025 Promissory Note (as defined below) into Ordinary Shares, the exercise price of the Pure Logistics Warrant was adjusted to $1.22609 per Ordinary Share, pursuant to Section 2(a) of the Pure Logistics Warrant (subject to any further adjustment as provided therein).
In addition, pursuant to the terms of the Pure Logistics Purchase Agreement, Smart Repair Pro delivered to the Sellers an aggregate cash payment of $247,401.87, covering an outstanding security deposit provided by the Sellers under a current lease agreement of Pure Logistics.
Impact Share Purchase Agreement
On February 6, 2025, we entered into the Purchase Agreement with Impact, pursuant to which, on the terms and subject to the conditions of the agreement, Fort will merge with and into Impact, with Impact as the surviving corporation. Pursuant to the Purchase Agreement, at the closing of the Proposed Fort Merger, we will sell to Impact, and Impact will purchase from us, all of the issued and outstanding shares of Fort, in consideration for 100,000,000 common shares of Impact and up to an additional 66,000,000 common shares of Impact, contingent upon the achievement of certain pre-determined milestones, or the Contingent Right Shares, each at a deemed price per share of CAD 0.171246, representing a post-closing equity interest in Impact of 75.02% (or up to 83.29% in the event of the full achievement of the milestones). The Proposed Fort Merger is based on a total value of Impact of approximately CAD 4.8 million (approximately $3.3 million) (considering its cash position of at least CAD 700,000 (approximately $486,330), after transaction costs) and a total valuation ascribed to Fort of approximately CAD 17.1 million (approximately $11.9 million).
Pursuant to the Purchase Agreement, upon the achievement of certain milestones, the Contingent Right Shares will be issued to us as follows: (i) 22,000,000 common shares of Impact will be issued upon the completion of a transaction resulting in Impact listing its securities on the New York Stock Exchange or the Nasdaq Stock Market LLC, or another transaction resulting in the issuance of shares listed on a U.S. national securities exchange, to shareholders of Impact in exchange for their common shares of Impact, if such transaction is completed within 24 months from the date of closing; (ii) 22,000,000 common shares of Impact will be issued upon the successful capital raising by Impact, within 48 months of the closing date in equity and/or debt financing, an aggregate of $8 million or more; and (iii) 22,000,000 common shares of Impact will be issued upon Impact reaching annual revenues of a minimum of $15 million by December 31, 2028, as reflected in Impact’s audited financial statements for such periods.
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The completion of the Proposed Fort Merger is subject to the satisfaction or waiver of certain conditions, including, but not limited to: (i) the fair market value of the equity interests of Fort being equal to at least CAD 14 million (approximately $9.7 million), based on a valuation report to be obtained; (ii) the receipt by us of a pre-ruling from the Israel Tax Authority approving the transaction; and (iii) the completion of due diligence by the parties and the receipt of corporate and regulatory approvals. On March 13, 2025, we announced that Impact obtained a valuation report from Evans & Evans, Inc., which indicates that in the opinion of Evans & Evans, Inc., the fair market value of the equity interests of Fort as of January 31, 2025, was between CAD 16.8 and 20.5 million (approximately $11.6 to $14.2 million), on a controlling, marketable basis, subject to the assumptions and qualifications specified therein.
Subject to the satisfaction or waiver of all conditions precedents to the Proposed Fort Merger, we anticipate that the transaction will be completed by May 31, 2025; however, there can be no assurance that the transaction will be completed on the agreed terms or at all. The final structure of the transaction is subject to the receipt of tax, corporate and securities law advice by both Impact and Jeffs’ Brands.
Smart Repair Pro LOI
On January 21, 2025, we entered into the Smart Repair LOI, with the Acquiror, for the proposed acquisition of Smart Repair Pro and our approximately 49.1% ownership interest (held by our subsidiary, Jeffs’ Brands Holdings) in SciSparc Nutraceuticals, in exchange for up to a 90% equity interest in the Acquiror (on a fully diluted basis), calculated as of immediately following the closing of the transaction and based on a valuation of CAD 17.125 million (approximately $11.8 million) of Smart Repair Pro and the minority interest in SciSparc Nutraceuticals, and a valuation of CAD 4.85 million (taking into account the full potential consideration and contingent on cash holdings of at least CAD 300,000 (approximately $207,000) of the Acquiror, or the Smart Repair Transaction.
Following the signing of the Smart Repair LOI, the negotiated terms of the Smart Repair Transaction were updated, such that prior to the execution of the definitive agreement with respect to the Smart Repair Transaction, we intend to enter into a share transfer agreement with Smart Repair Pro to transfer to Smart Repair Pro 5,000 shares of common stock, $0.01 par value per share of Jeffs’ Brands Holdings (which holds the minority interest in SciSparc Nutraceuticals), in exchange for shares of common stock of Smart Repair Pro, such that Jeff’ Brands Holdings will be a direct wholly owned subsidiary of Smart Repair Pro. Thereafter, and subject to the entry into a binding agreement, we will transfer all of the issued and outstanding shares of common stock of Smart Repair Pro to the Acquiror in exchange for initially 75% of the Acquiror’s issued and outstanding shares, as an initial payment upon the closing of the Smart Repair Transaction. Upon the achievement of certain milestones, we will receive an aggregate additional number of shares for up to a 90% equity interest in the Acquiror, on a fully diluted basis, calculated as of immediately following the closing of the Smart Repair Transaction.
The Smart Repair Transaction is expected to close by May 30, 2025, subject to the successful completion of due diligence by both parties, the execution of binding definitive agreements with respect to the transaction, which shall include customary closing conditions, and compliance with any regulatory approvals. There is no guarantee when or if the Smart Repair Transaction will be completed. Either party may terminate the Smart Repair LOI upon written notice to the other party that it is terminating negotiations with respect to the proposed transaction if it does not deem the due diligence review of the other party to be satisfactory. The Smart Repair LOI will automatically terminate upon the earlier of (i) the execution of definitive agreements with respect to the transaction, or (ii) May 31, 2025. On March 27, 2025, we entered into an amendment to the Smart Repair LOI, which extended the termination date from March 31, 2025 to May 31, 2025.
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January 2025 Convertible Promissory Note
On January 16, 2025, we issued a non-recourse convertible promissory note in the principal amount of $2,850,000 to an institutional investor, or the January 2025 Promissory Note. The January 2025 Promissory Note was issued with a 10% original issue discount from the principal amount and is to be repaid on in one payment on the 18th month anniversary of the issuance date, or July 16, 2026, unless repaid earlier (partially or in full) at our option, or if extended at the option. or the holder. The principal amount under the January 2025 Promissory Note bears an annual interest rate of 8% (which will increase to 18% upon an event of default, as defined in the note). The outstanding amount due under the January 2025 Promissory Note is convertible (partially or in full) into Ordinary Shares, at the option of the holder, at any time after the issuance date, at a conversion price equal to the lower of (i) $2.80984 per Ordinary Share, or (ii) 95% of the lowest daily volume-weighted average price during the 20 trading days immediately preceding the applicable date of conversion.
In connection with the issuance of the January 2025 Promissory Note, we issued to the holder a warrant to purchase up to 760,720 Ordinary Shares, or the January 2025 Warrant. The January 2025 Warrant was exercisable upon issuance at an initial exercise price of $2.80984 per Ordinary Share (subject to anti-dilution and share combination event protections) and has a term of 5.5 years from the issuance date, or July 16, 2030. The number of Ordinary Shares underlying the January 2025 Promissory Note and the January 2025 Warrant is subject to certain adjustments, as described therein. The exercise of the January 2025 Warrant is the holder’s sole recourse for non-payment of the principal amount, interest, and any payment premium (as defined in the note), if applicable, regardless of whether the value realized from the January 2025 Warrant and/or the Ordinary Shares issued upon conversion of the January 2025 Promissory Note is less than the then outstanding due principal amount, interest, and if applicable, the payment premium. Effective as of March 11, 2025, the exercise price of the January 2025 Warrant was adjusted to $1.22609 per Ordinary Share, pursuant to Section 2(a) of the January 2025 Warrant (subject to any further adjustment as provided therein).
January 2024 PIPE
On January 25, 2024, we entered into a private placement transaction, or the January 2024 PIPE, pursuant to a securities purchase agreement with certain institutional investors, providing for the issuance, in a private placement of Ordinary Shares, pre-funded warrants, Series A warrants and Series B warrants.
Following the November 2024 Reverse Split, on November 26, 2024, the exercise price and the number of Ordinary Shares issuable under the Series A warrants were adjusted, in accordance with the terms therein, or the Reverse Split Adjustment. Following the Reverse Split Adjustment, the exercise price was adjusted to $2.7008 per Ordinary Share and the number of Ordinary Shares underlying the Series A warrants was adjusted to 3,367,123. Effective as of January 16, 2025, the exercise price per each whole Ordinary Share issuable upon exercise of the outstanding Series A warrants was adjusted to $2.435105 per Ordinary Share and effective as of March 11, 2025, in connection with the partial conversion of the January 2025 Promissory Note into Ordinary Shares, the exercise price was further adjusted to $1.22609 per Ordinary Share, pursuant to Section 2(a) of the Series A warrants (subject to any further adjustment as provided therein). See “Item 5.A. Financial Arrangements - January 2024 PIPE,” for further information.
November 2024 Reverse Split
On October 30, 2024, our board of directors approved a 1-for-13 reverse split of our issued and outstanding Ordinary Shares, effective as of November 20, 2024, pursuant to which holders of our Ordinary Shares received one Ordinary Share for every 13 Ordinary Shares held as of such date. The November 2024 Reverse Split did not reduce the number of our authorized share capital. Unless the context expressly dictates otherwise, all references to share and per share amounts referred to herein give effect to the November 2024 Reverse Split.
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| C. | Organizational Structure |
Our organizational chart as of the date of this Annual Report is as follows:
| D. | Property, Plant and Equipment |
Our principal executive offices are located at 7 Mezada Street, Bnei Brak, Israel 5126112, and our telephone number is +972.3.7713520. This facility comprises approximately 24 square meters, or 2,594 square feet, of space. Our current lease, which we entered into on September 16, 2022, effective as of October 1, 2022, expires on September 30, 2025, with an option to extend the lease on the same terms for an additional two years. Our monthly rent payment as of December 31, 2024, was approximately NIS 19,165 (approximately $5,100). We consider our current office space sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business.
Pure Logistics operates an approximately 100,000 square foot logistics center equipped with 20 loading docks in New Jersey, which it leases under a sub-lease agreement, with a term expiring on December 31, 2025. The monthly payment as of December 31, 2024 was approximately $84,941.
Fort leases two warehouse facilities in the U.K. The first warehouse is approximately 4,667 square feet. The original lease agreement expired on February 23, 2025, but Fort continues to occupy the premises by mutual agreement with the leasers, until a new negotiated agreement is signed. The annual rent as of December 31, 2024 was £29,946 (approximately $31,161). The second warehouse is approximately 10,638 square feet, which Fort leases under a lease agreement effective as July 1, 2024, for a fixed five-year term with no early termination option. The annual rent as of December 31, 2024 was £52,000 (approximately $63,000).
We believe that all of our facilities are adequate for our current operations and provide sufficient capacity to support our anticipated growth in the foreseeable future.
We have contracts with third party warehouses in one location in the United States, two locations in the United Kingdom, one location in Italy and one location in Germany. These facilities are used for storage of the products prior to the shipment of such products to Amazon’s warehouses, based on availability.
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ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
| A. | Operating Results |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this Annual Report. The discussion below contains forward-looking statements that are based upon our current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to inaccurate assumptions and known or unknown risks and uncertainties, including those identified in “Cautionary Note Regarding Forward-Looking Statements” and under “Risk Factors” elsewhere in this Annual Report. Our discussion and analysis of our operating results for the years ended December 31, 2022 and December 31, 2023 can be found in our Annual Report on Form 20-F for the year ended December 31, 2023, filed with the SEC on April 1, 2024.
Overview
We are an e-commerce CPG company operating primarily on Amazon. We were incorporated in Israel in March 2021, under the name Jeffs’ Brands Ltd to provide various services, such as management, operation and logistics, marketing and financial services to our subsidiaries that operate online stores for the sale of various consumer products on Amazon, utilizing the FBA model. As of the date of this Annual Report, we have six wholly owned subsidiaries, held directly by us or through our subsidiaries: Top Rank, Fort, Smart Repair Pro, Pure Logistics, Jeffs’ Brands Holdings and Fort Products LLC. Jeffs’ Brands Holdings also holds a minority interest in SciSparc Nutraceuticals, to whom we provide a variety of professional and business support services.
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, as well as maximizing sales of its existing proprietary products. We also use our own skills, know-how and profound familiarity with Amazon’s algorithm and all the tools that the FBA platform has to offer. In some circumstances we scale the products and improve them.
Comparison of the Results for the Year Ended December 31, 2024 and 2023
Results of Operations
| Year Ended December 31, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Revenues | 13,688 | 10,008 | ||||||
| Cost of sales | 12,119 | 9,032 | ||||||
| Gross Profit | 1,569 | 976 | ||||||
| Sales and marketing | 1,302 | 833 | ||||||
| General and administrative | 5,405 | 4,262 | ||||||
| Equity losses | 1,186 | 1,249 | ||||||
| Other income | (120 | ) | (279 | ) | ||||
| Operating loss | (6,204 | ) | (5,089 | ) | ||||
| Financial expense (income) , net | 1,290 | (523 | ) | |||||
| Loss before taxes | (7,494 | ) | (4,566 | ) | ||||
| Tax expense | 310 | 32 | ||||||
| Net loss | (7,804 | ) | (4,598 | ) | ||||
| Loss attributable to holders of Ordinary Shares | (7,804 | ) | (4,598 | ) | ||||
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Revenues
Our revenues consist of revenue derived from sales on Amazon. The following table discloses the breakdown of our revenues, cost of sales and gross profit for the periods set forth below:
| Year Ended December 31, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Revenues | $ | 13,688 | 10,008 | |||||
| Cost of sales | 12,119 | 9,032 | ||||||
| Gross profit | 1,569 | 976 | ||||||
Our revenues for the year ended December 31, 2024, were $13,688 compared to $10,008 for the year ended December 31, 2023, an increase of $3,680, or 36.77%. The increase is mainly attributable to a rapid growth in Fort’s sales in the UK, as well as Fort’s revenues in Europe (mainly in France) that offset the decline in Smart Repair Pro’s revenue.
Cost of goods sold
Our cost of goods sold consist of the purchase of finished goods, freight, cost of commissions to Amazon and change in inventory.
The following table discloses the breakdown of cost of goods sold for the periods set forth below:
| Year Ended December 31, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Purchases of finished goods | $ | 6,030 | 3,817 | |||||
| Freight | $ | 619 | 311 | |||||
| Storage | $ | 496 | 660 | |||||
| Salary | $ | 210 | 70 | |||||
| Packing Supplies | $ | 83 | 14 | |||||
| Cost of commissions | $ | 6,348 | 4,431 | |||||
| increase in inventory | $ | (1,666 | ) | (271 | ) | |||
| Total | $ | 12,119 | 9,032 | |||||
Fright and storage expenses for the year ended December 31, 2024, amounted $1,115, compared to $971 for the year ended December 31, 2023, an increase of $144 or 14.8%. The increase is mainly due to our decision to move inventory from Europe to the United States and vice versa in order to decrease overall inventory level rather than order new products to either Europe or the United States.
Cost of commissions for the year ended December 31, 2024, amounted $6,348, compared to $4,431 for the year ended December 31, 2023, an increase of $1,917 or 43.2%. The increase is mainly attributable to the increase in revenues and sales on Amazon France which charges higher fees rates than Amazon U.K. and Amazon U.S.
Purchases of finished goods for the year ended December 31, 2024, amounted $6,030, compared to $3,817 for the year ended December 31, 2023, an increase of $2,213 or 58%. The increase is mainly attributable to the increase in Fort’s revenue that required more purchases of finished goods that was offset with a decrease in purchases of finished goods by Smart Repair Pro. In addition, Fort started sourcing finished goods in China in 2024 which resulted in substantial increase in inventory.
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Gross Profit
Our gross profit for the year ended December 31, 2024, was $1,569, compared to gross profit of $976 for the year ended December 31, 2023, an increase of $593, or 60.75%. The increase is mainly attributable to the increase in revenue and gross profit as well as profitability of Fort that was offset with a decrease of profitability of Smart Repair Pro.
Operating Expenses
Our current operating expenses consist of four components - marketing and sales expenses and general, administrative expenses, equity losses and other income.
Marketing and Sales Expenses
Our marketing and sales expenses consist primarily of Amazon marketing fees, consultants and other marketing and sales expenses.
The following table discloses the breakdown of marketing and sales expenses for the periods set forth below:
| Year Ended December 31, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Advertising | $ | 1,216 | 754 | |||||
| Wages, salaries and related expenses | 86 | 79 | ||||||
| Total | 1,302 | 833 | ||||||
The increase of $463, or 56.3% for the year ended December 31, 2024, as compared to the year ended December 31, 2023, is mainly attributable to an increase in advertising on Amazon by Fort.
General and Administrative Expenses
Our general and administrative expenses consist primarily of salaries and related expenses, professional service fees for accounting, legal and bookkeeping, facilities, amortization of intellectual property assets and other general and administrative expenses. The decision how much to spend in advertising is the seller’s sole decision according to different parameters that may vary within a short term.
The increase of $1,143, or 26.8%, for the year ended December 31, 2024, as compared to the year ended December 31, 2023, is mainly attributable to wages, salaries and related expenses and bonuses we paid to our management and to professional service providers and consulting fees.
Revenue sharing payment which included in other expenses is higher in 2024 compared to 2023 due to increase in revenue in 2024 compared to 2023.
The following table discloses the breakdown of our general and administrative expenses for the periods set forth below:
| Year Ended December 31, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Payroll and related expenses | $ | 1,511 | $ | 1,067 | ||||
| Professional services and consulting fees | 1,995 | 1,456 | ||||||
| Rent and office maintenance | 243 | 169 | ||||||
| Amortization of intangible assets | 786 | 739 | ||||||
| Insurance | 278 | 359 | ||||||
| Other expenses | 592 | 472 | ||||||
| Total | 5,405 | 4,262 | ||||||
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Equity losses
Our equity losses for the year ended December 31, 2024, was $1,186 compared to an operating loss of $1,249 for the year ended December 31, 2023, a decrease of $63, or 5.04% derive from investment in SciSparc Nutraceuticals. The amount includes $659 impairment loss for the year ended December 31, 2024, compared to $955 for the year ended December 31, 2023.
Other income
Our other income for the year ended December 31, 2024, derive from SciSparc Consulting Agreement, pursuant to which we provide management services to SciSparc Nutraceuticals for the Wellution brand. In addition, we provide a variety of professional and business support services in accordance with transfer pricing work received in SciSparc Nutraceuticals. The aforementioned services are provided in collaboration with SciSparc.
Operating loss
Our operating loss for the year ended December 31, 2024 was $6,204 compared to an operating loss of $5,089 for the year ended December 31, 2023, an increase of $1,115, or 21.91%. The increase in 2024 was due to factors mentioned above.
Financial income
Financial expenses consist of mainly interest, bank fees, revaluation of derivatives and other transactional costs.
Our financial expenses, net was $1,290 for the year ended December 31, 2024, compared to net financial income of $523 for the year ended December 31, 2023, an increase of $1,813. The increase was primarily attributable to issuance cost and change in fair value of derivatives liabilities, that in the year ended December 31, 2024 created expenses of $607 compared to income of $841 in the year ended December 31, 2023.
The following table discloses the breakdown of our financial income for the periods set forth below:
| Year ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Finance income: | ||||||||
| Change in fair value of derivative liabilities | - | (841 | ) | |||||
| Interest income | (78 | ) | (4 | ) | ||||
| Total finance income | (78 | ) | (845 | ) | ||||
| Finance expense: | ||||||||
| Issuance cost | 603 | - | ||||||
| Change in fair value of derivative liabilities | 607 | - | ||||||
| Amortization of loan discount | - | |||||||
| Exchange rate changes | 51 | 91 | ||||||
| Interest expense | 7 | - | ||||||
| Other finance expenses | 37 | 10 | ||||||
| Revaluation of securities -fair value through profit or loss | 63 | 221 | ||||||
| Total finance expenses | 1,368 | 322 | ||||||
| Finance expense (income), net | 1,290 | (523 | ) | |||||
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Net loss
Our net loss for the year ended December 31, 2024, was $7,804, compared to net loss of $4,598 for the year ended December 31, 2023, an increase of $3,206, or 69.72%. The increase in 2024 was due to factors mentioned above.
| B. | Liquidity and Capital Resources |
Overview
Since our inception in March 2021 and since the earlier inception of our subsidiaries, 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 our securities in private placements. As of December 31, 2024 and 2023, we had approximately $2,564 and $535, respectively, in cash and cash equivalents.
The table below presents our cash flow for the periods indicated:
| Year Ended December 31, | ||||||||
| U.S. dollars in thousands | 2024 | 2023 | ||||||
| Net cash used in operating activities | $ | (5,875 | ) | $ | (2,668 | ) | ||
| Net cash used in investing activities | $ | (572 | ) | $ | (4,814 | ) | ||
| Net cash from (used in) financing activities | $ | 8,484 | $ | (86 | ) | |||
| Net increase (decrease) in cash and cash equivalents | $ | 2,037 | $ | (7,568 | ) | |||
Our net cash used in operating activities was $5,875 for the year ended December 31, 2024, as compared to net cash from operating activities of $2,668 for the year ended December 31, 2023. Our net cash used in investing activities was $572 for the year ended December 31, 2024, as compared to net cash used in investment activities of $4,814 for the year ended December 31, 2023. Our net cash from financing activities was $8,484 for the year ended December 31, 2024, as compared to net cash used in financing activities of $86 for the year ended December 31, 2023.
The change in our liquidity for the year ended December 31, 2024, resulted from several factors, including:
Operating Activities
Our net cash used in operating activities consists primarily of net loss of $7,804, increase in inventory of $1,666 , decrease in trade receivables of $209, change in fair value of derivative liabilities of $607 offset by depreciation and amortization of intangible assets of $788, loss from change in value of investment at fair value of $62, equity losses of $1,186 thousand and decrease in other receivables of $106 thousand and issuance costs of financial instruments classified as derivative liabilities of $603.
Investing Activities
Our net cash used in investing activities primarily consisted of payments relating to acquisitions completed in 2023, including the final installment of approximately $98 thousand for SciSparc Nutraceuticals and approximately $330 thousand related to the final installment and post-closing adjustments for the acquisition of Fort, respectively.
Financing Activities
Our net cash used in financing activities consists of the issuance of Ordinary Shares, pre-funded warrants and warrants, net in the amount of $6,255 and issuance of Ordinary Shares, pre-funded warrants and warrants, net of issuance costs of $2,229 received upon exercise of warrants.
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Financial Arrangements
January 2024 PIPE
On January 25, 2024, we entered into 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. The January 2024 PIPE closed on January 29, 2024. The Company’s aggregate gross proceeds from the January 2024 PIPE were approximately $7,275, before deducting fees to the placement agent and other expenses payable by the Company in connection with the January 2024 PIPE. See “Item 4.B. Recent Developments - January 2024 PIPE” above for further information.
As of the date of this Annual Report, all of the 63,077 Ordinary Shares have been issued following exercise of pre-funded warrants 898,506 Ordinary Shares have been issued following the exercise of Series A warrants and 588,752 Ordinary Shares have been issued following exercise of Series B warrants.
Convertible Promissory Note
On January 16, 2025, we issued the January 2025 Promissory Note in the principal amount of $2,850 to an institutional investor, with net proceeds of $2,565. We intend to use the proceeds, along with any additional funds from the exercise of the January 2025 Warrant, if exercised in cash, for working capital, general corporate purposes, and potential acquisitions to expand Fort’s operations into the U.S. market.
The January 2025 Promissory Note was issued at a 10% original issue discount, bears interest at an annual rate of 8% (increasing to 18% upon default), and is due for repayment on July 16, 2026, unless repaid earlier at our option or extended at the holder’s option. The outstanding balance is convertible into ordinary shares at the lower of (i) $2.80984 per share, or (ii) 95% of the lowest daily volume-weighted average price during the 20 trading days preceding conversion. As of the date of this Annual Report, 93,954 Ordinary Shares have been issued following the partial conversion of the January 2025 Promissory Note by the holder.
In connection with the issuance of the January 2025 Promissory Note, we issued the January 2025 Warrant to purchase up to 760,720 Ordinary Shares. See “Item 4.B. Recent Developments - Convertible Promissory Note” above for further information.
Current Outlook
As of December 31, 2024, our cash and cash equivalents were $2,564. We expect that our existing cash and cash equivalents as of December 31, 2024, will be sufficient to fund our current operations and satisfy our obligations for the next twelve months taking into consideration the proceeds received from the January 2024 PIPE, the exercise of warrants from the January 2024 PIPE and the January 2025 convertible promissory note. 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 operating Pure Logistics; |
| ● | 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; |
| ● | the magnitude of our general and administrative expenses; and |
| ● | the costs of completing the contemplated Smart Repair Pro Transaction and the Proposed Fort Merger. |
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| C. | Research and development, patents and licenses, etc. |
None.
| D. | Trend information |
The trends impacting us are described elsewhere in this Annual Report, including in “Item 3.D. Risk Factors”, “Item 4.B. Business Overview”, “Item 5.A. Operating Results”, “Item 5.B. Liquidity and Capital Resources”, and Item 10.C. Material Contracts”.
Adverse macroeconomic conditions, including recent inflation, slower growth, changes to fiscal and monetary policy, higher interest rates, and currency fluctuations have impacted companies in Israel and around the world, and as the future market conditions and possible recession remain highly uncertain, we cannot predict severity of the possible recession and its effects on our customers and their spending habits. See also Item 3.D. “Risk Factors” - General economic factors may adversely affect our business, financial performance and results of operations”.
| E. | Critical Accounting Estimates |
We describe our significant accounting policies more fully in Note 2 to our financial statements included elsewhere in this Annual Report. We believe that the accounting policies described below and in Note 2 to our financial statements 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. We have identified the following critical accounting policies:
Derivative Liabilities
We account for the outstanding additional warrants to purchase up to 31,040 Ordinary Shares at an exercise price of $183.82 per Ordinary Share, issued on November 28, 2022, or the Additional Warrants and the outstanding Series A warrants to purchase up to 2,468,617 Ordinary Shares at an exercise price of $1.22609, issued on January 25, 2024 in connection with the January 2024 PIPE, or the Series A Warrants, as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in the Financial Accounting Standards Board’s (FASB) Accounting Standards Codification, or ASC, Topic 480, “Distinguishing Liabilities from Equity”, or ASC Topic 480, and ASC Topic 815, “Derivatives and Hedging”, or ASC Topic 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC Topic 480, meet the definition of a liability pursuant to ASC Topic 480, and whether the warrants meet all of the requirements for equity classification under ASC Topic 815, including whether the warrants are indexed to our own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of our control, among other conditions for equity classification. Based on their contractual terms, the Additional Warrants are accounted for as a derivative liability
The estimated fair value of the Additional Warrants is determined using Level 3 inputs (as described in the notes to financial statements accompanying this Annual Report). The Additional Warrants were calculated according to the binomial model under the following assumptions: expected stock-price volatility, expected life, dividend yield and risk-free interest rate and revenue forecast over the life of the Additional Warrants.
The estimated fair value of the Series A warrants was calculated according to the binomial model under the following assumptions: expected stock-price volatility, expected life, dividend yield and risk-free interest rate and management assumptions about the probability of future adjustment event.
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Intangible Assets Valuation
We review our intangible assets and equity investment for impairment when performance expectations, events, or changes in circumstances indicate that the asset’s carrying value may not be recoverable.
For intangible assets, when impairment indicators exist, we evaluate the undiscounted future cash flows to the carrying value of the intangible asset group. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related asset group as determined by an appropriate market appraisal or other valuation technique.
For an equity method investment, ASC 323 requires us to measure impairment that is determined to be other than temporary by comparing the carrying value of the investment with its fair value.
Based on the decline in SciSparc Nutraceuticals revenues and operating losses during 2024 and 2023, we used the work of a fair value expert, to determine that the fair value of the Company’s investment in SciSparc Nutraceuticals was impaired. Accordingly, an impairment loss of $659 and $955 thousand was recorded for the year ended December 31, 2024 and 2023 respectively, within equity losses in the consolidated statement of operations.
The fair value measurement of SciSparc Nutraceuticals as of December 31, 2024 and 2023, required significant judgements using Level 3 inputs, such as discounted projected future revenue projections, which are not observable from the market, directly or indirectly. There is uncertainty in the projected future revenues used in the Company’s impairment analysis, which requires the use of estimates and assumptions. Key assumptions in the impairment models included the discount rate and royalty rate.
Recent Accounting Pronouncements
Please see Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report for information regarding recent accounting pronouncements.
| F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation |
None.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
| A. | Directors and Senior Management |
The following table sets forth information regarding our executive officers, key employees and directors as of the date of this Annual Report:
| Name | Age | Position | Class | |||
| Viki Hakmon | 48 | Chief Executive Officer and Director | Class III(5) | |||
| Ronen Zalayet | 56 | Chief Financial Officer | N/A | |||
| Naor Bergman | 34 | Chief Operating Officer | N/A | |||
| Oz Adler(1) | 38 | Chairman of the Board of Directors | Class III(5) | |||
| Liron Carmel | 40 | Director | Class II(6) | |||
| Tali Dinar | 53 | Director | Class I(7) | |||
| Moshe Revach(1)(2)(3)(4) | 48 | Director | Class I(7) | |||
| Amitay Weiss(1) | 62 | Director | Class I(7) | |||
| Tomer Etzyoni(1)(2)(3)(4) | 44 | Director | ||||
| Israel Berenstein(1)(2)(3)(4) | 53 | Director |
| (1) | Independent Director (as defined under the Nasdaq listing rules) |
| (2) | Member of the Audit Committee |
| (3) | Member of the Compensation Committee |
| (4) | Member of the Nominating and Governance Committee |
| (5) | Class III directors shall hold office until the annual general meeting to be held in 2025 and until their successors shall have been elected and qualified. |
| (6) | The Class II director shall hold office until the annual general meeting to be held in 2027 and until their successor shall have been elected and qualified. |
| (7) | Class I directors shall hold office until the annual general meeting to be held in 2026 and until their successors shall have been elected and qualified. |
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Viki Hakmon, Founder and Chief Executive Officer and Director
Mr. Hakmon has served as our Chief Executive Officer since our inception on March 7, 2021 and as one of our directors since September 2021. Mr. Hakmon serves as Smart Repair Pro’s operating manager since its inception in December 2017. Prior to founding Smart Repair Pro, from April 2014 to April 2017, Mr. Hakmon owned and managed six businesses including two retail stores and four kiosks for computing hardware and software services, in various cities in California, including Pleasanton, San Jose and Palo Alto. We believe that Mr. Hakmon is qualified to serve as a member of our board of directors because of his vast business, management and leadership experience.
Ronen Zalayet, Chief Financial Officer
Mr. Zalayet has served as our Chief Financial Officer since October 2022. Mr. Zalayet has over 20 years of experience working in financial leadership positions in private and public companies, including in growing fintech and technology companies. Mr. Zalayet has served as the chief executive officer and director of Shemen Oil and Gas Resources Ltd, an Israeli company listed on the Tel Aviv Stock Exchange (TASE: SOG) that explores oil and natural gas from July 2021 until December 2023. From November 2019 to June 2021, Mr. Zalayet served as the chief financial officer of Colugo Systems Ltd., a company operating in the transportation field, and from 2016 to 2020, he served as a consultant, director and head of the Israeli office of Access Capital Markets Limited, a finance boutique company headquartered in the United Kingdom. Ms. Zalayet holds a B.A. in Economics and Accounting and an MBA from Tel Aviv University, Israel, and is a certified public accountant in Israel.
Naor Bergman, Chief Operating Officer
Mr. Bergman has served as our Chief Operating Officer since April 2021. From September 2018 to April 2021, Mr. Bergman established and led Amazon’s FBA logistics and warehousing department at Unicargo, which has 11 warehouses in the United States, Canada, England and Europe and was part of the management team that transformed Unicargo to become a leader in the field of outsourcing Amazon’s FBA warehousing. Unicargo is a one-stop-shop to FBA specializing in logistics services for Amazon sellers and e-commerce. From September 2017 to September 2018, Mr. Bergman was a strategic customer manager at Pick & Pack Ltd., a company fully owned by Israel Cargo Logistics Ltd, an international shipping company. Mr. Bergman holds a B.A. in Economics and Sustainability from Reichman University, Israel.
Oz Adler, Chairman of the Board of Directors
Mr. Adler, CPA, has served on our board of directors since September 2021. Mr. Adler currently serves as the chief executive officer and chief financial officer of SciSparc Ltd. Mr. Adler has served as SciSparc’s chief financial officer since April 2018 and as its chief executive officer since January 2022. Mr. Adler has experience in a wide variety of managerial, financial, tax and accounting roles. From December 2020 to April 2021, Mr. Adler served as the chief financial officer of Xylo Technologies Ltd. (Nasdaq: XYLO), from August 2021 to October 2022 he served as a director of Elbit Imaging Ltd. (TASE: EMITF). Mr. Adler also worked in the audit department of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global between December 2012 and August 2017. Additionally, Mr. Adler currently serves on the board of directors of numerous private and publicly traded companies, including: Clearmind Medicine Inc. (Nasdaq: CMND) (FSE:CWY), Rail Vision Ltd. (Nasdaq: RVSN). Mr. Adler is a certified public accountant in Israel and holds a B.A. degree in Accounting and Business Management from The College of Management, Israel.
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Liron Carmel, Director
Mr. Carmel has served as one of our directors since September 2021. Mr. Carmel has served as chief executive officer of Xylo Technologies Ltd. (Nasdaq: XYLO) since April 2019. Mr. Carmel has vast experience in business and leadership across multiple industries, including bio pharma, internet technology, oil and gas exploration and production, real estate and financial services. Since June 2018 Mr. Carmel has served as chairman of the Israel Tennis Table Association. Since September 2022 Mr. Carmel has served as a member of the board of directors of Viewbix Inc. (Nasdaq: VBIX). From January 2017 to May 2018, Mr. Carmel served as the chief executive officer and director of CannaPowder (PINK: CAPD), a bio-pharma company dedicated to developing and applying innovative technology in the cannabinoid field. From January 2018 to April 2019, Mr. Carmel served as a director of Chiron Refineries Ltd. (TASE: CHR), a company engaged in consulting and initiation of transactions in the refineries field, and as a member of the board of directors of Gix Internet Ltd. (TASE: GIX) which operates in the field of software development, marketing and distribution to internet users. From May 2016 to 2018, he served as vice president, business development at Yaad Givatayim Development, a municipal corporation dedicated to initiate, develop and establish projects of public importance. From 2013 to 2015, Mr. Carmel served as an investment manager and as a research and strategy analyst at Excellence Nessuah Investment House, a wealth management firm. We believe that Mr. Carmel is qualified to serve as a member of our board of directors because of his diverse business, management and leadership experience.
Tali Dinar, Director
Mrs. Dinar has served as one of our directors since September 2021. Mrs. Dinar is a senior executive with a two-decade track record in public and private companies in a global environment. Mrs. Dinar has served as chief financial officer of Xylo Technologies Ltd. (Nasdaq: XYLO) since June 2021. Mrs. Dinar also currently serves as a member of the board of directors of ParaZero Ltd. beginning February 13, 2022, as a director of Charging Robotics Ltd. since November 2021, and as a director of Charging Robotics Inc since April 4, 2023. Mrs. Dinar served as Chief Financial Officer of Novomic Ltd., a private company between January 2019 and January 2023. She has also served as a member of the board of directors of Micronet Ltd. (TASE: MCRNT) between July 2016 and February 2023. In addition, she has also served as a director of Canzon Israel Ltd. (TASE: CNZN) since August 2020 until March 2022. Between 2019 and 2020, Mrs. Dinar served as the Chief Financial Officer of TechCare Corp. (currently Citrine Global Corp.) (OTCQB: CTGL). Between 2009 and 2019, Mrs. Dinar worked at the MICT group and served in various positions, including as Chief Financial Officer of MICT Inc. (Nasdaq: MICT) and as Chief Financial Officer of MICT Telematics Ltd. Mrs. Dinar holds a B.A. in Accounting and Business Administration from The College of Management, Israel. We believe that Mrs. Dinar is qualified to serve as a member of our board of directors because of her diverse business, management and proven leadership skills in managing global finance, holding and industrial organizations.
Moshe Revach, Director
Mr. Revach has served as one of our directors since September 2021. Mr. Revach serves as member of the city council of Ramat Gan, Israel, and member of the finance committee of the city council of Ramat Gan, Israel, and previously served in various other municipality positions since 2008. Mr. Revach currently serves as a member of the board of directors of L.L.N IT solutions, a wholly-owned subsidiary of the Jewish Agency for Israel, a board member of Biomedico Hadarim Ltd., a board member of ParaZero Technologies Ltd (Nasdaq: PRZO) since 2022, a board member of SciSparc Ltd. (Nasdaq: SPRC) since January 2022 and a board member of Plantify Foods, Inc. since 2023. Mr. Revach previously served as a member of the board of directors of the RPG Economic Society and Jewish Experience Company on behalf of the Jewish Agency. Mr. Revach holds an LL.B from the Ono Academic College, Israel, and a B.A. in management and economics from the University of Derby. We believe that Mr. Revach is qualified to serve as a member of our board of directors because of his diverse management and leadership experience.
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Amitay Weiss, Director
Mr. Weiss has served as one of our directors since August 2022. Mr. Weiss has vast experience serving on boards of directors and other high positions. He has served as chairman of the board of directors of Save Foods Inc. (Nasdaq: SVFD) since August 2020, chairman of the board of directors of Infimer Ltd. (Maintaince) (TASE: INFR-M) since July 2021 and chairman of the board of directors of Upsellon Brands Holdings Ltd. (previously Chiron Ltd.) (TASE: UPSL) since June 2019. He has also served as a member of the board of directors of Automax Motors Ltd. (TASE: AMX) since March 2021, Gix Internet Ltd. (previously Algomizer Ltd.) (TASE: GIX) since March 2019, Clearmind Medicine Inc. (previously Cyntar Ventures Inc.) (CSE: CMND) since August 2019, as an external director of Cofix Group Ltd. (TASE: CFCS) since August 2015 and as a member of the board of directors of SciSparc since August 2020. Mr. Weiss served as chief executive officer of SciSparc from August 2020 to January 2022. He also previously served as chairman of the board of directors of Value Capital One Ltd. (previously P.L.T Financial Services Ltd.) (TASE: VALU) from April 2016 to February 2021 and of Matomy Media Group Ltd. from May 2020 to March 2021. In April 2016, Mr. Weiss founded Amitay Weiss Management Ltd., an economic consulting company, and now serves as its chief executive officer. Mr. Weiss holds a B.A in economics from New England College, an M.B.A. in business administration and an LL.B. from Ono Academic College, Israel. We believe that Mr. Weiss is qualified to serve as a member of our board of directors because of his diverse business, management and leadership experience.
Tomer Etzyoni, Director
Mr. Etzyoni has served as one of our directors since August 2022. Mr. Etzyoni has served as a fitness and health instructor at Wingate College since September 2016, professional course, as workshop instructor at Wingate College since March 2012 and as therapist at Dr. Gill Solberg’s Muscle and Motion Clinic since January 2012. Mr. Etzyoni previously served as fitness and health instructor and diagnostician at Wingate College, Si’im Campus from August 2012 to July 2016. Mr. Etzyoni holds a B.A in Physical Education and Movement, majoring in posture from Kibbutzim College, Israel, a certificate in gym and health clubs instructor from Wingate Institute, Israel, posture and kinesiology specialty certificate from Wingate Institute, Israel, Yir Karni’s neuration course, Wingate Institute, Israel, Thai stretches course, from Broshim Campus, Israel athletics instructor certificate from Kibbutzim College, Israel and a certificate in ergonomics and posture specialty from Kibbutzim College, Israel. We believe that Mr. Etzyoni is qualified to serve as a member of our board of directors because of his diverse fitness and health knowledge and his vast experience in fitness and health - issues that are related to the brands we sell or will sell in the future.
Israel Berenstein, Director
Mr. Berenstein has served as one of our directors since December 14, 2023. Mr. Berenstein has also serves as a director of Plantify Foods INC. (TSXV: PTFY), since July 2023, N2OFF, Inc. (Nasdaq: NITO), since August 2020, and Upsellon Brands Holdings Ltd (TASE: UPSL) since May 2019. Since 2023, Mr. Berenstein has been a solo practitioner in his law firm. Previously, he worked at Ben Yakov, Shvimer, Dolev - Law Office from 2020-2022. Formerly, Mr. Berenstein served in the legal department of Sonol Israel Ltd. from April 2010 to December 2020. Before that, he worked as a commercial lawyer and litigator for a leading Israeli law firm from July 2000 to April 2010. Mr. Berenstein earned an LL.B. in Law and an M.A. in Political Science from Bar-Ilan University, Israel. Mr. Berenstein was admitted to the Israel Bar Association in 2000. We believe that Mr. Berenstein is qualified to serve as a member of our board of directors because of his diverse business, legal and management experience.
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Family Relationships
There are no family relationships between any members of our executive management and our directors.
Arrangements for Election of Directors and Members of Management
There are no arrangements or understandings with major shareholders, customers, suppliers or others pursuant to which any of our executive management or our directors were selected. See “Related Party Transactions” for additional information.
| B. | Compensation |
The following table presents in the aggregate all compensation we paid to all of our directors and senior management as a group for the year ended December 31, 2024. The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during this period.
All amounts reported in the tables below reflect the cost to the Company, in thousands of U.S. dollars, for the year ended December 31, 2024. Amounts paid in NIS are translated into U.S. dollars at the rate of NIS 3.69 = U.S. $1.00, based on the average representative rate of exchange between the NIS and the U.S. dollar as reported by the Bank of Israel during such period of time.
| Salary, bonuses and Related Benefits | Pension, Retirement and Other Similar Benefits | Share Based Compensation(1) | ||||||||||
| All directors and senior management as a group, consisting of 11 persons for the year ended December 31, 2024(1) | $ | 1,279 | $ | 40 | $ | - | ||||||
| (1) | Includes Eliyahu Yoresh who served as a director until his resignation on January 5, 2025. |
For so long as we qualify as a foreign private issuer, we will not be required to comply with the proxy rules applicable to U.S. domestic companies regarding disclosure of the compensation of certain executive officers on an individual basis. In accordance with the Israeli Companies Law, we are required to disclose the compensation granted to our five most highly compensated officers. The table below reflects the compensation granted during or with respect to the year ended December 31, 2024.
| Executive Officer | Salary and Related Benefits(1) | Bonus Payments, Benefits and Perquisites | Share-Based Compensation(2) | Total | ||||||||||||
| Viki Hakmon | $ | 270 | $ | 177 | $ | - | $ | 447 | ||||||||
| Ronen Zalayet | $ | 174 | $ | 66 | $ | - | $ | 240 | ||||||||
| Naor Bergman | $ | 174 | $ | 42 | $ | - | $ | 216 | ||||||||
| Oz Adler | $ | 288 | $ | 100 | - | $ | 388 | |||||||||
Each of the members of our board of directors is the 5th most highly paid office holder. For further information, see Item 6B above.
| (1) | Represents the directors’ and senior management’s gross salary plus payment of mandatory social benefits made by the company on behalf of such persons. Such benefits may include, to the extent applicable to the executive, payments, contributions and/or allocations for savings funds, education funds (referred to in Hebrew as “Keren Hishtalmut”), pension, severance, risk insurances (e.g., life or work disability insurance) and payments for social security. |
| (2) | Share-based compensation includes the cost of our non-cash share-based compensation in 2024. |
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Employment and Service Agreements with Executive Officers
We have entered into written employment and service agreements with each of our executive officers. All of these agreements contain customary provisions regarding confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. In addition, we have entered into our standard form of indemnification agreement, in the form filed as an exhibit to this Annual Report, with each of our directors and members of our senior management. Each such indemnification agreement provides the indemnified person with indemnification to the maximum extent permitted under applicable law and up to a certain amount, and to the extent that these liabilities are not covered by directors and officers insurance or other indemnification agreements. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
Directors’ Service Contracts
Other than with respect to our directors that are also executive officers, we do not have written agreements with any director providing for benefits upon the termination of his employment with the Company.
Equity Incentive Plans
2022 Israeli Incentive Option Plan
On January 19, 2021, we adopted the 2022 Israeli Incentive Option Plan, or the 2022 Plan. We no longer grant any awards under the 2022 Plan as it was superseded by the Jeffs’ Brands Ltd 2024 Share Incentive Plan, or the 2024 Plan.
2024 Share Incentive Plan
The 2024 Plan was adopted by our board of directors on May 15, 2024. The 2024 Plan provides for the grant of equity-based incentive awards to our employees, directors, office holders, service providers and consultants in order to incentivize them to increase their efforts on behalf of the Company and to promote the success of our business. As of the date of this Annual Report, 1,575,000 Ordinary Shares were reserved and available for issuance under the 2024 Plan.
Shares Available for Grants. The maximum number ordinary shares available for issuance under the 2024 Plan is initially equal to 1,575,000 Ordinary Shares, provided that no more than 1,575,000 Ordinary Shares may be issued upon the exercise of Incentive Stock Options. If permitted by our board of directors, shares tendered to pay the exercise price or withholding tax obligations with respect to an award granted under the 2024 Plan or the 2022 Plan may again be available for issuance under the 2024 Plan, unless determined otherwise by the Board. Our board of directors may also reduce the number of ordinary shares reserved and available for issuance under the 2024 Plan in its discretion.
Administration. Our board of directors, or a duly authorized committee of our board of directors, or the administrator, will administer the 2024 Plan. Under the 2024 Plan, the administrator has the authority, subject to applicable law, to interpret the terms of the 2024 Plan and any award agreements or awards granted thereunder, designate recipients of awards, determine and amend the terms of awards, including the exercise price of an option award, the fair market value of an ordinary share, the time and vesting schedule applicable to an award or the method of payment for an award, accelerate or amend the vesting schedule applicable to an award, prescribe the forms of agreement for use under the 2024 Plan and take all other actions and make all other determinations necessary for the administration of the 2024 Plan.
The administrator also has the authority to approve the conversion, substitution, cancellation or suspension under and in accordance with the 2024 Plan of any or all option awards or ordinary shares, and the authority to modify option awards to eligible individuals who are foreign nationals or are individuals who are employed outside Israel to recognize differences in local law, tax policy or custom, in order to effectuate the purposes of the 2024 Plan but without amending the 2024 Plan. The administrator also has the authority to amend and rescind rules and regulations relating to the 2024 Plan or terminate the 2024 Plan at any time before the date of expiration of its ten-year term.
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| C. | Board Practices |
Introduction
Our board of directors presently consists of eight members. We believe that Oz Adler, Amitay Weiss, Tomer Etzyoni, Israel Berenstein and Moshe Revach are “independent” for purposes of the Nasdaq listing rules and SEC rules and regulations. Our amended and restated articles of association provide that the number of board of directors’ members shall be no less than three and not more than twelve (including external directors, if any). Pursuant to the Companies Law, the management of our business is vested in our board of directors. Our board of directors may exercise all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are responsible for our day-to-day management and have individual responsibilities established by our board of directors. Our Chief Executive Officer is appointed by, and serves at the discretion of, our board of directors, subject to the employment agreement that we have entered into with him. All other executive officers are appointed by our Chief Executive Officer. Their terms of employment are subject to the approval of the board of directors’ compensation committee of the board of directors, and are subject to the terms of any applicable employment agreements that we may enter into with them.
Each director, except for our former external directors Tomer Etzyoni and Israel Berenstein, will hold office until the annual general meeting of our shareholders for the year in which such director’s term expires, unless the tenure of such director expires earlier pursuant to the Companies Law or unless he or she is removed by the holders of at least 70% of the total voting power of our shareholders or upon the occurrence of certain events, in accordance with the Companies Law and our amended and restated articles of association. Our amended and restated articles of association provide that the directors are classified, with respect to the term for which they each severally hold office, into three classes, as nearly equal in number as practicable, and designated as Class I, Class II and Class III. The Class I directors shall hold office until the annual general meeting to be held in 2026 and until their successors shall have been elected and qualified. The Class II director shall hold office until the annual general meeting to be held in 2027 and until their successor shall have been elected and qualified. The Class III directors shall hold office until the annual general meeting to be held in 2025 and until their successors shall have been elected and qualified. The Board may assign members of the Board already in office to such classes at the time such classification becomes effective. If the number of directors is changed, any newly created directors or decrease in directors must be apportioned by the board among the classes to make them equal in number.
In addition, under certain circumstances, our amended and restated articles of association allow our board of directors to appoint directors to fill vacancies on our board of directors or in addition to the acting directors (subject to the limitation on the number of directors), in one of the classes and until the next annual general meeting according to the appropriate class in which directors may be appointed or terminated.
Under the Companies Law, any shareholder holding at least one percent of our outstanding voting power may ask to add nomination of a director for the approval of the general meeting of shareholders, however, as a company listed on an exchange outside of Israel, a matter relating to the appointment or removal of a director may only be requested by one or more shareholders holding at least 5% of the voting rights at the general meeting of the shareholders. However, any such shareholder may make such a nomination only if a written notice of such shareholder’s intent to make such nomination has been given to our board of directors. Any such notice must include certain information, including the consent of the proposed director nominee to serve as our director if elected, and a declaration that the nominee signed declaring that he or she possesses the requisite skills and has the availability to carry out his or her duties. Additionally, the nominee must provide details of such skills, and demonstrate an absence of any limitation under the Companies Law that may prevent his or her election, and affirm that all of the required election-information is provided to us, pursuant to the Companies Law.
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Under the Companies Law, our board of directors must determine the minimum number of directors who are required to have accounting and financial expertise. In determining the number of directors required to have such expertise, our board of directors must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our board of directors has determined that the minimum number of directors of our company who are required to have accounting and financial expertise is one.
The board of directors must elect one director to serve as the chairman of the board of directors to preside at the meetings of the board of directors, and may also remove that director as chairman. Pursuant to the Companies Law, neither the chief executive officer nor any of his or her relatives is permitted to serve as the chairman of the board of directors, and a company may not vest the chairman or any of his or her relatives with the chief executive officer’s authorities. In addition, a person who reports, directly or indirectly, to the chief executive officer may not serve as the chairman of the board of directors; the chairman may not be vested with authorities of a person who reports, directly or indirectly, to the chief executive officer; and the chairman may not serve in any other position in the company or a controlled company, but he or she may serve as a director or chairman of a controlled company. However, the Companies Law permits a company’s shareholders to determine, for a period not exceeding three years from each such determination or five years following a company’s initial public offering, that the chairman or his or her relative may serve as chief executive officer or be vested with the chief executive officer’s authorities, and that the chief executive officer or his or her relative may serve as chairman or be vested with the chairman’s authorities. Such determination of a company’s shareholders requires either: (1) the approval of at least a majority of the shares of those shareholders present and voting on the matter (other than controlling shareholders and those having a personal interest in the determination) (shares held by abstaining shareholders shall not be considered); or (2) that the total number of shares opposing such determination does not exceed 2% of the total voting power in the company. We refer to this special majority hereinafter as the Special Majority Approval. The chairman of our board of directors is Mr. Oz Adler.
The board of directors may, subject to the provisions of the Companies Law, delegate any or all of its powers to committees of the board, and it may, from time to time, revoke such delegation or alter the composition of any such committees, subject to certain limitations. Unless otherwise expressly provided by the board of directors, the committees shall not be empowered to further delegate such powers. The composition and duties of our audit committee and compensation committee are described below.
The board of directors oversees how management monitors compliance with our risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by us. The board of directors is assisted in its oversight role by an internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to our audit committee.
External Directors
Under the Companies Law, companies incorporated under the laws of the State of Israel that are “public companies” are required to appoint at least two external directors who meet the qualification requirements under the Companies Law. Pursuant to regulations promulgated under the Companies Law, companies with shares traded on certain U.S. stock exchanges, including Nasdaq, which do not have a “controlling shareholder,” may, subject to certain conditions, “opt out” from the Companies Law requirements to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors (other than the gender diversification rule under the Companies Law, which requires the appointment of a director from the other gender if at the time a director is appointed all members of the board of directors are of the same gender). In accordance with these regulations, after determining that we no longer have a controlling shareholder, on May 15, 2024, our Board of Directors elected to “opt out” from the Companies Law requirement to appoint external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of our board of directors. The transition rules set forth under the regulations promulgated under the Companies Law provide that Mr. Israel Berenstein and Mr. Tomer Etzyoni, our former external directors, have the right to remain in office as our directors at their option after the “opt out’ is adopted until the earlier of such directors’ original end of term of office or the second annual meeting of shareholders after the adoption of the exemption, which in the case of both is expected to be until the date of our annual meeting of shareholders to be held in 2025.
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Alternate Directors
Our amended and restated articles of association provide, as allowed by the Companies Law, that any director may, subject to the conditions set thereto including approval of the nominee by our board of directors, appoint a person as an alternate to act in his place, to remove the alternate and appoint another in his place and to appoint an alternate in place of an alternate whose office is vacated for any reason whatsoever. Under the Companies Law, a person who is not qualified to be appointed as a director, a person who is already serving as a director or a person who is already serving as an alternate director for another director, may not be appointed as an alternate director. Nevertheless, a director who is already serving as a director may be appointed as an alternate director for a member of a committee of the board of directors so long as he or she is not already serving as a member of such committee. Unless the appointing director limits the time or scope of the appointment, the appointment is effective for all purposes until the appointing director ceases to be a director or terminates the appointment.
Committees of the Board of Directors
Our board of directors has established two standing committees, the audit committee and the compensation committee.
Audit Committee
Our audit committee is composed of Moshe Revach, Israel Berenstein and Tomer Etzyoni. Israel Berenstein is the chairman of the audit committee.
Companies Law Requirements
Under the Companies Law we are required to appoint an audit committee.
Audit Committee Role
Under the Companies Law, our audit committee will be responsible for:
| (i) | determining whether there are deficiencies in the business management practices of our company, and making recommendations to the board of directors to improve such practices; |
| (ii) | determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is extraordinary or material under Companies Law) and establishing the approval process for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal interest. See “Item 6.C. Board Practices - Fiduciary Duties and Approval of Related Party Transactions under Israeli law” for additional information; |
| (iii) | determining the approval process for transactions that are “non-negligible” (i.e., transactions with a controlling shareholder that are classified by the audit committee as non-negligible, even though they are not deemed extraordinary transactions), as well as determining which types of transactions would require the approval of the audit committee, optionally based on criteria which may be determined annually in advance by the audit committee; |
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| (iv) | examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities; |
| (v) | examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our board of directors or shareholders, depending on which of them is considering the appointment of our auditor; |
| (vi) | establishing procedures for the handling of employees’ complaints as to deficiencies in the management of our business and the protection to be provided to such employees; and |
| (vii) | where the board of directors approves the working plan of the internal auditor, examining such working plan before its submission to the board of directors and proposing amendments thereto. |
Our board of directors adopted an audit committee charter which was effective upon the listing of our Ordinary Shares on Nasdaq setting forth, among others, the responsibilities of the audit committee consistent with the rules of the SEC and Nasdaq listing rules (in addition to the requirements for such committee under the Companies Law), including, among others, the following:
| ● | oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law; |
| ● | recommending the engagement or termination of the person filling the office of our internal auditor, reviewing the services provided by our internal auditor and reviewing effectiveness of our system of internal control over financial reporting; |
| ● | recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors; and |
| ● | reviewing and monitoring, if applicable, legal matters with significant impact, finding of regulatory authorities’ findings, receive reports regarding irregularities and legal compliance, acting according to “whistleblower policy” and recommend to our board of directors if so required. |
Nasdaq Listing Rules for Audit Committee
Under the Nasdaq listing rules, we are required to maintain an audit committee consisting of at least three members, all of whom are independent and are financially literate and one of whom has accounting or related financial management expertise.
As noted above, the members of our audit committee include Israel Berenstein, Tomer Etzyoni and Moshe Revach, each of whom is “independent,” as such term is defined in under Nasdaq listing rules and Rule 10A-3 under the Exchange Act. All members of our audit committee meet the requirements for financial literacy under the Nasdaq listing rules. Our board of directors has determined that Moshe Revach is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq listing rules.
Compensation Committee
Our compensation committee is composed of Moshe Revach, Tomer Etzyoni and Israel Berenstein. Israel Berenstein is the chairman of the compensation committee.
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Companies Law Requirements
Under the Companies Law, the board of directors of any public company must establish a compensation committee.
Our compensation committee acts pursuant to a written charter. Our compensation committee complies with the provisions of the Companies Law, the regulations promulgated thereunder, and our amended and restated articles of association, on all aspects referring to its independence, authorities and practice. Our compensation committee follows home country practice as opposed to complying with the compensation committee membership and charter requirements prescribed under the Nasdaq listing rules.
Nasdaq Listing Rules for Compensation Committee
Under the corporate governance rules of Nasdaq, we are required to maintain a compensation committee consisting of at least two independent directors.
Our board of directors has determined that each member of our compensation committee is independent under the corporate governance rules of Nasdaq, including the additional independence considerations applicable to the members of a compensation committee.
Compensation Committee Role
Our compensation committee reviews and recommends to our board of directors: with respect to our executive officers’ and directors’: (1) annual base compensation (2) annual incentive bonus, including the specific goals and amounts; (3) equity compensation; (4) employment agreements, severance arrangements, and change in control agreements and provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits, compensation, compensation policies or arrangements.
The duties of the compensation committee include the recommendation to the company’s board of directors of a policy regarding the terms of engagement of office holders, to which we refer as a compensation policy. Such policy must be adopted by the company’s board of directors, after considering the recommendations of the compensation committee. The compensation policy is then brought for approval by our shareholders, which requires the approval of a special majority. See “Item 6.C.- Board Practices - Fiduciary Duties and Approval of Related Party Transactions under Israeli law” for additional information. Under the Companies Law, the board of directors may adopt the compensation policy if it is not approved by the shareholders, provided that after the shareholders oppose the approval of such policy, the compensation committee and the board of directors revisit the matter and determine that adopting the compensation policy would be in the best interests of the company.
If a company that initially offers its securities to the public, like us, adopts a compensation policy in advance of its initial public offering, and describes it in its prospectus for such offering, then such compensation policy shall be deemed a validly adopted policy in accordance with the Companies Law requirements described above. Furthermore, if the compensation policy is established in accordance with the aforementioned relief, then it will remain in effect for a term of five years from the date such company becomes a public company. Accordingly, our compensation policy will remain in effect for five years from our IPO, until August 25, 2027. The compensation policy must serve as the basis for decisions concerning the financial terms of employment or engagement of executive officers and directors, including exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The compensation policy must relate to certain factors, including advancement of the company’s objectives, the company’s business and its long-term strategy, and creation of appropriate incentives for office holders. It must also consider, among other things, the company’s risk management, size and the nature of its operations. The compensation policy must furthermore consider the following additional factors:
| ● | the education, skills, expertise and accomplishments of the relevant officer holder; |
| ● | the officer holder’s roles and responsibilities and prior compensation agreements with him or her; |
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| ● | the relationship between the cost of the terms of service of an office holder and the average median compensation of the other employees of the company (including those employed through manpower companies), in particular the ratio between such cost to the average and median salary of such employees of the company including the impact of disparities in salary upon work relationships in the company; |
| ● | if the terms of employment include variable components the possibility of reducing variable compensation at the discretion of the board of directors; and the possibility of setting a limit on the exercise value of non-cash variable compensation; and |
| ● | as to severance compensation, the period of service of the office holder, the terms of his or her compensation during such service period, the company’s performance during that period of service, the person’s contribution towards the company’s achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company. |
The compensation policy must also include the following principles:
| ● | with the exception of office holders who report to the chief executive officer, a means of determining the variable components on the basis of long-term performance and measurable criteria; provided that the company may determine that an immaterial part of the variable components of the compensation package of an office holder shall be awarded based on non-measurable criteria, or if such amount is not higher than three months’ salary per annum, taking into account such office holder’s contribution to the company; |
| ● | the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation at the time of payment, or in the case of equity-based compensation, at the time of grant; |
| ● | the conditions under which an officer holder would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and such data was restated in the company’s financial statements; |
| ● | the minimum holding or vesting period for variable, equity-based compensation to be set in the terms of office or employment, as applicable, while taking into consideration long-term incentives; and |
| ● | maximum limits for severance compensation. |
The compensation policy must also consider appropriate incentives from a long-term perspective.
The compensation committee is responsible for: (1) recommending the compensation policy to a company’s board of directors for its approval (and subsequent approval by the shareholders); and (2) duties related to the compensation policy and to the compensation of a company’s office holders, including:
| ● | recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years); |
| ● | recommending to the board of directors, periodic updates to the compensation policy; |
| ● | assessing implementation of the compensation policy; |
| ● | administering the Company’s clawback policy; |
| ● | determining whether the terms of compensation of certain office holders of the company need not be brought to approval of the shareholders; and |
| ● | determining whether to approve the terms of compensation of office holders that require the committee’s approval. |
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Our compensation policy is designed to promote our long-term goals, work plan and policy, retain, motivate and incentivize our directors and executive officers, while considering the risks that our activities involve, our size, the nature and scope of our activities and the contribution of an officer to the achievement of our goals and maximization of profits, and align the interests of our directors and executive officers with our long-term performance. To that end, a portion of an executive officer compensation package is targeted to reflect our short and long-term goals, as well as the executive officer’s individual performance. On the other hand, our compensation policy includes measures designed to reduce the executive officer’s incentives to take excessive risks that may harm us in the long-term, such as limits on the value of cash bonuses and equity-based compensation, limitations on the ratio between the variable and the total compensation of an executive officer and minimum vesting periods for equity-based compensation.
Our compensation policy also addresses our executive officer’s individual characteristics (such as his or her respective position, education, scope of responsibilities and contribution to the attainment of our goals) as the basis for compensation variation among our executive officers, and considers the internal ratios between compensation of our executive officers and directors and other employees. Pursuant to our compensation policy, the compensation that may be granted to an executive officer may include: base salary, annual bonuses, equity-based compensation, benefits and retirement and termination of service arrangements. All cash bonuses are limited to a maximum amount linked to the executive officer’s base salary. In addition, our compensation policy provides for maximum permitted ratios between the total variable (cash bonuses and equity based compensation) and non-variable (base salary) compensation components, in accordance with an officer’s respective position with the company.
An annual cash bonus may be awarded to executive officers upon the attainment of pre-set periodic objectives and individual targets. The annual cash bonus that may be granted to executive officers other than our chairman or Chief Executive Officer may be based entirely on a discretionary evaluation. Our Chief Executive Officer will be entitled to recommend performance objectives to such executive officers, and such performance objectives will be approved by our compensation committee (and, if required by law, by our board of directors).
The performance measurable objectives of our chairman and Chief Executive Officer will be determined annually by our compensation committee and board of directors. A less significant portion of the chairman’s and/or the Chief Executive Officer’s annual cash bonus may be based on a discretionary evaluation of the chairman’s or the Chief Executive Officer’s respective overall performance by the compensation committee and the board of directors based on quantitative and qualitative criteria.
The equity-based compensation under our compensation policy for our executive officers (including members of our board of directors) is designed in a manner consistent with the underlying objectives in determining the base salary and the annual cash bonus, with its main objectives being to enhance the alignment between the executive officers’ interests with our long-term interests and those of our shareholders and to strengthen the retention and the motivation of executive officers in the long term. Our compensation policy provides for executive officer compensation in the form of share options or other equity-based awards, such as restricted shares and phantom, options, in accordance with our share incentive plan then in place. Share options granted to executive officers shall be subject to vesting periods in order to promote long-term retention of the awarded executive officers. The equity-based compensation shall be granted from time to time and be individually determined and awarded according to the performance, educational background, prior business experience, qualifications, role and the personal responsibilities of the executive officer.
In addition, our compensation policy contains compensation recovery provisions which allows us under certain conditions to recover bonuses paid in excess, enables our Chief Executive Officer to approve an immaterial change in the terms of employment of an executive officer (provided that the changes of the terms of employment are in accordance our compensation policy) and allows us to exculpate, indemnify and insure our executive officers and directors subject to certain limitations set forth thereto.
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Following the SEC approval of Nasdaq’s proposed clawback listing standards, under Rule 10D-1, or the Clawback Listing Rules, which directed companies to adopt and comply with a written clawback policy, to disclose and file the policy as an exhibit to its annual reports, we have adopted as of October 2, 2023, a clawback policy as contemplated pursuant to the Clawback Listing Rules, and have filed as Exhibit 97 to this Annual Report.
Our compensation policy also provides for compensation to the members of our board of directors either: (i) in accordance with the amounts provided in the Companies Regulations (Rules Regarding the Compensation and Expenses of an External Director) of 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel) of 2000, as such regulations may be amended from time to time; or (ii) in accordance with the amounts determined in our compensation policy.
Nominating and Governance Committee
Our nominating and governance committee is comprised of Moshe Revach, Israel Berenstein and Tomer Etzyoni. Israel Berenstein is the chairman of the nominating and governance committee.
Our nominating and corporate governance committee is responsible for, among other things:
| ● | identifying individuals qualified to become members of our board of directors; |
| ● | reviewing the board of directors’ committee structure and recommending to the board of directors in connection with its nomination of directors to serve as members of each committee; and |
| ● | recommending to the board of directors regarding governance matters, including, but not limited to, the Articles of Association and the charters of our other committees. |
Our board of directors adopted a written charter for the nominating and corporate governance committee, which is available on our website.
Internal Auditor
Under the Companies Law, the board of directors of an Israeli public company must appoint an internal auditor nominated by the audit committee. The role of the internal auditor is to examine, among other things, whether a company’s actions comply with the law and proper business procedure. The audit committee is required to oversee the activities, and to assess the performance of the internal auditor as well as to review the internal auditor’s work plan. An internal auditor may not be an interested party or office holder, or a relative of any interested party or office holder, and may not be a member of the company’s independent accounting firm or its representative. The Companies Law defines an interested party as a holder of 5% or more of the outstanding shares or voting rights of a company, any person or entity that has the right to appoint at least one director or the general manager of the company or any person who serves as a director or as the general manager of a company. Daniel Shapira from Daniel Shapira Accountants was appointed by the board of directors on December 13, 2022, to serve as the Internal Auditor of the Company.
Remuneration of Directors
Under the Companies Law, remuneration of directors is subject to the approval of the compensation committee, thereafter by the board of directors and thereafter, unless exempted under the regulations promulgated under the Companies Law, by the general meeting of the shareholders. In case the remuneration of the directors is in accordance with regulations applicable to remuneration of the external directors then such remuneration shall be exempt from the approval of the general meeting. Where the director is also a controlling shareholder, the requirements for approval of transactions with controlling shareholders apply.
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Fiduciary Duties and Approval of Related Party Transactions under Israeli Law
Fiduciary Duties of Office Holders
The Companies Law imposes a duty of care and a duty of loyalty on all office holders of a company. An office holder is defined in the Companies Law as a general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities of any of these positions regardless of such person’s title, a director, and any other manager directly subordinate to the general manager.
The duty of care requires an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:
| ● | information on the advisability of a given action brought for his approval or performed by him by virtue of his position; and |
| ● | all other important information pertaining to these actions. |
The duty of loyalty of an office holder requires an office holder to act in good faith and for the benefit of the company, and includes a duty to:
| ● | refrain from any conflict of interest between the performance of his duties in the company and his performance of his other duties or personal affairs; |
| ● | refrain from any action that is competitive with the company’s business; |
| ● | refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and |
| ● | disclose to the company any information or documents relating to the company’s affairs which the office holder has received due to his position as an office holder. |
Related Party Transactions
Under the Companies Law, we may approve an action by an office holder from which the office holder would otherwise have to refrain, as described above, if:
| ● | the office holder acts in good faith and the act or its approval does not cause harm to the company; and |
| ● | the office holder disclosed the nature of his or her interest in the transaction (including any significant fact or document) to the company sufficient time before the company’s approval of such matter. |
Any such approval is subject to the terms of the Companies Law, setting forth, among other things, the appropriate bodies of the company required to provide such approval, and the methods of obtaining such approval.
Disclosure of Personal Interests of an Office Holder
The Companies Law requires that an office holder disclose to the company, promptly, and, in any event, not later than the board meeting at which the transaction is first discussed, any direct or indirect personal interest that he or she may have and all related material information known to him or her relating to any existing or proposed transaction by the company. A personal interest includes an interest of any person in an act or transaction of a company, including a personal interest of one’s relative or of a corporate body in which such person or a relative of such person is a 5% or greater shareholder, director, or general manager or in which such person has the right to appoint at least one director or the general manager, but excluding a personal interest stemming solely from one’s ownership of shares in the company. A personal interest includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder with respect to the officer holder’s vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest in the matter.
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The Companies Law does not specify to whom within us nor the manner in which required disclosures are to be made. We require our office holders to make such disclosures to our board of directors.
Under the Companies Law, unless the articles of association of a company provide otherwise, a transaction with an office holder or with a third party in which the office holder has a personal interest, which is not an extraordinary transaction requires the approval of the board of directors or a committee authorized by the board of directors. If the transaction is an extraordinary transaction in which an office holder has a personal interest, first the audit committee and then the board of directors, in that order, must approve the transaction. Under specific circumstances, shareholder approval may also be required.
Under the Companies Law, an extraordinary transaction is a transaction:
| ● | not in the ordinary course of business; |
| ● | not on market terms; or |
| ● | that is likely to have a material effect on the company’s profitability, assets or liabilities. |
Generally, a person who has a personal interest in a matter which is considered at a meeting of the board of directors or the audit committee may not be present at such a meeting, or vote on this matter, unless the chairman of the audit committee or board of directors (as applicable) determines that he or she should be present in order to present the transaction that is subject to approval. A director who has a personal interest in a transaction, which is considered at a meeting of the board of directors or the audit committee, may not be present at this meeting or vote on this matter, unless a majority of members of the board of directors or the audit committee, as the case may be, has a personal interest. If a majority of the board of directors has a personal interest, then shareholder approval is generally also required.
Disclosure of Personal Interests of a Controlling Shareholder
Under the Companies Law, certain disclosure requirements also apply to a controlling shareholder of a public company, in which a controlling shareholder has a personal interest. For these purposes, a controlling shareholder is any shareholder that has the ability to direct the company’s actions, including any shareholder holding 25% or more of the voting rights if no other shareholder owns more than 50% of the voting rights in the company. Two or more shareholders with a personal interest in the approval of the same transaction are deemed to be one shareholder. Extraordinary transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement in which a controlling shareholder has a personal interest, as well as transactions for the provision of services whether directly or indirectly by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions concerning the terms of engagement and compensation of a controlling shareholder or a controlling shareholder’s relative, whether as an office holder or an employee, require the approval of (i) the audit committee or the compensation committee, as the case may be, (ii) the board of directors and (iii) a majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders’ meeting. In addition, the shareholder approval must fulfill one of the following requirements:
| ● | at least a majority of the shares held by shareholders who are not controlling shareholders and have no personal interest in the transaction and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or |
| ● | the shares voted by shareholders who and non-controlling shareholders and have no personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company. |
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In addition, any extraordinary transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three years requires the abovementioned approval every three years; however, such transactions not involving the receipt of services or compensation can be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances. In addition, transactions with a controlling shareholder or a controlling shareholder’s relative who serves as an executive officer in a company, directly or indirectly (including through a corporation under his control), involving the receipt of services by a company or their compensation can have a term of five years from the company’s initial public offering under certain circumstances.
The Companies Law requires that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a controlling shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question. Failure to so indicate will result in the invalidation of that shareholder’s vote for purposes of the Special Majority Approval.
Approval of the Compensation of Directors and Executive Officers
The compensation of, or an undertaking to indemnify, insure or exculpate, an office holder who is not a director requires the approval of the company’s compensation committee, followed by the approval of the company’s board of directors, and, if such compensation arrangement or an undertaking to indemnify, insure or exculpate is inconsistent with the company’s stated compensation policy, or if the said office holder is the chief executive officer of the company (subject to a number of specific exceptions), then such arrangement is subject to the approval of our shareholders, subject to the Special Majority Approval.
Directors. Under the Companies Law, the compensation of our directors requires the approval of our compensation committee, the subsequent approval of the board of directors and, unless exempted under the regulations promulgated under the Companies Law, the approval of the general meeting of our shareholders. If the compensation of our directors is inconsistent with our stated compensation policy, then, provided that those provisions that must be included in the compensation policy according to the Companies Law have been considered by the compensation committee and board of directors, shareholder approval by the Special Majority Approval will be required.
Executive officers other than the chief executive officer. The Companies Law requires the approval of the compensation of a public company’s executive officers (other than the chief executive officer and who does not also serve as a director) in the following order: (i) the compensation committee, (ii) the company’s board of directors, and (iii) only if such compensation arrangement is inconsistent with the company’s stated compensation policy, the company’s shareholders by the Special Majority Approval. However, if the shareholders of the company do not approve a compensation arrangement with a non-director executive officer that is inconsistent with the company’s stated compensation policy, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provide detailed reasons for their decision.
An amendment to an existing compensation arrangement with a non-director executive officer requires only the approval of the compensation committee, if the compensation committee determines that the amendment is immaterial. However, if such non-director executive officer is subordinate to the chief executive officer, an immaterial amendment to an existing compensation arrangement shall not require the approval of the compensation committee if (i) such amendment is approved by the chief executive officer, (ii) the company’s compensation policy allows for such immaterial amendments to be approved by the chief executive officer and (iii) the engagement terms are consistent with the company’s compensation policy.
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Chief executive officer. Under the Companies Law, the compensation of a public company’s chief executive officer is required to be in the following order approved by: (i) the company’s compensation committee; (ii) the company’s board of directors, and (iii) the company’s shareholders by a Special Majority Approval (provided that with respect to a Chief Executive Officer who is also a director of the company, the approval of the shareholders by a simple majority. is required). However, if the shareholders of the company do not approve the compensation arrangement with the chief executive officer, the compensation committee and board of directors may override the shareholders’ decision if each of the compensation committee and the board of directors provides detailed reasons for their decision, provided that the chief executive officer is not also a director of the company. In the case of a new chief executive officer, the compensation committee may exempt the engagement terms of a candidate to serve as the chief executive officer from shareholders’ approval, if the compensation committee determines that the compensation arrangement is consistent with the company’s stated compensation policy, that the chief executive officer did not have on the date of his appointment or during the two-year period preceding his appointment, an “affiliation” (including an employment relationship, a business or professional relationship or control) with the company or a controlling shareholder of the company or a relative thereof) and that subjecting the approval to a shareholder vote would impede the company’s ability to attain the candidate to serve as the company’s chief executive officer (and provide detailed reasons for the latter). However, if the chief executive officer candidate will serve as a member of the board of directors, such candidate’s compensation terms as chief executive officer must be approved in accordance with the rules applicable to approval of compensation of directors.
The approval of each of the compensation committee and the board of directors, with regard to the office holders and directors above, must be in accordance with the company’s stated compensation policy; however, under special circumstances, the compensation committee and the board of directors may approve compensation terms of a chief executive officer that are inconsistent with the company’s compensation policy provided that they have considered those provisions that must be included in the compensation policy according to the Companies Law and that shareholder approval was obtained by the Special Majority Approval.
Duties of Shareholders
Under the Companies Law, a shareholder has a duty to refrain from abusing his power in the company and to act in good faith and in a customary manner in exercising his rights and performing his obligations toward the company and other shareholders, including, among other things, in voting at general meetings of shareholders (and at shareholder class meetings) on the following matters:
| ● | amendment of the articles of association; |
| ● | increase in the company’s authorized share capital; |
| ● | merger; and |
| ● | the approval of related party transactions and acts of office holders that require shareholder approval. |
A shareholder also has a general duty to refrain from oppressing other shareholders. The remedies generally available upon a breach of contract will also apply to a breach of the above-mentioned duties, and in the event of oppression of other shareholders, additional remedies are available to the injured shareholder.
In addition, any controlling shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under a company’s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach of the duty to act with fairness, taking the shareholder’s position in the company into account.
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Exculpation, Insurance and Indemnification of Directors and Officers
Insurance
As permitted under the Companies Law, a company may obtain insurance for any of its office holders against the following liabilities incurred due to acts he or she performed as an office holder, if and to the extent provided for in the company’s articles of association:
| ● | breach of his or her duty of care to the company or to a third party, including a breach arises out of the negligent conduct of the office holder; |
| ● | a breach of his or her duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice the company’s interests; and |
| ● | a financial liability imposed upon him or her in favor of a third party. |
| ● | financial liability imposed on the office holder in favor of a third-party harmed by a breach in an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law; |
| ● | expenses incurred or to be incurred by an office holder in connection with an administrative proceeding, instituted against him or her, pursuant to certain provisions of the Israeli Securities Law, including reasonable litigation expenses, and including attorneys’ fees; and |
| ● | any other event in respect of which it is permitted and/or shall be permitted by Law to insure the liability of an officeholder. |
Our amended and restated articles of association provide that we may incuse an office holder against the abovementioned liabilities. Accordingly, we maintain directors’ and officers’ liability insurance, providing total coverage of $5 million for the benefit of all of our directors and officers, in respect of which we expect to pay a twelve-month premium of $197.5 thousand, which expires in July 2026.
Indemnification
The Companies Law and the Israeli Securities Law, 5728-1968, or the Securities Law, provide that a company may indemnify an office holder against the following liabilities and expenses incurred for acts performed by him or her as an office holder, either pursuant to an undertaking made in advance of an event or following an event, provided its articles of association include a provision authorizing such indemnification:
| ● | a financial liability imposed on him or her in favor of another person by any judgment concerning an act performed in his or her capacity as an office holder, including a settlement or arbitrator’s award approved by a court; |
| ● | reasonable litigation expenses, including attorneys’ fees, expended by the office holder (a) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (1) no indictment (as defined in the Companies Law) was filed against such office holder as a result of such investigation or proceeding; and (2) no financial liability as a substitute for the criminal proceeding (as defined in the Companies Law) was imposed upon him or her as a result of such investigation or proceeding, or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; or (b) in connection with a monetary sanction; |
| ● | reasonable litigation expenses, including attorneys’ fees, expended by the office holder or imposed on him or her by a court: (1) in proceedings that the company institutes, or that another person institutes on the company’s behalf, against him or her; (2) in a criminal proceedings of which he or she was acquitted; or (3) as a result of a conviction for a crime that does not require proof of criminal intent; |
| ● | expenses incurred by an office holder in connection with an administrative procedure under the Securities Law, including reasonable litigation expenses and reasonable attorneys’ fees. An “Administrative Procedure” is defined as a procedure pursuant to chapters H3 (Monetary Sanction by the Israeli Securities Authority), H4 (Administrative Enforcement Procedures of the Administrative Enforcement Committee) or I1 (Arrangement to prevent Procedures or Interruption of procedures subject to conditions) to the Securities Law; and |
| ● | any other obligation or expense in respect of which it is permitted or will be permitted under the Companies Law, to indemnify an officer or director, subject to and in accordance with all applicable law. |
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The Companies Law also permits a company to undertake in advance to indemnify an office holder, provided that if such indemnification relates to financial liability imposed on him or her, as described above, then the undertaking should be limited and shall detail the following foreseen events and amount or criterion:
| ● | to events that in the opinion of the board of directors can be foreseen based on the company’s activities at the time that the undertaking to indemnify is made; and |
| ● | in amount or criterion determined by the board of directors, at the time of the giving of such undertaking to indemnify, to be reasonable under the circumstances. |
We have entered into our standard form of indemnification agreement, the form of which is filed as an exhibit to this Annual Report, with each of our directors and with all members of our senior management. Each such indemnification agreement provides the indemnified person with indemnification to the maximum extent permitted under applicable law and up to a certain amount, and to the extent that these liabilities are not covered by directors’ and officers’ insurance or other indemnification agreement.
Exculpation
Under the Companies Law, an Israeli company may not exculpate an office holder from liability for a breach of his or her duty of loyalty, but may exculpate in advance an office holder from his or her liability to the company, in whole or in part, for damages caused to the company as a result of a breach of his or her duty of care (other than in relation to distributions), but only if a provision authorizing such exculpation is included in its articles of association. Our amended and restated articles of association provide that we may exculpate, in whole or in part, any office holder from liability to us for damages caused to the company as a result of a breach of his or her duty of care, but prohibit an exculpation from liability arising from a company’s transaction in which our controlling shareholder or officer has a personal interest. Subject to the aforesaid limitations, under the indemnification agreements, we exculpate and release our office holders from any and all liability to us related to any breach by them of their duty of care to us to the fullest extent permitted by law. An Israeli company may not exculpate in advance a director from liability arising from a breach of his or her duty of care in connection with a prohibited dividend or distribution to shareholders.
Limitations
The Companies Law provides that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty except for indemnification and insurance for a breach of loyalty to the extent the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly (as opposed to merely negligently); (3) any act or omission committed with the intent to derive an illegal personal benefit; or (4) any fine, monetary sanction, penalty or forfeit levied against the office holder.
Under the Companies Law, exculpation, indemnification and insurance of office holders in a public company must be approved by the compensation committee and the board of directors and, with respect to directors, the chief executive officer or controlling shareholders, their relatives and third parties in which controlling shareholders have a personal interest, also by the shareholders. However, under regulations promulgated under the Companies Law, the insurance of office holders shall not require shareholder approval and may be approved by only the compensation committee if the engagement terms are determined in accordance with the company’s compensation policy, which was approved by the shareholders by the same special majority required to approve a compensation policy, provided that the insurance policy is on market terms and the insurance policy is not likely to materially impact the company’s profitability, assets, or obligations.
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Our amended and restated articles of association permit us to exculpate (subject to the aforesaid limitation), indemnify and insure our office holders to the fullest extent permitted or to be permitted by the Companies Law.
The foregoing descriptions summarize the material aspects and practices of our board of directors. For additional details, we also refer you to the full text of the Companies Law, as well as of our amended and restated articles of association, which are filed as exhibits to this Annual Report and are incorporated herein by reference.
As of the date of this Annual Report, no claims for directors’ and officers’ liability insurance have been filed under this policy and we are not aware of any pending or threatened litigation or proceeding involving any of our office holders, including our directors, in which indemnification is sought.
| D. | Employees |
As of the date of this Annual Report, we had ten full-time employees and one part-time employee. None of our employees are members of a union or subject to the terms of a collective bargaining agreement.
None of our employees are members of a union or subject to the terms of a collective bargaining agreement. However, in Israel, we are subject to certain Israeli Labor laws, regulations and national labor court precedent rulings, as well as certain provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance with relevant labor laws by the Israeli Industry and Economy Office, and which apply such agreement provisions to our employees even though they are not part of a union that has signed a collective bargaining agreement. We have never experienced labor related work stoppages or strikes and believe that our relations with our employees are good.
All of our employment and consulting agreements include the employee’s and consultant’s undertaking with respect to assignment to us of intellectual property rights developed in the course of employment and confidentiality provisions. The enforceability of such provisions may be limited by Israeli law.
| E. | Share Ownership |
See “Item 7.A. Major Shareholders” below.
| F. | Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation |
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
| A. | Major Shareholders |
The following table sets forth information regarding beneficial ownership of our Ordinary Shares as of March 28, 2025, by:
| ● | each person, or group of affiliated persons, known to us to be the beneficial owner of more than 5% of our outstanding Ordinary Shares; |
| ● | each of our directors and executive officers; and |
| ● | all of our directors and executive officers as a group. |
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Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to Ordinary Shares. Ordinary Shares issuable pursuant to outstanding options or warrants to purchase Ordinary Shares that are exercisable, or securities that are convertible into Ordinary Shares, within 60 days after March 28, 2025, are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options, warrants or convertible securities, but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. Percentage of shares beneficially owned is based on 1,882,843 Ordinary Shares outstanding on March 28, 2025.
We are not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known to us which would result in a change in control of our company at a subsequent date. Except as indicated in footnotes to this table, we believe that the shareholders named in this table have sole voting and investment power with respect to all shares shown to be beneficially owned by them, based on information provided to us by such shareholders. Unless otherwise noted below, each beneficial owner’s address is c/o Jeffs’ Brands Ltd, 7 Mezada Street, Bnei Brak, Israel 5126112.
| No. of Shares Beneficially Owned | Percentage Owned | |||||||
| Holders of 5% or more of our voting securities: | ||||||||
| Jeffrey J. Conroy (1) | 170,300 | 9.06 | % | |||||
| Directors and executive officers who are not 5% holders: | ||||||||
| Viki Hakmon(2) | 16,139 | * | ||||||
| Liron Carmel | - | - | ||||||
| Tali Dinar | - | - | ||||||
| Moshe Revach | - | - | ||||||
| Ronen Zalayet | - | - | ||||||
| Naor Bergman | - | - | ||||||
| Oz Adler(3) | 54 | * | ||||||
| Amitay Wiess | - | - | ||||||
| Tomer Etzyoni | - | - | ||||||
| Israel Berenstein | ||||||||
| All directors and executive officers as a group (10 persons) | 16,193 | * | ||||||
| * | Indicates officer and/or director of the Company. |
| ** | Indicates less than 1%. |
| (1) | Based on a Schedule 13D filed with the SEC on December 19, 2024 and information provided to the Company by Jeffrey J. Conroy. Jeffrey J. Conroy has sole voting and dispositive power over all Ordinary Shares shown to be beneficially owned by him. The mailing address of Jeffrey J. Conroy is 7 Mayflower Dr, Basking Ridge, NJ 0792007920. Jeffrey J. Conroy is a United States citizen. |
| (2) | Based on a Schedule 13D/A filed with the SEC on February 26, 2024. Viki Hakmon has sole voting and dispositive power over all Ordinary Shares shown to be beneficially owned by him. The mailing address of Viki Hakmon is 7 Mezada Street, Bnei Brak, Israel 5126112. |
| (3) | Includes warrants to purchase up to 27 Ordinary Shares exercisable within 60 days of March 28, 2025 at an exercise price of $183.82 per Ordinary Share following the Exercise Price Adjustment (see “Description of Share Capital - Warrants” for additional information). |
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Significant Changes in Percentage Ownership by Major Shareholders
To our knowledge, other than as disclosed in the table above, and as disclosed below, and this Annual Report, there has been no significant change in the percentage ownership held by any major shareholder during the past three years.
On August 30, 2022, Xylo Technologies Ltd. (formerly, Medigus Ltd.)., or Xylo, purchased in our IPO 240,385 Units comprised of 2,642 Ordinary Shares and Warrants to purchase up to 2,642 Ordinary Shares for an aggregate purchase price of approximately $1,000,001. In addition, in connection with the IPO, on August 30, 2022, in accordance with a certain assignment agreement, the outstanding principal amount of the loans due to Xylo were automatically converted into 12,749 Ordinary Shares. Following that, Xylo held approximately 35.27% of our issued and outstanding share capital. In addition, following the Exercise Price Adjustment, on November 28, 2022, Xylo was issued Additional Warrants to purchase up to 2,652 Ordinary Shares. Also in November 2022, Xylo purchased a total of 659 Ordinary Shares in open market transactions, at an average price per share of $171.08. Following that, Xylo held approximately 39.61% of our issued and outstanding share capital. In December 2022, Xylo sold a total of 5,813 Ordinary Shares in open market transactions, at an average price per share of $103.74. Following that, Xylo held approximately 39.54% of our issued and outstanding share capital. As of May 7, 2024, Xylo ceased to beneficially own more than 5% of our issued outstanding share capital.
On August 30, 2022, L.I.A. Pure Capital Ltd., or Pure Capital, purchased in our IPO 180,288 Units comprised of 1,981 Ordinary Shares and Warrants to purchase up to 1,981 Ordinary Shares for an aggregate purchase price of approximately $750,000. Also, on August 30, 2022, in accordance with the Assignment Agreement, the outstanding principal amount of the loans due to Pure Capital were automatically converted into 347 Ordinary Shares. Following that, Pure Capital held approximately 4.99 % of our issued and outstanding share capital. In August 2022, Pure Capital sold a total of 717 Ordinary Shares in open market transactions, at an average price per share of $260.26. Following that, Pure Capital held approximately 4.19% of our issued and outstanding share capital. Also in August 2022, Pure Capital purchased a total of 985 Ordinary Shares in open market transactions, at an average price per share of $127.4. Following that, Pure Capital held approximately 5.29% of our issued and outstanding share capital. Based on a Schedule 13G/A filed by Pure Capital with the SEC on February 26, 2024, Pure Capital beneficially owned as of February 19, 2024, 4.99% of our issued and outstanding share capital.
On November 1, 2022, Viki Hakmon, our Chief Executive Officer, purchased 83 Ordinary Shares in an open market transaction, at a price per share of $115.67. Following that, Mr. Hakmon held approximately 17.65% of our issued and outstanding share capital. As of the date of this Annual Report, Mr. Hakmon beneficially owns approximately 0.9% of our issued and outstanding share capital.
Record Holders
As of March 28, 2025, there were 67 registered shareholders of our Ordinary Shares. This number is not representative of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since many of these shares were held of record by brokers or other nominees.
We are not controlled by another corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known to us which would result in a change in our control at a subsequent date.
| B. | Related Party Transactions |
The following is a description of related-party transactions we have entered into since January 1, 2022, with any of the members of the board of directors, executive officers or holders of more than 5% of any class of our voting securities at the time of such transaction.
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Employment and Service Agreements
We have entered into written employment and service agreements with each of our executive officers. All of these agreements contain customary provisions regarding confidentiality of information and assignment of inventions. However, the enforceability of the non-competition provisions may be limited under applicable law. In addition, we have entered into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent that these liabilities are not covered by directors and officers’ insurance. Members of our senior management are eligible for bonuses each year. The bonuses are payable upon meeting objectives and targets that are set by our Chief Executive Officer and approved annually by our board of directors that also set the bonus targets for our Chief Executive Officer.
Shareholders Agreements and Loans
On April 29, 2022 and August 24, 2022, Xylo advanced $80,000 and $70,000, respectively, to the Company for certain working capital matters, which the Company fully repaid on September 6, 2022.
As of August 30, 2022, Smart Repair Pro had outstanding loans to Xylo, Mr. Hakmon and Pure Capital of $4,010,000, $940,000 and $109,000, respectively. On May 3, 2022, we entered into the Assignment Agreement with Smart Repair Pro, Xylo, Mr. Hakmon and Pure Capital. In accordance with the Assignment Agreement, on August 30, 2022, the outstanding amounts due to Xylo, Mr. Hakmon and Pure Capital converted into 12,749 Ordinary Shares, 2,988 Ordinary Shares and 347 Ordinary Shares, respectively. Any accrued and unpaid interest due to each such party at that time was paid in cash. On July 25, 2023, we entered into an amendment to the Assignment Agreement, pursuant to which, among others, the outstanding debt between the Company and Smart Repair Pro was converted into and paid in capital of Smart Repair Pro.
Consulting Agreement with Pure Capital
On October 26, 2022, we entered into a consulting agreement with Pure Capital, a company owned by a family member of Mr. Viki Hakmon, our Chief Executive Officer, pursuant to which Pure Capital provides us with consultancy services for a monthly fee of NIS 57,750 (approximately $16,042). In addition, we paid Pure Capital a one-time signing bonus in the amount of NIS 425,000 (approximately $118,055) for their services to us from the day of our inception until the closing of the IPO. In addition to the monthly payments, pursuant to the consultancy agreement, Pure Capital is also entitled to the following payments: (i) an amount equal to 7% of the gross proceeds paid to the Company in connection with any exercise of warrants, whether or not currently outstanding; and (ii) 8% of the total consideration paid in connection with any purchase of a new brand, businesses, or similar events initiated or assisted by Pure Capital and approved by the Chief Executive Officer and chairman of the board of directors based on agreement with Pure Capital. The consulting agreement is for an undefined period of time and may be terminated after three years from October 26, 2022 by either party upon 30 days of advance notice. As of December 31, 2024, we paid $301,000 to Pure Capital pursuant to the agreement.
Agreement with Pure Logistics
On October 26, 2022, we entered into an agreement with Pure Logistics, intended to support our plans to sell our brands’ products directly to consumers and launch new e-commerce platforms. At the time of the Agreement, Pure Capital, which is owned by a family member of Mr. Viki Hakmon, our Chief Executive Officer and Mr. Eliyahu Yoresh, a former director of the Company, were holders of the membership interest. For the year ended December 31, 2024, the total expenses under this agreement related to Pure Logistics were $378,930.
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Stock Purchase Agreement with SciSparc
On February 23, 2023, we and Jeffs’ Brands Holdings entered into a stock purchase agreement with SciSparc, or the Wellution Agreement, as amended on March 22, 2023 by Addendum No. 1 to the Wellution Agreement, or the Addendum, pursuant to which, on March 22, 2023, Jeffs’ Brands Holdings acquired from SciSparc 57shares of common stock of SciSparc Nutraceuticals, a wholly-owned subsidiary of SciSparc that owns and operates Wellution, a brand that sells hemp seed oil-based products on Amazon, representing approximately 49.1% of the issued and outstanding shares of common stock of SciSparc Nutraceuticals, for approximately $3.0 million in cash (including the Price Adjustment, as defined below), of which approximately $2.5 million was paid at the closing, or the Wellution Transaction. The Addendum provided for the payment by us to SciSparc of an additional amount of $489,330 in cash for the purchase price adjustments, or the Price Adjustment, related to inventory and working capital which was paid in five equal installments of $97,866. As collateral for the payment in full of the Price Adjustment, SciSparc held back 11 shares of common stock of SciSparc Nutraceuticals, which was released to Jeffs’ Brands Holdings on March 6, 2024, when the final payment was made. Mr. Oz Adler, the Chairman and a member of our board of directors is the chief executive officer and chief financial officer of SciSparc, Mr. Amitay Weiss, is the chairman of the board of directors of SciSparc, and is a member of our board of directors, and Mr. Moshe Revach is a member of our board of directors and SciSparc’s board of directors.
Pursuant to the Wellution Agreement, in connection with the closing of the Wellution Transaction, on March 22, 2023, we entered into a consulting agreement with SciSparc Nutraceuticals, or the SciSparc Consulting Agreement, pursuant to which we will provide management services to SciSparc Nutraceuticals for the Wellution brand for a monthly fee of $20,000, which was reduced to $10,000 in November 2023 and received a one-time signing bonus in the amount of $51,000. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days’ advance notice.
Also pursuant to the Wellution Agreement, in connection with the closing of the Wellution Transaction, we issued 2,719 Ordinary Shares to SciSparc and on March 29, 2023, SciSparc issued 13,858 of its ordinary shares to us in a mutual share exchange, or, collectively, the Exchange Shares, representing approximately 2.97% and 4.99%, respectively, of the Company’s and SciSparc’s issued and outstanding ordinary shares as of the closing of the Wellution Transaction. The number of Exchange Shares acquired by each company was calculated by dividing $288,238, which was adjusted from $300,000, pursuant to the 4.99% ownership limitation included in the Wellution Agreement, by the average closing price of the relevant company’s shares on the Nasdaq Capital Market for the 30 consecutive trading days ending on the third trading day immediately prior to the closing date.
January 2024 PIPE
On January 25, 2024, we entered into the January 2024 PIPE pursuant to a securities purchase agreement, with certain institutional investors, providing for the issuance, in a private placement of our securities. As part of the January 2024 PIPE, Pure Capital, a company owned by a family member of Viki Hakmon our Chief Executive Officer, participated in the private placement as a purchaser. See “Item 4.B. Recent Developments -January 2024 PIPE” above, for further information.
Consulting Agreement with Xylo
On April 30, 2024, we entered into a consulting agreement with Xylo for the provision of certain advisory services. Under the agreement, Xylo will provide us with certain consulting services in exchange for a monthly fee of $20,000. The agreement is for a 36 months period and may be terminated by either party upon 30 days advance notice. As of December 31, 2024, we have paid $205 thousand to Xylo pursuant to the agreement.
January 2025 Convertible Promissory Note
On January 16, 2025, we issued the January 2025 Promissory Note an institutional investor, and received net proceeds of $2,565,000. In connection with the issuance of the January 2025 Promissory Note, we issued to the holder the January 2025 Warrant 760,720 Ordinary Shares. The holder of the January 2025 Promissory Note and January 2025 Warrant is a company owned by a family member of Mr. Viki Hakmon, our Chief Executive Officer and director. See “Item 4.B. Recent Developments – Convertible Promissory Note” above for further information.
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Reseller Agreement
On December 5, 2024, we entered into the ParaZero Reseller Agreement with ParaZero, pursuant to which we received an exclusive worldwide right to distribute and sell certain advanced drone safety systems developed by ParaZero and we are entitled to receive a percentage of the revenues generated from such sales. The ParaZero Reseller Agreement is in effect for a period of two years, with the option to renew for additional one year periods, and may be terminated by either party upon a 30 day advance notice period. Amitay Weiss, Moshe Revach and Tali Dinar, our directors, serve as members of the board of directors of ParaZero.
Impact Share Purchase Agreement
On February 6, 2025, we entered into the Purchase Agreement with Impact, for the Proposed Fort Merger. Upon the closing of the transaction, Impact intends to issue common shares to certain finders as compensation for providing advisory services in connection with the transaction. One of the finders is a company owned by a family member of Mr. Viki Hakmon, our Chief Executive Officer and director. In addition, Mr. Moshe Revach and Mr. Oz Adler, our directors, are shareholders of Impact. See “Recent Developments – Impact Share Purchase Agreement” above for further information.
Smart Repair Pro LOI
On January 21, 2025, we entered into the Smart Repair LOI with the Acquiror, for the proposed Smart Repair Transaction. Certain of our directors serve as directors in the Acquiror and/or the Acquiror’s controlling shareholders. See “Item 4.B. Recent Developments – Smart Repair Pro LOI” above for further information.
| C. | Interests of Experts and Counsel |
None.
ITEM 8. FINANCIAL INFORMATION.
| A. | Consolidated Statements and Other Financial Information |
See “Item 18. Financial Statements.”
Legal Proceedings
From time to time, we may become involved in legal proceedings that arise in the ordinary course of business. During the period covered by the financial statements contained herein, we were not subject to any material legal proceedings that has had a material adverse effect on our financial position. No assurance can be given that future litigation will not have a material adverse effect on our financial position. When appropriate in management’s estimation, we may record reserves in our financial statements for pending litigation and other claims.
Dividends
We have never declared or paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
The Companies Law imposes certain restrictions on our ability to declare and pay dividends. See “Divided and Liquidation Rights” in Exhibit 2.10 to this Annual Report for additional information.
Payment of dividends may be subject to Israeli withholding taxes. See “Item 10. E. Taxation” for additional information.
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| B. | Significant Changes |
No significant change, other than as otherwise described in this Annual Report, has occurred in our operations since the date of our consolidated financial statements included in this Annual Report.
ITEM 9. THE OFFER AND LISTING.
| A. | Offer and Listing Details |
Our Ordinary Shares and Warrants were approved for listing on the Nasdaq Capital Market and commenced trading under the symbol “JFBR” and “JFBRW”, respectively, on August 26, 2022.
| B. | Plan of Distribution |
Not applicable.
| C. | Markets |
See “Item 9A. Offer and Listing Details.”
| D. | Selling Shareholders |
Not applicable.
| E. | Dilution |
Not applicable.
| F. | Expenses of the Issue |
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
| A. | Share Capital |
Not applicable.
| B. | Memorandum and Articles of Association |
A copy of our amended and restated articles of association is attached as Exhibit 1.1 to this Annual Report. The information called for by this Item is set forth in Exhibit 2.10 to this Annual Report and is incorporated by reference into this Annual Report.
| C. | Material Contracts |
For a description of each material contract, other than material contracts entered into in the ordinary course of business, to which we are or have been a party, for the two years immediately preceding the date of this Annual Report, see “Item 4.A. History and Development of the Company,” Item 4.B. Recent Developments “Item 4.B. Business Overview,” “Item 5.B. Liquidity and Capital Resources - Financial Arrangements,” “Item 6.C Board Practices - Indemnification,” “Item 6.C Share Ownership - Share Option Plan,” “Item 7.A. Major Shareholders,” and “Item 7.B. Related Party Transactions” above.
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| D. | Exchange Controls |
There are currently no Israeli currency control restrictions on payments of dividends or other distributions with respect to our Ordinary Shares or the proceeds from the sale of the shares, except for the obligation of Israeli residents to file reports with the Bank of Israel regarding certain transactions. However, legislation remains in effect pursuant to which currency controls can be imposed by administrative action at any time.
The ownership or voting of our Ordinary Shares by non-residents of Israel, except with respect to citizens of countries that are in a state of war with Israel, is not restricted in any way by our memorandum of association or amended and restated articles of association or by the laws of the State of Israel.
| E. | Taxation |
The following description is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our Ordinary Shares. You should consult your own tax advisor concerning the tax consequences of your particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign, including Israeli, or other taxing jurisdiction.
Israeli Tax Considerations and Government Programs
The following is a description of the material Israeli income tax consequences concerning the acquisition, ownership and disposition of our Ordinary Shares. The following also contains a description of material relevant provisions of the current Israeli income tax structure applicable to companies in Israel, with reference to its effect on us. This summary does not discuss all the aspects of Israeli tax law that may be relevant to a particular investor in light of his or her personal investment circumstances or to some types of investors subject to special treatment under Israeli law. Examples of such investors include residents of Israel or traders in securities who are subject to special tax regimes not covered in this discussion. To the extent that the discussion is based on tax legislation which has not been subject to judicial or administrative interpretation, there can be no assurance that the applicable tax authorities or the courts will accept the views expressed in the discussion in question. The discussion below is subject to change, including due to amendments under Israeli law or changes to the applicable judicial or administrative interpretations of Israeli law, which change could affect the tax consequences described below. The discussion is not intended, and should not be taken, as legal or professional tax advice and is not exhaustive of all possible tax considerations.
The following description is not intended to constitute a complete analysis of all tax consequences relating to the acquisition, ownership or disposition of our Ordinary Shares. Shareholders should consult their own tax advisors concerning the tax consequences of their particular situation, as well as any tax consequences that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
General Corporate Tax Structure in Israel
Israeli companies are generally subject to corporate tax, currently at the rate of 23%. However, the effective tax rate payable by a company that derives income from a Preferred Enterprise or Preferred Technological Enterprise (as discussed below) may be considerably less.
Capital gains derived by an Israeli resident company are subject to tax at the regular corporate tax rate. Under Israeli tax legislation, a corporation will be considered as an “Israeli resident company” if it meets one of the following criteria: (i) it was incorporated in Israel; or (ii) the control and management of its business are exercised in Israel.
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Law for the Encouragement of Industry (Taxes), 5729-1969
The Law for the Encouragement of Industry (Taxes), 5729-1969, generally referred to as the Industry Encouragement Law, provides several tax benefits for “Industrial Companies.”
The Industry Encouragement Law defines an “Industrial Company” as an Israeli resident-company incorporated in Israel, which has 90% or more of its income in any tax year, other than income from certain government loans, derived from an “Industrial Enterprise” owned by it and located in Israel or in the “Area”, in accordance with the definition under section 3A of the Israeli Income Tax Ordinance (New Version) 1961, referred to as the Ordinance. An “Industrial Enterprise” is defined as an enterprise which is held by an Industrial Company whose principal activity in a given tax year is industrial production.
The following corporate tax benefits, among others, are available to Industrial Companies:
| ● | amortization of the cost to purchase a patent, rights to use a patent or know-how, that were purchased in good faith and are used for the development or advancement of the Industrial Enterprise, over an eight-year period, commencing on the year in which such rights were first exercised; |
| ● | under limited conditions, an election to file consolidated tax returns with related Israeli Industrial Companies; and |
| ● | expenses related to a public offering are deductible in equal amounts over three years commencing on the year of the offering. |
Eligibility for benefits under the Industry Encouragement Law is not contingent upon approval of any governmental authority.
Law for the Encouragement of Capital Investments, 5719-1959
The Law for the Encouragement of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in production facilities (or other eligible assets).
The Investment Law was significantly amended effective as of January 1, 2011, or the 2011 Amendment, and as of January 1, 2017, or the 2017 Amendment. The 2011 Amendment introduced new benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. The 2017 Amendment introduces new benefits for Technological Enterprises, alongside the existing tax benefits.
Tax benefits under the 2011 Amendment
The 2011 Amendment canceled the availability of the benefits granted under the Investment Law prior to 2011 and, instead, introduced new benefits for income generated by a “Preferred Company” through its “Preferred Enterprise” (as such terms are defined in the Investment Law) as of January 1, 2011. The definition of a Preferred Company includes a company incorporated in Israel that is not fully owned by a governmental entity, and that has, among other things, Preferred Enterprise status and is controlled and managed from Israel. Pursuant to the 2011 Amendment, a Preferred Company is entitled to a reduced corporate tax rate of 16% with respect to its income derived from its Preferred Enterprise, unless the Preferred Enterprise is located in a specified development zone, in which case the rate will be 7.5%. Income derived by a Preferred Company from a “Special Preferred Enterprise” (as such term is defined in the Investment Law) would be entitled, during a benefits period of 10 years, to further reduced tax rates of 8%, or 5% if the Special Preferred Enterprise is located in a certain development zone.
Dividends distributed from income which is attributed to a “Preferred Enterprise” or a “Special Preferred Enterprise” should generally be subject to withholding tax at source at the following rates: (i) Israeli resident corporations - 0%, (although, if such dividends are subsequently distributed to individuals or a non-Israeli company the below rates detailed in sub sections (ii) and (iii) shall apply), (ii) Israeli resident individuals - 20% and (iii) non-Israeli residents (individuals and corporations) - subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided under the provisions of any applicable double tax treaty.
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We currently do not intend to implement the 2011 Amendment.
Tax benefits under the 2017 Amendment
The 2017 Amendment was enacted as part of the Economic Efficiency Law that was published on December 29, 2016, and is effective as of January 1, 2017. The 2017 Amendment provided new tax benefits for two types of “Technological Enterprises,” as described below, and is in addition to the other existing tax beneficial programs under the Investment Law.
The 2017 Amendment provides that a technology company satisfying certain conditions should qualify as a Preferred Technological Enterprise, or PTE, and thereby enjoy a reduced corporate tax rate of 12% on income that qualifies as “Preferred Technological Income”, as defined in the Investment Law. The tax rate is further reduced to 7.5% for a PTE located in development zone “A”. In addition, a PTE will enjoy a reduced corporate tax rate of 12% on capital gain derived from the sale of certain “Benefited Intangible Assets” (as defined in the Investment Law) to a related foreign company if the Benefited Intangible Assets were acquired from a foreign company on or after January 1, 2017 for at least NIS 200 million, and the sale received prior approval from the National Authority for Technological Innovation previously known as the Israeli Office of the Chief Scientist), to which we refer as IIA.
The 2017 Amendment further provides that a technology company satisfying certain conditions (including a group turnover of at least NIS 10 billion) should qualify as a “Special Preferred Technological Enterprise” and will thereby enjoy a reduced corporate tax rate of 6% on “Preferred Technological Income” regardless of the company’s geographic location within Israel. In addition, a Special Preferred Technological Enterprise should enjoy a reduced corporate tax rate of 6% on capital gain derived from the sale of certain “Benefited Intangible Assets” to a related foreign company if the Benefited Intangible Assets were either developed by the Special Preferred Technological Enterprise or acquired from a foreign company on or after January 1, 2017, and the sale received prior approval from IIA. A Special Preferred Technological Enterprise that acquires Benefited Intangible Assets from a foreign company for more than NIS 500 million should be eligible for these benefits for at least ten years, subject to certain approvals as specified in the Investment Law.
Dividends distributed out of Preferred Technological Income to Israeli shareholders by a PTE or a Special Preferred Technological Enterprise, paid out of Preferred Technological Income, should generally be subject to withholding tax at source at the rate of 20% (in the case of non-Israeli shareholders, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced tax rate, 20%, or such lower rate as may be provided in an applicable tax treaty). However, if such dividends are paid to an Israeli company, no tax is generally required to be withheld (although, if such dividends are subsequently distributed to individuals or a non-Israeli company, the aforesaid should apply). If such dividends are distributed to a foreign company that holds solely or together with other foreign companies 90% or more in the Israeli company and other conditions are met, the withholding tax rate should be 4% (or such lower rate as may be provided in an applicable tax treaty, in either case, subject to the receipt in advance of a valid certificate from the ITA allowing for such reduced tax rate).
We are examining the potential impact of the 2017 Amendment and the degree to which we may qualify as a PTE, the amount of Preferred Technological Income that we may have and other benefits that we may receive from the 2017 Amendment in the future.
Taxation of our Shareholders
Israeli law generally imposes a capital gains tax on the sale of any capital assets by residents of Israel, as defined for Israeli tax purposes, and on the sale of assets located in Israel, including shares of Israeli companies, by both residents and non-residents of Israel unless a specific exemption is available or a tax treaty between Israel and the seller’s country of residence provides otherwise. The Tax Ordinance distinguishes between real capital gain and inflationary surplus. The inflationary surplus is a portion of the total capital gain equivalent to the increase of the relevant asset’s tax basis attributable to an increase in the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, between the date of purchase and the date of disposition. Inflationary surplus is not currently subject to tax in Israel. The real capital gain is the excess of the total capital gain over the inflationary surplus.
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Capital Gains Taxes Applicable to Non-Israeli Resident Shareholders. A non-Israeli resident (whether an individual or a corporation) who derives capital gains from the sale of shares in an Israeli resident company purchased upon or after the registration of the shares on the TASE or on a regulated market outside of Israel (such as Nasdaq) should be exempt from Israeli tax unless the capital gain derived from the sale of shares was attributed to a permanent establishment that the non-resident maintains in Israel. However, a non-Israeli “body of persons” (as defined under the Tax Ordinance, which includes corporate entities, partnerships and other entities) will not be entitled to the foregoing exemption if Israeli residents: (i) have a controlling interest of more than 25% in such non-Israeli entity or (ii) are the beneficiaries of, or are entitled to, 25% or more of the revenues or profits of such non-Israeli entity, both, whether directly or indirectly. In addition, such exemption is not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed business income.
If not exempt, a non-Israeli resident shareholder would generally be subject to tax on capital gain at the ordinary corporate tax rate as specified in section 126 of the Tax Ordinance (23% in 2024), if generated by a company, or at a marginal tax rate according to section 121 of the Tax Ordinance but up to a rate of 25%, if generated by an individual, or 30%, if generated by an individual who is a “substantial shareholder” (as defined under the Tax Ordinance), at the time of sale or at any time during the preceding 12-month period (or if the shareholder claims a deduction for interest and linkage differences expenses in connection with the purchase and holding of such shares). A “substantial shareholder” is generally a person who alone or together with such person’s relative or another person who collaborates with such person on a permanent basis, holds, directly or indirectly, at least 10% of any of the “means of control” of the corporation. “Means of control” generally include, among others, the right to vote, receive profits, nominate a director or an executive officer, receive assets upon liquidation, or order someone who holds any of the aforesaid rights how to act, regardless of the source of such right. Individual and corporate shareholders dealing in securities in Israel are taxed at the tax rates applicable to business income (a corporate tax rate for a corporation as specified in section 126 of the Tax Ordinance (23% in 2024) and a marginal tax rate (up to 47% for an individual in 2024) as specified in section 121 of the Tax Ordinance (excluding excess tax as discussed below)) unless contrary provisions in a relevant tax treaty apply.
Additionally, a sale of securities by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty between Israel and the shareholder’s country of residence. For example, under Convention Between the Government of the United States of America and the Government of the State of Israel with respect to Taxes on Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder who is a United States resident (for purposes of the treaty) holding the shares as a capital asset and is entitled to claim the benefits afforded to such a resident by the United States-Israel Tax Treaty, or a Treaty U.S. Resident, is generally exempt from Israeli capital gains tax unless: (i) the capital gain arising from such sale, exchange or disposition is attributed to real estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment that the shareholder maintains in Israel; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more of the voting capital of the company during any part of the 12-month period preceding the disposition, subject to certain conditions; or (v) such Treaty U.S. Resident is an individual and was present in Israel for a period or periods aggregating to 183 days or more during the relevant taxable year. In each case, the sale, exchange or disposition of our ordinary shares would be subject to Israeli tax, to the extent applicable.
Regardless of whether our non-Israeli shareholders may be liable for Israeli capital gains tax on the sale of their Ordinary Shares, the payment of the consideration may be subject to the withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains in order to avoid withholding at source at the time of sale. Specifically, in transactions involving a sale of all of the shares of an Israeli resident company, in the form of a merger or otherwise, the ITA may require from shareholders who are not liable for Israeli tax to sign declarations in forms specified by this authority or obtain a specific exemption from the ITA to confirm their status as non-Israeli tax residents, and, in the absence of such declarations or exemptions, may require the purchaser of the shares to withhold Israeli taxes at source.
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Capital Gains Taxes Applicable to Israeli Resident Shareholders. An Israeli resident will generally be subject to a capital gains tax as an individual on any real capital gain at the rate of 25%. However, where an individual shareholder claims a deduction for interest expenditures or he is a “substantial shareholder” at the time of the sale or at any time during the preceding twelve months period, such gain will be taxed at the rate of 30%. Individual holders dealing in securities in Israel for whom the income from the sale of securities is considered “business income,” as defined in section 2(1) of the Ordinance, are taxed at the marginal tax rates applicable to business income (up to 47% in 2024 excluding, excess tax, if applicable, as described below).
An Israeli resident corporation that derives capital gains from the sale of shares of an Israeli resident company will generally be subject to tax on the real capital gain generated on such sale at the corporate tax rate of 23%.
Taxation of Non-Israeli Shareholders on Receipt of Dividends. Non-Israeli residents (whether individuals or corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares at the rate of 25%, which tax will be withheld at source, unless relief is provided in a treaty between Israel and the shareholder’s country of residence (provided that a certificate from the ITA allowing for a reduced withholding tax rate or a tax exemption is obtained in advance). With respect to a person who is a “substantial shareholder” (as detailed above) at the time of receiving the dividend or at any time during the preceding twelve months, the applicable tax rate is 30%. Dividends paid on publicly traded shares, like our Ordinary Shares, to non-Israeli residents, are generally subject to Israeli withholding tax at a rate of 25%, so long as the shares are registered with a nominee company (whether or not the recipient is a substantial shareholder), unless a lower rate is provided under an applicable tax treaty (provided that a certificate from the ITA allowing for a reduced withholding tax rate is obtained in advance). However, subject to the receipt in advance of a valid certificate from the ITA allowing for a reduced withholding tax rate, a distribution of dividends to non-Israeli residents is generally subject to withholding tax at source at a rate of 20% if the dividend is distributed from income attributed to a Preferred Enterprise or PTE, unless a reduced tax rate is provided under an applicable tax treaty. For example, under the United States-Israel Tax Treaty and subject to the eligibility to the benefits under such treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our Ordinary Shares who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by our Preferred Enterprise or PTE, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income for such preceding year consists of certain types of dividends and interest. Notwithstanding the foregoing, dividends distributed from income attributed to a Preferred Enterprise or PTE are not entitled to such reduction under the tax treaty but are subject to a withholding tax rate of 20% for a shareholder that is a U.S. corporation, provided that the condition related to our gross income for the previous year (as set forth in the previous sentence) is met. The aforementioned rates under the United States-Israel Tax Treaty would not apply if the dividend income is derived through a permanent establishment of the U.S. resident in Israel. If the dividend is attributable partly to income derived from a Preferred Enterprise or PTE, and partly to other sources of income, the withholding rate will be a blended rate reflecting the relative portions of the two types of income. U.S. residents who are subject to Israeli withholding tax on a dividend may be entitled to a credit or deduction for United States federal income tax purposes in the amount of the taxes withheld, subject to detailed rules contained in the Code. We cannot assure you that we will designate the profits that we may distribute in a way that will reduce shareholders’ tax liability.
A non-Israeli resident who receives dividends from which tax was withheld is generally exempt from the obligation to file tax returns in Israel with respect to such income, provided that (i) such income was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required to be filed, and (iii) the taxpayer is not obligated to pay excess tax (as further explained below).
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Taxation of Israeli Shareholders on Receipt of Dividends. An Israeli resident individual is generally subject to Israeli income tax on the receipt of dividends paid on our ordinary shares at the rate of 25%. With respect to a person who is a “substantial shareholder” at the time of receiving the dividend or on any time during the preceding twelve months, the applicable tax rate is 30%. Such dividends are generally subject to Israeli withholding tax at a rate of 25% if the shares are registered with a nominee company (whether the recipient is a substantial shareholder or not). If the recipient of the dividend is an Israeli resident corporation such dividend income will be exempt from Israeli corporate tax provided the income from which such dividend is distributed was derived or accrued within Israel and was received directly or indirectly from another corporation that is liable to Israeli corporate tax (although, if such dividends are subsequently distributed to Israeli individuals or non-Israeli shareholders, the above shall apply). An exempt trust fund, pension fund or other entity that is exempt from tax under Section 9(2) or Section 129(C)(a)(1) of the Ordinance is exempt from tax on dividend.
Excess Tax
Individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at a rate of 3% on annual income exceeding NIS 721,560 for 2024 (which amount is generally linked to the annual change in the Israeli consumer price index (with the exception that based on Israeli new legislation such amount, and certain other statutory amounts will not be linked to the Israeli consumer price index for the years 2025-2027) , including, but not limited to, dividends, interest and capital gain. According to new legislation, in effect as of January 1, 2025, an additional 2% excess tax is imposed on Capital-Sourced Income (defined as income from any source other than employment income, business income or income from “personal effort”), to the extent that the Individual’s Capital Sourced Income exceeds the specified threshold of NIS 721,560 (and regardless of the employment/business income amount of such individual). This new excess tax applies, among other things, to income from capital gains, dividends, interest, rental income, or the sale of real property.
Estate and Gift Tax
Israeli tax law presently does not impose estate or gift taxes.
U.S. Federal Income Tax Considerations
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES, the Warrants, and the Ordinary Shares issued or issuable upon exercise of the Warrants, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE TAX LAWS.
Subject to the limitations described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a “U.S. Holder” arising from the purchase, ownership and sale of the Ordinary Shares, the Warrants, and the Ordinary Shares issued or issuable upon exercise of the Warrants, collectively, the “securities”. For this purpose, a “U.S. Holder” is a holder of Ordinary Shares that is: (1) an individual citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under U.S. federal income tax laws; (2) a corporation (or entity treated as a corporation for U.S. federal income tax purposes) or a partnership (other than a partnership that is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized under the laws of the United States or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is includable in gross income for U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or (5) a trust that has a valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.
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This summary is for general information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations that may be relevant to a decision to purchase our securities. This summary generally considers only U.S. Holders that will own our securities as capital assets. Except to the limited extent discussed below, this summary does not consider the U.S. federal tax consequences to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer’s status as a U.S. Holder. This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, (including with respect to the Tax Cuts and Jobs Act of 2017), and the U.S.-Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change, possibly on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to the U.S. federal income tax treatment of an investment in our securities by U.S. Holders and, therefore, can provide no assurances that the IRS will agree with the conclusions set forth below.
This discussion does not address all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder based on such holder’s particular circumstances and in particular does not discuss any estate, gift, generation-skipping, transfer, state, local, excise or foreign tax considerations. In addition, this discussion does not address the U.S. federal income tax treatment of a U.S. Holder who is: (1) a bank, life insurance company, regulated investment company, or other financial institution or “financial services entity;” (2) a broker or dealer in securities or foreign currency; (3) a person who acquired our securities in connection with employment or other performance of services; (4) a U.S. Holder that is subject to the U.S. alternative minimum tax; (5) a U.S. Holder that holds our securities as a hedge or as part of a hedging, straddle, conversion or constructive sale transaction or other risk-reduction transaction for U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment trusts or grantor trusts; (8) a U.S. Holder that expatriates out of the United States or a former long-term resident of the United States; or (9) a person having a functional currency other than the U.S. dollar. This discussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly or constructively, at any time, securities representing 10% or more of our voting power. Additionally, the U.S. federal income tax treatment of partnerships (or other pass-through entities) or persons who hold securities through a partnership or other pass-through entity are not addressed.
Each prospective investor is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding or disposing of our securities, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.
Exercise or Expiry of Warrants
No gain or loss will be realized on the exercise of a Warrant. When a Warrant is exercised, the U.S. Holder’s cost of the common share acquired thereby will be equal to the U.S. Holder’s adjusted cost basis of the Warrant plus the exercise price paid for the ordinary share. The expiry of an unexercised Warrant will generally give rise to a capital loss equal to the adjusted cost basis to the U.S. Holder of the expired Warrant. The holding period of the common share acquired thru the exercise of a Warrant includes the holding period of the Warrant.
Taxation of Dividends Paid on Securities
We do not intend to pay dividends in the foreseeable future and U.S. Holders of Warrants are not entitled to dividends. In the event that we do pay dividends, and subject to the discussion under the heading “Passive Foreign Investment Companies” below and the discussion of “qualified dividend income” below, a U.S. Holder, other than certain U.S. Holder’s that are U.S. corporations, will be required to include in gross income as ordinary income the amount of any distribution paid on securities (including distributions paid on Warrants if such warrants were to become entitled to dividends and the amount of any Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our earnings and profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder’s tax basis for the securities to the extent thereof, and then capital gain. We do not expect to maintain calculations of our earnings and profits under U.S. federal income tax principles and, therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as dividend income.
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In general, preferential tax rates for “qualified dividend income” and long-term capital gains are applicable for U.S. Holders that are individuals, estates or trusts. For this purpose, “qualified dividend income” means, inter alia, dividends received from a “qualified foreign corporation.” A “qualified foreign corporation” is a corporation that is entitled to the benefits of a comprehensive tax treaty with the United States which includes an exchange of information program. The IRS has stated that the U.S.-Israel Tax Treaty satisfies this requirement and we believe we are eligible for the benefits of that treaty.
In addition, our dividends will be qualified dividend income if our securities are readily tradable on the Nasdaq Capital Market or another established securities market in the United States. Dividends will not qualify for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as a PFIC, as described below under “Passive Foreign Investment Companies.” A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder has not held our securities for at least 61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend date, or (2) to the extent the U.S. Holder is under an obligation to make related payments on substantially similar property. Any days during which the U.S. Holder has diminished its risk of loss on our securities are not counted towards meeting the 61-day holding period. Finally, U.S. Holders who elect to treat the dividend income as “investment income” pursuant to Code section 163(d)(4) will not be eligible for the preferential rate of taxation.
The amount of a distribution with respect to our securities will be measured by the amount of the fair market value of any property distributed, and for U.S. federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible in the income of the U.S. Holder, and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such U.S. dollar value. If the U.S. Holder subsequently converts the NIS into U.S. dollars or otherwise disposes of it, any subsequent gain or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. source ordinary exchange gain or loss.
Taxation of the Disposition of Securities
Except as provided under the PFIC rules described below under “Passive Foreign Investment Companies,” upon the sale, exchange or other disposition of our securities, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder’s tax basis for the securities in U.S. dollars and the amount realized on the disposition in U.S. dollar (or its U.S. dollar equivalent determined by reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency). The gain or loss realized on the sale, exchange or other disposition of securities will be long-term capital gain or loss if the U.S. Holder has a holding period of more than one year at the time of the disposition. Individuals who recognize long-term capital gains may be taxed on such gains at reduced rates of tax. The deduction of capital losses is subject to various limitations.
Passive Foreign Investment Companies
Special U.S. federal income tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federal income tax purposes for any taxable year that either:
| ● | 75% or more of our gross income (including our pro rata share of gross income for any company, in which we are considered to own 25% or more of the shares by value), in a taxable year is passive; or |
| ● | At least 50% of our assets, averaged over the year and generally determined based upon fair market value (including our pro rata share of the assets of any company in which we are considered to own 25% or more of the shares by value) are held for the production of, or produce, passive income. |
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For this purpose, passive income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions and from notional principal contracts. Cash is treated as generating passive income.
Based on the projected composition of our income and valuation of our assets, we do not expect to be a PFIC for 2022, and we do not expect to become a PFIC in the future, although there can be no assurance in this regard. The tests for determining PFIC status are applied annually, and it is difficult to make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend in part on the market value of our securities.
If we currently are or become a PFIC, each U.S. Holder who has not elected to mark the shares to market (as discussed below), would, upon receipt of certain distributions by us and upon disposition of our securities at a gain: (1) have such distribution or gain allocated ratably over the U.S. Holder’s holding period for the securities, as the case may be; (2) the amount allocated to the current taxable year and any period prior to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year. In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the tax basis of such shares would not receive a step-up to fair market value as of the date of the decedent’s death, but instead would be equal to the decedent’s basis if lower, unless all gain were recognized by the decedent. Indirect investments in a PFIC may also be subject to these special U.S. federal income tax rules.
The PFIC rules described above would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held the securities while we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made such a QEF election is required for each taxable year that we are a PFIC to include in income such U.S. Holder’s pro rata share of our ordinary earnings as ordinary income and such U.S. Holder’s pro rata share of our net capital gains as long-term capital gain, regardless of whether we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required information. The QEF election is made on a shareholder-by-shareholder basis and generally may be revoked only with the consent of the IRS. We do not intend to notify U.S. Holders if we believe we will be treated as a PFIC for any tax year. In addition, we do not intend to furnish U.S. Holders annually with information needed in order to complete IRS Form 8621 and to make and maintain a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. Therefore, the QEF election will not be available with respect to our securities.
In addition, the PFIC rules described above would not apply if we were a PFIC and a U.S. Holder made a mark-to-market election. A U.S. Holder of our securities which are regularly traded on a qualifying exchange, including the Nasdaq Capital Market, can elect to mark the securities to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the securities and the U.S. Holder’s adjusted tax basis in the securities. Losses are allowed only to the extent of net mark-to-market gain previously included income by the U.S. Holder under the election for prior taxable years.
U.S. Holders who hold our securities during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders are strongly urged to consult their tax advisors about the PFIC rules.
Tax on Net Investment Income
U.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their net investment income (including dividends on and gains from the sale or other disposition of our securities), or in the case of estates and trusts on their net investment income that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent the U.S. Holder’s total adjusted income exceeds applicable thresholds.
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Information Reporting and Withholding
A U.S. Holder may be subject to backup withholding at a rate of 24% with respect to cash dividends and proceeds from a disposition of securities. In general, backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will not apply with respect to payments made to designated exempt recipients, such as corporations and tax-exempt organizations. Backup withholding is not an additional tax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that the required information is timely furnished to the IRS.
Pursuant to recently enacted legislation, a U.S. Holder with interests in “specified foreign financial assets” (including, among other assets, our securities, unless such securities are held on such U.S. Holder’s behalf through a financial institution) may be required to file an information report with the IRS if the aggregate value of all such assets exceeds $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year (or such higher dollar amount as may be prescribed by applicable IRS guidance); and may be required to file a Report of Foreign Bank and Financial Accounts if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. You should consult your own tax advisor as to the possible obligation to file such information report.
| F. | Dividends and Paying Agents |
Not applicable.
| G. | Statement by Experts |
Not applicable.
| H. | Documents on Display |
We are subject to certain information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will file reports with the SEC. The SEC maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC will also available to the public through the SEC’s website at www.sec.gov.
As a foreign private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act. However, we will file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the SEC, an annual report containing financial statements audited by an independent registered public accounting firm, and may submit to the SEC, on a Form 6-K, unaudited half-yearly financial information.
We maintain a corporate website www.jeffsbrands.com. Information contained on, or that can be accessed through, our website and the other websites referenced above do not constitute a part of this Annual Report. We have included these website addresses in this Annual Report solely as inactive textual references.
| I. | Subsidiary Information |
Not applicable.
| J. | Annual Report to Security Holders |
Not applicable.
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ITEM 11. 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 current investment policy is to invest available cash in bank deposits with banks that have a credit rating of at least A-minus. Accordingly, some of our cash and cash equivalents are held in deposits that bear interest. Given the current low rates of interest we receive, we will not be adversely affected if such rates are reduced. Our market risk exposure is primarily a result of U.S. dollar/NIS, GBP/NIS and GBP/U.S. Dollar exchange rates, which is discussed in detail in the following paragraph.
Impact of Inflation and Currency Fluctuations
Our functional and reporting currency is the U.S. dollar. We incur some of our 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. However, to mitigate any identified potential inflationary pressures, the Company purchased more inventory at the beginning of the year in order to avoid price increases that may be caused by the increase in inflation or shipping costs. We cannot assure you that we will not be adversely affected in the future.
The annual rate of inflation in Israel was 3.2% in 2024 and 3.0% in 2023. The NIS revaluated against the U.S. dollar by approximately 0.55% in 2024 and 3.1% in 2023. The NIS against the GBP depreciated by approximately 1.0% in 2024 and revaluated 9.0% in 2023.
Impact of Supply Chain Disruptions
As a result of the attacks by the Houthi movement on marine vessels traversing the Red Sea, we have experienced delays in shipment of inventory to and from the United Kingdom and increases in the costs of vessels. However, as of the date of this Annual Report, our business segment, products, lines of service, projects and operations are not materially adversely affected by supply chain disruptions in light of such attacks and we do not expect to be materially impacted by any supply chain disruptions in the future.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
| A. | Debt Securities. |
Not applicable.
| B. | Warrants and rights. |
The information called for by this Item is set forth in Exhibit 2.10 to this Annual Report and is incorporated by reference into this Annual Report.
| C. | Other Securities |
Not applicable.
| D. | American Depositary Shares |
Not applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
| (a) | Disclosure Controls and Procedures |
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness 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 December 31, 2024, or the Evaluation Date. Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.
| (b) | Management’s Annual Report on Internal Control over Financial Reporting |
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, 2024, our internal control over financial reporting was effective.
103
| (c) | Attestation Report of the Registered Public Accounting Firm |
This Annual Report does not include an attestation report of the company’s registered public accounting firm due to an exemption for emerging growth companies under the JOBS Act.
| (d) | Changes in Internal Control over Financial Reporting |
There were no changes in our internal control over financial reporting during the year ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined Moshe Revach is an audit committee financial expert as defined by the SEC rules and has the requisite financial experience as defined by the Nasdaq listing rules. Each of the members of our audit committee is “independent” as such term is defined in Rule 10A-3(b)(1) under the Exchange Act and satisfies the independent director requirements under the Nasdaq Stock Market Listing Rules.
ITEM 16B. CODE OF ETHICS
Code of Business Conduct and Ethics
We have adopted a written Code of Business and Ethics that applies to our officers and employees, including the Chief Executive Officer, President, Chief Financial Officer, Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer, Controller and persons performing similar functions, as well as our directors. Our Code of Business Ethics is posted on our website at www.jeffsbrands.com. Information contained on, or that can be accessed through, our website does not constitute a part of this Annual Report and is not incorporated by reference herein. If we make any amendment to the Code of Business Ethics or grant any waivers, including any implicit waiver, from a provision of the code, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC including the instructions to Item 16B of Form 20-F. Any waiver of this Code for any Covered Person may be made only by the Board or the Audit Committee and will be promptly disclosed to stockholders and others, as required by applicable law. The Company must disclose changes to and waivers of the Code in accordance with applicable law. We have not granted any waivers under our Code of Business Conduct and Ethics.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Pre-Approval of Auditors’ Compensation
Brightman Almagor Zohar & Co., a Firm in the Deloitte Global Network, an independent registered public accounting firm, or Brightman, has served as our principal independent registered public accounting firm for each of the two years ended December 31, 2024 and 2023.
104
The following table provides information regarding fees paid by us to Brightman, including audit services, for the years ended December 31, 2024 and 2023.
| Year Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Audit fees (1) | $ | 210 | $ | 215 | ||||
| Tax fees (2) | 3 | 15 | ||||||
| Audit-related fees | - | - | ||||||
| Total | $ | 213 | $ | 230 | ||||
| (1) | Includes professional services rendered in connection with the audit of our annual financial statements, review of our interim financial statements ,consents and comfort letters to underwriters. |
| (2) | Includes US tax compliance for the year ended December 31, 2023 and Israeli tax compliance for the year ended December 31, 2024. |
Pre-Approval of Auditors’ Compensation
Our board of directors have adopted an audit committee charter setting forth, among others, the responsibilities of the audit committee consistent with the rules of the SEC and Nasdaq Listing Rules (in addition to the requirements for such committee under the Companies Law), including, among others, the following:
| ● | oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the board of directors in accordance with Israeli law; |
| ● | recommending the engagement or termination of the person filling the office of our internal auditor, reviewing the services provided by our internal auditor and reviewing effectiveness of our system of internal control over financial reporting ; |
| ● | recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our board of directors; and |
| ● | reviewing and monitoring, if applicable, legal matters with significant impact, finding of regulatory authorities’ findings, receive reports regarding irregularities and legal compliance, acting according to “whistleblower policy” and recommend to our board of directors if so required. |
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, require foreign private issuers, such as us, to comply with various corporate governance practices. In addition, we are required to comply with the Nasdaq Listing Rules. Under those rules, we may elect to follow certain corporate governance practices permitted under the Companies Law in lieu of compliance with corresponding corporate governance requirements otherwise imposed by the Nasdaq Listing Rules for U.S. domestic issuers.
105
In accordance with Israeli law and practice and subject to the exemption set forth in Rule 5615 of the Nasdaq Listing Rules, we have elected to follow the provisions of the Companies Law, rather than the Nasdaq Listing Rules, with respect to the following requirements:
| ● | Quorum. While the Nasdaq Stock Market Listing Rules require that the quorum for purposes of any meeting of the holders of a listed company’s common voting stock, as specified in the company’s bylaws, be no less than 33 1/3% of the company’s outstanding common voting stock, under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our amended and restated articles of association provide that a quorum of two or more shareholders holding at least 25% of the voting rights in person or by proxy is required for commencement of business at a general meeting. However, the quorum set forth in our articles of association with respect to an adjourned meeting consists of at least one shareholders present in person or by proxy. |
| ● | Compensation of officers. Israeli law and our articles of association do not require that the independent members of our board of directors (or a compensation committee composed solely of independent members of our board of directors) determine an executive officer’s compensation, as is generally required under the Nasdaq Stock Market Listing Rules with respect to the chief executive officer and all other executive officers. Instead, compensation of executive officers is determined and approved by our compensation committee and our board of directors, and in certain circumstances by our shareholders, either in consistency with our office holder compensation policy or, in special circumstances in deviation therefrom, taking into account certain considerations stated in the Companies Law (see “Item 6.C. - Board Practices - Fiduciary Duties and Approval of Related Party Transactions under Israeli Law” for additional information). |
| ● | Shareholder approval. We will seek shareholder approval for all corporate actions requiring such approval under the requirements of the Companies Law, rather than seeking approval for corporation actions in accordance with Nasdaq Listing Rule 5635. In particular, under this Nasdaq listing rule, shareholder approval is generally required for: (i) an acquisition of shares/assets of another company that involves the issuance of 20% or more of the acquirer’s shares or voting rights or if a director, officer or 5% shareholder has greater than a 5% interest in the target company or the consideration to be received; (ii) the issuance of shares leading to a change of control; (iii) adoption or amendment of equity compensation arrangements (although under the provisions of the Companies Law there is no requirement for shareholder approval for the adoption/amendment of the equity compensation plan); and (iv) issuances of 20% or more of the shares or voting rights (including securities convertible into, or exercisable for, equity) of a listed company via a private placement (and/or via sales by directors/officers/5% shareholders) if such equity is issued (or sold) at below the greater of the book or market value of shares. By contrast, we follow Israeli practice, which is to have equity compensation plans approved only by the compensation committee and board of directors, unless such arrangements are for the compensation of chief executive officer or directors, in which case they also require the approval of the shareholders. In addition, we follow Israeli law, under which a private placement of securities requires approval by our board of directors and shareholders if it will cause a person to become a controlling shareholder (generally presumed at 25% ownership) or if: (a) the securities issued amount to 20% or more of our outstanding voting rights before the issuance; (b) some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and (c) transaction will increase the relative holdings of a shareholder that holds 5% or more of our outstanding share capital or voting rights or will cause any person to become, as a result of the issuance, a holder of more than 5% of our outstanding share capital or voting rights. |
106
| ● | Approval of Related Party Transactions. All related party transactions are approved in accordance with the requirements and procedures for approval of interested party acts and transaction as set forth in the Companies Law, which requires the approval of the audit committee, or the compensation committee, as the case may be, the board of directors and shareholders, as may be applicable, for specified transactions, rather than approval by the audit committee or other independent body of our board of directors as required under the Nasdaq Listing Rules (see “Item 6.C.- Board Practices - Fiduciary Duties and Approval of Related Party Transactions under Israeli Law” for additional information). |
| ● | Annual Shareholders Meeting. As opposed to the Nasdaq listing Rule 5620(a), which mandates that a listed company hold its annual shareholders meeting within one year of the company’s fiscal year-end, we are required, under the Companies Law, to hold an annual shareholder meeting each calendar year and within 15 months of the last annual shareholders meeting. |
| ● | Distribution of periodic reports to shareholders; proxy solicitation. As opposed to the Nasdaq Listing Rules, which require listed issuers to make such reports available to shareholders in one of a number of specific manners, Israeli law does not require us to distribute periodic reports directly to shareholders, and the generally accepted business practice in Israel is not to distribute such reports to shareholders but to make such reports available through a public website. In addition to making such reports available on a public website, we currently make our audited consolidated financial statements available to our shareholders at our offices and will only mail such reports to shareholders upon request. As a foreign private issuer, we are generally exempt from the SEC’s proxy solicitation rules. |
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
ITEM 16J. INSIDER TRADING POLICIES
We have
107
ITEM 16K. CYBERSECURITY
We
The measures that are taken to ensure proper protection include:
| ● | All computers are protected using
a cloud-powered endpoint security solution that helps enterprises prevent, detect, investigate, and respond to advanced threats on their
networks. |
| ● | All Company computer hard drives are automatically encrypted. |
| ● | All Company e-mails are protected by a cloud-based email filtering service designed to protect the Company against advanced threats related to email and collaboration tools. |
| ● | Periodically, all users on the Company’s computer network are required to perform multi-factor authentication. |
| ● | The Company uses a cloud-based identity and access management service that enables access to external resources. |
| ● | Backup is performed using a secure, automatic cloud-based backup and restore service. |
Additionally, we believe that
our
108
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide financial statements and related information pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The financial statements and the related notes required by this Item are included in this Annual Report beginning on page F-1.
ITEM 19. EXHIBITS
The following documents are filed as part of this Annual Report.
109
| * | Filed herewith. |
| % | Furnished herewith. |
| + | Compensatory arrangement. |
| & | Certain information from these exhibits has been redacted since disclosure of such information would constitute a clearly unwarranted invasion of personal privacy. |
| # | Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request. |
110
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F filed on its behalf.
| Jeffs Brands Ltd | ||
| Date: March 31, 2025 | By: | /s/ Viki Hakmon |
| Viki Hakmon | ||
| Chief Executive Officer | ||
111
JEFFS’ BRANDS LTD
CONSOLIDATED FINANCIAL STATEMENTS
as of december 31, 2024
TABLE OF CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of Jeffs’ Brands Ltd
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Jeffs’ Brands Ltd and its subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Certified Public Accountants
A Firm in the Deloitte Global Network
March 31, 2025
We have served as the Company’s auditor since 2021.
F-2
JEFFS’ BRANDS LTD
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| December 31 | ||||||||||
| Note | 2024 | 2023 | ||||||||
| ASSETS | ||||||||||
| CURRENT ASSETS: | ||||||||||
| Cash and cash equivalents | ||||||||||
| Restricted deposit | ||||||||||
| Trade receivables | ||||||||||
| Other receivables | 3 | |||||||||
| Inventory | 4 | |||||||||
| Total current assets | ||||||||||
| NON-CURRENT ASSETS: | ||||||||||
| Property and equipment, net | ||||||||||
| Investment accounted for using the equity method | 7 | |||||||||
| Investment at fair value | ||||||||||
| Intangible assets, net | 5 | |||||||||
| Deferred taxes | 12 | - | ||||||||
| Operating lease right-of-use assets | 6 | |||||||||
| Total non-current assets | ||||||||||
| TOTAL ASSETS | ||||||||||
| LIABILITIES AND EQUITY | ||||||||||
| CURRENT LIABILITIES: | ||||||||||
| Trade payables | ||||||||||
| Other payables | 8 | |||||||||
| Related party payables | 17 | |||||||||
| Total current liabilities | ||||||||||
| NON-CURRENT LIABILITIES: | ||||||||||
| Derivative liabilities | 10 | |||||||||
| Deferred taxes | ||||||||||
| Operating lease liabilities | 6 | |||||||||
| Total non-current liabilities | ||||||||||
| TOTAL LIABILITIES | ||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||
| Ordinary shares of par value per share – Authorized: | 13 | |||||||||
| Additional paid-in-capital | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| (*) |
The accompanying notes are an integral part of the consolidated financial statements
F-3
JEFFS’ BRANDS LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
| Year ended December 31 | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Revenues | |||||||||||||||||
| Cost of sales | |||||||||||||||||
| Gross profit | |||||||||||||||||
| Operating expenses: | |||||||||||||||||
| Sales and marketing | |||||||||||||||||
| General and administrative | |||||||||||||||||
| Equity losses | |||||||||||||||||
| Other income | 17 | ( | ) | ( | ) | ||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | |||||||||||
| Financial expenses (income), net | 15 | ( | ) | ( | ) | ||||||||||||
| Loss before taxes | ( | ) | ( | ) | ( | ) | |||||||||||
| Tax expense (benefit) | 12 | ( | ) | ||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | |||||||||||
| Basic and diluted net loss attributable to shareholders per ordinary share | 16 | ( | ) | ( | ) | (*) | ( | ) | (*) | ||||||||
| Weighted-average ordinary shares used in computing net loss per share, basic and diluted | (*) | (*) | |||||||||||||||
| (*) |
The accompanying notes are an integral part of the consolidated financial statements
F-4
JEFFS’ BRANDS LTD
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
(in thousands, except share and per share data)
| Ordinary Shares | Additional paid-in- | Accumulated | ||||||||||||||||||
| Number (*) | Amount | capital | deficit | Total | ||||||||||||||||
| BALANCE AT DECEMBER 31, 2021 | ( | ) | ||||||||||||||||||
| Loss for the year | - | ( | ) | ( | ) | |||||||||||||||
| Debt extinguishment of shareholders’ loans (Note 11) | - | |||||||||||||||||||
| Issuance of ordinary shares upon initial public offering, net of issuance costs (Note 13) | ||||||||||||||||||||
| Issuance of warrants to third party upon initial public offering (Note 13) | - | |||||||||||||||||||
| Conversion of shareholder loans (Note 11) | ||||||||||||||||||||
| Reclassification of derivative warrant liabilities to equity (Note 10) | - | |||||||||||||||||||
| BALANCE AT DECEMBER 31, 2022 | ( | ) | ||||||||||||||||||
| Loss for the year | - | ( | ) | ( | ) | |||||||||||||||
| Issuance of ordinary shares to SciSparc Ltd. (Note 7) | ||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2023 | ( | ) | ||||||||||||||||||
| Loss for the year | ( | ) | ( | ) | ||||||||||||||||
| Issuance of ordinary shares and pre-funded warrants, net (note 13) | ||||||||||||||||||||
| Exercise of pre-funded warrants (note 13) | ||||||||||||||||||||
| Exercise of Series A Warrants (note 13) | ||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2024 | ( | ) | ||||||||||||||||||
| (*) | Share and per share data in these consolidated financial statements have been retroactively adjusted to reflect the reverse share split effected in November 2024. See Note 13. |
The accompanying notes are an integral part of the consolidated financial statements.
F-5
JEFFS’ BRANDS LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year ended December 31 | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES: | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Exchange rate differences on cash and cash equivalents | ||||||||||||
| Depreciation and amortization of intangible assets | ||||||||||||
| Accrued interest and amortization of discount on third party, related party and shareholders’ loans | ||||||||||||
| Loss from change in value of investment at fair value | ||||||||||||
| Equity losses | ||||||||||||
| Changes in fair value of derivative liabilities | ( | ) | ( | ) | ||||||||
| Interest expense on short-term loan | ( | ) | ( | ) | ||||||||
| Changes in deferred taxes, net | ( | ) | ( | ) | ||||||||
| Issuance costs on financial instruments classified as derivative liabilities | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Decrease (increase) in trade receivables | ( | ) | ||||||||||
| Decrease (increase) in other receivables | ( | ) | ||||||||||
| Increase in inventory | ( | ) | ( | ) | ( | ) | ||||||
| Decrease in related party liabilities | ( | ) | ( | ) | ||||||||
| Increase (decrease) in accounts payable and other payables | ( | ) | ( | ) | ||||||||
| Decrease in operating lease right-of-use assets | ||||||||||||
| Decrease in operating lease liabilities | ( | ) | ( | ) | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ( | ) | ||||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ( | ) | ||||||
| Restricted deposit | ( | ) | ||||||||||
| Purchase of investment accounted for using the equity method (see note 7) | ( | ) | ( | ) | ||||||||
| Purchase of intangible assets (see note 5) | ( | ) | ( | ) | - | |||||||
| Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||
| CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES: | ||||||||||||
| Short-term loans received | ||||||||||||
| Short-term loans repaid | ( | ) | ( | ) | ||||||||
| Proceeds from initial public offering, net of issuance costs | ||||||||||||
| Issuance of ordinary shares, pre-funded warrants and warrants, net | ||||||||||||
| Exercise of warrants | ||||||||||||
| Net cash from (used in) financing activities | ( | ) | ||||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ) | ||||||||||
| LOSSES FROM EXCHANGE RATE DIFFERENCES ON CASH AND CASH EQUIVALENTS | ( | ) | ( | ) | ||||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR | ||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF THE YEAR | ||||||||||||
F-6
JEFFS’ BRANDS LTD
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Supplemental disclosure of cash flow information: | ||||||||||||
| Taxes paid | ||||||||||||
| Interest received | ||||||||||||
| Interest paid | ||||||||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||||||
| Issuance of ordinary shares upon conversion of shareholders’ loans | ||||||||||||
| Issuance of | ||||||||||||
| 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 | ||||||||||||
| Substantial modification of shareholders’ loans recorded in equity | ||||||||||||
| Right of use assets obtained in exchange for lease liabilities | ||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-7
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 private corporation founded in the State of California, was established on December 20, 2017, and commenced its operations in June 2019. As of December 31, 2024, Smart Pro operated four brands on the Amazon website.
In April 2021, Top Rank, an Israeli company, was established as a wholly owned subsidiary of Jeffs’ Brands.
On February 23, 2023, Jeffs’ Brands Holdings, was established and registered in Delaware as a wholly owned subsidiary of Jeffs’ Brands.
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 U.S., was incorporated and registered under the laws of the State of Delaware as a wholly owned subsidiary of Jeffs’ Brands Holdings.
On February 23, 2023, the Company purchased
approximately
F-8
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — GENERAL INFORMATION (cont.)
| b. | Initial public offering |
On August 30, 2022, the Company completed its initial public offering (“IPO”), for additional information see note 13.
| c. | 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.
| e. | Liquidity |
During the year ended December 31, 2024, the Group incurred a net loss
of $
The Group has funded its operations to date through the sale of its products, through equity financing, loans from shareholders and other third parties, and sale of its ordinary shares, no par value per share (“Ordinary Shares”) and warrants. The Company intends to continue to finance its operating activities through the sale of products via its Brands and through raising additional capital, as needed.
On January 29, 2024, the Company entered
into a private placement transaction (the “Private Placement”), pursuant to a Securities Purchase Agreement with certain
institutional investors for aggregate gross proceeds of approximately $
On January 16, 2025 the Company
issued a non-recourse convertible promissory note, in the principal amount of $
Management believes that its cash on hand together with expected cash flows are sufficient to support the Group’s current operations for more than 12 months from the issuance date of these consolidated financial statements.
F-9
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| a. | Basis of preparation of the financial statements |
The Group’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
| b. | Use of estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods and accompanying notes. The Group evaluates on an ongoing basis its assumptions including those related to sales allowances, fair value of intangible assets, useful lives of intangible assets, realizability of deferred tax assets, derivative liability and contingent liabilities, among others. Such estimates are based on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of the Group’s assets and liabilities.
| c. | Functional and presentation currency |
The functional and reporting currency of the Group is the United States dollar (“U.S. dollar”) as the U.S. dollar is the currency of the primary economic environment in which the Group has operated and expects to continue to operate in the foreseeable future.
The Group’s transactions and balances denominated in U.S. dollars are presented at their original amounts. Non-U.S. dollar transactions and balances have been remeasured to U.S. dollars in accordance with Accounting Standards Codification (“ASC”) 830, “Foreign Currency Matters”. All transaction gains and losses from remeasurement of monetary balance sheet items denominated in non-U.S. dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.
| d. | Cash and cash equivalents |
The Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and to be cash equivalents.
| e. | Accounts receivable |
Accounts receivables are stated at realizable value, net of an allowance for credit losses. The Group evaluates its outstanding accounts receivable and establishes an allowance for credit losses based on information available on their credit condition, current aging, historical experience and future economic and market conditions. These allowances are reevaluated and adjusted periodically as additional information is available. Payments are made by customers immediately at the point of sale, therefore, no provision for credit losses has been recorded as of December 31, 2024 and 2023.
F-10
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| f. | Inventories |
Inventories are stated at the lower of cost or market based on net realizable value. Inventories are adjusted for estimated excess and obsolescence and written down to net realizable value based upon estimates of future demand, technology developments, and market conditions. Cost is determined in accordance with first-in, first-out method (“FIFO”). The cost of inventory includes all costs of purchase, and other costs incurred in bringing the inventories to their present location and condition including shipment and freight costs.
| g. | Property and equipment |
Property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the acquisition of the items. Repairs and maintenance are charged to the statement of operations during the period in which they are incurred.
The assets are depreciated using the straight-line method to allocate their cost over their estimated useful lives, as follows:
| Estimated Useful Life (years) | ||
| Computers equipment | ||
| Office Equipment/Furniture | ||
| Plant & Machinery | ||
| Leasehold improvements |
F-11
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| h. | Leases |
In accordance with ASC 842, the Group determines if an arrangement is a lease and the classification of that lease at inception based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Group obtains the right to substantially all the economic benefits from the use of the asset throughout the period, and (3) whether the Group has a right to direct the use of the asset. The Group elected the practical expedient to not recognize a lease liability and a right-of-use (“ROU”) asset for leases with a term of twelve months or less. The Group also elected the practical expedient to not separate lease and non-lease components for its leases. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make minimum lease payments arising from the lease.
ROU assets are initially measured at amounts, which represents the discounted present value of the lease payments over the lease, plus any initial direct costs incurred. The lease liability is initially measured at lease commencement date based on the discounted present value of minimum lease payments over the lease term. The implicit rate within the operating leases is generally not determinable, therefore the Group uses its Incremental Borrowing Rate (“IBR”) based on the information available at commencement date in determining the present value of lease payments. The Group’s IBR is estimated to approximate the interest rate for collateralized borrowing with similar terms and payments and in economic environments where the leased asset is located. Certain leases include options to extend or terminate the lease.
An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain that the Group will exercise that option. An option to terminate is considered unless it is reasonably certain that the Group will not exercise the option.
Operating lease expense is recognized on a straight-line basis over the lease term.
| i. | Asset acquisition |
The Group accounts for a transaction as an asset acquisition when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, or otherwise does not meet the definition of a business. Asset acquisition-related costs are capitalized as part of the asset or assets acquired.
| j. | Intangible assets |
The Group’s intangible assets consist of its Brands. Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives. Each period the Group evaluates the estimated remaining useful lives of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization.
The estimated useful lives of the Group’s
intangible assets (Brands) are
F-12
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| k. | Impairment of long-lived assets |
The Group’s long-lived assets (assets group) to be held or used, including property and equipment, right of use assets and intangible assets subject to amortization are reviewed for impairment in accordance with ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets”, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The recoverability of these assets is measured by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If property and equipment, intangible assets or right of use assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.
In determining the fair values of long-lived assets for the purpose of measuring impairment, the Group’s assumptions include those that market participants will consider in valuations of similar assets.
| l. | Income taxes |
The Group accounts for income taxes in accordance with ASC 740, “Income Taxes”. ASC 740 prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances in respect of deferred tax assets are provided for, if necessary, to reduce deferred tax assets to amounts more likely than not to be realized. As of December 31, 2024 and 2023 a partial valuation allowance was recorded on the Group’s deferred tax assets.
The Group implements a two-step approach
to recognize and measure uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax
return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical
merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second
step is to measure the tax benefit as the largest amount that is more than
F-13
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| m. | Revenue recognition |
The Group accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company derives its revenue from the sale of consumer products mainly through its online Amazon stores.
The Company considers customer order confirmations to be a contract with the customer. Customer confirmations are executed at the time an order is placed through third-party online channels.
Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at the shipment date. A performance obligation is a promise in a contract to transfer a distinct good to the customer and is the unit of account in ASC Topic 606. A contract’s transaction price is recognized as revenue when the performance obligation is satisfied. Each of the Company’s contracts have a single distinct performance obligation, which is the promise to transfer individual goods.
Under the Group’s standard contract
terms, customers have a right of return within 45 days. For contracts with rights of return, the Group recognizes revenue based on the
amount of the consideration which the Group expects to receive for products which are not expected to be returned and recognizes a refund
liability for the amount not expected to be received. At the end of each reporting period, the Group updates its estimates of expected
product returns and adjusts the refund liabilities with a corresponding adjustment in revenues. The Group recorded an allowance for returns
in the amounts of $
The Group evaluates the criteria outlined in ASC 606-10-55, “Principal versus Agent Considerations”, in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. The Group evaluates whether it is appropriate to recognize revenue on a gross or net basis based upon its evaluation of whether the Company obtains control of the specified goods by considering if it is primarily responsible for fulfillment of the promise, has inventory risk, and has the latitude in establishing pricing and selecting suppliers, among other factors. Based on its evaluation of these factors, management has determined that it is the principal in these arrangements; therefore, sales are recorded on a gross basis.
Sales taxes collected from customers are presented on a net basis and as such are excluded from net revenue.
| n. | Cost of sales |
In accordance with Amazon’s terms of use, the Group is obligated to pay to Amazon incremental costs, such as sales fulfillment commissions which are contingent on making binding sales. Sales commissions would not have been incurred if the contract had not been obtained.
Cost of sales primarily consists of cost of goods sold, expenses related to Amazon’s commissions, storage costs and freight.
| o. | Advertising expenses |
The Group expenses advertising costs
as incurred. Advertising expenses, included within sales and marketing expenses, were $
F-14
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| p. | Employee benefits |
Groups employees are employed by the Company and by Fort and subject to the local labor laws.
The Company’s employees
Israeli labor law generally requires
payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. Pursuant to
Section 14 of the Severance Compensation Act, 1963 (“Section 14”), all of the Group’s employees in Israel
are entitled to a monthly contribution, at a rate of
Fort employees
England labor laws generally requires
an employer to make contributions to National Employment Savings Trust on behalf of its employees. Since April 2019, the minimum employer
contribution is required to be
| q. | Fair value measurement |
The Group applies ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
In determining fair value, the Group uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent from the Group. Unobservable inputs are inputs that reflect the Group’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the inputs as follows:
Level 1 - Valuations based on quoted prices in active markets for identical assets that the Group has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The carrying amounts of cash and cash equivalents, trade receivables, other receivable, trade payables, other accounts payable and accrued expenses and payables to related parties approximate their fair value due to the short-term maturity of such instruments.
The Group’s derivative liabilities in respect of Additional Warrants and Series A Warrants are classified within Level 3 of the fair value hierarchy because their fair values are estimated by utilizing valuation models and significant unobservable inputs. For more details, see Note 10.
The Group’s financial asset in respect of the investment in SciSparc Ltd. (“SciSparc”) as of December 31, 2024 and 2023 is classified within Level 1 of the fair value hierarchy, because the ordinary shares have quoted prices as they are traded on the Nasdaq Stock Market LLC.
F-15
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| r. | Warrants |
The Group accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance.
The assessment considers whether the warrants are freestanding financial instruments, meet the definition of a liability under ASC 480, “Distinguishing Liabilities and Equity”, are indexed to the Group’s own stock and whether the warrants are eligible for equity classification under ASC 815 (“ASC 815”), “Derivatives and Hedging”, Subtopic 40 “Contracts in Entity’s Own Equity” (“ASC 815-40”). This assessment is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.
Warrants that meet all the criteria for equity classification, are recorded as a component of additional paid-in capital. Warrants that do not meet all the criteria for equity classification, are recorded as liabilities at their initial fair value on the date of issuance and remeasured to fair value through earnings at each balance sheet date thereafter.
| s. | Legal and other contingencies |
The Group accounts for its contingent liabilities in accordance with ASC 450, “Contingencies”. A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, the Group reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Group accrues a liability for the estimated loss. Legal costs incurred in connection with loss contingencies are expensed as incurred. As of December 31, 2024, and 2023, the Group is not a party to any litigation that could have a material adverse effect on the Group’s business, financial position, results of operations or cash flows.
| t. | Basic and diluted net loss per share. |
The Group calculates basic net loss per share by dividing the net loss by the weighted-average number of Ordinary Shares outstanding during the period. Diluted net loss per share is computed by giving effect to all potentially dilutive Ordinary Share equivalents outstanding for the period. All outstanding warrants for the years ended December 31, 2024 and 2023 have been excluded from the calculation of the diluted net loss per share since all such securities were anti-dilutive.
| u. | Investment in affiliates |
The investment in affiliated company is accounted for by the equity method under ASC Subtopic 323-10, “Investments - Equity Method and Joint Ventures”. The Company uses the equity method when it has the ability to exercise significant influence over operating and financial policies of an entity but does not have control of the entity. Under the equity method of accounting, an investment is initially recorded on the balance sheet at cost, representing the Company’s proportionate share of fair value. The investment is subsequently adjusted to reflect the Company’s proportionate share of net earnings or losses recognized, distributions received, contributions made and certain other adjustments, as appropriate. The Company does not record losses of the equity method investee in excess of its investment balance unless the Company is liable for obligations of the equity method investee or is otherwise committed to provide financial support to the equity method investee. As of December 31,2024, and 2023 the Company held investments in SciSparc U.S.
The Company evaluates its equity
method investments for impairment at each reporting date, or more frequently if events or changes in circumstances indicate that the
carrying amount of the investment might not be recoverable. Factors considered by the Company when determining whether an investment
has been other-than-temporarily-impaired, include, but are not limited to, the length of the time and the extent to which the market
value has been less than cost, the financial condition and near-term prospects of the investee, and the Company’s intent and
ability to retain the investment until the recovery of its cost. An impairment loss on the equity method investments is recognized
in earnings when the decline in value is determined to be other-than-temporary. The Company recorded an impairment loss, as part of
the equity losses of $
F-16
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
| v. | Recently Issued Accounting Pronouncements |
Adoption of New Accounting Standards
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 fiscal year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. Adopting this new standard resulted in additional disclosure within the Company’s Consolidated Financial Statements, see Note 9 “Segment Information.”
Accounting Pronouncements Issued But Not Yet Adopted
In December 2023, the FASB issued 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 amendment 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 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This standard requires all public companies to disclose more detailed information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods. This standard is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of the disclosure requirements regarding specific expense categories in its Consolidated Financial Statements.
NOTE 3 — OTHER RECEIVABLES
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Advances to suppliers | * | |||||||
| Government institutions | ||||||||
| Other receivables | ** | |||||||
| * |
| ** |
NOTE 4 — INVENTORY
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Goods in transit | ||||||||
| Finished goods | ||||||||
F-17
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 — INTANGIBLE ASSETS
Total intangible assets consisted of the following as of December 31, 2024 and 2023:
| December 31, 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 $
The weighted average remaining amortization of the Brands as of December
2024 and 2023 was approximately
Management reviews intangible assets for impairment when performance expectations, events, or changes in circumstances indicate that the asset’s carrying value may not be recoverable. Management determined that the decrease in revenues and operating losses related to one of the Brands were indicative of an impairment as of December 31, 2024. As such, the Company evaluated the undiscounted future cash flows to the carrying value of the Brand. The evaluation indicated that the carrying amount of the Brand is recoverable. Accordingly, no impairment was recorded.
Share Purchase Agreement- Fort
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 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, and all termination costs were paid 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.
On February 29, 2024, the Company extended
a side letter to the Fort SPA to the Sellers, pursuant to which the Company agreed to increase certain adjustment amount payments to the
Sellers by approximately £
F-18
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 — LEASES
The Company leases office space in Israel
pursuant to a lease agreement effective as of October 1, 2022. The lease agreement expires on September 30, 2025, with an option to extend
the lease on the same terms for an additional two years. The monthly payment is approximately NIS
Fort leases two warehouse facilities
in the UK. The first lease agreement expired on February 23, 2025, but Fort continues to occupy the premises by mutual agreement with
the lessors, until a new negotiated agreement is signed. The annual rent as of December 31, 2024, was £
As of December 31, 2024, the Company’s
operating lease assets and lease liabilities (both the current and non-current portion) for operating leases totaled $
The Company uses its incremental borrowing rate as the discount rate for its leases, as the implicit rate in the lease is not readily determinable.
Supplemental weighted-average information for leases was as follows:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Weighted-average remaining lease term | ||||||||
| Weighted-average discount rate | % | % | ||||||
Future lease payments under operating leases as of December 31, 2024, were as follows:
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| $ | ||||
| Total future operating lease payments | $ | |||
| Less: imputed interest | $ | ( | ) | |
| Present value of lease liability | $ |
F-19
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — 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, a related party of the Company (see note 17), 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 began providing management services to SciSparc U.S. for the Wellution brand
for a monthly fee of $
Jeffs’ Brands Holdings owns approximately
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
Management assesses whether impairment
indicators are present that may indicate an other than temporary impairment (“OTTI”) exists. Management determined that the
decrease in revenues and operating losses of SciSparc U.S. were indicative of an OTTI impairment as of December 31 2024 and 2023. Accordingly,
management’s fair valuation expert performed an impairment test of the equity investment and determined that the carrying value
exceed the discounted cash flows. As a result, an impairment loss of $
The activity in the investment in SciSparc U.S. account was as follows:
| January 1, 2024 – December 31, 2024 | ||||
| USD in thousands | ||||
| Balance as of January 1, 2024 | ||||
| Equity losses | ( | ) | ||
| Balance as of December 31, 2024 | ||||
| February 23, 2023 – December 31, 2023 | ||||
| USD in thousands | ||||
| Balance as of January 1, 2023 | ||||
| Purchase on February 23, 2023 | ||||
| Equity losses | ( | ) | ||
| Balance as of December 31, 2023 | ||||
F-20
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 — INVESTMENT IN AFFILIATE (cont.)
Summarized financial information:
Summarized balance sheet of SciSparc U.S.:
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Current assets | ||||||||
| Long-term assets | ||||||||
| Current liabilities | ( | ) | ( | ) | ||||
| Equity | ||||||||
Summarized statement of operation of SciSparc U.S.:
| January 1, 2024 – December 31, 2024 | February 22, 2023 – December 31, 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Revenues | ( | ) | ( | ) | ||||
| Cost of sales | ||||||||
| Impairment of intangible asset | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Taxes on income | ( | ) | ||||||
| Net loss | ||||||||
| b. | Pursuant 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 a financial asset through profit and loss.
The activity in the investment in SciSparc’s shares was as follows:
| January 1, 2024 – December 31, 2024 | ||||
| USD in thousands | ||||
| Balance as of January 1, 2024 | ||||
| Revaluation losses | ( | ) | ||
| Balance as of December 31, 2024 | ||||
| March 23, 2023 – December 31, 2023 | ||||
| USD in thousands | ||||
| Balance as of January 1, 2023 | ||||
| Value of shares obtained in connection with share exchange on March 23, 2023 | ||||
| Change in fair value | ( | ) | ||
| Balance as of December 31, 2023 | ||||
F-21
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — OTHER PAYABLES
| December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Government institutions | ||||||||
| Employees and related benefits | ||||||||
| Liability to sellers | (*) | |||||||
| Revenue sharing payment payable | ||||||||
| Accrued expenses and other payables | ||||||||
| (*) | Includes $ |
NOTE 9 — SEGMENT INFORMATION
Segment information is prepared on the same basis that the Company’s chief operating decision maker (“CODM”), the Chief Executive Officer (“CEO”), manages the business, makes business decisions and assesses performance. The Company has one operating and reportable segment, which is the acquisition, improvement and operation of its Brands. See Note 1.a for further details.
The CODM assesses performance for this segment and decides how to allocate resources based on net loss. The measure of segment assets that is reviewed by the CODM is reported within the Consolidated Balance Sheet as consolidated Total assets. The CEO performs the assessment of segment performance by using the reported measure of segment loss to monitor actual results.
The table below summarizes the significant expense categories regularly reviewed by the CODM for the years ended December 31, 2024, 2023 and 2022:
| Year ended December 31 | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Revenue | ||||||||||||
| Cost of goods sold and Cost of advertising (1) | ( | ) | ( | ) | ( | ) | ||||||
| Operating expense (2) | ( | ) | ( | ) | ( | ) | ||||||
| Other segment items (3) | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| (1) |
| (2) |
| (3) |
Revenues are attributed to geographic areas:
| Year ended December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| USD in thousands | ||||||||||||
| America | ||||||||||||
| Europe | ||||||||||||
F-22
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — 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
The value of the Additional Warrants was calculated based on the binomial option pricing model.
Additionally, the revenue forecast over the life of the Additional Warrants is a significant input in determining the price of the Additional Warrants.
Series A Warrants
As part of the Private Placement, which
closed on January 29, 2024, the Company issued Series A Warrants to purchase up to an aggregate of
For the effect of a 1-for-13 reverse share split of the Ordinary Shares and on the adjustment related to the Share Combination Event, see note 13.
In addition, according to the terms of the Series A Warrant, if at any time on or after its issuance date,, the Company issues or sells, is deemed to have issued or sold, any Ordinary Shares for a consideration per share (the “New Issuance Price”) less than a price (the “Applicable Price”) equal to the exercise price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then immediately after and subject to the consummation of such Dilutive Issuance, the exercise price then in effect shall be reduced to an amount equal to the New Issuance Price. For the effect on the adjustment related to a Dilutive Issuance, see note 18.
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.
F-23
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 — DERIVATIVE LIABILITIES (cont.)
The following table presents changes in the fair value of the derivative Series A Warrants and the Additional Warrants liability during the period :
| Series A Warrants | Additional Warrants | Total | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Balance as of December 31 ,2022 | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||
| Balance as of December 31, 2023 | ||||||||||||
| Issuance on January 29, 2024 | ||||||||||||
| Exercise of warrants | ( | ) | ( | ) | ||||||||
| Change in fair value | ( | ) | ||||||||||
| Balance as of December 31, 2024 | ||||||||||||
The following table lists the significant unobservable inputs used for calculation of fair value of the Additional Warrants:
| December 31, 2024 | December 31, 2023 | |||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | |||||||
| Share price | $ | |||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | ||||||||
| Expected life | ||||||||
| Weighted average cost of capital (WACC) | % | % | ||||||
The following table lists the significant unobservable inputs used for calculation of fair value of Series A Warrants:
| December 31, 2024 | January 29, 2024 | |||||||
| Expected volatility | % | % | ||||||
| Exercise price | $ | |||||||
| Share price | $ | |||||||
| Risk-free interest rate | % | % | ||||||
| Dividend yield | ||||||||
| Expected life | ||||||||
F-24
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — LOANS FROM SHAREHOLDERS
| As of May 3, 2022, Smart Pro had outstanding loans to Xylo Technologies Ltd. (formerly Medigus Ltd.) (“Xylo”). Mr. Hakmon and Pure Capital of $ |
Based on management’s assessment,
the modified loan terms including an equity conversion feature upon IPO represented a substantial modification in accordance with ASC
470-50 and is accounted for as an extinguishment of the original financial liability in the amount of $
As the convertible note was not issued with a substantial premium or with an embedded conversion feature required to be bifurcated under ASC 815, the convertible note was accounted for as a liability in its entirety.
In accordance with such assignment
agreements, on August 30, 2022, the outstanding amounts due to Xylo, Mr. Hakmon and Pure Capital at a total amount of $
F-25
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — TAXES ON INCOME
Jeffs’ Brands and Top Rank are
taxed according to Israeli tax laws. The corporate tax rate in Israel is
Smart Pro, Purex Jeffs Brands Holdings
Inc and Fort US are taxed according to U.S. federal California state and Delaware state laws. The blended corporate tax rate is
Fort is taxed according to UK tax law.
The corporate tax rate was
Capital gains are subject to capital gain tax according to the corporate tax rate for the year during which the assets are sold.
For financial reporting purposes loss before taxes includes the following components:
| Year ended December 31 | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Israel | ( | ) | ( | ) | ( | ) | ||||||
| Foreign | ( | ) | ( | ) | ( | ) | ||||||
| ( | ) | ( | ) | ( | ) | |||||||
Income tax expense (benefit) was as follows:
| Year ended December 31 | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Current: | U.S. dollars in thousands | |||||||||||
| Israel | ||||||||||||
| Foreign | ||||||||||||
| Total current income tax expense | ||||||||||||
| Deferred: | ||||||||||||
| Israel | ||||||||||||
| Foreign | ( | ) | ( | ) | ||||||||
| Total deferred tax expenses (income) | ( | ) | ( | ) | ||||||||
| Total tax expense (benefit) | ( | ) | ||||||||||
F-26
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 — TAXES ON INCOME (cont.)
A reconciliation of the Group’s statutory income tax rate to effective income tax rate is as follows:
| December 31, | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Loss before taxes on income | ( | ) | ( | ) | ( | ) | ||||||
| Statutory tax rate | % | % | % | |||||||||
| Tax (tax benefit) computed at the statutory tax rate | ( | ) | ( | ) | ( | ) | ||||||
| Increase (decrease) in taxes on income resulting from the following: | ||||||||||||
| Tax rate differences applicable to subsidiaries | ( | ) | ( | ) | ( | ) | ||||||
| Previous years taxes | ||||||||||||
| Tax losses and timing differences for which deferred taxes were not recognized | ||||||||||||
| Taxes on income | ( | ) | ||||||||||
Deferred taxes are comprised of the following components:
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Deferred tax asset | ||||||||
| Intangible assets | ||||||||
| Investment accounted for using the equity method | ||||||||
| Operating lease right of use asset | ||||||||
| Operating loss carryforward | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Total deferred tax assets after valuation allowance | ||||||||
| Deferred tax liabilities | ||||||||
| Fixed asset | ||||||||
| Operating lease liability | ||||||||
| Total deferred tax liability | ||||||||
| Net deferred tax (liability) assets | ( | ) | ||||||
Deferred tax assets on losses for tax purposes carried forward to subsequent years are recognized if utilization of the related tax benefit against a future taxable income is expected.
Carry forward tax losses of Jeffs’
Brands were $
Carry forward tax losses of Smart Pro were $
Fort, Jeffs’ Brands Holdings and Fort US did not have any net operating loss carryforwards as of December 31, 2024, and 2023. The net deferred tax asset as of December 31, 2023 is with respect to Smart Pro. The net deferred tax liability in 2024 is with respect to Fort.
F-27
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 — SHARE CAPITAL
| a. |
| Number of ordinary shares December 31 | ||||||||
| 2024 | 2023 | |||||||
| Issued (*) | ||||||||
| Authorized | ||||||||
| (*) |
On February 17, 2022, the Company’s Board of Directors approved
the issuance of bonus shares (equivalent to a stock dividend) on a basis of
The share capital before consummation of the IPO was comprised of
On August 30, 2022, the Company closed its IPO, and the simultaneous
partial exercise of the underwriter’s over-allotment option, for aggregate gross proceeds of approximately $
The IPO Warrants had an initial exercise price of $
The IPO Warrants contain a down round protection,
so that for a period of two years from the date of issuance of the IPO Warrant, the exercise price is adjusted to the price in subsequent
fundings of the Company, if shares in these fundings are sold at a price per share below the warrant exercise price at the time of such
future fundings (or if other instruments with an exercise / conversion price at a price below the warrant exercise price are sold). The
exercise price, however, may not be reduced to less than $
The Ordinary Shares and IPO Warrants trade on the Nasdaq under the symbol “JFBR” and “JFBRW”, respectively.
In addition, On November 28, 2022, the
Company issued
F-28
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 — SHARE CAPITAL (cont.)
As the IPO Warrants and the Additional Warrants are not separable at the issuance date, the IPO Warrants and the Additional Warrants were initially accounted for as derivative instruments which were classified as a liability and measured at fair value through profit or loss. See note 10.
As part of the IPO, on August 30, 2022, the Company issued to the underwriter
On August 30, 2022, the underwriter partially
exercised its overallotment right to purchase
Effective as of August 30, 2022, the closing date of the IPO, and pursuant
to the loan agreement (the “Issuance Date”), the Company issued to lenders warrants (“Lender Warrants”) to purchase
up to
On the issuance date of the Lenders Warrants, all conditions for equity classification under U.S. GAAP were met, and as such, the fair value of the warrants as of the issuance date were classified to equity.
In addition, effective as of August 30, 2022,
the Company issued
On October 17, 2023, the Company’s Board
of Directors approved a 1-for-7 reverse split of the issued and outstanding Ordinary Shares, effective as of November 3, 2023, pursuant
to which holders of the Ordinary Shares received
On November 14, 2023, the Company issued
On January 25, 2024, the Company entered into
a Securities Purchase Agreement with certain institutional investors for aggregate gross proceeds of $
In connection with the Private Placement, the Company issued an aggregate of (i)
Pure Capital participated in the Private Placement as a purchaser and
purchased securities in the amount of $
F-29
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 — SHARE CAPITAL (cont.)
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 were exercisable into a total number of
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
Placement and to pay for expenses of the purchasers’ and Aegis’ legal counsel up to an aggregate amount of $90 thousand.
On October 30, 2024, the Company’s Board of Directors approved a 1-for-13 reverse split of the issued and outstanding Ordinary Shares (the “Reverse Share Split”), effective as of November 20, 2024, pursuant to which holders of the Ordinary Shares received one Ordinary Share for every thirteen Ordinary Shares held as of such date. The reverse stock split proportionally did not reduce the number of authorized share capital. The effect of such reverse split was applied retrospectively for all the number of shares, warrants, related par value and others presented in this note and elsewhere in the consolidated financial statements prior to the effective date of the reverse stock split.
Following the Reverse Share Split, on November 26, 2024, the exercise
price and the number of Ordinary Shares issuable pursuant to the exercise of the Series A Warrants were adjusted, in accordance with the
terms therein, or the Reverse Split Adjustment. Following the Reverse Split Adjustment, the exercise price was adjusted to $
In connection with the issuance of a certain promissory note on January 16, 2025 convertible into Ordinary Shares and pursuant to Section 2(a) of the Warrants, the exercise price of Series A Warrants was adjusted. See note 18.5 and 18.8.
During the year ended December 31, 2024,
During the year ended December 31, 2024,
On July 17, 2024 the shareholders approved to increase the authorized
share capital to
F-30
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 — SHARE INCENTIVE PLAN
On January 19, 2022, the Company’s
Board of Directors adopted the 2022 Incentive Option Plan (the “Prior Plan”). A total of
NOTE 15 — FINANCE (INCOME) EXPENSE, NET
| Year ended December 31 | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| U.S. dollars in thousands | ||||||||||||
| Finance income: | ||||||||||||
| Change in fair value of derivative liabilities | ( | ) | ( | ) | ||||||||
| Interest income | ( | ) | ( | ) | ||||||||
| Total finance income | ( | ) | ( | ) | ( | ) | ||||||
| Finance expense: | ||||||||||||
| Change in fair value of derivative liabilities | ||||||||||||
| Finance expenses in respect of third-party loan | ||||||||||||
| Amortization of loan discount | ||||||||||||
| Exchange rate differences | ||||||||||||
| Issuance costs | ||||||||||||
| Interest expense on loans from shareholders and related parties | ||||||||||||
| Other finance expenses | ||||||||||||
| Revaluation of securities -fair value through profit or loss | ||||||||||||
| Total finance expenses | ||||||||||||
| Finance expense (income), net | ( | ) | ( | ) | ||||||||
NOTE 16 — NET LOSS PER SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS
The following table sets forth the computation of basic and diluted net loss per share attributable to ordinary shareholders:
| Year ended December 31 | ||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||
| U.S. dollars in thousands (*) | ||||||||||||||
| Numerator: | ||||||||||||||
| Net loss applicable to shareholders of ordinary shares | ( | ) | ( | ) | ( | ) | ||||||||
| Denominator: | ||||||||||||||
| Shares of ordinary share used in computing basic and diluted net loss per share | (**) | (**) | ||||||||||||
| Net loss per share of ordinary share, basic and diluted | ( | ) | ( | ) | (**) | ( | ) | (**) | ||||||
F-31
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 — NET LOSS PER SHARE ATTRIBUTABLE TO ORDINARY SHAREHOLDERS (cont.)
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average shares outstanding, because such securities had an antidilutive impact (the securities presented according to the number of issuable shares):
| Year ended December 31 | ||||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| IPO Warrants and Additional Warrants (Note 13) | ||||||||||||
| Series A Warrants | ||||||||||||
| Series B Warrants | ||||||||||||
| Underwriter warrants (Note 13) | ||||||||||||
| Other warrants | ||||||||||||
| (*) |
| (**) |
NOTE 17 — RELATED PARTIES
| a. |
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Labor cost and related expenses (included in general and administrative) (c1) | ||||||||
| Directors’ fees (included in general and administrative) (c2) | ||||||||
| Consulting fees (included in general and administrative) (c3) | ||||||||
| Consulting fees (included in general and administrative) (c6) | ||||||||
| Inventory storage (included in cost of sale) (c3) | ||||||||
| Revenue sharing payment (included in general and administrative) (c7) | ||||||||
| Other income, net (c5) | ( | ) | ( | ) | ||||
F-32
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 — RELATED PARTIES (cont.)
| b. |
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| U.S. dollars in thousands | ||||||||
| Assets: | ||||||||
| ParaZero (included in advances to suppliers) (c9) | ||||||||
| SciSparc U.S (included in other receivables) (c5) | ||||||||
| Liabilities: | ||||||||
| Related parties (c4), (c5) | ||||||||
| Chief executive officer salary (included in other account payable) (c1) | ||||||||
| Revenue sharing payment (included in other account payable) (c7) | ||||||||
| Liability to SciSparc (included in other account payable) (c8) | ||||||||
| Liability to supplier (included in trade payable) (c3) | ||||||||
| Liability to consultant (included in account payable and trade payable) (c3), (c6) | ||||||||
| c. | Additional information: |
| 1. |
| 2. | ||
| 3. | On October 26, 2022, the Company and Pure Capital, a company owned by a family member of the CEO, entered into a consultant agreement, pursuant to which Pure Capital will provide consultancy services to the Company for a monthly fee of NIS
Additionally, on October 26, 2022 the Company and Pure Logistics, which was formerly owned by Pure Capital and a former director of the Company, entered into a warehouse storage agreement located in the USA. In March 2023, the Company paid to Pure Capital $ |
F-33
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 — RELATED PARTIES (cont.)
| 4. |
| 5. |
| 6. |
| 7. |
| 8. |
As of December 31, 2024, the Company paid $
F-34
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 — SUBSEQUENT EVENTS
| 1. | On January 16, 2025 the Company issued a non-recourse convertible promissory
note (the “Note”), in the principal amount of $ |
The Note was issued with a
In connection with the issuance of the Note, the Company also issued
to Pure Capital a warrant to purchase up to
The exercise of the Pure Capital Warrant is Pure Capital’s sole recourse against non-payment of the principal amount, interest, and any payment premium (as defined in the Note), if applicable, regardless of whether the value realized from the Pure Capital Warrant and/or the Ordinary Shares issued upon conversion of the Note is less than the then outstanding due principal amount, interest, and if applicable, the payment premium.
On March 11, 2025, Pure Capital converted
| 2. | On January 5, 2025, Mr. Eli Yoresh tendered his resignation from the board of directors of the Company effective immediately. | |
| 3. | During January 2025, |
| 4. | On January 21, 2025, the Company entered into a non-binding letter of intent ("Smart Pro LOI") with a Canadian public company, (the “Acquiror”), for the proposed acquisition of Smart Pro. Under the new negotiated terms, prior to the execution of the definitive agreement, the Company shall enter into a share transfer agreement with Smart Pro and transfer to Smart Pro, |
F-35
JEFFS’ BRANDS LTD
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 — SUBSEQUENT EVENTS (cont.)
The Proposed Smart Acquisition is subject to the successful completion of due diligence by both parties, the execution of binding definitive agreements with respect to the transaction, which shall include customary closing conditions, and compliance with any regulatory approvals. Either party may terminate the non-binding letter of intent upon written notice to the other party that is terminating negotiations with respect to the proposed transaction if it does not deem the due diligence review of the other party to be satisfactory. The non-binding letter of intent will automatically terminate upon the earlier of (i) the execution of definitive agreements with respect to the transaction or (ii) March 31, 2025. On March 27, 2025, the Company entered into an amendment to the Smart Pro LOI, which extended the termination date from March 31, 2025 to May 31, 2025.
| 5. | On January 27, 2025, the Company notified the holders of Series A Warrants
that pursuant to Section 2(a), the exercise price per each outstanding Ordinary Share purchasable under the Warrant, was adjusted to $ |
| 6. | On February 6, 2025, the Company entered into a definitive share purchase
agreement for the contemplated merger of Fort, with Impact Acquisitions Corp. (“Impact Acquisitions”), a capital pool company
listed on the TSX Venture Exchange. Under the definitive share purchase agreement, Impact Acquisitions will acquire from the Company |
| The completion of the Proposed Fort Transaction is subject to the satisfaction or waiver of certain conditions, including but not limited to, the completion of due diligence by the parties, receipt of corporate and regulatory approvals and the receipt by the Company of a pre-ruling from the Israel Tax Authority approving the proposed transaction. |
| 7. | On March 11, 2025, the Company and Smart Pro entered into a definitive
agreement to acquire Pure Logistics, a company that operates an approximately |
In addition, pursuant to the terms of
the agreement, Smart Pro delivered to the Sellers an aggregate cash payment of $
| 8. | Effective as of March 11, 2025, the exercise price per each outstanding Ordinary
Share issuable upon the exercise of the Series A Warrant, the Pure Capital Warrant and the Pure Logistics Warrant, was adjusted to $ |
F-36
Exhibit 2.10
DESCRIPTION OF SECURITIES
Jeffs’ Brands Ltd has two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: ordinary shares, no par value per share, or Ordinary Shares, and warrants to purchase ordinary shares, or IPO Warrants. References herein to “we,” “us,” “our” and the “Company” refer to Jeffs’ Brands Ltd and not to any of its subsidiaries. The following description may not contain all of the information that is important to you, and we therefore refer you to our amended and restated articles of association, or Articles of Association, a copy of which is filed with the Securities and Exchange Commission, or the SEC, as an exhibit to this Annual Report on Form 20-F.
ORDINARY SHARES
As of the date of this Annual Report, our authorized share capital consisted of 90,000,000 Ordinary Shares. All of our outstanding Ordinary Shares have been validly issued, fully paid and non-assessable. Our Ordinary Shares are not redeemable and are not subject to any preemptive right.
Our Ordinary Shares are listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “JFBR” since August 26, 2022.
Articles of Association
Purposes and Objects of the Company
Our purpose as stated in our Articles of Association includes every lawful purpose.
The Powers of the Directors
Our board of directors shall direct our policy and shall supervise the performance of our Chief Executive Officer and his actions. Our board of directors may exercise all powers that are not required under the Israeli Companies Law – 1999, or the Companies Law, or under our Articles of Association to be exercised or taken by our shareholders.
Rights Attached to Shares
Our Ordinary Shares shall confer upon the holders thereof:
| ● | equal right to attend and to vote at all of our general meetings, whether regular or special, with each Ordinary Share entitling the holder thereof, which attend the meeting and participate at the voting, either in person or by a proxy or by a written ballot, to one vote; |
| ● | equal right to participate in distribution of dividends, if any, whether payable in cash or in bonus shares, in distribution of assets or in any other distribution, on a per share pro rata basis; and |
| ● | equal right to participate, upon our dissolution, in the distribution of our assets legally available for distribution, on a per share pro rata basis. |
Transfer of Shares
Our fully paid Ordinary Shares are issued in registered form and may be freely transferred under our Articles of Association, unless the transfer is restricted or prohibited by another instrument, applicable law or the rules of the Nasdaq. The ownership or voting of Ordinary Shares by non-residents of Israel is not restricted in any way by our Articles of Association, or the laws of the State of Israel, except for ownership by nationals of some countries that are, have been, or will be, in a state of war with Israel.
Election of Directors
Under our Articles of Association, our board of directors must consist of not less than three but no more than twelve directors. Each of our directors, other than external directors (if any), for whom special election requirements apply under the Companies Law, are appointed by a simple majority vote of holders of Ordinary Shares, participating and voting at an annual general meeting of our shareholders. Our directors are classified, with respect to the term for which they each severally hold office, into three classes, as nearly equal in number as practicable, and designated as Class I, Class II and Class III, with one class being elected each year at the annual general meeting of our shareholders, and serve on our board of directors until the third annual general meeting following such election or re-election or until they are removed by a vote of 70% of the total voting power of our shareholders at a general meeting of our shareholders or upon the occurrence of certain events in accordance with the Companies Law and our Articles of Association. The board of directors may assign members of the Board already in office to such classes at the time such classification becomes effective. If the number of directors is changed, any newly created directors or decrease in directors must be apportioned by the board among the classes to make them equal in number. In addition, our Articles of Association allow our board of directors to appoint directors to fill vacancies and/or as an addition to the board of directors (subject to the maximum number of directors). A director so appointed will hold office until the next annual general meeting of our shareholders for the election of the class of directors in respect of which the vacancy was created, or in the case of a vacancy due to the number of directors being less than the maximum number of directors, until the next annual general meeting of our shareholders for the election of the class of directors to which such director was assigned by our board of directors. External directors, if any, are elected for an initial term of three years, may be elected for additional terms of three years each under certain circumstances, and may be removed from office pursuant to the terms of the Companies Law.
Dividend and Liquidation Rights
We may declare a dividend to be paid to the holders of Ordinary Shares in proportion to their respective shareholdings. Under the Companies Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company unless the company’s articles of association provide otherwise. Our Articles of Association do not require shareholder approval of a dividend distribution and provide that dividend distributions may be determined by our board of directors.
Pursuant to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two years, according to the Company’s most recently reviewed or audited financial statements (less the amount of previously distributed dividends, if not reduced from the earnings), provided that the end of the period to which the financial statements relate is not more than six months prior to the date of the distribution. If we do not meet such criteria, then we may distribute dividends only with court approval; as a company listed on an exchange outside of Israel, however, court approval is not required if the proposed distribution is in the form of an equity repurchase, provided that we notify our creditors of the proposed equity repurchase and allow such creditors an opportunity to initiate a court proceeding to review the repurchase. If within 30 days such creditors do not file an objection, then we may proceed with the repurchase without obtaining court approval. In each case, we are only permitted to distribute a dividend if our board of directors and, if applicable, the court determines that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable obligations as they become due.
In the event of the Company’s liquidation, after satisfaction of liabilities to creditors, its assets will be distributed to the holders of Ordinary Shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential dividend or distribution rights to the holders of a class of shares with preferential rights which may be authorized in the future.
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Exchange control
There are currently no Israeli currency control restrictions on remittances of dividends on Ordinary Shares, proceeds from the sale of the Ordinary Shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of countries that at the time are, or have been, in a state of war with Israel.
Annual and Special Meetings
Under the Israeli law, we are required to hold an annual general meeting of our shareholders once every calendar year, at such time and place which shall be determined by our board of directors, that must be no later than 15 months after the date of the previous annual general meeting. All meetings other than the annual general meeting of shareholders are referred to as special general meetings. Our board of directors may call special meetings whenever it sees fit, at such time and place, within or outside of Israel, as it may determine. In addition, the Companies Law provides that our board of directors is required to convene a special general meeting of our shareholders upon the written request of: (a) any two of our directors or such number of directors equal to one quarter of the directors then at office; and/or (b) As a company listed on an exchange in the U.S., one or more shareholders holding, in the aggregate, (i) 10% or more of our outstanding issued shares and 1% of our outstanding voting power or (ii) 10% or more of our outstanding voting power.
Under the Companies Law, one or more shareholders holding at least 1% of the voting rights at the general meeting of shareholders may request that the board of directors include a matter in the agenda of a general meeting of shareholders to be convened in the future, provided that it is appropriate to discuss such a matter at the general meeting. Notwithstanding the foregoing, as a company listed on an exchange outside of Israel, a matter relating to the appointment or removal of a director may only be requested by one or more shareholders holding at least 5% of the voting rights at the general meeting of the shareholders.
Our Articles of Association contain procedural guidelines and disclosure items with respect to the submission of shareholder proposals for general meetings. Subject to the provisions of the Companies Law and the regulations promulgated thereunder, shareholders entitled to participate and vote at general meetings are the shareholders of record on a date to be decided by the board of directors, which, as a company listed on an exchange outside Israel, may be between four and forty days prior to the date of the meeting. Resolutions regarding the following matters must be passed at a general meeting of our shareholders:
| ● | amendments to our Articles of Association; |
| ● | the exercise of our board of director’s powers by a general meeting if our board of directors is unable to exercise its powers and the exercise of any of its powers is required for our proper management; |
| ● | appointment or termination of our auditors; |
| ● | appointment of directors, including external directors; |
| ● | approval of acts and transactions requiring general meeting approval pursuant to the provisions of the Companies Law (mainly certain related party transactions and certain compensation matters) and any other applicable law; |
| ● | increases or reductions of our authorized share capital; and |
| ● | a merger (as such term is defined in the Companies Law). |
Notices
The Companies Law and our Articles of Association require that a notice of any annual or special shareholders meeting be provided at least 14 or 21 days prior to the meeting (as applicable), and if the agenda of the meeting includes, among other things, the appointment or removal of directors, the approval of transactions with office holders or interested or related parties, approval of the company’s chief executive officer to serve as the chairman of the board of directors or an approval of a merger, notice must be provided at least 35 days prior to the meeting.
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Quorum
As permitted under the Companies Law, the quorum required for our general meetings consists of at least two shareholders present in person, by proxy, written ballot or voting by means of electronic voting system, who hold or represent between them at least 25% of the total outstanding voting power. If within half an hour of the time set forth for the general meeting a quorum is not present, the general meeting shall stand adjourned the same day of the following week, at the same hour and in the same place, or to such other date, time and place as prescribed in the notice to the shareholders and in such adjourned meeting, if no quorum is present within half an hour of the time arranged, any number of shareholders participating in the meeting, shall constitute a quorum.
If a special general meeting was summoned following the request of a shareholder, and within half an hour a legal quorum shall not have been formed, the meeting shall be cancelled.
Adoption of Resolutions
Our Articles of Association provide that all resolutions of our shareholders require a simple majority vote, unless otherwise required under the Companies Law or our Articles of Association. A shareholder may vote in a general meeting in person, by proxy or by a written ballot.
In order to amend our Articles of Association, in addition and prior to the approval of a general meeting of shareholders, the approval of the board of directors with the affirmative vote of a majority of the directors then in office and entitled to vote thereon is required in order to approve any amendment to the Articles of Association.
Changing Rights Attached to Shares
Unless otherwise provided by the terms of the shares and subject to any applicable law, any modification of rights attached to any class of shares must be adopted by the holders of a majority of the shares of that class present a general meeting of the affected class or by a written consent of all the shareholders of the affected class.
The enlargement of an existing class of shares or the issuance of additional shares thereof, shall not be deemed to modify the rights attached to the previously issued shares of such class or of any other class, unless otherwise provided by the terms of the shares.
Limitations on the Right to Own Securities in Our Company
There are no limitations on the right to own our securities in our Articles of Association. In certain circumstances the IPO Warrants have restrictions upon the exercise of such warrants if such exercise would result in the holders thereof owning more than 4.99% or 9.99% of our Ordinary Shares upon such exercise, as further described below.
Access to Corporate Records
Under the Companies Law, all shareholders generally have the right to review minutes of our general meetings, our shareholder register (including with respect to material shareholders), our Articles of Association, our financial statements, other documents as provided in the Companies Law, and any document we are required by law to file publicly with the Israeli Registrar of Companies or the Israeli Securities Authority. Any shareholder who specifies the purpose of its request may request to review any document in our possession that relates to any action or transaction with a related party which requires shareholder approval under the Companies Law. We may deny a request to review a document if it determines that the request was not made in good faith, that the document contains a commercial secret or a patent or that the document’s disclosure may otherwise impair its interests.
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Anti-Takeover Provisions
Acquisitions under Israeli Law
Full Tender Offer
A person wishing to acquire shares of a public Israeli company who would, as a result, hold over 90% of the target company’s voting rights or the target company’s issued and outstanding share capital (or of a class thereof), is required by the Companies Law to make a tender offer to all of the company’s shareholders for the purchase of all of the issued and outstanding shares of the company (or the applicable class). If (a) the shareholders who do not accept the offer hold less than 5% of the issued and outstanding share capital of the company (or the applicable class) and the shareholders who accept the offer constitute a majority of the offerees that do not have a personal interest in the acceptance of the tender offer or (b) the shareholders who did not accept the tender offer hold less than 2% of the issued and outstanding share capital of the company (or of the applicable class), all of the shares that the acquirer offered to purchase will be transferred to the acquirer by operation of law. A shareholder who had its shares so transferred may petition an Israeli court within six months from the date of acceptance of the full tender offer, regardless of whether such shareholder agreed to the offer, to determine whether the tender offer was for less than fair value and whether the fair value should be paid as determined by the court. However, an offeror may provide in the offer that a shareholder who accepted the offer will not be entitled to petition the court for appraisal rights as described in the preceding sentence, as long as the offeror and the company disclosed the information required by law in connection with the full tender offer. If the full tender offer was not accepted in accordance with any of the above alternatives, the acquirer may not acquire shares of the company that will increase its holdings to more than 90% of the company’s voting rights or the company’s issued and outstanding share capital (or of the applicable class) from shareholders who accepted the tender offer. Shares purchased in contradiction to the full tender offer rules under the Companies Law will have no rights and will become dormant shares.
Special Tender Offer
The Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of 25% or more of the voting rights in the company. This requirement does not apply if there is already another holder of 25% or more of the voting rights in the company. Similarly, the Companies Law provides that an acquisition of shares of an Israeli public company must be made by means of a special tender offer if as a result of the acquisition the purchaser would become a holder of more than 45% of the voting rights in the company, if there is no other shareholder of the company who holds more than 45% of the voting rights in the company. These requirements do not apply if (i) the acquisition occurs in the context of a private placement by the company that received shareholder approval as a private placement whose purpose is to give the purchaser 25% or more of the voting rights in the company, if there is no person who holds 25% or more of the voting rights in the company or as a private placement whose purpose is to give the purchaser 45% of the voting rights in the company, if there is no person who holds 45% of the voting rights in the company, (ii) the acquisition was from a shareholder holding 25% or more of the voting rights in the company and resulted in the purchaser becoming a holder of 25% or more of the voting rights in the company, or (iii) the acquisition was from a shareholder holding more than 45% of the voting rights in the company and resulted in the purchaser becoming a holder of more than 45% of the voting rights in the company. A special tender offer must be extended to all shareholders of a company. A special tender offer may be consummated only if (i) at least 5% of the voting power attached to the company’s outstanding shares will be acquired by the offeror and (ii) the number of shares tendered in the offer exceeds the number of shares whose holders objected to the offer (excluding the purchaser, its controlling shareholders, holders of 25% or more of the voting rights in the company and any person having a personal interest in the acceptance of the tender offer, or anyone on their behalf, including any such person’s relatives and entities under their control).
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In the event that a special tender offer is made, a company’s board of directors is required to express its opinion on the advisability of the offer, or shall abstain from expressing any opinion if it is unable to do so, provided that it gives the reasons for its abstention. The board of directors shall also disclose any personal interest that any of the directors has with respect to the special tender offer or in connection therewith. An office holder in a target company who, in his or her capacity as an office holder, performs an action the purpose of which is to cause the failure of an existing or foreseeable special tender offer or is to impair the chances of its acceptance, is liable to the potential purchaser and shareholders for damages, unless such office holder acted in good faith and had reasonable grounds to believe he or she was acting for the benefit of the company. However, office holders of the target company may negotiate with the potential purchaser in order to improve the terms of the special tender offer, and may further negotiate with third parties in order to obtain a competing offer.
If a special tender offer is accepted, then shareholders who did not respond to or that had objected the offer may accept the offer within four days of the last day set for the acceptance of the offer and they will be considered to have accepted the offer from the first day it was made.
In the event that a special tender offer is accepted, then the purchaser or any person or entity controlling it or under common control with the purchaser or such controlling person or entity at the time of the offer may not make a subsequent tender offer for the purchase of shares of the target company and may not enter into a merger with the target company for a period of one year from the date of the offer, unless the purchaser or such person or entity undertook to effect such an offer or merger in the initial special tender offer. Shares purchased in contradiction to the special tender offer rules under the Companies Law will have no rights and will become dormant shares.
Merger
The Companies Law permits merger transactions if approved by each party’s board of directors and, unless certain conditions described under the Companies Law are met, a simple majority of the outstanding shares of each party to the merger that are represented and voting on the merger. The board of directors of a merging company is required pursuant to the Companies Law to discuss and determine whether in its opinion there exists a reasonable concern that as a result of a proposed merger, the surviving company will not be able to satisfy its obligations towards its creditors, such determination taking into account the financial status of the merging companies. If the board of directors determines that such a concern exists, it may not approve a proposed merger. Following the approval of the board of directors of each of the merging companies, the boards of directors must jointly prepare a merger proposal for submission to the Israeli Registrar of Companies. For purposes of the shareholder vote of a merging company whose shares are held by the other merging company, or by a person or entity holding 25% or more of the voting rights at the general meeting of shareholders of the other merging company, or by a person or entity holding the right to appoint 25% or more of the directors of the other merging company, unless a court rules otherwise, the merger will not be deemed approved if a majority of the shares voted on the matter at the general meeting of shareholders (excluding abstentions) that are held by shareholders other than the other party to the merger, or by any person or entity who holds 25% or more of the voting rights of the other party or the right to appoint 25% or more of the directors of the other party, or any one on their behalf including their relatives or corporations controlled by any of them, vote against the merger. In addition, if the non-surviving entity of the merger has more than one class of shares, the merger must be approved by each class of shareholders. If the transaction would have been approved but for the separate approval of each class or the exclusion of the votes of certain shareholders as provided above, a court may still approve the merger upon the request of holders of at least 25% of the voting rights of a company, if the court holds that the merger is fair and reasonable, taking into account the valuation of the merging companies and the consideration offered to the shareholders. If a merger is with a company’s controlling shareholder or if the controlling shareholder has a personal interest in the merger, then the merger is instead subject to the same special majority approval that governs all extraordinary transactions with controlling shareholders.
Under the Companies Law, each merging company must deliver to its secured creditors the merger proposal and inform its unsecured creditors of the merger proposal and its content. Upon the request of a creditor of either party to the proposed merger, the court may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a result of the merger, the surviving company will be unable to satisfy the obligations of a merging company, and may further give instructions to secure the rights of creditors.
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addition, a merger may not be completed unless at least 50 days have passed from the date that a proposal for approval of the merger is filed with the Israeli Registrar of Companies and 30 days from the date that shareholder approval of both merging companies is obtained.
Anti-Takeover Measures
The Companies Law allows us to create and issue shares having rights different from those attached to the Ordinary Shares, including shares providing certain preferred rights with respect to voting, distributions or other matters and shares having preemptive rights. No preferred shares are authorized under our Articles of Association. In the future, if we do authorize, create and issue a specific class of preferred shares, such class of shares, depending on the specific rights that may be attached to it, may have the ability to frustrate or prevent a takeover or otherwise prevent our shareholders from realizing a potential premium over the market value of the Ordinary Shares. The authorization and designation of a class of preferred shares will require an amendment to our Articles of Association, which requires the prior approval of the holders of a majority of the voting power attached to our issued and outstanding shares at a general meeting of our shareholders. The convening of the meeting, the shareholders entitled to participate and the vote required to be obtained at such a meeting will be subject to the requirements set forth in the Companies Law and our Articles of Association.” In addition, as disclosed under “— Election of Directors,” we have a classified board structure, which effectively limits the ability of any investor or potential investor or group of investors or potential investors to gain control of our board of directors.
Lastly, Israeli tax law treats some acquisitions, such as stock-for-stock exchanges between an Israeli company and a foreign company, less favorably than U.S. tax laws. For example, Israeli tax law may, under certain circumstances, subject a shareholder who exchanges his Ordinary Shares for shares in another corporation to taxation prior to the sale of the shares received in such stock-for-stock swap.
Changes in Our Capital
The general meeting may, by a simple majority vote of the shareholders attending the general meeting:
| ● | increase our registered share capital by the creation of new shares from the existing class or a new class, as determined by the general meeting; |
| ● | cancel any registered share capital which have not been taken or agreed to be taken by any person; |
| ● | consolidate and divide all or any of our share capital into shares of larger nominal value than our existing shares; |
| ● | subdivide our existing shares or any of them, our share capital or any of it, into shares of smaller nominal value than is fixed; and |
| ● | reduce our share capital and any fund reserved for capital redemption in any manner, and with and subject to any incident authorized, and consent required, by the Companies Law. |
Exclusive Forum
Our Articles of Association provide that, unless the Company consents in writing to the selection of an alternative forum, the competent courts in Tel Aviv, Israel shall be the exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s shareholders, or (iii) any action asserting a claim arising pursuant to any provision of the Companies Law or the Securities Law. Our Articles of Association further provide, that the federal district courts of the United States of America, shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act.
Transfer Agent and Registrar
The transfer agent and registrar for our Ordinary Shares is VStock Transfer, LLC. Its address is 18 Lafayette Place, Woodmere, New York 11598.
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WARRANTS
As of the date of this Annual Report, we have issued and outstanding IPO Warrants to purchase up to 48,441Ordinary Shares, with an exercise price of $183.82 per Ordinary Share, issued as part of our initial public listing, or IPO, and are listed on Nasdaq under the symbol “JFBRW” since August 26, 2022.
Exercisability. The IPO Warrants are exercisable at any time after their original issuance and at any time up to the date that is five years after their original issuance. The IPO Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to the Company a duly executed exercise notice and, at any time a registration statement registering the issuance of the Ordinary Shares underlying the IPO Warrants under the Securities Act is effective and available for the issuance of such shares, by payment in full in immediately available funds for the number of Ordinary Shares purchased upon such exercise. If a registration statement registering the issuance of the Ordinary Shares underlying the IPO Warrants under the Securities Act is not effective or available the holder may, in its sole discretion, elect to exercise the IPO Warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of Ordinary Shares determined according to the formula set forth in the IPO Warrant. No fractional shares will be issued in connection with the exercise of an IPO Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
Exercise Limitation. A holder will not have the right to exercise any portion of the IPO Warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% of the number of Ordinary Shares outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the IPO Warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days following notice from the holder to the Company.
Exercise Price. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Ordinary Shares and also upon any distributions of assets, including cash, stock or other property to our stockholders.
Home Country Practice. For so long as any of the IPO Warrants remains outstanding, the Company will elect to follow home country practice in lieu of any rules and regulations of the trading market that would limit the Company’s ability to effect the provisions of the IPO Warrants, including but not limited to shareholder approval rules related to the issuance of securities or adjustment of terms of the IPO Warrant for the benefit of warrant holders.
Transferability. Subject to applicable laws, the IPO Warrants may be offered for sale, sold, transferred or assigned without our consent.
Warrant Agent. The IPO Warrants were issued in registered form under a warrant agent agreement between VStock Transfer, LLC, as warrant agent, and the Company. The IPO Warrants were initially represented only by one or more global warrants deposited with the warrant agent, as custodian on behalf of The Depository Trust Company, or DTC, and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
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Fundamental Transactions. In the event of a Fundamental Transaction (as defined in the IPO Warrant) and generally including any reorganization, recapitalization or reclassification of our Ordinary Shares, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding Ordinary Shares, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding Ordinary Shares, the holders of the IPO Warrants will be entitled to receive upon exercise of the IPO Warrants the number of Ordinary Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, or depositary shares representing those shares, and any additional consideration receivable as a result of such Fundamental Transaction by holders of the number of Ordinary Shares for which the IPO Warrants are exercisable immediately prior to such Fundamental Transaction without regard to any limitations on exercise contained in the IPO Warrants. The holders of the IPO Warrants may also require us or any successor entity to purchase the IPO Warrants from the holders by paying to the holder an amount in cash (or other types or form of consideration in special circumstances listed in the IPO Warrant) equal to the Black Scholes value of the remaining unexercised portion of the IPO Warrant on the date of the fundamental transaction.
Rights as a Stockholder. Except as otherwise provided in the IPO Warrants or by virtue of such holder’s ownership of our Ordinary Shares, the holder of an IPO Warrant does not have the rights or privileges of a holder of our Ordinary Shares, including any voting rights, until the holder exercises the Warrant.
Right of Participation. Subject to certain exceptions, a holder of at least 120,192 IPO Warrants as of the time the Company engages in a subsequent placement (as defined in the IPO Warrant) will be entitled to participate in such subsequent placement subject to the terms and conditions set forth in the Warrant.
Governing Law. The IPO Warrants and the warrant agent agreement are governed by New York law.
Exclusive Forum
The agreements governing the IPO Warrants provide that, and by purchasing IPO Warrants in this offering investors will agree that, all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by the IPO Warrant (whether brought against a party hereto or their respective affiliates, directors, officers, shareholders, partners, members, employees or agents) will be commenced exclusively in the state and federal courts sitting in the City of New York, irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan for the adjudication of any such dispute and irrevocably waive, and agree not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper or is an inconvenient venue for such proceeding. The warrant agent agreement has a similar provision. In addition, the warrant agent agreement provides that the Company and the warrant agent each waive the right to a trial by jury in any action or proceeding arising out of or relating to the warrant agent agreement. Each of the agreement governing the IPO Warrants and the warrant agent agreement provide that the foregoing provisions do not limit or restrict the federal district court in which a party may bring a claim under the U.S. federal securities laws.
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Exhibit 4.7
Services Agreement
This Services Agreement (this “Agreement”) is entered into as of 24 October, 2022 (the “Effective Date”) by and between Jeff’s Brands Ltd. Reg. No. 516356763, a company incorporated under the laws of the State of Israel, located at Mezada street 7, Bnei Brak 5126112 (the “Company”), and D.S. Blue White Assets (2006) Ltd., Reg. No. 513843169 of 14a Smulik Segal St., Israel 6961314 (“DS” or “Service Provider”). Each of the Company or the Service Provider may be referred to as a “Party” and collectively the “Parties”.
| WHEREAS | Service Provider desires to render the Services (as defined below) to the Company as set forth herein; and, |
| WHEREAS | Company and Service Provider Agree that Services shall be rendered solely via Mr. Ronen Zalayet, ID No. 023944242 (“Ronen” or “Key Person”) |
| WHEREAS | Despite the Company offering the Key Person to be engaged as an employee, Service Provider nevertheless requested to be engaged as an independent contractor; and, |
| WHEREAS | Company wishes to retain Service Provider, as an independent contractor, in order to provide Company with the Services, on a non-exclusive basis, pursuant to and in accordance with the terms and conditions set forth hereunder. |
NOW THEREFORE, in consideration of the premises and mutual covenants and agreements herein, the Parties, intending to be legally bound, hereby agree as follows:
| 1. | Engagement |
| 1.1. | Company’s obligations, warranties and representations hereunder are subject in all manners and respects to the Company’s securing all requisite corporate consents in connection thereto. |
| 1.2. | Subject to the terms and conditions set forth hereunder, Company retains Service Provider to provide Company with certain management, business consulting services, on the basis of the scope prescribed under Exhibit A attached herewith (the “Services”). |
| 1.3. | Service Provider shall cause Key Person make himself available to perform the Services in accordance with the Company’s needs and instructions, at a scope determined from time to time by the Company (as shall be reasonably communicated in advance to the Service Provider), and as further described in Exhibit A. The Service Provider understands that the scope, hours and locations per which the Company requires the Services to be rendered may change, and the Service Provider shall make himself available to render the Services, as required by the Company. The Company makes no representations or commitment regarding the overall capacity, scope or hours required to be devoted by the Service Provider in rendering the Services. |
| 1.4. | Service Provider understands and acknowledges that Service Provider shall adhere and be subject to all applicable policies adopted by the Company, if and when applicable (including without limitations, anti-insider trading policy). |
| 1.5. | Parties agree that as a material condition to this Agreement, Key Person shall be the sole person on behalf of Service Provider rendering the Services. |
| 2. | Representations and Warranties |
The Service Provider warrants to the Company, on its behalf and on behalf of Key Person, as follows:
| 2.1. | He is not a party, nor shall be become a party, to any contract or agreement preventing him from entering into this Agreement and carrying out his obligations hereunder, and such do not violate, conflict with or constitute a default under applicable law, nor give rise to any conflict of interest. |
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| 2.2. | He is not a party to any agreement, nor shall he become a party to any agreement, which would prevent him from fulfilling his obligations under this Agreement and that during the Term of this Agreement (as defined below), and agrees that he will not enter into any agreement to provide services which would in any way prevent or otherwise limit him from providing the Services contemplated under this Agreement. |
| 2.3. | When executed, this Agreement shall become his legal, valid and binding obligation, fully enforceable in accordance with the Agreement’s terms. |
| 2.4. | He has the expertise, knowledge and capacity necessary to carry out his obligations under this Agreement. |
| 3. | Consideration |
| 3.1. | For the performance of the Services, during the Term, the Service Provider shall be entitled to the fee prescribed under Exhibit B attached herewith (the “Fee” or “Consideration”). |
| 3.2. | The Service Provider shall bear any applicable tax in connection with the Fee. The Company shall withhold such amounts as required under applicable law. |
| 3.3. | The Fee shall constitute the sole, full and final payment for the Services rendered pursuant to this Agreement and the Service Provider shall not be entitled to any further payment in connection therewith, unless otherwise approved in advance and in writing by the Company. The above notwithstanding, Company shall reimburse Service Provider for any pre- approved, validly documented business expenses borne by Service Provider, in accordance with the Company’s policy as set from time to time. Company shall reimburse Service Provider within ten (10) calendar days of any of the foregoing expenses after receiving an itemized expense statement, which shall include a proof of purchase. Upon request, Service Provider shall provide any receipt(s) or proof of purchase for said expense(s). |
| 4. | Term and Termination |
| 4.1. | The term of the engagement has commenced on October 24, 2022, and continue to be in force (the “Term”) thereafter, unless terminated by either Party, for any reason, by providing the other Party with a sixty (60) days prior written notice. The above notwithstanding, the effectiveness of this Agreement and the commencement of the Term shall be further subject to the receipt of all corporate approvals required in connection thereto. |
| 4.2. | Notwithstanding anything to the contrary herein, the Company may terminate this Agreement due to a breach by the Service Provider (including without limitations, regarding his representations set forth herein), which was not cured within seven (7) days from receipt of notice of such breach; or immediately, while providing a prompt notice, due to a material breach of the Service Provider (including without limitations, in the event of deceptive business practices or unethical conduct whatsoever, whether or not related to the Services). |
| 4.3. | Furthermore, the Company may forthwith terminate this Agreement for Cause. “Cause” means such circumstances justifying dismissal without provision of prior notice under the laws of the State of Israel, and may include (a) conviction of Service Provider in felony or crime involving moral turpitude; (b) actions taken in the intent to harm the Company; (c) fraud, self-dealing, embezzlement of funds of Company or its subsidiaries; (d) falsification of Company’s or subsidiaries’ records or reports; (e) material breach of Service Provider’s fiduciary duties or duties of care; (f) breach of the confidentiality, proprietary information and non-compete provisions set forth in Exhibit C; (g) any cessation of Key Person’s engagement by Service Provider or in rendering the Services on behalf of Service Provider (h) any other circumstances under which severance pay (or part of them) may be denied from the Service Provider upon termination of employment under the applicable Israeli law had he been employed by Company. |
| 5. | Confidentiality, Intellectual Property Assignment and Non-Competition |
The Service Provider undertakes to fully comply with the Confidentiality, Intellectual Property Assignment and Non-Competition provisions set forth in Exhibit C.
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| 6. | Scope of Relationship |
| 6.1. | The relationship between the Company and Service Provider shall be that of independent contractors. Neither Party is a partner, joint-venturer, agent, employee or legal representative of the other. The Service Provider shall have no authority to assume or create any obligation on behalf of the Company, to bind the Company or to represent himself as such to any third party. Service Provider shall bear all taxes, social and fringe benefits required under any applicable law and shall not receive nor be entitled to overtime pay, insurance, paid vacation, severance payments or similar fringe or employment benefits from the Company. |
| 6.2. | The Service Provider affirms that this Agreement does not create any employee relationship between the Service Provider and the Company. |
| 6.3. | Without derogating from the above, Service Provider shall reimburse and compensate the Company in the event that the Company is required to pay any sum of money to the Service Provider and/or the Service Provider’s heirs and/or dependents and/or to the National Social Security Authority and/or the tax authorities and/or any other party that sues in the name of the Service Provider or on Service Provider’s behalf, for any rights deriving from a status of an employee of the Company. |
| 6.4. | If, despite the Parties’ express representations and agreements hereunder, the Service Provider shall, at any time, be determined by a court of competent jurisdiction or by any other governmental authority, that employer-employee relations exist between the Company and Service Provider, and as a result of such decision Service Provider shall become entitled to any rights and/or payments resulting from the existence of such relations, and/or the Company shall be required to bear any additional expenses or costs (including without limitation any taxes or obligatory payments to the tax authorities or the National Insurance authorities) then the Parties agree and undertake that the “salary” to which Service Provider may be entitled for the Services as such deemed employee of the Company hereunder shall be equal to 60% of the Fees actually paid to Service Provider, and the remaining 40% shall be deemed as payment on account of any and all social and fringe benefits which Service Provider would have otherwise been entitled to as an employee and/or any other additional costs which Company should have borne with respect to Service Provider’s engagement, had he had been engaged as an employee of the Company. |
| 6.5. | The obligations of the Service Provider set forth under this Section 6 shall survive the termination or expiration of this Agreement, regardless of reason. |
| 7. | Miscellaneous |
| 7.1. | Service Provider shall not assign any of his obligations and/or rights under this Agreement without the Company’s prior written consent. The Company may assign its rights and/or obligations set forth herein; provided that, none of the Service Provider’s rights shall be adversely affected by such assignment. |
| 7.2. | This Agreement, including its Exhibits, when signed by the authorized representatives of the Parties hereto, shall constitute the sole and entire agreement between the Parties, with respect to the subject matter of this Agreement, and shall supersede any and all prior agreements, whether oral or written. |
| 7.3. | No amendment or waiver to this Agreement shall be effective unless in writing and signed by authorized representatives of the Parties. |
| 7.4. | Any notices to be given hereunder shall be served on a Party by prepaid registered letter, facsimile, or email to its address given herein or such other address as may from time to time be notified for this purpose. Any notice given by letter shall be deemed to have been served four (4) days after the time at which it was posted and any notice given by facsimile or email shall be deemed to have been served twenty four (24) hours after it is dispatched. |
| 7.5. | This Agreement shall be governed by and construed in accordance with the laws of the State of Israel, without regard to its rules regarding conflict of laws. The competent courts located in the district of Tel-Aviv, Israel, shall have exclusive jurisdiction with respect to any claims or disputes arising out of or concerning this Agreement. The provision of this sub section shall survive the termination or expiration of this Agreement, regardless of reason. |
[Signatures Page Below]
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.
| /s/ Vik Hakmon | /s/ Ronen Zalayet | |
| Jeff’s Brands Ltd. | D.S. Blue White Assets (2006) Ltd. | |
| By: Vik Hakmon | By: Ronen Zalayet | |
| Title: CEO | Title: Director |
I, Mr. Ronen Zalayet, acting as the Key Person, hereby confirm that any obligation, warranty and/or representation made herein by Service Provider, shall apply, mutatis-mutandis, to me.
| /s/ Ronen Zalayet | |
| Ronen Zalayet |
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Exhibit A
| 1. | The scope of the Services rendered by Service Provider shall reflect an equivalent an 80% capacity engagement, with no time limitations. However, Service Provider shall be entitled to leave of absence for up to (12) days (“absence days”) in each twelve month period during the Term, without a reduction of the monthly Fees, provided that Service Provider coordinates with the Company’s CEO the days on which it does not provide the Services, sufficiently in advance to allow the Company to find alternatives, if and when necessary. |
| 2. | All services by Service Provider shall include all functions equivalent to the functions fulfilled by Company’s CFO. |
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Exhibit B
Consideration
| 1. | Fee. For rendering the Services in accordance with the provisions of the Agreement, the Service Provider shall be entitled to the following to a monthly consideration of NIS 35,000 plus VAT (if applicable), against duly issued invoices. |
| 2. | Payment. The Fee shall be paid to the Service Provider no later than the 9th day of the month, following the month per which the Fee is due. The Fee shall be pain in NIS. |
| 3. | Full Consideration. The Consideration specified under this Exhibit constitutes the full consideration which the Service Provider be entitled to, unless otherwise expressly agreed upon by the Parties. |
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Exhibit C
Confidentiality, Intellectual Property Assignment and Non-Competition
| 1. | Secrecy |
(a) The Service Provider recognizes and acknowledges that its access whether prior to the date hereof or thereafter, to the trade secrets and confidential or proprietary information (collectively, the “Confidential Information”) of the Company and the Company’s subsidiaries and other affiliates (collectively, the “Companies”), is essential to the services Service Provider is giving to the Companies (the “Services”).
By way of illustration and not limitation, such Confidential Information shall include (i) any and all information concerning the business and affairs of the Companies, product specifications, data, know- how, compositions, processes, formulas, methods, designs, samples, inventions and ideas, past, current and planned development or experimental work, current and planned distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code and source code), computer software and database technologies, systems, structures and architectures (and related processes, algorithms, compositions, improvements, know-how, inventions, discoveries, concepts, ideas, designs, methods and information) of the Company, and any other information, however documented of the Companies; (ii) any and all information concerning the business and affairs of the Companies (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training and techniques and materials), however documented; and (iii) all derivatives, improvements and enhancements to the Company’s technology which are created or developed in relation to the Services; and (iv) information of third parties as to which the Company has an obligation of confidentiality; and (v) any and all notes, analysis, compilations, studies, summaries, and other material prepared by or for the Companies containing or based, in whole or in part, on any information included in the foregoing.
The Confidential Information shall not include information which: (i) has become publicly known and made generally available through no wrongful act of Service Provider of others who were under confidentiality obligations as to the information involved; (ii) was known to the Service Provider prior to its involvement with the Companies; or (iii) is required to be disclosed as a result of court order to other legal process, provided, however, that Service Provider shall limit disclosure the required minimum, and will promptly notify the Company of the request to disclose the Confidential Information and the parts thereof that will, or have been disclosed.
(b) Service Provider further recognizes and acknowledges that such Confidential Information is a valuable and unique asset of the Company’s, and that its use or disclosure (except use or disclosure as required for giving the Companies the Services) would cause the Company substantial loss and damages. Service Provider undertakes and agrees that it will not, in whole or in part, disclose such Confidential Information to any person or organization under any circumstances (except use or disclosure as required for giving the Companies the Services), will not make use of any such Confidential Information for Service Provider own purposes or for the benefit of any other person or organization, and will not reproduce any of the Confidential Information without the Company’s prior written consent.
(c) Service Provider will not disclose or otherwise make available to the Companies in any manner any confidential information received by Service Provider from third parties.
(d) The obligations set forth in this section are perpetual, and shall survive termination of any agreement regarding Services given to the Company by the Service Provider.
(e) Service Provider further recognizes and acknowledges that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to certain limited purposes. Service Provider agrees to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in giving the Company the Services consistent with the Company’s agreement with the third party.
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| 2. | Return of Materials. |
Upon termination of any agreement regarding the Services, or at the request of the Company before such termination, Service Provider will promptly deliver to the Company all copies of all written and tangible material, in Service Provider’s possession or under Service Provider’s control, incorporating the Confidential Information or otherwise relating to the Company’s business, without retaining any copies thereof. The obligations set forth in this subsection shall survive termination of any agreement regarding the Services between Service Provider and the Company.
| 3. | Ownership of Property and Rights |
| (a) | Exclusive Property. Service Provider confirms that all Confidential Information and Works are, will be, and shall remain the exclusive property of the Company including all intellectual property rights therein under patent, copyright, trade secrets and similar laws in all countries throughout the world. All business records, papers and documents however documented kept or made by Service Provider as part of the Services given by it to the Company shall be and remain the property of the Company. |
For the purpose of this section, the term “Works” shall mean any and all works, projects or Inventions (as defined below) performed and/or developed by Service Provider for or used by the Companies or otherwise included in the source code or object code of the Company’s products or otherwise used in the business of the Companies whether made prior or after the date of this Agreement.
| (b) | Assignment & Waiver. Service Provider hereby assigns and waives to the Company, without additional consideration to Service Provider, the entire right, title and interest in the Works and to any ideas, inventions, original works of authorship, developments, improvements, modifications, enhancements, trade secrets, and in and to any documentation, software, hardware, firmware, creative works, know-how and information, conceived or reduced to practice, in whole or in part, by Service Provider during Service Provider’s period giving the Company the Services, or caused to be conceived or reduced to practice, during the above period, and/or related to the Companies’ business, whether or not patentable, copyrightable or otherwise protectable, and Service Provider assigns to the Company as above stated, the entire right, title and interest in and to any proprietary rights therein or based thereon including all intellectual property rights therein under patent, copyright, trade secrets and similar laws in all countries throughout the world (collectively, the “Inventions”). This assignment applies to all Works and Inventions created before, on and after the date of this Agreement, and also includes the right to sue for and recover damages for any past, present and/or future infringement of any of the Works and/or Inventions. |
It is hereby clarified that Service Provider waives any right it may have to royalties or any other payment from the Company with regard to the assigned Inventions and/or Works. Service Provider undertakes that its employees shall be bound by intellectual property assignment obligations to allow Service Provider to meet its obligations hereunder.
| (c) | Perfection of Rights. Service Provider shall provide all assistance the Company may request, and shall execute, verify and deliver such documents and perform such other acts (including appearing as a witness) the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such proprietary rights and the assignment thereof, as set forth above. Service Provider’s obligation to assist the Company with respect to proprietary rights in any and all countries shall continue beyond the termination of any agreement between the Company and Service Provider regarding the Services, but the Company shall compensate Service Provider at a reasonable rate after termination of such agreement for the time actually spent by Service Provider at the Company’s request on providing such assistance. |
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| (d) | Service Provider represents and warrants that except for the Company’s rights in the Inventions and/or the Works, no other third party has any rights whether contractual, by law or otherwise from any kind whatsoever in the Inventions and/or the Works or in any intellectual property rights relating thereto. Service Provider further represents and warrants that it has not granted to any third party any licenses in and to any of the Works, Inventions or any of the intellectual property rights relating thereto. |
| (e) | Survivability. The obligations set forth in this section are perpetual, and shall survive termination of any agreement regarding Services given to the Company by the Service Provider. |
| (f) | Attorney-in-fact. If the Company is unable because of the Service Provider’s mental or physical incapacity or the Service Provider’s refusal to cooperate with the Company after receiving the Company’s request pursuant Section 3(c) above to secure the Service Provider’s signature to application for any Israeli or foreign patent or copyright registration covering Inventions, Works or original works of authorship assigned to the Company as set forth above, Service Provider hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as Service Provider’s agent and attorney-in-fact, to act on behalf and instead to execute and file any such application and to do all other lawfully permitted acts to further the prosecution and issuance of letter patent or copyright registration thereon with same legal force and effect as if executed by the Service Provider. |
| 4. | No Solicitation; Non-Compete. |
For so long as Service Provider is giving Services to the Company and continuing for six (6) months after the termination or expiration of any agreement between the Service Provider and the Company regarding such Services, Service Provider shall not, directly, or indirectly:
| (a) | solicit, endeavor to entice away from the Companies or otherwise interfere with the relationship of the Companies with any person or organization who is, or was within the preceding 6 months, a customer of the Companies, or who is employed by the Companies; or |
| (b) | engage in, be employed by, or have any connection with any business or venture that is engaged in any activities competing with those of the Companies. |
By: D.S. Blue White Assets (2006) Ltd ; Signature: ____/s/ Ronen Zalayet___Date: 17 November 2022
I, Mr. Ronen Zalayet, acting as the Key Person, hereby confirm that any obligation, warranty and/or representation made herein by Service Provider, shall apply, mutatis-mutandis, to me.
| /s/ Ronen Zalayet | |
| Ronen Zalayet |
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AMENDMENT TO SERVICES AGREEMENT
This Amendment (“Amendment”) is entered into as of July [28], 2024, by and between Jeffs’ Brands Ltd., a company incorporated under the laws of the state of Israel (the “Company”) and D.S. Blue White Assets (2006) Ltd., Reg. No. 513843169 of 14a Smulik Segal St., Israel 6961314 (“DS” or “Service Provider”). Each of the Company or the Service Provider may be referred to as a “Party” and collectively the “Parties”.
WHEREAS, the Parties have previously entered into that certain Services Agreement, dated as of October 24, 2022 (the “Agreement”); and
WHEREAS, the Agreement includes certain provisions which the Parties mutually wish to amend, as of October [20], 2023 (the “Effective Date”), as set forth herein.
NOW, THEREFORE, the Parties agree to amend the Agreement as follows:
| 1. | The Amendment |
| 1.1. | As of the Effective Date, the current wording of Exhibit B – Consideration Section 1 of the Agreement shall be deleted in its entirety and replaced with the following: |
“Fee. For rendering the Services in accordance with the provisions of the Agreement, the Service Provider shall be entitled to a monthly consideration of NIS 50,000 plus VAT (if applicable), against duly issued invoices.”
| 2. | Miscellaneous |
| 2.1. | This Amendment shall be deemed for all intents and purposes as an integral part of the Agreement and/or any amendment thereof. All capitalized terms used in this Amendment and not defined herein, shall have the meanings attributed to them in the Agreement. In the event of any inconsistency between the provisions of this Amendment and the provisions of the Agreement and/or any amendment thereof, this Amendment shall prevail. Except as provided explicitly hereto, all other provisions of the Agreement shall continue to be in full force and effect, mutatis mutandis. |
| 2.2. | This Amendment supersedes all prior agreements, written or oral, between the Parties relating to the subject matter of this Amendment. |
| 2.3. | Any provision of this Amendment may be amended, waived or modified only upon the written consent of both Parties. |
[Signature Page Follows]
IN WITNESS WHEREOF, the Parties have caused their duly authorized representatives to execute this Amendment as of the day and year first above written.
| JEFFS’ BRANDS LTD. | D.S. Blue White Assets (2006) Ltd. | |||
| By: | /s/ Vik Hakmon | By: | /s/ Ronen Zalayet | |
| Name: | Name: | |||
| Title: | Title: | |||
Exhibit 4.14
Execution Version
Certain identified information contained in this document, marked by brackets, has been redacted since disclosure of such information would constitute a clearly unwarranted invasion of personal privacy.“[***]” indicates where the information has been omitted from this exhibit.
IMPACT ACQUISITIONS CORP.
and
JEFFS BRANDS LTD
and
FORT PRODUCTS LIMITED
SHARE PURCHASE AGREEMENT
FEBRUARY 6, 2025
TABLE OF CONTENTS
| PART 1 INTERPRETATION | 1 | |||
| 1.1 | Definitions | 1 | ||
| 1.2 | Schedules | 7 | ||
| 1.3 | Interpretation | 7 | ||
| 1.4 | Governing Law | 8 | ||
| 1.5 | Severability | 8 | ||
| 1.6 | Entire Agreement | 8 | ||
| 1.7 | Waiver | 9 | ||
| PART 2 PURCHASE AND SALE AND RELATED TRANSACTIONS | 9 | |||
| 2.1 | Purchase | 9 | ||
| 2.2 | Retention of Liabilities | 9 | ||
| 2.3 | Consideration | 9 | ||
| 2.4 | Reconstitution of Board and Management | 10 | ||
| 2.5 | Name Change | 10 | ||
| 2.6 | Finders’ Fees | 10 | ||
| PART 3 REPRESENTATIONS AND WARRANTIES OF THE VENDOR | 11 | |||
| 3.1 | Representations and Warranties of the Vendor and the Target | 11 | ||
| 3.2 | Survival of Representations and Warranties of the Vendor and Target | 15 | ||
| 3.3 | Reliance | 16 | ||
| PART 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER | 16 | |||
| 4.1 | Representations and Warranties of the Purchaser | 16 | ||
| 4.2 | Fees | 20 | ||
| 4.3 | Other Representations | 20 | ||
| 4.4 | Survival | 20 | ||
| 4.5 | Reliance | 20 | ||
| PART 5 COVENANTS | 20 | |||
| 5.1 | Covenants of the Vendor and Target | 20 | ||
| 5.2 | Covenants of the Purchaser | 23 | ||
| 5.3 | Mutual Covenants | 26 | ||
| 5.4 | Alternative Transaction | 27 | ||
| 5.5 | Facilitation of Transaction | 27 | ||
| 5.6 | Confidentiality | 28 | ||
| 5.7 | Public Announcements | 29 | ||
| 5.8 | Notification of Certain Matters | 29 | ||
| 5.9 | Consents | 29 | ||
| 5.10 | Target Financial Statements | 30 | ||
| PART 6 CLOSING | 30 | |||
| 6.1 | Closing Date and Location | 30 | ||
| 6.2 | Closing | 30 | ||
| 6.3 | Deliveries by Purchaser at Closing | 31 | ||
| 6.4 | Deliveries by Vendor at Closing | 32 | ||
| PART 7 MUTUAL CONDITIONS PRECEDENT | 32 | |||
| 7.1 | Mutual Conditions Precedent | 32 | ||
| 7.2 | Notice and Cure Provisions | 33 | ||
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| PART 8 PURCHASER’S CONDITIONS PRECEDENT | 33 | |||
| 8.1 | Purchaser’s Conditions | 33 | ||
| 8.2 | Waiver | 34 | ||
| PART 9 VENDOR’S CONDITIONS PRECEDENT | 34 | |||
| 9.1 | Target’s and Vendor’s Conditions | 34 | ||
| 9.2 | Waiver | 35 | ||
| PART 10 FURTHER ASSURANCES | 35 | |||
| 10.1 | Further Assurances | 35 | ||
| PART 11 INDEMNITIES | 35 | |||
| 11.1 | Indemnification of Purchaser by Vendor | 35 | ||
| 11.2 | Claims Under Vendor’s Indemnities | 36 | ||
| 11.3 | Indemnification Limitations | 37 | ||
| 11.4 | Indemnification of Vendor by Purchaser | 37 | ||
| 11.5 | Claims Under Purchaser’s Indemnities | 37 | ||
| 11.6 | Survival of Indemnities | 38 | ||
| 11.7 | Indemnification Limitations | 38 | ||
| PART 12 TERMINATION, AMENDMENT AND WAIVER | 39 | |||
| 12.1 | Termination by the Purchaser | 39 | ||
| 12.2 | Termination by the Vendor | 39 | ||
| 12.3 | Effect of Termination | 39 | ||
| 12.4 | Amendment | 40 | ||
| 12.5 | Extension and Waiver | 40 | ||
| PART 13 GENERAL | 40 | |||
| 13.1 | Expenses | 40 | ||
| 13.2 | Arbitration | 40 | ||
| 13.3 | Time | 40 | ||
| 13.4 | Notices | 41 | ||
| 13.5 | Further Assurances | 42 | ||
| 13.6 | Enurement | 42 | ||
| 13.7 | Assignment | 42 | ||
| 13.8 | Counterparts | 42 | ||
| 13.9 | Severability | 42 | ||
| 13.10 | Entire Understanding | 42 | ||
| 13.11 | Binding Effect; No Third Party Beneficiaries | 42 | ||
| 13.12 | Language | 42 | ||
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| SCHEDULE A CONTRACTS | A-1 | |||
| SCHEDULE B FORM OF CONTINGENT RIGHT CERTIFICATE | B-1 | |||
| 1. | INTERPRETATION | B-1 | ||
| 1.1 | Definitions | B-1 | ||
| 1.2 | Currency | B-2 | ||
| 1.3 | Interpretation Not Affected by Headings, etc | B-2 | ||
| 1.4 | Number, etc | B-2 | ||
| 1.5 | Date for Any Action | B-2 | ||
| 2. | CONTINGENT RIGHTS | B-2 | ||
| 2.1 | Terms of Contingent Rights | B-2 | ||
| 2.2 | Holder of Contingent Right not a Shareholder | B-3 | ||
| 2.3 | Contingent Rights to Rank Pari Passu | B-3 | ||
| 2.4 | Transfer and Ownership of Contingent Rights | B-3 | ||
| 2.5 | Ownership of Rights | B-3 | ||
| 2.6 | Issue in Substitution for Contingent Right Certificates Lost, etc | B-3 | ||
| 3. | ISSUANCE OF CONTINGENT RIGHT SHARES | B-4 | ||
| 3.1 | Achievement Certificate | B-4 | ||
| 3.2 | Payment Procedure | B-4 | ||
| 3.3 | Payment Mechanism | B-4 | ||
| 3.4 | Cancellation of Rights | B-4 | ||
| 4. | WITHHOLDING TAX | B-4 | ||
| 4.1 | Withholding Taxes | B-4 | ||
| 5. | ADJUSTMENT OF NUMBER OF CONTINGENT RIGHT SHARES AND EXERCISE PRICE | B-5 | ||
| 5.1 | Definitions | B-5 | ||
| 5.2 | Adjustment | B-5 | ||
| 5.3 | Adjustment Rules | B-7 | ||
| 5.4 | Notice of Certain Events | B-8 | ||
| 6. | RIGHTS OF THE COMPANY AND COVENANTS OF THE COMPANY | B-8 | ||
| 6.1 | General Covenants | B-8 | ||
| 6.2 | Enforceability of Certificate | B-9 | ||
| 7. | DISPUTE MECHANISM | B-9 | ||
| 7.1 | Disputed Matters | B-9 | ||
| 8. | GENERAL | B-9 | ||
| 8.1 | Notices | B-9 | ||
| 8.2 | Provisions of this Agreement and Contingent Rights for the Sole Benefit of Parties and Holder | B-10 | ||
| 8.3 | Governing Law | B-10 | ||
| 8.4 | Entire Agreement | B-10 | ||
| 8.5 | Further Assurances | B-10 | ||
| 8.6 | Waiver | B-10 | ||
| 8.7 | Enurement | B-10 | ||
| 8.8 | Severability | B-10 | ||
iii
Execution Version
SHARE PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 6th day of February, 2025
BETWEEN:
IMPACT ACQUISITION CORP., a corporation existing under the Laws of the Province of British Columbia
(“Purchaser”)
AND:
JEFFS BRANDS LTD, a company existing under the Laws of Israel (“Vendor”)
AND:
FORT PRODUCTS LIMITED, a company existing under the Laws of England and Wales
(“Target”)
WHEREAS:
| A. | the Vendor owns the Target Shares (as defined herein); |
| B. | the Vendor wishes to sell, and the Purchaser wishes to purchase all of the Vendor’s interest in Target Shares on the terms and conditions set forth herein (the “Transaction”); and |
| C. | the completion of this Agreement is intended to, among other things, constitute a “qualifying transaction” of the Purchaser pursuant to the policies of the TSXV. |
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and mutual agreements and covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties covenant and agree as follows:
PART 1
INTERPRETATION
| 1.1 | Definitions |
In this Agreement, the words defined above have the meanings ascribed thereto and the following words and phrases shall have the following meanings:
| (a) | “Affiliate” has the meaning ascribed thereto under the Securities Act (British Columbia); |
| (b) | “Agreement” shall mean this Share Purchase Agreement, together with the recitals above and the Schedules hereto, as amended, supplemented or otherwise modified from time to time; |
| (c) | “Alternative Transaction” means, other than the transactions contemplated in this Agreement, any offer, proposal or inquiry relating to, or any Person’s indication of interest in: (i) the sale, license, disposition, or acquisition of any of the Target Shares or any material portion of the assets or undertaking of the Target; (ii) the issuance, disposition, or acquisition of (A) any capital stock or other equity security of the Purchaser or Target, (B) any subscription, option, call, warrant, pre- emptive rights, right of first refusal, or any other right (whether or not exercisable) to acquire any capital stock of other equity security of the Purchaser or Target, or (C) any security, instrument or obligation that is or may become convertible into or exchangeable for any capital stock or other equity security of the Purchaser or Target; or (iii) any merger, consolidation, business combination, reorganization, or similar transaction involving the Purchaser or Target or any material portion of their respective assets or undertakings; |
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| (d) | “Authorizations” means those sanctions, rulings, consents, orders, exemptions, permits and other approvals (including the lapse, without objection, of a prescribed time under a statute or regulation that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) of any Government Authority, regulatory agency or self- regulatory organizations required by the Purchaser or the Vendor in connection with the completion of this Agreement; |
| (e) | “Books and Records” means: (i) the available books of account, including trial balances ledger and back-end documents, (ii) the available sales records from the Target’s sale platforms and (iii) the share registry and minute books of Target but excluding (i) Excluded Books and Records and (ii) information which is either protected under privacy laws or under attorney-client privilege; |
| (f) | “Business” means the assembly and sale of pest control products primarily through Amazon.uk under fully owned trademarks: Roshield, Entopest, Rempro and BirdGo; |
| (g) | “Business Day” means any day, other than a Saturday, Sunday or any statutory holiday, when banks are open for business in the city of Vancouver, British Columbia, Canada or both days of Rosh Hashanah and Shavuoth, Yom Kippur, Tisha B’av, the first two days of Succoth, Shimini Atzeret and Simchat Torah, and the last two days of Passover and Purim; |
| (h) | “Closing” means the completion of the transactions of purchase and sale contemplated in this Agreement; |
| (i) | “Closing Date” means such date as may be agreed to in writing by the Parties as the date on which the Closing shall take place, but in any event not later than the Termination Date; |
| (j) | “Closing Documents” means the documents required to be delivered pursuant to Section 6.2; |
| (k) | “Closing Time” means 10:00 a.m. (Vancouver time) on the Closing Date or such other time as may be agreed to in writing by the Parties; |
| (l) | “Confidential Information” means, with respect to the Business, confidential or non-public information and trade secrets, including confidential or non-public: proprietary information, know how, technology, technical data, proprietary processes, specifications, formulations, formulae, materials or compositions of matter of any type or kind (patentable or otherwise), marketing reports, customer lists and supplier lists, study reports, regulatory submission summaries and regulatory submission documents, expertise, test data, analytical and quality control data, studies and procedures, schematics, test methodologies, simulation and development tools, prototypes and other devices; |
| (m) | “Consents and Notices” means: |
| (i) | all requirements of any Government Authorities; |
| (ii) | any approvals by any stock exchange, or other regulatory authority, including the TSXV; |
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| (iii) | all consents, approvals or notices required to be given to or received from any Person pursuant to a Contract; |
| (iv) | all filings, registrations or notices to any Government Authority required under Law; and |
| (v) | the expiration of all notice periods established under Law, established by any Government Authority or established pursuant to any Contract, |
necessary to permit the consummation of the transactions contemplated by this Agreement;
| (n) | “Contingent Right Certificate” means a certificate representing the Purchaser Contingent Rights in the form attached hereto as Schedule B. |
| (o) | “Contingent Right Shares” means the Purchaser Common Shares issuable upon conversion of the Purchaser Contingent Rights upon the satisfaction of the applicable Milestone, on the terms and conditions set forth in the Contingent Right Certificate; |
| (p) | “Contracts” means those subsisting agreements, contracts, memorandum of understandings, instruments, leases, permits, licenses and other commitments, oral or written, entered into by the Vendor or by which the Vendor is bound, which are significant to the Business, as set out in Schedule A; |
| (q) | “Employment Agreements” has the meaning ascribed thereto in section 3.1(v); |
| (r) | “Encumbrance” means any mortgage, easement, right-of-way, encroachment, covenant, condition, right of re-entry, right of possession, lease, license, lien, charge, pledge, assignment, option, claim, title defect, hypothecation, security interest, title retention right, including any agreement to give any of the foregoing, or other encumbrance of any nature or kind whatsoever; |
| (s) | “Escrow Agent” means Endeavor Trust Corporation. |
| (t) | “Escrowed Securities” means the securities held by the Escrowed Securityholders and subject to the TSXV Escrow Agreement; |
| (u) | “Escrowed Securityholders” means the securityholders of the Purchaser that will be subject to escrow requirements of the TSXV pursuant to TSXV Policy 5.4 – Escrow, Vendor Consideration and Resale Restrictions; |
| (v) | “Excluded Books and Records” means all corporate, financial, taxation, Tax Returns and other books and records of the Vendor not related to the Business or Target Shares; |
| (w) | “Existing Options” has the meaning ascribed thereto in section 4.1(s); |
| (x) | “Existing Warrants” has the meaning ascribed thereto in section 4.1(s); |
| (y) | “Filing Statement” means the TSXV filing statement prepared by the Purchaser and the Vendor in accordance with the TSXV Form 3B1; |
| (z) | “Finders” means Capitalink Ltd. and LIA Pure Capital Ltd.; |
| (aa) | “Finders’ Shares” has the meaning ascribed thereto in section 2.6; |
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| (bb) | “Government Authority” means: |
| (i) | any domestic or foreign, national, federal, provincial, state, regional, municipal, county or other local government; |
| (ii) | any body exercising any statutory, regulatory, expropriation or taxing authority on behalf or under the authority of any of the governments described in (i) above or any Laws, including any ministry, directorate, department, commission, bureau, board, administrative or other agency, regulatory body or instrumentality thereof; |
| (iii) | any quasi-governmental or private body exercising any statutory, regulatory, expropriation or taxing authority operating under the authority of any of the governments described in (i) above or any Laws; |
| (iv) | any domestic or foreign judicial, quasi-judicial or administrative court, tribunal, commission, board or panel acting under the authority of any of the governments described in (i) above or any Laws; and |
| (v) | the TSXV; |
| (cc) | “IFRS” means the International Financial Reporting Standards issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Interpretations Committee; |
| (dd) | “Indebtedness” of any Person means all obligations of such Person (a) for money borrowed, whether or not evidenced by bonds, debentures, notes or other similar instruments (including obligations to reimburse any other Person under any letter of credit, banker’s acceptance or related reimbursement agreement, to the extent drawn and not repaid, and any notes issued by such Person in connection with any acquisition undertaken by such Person); (b) relating to any lease that is required to be classified as a capital lease in accordance with generally accepted accounting principles; (c) for amounts owing or due under any interest rate protection agreement, derivative instrument, “swap” agreement or similar agreement (valued on a fair market value basis); (d) in respect of the deferred purchase price of property (other than trade accounts payable and other accrued current liabilities arising in the ordinary course of business); (e) to guarantee or be liable for obligations of the types described in clauses (a) to (d) above, of any Person; and (f) for any accrued interest, prepayment premium or penalty or other costs, fees or expenses related to the foregoing. |
| (ee) | “Intellectual Property” means: (i) all works, including literary, artistic and graphic works, databases, and compilations thereof, including computer software, source code, object code, firmware, development tools, files, records and data, (the “Works”); (ii) all inventions, arts, processes, machines, manufactures, compositions of matter and developments, whether or not patentable, patented or the subject of applications for patents (the “Inventions”); (iii) all trade names, logos, trade dress, trademarks and service marks (“Marks”); (iv) all industrial designs, whether or not patentable or registrable, patented or registered or the subject of applications for design patent or registration (“Designs”); (v) all Confidential Information; |
| (ff) | “Intellectual Property Rights” means any and all industrial and intellectual property and proprietary rights in the Intellectual Property, including, without limitation, the following: (i) all patents and applications therefor and rights to file applications for the Inventions and all reissues, divisions, renewals, extensions, re-examinations, reissues, provisionals, continuations and continuations-in-part thereof and other derivative applications and patents; (ii) all rights in the Confidential Information; (iii) all design patents, design registrations, pending patent and design applications and rights to file applications for the Designs, including all rights of priority and rights in continuations, continuations-in-part, divisions, re-examinations, reissues and other derivative applications and patents; (iv) all trademark and service mark registrations for the Marks, trademark and service mark applications for the Marks, any rights arising from the use, application for or registration of the Marks, and any and all goodwill associated with and symbolized by the Marks; and (v) all copyright and other rights and all registrations, pending applications for registration and rights to file applications for, and all moral rights and, where a Party is not the author, the benefits of such Party in all waivers of moral rights in, the Works; |
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| (gg) | “Judgment” means, any judgment, decree, order, decision, injunction, award or ruling of any Government Authority; |
| (hh) | “Laws” means all domestic or foreign federal, national, provincial, state, regional, municipal, local or other constitutions, treaties, laws, statutes, codes, ordinances, decrees, rules, regulations, by- laws, communiqués, policies, voluntary restraints, guidelines, requirements, directives and any Judgments, including general principles of civil or common law, binding on or affecting the Person referred to in the context in which such word is used; |
| (ii) | “Liability” means any debt, liability or obligation (whether direct or indirect, known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), and including all costs and expenses relating thereto; |
| (jj) | “Material Adverse Change” means any change in the business, operations, affairs, liabilities, capitalization, financial condition, prospects, licenses, permits, rights or privileges, of the Vendor or Target which could reasonably be expected to materially and adversely affect the Business taken as a whole, except that none of the following, either alone or in combination, shall be considered in determining whether there has been a “Material Adverse Change” or breach of a representation, warranty, covenant or agreement that is qualified by the term “Material Adverse Change”: (i) changes, effects, events or conditions affecting Israeli, Canadian or British or other financial or securities markets or general economic or political conditions, including changes in the credit, interest rate, commodity and currency markets or in the availability of financing, except to the extent any such change disproportionately impacts the Business relative to other companies operating in the industries in which the Business operates; (ii) changes, effects, events or conditions that result from the execution, announcement or performance of this Agreement or the identity of the Purchaser (which the Vendor unreasonably objects to) or the consummation of the transactions contemplated hereby; (iii) changes, effects, events or conditions that result from any action or omission required to be taken pursuant to this Agreement or at the request of or with the prior written consent of the Purchaser, (iv) changes, effects, events, or conditions arising from acts of war (whether or not declared), armed hostilities, terrorism, or other international or national calamity or crisis; and (v) changes, effects, events, or conditions arising from pandemics, epidemics, or other public health crises, including any significant increase in the effects of COVID-19 and any evolutions or mutations thereof; |
| (kk) | “material fact”, “material change” and “misrepresentation” have the meanings ascribed to such terms under the Securities Act; |
| (ll) | “Milestone” means the Purchaser (i) completing a transaction resulting in either the listing of the Purchaser on the New York Stock Exchange or the NASDAQ (each, a “US Exchange”) or other transaction resulting in the issuance of shares listed on a US Exchange to holders of Purchaser Common Shares in exchange for such Purchaser Common Shares (in either case, an “Uplisting Transaction”) if such Uplisting Transaction is completed within twenty four (24) months of date of the Closing Date; (ii) successfully raising within forty-eight (48) months of the Closing Date in equity and/or debt financing an aggregate of US$8,000,000 or more as of the date of closing of such financing; and (iii) reaching annual revenues of a minimum of US$15,000,000 by December 31, 2028, as shown on the audited financial statement for such periods (and in the case of (ii) and (iii), if applicable, converted into United States dollars using the applicable Bank of Canada conversion rate as of the relevant date(s)); |
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| (mm) | “NASDAQ” means the Nasdaq Stock Market; |
| (nn) | “Parties” means the Vendor, the Target and the Purchaser, and “Party” means any of them, as the case may be; |
| (oo) | “Payment Rights” has the meaning ascribed to it in Section 2.3(b) of this Agreement; |
| (pp) | “Payment Securities” has the meaning ascribed to it in Section 2.3(b) of this Agreement; |
| (qq) | “Payment Shares” has the meaning ascribed to it in Section 2.3(a) of this Agreement; |
| (rr) | “Person” includes an individual, corporation, body corporate, partnership, joint venture, association, trust or unincorporated organization or any trustee, executor, administrator or other legal Representative thereof or heirs, successors and assigns of such persons as the context may require; |
| (ss) | “Proceeding” means any action, cause of action, suit or proceeding, including appeals or applications for review, before or by any Government Authority, arbitrator or arbitration board or any investigation or inquiry by any Government Authority; |
| (tt) | “Purchaser Balance Sheet” has the meaning ascribed thereto in subsection 4.1(f)(i) hereof; |
| (uu) | “Purchaser Common Shares” means the common shares in the capital of the Purchaser; |
| (vv) | “Purchaser Contingent Rights” means the contingent value rights to be issued to the Vendor on the Closing Date, each of which entitles the holder thereof to acquire one Contingent Right Share for no additional consideration upon the satisfaction of the applicable Milestone, on the terms and conditions set forth in the Contingent Right Certificate; |
| (ww) | “Purchaser Financial Statements” means the most recent financial statements of the Purchaser posted to the Purchaser Public Disclosure Record; |
| (xx) | “Purchaser Public Disclosure Record” means all press releases, material change reports, material contracts, management proxy circulars, financial statements, management’s discussion and analysis, prospectuses and all other documents required to be filed under applicable Securities Laws by or on behalf of the Purchaser to its SEDAR+ profile; |
| (yy) | “Representative” means, as to any Person, such Person’s Affiliates and its Affiliates’ respective agents, directors, officers, employees, consultants, advisors (including, without limitation, financial, legal and accounting advisors) and representatives; |
| (zz) | “Securities Laws” means the securities legislation and regulations of, and the instruments, policies, rules, orders, codes, notices and interpretation notes of the applicable securities regulatory authority or applicable securities regulatory authorities of, the applicable jurisdiction or jurisdictions collectively; |
| (aaa) | “Target Financial Statements” means the audited financial statements of Target as at and for the financial years ended December 31, 2024 and 2023. |
| (bbb) | “Target Shares” means all of the 100 ordinary shares of Target registered in the name of Vendor, representing 100% of the issued and outstanding equity interests of Target; |
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| (ccc) | “Tax” means all forms of direct or indirect taxation, duties, levies, charges, fees, withholding (including but not limited to health, welfare, social security, employment and similar payments) and imposts, whether payable directly or indirectly, including, corporate tax, partnership tax (or any other business tax), income tax, value added tax, stamp tax, banking and insurance transactions tax, municipality taxes, social security taxes, customs and other import duties, capital gains tax, withholding tax on securities trading transactions and service arrangements with foreign counterparts, expenses, penalties and interest relating to the foregoing or resulting from a failure to comply with any provisions of any enactment relating to any of the foregoing; |
| (ddd) | “Tax Return” means all returns, information returns, reports, declarations, elections, notices, filings, forms, statements and other documents and including any amendments, schedules, attachments, supplements, appendices and exhibits thereto, made, prepared, filed or required to be made, prepared or filed by Law in respect of Taxes; |
| (eee) | “Tax Ruling” has the meaning ascribed thereto in subsection 7.1(c) hereof; |
| (fff) | “Termination Date” means May 31, 2025; |
| (ggg) | “TSXV” means the TSX Venture Exchange; |
| (hhh) | “TSXV Escrow Agreement” means the Value Security Escrow Agreement and/or the Surplus Security Escrow Agreement (each as defined in accordance with the policies of the TSXV), as applicable; |
| (iii) | “Vendor’s Authorizations” means the Authorizations, approvals and consents which are required by the Vendor to complete the transactions contemplated under this Agreement; and |
| (jjj) | “Vendor Balance Sheet” has the meaning ascribed thereto in section 3.1(h). |
| 1.2 | Schedules |
The following are the Schedules to this Agreement and are incorporated into and form an integral part of this Agreement:
| Schedule A | Contracts |
| Schedule B | Form of Contingent Right Certificate |
| 1.3 | Interpretation |
For the purposes of this Agreement, except as otherwise expressly provided herein:
| (a) | “this Agreement” means this Agreement, including the recitals and Schedules hereto, as it may from time to time be supplemented or amended; |
| (b) | all references in this Agreement to a designated “Part”, “Section”, “Subsection”, or other subdivision, or to a “Schedule”, is to the designated Part, Section, Subsection or other subdivision of or Schedule to this Agreement unless otherwise specifically stated; |
| (c) | the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Part, Section, Subsection or other subdivision or Schedule; |
| (d) | the singular of any term includes the plural and vice versa and the use of any term is equally applicable to any gender; |
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| (e) | the word “or” is not exclusive and the word “including” is not limiting (whether or not non-limiting language such as “without limitation” or “but not limited to” or other words of similar import are used with reference thereto); |
| (f) | all accounting terms not otherwise defined in this Agreement have the meanings assigned to them in accordance with generally accepted accounting principles applicable in British Columbia and/or Canada, applied on a consistent basis with prior years; |
| (g) | except as otherwise provided, any reference to a statute includes and is a reference to such statute and to the regulations made pursuant thereto with all amendments made thereto and in force from time to time, and to any statute or regulations that may be passed which have the effect of supplementing or superseding such statute or regulations; |
| (h) | where the phrase “to the best of the knowledge of” or phrases of similar import are used in this Agreement, it shall be deemed to mean that the Person in respect of whom the phrase is used shall have made reasonable due enquiries; |
| (i) | the headings to the Parts, Sections and Subsections of this Agreement are inserted for convenience only and do not form a part of this Agreement and are not intended to interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof; |
| (j) | any reference to a corporate entity includes and is also a reference to any corporate entity that is a successor to such entity; |
| (k) | the representations, warranties, covenants and agreements contained in this Agreement shall not merge at Closing and shall continue in full force and effect from and after the Closing Date for the applicable period set out in this Agreement; |
| (l) | unless otherwise specifically noted, all references to money in this Agreement are or shall be to money in lawful money of Canada; and |
| (m) | if any action is required to be taken under this Agreement on a day that is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day. |
| 1.4 | Governing Law |
This Agreement shall be construed both in accordance with the Laws of British Columbia and the federal Laws of Canada applicable in British Columbia.
| 1.5 | Severability |
If an arbitrator, court or other tribunal of competent jurisdiction determines that any one or more of the provisions contained in this Agreement is invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of such provision or provisions shall not in any way be affected or impaired thereby in any other jurisdiction and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless in either case as a result of such determination this Agreement would fail in its essential purpose.
| 1.6 | Entire Agreement |
This Agreement constitutes the entire agreement between the Parties and supersedes all prior agreements and understandings, oral or written, by and between any of the Parties with respect to the subject matter hereof, including the letter of intent between the Parties dated January 2, 2025.
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| 1.7 | Waiver |
If any Party breaches any provision of this Agreement, the failure of any other Party to require strict performance shall not constitute a waiver of such breach or otherwise prejudice the other Party from subsequently enforcing the provisions hereof as they relate to the breach in question or any similar or other breach. No waiver of any of the provisions of this Agreement shall be deemed to constitute a waiver of any other provision (whether or not similar) of this Agreement, nor shall such waiver constitute a continuing waiver unless otherwise expressly provided in writing duly executed by the Party to be bound thereby.
PART 2
PURCHASE AND SALE AND RELATED TRANSACTIONS
| 2.1 | Purchase |
On and subject to the terms and conditions of this Agreement, including the representations, warranties and covenants contained herein, the Vendor shall sell, assign, transfer and convey unto the Purchaser, or an assignee of the Purchaser, all of the Vendor’s interest in and to the Target Shares, free and clear of all Encumbrances, , and the Purchaser shall purchase, accept and receive, all right, title and interest in or to the Target Shares on the Closing Date.
| 2.2 | Retention of Liabilities |
The Purchaser will not assume, acquire or otherwise become subject to any Liability or Indebtedness of the Vendor hereunder or in connection with the Transaction.
| 2.3 | Consideration |
As consideration for the sale, assignment, transfer and conveyance by the Vendor to the Purchaser of the Target Shares pursuant to this Agreement, the Purchaser will at Closing:
| (a) | issue 100,000,000 Purchaser Common Shares (the “Payment Shares”) to the Vendor on a prospectus and registration exempt basis at a deemed price per share of $0.171246 as validly issued and fully paid and non-assessable shares, free and clear of any Encumbrances (other than pursuant to applicable statutory or TSXV Escrow Agreement), and shall deliver or cause to be delivered to the Vendor share certificates and/or direct registration statements as directed by the Vendor, representing the Payment Shares; |
| (b) | issue 66,000,000 Purchaser Contingent Rights (the “Payment Rights” and together with the Payment Shares, the “Payment Securities”) to the Vendor, free and clear of any Encumbrances on a prospectus and registration exempt basis, subject to the terms and conditions contained in the Contingent Right Certificate; |
| (c) | the Vendor and the Purchaser hereby agree and acknowledge that the Payment Securities shall only be issued pursuant to available exemptions under applicable Securities Laws on a prospectus exempt basis in Canada, including, without limitation, exemptions available under National Instrument 45-106 - Prospectus Exemptions. Accordingly, the Payment Securities will be subject to a four-month hold period and will bear the following legend: |
“UNLESS PERMITTED UNDER APPLICABLE SECURITIES LEGISLATION, THE HOLDER OF THESE SECURITIES MUST NOT TRADE THE SECURITIES BEFORE THE DATE THAT IS FOUR (4) MONTHS AND A DAY AFTER [THE CLOSING DATE]”;
| (d) | the Vendor recognizes that the Escrowed Securities will be subject to a TSXV Escrow Agreement in accordance with the policies of the TSXV and may bear legends evidencing such escrow; and |
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| (e) | the Vendor further agrees and acknowledges that the Escrowed Securities may be subject to additional escrow in accordance with applicable Securities Laws of non-Canadian jurisdictions, including, but not limited to, the United Kingdom of Great Britain and Northern Ireland and the United States of America, and may bear legends evidencing such escrow. |
| 2.4 | Reconstitution of Board and Management |
In connection with the Transaction, on the Closing Date the Purchaser will:
| (a) | procure the resignations of the incumbent directors of the Purchaser (the “Legacy Directors”) and have such Legacy Directors waive and release any and all claims against the Purchaser in a form acceptable to the Vendor; |
| (b) | fill the vacancies created by the resignations of the Legacy Directors by nominating the following individuals as directors (the “New Directors”): |
Viki Hakmon
Liat Sidi
Tamir Fayerman
Ohad David
Asaf Itzhaik
| (c) | procure the resignations of the incumbent officers of the Purchaser (the “Legacy Officers”) and have such Legacy Officers waive and release any and all claims against the Purchaser in a form acceptable to the Vendor; |
| (d) | fill the vacancies created by the resignations of the Legacy Officers by appointing the following individuals as officers (the “New Officers”): |
Gabi Gabazo (CEO)
Ronen Zalayet (CFO)
| 2.5 | Name Change |
As at the Closing Time, the Purchaser will be renamed “Impact Technologies Corp.” or such other name as the Vendor and Purchaser may determine, acting reasonably (the “Name Change”).
| 2.6 | Finders’ Fees |
A finder’s fee of 5,000,000 Purchaser Common Shares (the “Finders’ Shares”) will be issuable to the Finders on the Closing Date as set out in the table below, subject to TSXV approval and requirements, including any applicable hold periods, and applicable Laws:
| Finder | Number of Finders’ Shares | |||
| Capitalink Ltd. | 3,333,333 | |||
| L.I.A Pure Capital Ltd. | 1,666,667 | |||
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PART 3
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
| 3.1 | Representations and Warranties of the Vendor and the Target |
To induce the Purchaser to enter into and complete the transactions contemplated by this Agreement, the Vendor and the Target represent and warrant to the Purchaser as representations and warranties that are true and correct as at the date of this Agreement and that shall be true and correct on the date of this Agreement and the Closing Date as if such representations and warranties were made on each of the date of this Agreement and the Closing Date (except insofar as such representations and warranties are stated to be given as of a particular date or for a particular period and relate solely to such date or period), on a joint and several basis, as follows:
| (a) | Incorporation and Status of the Vendor – Each of the Vendor and Target is a body corporate duly formed, organized and validly subsisting under the Laws of the jurisdiction of its incorporation or organization and is duly qualified to carry on business in the jurisdictions in which it carries on business or owns assets; |
| (b) | Power and Authority – Each of the Vendor and the Target has all necessary corporate power and capacity to enter into this Agreement and all documents and agreements contemplated herein to which each of the Vendor and the Target is or may become a party, to perform its obligations hereunder and thereunder, and to transfer the legal and beneficial title to and ownership of the Target Shares to the Purchaser, free and clear of all Encumbrances. The execution and delivery of this Agreement by each of the Vendor and the Target has been duly authorized by all necessary corporate action on the part of each of the Vendor and the Target and no other corporate Proceedings on the part of each of the Vendor and the Target are necessary to authorize this Agreement and the transactions contemplated hereunder; |
| (c) | Agreement Valid – This Agreement has been duly executed and delivered by each of the Vendor and the Target and constitutes a legal, valid and binding obligation of each of the Vendor and the Target, enforceable against each of the Vendor and the Target in accordance with its terms, subject to such limitations and prohibitions as may exist or may be enacted in applicable laws relating to bankruptcy, insolvency, liquidation, moratorium, reorganization, arrangement or winding-up and other laws, rules and regulations of general application affecting the rights, powers, privileges, remedies and/or interests of creditors generally; |
| (d) | No Violation – The execution and delivery by each of the Vendor and the Target of this Agreement and performance by each of the Vendor and the Target of its obligations hereunder and the transactions contemplated hereby, including, but not limited to transferring the legal and beneficial title to and ownership of the Target Shares to the Purchaser, will not result in: |
| (i) | a violation or breach of any provision of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, shot-gun, acceleration or cancellation of or under: |
| (A) | the Vendor’s or Target’s constating documents or any resolution of its directors, shareholders, managers and members, as applicable; |
| (B) | to the best of the knowledge of the Vendor and the Target, any Judgment; or |
| (C) | any agreement, arrangement or understanding to which the Vendor and Target is a party or by which it is bound or affected that could reasonably be expected to have a Material Adverse Change on the Target Shares taken as a whole; or |
| (ii) | a contravention of any applicable corporate Law or Securities Law; |
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| (e) | Target Shares – The Vendor owns the Target Shares free and clear of all Encumbrances other than any restrictions on transfer contained in the constating documents of Target. The Target Shares constitute 100% of the issued and outstanding equity interests of Target. The Target Shares are validly issued, fully paid and are non-assessable and there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of shares or other equity interests in the Target to which Target or the Vendor is a party, obligating Target or the Vendor to compel the Target to (i) issue, transfer or sell any Target Shares or other equity interests of Target or securities convertible into or exchangeable or exercisable for such shares or equity interests, (ii) grant, extend or enter into such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, or (iii) redeem or otherwise acquire any such shares or other equity interests. |
| (f) | Target Corporate Records and Documentation – |
| (i) | True, complete and current copies of the Articles of Target have been delivered or made available to the Purchaser; |
| (ii) | True, complete and current copies of the share and shareholder register of Target have been delivered or made available to the Purchaser; |
| (iii) | All corporate documentation of Target, including minutes of the board meetings and shareholder meetings have been duly and properly recorded and stored and are accurate, correct and complete, except as would not be material. All such documentation has been provided to the Purchaser; |
| (iv) | All filings required by applicable Law to be delivered or made by Vendor and Target to company registries, except as would not be material, have been duly delivered or made on a timely basis; and |
| (v) | No registration filings for Target, except as would not be material, are pending and no resolutions have been passed which should, but have not yet been filed for registration; |
| (g) | Consents and Approval – Other than the approval of the TSXV (if applicable) or as required under the Contracts that require consent/approval, there is no requirement for the Vendor or Target to give or receive any Consents and Notices or obtain any Authorization in order for the Vendor or Target, as applicable: |
| (i) | to consummate the transactions contemplated by this Agreement; |
| (ii) | to execute and deliver this Agreement and all of the documents and instruments to be delivered by the Vendor and Target under this Agreement; or |
| (iii) | to render this Agreement legal, valid, binding and enforceable against either; |
| (h) | Material Liabilities – The Target Shares are not subject to material liabilities of any nature (matured or unmatured, fixed or contingent), other than: |
| (i) | those set forth or adequately provided for in the most recent balance sheet and associated notes thereto included in the Target Financial Statements (the “Vendor Balance Sheet”); |
| (ii) | those incurred in the ordinary course of business and not required to be set forth in the Vendor Balance Sheet under IFRS; and |
| (iii) | those incurred in the ordinary course of business since the date of the Vendor Balance Sheet and consistent with past practice; |
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| (i) | Acts of Bankruptcy – Neither the Vendor nor Target has proposed a compromise or arrangement to its creditors generally, has taken any Proceeding with respect to such a compromise or arrangement, has taken any Proceeding to have itself declared bankrupt or wound-up, has taken any Proceeding to have a receiver appointed in respect of any part of its assets and, at present, no encumbrancer or receiver has taken possession of any of its property and no execution or distress is enforceable or levied upon any of its property that is material to the Vendor or Target and no petition for a receiving order in bankruptcy is filed against either; |
| (j) | Litigation – Neither the Vendor nor Target is a party to any Proceedings that could materially affect the business, operations, financial condition of the Target and, to the best of the knowledge of the Vendor, no such Proceedings are contemplated or have been threatened; |
| (k) | Judgments – To the best of the knowledge of the Vendor and the Target, there are no Judgments against Target or the Vendor that are unsatisfied; |
| (l) | Compliance with Laws – Neither the Vendor nor Target is in breach of any Laws which may have a Material Adverse Change on the value of the Target Shares, the Business or the operations concerning the Target or the Business, and has not received any notice or claim of any alleged breach or violation of any Laws; |
| (m) | Accuracy of Books and Records – All material transactions of the Vendor and Target related to the Target Shares have been properly recorded in the Books and Records in all material respects; |
| (n) | Accounting Records – The Vendor and Target has maintained proper accounting records such that an audit can readily be completed on its financial statements; |
| (o) | Title of Target Shares – The Vendor directly owns all interest in and to and has good and marketable title to the Target Shares, free and clear of all Encumbrances, adverse claims, interests of others and demands of any nature or kind whatsoever recorded or unrecorded; |
| (p) | No Adverse Claims – There are no adverse claims or challenges to or against the Vendor’s ownership of interest in or title to the Target Shares or the validity thereof, nor, to the best of the knowledge of the Vendor and the Target, is there any basis therefor. Neither the Vendor nor the Target has received notice from any Person claiming rights or interests in or to the Target Shares or an Encumbrance on the Target Shares and there are no outstanding agreements or rights or options to acquire or purchase the Target Shares or any portion thereof and no Person, firm or corporation has any proprietary or possessory interest in the Target Shares other than the Vendor, and no Person is entitled to any royalty or other payment in the nature of rent or royalty on any of the assets of the Target; |
| (q) | Possession – No Person, other than the Vendor, is entitled to be in possession, including any mortgagee, of the whole or any part of the Target Shares as contemplated under applicable Laws; |
| (r) | Contracts – |
| (i) | Contracts – Except for the Contracts described in Schedule A, the Target is not a party to any Contract related to the Business; and |
| (ii) | Copies of Agreements – True, correct and complete copies of all Contracts have been delivered to the Purchaser; |
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| (s) | Insurance – |
| (i) | Coverage – The Vendor maintains insurance policies with coverages customary to businesses similar to the Business; |
| (ii) | Insurance – All policies of insurance related to the Target or the Business maintained by the Vendor and Target are in good standing; and |
| (iii) | Outstanding Claims – To the best of the knowledge of the Vendor and Target, no threatened or actual material claims against or under any insurance policies of the Vendor or Target providing coverage of the Target and the Business have been made, except for claims that have been settled, satisfied or otherwise terminated, with no remaining liability to the Vendor or Target; |
| (t) | Filing of Reports and Returns – The Vendor and Target have duly filed or made all reports and returns required to be filed by it with any Government Authority and has obtained all permits, licenses, consents, approvals, certificates, registrations and Authorizations (whether from Government Authority or otherwise) which are required in connection with the operations concerning the Business; |
| (u) | Employee – Except for as disclosed by Schedule A, the Vendor and the Target do not currently have any employment, consulting, severance pay, continuation pay, termination pay, change of control or indemnification agreements or other similar agreements of any nature whatsoever (collectively, “Employment Agreements”) between the Vendor, on the one hand, and any current or former shareholder, officer or director of the Vendor, or any other employee or consultant for which such employee or consultant receives a salary of greater than $50,000 or is entitled to any extraordinary, bonus, termination, change of control, indemnification or other payment as a result of or in connection with the transactions contemplated in this Agreement at any time, that are currently in effect; |
| (v) | Collective Bargaining – The Target are not party to any collective bargaining agreement or collective bargaining relationship with any labour union or employee Representative that would apply to Target or the operations concerning the Business. No trade union, council of trade unions, employee bargaining agency or affiliated bargaining agent holds bargaining rights with respect to any of the employees by way of certification, interim certification, voluntary recognition, or succession rights and no union organizing or decertification activities are underway or threatened, and no such activities have occurred in the last five years which would affect Target or the operations concerning the Business. There are no pending nor, to the knowledge of the Vendor, threatened stoppages, strikes, lockouts, walkouts, or other material labour disputes with respect to the Vendor, and no such dispute has occurred in the last five years which would affect Target or the operations concerning the Business; |
| (w) | Employment Law Compliance – The Target has complied in all material respects with all Laws relating to the employment of employees, including provisions thereof relating to wages, hours, overtime, collective bargaining, immigration, vacations, occupational health and safety, workplace safety and the payment of social security and other Taxes and there are no outstanding claims, complaints, investigations or orders under any such Laws; |
| (x) | Material Events – At the Closing Time, there is no Material Adverse Change with respect to the Business, the Target or Target Shares; |
| (y) | Anti-Bribery and Corruption – Neither the Vendor and the Target, nor any director, officer, employee, consultant, Representative or agent of the Vendor and the Target has: |
| (i) | violated any anti-bribery or anti-corruption Laws applicable to the Vendor and/or the Target, including but not limited to the U.S. Foreign Corrupt Practices Act and Canada’s Corruption of Foreign Public Officials Act; or |
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| (ii) | offered, paid, promised to pay, or authorized the payment of any money, or offered, given, promised to give, or authorized the giving of anything of value, that goes beyond what is reasonable and customary and/or of modest value: (a) to any government official, whether directly or through any other person, for the purpose of influencing any act or decision of a government official in his or her official capacity; inducing a government official to do or omit to do any act in violation of his or her lawful duties; securing any improper advantage; inducing a government official to influence or affect any act or decision of any Government Authority; or assisting any Representative of Vendor or Target in obtaining or retaining business for or with, or directing business to, any person; or (b) to any person, in a manner which would constitute or have the purpose or effect of public or commercial bribery, or the acceptance of or acquiescence in extortion, kickbacks, or other unlawful or improper means of obtaining business or any improper advantage. Neither Vendor nor Target nor to the knowledge of the Vendor, any director, officer, employee, consultant, Representative or agent of foregoing, has (i) conducted or initiated any review, audit, or internal investigation that concluded Vendor or Target or any director, officer, employee, consultant, Representative or agent of the foregoing violated such Laws or committed any material wrongdoing, or (ii) made a voluntary, directed, or involuntary disclosure to any Government Authority responsible for enforcing anti-bribery or anti-corruption Laws, in each case with respect to any alleged act or omission arising under or relating to non- compliance with any such Laws, or received any notice, request, or citation from any person alleging non-compliance with any such Laws; |
| (z) | Intellectual Property – The Target owns all right, title and interest in and to, or have validly licensed (and are not in breach of such licenses) all material Intellectual Property Rights related to the Target or the Business. All such Intellectual Property Rights that are owned by or licensed to the Vendor or Target, as the case may be, are sufficient, in all material respects, for conducting the operations concerning the Business. All Intellectual Property Rights owned or leased by the Vendor or Target, as the case may be, are valid and enforceable and the carrying on of the operations concerning the Business and the use by the Vendor or Target of any such Intellectual Property Rights or Technology (as defined below) owned by or licensed by it does not breach, violate, infringe or interfere with any rights of any other Person. To the knowledge of the Vendor, no third party is infringing upon the Intellectual Property Rights owned or licensed by the Vendor or Target. All computer hardware and associated firmware and operating systems, application software, database engines and processed data, and technology infrastructure used in connection with the conduct of the Target (collectively, the “Technology”) are sufficient, in all material respects, for conducting the Business, as presently conducted, and the Vendor owns or has validly licensed or leased (and are not in breach of such licenses or leases) such Technology; |
| (aa) | Representations Regarding Investment in the Payment Securities – The Payment Securities to be received by the Vendor will be issued to the Vendor as principal for its own account, not as a nominee or agent, and not with a view to distribution of any part thereof, and the Vendor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Vendor does not currently have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third party, with respect to any of the Payment Securities; and |
| (bb) | Authorized Conduct – The Vendor has not engaged in an unlawful or unauthorized practice of medicine or other professionally licensed activities through any web sites sponsored or operated, or formerly sponsored or operated, by the Vendor or any other Person. |
| 3.2 | Survival of Representations and Warranties of the Vendor and Target |
The representations and warranties of the Vendor and Target set out in Section 3.1 shall survive the Closing and the payment of the Consideration Securities and shall continue in full force and effect for eighteen (18) months for all matters, subject only to applicable limitation periods imposed by Law.
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| 3.3 | Reliance |
The Vendor and the Target acknowledge and agree that the Purchaser has entered into this Agreement relying on the warranties and representations, covenants and other terms and conditions of this Agreement, provided that in no event will the Vendor or the Target have any liability to the Purchaser with respect to a breach of a representation, covenant or other term and condition of this Agreement that the Purchaser was aware of before the Closing Time.
PART 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
| 4.1 | Representations and Warranties of the Purchaser |
In order to induce the Vendor and the Target to enter into and to consummate the transactions contemplated by this Agreement, the Purchaser represents and warrants to the Vendor and the Target as representations and warranties that are true and correct as at the date of this Agreement and that will be true and correct on each of the date of this Agreement and the Closing Date as if such representations and warranties were made on each of the date of this Agreement and the Closing Date (except insofar as such representations and warranties are stated to be given as of a particular date or for a particular period and relate solely to such date or period), as follows:
| (a) | Incorporation and Status –The Purchaser is a body corporate duly formed, organized and validly subsisting under the Laws of the jurisdiction of its incorporation or organization and is duly qualified to carry on business in the jurisdictions in which it carries on business; |
| (b) | Power and Authority –The Purchaser has all necessary corporate power and capacity to enter into this Agreement and all documents and agreements contemplated herein to which it is or becomes a party, to perform its obligations hereunder and thereunder, and to acquire legal and beneficial title to and ownership of the Target Shares from the Vendor. The execution and delivery of this Agreement by the Purchaser has been duly authorized by all necessary corporate action on the part of the Purchaser and no other corporate Proceedings on the part of the Purchaser is necessary to authorize this Agreement and the transactions contemplated hereunder; |
| (c) | Agreement Valid – This Agreement has been duly executed and delivered by the Purchaser and constitutes a legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to such limitations and prohibitions as may exist or may be enacted in applicable laws relating to bankruptcy, insolvency, liquidation, moratorium, reorganization, arrangement or winding-up and other laws, rules and regulations of general application affecting the rights, powers, privileges, remedies and/or interests of creditors generally; |
| (d) | No Violation – The execution and delivery by the Purchaser of this Agreement and performance by the Purchaser of its obligations hereunder and the transactions contemplated hereby, including, but not limited to, acquiring the legal and beneficial title to and ownership of the Target Shares from the Vendor, will not result in: |
| (i) | a violation or breach of any provision of, constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, shot-gun, acceleration or cancellation of or under: |
| (A) | the Purchaser’s constating documents or any resolution of its directors, shareholders, managers and members, as applicable; |
| (B) | to the best of the knowledge of the Purchaser, any Judgment; or |
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| (C) | any agreement, arrangement or understanding to which the Purchaser is a party or by which it or its properties is bound or affected that, individually or in the aggregate, could reasonably be expected to have a Materially Adverse Effect on the Purchaser; or |
| (ii) | a material breach of any applicable corporate or Securities Law; |
| (e) | Consents and Approval – Other than the approval of the TSXV, there is no requirement for the Purchaser to give or receive any Consents and Notices or obtain any Authorization in order for the Purchaser: |
| (i) | to consummate the transactions contemplated by this Agreement; |
| (ii) | to execute and deliver this Agreement and all of the documents and instruments to be delivered by the Purchaser under this Agreement; or |
| (iii) | to render this Agreement legal, valid, binding and enforceable against it; |
| (f) | Material Liabilities – The Purchaser does not have material liabilities of any nature (matured or unmatured, fixed or contingent), other than: |
| (i) | those set forth or adequately provided for in the most recent balance sheet and associated notes thereto included in the Purchaser Financial Statements (the “Purchaser Balance Sheet”); |
| (ii) | those incurred in the ordinary course of business and not required to be set forth in the Purchaser Balance Sheet under IFRS; and |
| (iii) | those incurred in the ordinary course of business since the date of the Purchaser Balance Sheet and consistent with past practice; |
| (g) | Acts of Bankruptcy – The Purchaser has not proposed a compromise or arrangement to its creditors generally, has not taken any Proceeding with respect to such a compromise or arrangement, has not taken any Proceeding to have itself declared bankrupt or wound-up, has not taken any Proceeding to have a receiver appointed of any part of its assets and, at present, no encumbrancer or receiver has taken possession of any of its property and no execution or distress is enforceable or levied upon any of its property that is material to the Purchaser and no petition for a receiving order in bankruptcy is filed against either; |
| (h) | Litigation – The Purchaser is not a party to any Proceedings that could materially affect its business, operations or financial condition, and, to the best of the knowledge of the Purchaser, no such Proceedings are contemplated or have been threatened; |
| (i) | Judgments – To the best of the knowledge of the Purchaser, there are no Judgments against the Purchaser that are unsatisfied; |
| (j) | Compliance with Laws – The Purchaser is in material compliance with all applicable Laws and has not received any notice of any alleged breach or violation of any such Laws; |
| (k) | Corporate Records and Documentation – |
| (i) | True, complete and current copies of the Articles of the Purchaser have been delivered to the Vendor; |
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| (ii) | A certificate of the registrar and transfer agent of the Purchaser Common Shares, which certifies the number of Purchaser Common Shares issued and outstanding on the date prior to the Closing Date have been delivered to the Vendor; |
| (iii) | All corporate documentation of the Purchaser, including minutes of the board meetings and shareholders’ meetings exists, is safely stored and is correct, except as would not be material. All such documentation has been provided to the Vendor; and |
| (iv) | All filings required by applicable Law to be delivered or made by the Purchaser to company registries, except as would not be material, have been duly delivered or made on a timely basis. |
| (l) | Accuracy of Books and Records – All material transactions of the Purchaser have been properly recorded in its books and records in all material respects; |
| (m) | Accounting Records – the Purchaser has maintained proper accounting records such that an audit can be readily completed on its financial statements; |
| (n) | Filing of Reports and Returns – The Purchaser has duly filed or made all reports and returns required to be filed by it with any Governmental Authorities and obtained all permits, licenses, consents, approvals, certificates, registrations and Authorizations (whether from Government Authority or otherwise) which are required in connection with its business and operations; |
| (o) | Employees – The Purchaser does not currently have any Employment Agreements between the Purchaser, on the one hand, and any current or former shareholder, officer or director of the Purchaser or any other employee or consultant; |
| (p) | Employment Law Compliance – The Purchaser has complied in all material respects with all Laws relating to the employment of employees, including provisions thereof relating to wages, hours, overtime, collective bargaining, immigration, vacation, occupational health and safety and the payment of social security and other Taxes and there are no outstanding claims, complaints, investigations or orders under any such Laws; |
| (q) | Material Events – Except as contemplated by this Agreement, at the Closing Time there is no Material Adverse Change with respect to its business or operations; |
| (r) | Capitalization – The authorized capital of the Purchaser consists of an unlimited number of Purchaser Common Shares, all of which are of a single class and have the same rights attached to them. As of the date hereof, 28,300,000 Purchaser Common Shares were issued and outstanding. All of the outstanding share capital of the Purchaser has been duly authorized and validly issued and are fully paid and non-assessable are free and clear of any pre-emptive rights or restrictions on transfer. |
| (s) | Options and Warrants – The Purchaser has issued (i) 580,000 incentive stock options (“Existing Options”) each exercisable to acquire one (1) Purchaser Common Share upon payment of an exercise price per Purchaser Common Share of $0.10 and (ii) 300,000 common share purchase warrants (the “Existing Warrants”), each exercisable to acquire one (1) Purchaser Common Share upon payment of an exercise price per Purchaser Common Share of $0.10. Except for the Existing Options and Existing Warrants, there are no outstanding subscriptions, options, warrants, calls, convertible securities or other similar rights, agreements or commitments relating to the issuance of shares or other equity interests in Purchaser to which Purchaser is a party, obligating Purchaser to (i) issue, transfer or sell any Purchaser Common Shares or other equity interests of Purchaser or securities convertible into or exchangeable or exercisable for such shares or equity interests, (ii) grant, extend or enter into such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, or (iii) redeem or otherwise acquire any such shares or other equity interests. The execution and delivery by the Purchaser of this Agreement and performance by the Purchaser of its obligations hereunder and the transactions contemplated hereby shall not trigger any adjustment to the entitlements under the Existing Options or the Existing Warrants (e.g., each Existing Option shall continue to entitle the holder to acquire one (1) Purchaser Common Share up to an aggregate of 580,000 Purchaser Common Shares and each Existing Warrant shall continue to entitle the holder to acquire one (1) Purchaser Common Share up to an aggregate of 300,000 Purchaser Common Shares) or trigger any cash payments to holders thereunder. |
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| (t) | Listing of Payment Shares – The Purchaser Common Shares are listed and posted for trading on the TSXV and, to the knowledge of the Purchaser, other than in connection with the Transaction, no order ceasing or suspending trading in any securities of the Purchaser or prohibiting the sale or issuance of the Payment Securities or the trading of any of the Purchaser’s issued securities has been issued and no (formal or informal) Proceedings for such purposes have been threatened or, to the knowledge of the Purchaser, are pending except in connection with this Agreement; |
| (u) | Regulatory Matters – The Purchaser is a “reporting issuer” under the Securities Laws of each of the provinces of British Columbia and Alberta and is not noted as being in default on the list of reporting issuers maintained under the securities legislation in such provinces, and in particular, without limiting the foregoing, the Purchaser is in material compliance with its disclosure obligations under Securities Laws and, except with respect to this Agreement and the transactions contemplated herein, there is no material change relating to the Purchaser which has occurred and with respect to which the requisite material change report has not been filed with the applicable securities regulators. All material filings and fees due and payable by the Purchaser pursuant to Securities Laws and general corporate law have been made and paid. The Purchaser has not taken any action to cease to be a reporting issuer in any jurisdiction in which it is a reporting issuer, and has not received any notification from a securities regulator seeking to revoke the reporting issuer status of the Purchaser; |
| (v) | Resale of Securities – The Payment Securities will be subject to a TSXV Escrow Agreement as required by the TSXV and a statutory hold period in accordance with Section 2.3(d) hereof and will bear legends accordingly; |
| (w) | Issue of Consideration Securities – The execution of this Agreement and the issue by the Purchaser to the Vendor of the Consideration Securities will be exempt from the registration and prospectus requirements of Securities Laws in Canada; |
| (x) | Issue of Payment Securities is Valid – All necessary corporate action has been taken or will have been taken prior to Closing to authorize the issue and the delivery of the Payment Securities at Closing and the Payment Shares will be validly issued as fully paid and non-assessable shares and the Purchaser has reserved for issuance. There are 28,300,000 Purchaser Common Shares issued and outstanding, an aggregate of 580,000 Existing Options issued and outstanding (each such Existing Option exercisable to acquire one (1) Purchaser Common Share at an exercise price per share of $0.10) and an aggregate of 300,000 Existing Warrants issued and outstanding (each such Existing Warrant exercisable to acquire one (1) Purchaser Common Share at an exercise price per share of $0.10) and each such Purchaser Common Share has and will have the same rights and entitlements as the Payment Shares and the Contingent Right Shares. The Purchaser Common Shares, Existing Options and Existing Warrants are free and clear of Encumbrances. At the Closing Time, all conditions required for the conditional listing of the Payment Securities on the TSXV will have been fulfilled (subject to standard post-Closing filings with the TSXV); |
| (y) | No Cease Trade Order – No order ceasing or suspending trading in the securities of the Purchaser nor prohibiting the sale of such securities has been issued to or in respect of the Purchaser or its directors, officers or promoters and to the best of the knowledge of the Purchaser, no investigations or Proceeding for such purposes are pending or threatened, other than the halting of the Purchaser Common Shares by the TSXV in connection with the Transaction; |
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| (z) | Taxes – The Purchaser has paid all Taxes shown as due and payable by it on all of its Tax returns and has paid all assessments and reassessments it has received in respect of Taxes. The Purchaser has paid all Tax installments due and payable by it. There are no assessments or reassessments of Taxes that have been issued and are outstanding. The Purchaser is not negotiating any assessment or reassessment with any Governmental Authority. The Purchaser is not aware of any liabilities for Taxes or any grounds for an assessment or reassessment, including any liability to pay Taxes in connection with this Agreement; |
| (aa) | Subsidiaries – The Purchaser does not have any subsidiaries; and |
| (bb) | Name Change – The Name Change does not require the approval of any party other than the TSXV. |
| 4.2 | Fees |
Other than the Finders, there is no investment banker, broker or other intermediary or advisor that has been retained by or is authorized to act on behalf of the Purchaser, who might be entitled to any fee, commission or reimbursement of expenses on Closing.
| 4.3 | Other Representations |
All statements contained in any certificate or other instrument delivered by or on behalf of the Purchaser pursuant hereto or in connection with the transactions contemplated by this Agreement shall be deemed to be representations and warranties by the Purchaser hereunder.
| 4.4 | Survival |
The representations and warranties of the Purchaser hereunder shall survive the Closing and the purchase of the Target Shares, and, notwithstanding the Closing and the purchase of the Target Shares, the representations and warranties of the Purchaser shall continue in full force and effect for the benefit of the Vendor and Target for a period of eighteen (18) months from the Closing Date.
| 4.5 | Reliance |
The Purchaser acknowledges and agrees that the Vendor and Target have entered into this Agreement relying on the warranties and representations, covenants and other terms and conditions of this Agreement provided that in no event will the Purchaser have any liability to the Vendor with respect to a breach of a representation, covenant or other term and condition of this Agreement that the Vendor was aware of before the Closing Time.
PART
5
COVENANTS
| 5.1 | Covenants of the Vendor and Target |
Each of the Vendor and the Target hereby covenants and agrees that, during the period from the date of this Agreement to the Closing Time, the Vendor and the Target will do the following:
| (a) | Access – Permit the Purchaser and each of its employees, agents, technical and professional advisors and other Representatives, between the date hereof and the Closing Date, upon reasonable advance notice to the Vendor or the Target of such proposed access, to have reasonable access during normal business hours, without interruption to the Business being carried out by the Vendor and/or the Target on the premises, to the premises and such employees, all as may be authorized by the Vendor and/or the Target, as applicable, for the purposes of accessing and reviewing the Books and Records, Business and Technical Information and the assets of the Vendor or the Target as they pertain to the Business, and shall furnish, and require that the Vendor’s principal bankers, independent auditors, counsel, technical advisors and other advisors furnish, to the Purchaser, such financial, technical and operating data and other information with respect to the Target, as the Purchaser shall from time to time reasonably request to enable confirmation of the matters represented and warranted in Part 3; |
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| (b) | Confer – Confer on a regular basis with the Purchaser with respect to operational matters concerning the Target and promptly advise the Purchaser, orally and in writing, of any materially adverse change in respect of the Target or the Business and of any material Proceedings (or communications indicating that Proceedings may be contemplated) with respect thereto; |
| (c) | Conduct Business in Ordinary and Usual Course – Except as otherwise provided in this Agreement, each of the Target and the Vendor shall: |
| (i) | conduct its business relating to the Target and the Business in the ordinary and usual course consistent with past practices; |
| (ii) | not transfer, sell, consume or otherwise dispose of any part of the Target Shares; |
| (iii) | not appoint or permit the appointment of a liquidator, receiver, trustee in bankruptcy, or similar official in respect of the Target Shares; |
| (iv) | not request an order by a Government Authority for the winding-up or dissolution of the Vendor or Target; |
| (v) | except in the ordinary course of business, not, without the prior written consent of the Purchaser, which shall not be unreasonably withheld, delayed or conditioned: |
| (A) | enter into, modify, amend or terminate any Contracts or Authorizations related to the Business or incur any liability, except in the ordinary course of business and which is not material; |
| (B) | issue or agree to issue any debt, equity or other securities in Target; |
| (C) | borrow money or incur any Indebtedness for money borrowed in Target, except in the ordinary course of business; |
| (D) | make loans, advances or other payments which would affect the operations relating to the Target or the Business, other than as required in connection with this Agreement; |
| (E) | distribute, transfer, sell, assign or encumber in any way whatsoever any of the Target Shares; |
| (F) | alter or amend the articles or by-laws or any other constating documents of the Target in any manner, except as required to give effect to the matters contemplated by this Agreement; or |
| (G) | other than in connection with this Agreement, enter into any transaction or material Contract or engage in any business enterprise or activity different from that carried on by the Target in the ordinary course of business; |
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| (d) | Continue Insurance – Use its commercially reasonable efforts to maintain all existing policies of insurance on the Target; |
| (e) | Comply with Laws – Comply with all Laws and all Authorizations governing or affecting the Target and/or the Business; |
| (f) | Pay Liabilities – Pay and discharge all Liabilities or obligations of the Vendor (as they relate to the Target Shares) and Target in the ordinary and usual course of business consistent with past business practice, except for such liabilities or obligations as may be contested in good faith; |
| (g) | No Breach – Not take any action or omit to take any action which would, or would reasonably be expected to, result in a breach of or render untrue any representation, warranty, covenant, agreement, term or other obligation of the Vendor contained herein; |
| (h) | Consents, Notices and Authorizations – Use commercially reasonable efforts to ensure that all Consents and Notices have been received or given; and those Consents and Notices which have already been received or given be maintained effective, as the case may be, prior to the Closing Date and that all Authorizations required to permit the Purchaser to carry on the Business as currently carried on have been obtained prior to the Closing Date, all in form and substance satisfactory to the Purchaser, acting reasonably; |
| (i) | Preserve Business – Use commercially reasonable efforts carry on the Business and operate Target as currently conducted, in each case in all material respects; |
| (j) | Maintenance of Books and Records – Maintain the Books and Records in the usual, regular and ordinary manner, consistent with accepted accounting practices; |
| (k) | Notice of Material Developments – Notify the Purchaser as soon as the Vendor or the Target has determined that a state of facts exists which results in, or can reasonably be expected to result in: |
| (i) | any representation or warranty of the Vendor or the Target set forth in this Agreement being untrue or incorrect in any material respect; |
| (ii) | the breach of any covenant of the Vendor or the Target set forth in this Agreement; |
| (iii) | the non-fulfillment of any condition for the benefit of the Purchaser set forth in this Agreement; |
| (iv) | any material change in the operations, Business, Target, Target Shares, liabilities, ownership, capital or financial position or condition of the Target, or change in a material fact that has a Material Adverse Change on, or would reasonably be expected to have a Material Adverse Change on, the Business, Target or Target Shares, except for the transactions contemplated by this Agreement; |
| (v) | any notice or other communication from any Person alleging that the Consent (or waiver, permit, exemption, order, approval, agreement, amendment or confirmation) of such Person is required in connection with this Agreement or the Transaction (and contemporaneously provide a copy of any such notice or communication to the other Party); |
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| (vi) | any notice or other communication from any Government Authority in connection with this Agreement or the Transaction (and contemporaneously provide a copy of any such notice or communication to the other Party); or |
| (vii) | any material legal or regulatory Proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting such Party, in each case, solely to the extent that it relates to this Agreement, or the Transaction; |
| (l) | Necessary Steps – Take all actions, steps and Proceedings that are necessary or desirable to approve or authorize, or to validly and effectively undertake, the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement; |
| (m) | Pay Liabilities – Pay and discharge all Liabilities and obligations of the Target and the Business in the ordinary and usual course of business consistent with past business practice, except for liabilities or obligations as may be contested in good faith; |
| (n) | Maintenance of Books and Records – Maintain the books and records of the Target in the usual, regular and ordinary manner, consistent with accepted accounting practices; |
| (o) | Regulatory Approvals – Use commercially reasonable efforts to execute all undertakings and comply with all requirements of the applicable Securities Laws, the TSXV, and any other Persons or Government Authority, which may be necessary or reasonable to obtain the necessary approvals under applicable laws and stock exchange requirements to the transactions contemplated hereunder; |
| (p) | Representations and Warranties – Use commercially reasonable efforts to ensure that, immediately prior to the Closing Time, the representations and warranties of the Vendor and Target set out in this Agreement will be true and correct in all material respects; and |
Notwithstanding anything set out in this Section 5.1, the Vendor may refrain from taking any action required to be taken by, or take any action restricted by, this Section 5.1 with the prior written consent of the Purchaser.
| 5.2 | Covenants of the Purchaser |
The Purchaser covenants and agrees with the Vendor and Target that during the period from the date of this Agreement to the Closing Time, the Purchaser shall do the following:
| (a) | Access – Permit the Vendor, the Target and each of its respective employees, agents, technical and professional advisors and other Representatives, between the date hereof and the Closing Date, upon reasonable advance notice to the Purchaser of such proposed access, to have reasonable access during normal business hours, without interruption to any business being carried out by the Purchaser on the premises, to the premises and such employees, all as may be authorized by the Purchaser, for the purposes of accessing and reviewing the books and records of the Purchaser, and shall furnish, and require that the Purchaser’s principal bankers, independent auditors, counsel, technical advisors and other advisors furnish, to the Vendor, such financial, technical and operating data and other information as the Vendor shall from time to time reasonably request to enable confirmation of the matters represented and warranted in Part 4; |
| (b) | Conduct of Business in Ordinary and Usual Course – Except as otherwise provided in this Agreement: |
| (i) | conduct its business in the ordinary and usual course consistent with past practices and in conformance with good practices; |
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| (ii) | not, without the prior written consent of the Vendor: |
| (A) | dispose of any of its properties or assets out of the ordinary course of business; |
| (B) | appoint or permit the appointment of a liquidator, receiver, trustee in bankruptcy, or similar official; |
| (C) | request an order by a Government Authority for the winding-up or dissolution of the Purchaser; |
| (D) | issue any debt, equity or other securities in the Purchaser; |
| (E) | borrow money or incur any Indebtedness for money borrowed in Purchaser, except in the ordinary course of business; |
| (F) | make loans, advances or other payments, other than in the ordinary course of business or as required in connection with this Agreement; |
| (G) | pay any dividends, distribute, transfer, sell, assign or encumber in any way whatsoever any of its assets; |
| (H) | alter or amend the articles or any other constating documents of the Purchaser in any manner, except as required to give effect to the matters contemplated by this Agreement; or |
| (I) | other than in connection with this Agreement, enter into any transaction or material Contract or engage in any business enterprise or activity different from that carried on by the Purchaser in the ordinary course of business; |
| (c) | Notice of Material Developments – Notify the Vendor and the Target as soon as the Purchaser or any of its directors, officers, employees, agents or technical and professional advisors have determined that a state of facts exist which results in, or will result in: |
| (i) | any representation or warranty of the Purchaser set forth in this Agreement being untrue or incorrect in any material respects; |
| (ii) | the breach of any covenant of the Purchaser set forth in this Agreement; |
| (iii) | the non-fulfillment of any conditions for the benefit of the Vendor set forth in this Agreement; |
| (iv) | any material change in the business, operations, assets, liabilities, ownership, capital or financial position of the Purchaser, or change in a material fact that has a Material Adverse Change on, or would reasonably be expected to have a Material Adverse Change on, the Purchaser, except for the transactions contemplated by this Agreement; |
| (v) | any notice or other communication from any Person alleging that the Consent (or waiver, permit, exemption, order, approval, agreement, amendment or confirmation) of such Person is required in connection with this Agreement or the Transaction (and contemporaneously provide a copy of any such notice or communication to the other Party); |
| (vi) | any notice or other communication from any Government Authority in connection with this Agreement or the Transaction (and contemporaneously provide a copy of any such notice or communication to the other Party); or |
| (vii) | any material legal or regulatory Proceedings commenced or, to its knowledge, threatened against, relating to or involving or otherwise affecting such Party or that relate to this Agreement, or the Transaction; |
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| (d) | Necessary Steps – Take all necessary actions, steps and Proceedings to approve or authorize, or to validly and effectively undertake, the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement; |
| (e) | Comply with Laws – Comply with all Laws and all Authorizations, governing or affecting the business and operations of the Purchaser, except for failures to comply which in the aggregate would not have a Material Adverse Change on the business and operations of the Purchaser, as applicable; |
| (f) | Pay Liabilities – Pay and discharge all Liabilities and obligations of the Purchaser in the ordinary and usual course of business consistent with past business practice, except for liabilities or obligations as may be contested in good faith; |
| (g) | No Breach – Not take any action or omit to take any action which would, or would reasonably be expected to, result in a breach of or render untrue any representation, warranty, covenant, agreement, term or other obligation of the Purchaser contained herein; |
| (h) | Consents, Notices and Authorizations – Use commercially reasonable efforts to ensure that all Consents and Notices have been received or given; and those Consents and Notices which have already been received or given to be maintained effective, as the case may be, prior to the Closing Date; |
| (i) | Preserve Business – Use commercially reasonable efforts to carry on the business and operations of the Purchaser as currently conducted; |
| (j) | Maintenance of Books and Records – Maintain the books and records of the Purchaser in the usual, regular and ordinary manner, consistent with accepted accounting practices; |
| (k) | Free Cash – As of immediately prior to the Closing Date, the Purchaser shall have no less than CAN$700,000 free cash (after deducting the Transaction expenses). For the purposes of this covenant and Section 6.3(e), “free cash” shall mean cash and cash equivalents that (a) are not subject to any Encumbrances, or restrictions on use, and are readily available for the Purchaser’s general corporate purposes, and (b) are net of any Liabilities of the Purchaser, including for any professional or advisory services rendered to the Purchaser prior to or on the Closing Date. The Purchaser shall provide evidence satisfactory to the Vendor, at least three (3) of Business Days prior to the Closing Date, demonstrating compliance with this covenant. Such evidence may include, but is not limited to, bank statements, financial statements, or a certificate from the Purchaser’s Chief Financial Officer; |
| (l) | Regulatory Approvals – Use commercially reasonable efforts to assist the Vendor to obtain and comply with all requirements of any Persons or Government Authority, which may be necessary or reasonable to obtain the necessary approvals under applicable Laws to the transactions contemplated hereunder; and |
| (m) | Representations and Warranties – Use commercially reasonable efforts to ensure that, immediately prior to Closing Time, the representations and warranties of the Purchaser set forth in this Agreement will be true and correct in all material respects. |
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| 5.3 | Mutual Covenants |
Each of the Parties covenants and agrees that, as applicable, during the period from the date of this Agreement to Closing Time, such Party shall:
| (a) | Satisfy Conditions – Use all commercially reasonable efforts to satisfy or cause the satisfaction of the mutual conditions precedent that are set out in Part 7 (and in the case of the Vendor, the conditions precedent that are set out in Part 8, and in the case of the Purchaser, the conditions precedent that are set out in Part 9) and to take, or cause to be taken, all other actions and do, or cause to be done, all other things necessary, proper or advisable under applicable Laws to consummate the transactions contemplated by this Agreement, including using commercially reasonable efforts to: |
| (i) | ensure that all Consents and Notices are given or received; and those Consents and Notices which have already been received or given be maintained effective, as the case may be; |
| (ii) | there shall have been no action taken under any Law or by any government or Government Authority which makes it illegal or otherwise directly or indirectly restrains, enjoins or prohibits the completion of the transactions contemplated in this Agreement; |
| (b) | Valuation – The Purchaser will have obtained or caused the Vendor or Target to obtain and provide to the Purchaser, a valuation report (the “Valuation Report”) (in a form acceptable to the Parties acting reasonably), on a reliance basis, determining the fair market value of the Target Shares (the “Target FMV”). The Valuation Report will evidence that the Target FMV is equal or greater than $14,000,000. |
| (c) | Cooperation – Use all commercially reasonable efforts to cooperate with each other Party in connection with the performance by the other Party of its obligations under this Part 5; |
| (d) | Other Actions – Use all commercially reasonable efforts to ensure compliance with all the conditions in Parts 7, 8 and 9; and |
| (e) | Rectification of Corporate Records - The Parties and their respective officers and directors will, in consultation and cooperation with one another, rectify all material deficiencies and irregularities in the corporate records, record-keeping, resolutions, minutes, registers and other similar and related corporate documents customarily maintained in a body corporate’s minute books as such deficiencies and irregularities are identified by the other Party, as soon as practicable following the execution of this Agreement and, in any event, prior to the Closing Date, to the satisfaction of the other Party, acting reasonably. |
The foregoing conditions are for the mutual benefit of the Parties hereto and may be waived by mutual consent of the Vendor, the Target, and the Purchaser in writing at any time. If any of such conditions shall not be complied with or waived as aforesaid on or before the Closing Date or, if earlier, the date required for the performance thereof, then, subject to Section 13.3, any Party hereto may terminate this Agreement by written notice to the other in circumstances where the failure to satisfy any such condition is not the result, directly or indirectly, of a breach of this Agreement by such rescinding Party hereto.
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| 5.4 | Alternative Transaction |
The Vendor, the Target and the Purchaser hereby covenant that, from the date hereof until the earlier of: (i) the Closing Time; (ii) this Agreement having been terminated pursuant to and in accordance with Part 12; and (iii) the Termination Date, it will:
| (a) | not directly or indirectly through any Representative take any action of any kind which could reasonably be construed to reduce the likelihood of success of consummating the Transaction, including but not limited to any action to continue, solicit, initiate, assist or encourage enquiries, submissions, proposals or offers from any other Person, entity or group relating to, and will not participate in any discussions or negotiations regarding or furnish to any other Person, entity or group any information with respect to, or otherwise cooperate in any way with or assist or participate in, or facilitate or encourage any effort or attempt with respect to an Alternative Transaction; |
| (b) | promptly notify the other Parties if it becomes aware that any proposal in respect of any Alternative Transaction has been made, or it or any of its Representatives has received any inquiry from or contact with any Person with respect thereto, and advise the Purchaser of the content of any such proposal and, if written, provide the Purchaser with copies; and |
| (c) | cease any and all negotiations with any third party in respect of any Alternative Transaction, and not release any such third party from its obligations under any confidentiality agreement or other similar agreement. |
| 5.5 | Facilitation of Transaction |
Without limiting Section 5.4, each of the Vendor, the Target and the Purchaser will use commercially reasonable efforts to satisfy each of the conditions precedent to be satisfied by it and to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary, proper or advisable under applicable Laws, including applicable Securities Laws, to permit the completion of the Transaction in accordance with the provisions of this Agreement and other applicable agreements and instruments, and to consummate and make effective all other transactions contemplated in and by this Agreement and other applicable agreements and instruments, and each will cooperate with each other, to the extent applicable, in connection with the foregoing, including:
| (a) | executing and delivering the applicable Closing Documents on or before the first Business Day preceding the Closing Date; |
| (b) | preparing the Filing Statement; |
| (c) | furnishing to one another, on a timely basis, all such information as may be required to prepare and submit the Filing Statement to the TSXV and complete the other actions required under this Section 5.5, and each hereby covenants that no information so furnished by it in writing in connection with such actions or otherwise in connection with the consummation of this Agreement will contain any untrue statement of a material fact or omit to state a material fact required to be stated in order to make any information so furnished, in light of the circumstances in which they were made, not misleading; |
| (d) | ensuring that the information relating to it disclosed in the Filing Statement will not contain any misrepresentation; |
| (e) | promptly notifying one another if at any time before or after the Closing Time either Party becomes aware that the Filing Statement contains a misrepresentation or any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances under which they were made and cooperate in the preparation of a supplement or amendment to the Filing Statement, as the case may be, that corrects any such misstatement or omission; |
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| (f) | ensuring that the Filing Statement is prepared in compliance with the applicable provisions of the rules of TSXV and applicable Securities Laws; |
| (g) | cooperate with each other in connection with the preparation of documentation for submission to TSXV and any other applicable regulatory authorities and keep each other informed of any requests or comments made by regulatory authorities in connection with such documentation; |
| (h) | using commercially reasonable efforts to provide notice to, and obtain all necessary Consents and Authorizations, the failure of which to obtain would prevent the Parties from effecting the Transaction or would result in a Material Adverse Change on the value of the Target Shares, the Business or the operations concerning the Purchaser; |
| (i) | using commercially reasonable efforts to effect or cause to be effected all necessary registrations and filings and submissions of information requested of it by any Government Authority, the failure of which to obtain would prevent the Parties hereto from effecting the Transaction or would result in a Material Adverse Change on the value of the Target Shares, the Business or the operations concerning the Target or the Purchaser; |
| (j) | using commercially reasonable efforts to lift or rescind any injunction or restraining order or other order which may be entered against it, which injunction or order would prevent the Parties hereto, as applicable, from completing the Transaction; |
| (k) | cooperating with each other in connection with any lawsuits or legal Proceedings brought against any party or any Affiliate thereof challenging this Agreement, the completion of the Transaction and keeping each other informed of any material information that becomes known to them in connection therewith; |
| (l) | complying promptly with all requirements imposed by Law on its or its subsidiaries with respect to this Agreement; and |
| (m) | not taking any action, or refraining from taking any commercially reasonable action, or permitting any action to be taken or not taken, which is inconsistent with this Agreement or which would reasonably be expected to prevent, delay or otherwise impede the consummation of the Transaction, as applicable. |
| 5.6 | Confidentiality |
| (a) | The Parties will, and will cause their Representatives to, treat any data and information obtained with respect to the Parties, or any of their Affiliates or associates, from any Representative, officer, director or employee of the Parties, or from any books or records of the Parties, confidentially and with commercially reasonable care and discretion, and will not disclose any such information to third parties; provided, however, that the foregoing shall not apply to: (i) information in the public domain or that becomes public through disclosure in accordance with applicable Law, (ii) information that is required to be disclosed by applicable Law, (iii) information that is disclosed by Parties or their Affiliates or associates, on a confidential basis, to any of their respective agents, accountants, attorneys and prospective lenders or investors in connection with or related to the consummation this Agreement, including the financing of this Agreement, or (iv) any information that is disclosed by the Parties after the Closing Time. |
| (b) | In the event that this Agreement is terminated, the Vendor and the Purchaser, upon the written request of the other, will, and will cause their Representatives to, promptly deliver to the other any and all documents or other materials furnished by the disclosing Party or their respective Affiliates in connection with this Agreement without retaining any copy thereof. In the event of such request, all other documents, whether analyses, compilations or studies, that contain or otherwise reflect the information furnished by the disclosing Party, shall be destroyed by the receiving Party or shall be returned and such receiving Party shall confirm in writing that all such materials have been returned or destroyed. No failure or delay by the Parties in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. |
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| (c) | The Vendor and the Purchaser recognize and agree that in the event of a breach by either of this section, money damages would not be an adequate remedy for such breach and, even if money damages were adequate, it would be impossible to ascertain or measure with any degree of accuracy the damages sustained therefrom. Accordingly, if there should be a breach or threatened breach by the receiving Party of the provisions of this section, the disclosing Party, shall be entitled to an injunction restraining any breach without showing or proving actual damage sustained by such disclosing Party. Nothing in the preceding sentence shall limit or otherwise affect any remedies that the non-violating Party may otherwise have under applicable Law. |
| 5.7 | Public Announcements |
Neither the Purchaser nor the Vendor will (and each such Party will use commercially reasonable efforts to cause its Representatives not to), issue any press release, make any public announcement or public filing, conduct any interviews, or furnish any written statement to its employees or shareholders generally concerning the or the Transaction or this Agreement without the consent of the other Party (such consent not to be unreasonably withheld), except to the extent required by applicable Laws or the rules of the TSXV or the NASDAQ as applicable (and in any such case, the Purchaser or the Vendor, as applicable, will, to the extent consistent with timely compliance with such requirement, consult with the other Party prior to making the required release, announcement, filing or statement).
| 5.8 | Notification of Certain Matters |
Between the date hereof and the Closing Time, the Parties will give prompt notice in writing to each other of:
| (a) | any information that indicates that any of its representations or warranties contained herein was not true and correct as of the date hereof or will not be true and correct at and as of the Closing Time with the same force and effect as if made at and as of the Closing Time (except for changes specifically permitted or contemplated by this Agreement), |
| (b) | the occurrence of any event that will result, or has a reasonable prospect of resulting, in the failure of any condition specified in Part 7, 8, or 9 hereof to be satisfied, and |
| (c) | any notice or other communication from any third party alleging that the Consent of such third party is or may be required in connection with the Transaction, or that the Transaction may otherwise violate the rights of or confer remedies upon such third party. |
| 5.9 | Consents |
Vendor and the Purchaser will use their commercially reasonable efforts to obtain all required third party Consents and Notices, Authorizations, permits, filings, assignments or waivers and amendments or terminations to any instrument or agreement and take such other measures as may be necessary to fulfil their obligations hereunder and to carry out the Transaction, including obtaining any shareholder approvals, Consents or agreements as may be required under applicable Laws the rules and policies of the TSXV and their constating documents to be able to fulfill their obligations hereunder and in connection with the delivery of all of the Closing Documents, as applicable.
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| 5.10 | Target Financial Statements |
The Target hereby agrees that it will prepare and provide the Target Financial Statements in accordance with IFRS and ensure that:
| (a) | such Target Financial Statements present fairly in accordance with IFRS the consolidated financial position, results of operations and changes in financial position of the Vendor and Target as of the date thereof and for the periods indicated therein; |
| (b) | such Target Financial Statements reflect appropriate and adequate reserves in respect of contingent liabilities (including Taxes), if any, of the Vendor; |
| (c) | with respect to the Target Financial Statements and any subsequent financial reporting periods for which financial statements of the Vendor will be required to be included in the Filing Statement, ensure such annual financial statements are audited or, if subsequent interim financial statements are required, such subsequent interim financial statements are reviewed, as applicable pursuant to Policy 2.4 – Capital Pool Companies of the TSXV Corporate Finance Manual, by an independent public accountant in accordance with the CPA Canada Handbook; |
| (d) | with respect to material Contracts to which the Vendor or Target is a party and commitments for the sale of goods or the provision of services by the Vendor, such Target Financial Statements contain and reflect adequate reserves for all reasonably anticipated material losses and costs and expenses in excess of expected receipts; and |
| (e) | any Material Adverse Change in the financial position of the Vendor subsequent to the date of the Target Financial Statements will be adequately disclosed to the Purchaser and reflected in the subsequent Target Financial Statements, as necessary. |
PART
6
CLOSING
| 6.1 | Closing Date and Location |
The transactions contemplated by this Agreement shall be completed at Closing Time on the Closing Date at the offices of MLT Aikins LLP, counsel to the Purchaser, at its offices located in Vancouver, British Columbia, or at such other time or at such other location as may be mutually agreed upon in writing by the Parties. In this regard the Parties shall use their commercially reasonable efforts to cause the Closing Date to occur on or before the Termination Date.
| 6.2 | Closing |
At the Closing:
| (a) | the Purchaser shall issue the Payment Securities to the Vendor and the Finders’ Shares to the Finders; |
| (b) | the Purchaser shall deliver to, or cause to be delivered to, the Vendor the documents set forth in Section 6.3; and |
| (c) | the Vendor and the Target will deliver, or cause to be delivered, to the Purchaser the documents set forth in Section 6.4. |
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| 6.3 | Deliveries by Purchaser at Closing |
At or before Closing Time, the Vendor and/or the Vendor’s counsel shall have received from the Purchaser the following:
| (a) | a certificate of the Purchaser, duly executed by a senior officer of the Purchaser, on behalf of the Purchaser and not in such officer’s personal capacity, stating that, except as disclosed in such certificate, |
| (i) | the representations and warranties of Purchaser contained in this Agreement are true, accurate and complete in all material respects as at Closing Time, |
| (ii) | the Purchaser’s covenants and obligations hereunder has been satisfied and performed, and |
| (iii) | each of the conditions for the benefit of the Purchaser set forth in Section 8.1 has been satisfied or waived; |
| (b) | a certificate of good standing of the Purchaser; |
| (c) | a duly executed Contingent Right Certificate representing 66,000,000 Purchaser Contingent Rights delivered to the Escrow Agent appointed under the TSXV Escrow Agreement; |
| (d) | a direct registration statement issued by Endeavor Trust Corporation to each of the Finders representing the Finders’ Shares issuable to each Finder; |
| (e) | evidence satisfactory to the Vendor that as of three (3) Business Days prior to the Closing Date, the Purchaser has no less than CAN$700,000 in free cash; |
| (f) | certified copies of the resolutions of the directors and shareholders of the Purchaser evidencing the approval of this Agreement and all of the transactions of the Purchaser contemplated hereunder; |
| (g) | a copy of the share certificates or direct registration statements representing the Payment Shares registered in the name of the Vendor and delivered to the Escrow Agent appointed under the TSXV Escrow Agreement; |
| (h) | resignations and releases in writing from each of the Legacy Directors and Legacy Officers of the Purchaser, in a form acceptable to the Vendor; |
| (i) | certified copies of the resolutions of the Purchaser filling vacancies and appointing the New Directors and New Officers as contemplated in Section 2.4; |
| (j) | certified copies of the resolutions of the Purchaser changing its name to “Impact Technologies Corp.” or such other name as contemplated by Section 2.5; |
| (k) | all necessary Consents and Notices and Authorizations, including, if applicable, the approval of the TSXV, as the case may be, required to enable the transfer of the Target Shares to the Purchaser as provided for in this Agreement and to permit the Purchaser to carry on the Business as currently conducted, all in form and substance satisfactory to the Purchaser, acting reasonably; |
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| (l) | the TSXV Escrow Agreement duly executed by the Purchaser; and |
| (m) | such other documents, certificates, opinions and deliveries as the Parties mutually consider reasonably necessary or desirable in connection with this Agreement. |
| 6.4 | Deliveries by Vendor at Closing |
At or before Closing Time, the Purchaser, and the Purchaser’s counsel shall have received from the Vendor the following:
| (a) | a certificate of the Vendor and the Target, duly executed by a senior officer of the Vendor and the Target, on behalf of the Vendor and the Target and not in such officer’s personal capacity, stating that, except as disclosed in such certificate, |
| (i) | the representations and warranties of each of the Vendor and Target contained in this Agreement are true, accurate and complete in all material respects as at Closing Time, |
| (ii) | each of the Vendor’s and the Target’s covenants and obligations hereunder has been satisfied and performed, and |
| (iii) | each of the conditions for the benefit of the Vendor and the Target set forth in Section 9.1 has been satisfied or waived; |
| (b) | the TSXV Escrow Agreement duly executed by the Vendor and the Escrowed Securityholders; |
| (c) | certified copies of the resolutions of the directors and shareholders, as the case may be, of the Vendor and the Target evidencing that each of the Vendor and the Target has approved this Agreement and all of the transactions of the Vendor and Target contemplated hereunder including the sale and transfer of the Target Shares to the Purchaser as provided for herein; |
| (d) | consents in writing to act as directors of the Purchaser duly signed by Viki Hakmon, Liat Sidi, Tamir Fayerman, Ohad David, and Asaf Itzhaik; |
| (e) | all instruments of conveyance and transfer, in form and substance reasonably acceptable to the Purchaser, as may be necessary to transfer the Target Shares to the Purchaser or a permitted assignee of the Purchaser; |
| (f) | such other agreements and documents as Purchaser may reasonably require to give effect to the assignment and transfer to Purchaser of the Target Shares; |
| (g) | the Books and Records in the possession of the Vendor; and |
| (h) | such other documents, certificates, and deliveries as the Parties mutually consider reasonably necessary or desirable in connection with this Agreement. |
PART 7
MUTUAL CONDITIONS PRECEDENT
| 7.1 | Mutual Conditions Precedent |
The obligations of the Parties to complete the Transaction shall be subject to the satisfaction of, or compliance with, at or before Closing Time, each of the following conditions precedent:
| (a) | No Prohibitions – No Law or Judgment will have been enacted, entered, promulgated or enforced by any Government Authority which enjoins or prohibits the consummation of any of the transactions contemplated by this Agreement; |
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| (b) | Satisfactory due diligence –Each Party shall have completed due diligence to its satisfaction on the other Party, solely with the extent to matters related to the Transaction and as to be determined in each Party’s sole discretion; |
| (c) | Tax Ruling – The Vendor shall have obtained a “Pre Ruling” (“Tax Ruling”) approval for the Transaction from the Israeli Tax Authority in accordance with Section 103T of the Income Tax Ordinance (New Version),1961, which confirms that the Transaction complies with the conditions set forth in Section 103 and therefore, can be carried out as a tax free transaction; |
| (d) | No Proceedings – No Proceeding will have been instituted or be pending for an injunction to restrain, or a declaratory Judgment in respect of damages on account of or relating to, the transactions contemplated by this Agreement and, to the best of the knowledge of the Parties, no such Proceeding will have been threatened or announced; and |
| (e) | No Termination – This Agreement will not have been terminated pursuant to Part 12. |
| 7.2 | Notice and Cure Provisions |
Each of the Vendor, on the one hand, and the Purchaser, on the other hand, will give prompt notice to the other of the occurrence, or failure to occur, at any time from the date hereof until the Closing Time, of any event or state of facts which occurrence or failure would, or would reasonably be likely to:
| (a) | constitute a material breach of any of its representations or warranties contained herein or which would cause such representations and warranties to be untrue or incorrect in any material respect at the Closing Time; or |
| (b) | result in the failure to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by the other hereunder prior to the Closing Date or Closing Time, as applicable. |
Neither the Vendor, on the one hand, nor the Purchaser, on the other hand, may elect not to complete the transactions contemplated under this Agreement pursuant to any of the conditions precedent contained in Parts 7, 8, or 9, or exercise any termination right arising therefrom, unless forthwith and in any event prior to the Closing Time, the Vendor or the Purchaser, as the case may be, has delivered a written notice to the other specifying in reasonable detail all breaches of covenants, representations and warranties or other matters which the Vendor or the Purchaser, as the case may be, is asserting as the basis for the non- fulfillment of the applicable condition precedent or the exercise of the termination right, as the case may be. If any such notice is delivered, provided that the Vendor or the Purchaser, as the case may be, is proceeding diligently to cure such matter, if such matter is capable of being cured, the other may not terminate this Agreement until the earlier of the Termination Date and the expiration of a period of 30 days from such notice.
PART 8
PURCHASER’S CONDITIONS PRECEDENT
| 8.1 | Purchaser’s Conditions |
The obligations of the Purchaser to complete the purchase of the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, at or before Closing Time, each of the following conditions precedent:
| (a) | Truth and Accuracy of Representations of the Vendor at Closing – The representations and warranties of the Vendor and the Target made in Part 3 shall be true, correct in all material respects and not misleading at Closing and with the same effect as if made at and as of Closing, provided that any inaccuracies in the representations and warranties that are deemed to be immaterial to the overall transaction shall not be used by the Purchaser as a basis to delay Closing or adjust the Purchase Price; |
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| (b) | Performance of Obligations – The Vendor and Target shall have performed and complied with all of its respective obligations, covenants and agreements to be performed and complied with by it pursuant to this Agreement; |
| (c) | Absence of Material Adverse Change – No event shall have occurred or condition or situation shall have arisen or Law shall have been introduced which might reasonably be expected to have a Material Adverse Change upon on the value of the Target Shares, the Business or the operations concerning the Target; |
| (d) | Consents and Notices – All Consents and Notices, including the Vendor Authorizations and any such Authorizations necessary for the sale of the Target Shares, have been received or given, as the case may be, in form and substance satisfactory to the Purchaser, acting reasonably, other than Consents and Notices which are routinely delivered post-Closing; and |
| (e) | Authorizations – All Authorizations required to permit the Purchaser to carry on the Business as currently conducted after the Closing Time have been obtained, all in form and substance satisfactory to the Purchaser, acting reasonably. |
| 8.2 | Waiver |
The conditions set forth in this Part 8 are for the exclusive benefit of the Purchaser and may be waived by the Purchaser in writing, in whole or in part, on or before the Closing Date. Notwithstanding any such waiver, the completion of the purchase and sale contemplated by this Agreement by the Purchaser shall not prejudice or affect in any way the rights of the Purchaser in respect of the warranties and representations of the Vendor in this Agreement.
PART 9
VENDOR’S CONDITIONS PRECEDENT
| 9.1 | Target’s and Vendor’s Conditions |
The obligations of the Vendor and the Vendor to complete the transactions contemplated by this Agreement shall be subject to the satisfaction of, or compliance with, at or before Closing Time, each of the following conditions precedent:
| (a) | Truth and Accuracy of Representations of the Purchaser at Closing – The representations and warranties of the Purchaser made in Part 4 shall be true, correct and not misleading at Closing and with the same effect as if made at and as of Closing, provided that any inaccuracies in the representations and warranties that are deemed to be immaterial to the overall transaction shall not be used by the Vendor as a basis to delay Closing or to adjust the Purchase Price; |
| (b) | Performance of Agreements – The Purchaser shall have performed and complied with all of the obligations, covenants and agreements to be performed and complied with by it pursuant to this Agreement; |
| (c) | Absence of Materially Adverse Change - No event shall have occurred or condition or situation shall have arisen or Law shall have been introduced which might reasonably be expected to have a material adverse change upon the Purchaser; and |
| (d) | Consents and Notices – All Consents and Notices have been received or given, as the case may be, in form and substance satisfactory to the Vendor and Target, acting reasonably. |
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| 9.2 | Waiver |
The conditions set forth in this Part 9 are for the exclusive benefit of the Vendor and the Target and may be waived by the Vendor and the Target in writing, in whole or in part, on or before the Closing Date. Notwithstanding any such waiver, completion of the purchase and sale contemplated by this Agreement by the Vendor and the Target shall not prejudice or affect in any way the rights of the Vendor and the Target in respect of the warranties and representations of the Purchaser set forth in this Agreement.
PART
10
FURTHER ASSURANCES
| 10.1 | Further Assurances |
The Vendor will from time to time upon reasonable notice after the Closing execute and deliver to the Purchaser all such conveyances, transfers, assignments and other instruments in writing and further assurances as the Purchaser may reasonably require from the Vendor, and the Purchaser will execute and deliver to the Vendor all such agreements of assumption and other instruments in writing and further assurances as the Vendor may reasonably require from the Purchaser, in order to give effect to the provisions hereof. Subject to prior written approval, all costs and expenses incurred by a Party at the request of the other in providing such conveyances, assignments, assumptions and other instruments and further assurances shall be for the account of the requesting Party.
PART
11
INDEMNITIES
| 11.1 | Indemnification of Purchaser by Vendor |
The Vendor covenants and agrees with the Purchaser to indemnify the Purchaser and each of its respective officers, directors, managers, members, employees, agents, successors and assigns against all Proceedings, liabilities, obligations, claims, demands, damages, losses, costs and expenses (including reasonable legal fees) suffered or incurred by the Purchaser, directly or indirectly (the “Purchaser’s Losses”), by reason of or arising out of any of the following:
| (a) | any warranties or representations on the part of the Vendor and the Target hereunder being untrue; |
| (b) | a breach of any agreement, term or covenant on the part of the Vendor and the Target made or to be observed or performed under this Agreement, except for breaches that are de minimis or that are remedied by the Vendor within ten (10) Business Days after notice thereof; or |
| (c) | any Purchaser’s Losses, legal causes of which arise prior to the Closing Date and arising from: |
| (i) | all Taxes of the Vendor and the Target and all interest and penalties thereon due and payable to all applicable Government Authorities; or |
| (ii) | any Proceedings pending or, to the best of the knowledge of the Vendor and the Target, threatened against, or relating to the Vendor or Target and Judgments outstanding against the Vendor and the Target on or prior to the Closing Date. |
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| 11.2 | Claims Under Vendor’s Indemnities |
If any claim is made by any Person against the Purchaser in respect of which the Purchaser may incur or suffer damages, losses, costs or expenses, directly or indirectly, that might reasonably be considered to be subject to the indemnification obligations of the Vendor in Section 11.1, the Purchaser shall notify the Vendor where indemnification is sought under Section 11.1 (in this Section 11.2, as applicable, the “Indemnitor”) as soon as reasonably practicable of the nature of such claim and the Indemnitor shall be entitled (but not required) to assume the defense of any suit brought to enforce such claim. The Purchaser’s omission to so notify the Indemnitor shall not relieve the Indemnitor of any liability which the Indemnitor may have under the indemnity in Section 11.1, except only to the extent that any such delay in, or failure to give, notice as herein required prejudices the defense, settlement or mitigation of a claim or results in any material increase in the Purchaser’s Losses. The defense of any such claim (whether assumed by the Indemnitor or not) shall be through experienced and competent legal counsel, and shall be conducted in a manner acceptable to the Purchaser, and the Indemnitor, acting reasonably, and no settlement may be made or permitted to be made, as applicable, by the Indemnitor or the Purchaser without the prior written consent of the other. If the Indemnitor assumes the defense of any claim then:
| (a) | the Purchaser and their counsel shall cooperate with the Indemnitor and its counsel in the course of the defense, such cooperation to include providing or making available to the Indemnitor and its counsel documents and information and witnesses for attendance at examinations for discovery and trials; |
| (b) | the reasonable legal fees and disbursements and other costs of such defense shall, from and after such assumption, be borne by the Indemnitor on a solicitor and own client basis; and |
| (c) | if the Purchaser retains additional counsel to act on its behalf, the Indemnitor and its counsel shall cooperate with the Purchaser and their counsel, such cooperation to include providing or making available to the Purchaser and their counsel documents and information and witnesses for attendance at examinations for discovery and trials; provided that all fees and disbursements of such additional counsel shall be paid by the Purchaser on a solicitor and own client basis, unless: |
| (i) | the Indemnitor consents to the retention of such counsel by the Purchaser at the Indemnitor’s expense; or |
| (ii) | the Indemnitor and the Purchaser are or become parties to the same action, and the representation of all parties by the same counsel would be inappropriate due to a conflict of interest, in which case all fees and disbursements of the Purchaser’s counsel shall be paid by the Indemnitor on a solicitor and own client basis. |
If the Indemnitor has not assumed the defense of a claim and employed counsel therefor within 30 days of receiving notice of such claim, all reasonable fees and disbursements of the Purchaser’s counsel in respect of such claim shall be paid by the Indemnitor on a solicitor and own client basis. If the Indemnitor, having elected to assume the defense of any claim, thereafter, fails to defend such claim within a reasonable time and with reasonable diligence, the Purchaser shall be entitled to assume the defense of the claim and the Indemnitor shall be bound by the results obtained by the Purchaser with respect to such claim.
In the event that any claim is of a nature such that the Purchaser is required by applicable Law or any Judgment to make payment to any Person or Government Authority with respect to such claim before the completion of settlement negotiations or legal Proceedings, the Purchaser may make such payment and the Indemnitor shall, forthwith after demand by the Purchaser reimburse the Purchaser for any such claim. If the amount of any liability of the Purchaser under the claim in respect of which such a payment was made, as finally determined, is less than the amount which was paid by the Indemnitor to the Purchaser, the Purchaser shall promptly pay the amount of such difference to the Indemnitor. The Purchaser shall not knowingly permit any right of appeal in respect of any claim to terminate without giving the Indemnitor reasonable notice thereof and a reasonable opportunity to contest such claim.
For avoidance of doubt, references in this Section 11.2 to the Purchaser shall also include each of its respective officers, directors, managers, members, employees, agents, successors and assigns.
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| 11.3 | Indemnification Limitations |
Notwithstanding the foregoing, (a) the Vendor shall not be liable for any indemnifiable claims unless and until the aggregate amount of such claims, excluding legal fees, exceeds $100,000 (the “De Minimis Amount”), provided that once the aggregate amount of such claims exceeds the De Minimis Amount, the Vendor shall be liable for the entire payment, including the De Minimis Amount and reasonable legal fees, and (b) the total liability for the Vendor for all indemnifiable claims arising under this Agreement shall not exceed $1,000,000, except for claims involving fraud or fraudulent misrepresentation, which shall not be subject to this limitation. The parties further acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims for fraud or fraudulent misrepresentation) for any breach or inaccuracy of any representation, warranty, covenant, agreement or obligation set forth in this Agreement or otherwise relating to the transactions contemplated in this Agreement shall be pursuant to the indemnification provisions set forth in this Part 11.
| 11.4 | Indemnification of Vendor by Purchaser |
The Purchaser covenants and agrees with the Vendor to indemnify the Vendor and its respective officers, directors, managers, members, employees, agents, successors and assigns against all Proceedings, liabilities, obligations, claims, demands, damages, losses, costs and expenses (including legal fees on a solicitor and own client basis) suffered or incurred by the Vendor, directly or indirectly (the “Vendor’s Losses”), by reason of or arising out of any of the following:
| (a) | any warranties or representations on the part of the Purchaser hereunder being untrue; |
| (b) | a breach of any agreement, term or covenant on the part of the Purchaser made or to be observed or performed under this Agreement; or |
| (c) | any Vendor’s Losses, legal causes of which arise following the Closing Date and arising from any Proceedings pending or, to the best of the knowledge of the Purchaser, threatened against, or relating to the Purchaser and Judgments outstanding against the Purchaser. |
| 11.5 | Claims Under Purchaser’s Indemnities |
If any claim is made by any Person against the Vendor in respect of which the Vendor may incur or suffer damages, losses, costs or expenses, directly or indirectly, that might reasonably be considered to be subject to the indemnification obligations of the Purchaser in Section 11.4, the Vendor shall notify the Purchaser, where indemnification is sought under Section 11.4 (in this Section 11.5, as applicable, the “Indemnitor”) as soon as reasonably practicable of the nature of such claim and the Indemnitor shall be entitled (but not required) to assume the defense of any suit brought to enforce such claim. The Vendor’s omission to so notify the Indemnitor shall not relieve the Indemnitor of any liability which the Indemnitor may have under the indemnity in Section 11.4, except only to the extent that any such delay in, or failure to give, notice as herein required prejudices the defense, settlement or mitigation of a claim or results in any material increase in the Vendor’s Losses. The defense of any such claim (whether assumed by the Indemnitor or not) shall be through experienced and competent legal counsel, and shall be conducted in a manner, acceptable to the Vendor and the Indemnitor, acting reasonably, and no settlement may be made or permitted to be made, as applicable, by the Indemnitor or the Vendor without the prior written consent of the other. If the Indemnitor assumes the defense of any claim then:
| (a) | the Vendor and their counsel shall cooperate with the Indemnitor and its counsel in the course of the defense, such cooperation to include providing or making available to the Indemnitor and their counsel documents and information and witnesses for attendance at examinations for discovery and trials; |
| (b) | the reasonable legal fees and disbursements and other costs of such defense shall, from and after such assumption, be borne by the Indemnitor on a solicitor and own client basis; and |
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| (c) | if the Vendor retains additional counsel to act on its behalf, the Indemnitor and its counsel shall cooperate with the Vendor and its counsel, such cooperation to include providing or making available to the Vendor and its counsel documents and information and witnesses for attendance at examinations for discovery and trials; provided that all fees and disbursements of such additional counsel shall be paid by the Vendor on a solicitor and own client basis, unless: |
| (i) | the Indemnitor consents to the retention of such counsel by the Vendor at the Purchasers’ expense; or |
| (ii) | the Indemnitor and the Vendor are or become parties to the same action, and the representation of all parties by the same counsel would be inappropriate due to a conflict of interest, in which case all fees and disbursements of the Vendor’s counsel shall be paid by the Indemnitor on a solicitor and own client basis. |
If the Indemnitor has not assumed the defense of a claim and employed counsel therefor within 30 days of receiving notice of such claim, all reasonable fees and disbursements of the Vendor’s counsel in respect of such claim shall be paid by the Indemnitor on a solicitor and own client basis. If the Indemnitor, having elected to assume the defense of any claim, thereafter, fails to defend such claim within a reasonable time and with reasonable diligence, the Vendor shall be entitled to assume the defense of the claim and the Indemnitor shall be bound by the results obtained by the Vendor with respect to such claim.
In the event that any claim is of a nature such that the Vendor is required by applicable Law or any Judgment to make payment to any Person or Government Authority with respect to such claim before the completion of settlement negotiations or legal Proceedings, the Vendor may make such payment and the Indemnitor shall, forthwith after demand by the Vendor reimburse the Vendor for any such claim. If the amount of any liability of the Vendor under the claim in respect of which such a payment was made, as finally determined, is less than the amount which was paid by the Indemnitor to the Vendor, the Vendor shall promptly pay the amount of such difference to the Indemnitor. The Vendor shall not knowingly permit any right of appeal in respect of any claim to terminate without giving the Indemnitor reasonable notice thereof and a reasonable opportunity to contest such claim.
For avoidance of doubt, references in this Section 11.5 to the Vendor shall also include each of their respective officers, directors, managers, members, employees, agents, successors and assigns.
| 11.6 | Survival of Indemnities |
The indemnities provided in this Part 11 will survive the Closing and shall continue in full force and effect for the benefit of the applicable Parties’; provided, that no claim may be made or brought by a Party pursuant to this Part 11 after the date that is eighteen (18) months following the Closing Date, except a claim for breach of any of the representations and warranties by the Vendor or the Purchaser in or pursuant to this Agreement involving fraud or fraudulent misrepresentation, subject only to applicable limitation periods imposed by applicable Law.
| 11.7 | Indemnification Limitations |
Notwithstanding the foregoing, (a) the Purchaser shall not be liable for any indemnifiable claims unless and until the aggregate amount of such claims, excluding legal fees, exceeds the De Minimus Amount, provided that once the aggregate amount of such claims exceeds the De Minimis Amount, the Purchaser shall be liable for the entire payment, including the De Minimis Amount and reasonable legal fees, and (b) the total liability for the Purchaser for all indemnifiable claims arising under this Agreement shall not exceed $1,000,000, except for claims involving fraud or fraudulent misrepresentation, which shall not be subject to this limitation. The parties further acknowledge and agree that their sole and exclusive remedy with respect to any and all claims (other than claims for fraud or fraudulent misrepresentation) for any breach or inaccuracy of any representation, warranty, covenant, agreement or obligation set forth in this Agreement or otherwise relating to the transactions contemplated in this Agreement shall be pursuant to the indemnification provisions set forth in this Part 11.
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PART 12
TERMINATION, AMENDMENT AND WAIVER
| 12.1 | Termination by the Purchaser |
Subject to compliance with Section 7.2, the Purchaser may, when not in default in the performance of any of its obligations under this Agreement, without prejudice to any other rights, terminate this Agreement by written notice to the Vendor if:
| (a) | not all of the conditions precedent in Part 7 and 8 will be or have been satisfied or waived by the Purchaser on or prior to the Termination Date; |
| (b) | the Purchaser is not satisfied, in its sole discretion, acting reasonably, with the results of its due diligence review and investigations; |
| (c) | this Agreement or any other material part of the transactions contemplated herein cannot be completed because the Vendor or the Target is in default under any of its covenants contained in Part 5; |
| (d) | the audit and/or review, as applicable, of the Target Financial Statements in accordance with IFRS is not completed by March 31, 2025, or such other date to be mutually agreed upon by the Parties, acting reasonably; or |
| (e) | the Vendor or the Target breaches this Agreement in any material respect. |
| 12.2 | Termination by the Vendor |
Subject to compliance with Section 7.2, the Vendor, when not in default in the performance of any of its obligations under this Agreement, may, without prejudice to any other rights, terminate this Agreement by written notice to the Purchaser if:
| (a) | not all of the conditions precedent in Part 7 and 9 will be or have been satisfied or waived by the Purchaser on the Termination Date; |
| (b) | the Vendor is not satisfied, in its sole discretion, acting reasonably, with the results of its due diligence review and investigations; |
| (c) | this Agreement or any other material part of the transactions contemplated herein cannot be completed because the Vendor is in default under any of its covenants contained in Part 5 on the Termination Date; or |
| (d) | the Purchaser breaches this Agreement in any material respect. |
| 12.3 | Effect of Termination |
In the case of any termination of this Agreement pursuant to this Part 12, this Agreement, except in respect to any obligation hereunder which expressly survives termination in accordance with its terms, will be of no further force or effect provided that nothing herein will relieve any Party from its liability for any breach of this Agreement prior to such termination.
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| 12.4 | Amendment |
The Agreement may not be modified or amended except by an instrument in writing duly executed by or on behalf of all of the Parties.
| 12.5 | Extension and Waiver |
At or any time prior to Closing Time, the Purchaser, the Vendor or Target may to the extent legally allowed:
| (a) | extend the time for the performance of any of the obligations or other acts of the other Parties; |
| (b) | waive any inaccuracies in the representations and warranties made by the other Parties; and/or |
| (c) | waive compliance with any of the agreements, covenants or conditions for the benefit of such Party contained herein. |
Any agreement on the part of the Purchaser, the Vendor or Target to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on their behalf.
PART 13
GENERAL
| 13.1 | Expenses |
All costs and expenses incurred in connection with the preparation, negotiation, implementation and execution of this Agreement and the transactions contemplated by this Agreement and in obtaining any necessary Consents and Notices, shall be paid by the party incurring such expenses or required to obtain such Consents and Notices, as applicable.
| 13.2 | Arbitration |
Any disagreement among the parties as to the interpretation or enforcement of this Agreement shall be resolved, failing agreement, by binding arbitration in accordance with the provisions of the Arbitration Act (British Columbia). The subject of all such arbitrations will be subject to any statutes of limitation applicable that would be applicable if the claims were litigated. All arbitration hearings will be conducted in Vancouver, British Columbia by an arbitrator agreed upon by the parties to the arbitration or, failing agreement, an arbitrator appointed under the Arbitration Act (British Columbia) upon application by any party for that purpose. In addition to all other powers, the arbitrator shall have the exclusive right to determine all issues of arbitrability. Judgment on any arbitration award may be entered in any court with jurisdiction. The cost of arbitration (other than a party’s own costs) shall be borne equally by the parties.
| 13.3 | Time |
Time shall be of the essence hereof.
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| 13.4 | Notices |
Any notice or other writing required or permitted to be given hereunder or for the purposes hereof shall be sufficiently given if delivered by courier or electronic transmission to the Party to whom it is given addressed to such Party at:
| (a) | If to the Purchaser: |
Impact Acquisition Corp.
501 – 3292 Production Way,
Burnaby, British Columbia
V5A 4R4 Canada
| Attention: | Gabi Kabazo, Chief Financial Officer | |
| Email: | [***] |
with a copy (not to constitute notice) at:
MLT Aikins LLP
2600-1066 West Hasting Street
Vancouver, BC V6E 3X1
| Attention: | Mahdi Shams |
| Email: | mshams@mltaikins.com |
| (b) | If to the Vendor or Target at: |
Jeffs Brands Ltd
7 Mezada Street
Bnei Brak
Tel Aviv 5126112
Israel
| Attention: | Ronen Zalayet, Chief Financial Officer |
| Email: | ronen@jeffsbrands.com |
with a copy (not to constitute notice) at:
Meitar Law Offices
16 Abba Hillel Road
Ramat-Gan 5250608 Israel Telephone:
+972-3-6103766
| Attention: | Dr. Shachar Hadar, Adv. |
| E-mail: | shacharh@meitar.com |
PAC Law
| Attention: | Peter Crawford |
| Email: | peter@paclaw.ca |
or at such other address as the Party to whom such writing is to be given shall have last notified to the Party giving the same in the manner provided in this clause. Any notice delivered by courier or facsimile to the Party to whom it is addressed shall be deemed to have been given and received on the Business Day next following the day it was delivered or telecopied.
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| 13.5 | Further Assurances |
The Parties shall with reasonable diligence, do all such things and provide all such reasonable assurances as may be required to consummate the transactions contemplated by this Agreement, and each Party shall provide such further documents or instruments required by the other Party as may be reasonably necessary or desirable to give effect to the purpose of this Agreement and carry out its provisions whether before or after the Closing Date.
| 13.6 | Enurement |
This Agreement and each of the terms and provisions hereof shall inure to the benefit of and be binding upon the Parties and their respective heirs, executors, administrators, personal Representatives, successors and permitted assigns.
| 13.7 | Assignment |
This Agreement and the rights, duties and obligations of any Party hereunder are not assignable without the prior written consent of the other Party hereto.
| 13.8 | Counterparts |
This Agreement may be executed in any number of counterparts and may be signed and delivered by facsimile or other means of electronic communication producing a printed copy, each of which so signed shall be deemed to be an original. Such counterparts shall together constitute one and the same instrument and, notwithstanding the date of execution, shall be deemed to bear the date first written above.
| 13.9 | Severability |
Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable Law. If any portion of this Agreement is declared invalid for any reason in any jurisdiction, such declaration shall have no effect upon the remaining portions of this Agreement which shall continue in full force and effect as if this Agreement had been executed with the invalid portions thereof deleted; provided, however, if such severability will negate in any material respect the monetary terms of this Agreement, then the Parties shall negotiate in good faith to amend the invalid terms in a manner so that such terms shall not be invalid and will not modify in any material respect the monetary terms of this Agreement unless otherwise agreed to by the Parties. Furthermore, the entirety of this Agreement shall continue in full force and effect in all other jurisdictions.
| 13.10 | Entire Understanding |
This Agreement, including the Schedules hereto, sets forth the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersedes any and all prior discussions, negotiations, letters of intent or agreements in principle between them.
| 13.11 | Binding Effect; No Third Party Beneficiaries |
Except for the provisions of Part 11 relating to the officers, directors, managers, members, employees, agents, successors and assigns of each of the Vendor and the Purchaser (the “Permitted Third Parties”), this Agreement shall be binding upon and shall inure to the exclusive benefit of the Parties and their respective heirs, executors, administrators, legal representatives, successors and permitted assigns and nothing herein, express or implied, is intended to, nor shall it, confer on any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. The Parties agree that, for the purpose of giving enforceable rights under this Agreement to the Permitted Third Parties who are not party to this Agreement, the Vendor and the Purchaser, as the case may be, is contracting as agent of such Persons and will hold the rights of such Persons in trust for them.
| 13.12 | Language |
This Agreement has been negotiated and executed in the English language. The Parties agree and acknowledge that the English version of this Agreement shall prevail over any translation of the Agreement to the extent permitted by applicable Law.
[Remainder of page intentionally left blank. Signature page to follow.]
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IN WITNESS WHEREOF the Parties have duly executed this Agreement as of the day and year first above written.
| IMPACT ACQUISITIONS CORP. | ||
| Per: | /s/ Gabi Kabazo | |
| Author zed Signatory | ||
| JEFFS BRANDS LTD | ||
| Per: | /s/ Ronen Zalayet | |
| Authorized Signatory | ||
| FORT PRODUCTS LIMITED | ||
| Per: | /s/ Ronen Zalayet | |
| Authorized Signatory | ||
[Signature Page to Share Purchase Agreement]
SCHEDULE A
CONTRACTS
[***]
- A-1 -
SCHEDULE B
FORM OF CONTINGENT RIGHT CERTIFICATE
CONTINGENT RIGHTS CERTIFICATE
Impact Acquisition Corp., a corporation existing under the laws of British Columbia
(the “Company”)
| CONTINGENT RIGHT CERTIFICATE NO. CVR-001 |
| 66,000,000 CONTINGENT RIGHTS, each entitling the holder thereof to acquire Common Shares. |
THIS IS TO CERTIFY THAT JEFFS BRANDS LTD (the “Holder”) is the registered holder of the number of Contingent Rights specified above (“Contingent Rights”). The Contingent Rights represented by this Certificate entitles the Holder, to receive Common Shares of the Company, on the terms and conditions set forth in this Certificate.
This Certificate is issued pursuant to that share purchase agreement dated February 6, 2025 (the “Purchase Agreement”) among the Company and Jeffs Brands Ltd (a corporation existing under the laws of Israel) (“Jeffs Brands”). In the event of any conflict between the terms of this Certificate and the Purchase Agreement, the terms of this Certificate shall prevail.
| 1. | INTERPRETATION |
| 1.1 | Definitions. Capitalized terms used in this Certificate, to the extent not otherwise defined herein, shall have the same meaning as in the Purchase Agreement. The terms set forth below shall have the meanings ascribed to them below: |
| (a) | “Adjustment Period” means the period of time in which these Contingent Rights are outstanding; |
| (b) | “Common Shares” means the common shares in the capital of the Company; |
| (c) | “Contingent Right Shares” means, any time, the Common Shares issuable pursuant to the Contingent Rights then represented by this Certificate; |
| (d) | “Exchange” means the TSX Venture Exchange; |
| (e) | “Expiry Date” means: (a) with respect to the achievement of Milestone B (as defined below), forty-eight (48) months from the closing of the Purchase Agreement (the “Closing Date”) and (b) with respect to the achievement of Milestone C (as defined below), December 31, 2028, provided that the Expiry Date shall be extended until the date of issuance of the audited financial statements for such periods; |
| (f) | “Expiry Time” means 5:00 p.m. (Vancouver time) on the Expiry Date; |
| (g) | “Termination Date” means, the date that is the later of (i) the Expiry Time; (ii) the date all of the Contingent Right Shares issuable hereunder, are issued in accordance with this Certificate; (iii) the expiration of the Dispute Period in respect of the General Non- Achievement Notice, without delivery of a Dispute Notice, and (iv) in the case of delivery of one or more Dispute Notices, the date agreed upon by the Holder and the Company or a court of competent jurisdiction in respect of the last Dispute Notice; and |
- B-1 -
| (h) | “Unissued Shares” means, at any time, all of the Contingent Rights Shares that are then unissued. |
| 1.2 | Currency. All sums of money which are referred to as: (a) “C$” in this Certificate refer to lawful currency of Canada; and (b) “US$” in this Agreement refer to United States dollars, unless otherwise specified. |
| 1.3 | Interpretation Not Affected by Headings, etc.. The division of this Certificate into articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Certificate. Unless otherwise indicated, any reference in this Certificate to an Article, Section or a Schedule refers to the specified Article or Section of, or Schedule to, this Certificate. |
| 1.4 | Number, etc.. Unless the subject matter or context requires the contrary, words importing the singular number only shall include the plural and vice versa; words importing the use of any gender shall include all genders and words importing persons shall include natural persons, firms, trusts, partnerships and corporations. |
| 1.5 | Date for Any Action. In the event that any date on which any action is required or permitted to be taken hereunder by any person is not a Business Day, such action shall be required to be taken on the next succeeding day which is a Business Day. |
| 2. | CONTINGENT RIGHTS |
| 2.1 | Terms of Contingent Rights |
| (a) | Subject to adjustment in accordance with Sections 4, 5 and 6, the Contingent Rights shall entitle the Holder to acquire without any further act or formality or payment of additional consideration: |
| (i) | 22,000,000 Common Shares, upon the completion of a transaction resulting in the Company listing its securities on either the New York Stock Exchange or NASDAQ (each, a “US Exchange”), or other transaction resulting in the issuance of shares listed on a US Exchange to shareholders of the Company in exchange their Common Shares (in either case, an “Uplisting Transaction”) if such Uplisting Transaction is completed within twenty-four (24) months from the Closing Date (“Milestone A”); |
| (ii) | 22,000,000 Common Shares, upon the Company (or a successor entity) successfully raising within forty-eight (48) months of the Closing Date in equity and/or debt financing an aggregate of US$8,000,000 or more as of the date of closing of such financing (“Milestone B”); and |
| (iii) | 22,000,000 Common Shares, upon the Company reaching annual revenues of a minimum of US$15,000,000 by December 31, 2028, as shown on the audited financial statement for such periods (and in the case of (ii) and (iii), if applicable, converted into United States dollars using the applicable Bank of Canada conversion rate as of the relevant date(s)) (“Milestone C”), |
up to a maximum of 66,000,000 Common Shares upon the satisfaction of Milestone A, Milestone B and Milestone C (collectively, the “Milestones” and individually, a “Milestone”).
| (b) | For the purposes of the Milestone, references to “Company” includes the Company and any Affiliate thereof. |
| (c) | Each Contingent Right shall entitle the Holder thereof to such other rights and privileges as are set forth in this Certificate. |
- B-2 -
| (d) | The Company shall not have any obligation to deliver Common Shares pursuant to any Contingent Right if the Contingent Rights are transferred to any person who is a resident of a country or political subdivision thereof in which the Contingent Right Shares may not lawfully be issued pursuant to applicable securities legislation. The Company may require any such person to provide proof of an applicable exemption from such securities legislation to the Company before Contingent Right Shares are delivered pursuant to any Contingent Right. |
| 2.2 | Holder of Contingent Right not a Shareholder. Nothing in this Agreement or in the holding of a Contingent Right Certificate, or otherwise, shall, in itself, confer or be construed as conferring upon a Holder any right or interest whatsoever as a shareholder of the Company, including, but not limited to, the right to vote at, to receive notice of, or to attend, meetings of shareholders of the Company or any other proceedings of the Company, or the right to dividends and other allocations. |
| 2.3 | Contingent Rights to Rank Pari Passu. All Contingent Rights shall rank equally and without preference over each other, whatever may be the actual date of issue thereof. |
| 2.4 | Transfer and Ownership of Contingent Rights. Neither this Certificate nor any right or interest hereunder shall be assignable by the Holder, his beneficiaries, dependents or legal representatives without the Company’s prior written consent; provided, however, that nothing in this Section 2.4 shall preclude (a) the Holder from designating a beneficiary to receive any benefit payable hereunder upon his death or (b) the executors, administrators or other legal representatives of the Holder or his estate from assigning any rights hereunder to the Person(s) entitled thereto. |
| 2.5 | Ownership of Rights. The Company may deem and treat the registered Holder of any Certificate as the absolute owner of the Contingent Right represented thereby for all purposes and the Company shall not be affected by any notice or knowledge to the contrary, except where the Company is required to take notice by statute or by order of a court of competent jurisdiction. |
| 2.6 | Issue in Substitution for Contingent Right Certificates Lost, etc. |
| (a) | If this Certificate becomes mutilated or is lost, destroyed or stolen, the Company, subject to applicable law, shall issue and deliver, a new Certificate of like tenor, and bearing the same legend, if applicable, as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of such mutilated Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Certificate, and the substituted Certificate shall be entitled to the benefits hereof and shall rank equally in accordance with its terms with all other Contingent Rights issued or to be issued hereunder. |
| (b) | The applicant for the issue of a new Certificate pursuant to this Section 2.6 shall bear the cost of the issue thereof and in case of loss, destruction or theft shall, as a condition precedent to the issuance thereof, furnish to the Company such evidence of ownership and of the loss, destruction or theft of the Certificate so lost, destroyed or stolen as shall be satisfactory to the Company, in its sole discretion, acting reasonably, and such applicant shall also be required to furnish an indemnity and surety bond in amount and form satisfactory to the Company, in its sole discretion, and shall pay the reasonable charges of the Company in connection therewith. |
| 2.9 | Cancellation of Contingent Value Rights. This Certificate shall be cancelled by the Company upon surrender, transfer or after the Termination Date. |
- B-3 -
| 3. | ISSUANCE OF CONTINGENT RIGHT SHARES |
| 3.1 | Achievement Certificate |
| (a) | Upon the satisfaction of any Milestone in accordance with Section 2.1 prior to the Expiry Time, the Company will, as soon as practicable (and in any event not later than five Business Days after the date that the Milestone has been satisfied), deliver to the Holder: (i) a notice in writing (the “Achievement Certificate”) signed on behalf of the Company by one or more officers (without personal liability) certifying that the Milestone has been satisfied; and (ii) a new Certificate for the balance of the Contingent Rights and the remaining Milestones, which new Certificate will supersede and replace this one. |
| (b) | Within five (5) Business Days of the Expiry Time, the Company will deliver to the Holder a notice in writing (the “General Non-Achievement certificate”) signed on behalf of the Company by one or more officers (without personal liability) certifying that each applicable Milestone has not been satisfied by the Expiry Time, and that the Company has complied in all material respects with its obligations under this Agreement. |
| 3.2 | Payment Procedure. Upon satisfaction of a Milestone in accordance with Section 2.1, the Holder shall receive, at no additional cost or expense, the Contingent Right Shares to which the Contingent Rights is entitled pursuant to Section 2.1, less any applicable withholding taxes in accordance with Article 4. The aggregate number of Contingent Right Shares issued to the Holder shall be rounded down to the nearest whole share, as is appropriate in the circumstances. |
| 3.3 | Payment Mechanism |
| (a) | All Contingent Right Shares issuable in respect of the Contingent Rights will be deemed to be issued effective as of the date specified in the Achievement Certificate or the Agreed Issue Date (as defined below), as the case may be, for and on behalf of the Holder and the Holder shall, without payment of additional consideration or any further action on the part of the Holder (including the surrender of this Certificate), be deemed to have subscribed for the corresponding number of Contingent Right Shares issuable pursuant to such Contingent Rights and the Company hereby irrevocably authorizes the issuance and delivery of the Contingent Right Shares. |
| (b) | The Company or its registrar and transfer agent shall cause to be mailed to the address of the Holder set forth herein, Contingent Right Shares in the name of the Holder representing the number of Contingent Right Shares issuable to the Holder in respect of such Contingent Rights, as fully paid and non-assessable common shares of the Company, in accordance with this Section 3.3, if and when necessary. |
| 3.4 | Cancellation of Rights. At the Termination Date, this Certificate shall be cancelled and shall thereafter be null, void and of no effect. |
| 4. | WITHHOLDING TAX |
| 4.1 | Withholding Taxes |
| (a) | The Company shall be entitled to deduct and withhold from the Contingent Right Shares issuable hereunder such amounts as it is entitled or required (or otherwise reasonably determines) to deduct and withhold under the provision of any Applicable Laws, including but not limited to the Income Tax Ordinance 5721-1961 (Israel), or the administration or interpretation thereof in respect of Taxes. To the extent that any such amounts are so deducted and withheld and are remitted to the relevant Governmental Entity, such amounts shall be treated for all purposes of this Certificate as having been paid to the person to whom such amounts would otherwise have been paid. |
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| (b) | Notwithstanding the foregoing, the Company and the Holder hereby agree that no withholding will be made under this Section 4.1 in respect of persons covered by an applicable Tax Ruling or a Valid Certificate provided to the Company at least five (5) Business Days prior to the time such payment of consideration is to be made. A “Valid Certificate” means a certificate, ruling, approval or any other written instructions issued by the applicable Governmental Entity indicating that no withholding (or reduced withholding or any other instructions regarding withholding) of Tax is required with respect to that person in form and substance satisfactory to the Company, acting reasonably. |
| (c) | For the avoidance of doubt, the Company shall not be required to issue any Contingent Right Shares to the Holder, unless either (i) an applicable Tax Ruling, (ii) a Valid Certificate is delivered to the Company; or (iii) the applicable amounts required to be withheld are paid by such Holder to the Company, as applicable. |
| (d) | In the event that a Holder has not provided the Company with any of items (c)(i), (ii) or (iii) above at the time of issue of the applicable Contingent Right Shares, Company shall have the right (but not the obligation), in its sole discretion, to sell a portion of the Contingent Right Shares otherwise issuable to the Holder in such amounts and in such manner as the Company deems necessary and practicable to pay such withholding taxes and the Company shall issue the balance of the Holder’s Contingent Right Shares. |
| (e) | The Holder shall and hereby agrees to indemnify the Company against and hold the Company harmless from and against any Taxes, interest, penalties and attorneys’ fees and disbursements arising or resulting from any failure of the Company to withhold Taxes from any payment made to the Holder at the applicable statutory rate, including any failure of the Company to withhold in reliance upon any representation, certificate, statement, document or instrument made or provided by the Holder, including the Tax Ruling, to the Company in connection with the obligation of the Company to withhold Taxes from payments made to the Holder, it being expressly understood and agreed that (i) the Company shall be absolutely and unconditionally entitled to accept any such representation, certificate, statement, document or instrument as being true and correct in all respects and to fully rely thereon without any obligation or responsibility to investigate or to make any inquiries with respect to the accuracy, veracity, correctness or validity of the same (and without diminution of the indemnities herein contained) and (ii) the Holder, upon request of the Company and at its sole cost and expense, shall defend any claim or action relating to the foregoing indemnification using counsel agreed upon by the Holder and the Company. |
| 5. | ADJUSTMENT OF NUMBER OF CONTINGENT RIGHT SHARES AND EXERCISE PRICE |
| 5.1 | Definitions. In this Article 5, references to “record date” refer to the particular time on such relevant date stipulated for such event and otherwise refer to 5:00 p.m. (Vancouver time) on such date. |
| 5.2 | Adjustment. The rights attached to the Contingent Rights are subject to adjustment from time to time in the events and in the manner provided as follows: |
| (a) | Share Reorganization. If at any time during the Adjustment Period, the Company: |
| (i) | subdivides, re-divides or changes its outstanding Common Shares into a greater number of Common Shares; |
| (ii) | reduces, combines, consolidates or changes its outstanding Common Shares into a lesser number of Common Shares; or |
| (iii) | issues to all or substantially all the holders of its Common Shares by way of a stock distribution, stock dividend or otherwise, Common Shares or convertible securities, (any of such events in Paragraphs 5.2(a)(i), 5.2(a)(ii) and 5.2(a)(iii) being herein called a “Share Reorganization”), then the Contingent Right Shares issuable pursuant to the Contingent Rights then outstanding will be adjusted as of the record date at which the holders of the Common Shares are determined for the purpose of the Share Reorganization by multiplying the number of Common Shares issuable pursuant to each Contingent Right theretofore obtainable immediately prior to such record date by a fraction, the numerator of which will be the number of Common Shares outstanding on the record date after giving effect to the Share Reorganization and the denominator of which will be the number of Common Shares outstanding on the record date before giving effect to the Share Reorganization. |
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For the purposes of determining the number of Common Shares outstanding at any particular time for the purpose of this Subsection 5.2(a), there shall be included that number of Common Shares which would have resulted from the conversion at that time of any such convertible securities issued to all or substantially all the holders of the Common Shares.
| (b) | Capital Reorganization. If at any time during the Adjustment Period, there is a reclassification of the Common Shares or a change of the Common Shares (other than through a Share Reorganization) into other securities or property, or a consolidation, amalgamation, arrangement or merger of the Company (including a business combination or exchange of like effect) with or into any corporation or other entity (other than a consolidation, amalgamation, arrangement or merger which does not result in any reclassification of the outstanding Common Shares or a change of the Common Shares into other securities or property), or a transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to another entity, or a record date for any of the foregoing events occurs (any of such events being herein called a “Capital Reorganization”), any Holder who is entitled to receive Contingent Right Shares under this Contingent Right Certificate after the record date or effective date of such Capital Reorganization will be entitled to receive, and will accept, in lieu of the number of Common Shares to which such holder was theretofore entitled, the aggregate number of securities or property of the Company, or the continuing, successor or purchasing person, as the case may be, under the Capital Reorganization which such holder would have been entitled to receive as a result of such Capital Reorganization if, on the effective date of such Capital Reorganization, the Holder had been the registered holder of the number of Common Shares to which such holder was then entitled pursuant to the Contingent Rights. No such Capital Reorganization shall be carried into effect unless all necessary steps shall have been taken so that the Holders shall thereafter be entitled to receive such number of Common Shares or other securities or property of the Company or of the continuing, successor or purchasing person, as the case may be, under the Capital Reorganization, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in this Section 5.2 and Section 5.3. If determined appropriate by the Company, acting reasonably, appropriate adjustments will be made as a result of any such Capital Reorganization in the application of the provisions set forth in this Article 5 with respect to the rights and interests thereafter of the Holder to the extent that the provisions set forth in this Article 5 will thereafter correspondingly be made applicable as nearly as may be reasonable in relation to any securities or property thereafter deliverable upon the satisfaction of any Milestone. Any such adjustments will be made by and set forth in terms and conditions supplemental hereto approved by the Company, acting reasonably, and, absent manifest error, will for all purposes be conclusively deemed to be the appropriate adjustment. |
| (c) | Special Distributions. If at any time during the Adjustment Period, the Company issues or distributes to the holders of all or substantially all of the outstanding Common Shares, securities of the Company, including rights, options or warrants to acquire Common Shares or securities convertible into or exchangeable for Common Shares or property or assets, including evidences of indebtedness, other than dividends or distributions paid in the ordinary course and other than as a result of a Share Reorganization or a Capital Reorganization (any such events being herein called a “Special Distribution”), or a record date for any of the foregoing events occurs, subject to the receipt of the approval of the Exchange, there will be an appropriate adjustment in the number of Common Shares issuable upon satisfaction of each Milestone such that the Holder will be entitled to receive from the Company such securities, property or assets as if, on the record date at which holders of Common Shares are determined for the purpose thereof, such holder had been the registered holder of the number of Common Shares to which the Holder was then entitled. |
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| (d) | Binding on Successors. The provisions of this Certificate will be binding upon and inure to the benefit of the corporation or other entity resulting from any Capital Reorganization or similar transaction. In the event of any such merger, consolidation or sale of assets, references to the Company in this Certificate shall unless the context suggests otherwise be deemed to include the entity resulting from such merger or consolidation or the acquirer of such assets of the Company. The Company shall require any successor or assignee to, expressly and unconditionally to assume and agree to perform the Company’s obligations under this Agreement, in the same manner and to the same extent that the Company would be required to perform if no such succession or assignment had taken place. |
| 5.3 | Adjustment Rules. The following rules and procedures shall be applicable to adjustments made pursuant to Section 5.2: |
| (a) | The adjustments provided for in this Article 5 are cumulative and, subject to Subsection 5.3(b), shall apply (without duplication) to successive issues, subdivisions, combinations, consolidations, changes, distributions and any other events that require adjustment of the Contingent Right Shares issuable pursuant to the Contingent Rights or the number or kind of securities or property issuable hereunder. |
| (b) | No adjustment in the Contingent Right Shares issuable pursuant to the Contingent Rights shall be required unless the adjustment would result in a change of at least 0.01% of the number of such Common Shares to be issued, provided, however, that any adjustments that, except for the provisions of this subsection would otherwise have been required to be made, shall be carried forward and taken into account in any subsequent adjustment. |
| (c) | Notwithstanding anything in this Article 5, no adjustment shall be made to the Contingent Right Shares issuable pursuant to the Contingent Rights if the issue of Common Shares is being made pursuant to this Agreement or pursuant to any stock option, stock purchase, restricted stock unit, deferred stock unit or other long term incentive plan in force from time to time for directors, officers or employees of the Company and any such issue shall be deemed not to be a Share Reorganization or a Special Distribution. |
| (d) | No adjustment in the Contingent Right Shares issuable pursuant to the Contingent Rights shall be made in respect of any events described in this Article 5 if the Holders are entitled to participate, subject to the receipt of the approval of the Exchange, in the events on the same terms, mutatis mutandis, as if their Contingent Rights had been converted immediately prior to the effective date or record date of the events. |
| (e) | If any questions, controversies or disputes shall at any time arise with respect to adjustments of the Contingent Right Shares issuable pursuant to the Contingent Rights, such questions, controversies or disputes shall be conclusively determined by the Company’s external auditors or, if they are unable or unwilling to act, in accordance with Article 9. |
| (f) | If the Company shall set a record date to determine the holders of Common Shares for the purpose of entitling them to receive any distribution or any subscription or purchase rights in accordance with this Article 5 and shall, thereafter, legally abandon its plans to pay or deliver the distribution or subscription or purchase rights, then no adjustment in the Contingent Right Shares issuable pursuant to the Contingent Rights shall be required by reason of the setting of the record date. |
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| 5.4 | Notice of Certain Events |
| (a) | Promptly upon the occurrence of the earlier of the effective date of or the record date for any event referred to in Section 5.2 that requires an adjustment or readjustment to the Contingent Right Shares issuable pursuant to the Contingent Rights, the Company shall provide the Holder with a certificate of the Company specifying the particulars of the event and, if determinable, the amount of the adjustment or readjustment, and computation of the adjustment or readjustment and the Holder may act and rely absolutely on the certificate of the Company; and |
| (b) | If notice has been given under Subsection 5.4(a) and the adjustment is not then determinable, the Company shall promptly, after the adjustment is determinable provide the Holder with a computation of the adjustment. |
| 6. | RIGHTS OF THE COMPANY AND COVENANTS OF THE COMPANY |
| 6.1 | General Covenants. The Company covenants with the Holder that during the Adjustment Period, the Company will: |
| (a) | reserve and keep available a sufficient number of Contingent Right Shares for the purpose of enabling it to satisfy its obligations to issue Contingent Right Shares upon satisfaction of the entire Milestones; |
| (b) | cause the Contingent Right Shares from time to time acquired pursuant to the exercise of the Contingent Rights to be duly issued and delivered in accordance with the Contingent Rights and the terms hereof; |
| (c) | ensure all Contingent Right Shares which shall be issued upon exercise of the right to acquire provided for herein shall be fully paid and non-assessable; |
| (d) | use reasonable commercial efforts to maintain its existence and carry on its business in the ordinary course; |
| (e) | diligently pursue the satisfaction of the Milestones and in good faith and provide an Achievement Certificate, or Non-Achievement Certificate, in accordance with Section 3.1 as soon as practicable with respect thereto; |
| (f) | use reasonable commercial efforts to ensure that all Common Shares outstanding continue to be or are listed and posted for trading on the Exchange (or such other Canadian stock exchange acceptable to the Company), provided that this clause shall not be construed as limiting or restricting the Company to agree to a consolidation, amalgamation, arrangement, takeover bid, merger or like transaction that would result in the Common Shares ceasing to be listed and posted for trading on the Exchange; |
| (g) | make all requisite filings under applicable Canadian securities legislation including those necessary to remain a reporting issuer not in default in each of the provinces and other jurisdictions where it is or becomes a reporting issuer; |
| (h) | in general, well and truly perform and carry out all of the acts or things to be done by it as provided in this Certificate. |
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| 6.2 | Enforceability of Certificate. The Company represents and warrants that this Certificate is valid and enforceable against the Company in accordance with the provisions hereof. |
| 7. | DISPUTE MECHANISM |
| 7.1 | Disputed Matters |
| (a) | If the Holder, at any time but no later than sixty (60) days after the delivery of a General Non-Achievement Certificate (in either case, the “Dispute Period”) wishes to dispute the non-satisfaction of the Milestone, the Holder may provide the Company with written notice (the “Dispute Notice”) of such dispute in reasonable detail. |
| (b) | If the Holder does not deliver such a Dispute Notice on or prior to the expiry of the Dispute Period, the Holder will be deemed to have accepted the non-performance of any Milestone as of the Termination Date and the Company and its Affiliates will have no further obligation with respect to the Contingent Rights represented hereby. |
| (c) | If the Holder delivers a Dispute Notice during the Dispute Period, and it is finally determined by agreement of the Company and the Holder or by a court of competent jurisdiction that the disputed Milestone has been met, the Contingent Right Shares subject to the Dispute Notice will be issued on a date established by the Company that is as soon as possible (and in any event no later than five Business Days) after such agreement or determination (“Agreed Issue Date”). |
| (d) | The Holder and the Company shall work in good faith together to resolve the dispute set out therein on a mutually satisfactory basis for not less than thirty (30) days, following which the Holder may proceed with an action against the Company in the Courts of British Columbia, which shall have exclusive jurisdiction over any dispute under this Certificate or in connection with the Contingent Rights. |
| 8. | GENERAL |
| 8.1 | Notices. Any notice, consent, waiver, direction or other communication required or permitted to be given under this Agreement (each, a “notice”) shall be in writing addressed as follows: |
| (a) | if to the Company: |
Impact Acquisition Corp.
501 – 3292 Production Way,
Burnaby, British Columbia
V5A 4R4 Canada
| Attention: | Gabi Kabazo, Chief Financial Officer | |
| Email: | [***] |
| (b) | if to the Holder: |
Jeffs Brands
7 Mezada Street
Bnei Brak
Tel Aviv 5126112 Israel
| Attention: | Ronen Zalayet, Chief Financial Officer | |
| Email: | ronen@jeffsbrands.com |
or such other address as may be designated by notice given by either the Holder or the Company to the other in accordance with this Section 8.1. Each notice shall be personally delivered to the addressee or sent by e-mail to the addressee and a notice which is personally delivered or sent by email shall, if delivered or sent prior to 4:00 p.m. (local time of the recipient) on a Business Day, be deemed to be given and received on that day and, in any other case, be deemed to be given and received on the next Business Day.
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| 8.2 | Provisions of this Agreement and Contingent Rights for the Sole Benefit of Parties and Holder. Nothing in this Certificate, expressed or implied, shall give or be construed to give to any person other than the Company and the Holder, as the case may be, any legal or equitable right, remedy or claim under this Certificate, or under any covenant or provision herein or therein contained, all such covenants and provisions being for the sole benefit of the Company and the Holder. |
| 8.3 | Governing Law. This Certificate shall be governed by and construed and interpreted in accordance with the laws of the Province of British Columbia and the federal laws of Canada applicable therein without giving effect to the conflicts of laws principles thereof and without reference to the laws of any other jurisdiction and is to be treated in all respects as a British Columbia contract. The Parties agree to submit to the exclusive jurisdiction of the courts of British Columbia, provided that nothing in this Certificate shall prevent either Party from seeking injunctive relief in the courts of any competent jurisdiction. |
| 8.4 | Entire Agreement. Other than the Purchase Agreement, this Certificate, constitute the entire agreement among the Company and the Holder hereto pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, between the Company and the Holder with respect to the subject matter hereof. |
| 8.5 | Further Assurances. Each Party will, upon request but without further consideration, from time to time promptly execute and deliver all further documents and instruments and take all further action necessary or appropriate to give effect to and perform the provisions and intent of this Agreement. |
| 8.6 | Waiver. No waiver of any provision of this Agreement will constitute a waiver of any other provision, nor will any waiver constitute a continuing waiver unless otherwise expressly provided. Any agreement as to the extension or waiver of any provision of this Agreement by any Party will be valid only if in writing and signed by such Party. No waiver of any breach of any provision of this Agreement will be effective or binding unless made in writing and signed by the Party purporting to give the same and, unless otherwise provided, will be limited to the specific breach waived. |
| 8.7 | Enurement. This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective successors and permitted assigns. |
| 8.8 | Severability. In the event that any provision or part of this Certificate is determined by any court or other judicial or administrative body to be illegal, null, void, invalid or unenforceable, that provision shall be severed to the extent that it is so declared and the other provisions of this Certificate shall continue in full force and effect. |
| 8.9 | Counterparts. This Agreement may be executed and delivered in one or more counterparts and may be executed and delivered by any electronically communicated method, each of which when executed and delivered shall be deemed to be an original and all of which counterparts together shall be deemed to constitute one and the same instrument. |
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF the Company has caused this Certificate to be signed by its duly authorized officer as of February 6, 2025.
| IMPACT ACQUISITION CORP. | ||
| The digital signature shall be deemed to constitute an original signature to this Certificate. | Per: | /s/ Gabi Kabazo |
| Authorized Signatory | ||
| Jeffs Brands Ltd | ||
| Per: | /s/ Ronen Zalayet | |
| Authorized Signatory | ||
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Exhibit 4.15
CONSULTING AGREEMENT
THIS AGREEMENT (the “Agreement”) is made on this 30 day of April 2024 between Jeffs’ Brands Ltd. (the “Company”) and XYLO TECHNOLOGIES LTD. (the “Consultant”). The Company and together with the Consultant, each a “Party” and collectively, the “Parties”.
| WHEREAS: | the Company wishes the Consultant to provide the Company with certain services and the Consultant wishes to render such services to the Company; and |
| WHEREAS: | the Consultant represents to the Company that it is ready, qualified, willing and able to carry out its obligations and undertakings towards the Company pursuant hereto; and |
| WHEREAS: | the Company and the Consultant desire to regulate their relationship in accordance to the terms and conditions set forth in this Agreement. |
NOW THEREFORE, the parties hereto agree as follows:
| 1. | The Services |
| 1.1. | The Company hereby engages the Consultant as an independent consultant and the Consultant hereby agrees to serve as a consultant to the Company providing public markets business development and strategic consulting services, including ongoing consulting to the Company, its management and its chief executive officer, as well as additional services as may be requested from time to time by the chief executive officer or chairman of the board of directors of the Company (the “Services”). |
| 1.2. | The Consultant shall cooperate on an ongoing basis with such employees, consultants and contractors of the Company as determined by the Company from time to time; the person within the Company who shall be in charge of the engagement of the Consultant shall be the chairman of the board of directors of the Company or such other person as determined by the Company from time to time. The Company may require the Consultant to provide reports or other types of ongoing information concerning the Services as determined from time to time, whether or not set forth herein. |
| 1.3. | The Consultant undertakes that the Services shall be performed by its personnel (“Consultant’s Representative”). Each employee, consultant, manager or any other representative of the Consultant, including the Consultant’s Representative shall be deemed to be personally bound by all the obligations and liabilities of the Consultant as if he was the Consultant hereunder. All references to the term the Consultant hereunder shall be deemed to refer to the Consultant and the Consultant’s Representative jointly and severally. Any breach of this Agreement by the Consultant’s Representative or by any other employee, consultant, manager or representative of the Consultant shall be deemed a breach by the Consultant. |
| 1.4. | The Consultant’s Representative shall devote all the necessary time in performing its duties and responsibilities under this Agreement, as shall be reasonably required by the Company. |
| 1.5. | The Consultant agrees to perform its duties described herein in a faithful, diligent and professional manner. |
| 1.6. | The Consultant shall be responsible for maintaining, throughout the Term of this Agreement and at the Consultant’s own expense, any and all required licenses, permits, authorizations, personnel, resources, a place of work, any equipment and supplies necessary for the execution and performance of the Services. |
| 1.7. | Nothing in this Agreement shall be interpreted as preventing or restricting the Company from obtaining or seeking from any other person services of the same nature as the Services, or otherwise from performing or seeking to perform any action or operation. Nothing in this Agreement shall be interpreted as preventing or restricting the Consultant from supplying services to any third party, as long as such services to third parties (i) do not conflict with any obligation or undertaking of the Consultant hereunder, and (ii) do not interfere with the performance of or restrict the ability of the Consultant to perform the Services hereunder. To the extent Consultant becomes aware of any existing or potential conflict with Consultant’s obligations and undertaking hereunder, Consultant shall immediately inform Company of the same, and if Consultant cannot remedy or rectify such conflict within seven (7) days of becoming aware of such conflict or from receiving the Company’s notice concerning such conflict then Company shall be entitled to terminate this Agreement immediately without prejudice to any other remedy or relief it might have due to the same. A conflict of interest shall include, but shall not be limited to, providing similar Services to a competitor of the Company during the Term. |
| 2. | Term |
| 2.1. | This Agreement shall become effective as of January 1, 2024 (the “Effective Date”) for a period of 36 months from the Effective Date (the “Initial Term”). Upon expiration of the Initial Term, this Agreement shall automatically renew for successive 12 month periods (each, a “Renewal Term”) unless either party provides written notice of its intent not to renew at least 30 days prior to the expiration of the then-current term. The Initial Term and any Renewal Term(s) shall collectively be referred to as the “Term” of this Agreement. |
| 2.2. | Notwithstanding the provisions of Section 2.1, each Party may terminate this Agreement prior to its expiration for Cause (as defined herein) by giving the other party 30 days’ advance notice in writing (the “Notice Period”). A termination for “Cause” is a termination due to: (a) a breach by either Party of (i) the Agreement which cannot be cured, or, if curable, has not been cured within thirty (30) days from delivery of a notice of breach, or (ii) the provisions of Sections 4 and 5, and Schedule A; (severally and collectively, a “Material Breach”); (b) the other Party’s conviction or indictment of any felony; or (c) causing grave injury to the business, assets, operations or reputation of the Company. |
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| 3. | Consideration |
| 3.1. | Consulting Fee |
| 3.1.1. | In consideration for the Services rendered by the Consultant pursuant to this Agreement, the Company shall pay the Consultant a monthly fee in the amount of US$20,000 (plus VAT, if required by law) (the “Consulting Fee”). |
| 3.1.2. | All payments of Consulting Fee hereunder, subject to Section 3.1.1, shall be made on a monthly basis, within 10 days from, and subject to, receipt by the Company of a duly issued tax invoice(s) and receipt(s) by the Consultant for the amount due together with the required reports; provided, however, that such payment shall be made not later than the tenth (10th) day of each calendar month during the Term of this Agreement following the Consulting Commencement Date. |
| 3.1.3. | The Consulting Fees are inclusive of any and all taxes, and the Consultant shall bear full responsibility for all tax obligations of any kind or nature relating, directly or indirectly, to the Consulting Fee and otherwise to the Services hereunder. To the extent that any such taxes may be imposed upon or required to be deducted or withheld by the Company, the Company may deduct or withhold such amounts from any payments due to the Consultant. VAT shall be charged on all amounts payable hereunder. |
| 3.2. | Full Consideration |
Other than the consideration specified in this Section 3, which consideration constitutes full consideration for the Services rendered hereunder, the Consultant will not be entitled to any other consideration for rendering the Services hereunder. Consultant shall be entitled to any repayment or reimbursement of any costs and expenses in connection with its performance of the Services. Any and all expenses incurred by Consultant (or anyone on its behalf) shall be borne and paid exclusively by Company.
| 4. | Confidentiality, Non-Competition and Invention Assignment Undertaking |
Simultaneously with the execution of this Agreement, and a as condition hereto, the Consultant hereby executes the Undertaking attached hereto as Schedule A.
| 5. | Relationship of Parties |
| 5.1. | The parties hereto hereby declare and approve, that this Agreement is a Contractors Agreement within the meaning of the Israeli Contractors Law – 1974 (the “Contractors Law”), and that nothing in this Agreement that shall be interpreted or construed as creating or establishing any partnership, joint venture, employment relationship, franchise or agency or any other similar relationship between the Company or its Affiliates (as such term is defined below) and the Consultant or the Consultant’s Representative, and it is specifically clarified that with respect to the Services, no employer-employee relationship will be formed between the Company or its Affiliates and the Consultant or the Consultant’s Representative, and the Consultant is not entitled to any social or other benefits resulting from employer-employee relationship. Notwithstanding the above, the Consultant hereby waives any right to a lien in accordance with Section 5 of the Contractors Law or any other law. The Consultant hereby acknowledges that the Company is relying upon the truthfulness and accuracy of the representations set forth in this Section 5.1 in engaging the Consultant. |
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| 5.2. | The Consultant shall bear and/or will defend, indemnify and hold the Company, or any third party on its behalf, harmless from and against all claims, all damages, losses and expenses, including reasonable fees and expenses of attorneys and other professionals, upon receipt of demand (i) relating to any obligation, future or past, imposed upon the Company to pay any withholding tax payments regarding consulting services, social security, unemployment or disability insurance or similar terms in connection with compensation received by the Consultant or, or which are based upon a stipulation by a competent judicial authority that an employer - employee relationship was created between the Company or its Affiliates and the Consultant’s Representative; and (ii) resulting from any act, omission or negligence on the Consultant’s or any of its employees’ part in the performance or failure to perform the scope of work under this Agreement. |
| 5.3. | The Consultant acknowledges that the Consultant’s Representative has read and fully understood the terms of this structure of the relationship between the parties as an independent contractor and that the Consultant’s Representative has consulted and received advice of counsel regarding said structure of the relationship between the parties hereto and has had sufficient opportunity to do so. |
| 5.4. | It is hereby clarified that any right granted to the Company to instruct and/or oversee the Services by the Consultant is granted in order to ensure the performance of the Services in full and not to imply or justify an employer-employee relationship between the Company and the Consultant or the Consultant’s Representative. |
| 5.5. | The Consultant shall be responsible to pay any and all payments, salary, taxes and all other benefits and any amounts due to any relevant social security or similar authority with respect to its employees and/or the Services provided by the Consultant’s Representative pursuant to this Agreement. The Consultant undertakes to acquire for the Consultant’s Representative pension coverage in a customary amount. The Consultant, hereby releases and forever discharges the Company and its Affiliates, from any and all claims, which it ever had, now has, or may claim to have against the Company and/or its Affiliates in connection with the existence of any employer - employee relationship between Company or its Affiliates and the Consultant or the Consultant’s Representative. |
| 6. | Miscellaneous |
| 6.1. | In this Agreement the term “Affiliate” shall mean, any person or entity that directly or indirectly controls, is controlled by, or is under common control with, a party to this Agreement. For purposes hereof, the term “control” means the power to direct the management or affairs of a person or entity through the ownership of voting securities, by contract, or otherwise. |
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| 6.2. | The preamble and the schedules hereto shall form an integral part of this Agreement. All headings of the Sections and Subsections of this Agreement are intended for convenience of reference and shall not be used in interpreting this Agreement. |
| 6.3. | Assignment. Neither this Agreement nor any interest herein may be assigned by the Parties without the prior written consent of the other Party. |
| 6.4. | Entire Agreement; Amendments. This Agreement constitutes the entire agreement between the Consultant and the Company with respect to the subject matter hereof and supersedes any other arrangement, understanding or agreement, verbal or otherwise, including the Prior Agreement. No amendment of or waiver of, or modification of any obligation under this Agreement will be enforceable unless set forth in a writing signed by the parties hereto. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. |
| 6.5. | Law; Jurisdiction. This Agreement shall be governed by the laws of the State of Israel (excluding its conflict of law principles) and the competent courts/tribunals of Tel-Aviv shall have exclusive jurisdiction over any disputes arising hereunder. |
| 6.6. | No Waiver. No failure or delay on the part of any party hereto in exercising any right, power or remedy thereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver granted thereunder must be in writing and shall be valid only in the specific instance in which given. |
| 6.7. | Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Agreement and the remainder of this Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Agreement shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction. |
| 6.8. | Notices. Any notice or other communication in connection with this Agreement must be in writing to the address set forth in the preamble to this Agreement (or to such other address as shall be specified by like notice) and will be deemed given: (i) if sent by a delivery service, on the date confirmed as the actual date of delivery by such service; (ii) if sent by registered air mail, return receipt requested, within seven (7) days of mailing; or (iii) if sent by facsimile or email with electronic confirmation of transmission, on the next business day after transmission, if not transmitted on a business day, or on the day of transmission, if transmitted on a business day. |
| 6.9. | Survival. The provisions of Sections 4, 5 and 56 of this Agreement, including the provisions of Schedule A, shall continue and remain in full force and effect following the termination or expiration of this Agreement, for whatever reason. |
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IN WITNESS WHEREOF, the parties have signed this Agreement as of the date hereof.
| Jeffs’ Brands Ltd. | XYLO TECHNOLOGIES LTD. | |||
| /s/ Viki Hakmon | /s/ Liron Carmel | |||
| By: | Viki Hakmon | By: | Liron Carmel | |
| Title: | CEO | Title: | CEO | |
| /s/ Ronen Zalayet | /s/ Tali Dinar | |||
| By: | Ronen Zalayet | By: | Tali Dinar | |
| Title: | CFO | Title: | CFO | |
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SCHEDULE A
UNDERTAKING
THIS UNDERTAKING (“Undertaking”) is entered into as of the 03 day of April 2024 by XYLO TECHNOLOGIES LTD. (the “Consultant”).
| WHEREAS, | the Consultant wishes to be engaged by Jeff’s Brands Ltd., whose address is at 7 Mezada Street, Bnei Brak, 5126112, Israel (the “Company”); and |
| WHEREAS, | it is critical for the Company to preserve and protect its Confidential Information (as defined below) and its rights in Inventions (as defined below) and in all related intellectual property, and the Consultant is entering into this Undertaking as a condition to the Consultant’s engagement with the Company. |
NOW, THEREFORE, the Consultant undertakes and warrants towards the Company as follows:
References herein to the term “Company” shall include any of the Company’s direct or indirect parent, subsidiary and affiliated companies, and their respective successors and assigns.
| 1. | Confidentiality. |
| 1.1. | the Consultant acknowledges that the Consultant may have access to information that relates to the Company, its business, assets, financial condition, affairs, activities, plans and projections, customers, suppliers, partners, and other third parties with whom the Company agreed or agrees, from time to time, to hold information of such party in confidence (the “Confidential Information”). Confidential Information shall include, without limitation, information, whether or not marked or designated as confidential, concerning technology, products, research and development, patents, copyrights, inventions, trade secrets, test results, formulae, processes, data, know-how, marketing, promotion, business and financial plans, policies, practices, strategies, surveys, analyses and forecasts, financial information, customer lists, agreements, transactions, undertakings and data concerning employees, consultants, officers, directors, and shareholders. Confidential Information includes information in any form or media, whether documentary, written, oral, magnetic, electronically transmitted, through presentation or demonstration or computer generated. Confidential Information shall not include information that: (i) has become part of the public domain not as a result of a breach of any obligation owed by the Consultant to the Company; or (ii) is required to be disclosed by law or the binding rules of any governmental organization, provided, however, that the Consultant gives the Company prompt notice thereof so that the Company may seek a protective order or other appropriate remedy, and further provided, that in the event that such protective order or other remedy is not obtained, the Consultant shall furnish only that portion of the Confidential Information which is legally required, and shall exercise all reasonable efforts required to obtain confidential treatment for such information. |
| 1.2. | The Consultant acknowledges and understands that the engagement by the Company and the access to Confidential Information creates a relationship of confidence and trust with respect to such Confidential Information. |
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| 1.3. | During the term of the Consultant’s engagement and at any time after termination or expiration thereof, for any reason, the Consultant shall keep in strict confidence and trust, shall safeguard, and shall not disclose to any person or entity, nor use for the benefit of any party other than the Company, any Confidential Information, other than with the prior express consent of the Company. |
| 1.4. | All right, title and interest in and to Confidential Information are and shall remain the sole and exclusive property of the Company or of the third party providing such Confidential Information to the Company, as the case may be. Without limitation of the foregoing, the Consultant agrees and acknowledges that all memoranda, books, notes, records, email transmissions, charts, formulae, specifications, lists and other documents (contained on any media whatsoever) made, reproduced, compiled, received, held or used by the Consultant in connection with the engagement by the Company or that otherwise relates to any Confidential Information (the “Confidential Material”), shall be the Company’s sole and exclusive property and shall be deemed to be Confidential Information. All originals, copies, reproductions and summaries of the Confidential Material shall be delivered by the Consultant to the Company upon termination or expiration of the Consultant’s engagement for any reason, or at any earlier time at the request of the Company, without the Consultant retaining any copies thereof. |
| 1.5. | During the term of the Consultant’s engagement with the Company, the Consultant shall not remove from the Company’s offices or premises any Confidential Material unless and to the extent necessary in connection with the duties and responsibilities of the Consultant and permitted pursuant to then applicable policies and regulations of the Company. In the event that such Confidential Material is duly removed from the Company’s offices or premises, the Consultant shall take all actions necessary in order to secure the safekeeping and confidentiality of such Confidential Material and return the Confidential Material to their proper files or location as promptly as possible after such use. |
| 1.6. | During the term of the Consultant’s engagement with the Company, the Consultant will not improperly use or disclose any proprietary or confidential information or trade secrets, and will not bring onto the premises of the Company any unpublished documents or any property, belonging to any former employer or any other person to whom the Consultant has an obligation of confidentiality and/or non-use (including, without limitation, any academic institution or any entity related thereto), unless generally available to the public or consented to in writing by that person. |
| 2. | Ownership of Inventions. |
| 2.1. | The Consultant will notify and disclose in writing to the Company, or any persons designated by the Company from time to time, all information, improvements, inventions, trademarks, works of authorship, designs, trade secrets, formulae, processes, techniques, know-how, and data, whether or not patentable or registerable under copyright or any similar laws, made or conceived or reduced to practice or learned by the Consultant, either alone or jointly with others, during the Consultant’s engagement with the Company (all such information, improvements, inventions, trademarks, works, designs, trade secrets, formulae, processes, techniques, know-how, and data are hereinafter referred to as the “Invention(s)”) immediately upon discovery, receipt or invention as applicable. |
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| 2.2. | Consultant agrees that all the Inventions are, upon creation, Inventions of the Company, shall be the sole property of the Company and its assignees, and the Company and its assignees shall be the sole owner of all title, rights and interest in and to any patents, copyrights, trade secrets and all other rights of any kind or nature, including moral rights, in connection with such Inventions. the Consultant hereby irrevocably and unconditionally assigns to the Company all the following with respect to any and all Inventions: (i) all title, rights and interest in and to any patents, patent applications, and patent rights, including any and all continuations or extensions thereof; (ii) rights associated with works of authorship, including copyrights and copyright applications, Moral Rights (as defined below) and mask work rights; (iii) rights relating to the protection of trade secrets and confidential information; (iv) design rights and industrial property rights; (v) any other proprietary rights relating to intangible property including trademarks, service marks and applications thereof, trade names and packaging and all goodwill associated with the same; (vi) any and all title, rights and interest in and to any Invention; and (vii) all rights to sue for any infringement of any of the foregoing rights and the right to all income, royalties, damages and payments with respect to any of the foregoing rights. the Consultant also hereby forever waives and agrees never to assert any and all Moral Rights the Consultant may have in or with respect to any Inventions, even after termination of engagement on behalf of the Company. “Moral Rights” means any right to claim authorship of a work, any right to object to any distortion or other modification of a work, and any similar right, existing under the law of any country in the world, or under any treaty. |
| 2.3. | The Consultant further agrees to perform, during and after the term of the Consultant’s engagement with the Company, all acts deemed reasonably necessary or desirable by the Company to permit and assist it, at the Company’s expense, in obtaining, maintaining, defending and enforcing the Inventions in any and all countries. Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings. the Consultant hereby irrevocably designates and appoints the Company and its duly authorized officers and agents, as the Consultant’s agents and attorneys-in-fact to act for and on the Consultant’s behalf and instead of the Consultant, to execute and file any documents and to do all other lawfully permitted acts to further the above purposes with the same legal force and effect as if executed by the Consultant. |
| 2.4. | The Consultant shall not be entitled to any monetary consideration or any other consideration except as explicitly set forth in the Consulting Agreement. Without limitation of the foregoing, the Consultant irrevocably confirms that the consideration explicitly set forth in the Consulting Agreement is in lieu of any rights for compensation that may arise in connection with the Inventions under applicable law and waives any right to claim royalties or other consideration with respect to any Invention, including under Section 134 of the Israeli Patent Law - 1967. Any oral understanding, communication or agreement with respect to the matters set forth herein, not memorialized in writing and duly signed by the Company, shall be void. |
| 3. | General. |
| 3.1. | The Consultant represents that the performance of all the terms of this Undertaking and the Consultant’s duties as a consultant of the Company does not and will not breach any invention assignment, proprietary information, non-compete, confidentiality or similar agreements with, or rules, regulations or policies of, any other party (including, without limitation, any academic institution or any entity related thereto). The Consultant acknowledges that the Company is relying upon the truthfulness and accuracy of such representations in its decision to engage with the Consultant. |
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| 3.2. | The Consultant acknowledges that the provisions of this Undertaking serve as an integral part of the terms of the Consulting Agreement and reflect the reasonable requirements of the Company in order to protect its legitimate interests with respect to the subject matter hereof. |
| 3.3. | The Consultant recognizes and acknowledges that in the event of a breach or threatened breach of this Undertaking by the Consultant, the Company may suffer irreparable harm or damage and will, therefore, be entitled to injunctive relief to enforce this Undertaking (without limitation to any other remedy at law or in equity). |
| 3.4. | This Undertaking is governed by and construed in accordance with the laws of the State of Israel, without giving effect to its laws pertaining to conflict of laws. Any and all disputes in connection with this Undertaking shall be submitted to the exclusive jurisdiction of the competent courts or tribunals, as relevant, located in the city of Tel-Aviv-Jaffa, Israel. |
| 3.5. | If any provision of this Undertaking is determined by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Undertaking only with respect to such jurisdiction in which such clause or provision cannot be enforced, and the remainder of this Undertaking shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Undertaking. In addition, if any particular provision contained in this Undertaking shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing the scope of such provision so that the provision is enforceable to the fullest extent compatible with applicable law. |
| 3.6. | The provisions of this Undertaking shall continue and remain in full force and effect following the termination or expiration of the engagement between the Company and the Consultant, for whatever reason. This Undertaking shall not serve in any manner so as to derogate from any of the Consultant’s obligations and liabilities under any applicable law. |
| 3.7. | This Undertaking constitutes the entire agreement between the Consultant and the Company with respect to the subject matter hereof and supersedes all prior agreements, proposals, understandings and arrangements, if any, whether oral or written, with respect to the subject matter hereof. No amendment, waiver or modification of any obligation under this Undertaking will be enforceable unless set forth in a writing signed by the Company. No delay or failure to require performance of any provision of this Undertaking shall constitute a waiver of that provision as to that or any other instance. No waiver granted under this Undertaking as to any one provision herein shall constitute a subsequent waiver of such provision or of any other provision herein, nor shall it constitute the waiver of any performance other than the actual performance specifically waived. |
| 3.8. | This Undertaking, the rights of the Company hereunder, and the obligations of the Consultant hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. The Company may assign any of its rights under this Undertaking. The Consultant may not assign, whether voluntarily or by operation of law, any of the Consultant’s obligations under this Undertaking, except with the prior written consent of the Company. |
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IN WITNESS WHEREOF, the undersigned, has executed this Undertaking as of the date first mentioned above.
| Printed Name: | XYLO TECHNOLOGIES LTD. | Signature: | /s/ Tali Dinar | |
| /s/ Liron Carmel |
Exhibit 8.1
LIST OF SUBSIDIARIES
|
Entity Name (100% ownership unless stated otherwise) |
Jurisdiction of Incorporation | Direct Parent Company | ||
| Smart Repair Pro | California | Jeffs’ Brands Ltd | ||
| Pure NJ Logistics LLC | Delaware | Smart Repair Pro | ||
| Top Rank Ltd. | Israel | Jeffs’ Brands Ltd | ||
| Jeffs’ Brands Holdings Inc. | Delaware | Jeffs’ Brands Ltd | ||
| SciSparc Nutraceuticals Inc. | Delaware | Jeffs’ Brands Holdings Inc. | ||
| Fort Products Ltd. | England and Wales | Jeffs’ Brands Ltd | ||
| Fort Products LLC | Delaware | Jeffs’ Brands Holdings Inc. |
Exhibit 11.1
Jeffs’ Brands Ltd
Insider Trading Compliance Policy (2025)
Contents
| Page | ||
| I. | Summary | 2 |
| II. | Statement of Policies Prohibiting Insider Trading | 3 |
| III. | Explanation of Insider Trading | 4 |
| IV. | Statement of Procedures to Prevent Insider Trading | 7 |
| V. | Additional Prohibited Transactions | 9 |
| VI. | Rule 10b5-1 Trading Plans | 10 |
Insider Trading Compliance Policy
U.S. federal securities laws prohibit trading in the securities of a company while in possession of material nonpublic information with an intent to deceive and in breach of a duty of trust or confidence and providing material nonpublic information to others so that they can trade. Violating such laws can undermine investor trust, harm our company’s reputation, and result in your dismissal from Jeffs’ Brands Ltd (together with its subsidiaries, the “Company”) or even serious criminal and civil charges against you and the Company.
This Insider Trading Compliance Policy (this “Policy”) outlines your responsibilities to avoid insider trading and implements certain procedures to help you avoid even the appearance of insider trading.
| I. | Summary |
Preventing insider trading is necessary to comply with U.S. federal securities laws and to preserve the reputation and integrity of the Company. “Insider trading” occurs when any person purchases or sells a security while in possession of material nonpublic information relating to the security in breach of a duty of trust or confidence. Insider trading is a crime. The criminal penalties for violating insider trading laws include imprisonment and fines of up to $5 million for individuals and $25 million for corporations. Insider trading may also result in civil penalties, including disgorgement of profits and civil fines. Insider trading is also prohibited by this Policy, and violation of this Policy may result in Company-imposed sanctions, including removal or dismissal for cause.
This Policy applies to all officers, directors, and employees of the Company, and the Company may determine that this Policy applies to additional persons with access to material nonpublic information, such as contractors or consultants (collectively, “Covered Persons”). In all cases, as someone subject to this Policy, you bear full responsibility for ensuring your compliance with this Policy, and also for ensuring that members of your household, individuals not residing in your household but whose transactions are subject to your influence or control and entities under your influence or control are in compliance with this Policy. Every Covered Person must review this Policy. This Policy extends to all activities within and outside your Company duties. Questions regarding the Policy should be directed to the Company’s Compliance Officer.
For purposes of this Policy, the “Compliance Officer” shall be the Company’s General Counsel; provided that if the General Counsel is unavailable or personally involved in the transaction at issue or if no General Counsel is appointed, the Compliance Officer shall be the Company’s Chief Financial Officer.
Actions taken by the Company, the Compliance Officer, or any other Company personnel do not constitute legal advice, nor do they insulate you from the consequences of noncompliance with this Policy.
2
Statement of Policies Prohibiting Insider Trading
Unless otherwise permitted by this Policy, you must not (a) purchase sell, gift or otherwise transfer any security of the Company while you possess material nonpublic information about the Company or (b) purchase, sell, gift or otherwise transfer any security of any other company, while you possess material nonpublic information about the other company that you obtained in connection with your employment by or service to the Company.
These prohibitions do not apply to:
| ● | purchases of the Company’s securities from the Company or sales of the Company’s securities to the Company; | |
| ● | exercises of stock options or other equity awards or the surrender of shares to the Company in payment of the exercise price or in satisfaction of any tax withholding obligations in a manner permitted by the applicable equity award agreement, or vesting of equity-based awards that, in each case, do not involve a market sale of the Company’s securities (the “cashless exercise” of a Company stock option through a broker does involve a market sale of the Company’s securities, and therefore would not qualify under this exception); |
| ● | gift transactions for family or estate planning purposes, where securities are gifted to a person or entity subject to this policy; or | |
| ● | purchases or sales of the Company’s securities made pursuant to any binding contract, specific instruction or written plan entered into while the purchaser or seller, as applicable, was unaware of any material nonpublic information and which contract, instruction, or plan (i) meets all requirements of the affirmative defense provided by Rule 10b5-1 (“Rule 10b5-1”) promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”), (ii) was precleared in advance pursuant to this Policy and (iii) has not been amended or modified in any respect after such initial preclearance without such amendment or modification being precleared in advance pursuant to this Policy. For more information about Rule 10b5-1 trading plans, see Section VI below. |
From time to time, events will occur that are material to the Company and cause certain officers, directors, or employees to be in possession of material nonpublic information. When that happens, the Company will recommend that those in possession of the material nonpublic information suspend all trading in the Company’s securities until the information is no longer material or has been publicly disclosed.
When such event-specific blackout periods occur, those subject to it will be notified by the Company. The event-specific blackout period will not be announced to those not subject to it, and those subject to it or otherwise aware of it should not disclose it to others.
3
Even if the Company has not notified you that you are subject to an event-specific blackout period, if you are aware of material nonpublic information about the Company, you should not trade in Company securities. Any failure by the Company to designate you as subject to an event-specific blackout period, or to notify you of such designation, does not relieve you of your obligation not to trade in the Company’s securities while possessing material nonpublic information.
No officer, director, or employee shall directly or indirectly communicate (or “tip”) material nonpublic information to anyone outside the Company (except in accordance with the Company’s policies regarding the protection or authorized external disclosure of Company information) or to anyone within the Company other than on a “need-to-know” basis.
| II. | Explanation of Insider Trading |
“Insider trading” refers to the purchase or sale of a security while in possession of material nonpublic information relating to the security with an intent to deceive and in breach of a duty of trust or confidence.
“Securities” includes stocks, bonds, notes, debentures, options, warrants, and other convertible securities, as well as derivative instruments.
“Purchase” and “sale” are defined broadly under the federal securities law. “Purchase” includes not only the actual purchase of a security, but any contract to purchase or otherwise acquire a security. “Sale” includes not only the actual sale of a security, but any contract to sell or otherwise dispose of a security. These definitions extend to a broad range of transactions, including conventional cash-for-stock transactions, conversions, the exercise of stock options, and acquisitions and exercises of warrants or puts, calls, or other derivative securities.
| A. | What Facts Are Material? |
The materiality of a fact depends upon the circumstances. A fact is considered “material” if there is a substantial likelihood that a reasonable investor would consider it important in making a decision to buy, sell, or hold a security, or if the fact is likely to have a significant effect on the market price of the security. Material information can be positive or negative and can relate to virtually any aspect of a company’s business or to any type of security, debt, or equity. Also, information that something is likely to happen in the future—or even just that it may happen—could be deemed material.
Examples of material information include (but are not limited to) information about corporate earnings or earnings forecasts; possible mergers, acquisitions, tender offers, or dispositions; dividends; major new products or product developments; important business developments such as major contract awards or cancellations, developments regarding strategic collaborators, or the status of regulatory submissions; management or control changes; significant borrowing or financing developments, including pending public sales or offerings of debt or equity securities; defaults on borrowings; bankruptcies; cybersecurity or data security incidents; and significant litigation or regulatory actions. Moreover, material information does not have to be related to a company’s business. For example, the contents of a forthcoming newspaper column that is expected to affect the market price of a security can be material.
4
Questions regarding material information should be directed to the Compliance Officer. A good rule of thumb: When in doubt, do not trade.
| B. | What Is Nonpublic? |
Information is “nonpublic” if it is not available to the general public. In order for information to be considered public, it must be widely disseminated in a manner making it generally available to investors, through newswire services such as Dow Jones, Reuters, Bloomberg, Business Wire, The Wall Street Journal, Associated Press, or United Press International; broadcasts on widely available radio or television programs; publication in a widely available newspaper, magazine, or news website; a Regulation FD-compliant conference call; or public disclosure documents filed with the US Securities and Exchange Commission (the “SEC”) that are available on the SEC’s website. Note that simply posting information to the Company’s website may not be sufficient disclosure to make the information public.
The circulation of rumors, even if accurate and reported in the media, does not constitute effective public dissemination. In addition, even after a public announcement, a reasonable period of time must lapse in order for the market to react to the information. Generally, one should allow two full trading days following publication as a reasonable waiting period before such information is deemed to be public.
| C. | Who Is an Insider? |
“Insiders” include officers, directors, and any employees of a company, or anyone else who has material nonpublic information about a company. Insiders have independent fiduciary duties to their company and its stockholders not to trade on material nonpublic information relating to the company’s securities. Insiders may not trade in the Company’s securities while in possession of material nonpublic information relating to the Company, nor may they tip such information to anyone outside the Company (except in accordance with the Company’s policies regarding the protection or authorized external disclosure of Company information) or to anyone within the Company other than on a “need-to-know” basis.
| D. | Trading by Persons Other Than Insiders |
Insiders may be liable for communicating or tipping material nonpublic information to a third party (“tippee”), and insider trading violations are not limited to trading or tipping by insiders. Persons other than insiders can also be liable for insider trading, including tippees who trade on material nonpublic information tipped to them or individuals who trade on material nonpublic information that has been misappropriated. Insiders may be held liable for tipping even if they receive no personal benefit from tipping and even if no close personal relationship exists between them and the tippee.
5
Penalties for Engaging in Insider Trading
Penalties for trading on or tipping material nonpublic information can extend significantly beyond any profits made or losses avoided, both for individuals engaging in such unlawful conduct and their employers. The SEC and Department of Justice have made the civil and criminal prosecution of insider trading violations a top priority. Enforcement remedies available to the government or private plaintiffs under the federal securities laws include:
| ● | SEC administrative sanctions; |
| ● | securities industry self-regulatory organization sanctions; |
| ● | civil injunctions; |
| ● | damage awards to private plaintiffs; |
| ● | disgorgement of all profits; |
| ● | civil fines for the violator of up to three times the amount of profit gained or loss avoided; |
| ● | civil fines for the employer or other controlling person of a violator (i.e., where the violator is an employee or other controlled person) of up to the greater of $1.525 million or three times the amount of profit gained or loss avoided by the violator; |
| ● | criminal fines for individual violators of up to $5 million ($25 million for an entity); and |
| ● | jail sentences of up to 20 years. |
In addition, insider trading could result in serious sanctions by the Company, including dismissal. Insider trading violations are not limited to violations of the federal securities laws. Other federal and state civil or criminal laws, such as the laws prohibiting mail and wire fraud and the Racketeer Influenced and Corrupt Organizations Act (RICO), may also be violated in connection with insider trading.
| E. | Size of Transaction and Reason for Transaction Do Not Matter |
The size of the transaction or the amount of profit received does not have to be significant to result in prosecution. The SEC has the ability to monitor even the smallest trades, and the SEC performs routine market surveillance. Brokers or dealers are required by law to inform the SEC of any possible violations by people who may have material nonpublic information. The SEC aggressively investigates even small insider trading violations.
6
Statement of Procedures to Prevent Insider Trading
The following procedures have been established, and will be maintained and enforced, by the Company to prevent insider trading.
| A. | Blackout Periods |
The period during which the Company prepares quarterly financials is a sensitive time for insider trading purposes, as Company personnel may be more likely to possess, or be presumed to possess, material nonpublic information. To avoid the appearance of impropriety and assist Company personnel in planning transactions in the Company’s securities for appropriate times, no officer, director, or employee shall purchase, sell, gift or otherwise transfer of the Company during the period beginning on the 14th calendar day before the end of any fiscal quarter of the Company and ending upon completion of the second full trading day after the public release of earnings data for such fiscal quarter or during any other trading suspension period declared by the Company, except for:
| ● | purchases of the Company’s securities from the Company or sales of the Company’s securities to the Company; |
| ● | exercises of stock options or other equity awards, the surrender of shares to the Company in payment of the exercise price or in satisfaction of any tax withholding obligations in a manner permitted by the applicable equity award agreement, or the vesting of equity-based awards that do not involve a market sale of the Company’s securities (the cashless exercise of a Company stock option through a broker does involve a market sale of the Company’s securities, and therefore would not qualify under this exception); |
| ● | gift transactions for family or estate planning purposes, where securities are gifted to a person or entity subject to this policy; and |
| ● | purchases or sales of the Company’s securities made pursuant to any binding contract, specific instruction, or written plan entered into while the purchaser or seller, as applicable, was unaware of any material nonpublic information and which contract, instruction, or plan (i) meets all requirements of the affirmative defense provided by Rule 10b5-1, (ii) was precleared in advance pursuant to this Policy, and (iii) has not been amended or modified in any respect after such initial preclearance without such amendment or modification being precleared in advance pursuant to this Policy. |
Exceptions to the blackout period policy may be approved only by the Company’s General Counsel or Chief Financial Officer or, in the case of exceptions for officers and directors, the Board of Directors or Audit Committee of the Board of Directors.
7
From time to time, the Company, through the Board of Directors or the General Counsel or Chief Financial Officer, may instruct that officers, directors, employees, or others suspend trading in the Company’s securities because of developments that have not yet been disclosed to the public. Subject to the exceptions noted above, all those affected should not trade in the Company’s securities while the suspension is in effect, and should not disclose to others that the Company has suspended trading.
| B. | Preclearance of All Trades by All Officers, Directors and Certain Key Employees |
To provide assistance in preventing inadvertent violations of applicable securities laws and to avoid the appearance of impropriety in connection with the purchase and sale of the Company’s securities, all transactions in the Company’s securities (including, without limitation, acquisitions and dispositions of Company stock, the exercise of stock options, and the sale of Company stock issued upon exercise of stock options) by officers and directors (each, a “Preclearance Person”) must be precleared by the Company’s Compliance Officer, except for certain exempt transactions as explained in Section VI of this Policy.
A request for preclearance must be in writing at least two business days in advance of the proposed transaction. Such preclearance request form must include a description of the proposed transaction, the proposed date of the transaction, the number of shares or other securities to be involved and a certification that the Preclearance Person is not aware of material nonpublic information about the Company. The Compliance Officer shall have sole discretion to decide whether to clear any contemplated transaction. All trades that are precleared must be effected within five business days of receipt of the preclearance, unless a specific exception has been granted by the Compliance Officer. A precleared trade (or any portion of a precleared trade) that has not been effected during the five business day period must be precleared again prior to execution. Notwithstanding receipt of preclearance, if the Preclearance Person becomes aware of material nonpublic information or becomes subject to a blackout period before the transaction is effected, the transaction may not be completed.
None of the Company, the Compliance Officer, or the Company’s other employees will have any liability for any delay in reviewing, or refusal of, a request for preclearance submitted pursuant to this Section IV.B. Notwithstanding any preclearance of a transaction pursuant to this Section IV.B, none of the Company, the Compliance Officer, or the Company’s other employees assumes any liability for the legality or consequences of such transaction to the person engaging in such transaction.
| C. | Post-Termination Transactions |
With the exception of the preclearance requirement, this Policy continues to apply to transactions in the Company’s securities even after termination of service to the Company. If you are in possession of material nonpublic information when your service terminates, you may not trade in the Company’s securities until that information has become public or is no longer material. If you were subject to an event-specific blackout period or quarterly blackout period at the time of your termination of service to the Company, you must not purchase, sell, gift or otherwise transfer any security of the Company while such blackout period remains in effect.
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| D. | Information Relating to the Company |
| 1. | Access to Information |
Access to material nonpublic information about the Company, including the Company’s business, earnings, or prospects, should be limited to officers, directors, and employees of the Company on a “need-to-know” basis. In addition, such information should not be communicated to anyone outside the Company under any circumstances (except in accordance with the Company’s policies regarding the protection or authorized external disclosure of Company information) or to anyone within the Company on an other than “need-to-know” basis.
In communicating material nonpublic information to employees of the Company, all officers, directors, and employees must take care to emphasize the need for confidential treatment of such information and adherence to the Company’s policies with regard to confidential information.
| 2. | Inquiries From Third Parties |
Inquiries from third parties, such as industry analysts or members of the media, about the Company should be directed to the Chief Financial Officer at ronen@jeffsbrands.com.
| III. | Additional Prohibited Transactions |
The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if the persons subject to this Policy engage in certain types of transactions. Therefore, officers, directors, and employees shall comply with the following policies with respect to certain transactions in the Company securities:
| A. | Short Sales |
Short sales of the Company’s securities evidence an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller has no confidence in the Company or its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s performance. For these reasons, short sales of the Company’s securities are prohibited by this Policy.
| B. | Publicly Traded Options |
A transaction in options is, in effect, a bet on the short-term movement of the Company’s stock and therefore creates the appearance that an officer, director, or employee is trading based on material nonpublic information. Transactions in options may also focus an officer’s, director’s, or employee’s attention on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in puts, calls, or other derivative securities involving the Company’s equity securities, on an exchange or in any other organized market, are prohibited by this Policy.
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| C. | Hedging Transactions |
Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow an officer, director, or employee to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. Such transactions allow the officer, director, or employee to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the officer, director, or employee may no longer have the same objectives as the Company’s other stockholders. Therefore, such transactions involving the Company’s equity securities are prohibited by this Policy.
| D. | Purchases of the Company’s Securities on Margin; Pledging the Company’s Securities to Secure Margin or Other Loans |
Purchasing on margin means borrowing from a brokerage firm, bank, or other entity in order to purchase the Company’s securities (other than in connection with a cashless exercise of stock options under the Company’s equity plans). Margin purchases of the Company’s securities are prohibited by this Policy. Pledging the Company’s securities as collateral to secure loans is also prohibited. This prohibition means, among other things, that you cannot hold the Company’s securities in a “margin account” (which would allow you to borrow against your holdings to buy securities).
| IV. | Rule 10b5-1 Trading Plans |
The trading restrictions set forth do not apply to transactions under a previously established contract, plan, or instruction to trade in the Company’s stock in accordance with the terms of Rule 10b5-1 and all applicable state laws (a “Trading Plan”) that:
| ● | has been submitted to and preapproved by the Company’s Compliance Officer, or such other person as the Board of Directors may designate from time to time (the “Authorizing Officer”), at least 30 days before the commencement of any transactions under the Trading Plan, with directors and senior management subject to a longer “cooling-off period” that extends to the later of 90 days after adoption or modification of a Trading Plan or two (2) business days after filing the Form 20-F or Form 6-K with financial results covering the fiscal quarter in which Trading Plan was adopted, up to a maximum of 120 days; |
| ● | you entered into in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 at a time when you were not in possession of material nonpublic information about the Company, and, to the extent required by Rule 10b5-1, contains representations in the Trading Plan certifying as to the same; and either (i) specifies the amounts, prices, and dates of all security transactions under the Trading Plan, (ii) provides a written formula, algorithm, or computer program for determining the amount, price, and date of the transactions, or (iii) prohibits you from exercising any subsequent influence over the transactions. |
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You may only adopt more than one Trading Plan at a time if the adoption of an additional Trading Plan is under the limited circumstances permitted by Rule 10b5-1. You may only amend a Trading Plan outside of quarterly trading blackout periods when you do not possess material nonpublic information. Any amendment of a Trading Plan must be preapproved by the Authorizing Officer at least 30 days before you trade under an amended Trading Plan, with directors and senior management subject to a longer “cooling-off period” that extends to the later of 90 days after adoption or modification of a Trading Plan or two (2) business days after filing the Form 20-F or Form 6-K with financial results covering the fiscal quarter in which a Trading Plan was adopted, up to a maximum of 120 days and as required by Rule 10b5-1 for certain amendments (i.e. those that change the amount, price, or timing of purchases or sales). However, previously scheduled trades under the Trading Plan before its amendment may continue until the amended Trading Plan takes effect. Revocation of a Trading Plan should occur only in unusual circumstances. Effectiveness of any revocation or amendment of a Trading Plan will be subject to the prior review and approval of the Compliance Officer.
Although non-discretionary Trading Plans are preferred, discretionary Trading Plans, where the discretion or control over trading is transferred to a broker, are permitted if pre-approved by the Compliance Officer.
The Company reserves the right to publicly announce, or respond to inquiries from the media regarding, the implementation of Trading Plans or the execution of transactions made under a Trading Plan. The Company also reserves the right, from time to time, to suspend, discontinue, or otherwise prohibit transactions under a Trading Plan if the Authorizing Officer or the Board of Directors, in its discretion, determines that such suspension, discontinuation, or other prohibition is in the best interests of the Company. Transactions prohibited under Section V of this Policy, including short sales and hedging transactions, may not be carried out through a Trading Plan.
Compliance of a Trading Plan with the terms of Rule 10b5-1 and the execution of transactions pursuant to the Trading Plan are the sole responsibility of the person initiating the Trading Plan, and none of the Company, the Authorizing Officer, or the Company’s other employees assume any liability for any delay in reviewing and/or refusing a Trading Plan submitted for approval nor the legality or consequences relating to a person entering into or trading under a Trading Plan.
If required, an SEC Form 144 will be filled out and filed by the individual/brokerage firm in accordance with the existing rules regarding Form 144 filings. A footnote at the bottom of the Form 144 should indicate that the trades are in accordance with a Trading Plan that complies with Rule 10b5-1 and noting the expiration date of such Trading Plan.
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Exhibit 12.1
CERTIFICATION
I, Viki Hakmon, Chief Executive Officer, certify that:
| 1. | I have reviewed this Annual Report on Form 20-F of Jeffs’ Brands Ltd; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: March 31, 2025
| By: | /s/ Viki Hakmon | |
| Viki Hakmon | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 12.2
CERTIFICATION
I, Ronen Zalayet, Chief Financial Officer, certify that:
| 1. | I have reviewed this Annual Report on Form 20-F of Jeffs’ Brands Ltd; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report; |
| 4. | The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and |
| 5. | The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting. |
Date: March 31, 2025
| By: | /s/ Ronen Zalayet | |
| Ronen Zalayet | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2024 (the “Report”) by Jeffs’ Brands Ltd (the “Company”), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: March 31, 2025 | /s/ Viki Hakmon |
| Viki Hakmon | |
| Chief Executive Officer |
Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. Section 1350
In connection with the filing of the Annual Report on Form 20-F for the period ended December 31, 2024 (the “Report”) by Jeffs’ Brands Ltd (the “Company”), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, that, to my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: March 31, 2025 | /s/ Ronen Zalayet |
| Ronen Zalayet | |
| Chief Financial Officer |
Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form F-3 (File Nos. 333-277188, 333-262835, 333-283848, 333-283904, and 333-285030) and in the Registration Statements on Form S-8 (File Nos. 333-269119 and 333-280459) of our report dated March 31, 2025, relating to the financial statements of Jeffs’ Brands Ltd appearing in this Annual Report on Form 20-F for the year ended December 31, 2024.
/s/ Brightman Almagor Zohar & Co.
Certified Public Accountants
A Firm in the Deloitte Global Network
Tel Aviv, Israel
March 31, 2025