UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934

 

For the month of September 2023 (Report No. 2)

 

Commission file number: 001-41482

 

Jeffs’ Brands Ltd

(Translation of registrant’s name into English)

 

7 Mezada St.
Bnei Brak, Israel 5126112
(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒            Form 40-F ☐

 

 

 

 

 

 

CONTENTS

 

This Report of Foreign Private Issuer on Form 6-K consists of Jeffs’ Brands Ltd.’s (the “Registrant”): (i) Unaudited Condensed Consolidated Interim Financial Statements as of June 30, 2023, which is attached hereto as Exhibit 99.1; and (ii) Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2023, which is attached hereto as Exhibit 99.2.

 

This Report of Foreign Private Issuer on Form 6-K, including its exhibits, is incorporated by reference into the Registrant’s registration statement on Form S-8 (File No. 333-269119) filed with the Securities and Exchange Commission to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

 

EXHIBIT INDEX

 

Exhibit No.    
99.1   Jeffs’ Brands Ltd’s Unaudited Condensed Consolidated Interim Financial Statements as of June 30, 2023.
99.2   Jeffs’ Brands Ltd’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2023.
101.INS   Inline XBRL Instance Document.
101.SCH   Inline XBRL Taxonomy Extension Schema Document.
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document.

 

1

 

 

SIGNATURES

 

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

 

  Jeffs’ Brands Ltd
   
Date: September 26, 2023 By: /s/ Ronen Zalayet
    Ronen Zalayet
    Chief Financial Officer

 

 

2

 

Exhibit 99.1

 

JEFFS’ BRANDS LTD

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
Interim Condensed Consolidated Financial Statements as of June 30, 2023  
Condensed Consolidated Balance Sheets (unaudited) 2
Condensed Consolidated Statements of Operations (unaudited) 3
Condensed Consolidated Statements of Changes in Shareholders’ Equity (unaudited) 4
Condensed Consolidated Statements of Cash Flows (unaudited) 5
Notes to the Condensed Consolidated Financial Statements 6

 

1

 

 

JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED BALANCE SHEETS

 

        June 30,     December 31,  
    Note   2023     2022  
ASSETS       Unaudited    

Audited

  
        USD in thousands  
                 
CURRENT ASSETS:                
Cash and cash equivalents         2,153       8,137  
Trade receivables         131       327  
Other receivables         560       779  
Inventory         2,542       1,791  
Total current assets         5,386       11,034  
NON-CURRENT ASSETS:                    
Property and equipment, net         47       41  
Investment in SciSparc Nutraceuticals Inc. accounted for using the equity method   3a.     2,944      
-
  
Investment in SciSparc Ltd. at fair value   3b.     198      
-
  
Intangible assets, net  

3c.,4

     6,136       4,452  
Deferred taxes         137       110  
Operating lease right-of-use assets         167       138  
Total non-current assets         9,629       4,741  
TOTAL ASSETS         15,015       15,775  
                     
LIABILITIES AND EQUITY                    
CURRENT LIABILITIES:                    
                     
Trade payables         643       131  
Other payables         1,098       391  
Related party payables   4b.     30       32  
Short-term loans        
-
       86  
Total current liabilities         1,771       640  
NON-CURRENT LIABILITIES:                    
                     
Derivative liabilities   5     1,875       2,216  
Operating lease liabilities         88       98  
Total non-current liabilities         1,963       2,314  
TOTAL LIABILITIES         3,734       2,954  
                     
SHAREHOLDERS’ EQUITY:                    
Ordinary shares, no par value per share - Authorized: 43,567,567 as of June 30, 2023 and December 31, 2022; Issued and outstanding: 8,321,632 shares as of June 30, 2023; and 8,074,217 shares as of December 31, 2022        
-
      
-
  
Additional paid-in-capital         16,787       16,499  
Accumulated deficit         (5,506 )     (3,678 )
TOTAL SHAREHOLDERS’ EQUITY         11,281       12,821  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY         15,015       15,775  

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

2

 

 

JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

   Six months ended
June 30,		 
   U.S. dollars in thousands (*) 
   Unaudited 
   2023   2022 
Revenues   3,871    2,343 
Cost of sales   3,498    1,933 
           
Gross profit   373    410 
           
Operating expenses:          
           
Sales and marketing   342    617 
General and administrative   2,067    891 
Equity losses   89    
-
 
Other income, net   (158)   
-
 
           
Operating loss   (1,967)   (1,098)
           
Financial expenses (income), net   (148)   335 
           
Loss before taxes   (1,819)   (1,433)
           
Tax expenses   9    93 
           
Net loss for the period   (1,828)   (1,526)
           
Loss per ordinary share (basic and diluted)   (0.22)   (0.53)
           
Weighted-average ordinary shares used in computing net loss per share, basic and diluted   8,211,670    2,893,125 

  

(*)Except share and per share information

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

3

 

 

JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS’ EQUITY

 

Six Months Ended June 30, 2023 (Unaudited)

 

   Ordinary
Shares		   Additional
paid-in-		   Retained
earnings
(Accumulated		    
   Number   Amount   capital   deficit)   Total 
                     
BALANCE AT DECEMBER 31, 2022   8,074,217    
-
    16,499    (3,678)   12,821 
Net loss for the period   -    
-
    
-
    (1,828)   (1,828)
Issuance of ordinary shares to SciSparc Ltd. (Note 3b.)   247,415    
-
    288    
-
    288 
BALANCE AT JUNE 30, 2023   8,321,632    
-
    16,787    (5,506)   11,281 

  

Six Months Ended June 30, 2022 (Unaudited)

 

   Ordinary
Shares		   Additional
paid-in-		   Retained
earnings
(Accumulated		     
   Number   Amount   capital   deficit)   Total 
                     
BALANCE AT DECEMBER 31, 2021   2,893,125    
-
    2,730    (1,477)   1,253 
Net loss for the period   -    
-
    
-
    (1,526)   (1,526)
Debt extinguishment of shareholders’ loans   -    
-
    769    
-
    769 
BALANCE AT June 30, 2022   2,893,125    
-
    3,499    (3,003)   496 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

4

 

 

JEFFS’ BRANDS LTD
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Six months ended
June 30,		 
   2023   2022 
   U.S. dollars in thousands 
   Unaudited 
CASH FLOWS USED IN OPERATING ACTIVITIES:        
Net loss for the period   (1,828)   (1,526)
Adjustments to reconcile net loss to net cash from (used in) operating activities:          
           
Exchange differences on cash and cash equivalent   46    
-
 
Amortization of intangible assets   347    284 
Depreciation   3    
-
 
Accrued interest and amortization of discount on third party, related party and shareholders’ loans   
-
    135 
Loss from change in the fair value of a financial asset at fair value    90    
-
 
Equity losses   89    
-
 
Change in fair value of derivative liabilities   (341)   
-
 
Changes in deferred taxes, net   (27)   11 
Changes in operating assets and liabilities:          
           
Decrease in trade receivables   196    349 
Decrease (increase) in related parties balance   (2)   45 
Operating lease right-of-use assets   (30)   
-
 
Operating lease liabilities   31    
-
 
Decrease (increase) in other receivables   219    (35)
Increase in inventory   (752)   (604)
Increase in accounts payable and other payables   790    287 
Net cash used in operating activities   (1,169)   (1,054)
           
CASH FLOWS USED IN INVESTING ACTIVITIES:          
           
Purchase of property and equipment   (8)   (3)
Purchase of SciSparc Nutraceuticals Inc.(see note 3.a)   (2,993)   
-
 
Purchase of intangible asset (see note 3.c)   (1,682)   
-
 
Net cash used in investing activities   (4,683)   (3)
           
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:          
           
Short term loan received   
-
    731 
Short term loan repaid   (86)   
-
 
Net cash from (used in) financing activities   (86)   731 
           
NET DECREASE IN CASH AND CASH EQUIVALENTS   (5,938)   (326)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD   8,137    393 
LOSSES FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS   (46)   
-
 
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD   2,153    67 
           
Supplemental disclosure of cash flow information:          
Taxes paid   28    15 
Interest paid   2    36 
Supplemental disclosure of noncash investing and financing activities:          
Deferred offering costs included in other payables   
-
    497 
Issuance of 247,415 ordinary shares to SciSparc Ltd. in consideration for 360,297 ordinary shares (see note 3.b)   288    
-
 
Consideration payable to sellers of Fort Products Ltd. included in other payables   349    
-
 
Consideration payable to seller of SciSparc Nutraceuticals Inc. shares included in other payables   41    
-
 
Substantial modification of shareholders’ loans recorded in equity   
-
    982 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

5

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 — GENERAL INFORMATION

 

a.      General

 

Jeffs’ Brands Ltd (the “Company” or “Jeffs’ Brands”) was incorporated in Israel on March 7, 2021. As of September 26, 2023, the Company had five wholly owned subsidiaries — Smart Repair Pro (“Smart Pro”), Top Rank Ltd. (“Top Rank”), Jeffs’ Brands Holdings Inc. (“Jeffs’ Brands Holdings”), Fort Products Ltd. (“Fort”) and Fort Products LLC (“Fort US”), and together with Smart Pro, Top Rank and Jeffs’ Brands Holdings, the “Subsidiaries”. The Company and the Subsidiaries (“Group”) are engaged in the acquisition, improvement and operation of virtual stores (the “Brands”) mainly on the Amazon.com (“Amazon”) website.

 

Smart Pro, a private corporation incorporated under the laws of the State of California, was established on December 20, 2017, and commenced its operations in June 2019. As of June 30, 2023, Smart Pro operated four Brands on the Amazon website.

 

In April 2021, Top Rank, an Israeli company, was incorporated as a wholly owned subsidiary of Jeffs’ Brands.

 

On February 23, 2023, Jeffs’ Brands Holdings, was incorporated and registered under the laws of the State of Delaware as a wholly owned subsidiary of Jeffs’ Brands.

 

On 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 3.c.

 

On April 23, 2023, Fort US was incorporated and registered under the laws of the State of Delaware as a wholly owned subsidiary of Jeffs’ Brands Holdings.

 

On February 23, 2023, the Company purchased approximately 49% of the issued and outstanding shares of common stock of SciSparc Nutraceuticals Inc. (“Wellution”). For additional information see note 3a.

 

b.      Concentration Risk

 

The Group’s activities are mainly conducted through Amazon’s commercial platform. Any material change, whether temporary or permanent, including changes in Amazon’s terms of use and/or its policies, may affect sales performance, and may have a material effect on the Group’s financial position and the results of its operations.

 

In addition, the Group is engaged with a small number of suppliers as part of the production process of its brands. Any material changes in the supply process, whether temporary or permanent, may affect sales performance, and may have a material effect on the Group’s financial position and the results of its operations.

 

6

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 — GENERAL INFORMATION (cont.)

 

c.      Liquidity

 

During the six months ended June 30, 2023, the Group incurred a net loss of $ 1,828 thousand and cash flows used in operating activities were $ 1,169 thousand. As of June 30, 2023, the Group had an accumulated deficit of approximately $5,506 thousand.

 

The Group intends to continue to finance its operating activities through the sale of products via the Brands and through raising additional capital, as needed.

 

Management believes that expected cash flows are sufficient to support the Group’s current operations for more than 12 months from September 26, 2023, the issuance date of these condensed consolidated financial statements.

 

NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

 

a.      Unaudited Interim Financial Statements

 

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2022.

 

b.       Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Group. All intercompany balances and transactions have been eliminated in consolidation.

 

c.       Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment, derivative liability, useful lives of intangible assets, intangible assets impairment as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates.

 

7

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (cont.)

 

In the preparation of these condensed consolidated financial statements, the significant judgments exercised by management in the application of the Group’s accounting policies and the uncertainty involved in the key sources of those estimates were identical to the ones used in the Group’s consolidated financial statements for the year ended December 31, 2022.

 

d.       Significant Accounting Policies

 

The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the Group’s financial statements for the year ended December 31, 2022.

 

Affiliates

 

The investment in affiliated company is accounted for by the equity method under ASC Subtopic 323-30, “Investments - Equity Method and Joint Ventures: Partnerships, Joint Ventures, and Limited Liability Entities”. Upon initial recognition, the cost of investment is based on the direct costs of acquiring the investment including amounts incurred on behalf of the investee.

 

Following an acquisition, the Company recognizes its proportionate share of the affiliated company’s net income or loss after the date of investment.

 

Fair value measurement

 

Shares of an entity held by the Company, over which the Company does not have significant influence, are accounted for as financial assets at fair value.

 

The Group’s financial asset in respect of the investment in SciSparc Ltd. (“SciSparc”) 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.

 

e.       Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Group’s condensed consolidated financial statements.

 

NOTE 3 — SIGNIFICANT EVENTS DURING THE PERIOD

 

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, pursuant to which, on March 22, 2023, Jeffs’ Brands Holdings acquired from SciSparc 57 shares of common stock of Wellution , a wholly-owned subsidiary of SciSparc that owns and operates Wellution, an Amazon food supplements and cosmetics brand, representing approximately 49% of the issued and outstanding common stock of Wellution, for approximately $3.0 million in cash. The Company reviewed the transaction and deemed it to be the purchase of assets for accounting purposes under ASC Subtopic 805 “Business Combinations” (“ASC 805”), and not as a business combination. The Company reviewed the guidance under ASC 805 for the transaction and determined that the fair value of the gross assets acquired was concentrated in a single identifiable asset, a brand.

 

8

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 — SIGNIFICANT EVENTS DURING THE PERIOD (cont.)

 

a.(cont.)

 

In connection with the closing of the Wellution Agreement, on March 22, 2023, the Company entered into a consulting agreement with Wellution (the “SciSparc Consulting Agreement”), pursuant to which the Company will provide management services to Wellution for the Wellution brand for a monthly fee of $20 thousand and the Company received a one-time signing bonus in the amount of $51 thousand. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days advance notice.

 

The investment in Wellution was accounted for as an equity investment under ASC Subtopic 323-30, “Investments - Equity Method and Joint Ventures: Partnerships, Joint Ventures, and Limited Liability Entities”. Upon initial recognition, the cost of investment is based on the direct costs of acquiring the investment including amounts incurred on behalf of the investee.  

 

The activity in the investment in Wellution account was as follows:

 

   February 23, 2023 – June 30,
2023		 
   USD in
thousands		 
Balance as of January 1, 2023   
-
 
Purchase on February 23, 2023   3,033 
Equity losses   (89)
Balance as of June 30, 2023   2,944 

 

9

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 — SIGNIFICANT EVENTS DURING THE PERIOD (cont.)

 

Summarized financial information:

 

Summarized statement of statement of operation:

 

   February 23,
2023 –
June 30,
2023		 
   USD in
thousands		 
Revenues   1,186 
Net loss   (151)

 

b.Pursuant to the Wellution Agreement, in connection with the closing of the Wellution Agreement, on March 22, 2023, the Company issued 247,415 ordinary shares, no par value per share (“Ordinary Shares”) to SciSparc and SciSparc issued 360,297 of its ordinary shares to the Company in a share exchange, (collectively, the “Exchange Shares”), representing approximately 2.97% and 4.99%, respectively, of the Company’s and SciSparc’s issued and outstanding ordinary shares. The number of Exchange Shares acquired by each company was calculated by dividing $288 thousand 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.

 

The investment in SciSparc was accounted for as financial asset through profit and loss.

 

The activity in the investment in SciSparc shares was as follows:

 

   March 23,
2023 –
June 30,
2023		 
   USD in
thousands		 
Balance as of January 1, 2023   - 
Purchase on March 23, 2023   288 
Revaluation losses   (90)
Balance as of June 30, 2023   198 

  

c.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 £2 million (approximately $2.4 million) (the “Fort Acquisition”).

 

Although employees were on the payroll of Fort, as part of the Fort SPA, the employment of these employees were terminated within three months, with all termination costs to be borne by the Sellers.

  

Also, in connection with the closing of the Fort Acquisition, on March 9, 2023, Fort and the Sellers entered into a consulting agreement, pursuant to which the Sellers will provide the Company with consultancy services for a period of six months following the closing, at a monthly fee of £2.5 thousand (approximately $3 thousand). On September 20 ,2023, the Company and the Sellers entered into a new consulting agreement for indefinite period at a monthly fee of £3.5 thousand (approximately $4.5 thousand) effective as of June 1, 2023 (the “Fort Consulting Agreement”).

 

10

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 — SIGNIFICANT EVENTS DURING THE PERIOD (cont.)

  

The Company reviewed the transaction and deemed it to be the purchase of assets for accounting purposes under ASC 805 and not as a business combination. The Company reviewed the guidance under ASC 805 for the transaction and determined that the fair value of the gross assets acquired was concentrated in a single identifiable asset, a brand.

 

d.On May 30, 2023, the Company received a written notification from the Listing Qualifications Department of the Nasdaq Stock Market LLC notifying that the Company was not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Stock Market LLC, as set forth under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), because the closing bid price of the Company Ordinary Shares was below $1.00 per Ordinary Share for the previous 30 consecutive business days. The Company was granted 180 calendar days, or until November 27, 2023, to regain compliance with the Minimum Bid Price Requirement. The Company can regain compliance if, at any time during this 180-day period, the closing bid price of the Company Ordinary Shares is at least $1.00 for a minimum of ten consecutive business days, in which case the Company will be provided with written confirmation of compliance and this matter will be closed.

  

However, the Nasdaq Stock Market LLC may, in its discretion, require the Company Ordinary Shares to maintain a bid price of at least $1.00 for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining that the Company did not demonstrate an ability to maintain long-term compliance. In the event that the Company does not regain compliance after the initial 180-day period, the Company may then be eligible for an additional 180-day compliance period if the Company meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, with the exception of the minimum bid price requirement. In this case, the Company will need to provide written notice of its intention to cure the deficiency during the second compliance period.

  

NOTE 4 — INTANGIBLE ASSETS

  

Total intangible assets consisted of the following as of June 30, 2023 and December 31, 2022:

 

   June 30,
2023		 
   Gross Amount   Accumulated Amortization   Net Balance 
   U.S. dollars in thousands 
Brands   7,814    (1,678)   6,137 

  

   December 31,
2022		 
   Gross Amount   Accumulated Amortization   Net Balance 
   U.S. dollars in thousands 
Brands   5,783    (1,331)   4,452 

 

On March 9, 2023, the Company recognized the amount of $2,031 thousand paid in connection with the Fort Acquisition amortized over a period of 10 years.

 

Amortization expense was $347 thousand and $282 thousand, for the six months ended June 30, 2023, and 2022, respectively.

 

NOTE 5 — DERIVATIVE LIABILITIES

 

On November 28, 2022, the Company issued additional warrants (the “Additional Warrants”), issued 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 2,824,525 Ordinary Shares to certain qualified buyers, as defined in the IPO Warrants. The term of each Additional Warrant is five (5) years from the issuance date. Each Additional Warrant holder receives semi-annual payments equal to approximately 2% of the Company’s gross revenues, calculated for the first and second six-month fiscal periods, shared pro rata among qualified holders ("Revenue Sharing Payment"). As of June 30, 2023, the Revenue Sharing Payment was equal to approximately 2.3% of the Company’s revenues for the six months ended June 30, 2023. The Company determined that the Additional Warrants preclude equity classification. The derivative liability is recorded at fair value and amounted to $1,875 thousands as of June 30, 2023.

 

The following table presents changes in the fair value of the derivative warrant liability during the period (in thousands)

 

Balance as of December 31, 2022   (2,216)
Change in fair value   341
Balance as of June 30, 2023   (1,875)

  

11

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 5 — DERIVATIVE LIABILITIES (cont.)

 

The following table lists the significant unobservable inputs used for calculation of fair value of the Additional Warrants during the six months ended June 30, 2023:

 

   June 30,
2023		 
Expected volatility   100%
Exercise price   2.02 
Share price  $0.75 
Risk-free interest rate   5.4%
Dividend yield   
-
 
Expected life   4.41 
Weighted average cost of capital (WACC)   23.20%

 

Additionally, the revenue forecast over the life of the Additional Warrants is a significant input in determining the price of the Additional Warrants as of June 30, 2023. 

 

NOTE 6 — RELATED PARTIES — TRANSACTIONS AND BALANCES

 

a.Transactions with interested and related parties:

 

   Six months ended
June 30,		 
   2023   2022 
   U.S. dollars in thousands 
Labor cost and related expenses   133    66 
Directors’ fees   158    
-
 
Inventory storage (included in cost of sale) (a1)   313    
-
 
Consulting fees (a1)   95    
-
 
Other income (a2)   (158)   
-
 
Revenue Sharing Payment (a3)   19    
-
 
Interest expenses on loans from related parties and shareholders   
-
    311 
    560    377 

 

(a1) On October 26, 2022, the Company and Pure Capital Ltd. (“Pure Capital”) entered into a consulting agreement (the “Pure Capital Consulting Agreement”), pursuant to which Pure Capital will provide consultancy services to the Company for a monthly fee of NIS 57.75 thousand (approximately $16 thousand). Pursuant to the Pure Capital Consulting Agreement, Pure Capital is also entitled during the term of the consulting agreement 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 based on agreement with Pure Capital. In March 2023, the Company paid to Pure Capital $352 thousand in accordance with the terms of the Pure Capital Consulting Agreement. The consultancy fees were paid in consideration with the investments in Fort and SciSparc. Additionally, on October 26, 2022, the Company and Pure NJ Logistics LLC, a company wholly-owned by Pure Capital and a director of the Company, entered into a warehouse lease agreement located in the U.S.

 

(a2) On March 22, 2023, the Company entered into the SciSparc Consulting Agreement, pursuant to which the Company will provide management services to Wellution for the Wellution brand for a monthly fee of $20 thousand and the Company received a one-time signing bonus in the amount of $51 thousand. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days advance notice. The consultancy services fees paid according to the SciSparc Consulting Agreement are -included in other income.

 

(a3) Comprised of $11 thousand to Medigus Ltd. (“Medigus”) and $8 thousand to Pure Capital.

 

12

 

 

JEFFS’ BRANDS LTD
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 6 — RELATED PARTIES — TRANSACTIONS AND BALANCES (cont.)

 

b.Balances with interested and related parties:

 

  

Period ended

 
   June 30,
2023		   December 31,
2022		 
   U.S. dollars in thousands 
ASSETS:        
Advances to suppliers   
-
    228 
Wellution (included in other receivables) (a2)   158    
-
 
    158    228 
LIABILITIES:          
Medigus (included in related party liability)   30    32 
Liability to SciSparc (included in other accounts payable)   50    
-
 
Revenue Sharing Payment liability in connection with Additional Warrants held by Medigus (included in other account payable)   7    
-
 
Revenue Sharing Payment liability in connection with Additional Warrants held by Pure Capital (included in other account payable)    6    
-
 
Liability to supplier (included in other account payable) (a1)   42      
    135    32 

 

NOTE 7 — SUBSEQUENT EVENTS

 

a.On September 5, 2023, the shareholders of the Company approved at the annual general meeting a reverse split of the Company’s issued and outstanding Ordinary Shares at a ratio of between 1:2 and 1:10, to be effected at the discretion of, and at such ratio and on such date to be determined by, the board of directors.

 

13

 

 

 

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Exhibit 99.2

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

For the Six Months Ended June 30, 2023.

 

Cautionary Note Regarding Forward-Looking Statements

 

Certain information included herein may be deemed to be “forward-looking statements”. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified.

 

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

 

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

 

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

 

  ● our ability to raise capital through the issuance of additional securities;  
     
  ● our belief that our existing cash and cash equivalents as of June 30, 2023, will be sufficient to fund our operations through the next twelve months;
     
  ● our ability to adapt to significant future alterations in Amazon’s policies;
     
  ● our ability to sell our existing products and grow our brands and product offerings, including by acquiring new brands and expanding into new territories;
     
  ● our ability to meet our expectations regarding the revenue growth and the demand for e-commerce;
     
  ● our ability to enter into definitive agreements for our current letters of intent and term sheet;
     
  ● the overall global economic environment;
     
  ● the impact of competition and new e-commerce technologies;
     
  ● general market, political and economic conditions in the countries in which we operate;
     
  ● projected capital expenditures and liquidity;
     
  ● the impact of competition and new e-commerce technologies;
     
  ● our ability to retain key executive members;
     
  ● the impact of possible changes in Amazon’s policies and terms of use;  
     
  ● projected capital expenditures and liquidity;  

 

 

 

 

  ● our expectations regarding our tax classifications;
     
  ● how long we will qualify as an emerging growth company or a foreign private issuer;
     
  ● interpretations of current laws and the passages of future laws;
     
  ● changes in our strategy; and  
     
  ● litigation.

 

The foregoing list is intended to identify only certain of the principal factors that could cause actual results to differ. For a more detailed description of the risks and uncertainties affecting our company, reference is made to our Annual Report on Form 20-F for the year ended December 31, 2022, or our Annual Report, filed with the Securities and Exchange Commission, or the SEC, and the other risk factors discussed from time to time by our company in reports filed or furnished to the SEC.

 

Except as otherwise required by law, we undertake no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

 

General

 

Introduction

 

Unless indicated otherwise by the context, all references in this report to “Jeffs’ Brands”, the “Company”, “we”, “us” or “our” are to Jeffs’ Brands Ltd. When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:

 

  ● “dollars” or “$” means United States dollars; and
     
  ● “NIS” means New Israeli Shekels.

 

You should read the following discussion and analysis in conjunction with our unaudited consolidated financial statements for the six months ended June 30, 2023, and notes thereto, and together with our audited consolidated financial statements for the year ended December 31, 2022 and notes thereto included in our Annual Report filed with the SEC.

 

Unless otherwise indicated, dollars are in thousands.

 

Overview

 

We are an e-commerce consumer products goods, or CPG, company, operating primarily on the Amazon.com platform. We were incorporated in Israel in March 2021, under the name Jeffs’ Brands Ltd. Together with four of our wholly-owned subsidiaries – Smart Repair Pro, Top Rank Ltd, or Top Rank, and Fort Products Ltd or Fort, we operate online stores for the sale of various consumer products on the Amazon.com online marketplace, utilizing the Fulfillment by Amazon, or FBA model.

 

In addition to executing the FBA business model, we utilize A.I. and machine learning technologies to analyze sales data and patterns on the Amazon.com marketplace in order to identify existing stores, niches and products that have the potential for development and growth, and for maximizing sales of existing proprietary products. We also use our own skills, know-how and profound familiarity with the Amazon.com algorithm and all the tools that the FBA platform FBA has to offer. In some circumstances we scale the products and improve them. 

 

2

 

 

Comparison of the Six Months Ended June 30, 2023, and 2023

 

Results of Operations

 

The following table summarizes our results of operations for the periods presented:

 

   Six Months Ended
June 30,		 
U.S. dollars in thousands  2023   2022 
Revenues   3,871    2,343 
Cost of sales   3,498    1,933 
Gross profit   373    410 
Sales and marketing   342    617 
General and administrative   2,067    891 
Equity losses   89    - 
Other income, net   (158)   - 
Operating loss   (1,967)   (1,098)
Financial expenses (income), net   (148)   335 
Tax expenses   9    93 
Net loss for the period   (1,828)   (1,526)

 

Revenues

 

Our revenues consist of revenue which mainly derived from sales on Amazon.

 

Our revenues for the six months ended June 30, 2023, were $3,871 compared to $2,343 for the six months ended June 30, 2022. This represents an increase of $1,528 or 65.2%. The increase is mainly attributable to the increase in revenues as a result of the acquisition of Fort for approximately $2,049, offset by a decrease in revenues of $522 for our remaining brands.

 

Cost of goods sold

 

Our cost of goods sold consist of the purchase of finished goods, freight, cost of commissions to Amazon.com and other e-commerce platforms, and change in inventory.

 

The following table sets forth the breakdown of cost of goods sold for the periods set forth below:

 

   Six Months Ended
June 30,		 
U.S. dollars in thousands  2023   2022 
Purchases of finished goods and changes in inventory  $1,270   $381 
Freight   158    315 
Storage   363    179 
Salaries   48    - 
Cost of commissions   1,659    1,058 
Total   3,498    1,933 

  

Our cost of goods sold for the six months ended June 30, 2023, was $3,498 compared to $1,933 for the six months ended June 30, 2022. This represents an increase of $1,565 or 80%. The increase is mainly attributable to: (i) an increase in purchases of finished goods and changes in inventory of $889, associated with the acquisition of Fort in March 2023; (ii) an increase in storage expenses of $184 due to increased inventory kept in warehouses; and (iii) an increase in cost of commissions mainly paid to Amazon.com of $601 due to an increase in sales, partially offset by a decrease in freight charges of $157 due to a decrease in shipment costs and lower purchases.

 

3

 

 

Gross Profit

 

Our gross profit for the six months ended June 30, 2023, was $373 compared to gross profit of $410 for the six months ended June 30, 2022. This represents a decrease of $37 or 9%. The decrease was primarily due to an increase in revenues offset by increase in cost of sales, as described above.

 

Operating Expenses, net

 

Our current operating expenses consist of four components marketing and sales expenses, general and administrative expenses and other income.

 

Marketing and Sales Expenses

 

Our marketing and sales expenses consist primarily of Amazon.com marketing fees, consultant fees and other marketing and sales expenses.

 

The following table sets forth the breakdown of marketing and sales expenses for the periods set forth below:

 

   Six Months Ended
June 30,		 
U.S. dollars in thousands  2023   2022 
Advertising  $330   $581 
Other   12    36 
Total   342    617 

 

Our marketing and sales expenses for the six months ended June 30, 2023, were $342 compared to expenses of $617 for the six months ended June 30, 2022, representing a decrease of $275 or 44.5%. The decrease is mainly attributable to the decrease in our advertising costs on Amazon.com.

 

General and Administrative Expenses

 

Our general and administrative expenses consist primarily of salaries and related expenses, professional service fees, legal, amortization of intellectual property assets and other general and administrative expenses.

 

The following table sets forth the breakdown of our general and administrative expenses for the periods set forth below:

 

   Six Months Ended
June 30,		 
U.S. dollars in thousands  2023   2022 
Payroll and related expenses  $500   $289 
Subcontractors   46    12 
Professional services and consulting fees   547    232 
Director fees   158    - 
Rent and office maintenance   71    21 
Amortization of intangible assets   350    283 
Insurance   196    3 
Other expenses   199    51 
Total   2,067    891 

  

Our general and administrative expenses for the six months ended June 30, 2023 were $2,067 compared to $891 for the six months ended June 30, 2022, representing an increase of $1,176 or 131.9%. The increase is primarily attributable to an increase in the number of employees of the Company (from four (4) employees as of June 30, 2022 to twelve (12) employees as of June 30, 2023), and other costs associated with insurance expenses, payments to consultants and compensation paid to members of our board of directors.

 

4

 

 

Other Income

 

Our other income for the six months ended June 30, 2023 was $158 compared to $0 for the six months ended June 30, 2022. The increase is primarily attributable to an increase in management fees as a result of our management agreement with SciSparc Nutraceuticals Inc. entered into on February 23, 2023.

 

Share of Losses Accounted for at Equity

 

Our share of losses accounted for as equity for the six months ended June 30, 2023, was $89 compared to $0 for the six months ended June 30, 2022. The increase is attributable to losses derived from our investment in SciSparc Nutraceuticals Inc.

 

Operating Loss

 

Our operating loss for the six months ended June 30, 2023, was $1,967, compared to operating loss of $1,098 for the six months ended June 30, 2022, an increase of $869 or 79%. The increase is attributable to the changes in revenues, cost of sales and operating expenses, as described above.

 

Financial expenses (income), net

  

Our financial income, net was $148 for the six months ended June 30, 2023, compared to net financial expenses of $335 for the six months ended June 30, 2022, a decrease of $483. The decrease was primarily attributable to a decrease of $341 in derivative liabilities (following revaluation by management of such liabilities), a decrease of $262 in interest on related party and third-party loans, partially offset by $64 of financial losses from exchange rate variations and $90 in losses following revaluation of our investment in SciSparc Ltd.

 

Net loss for the period

 

Our net loss for the six months ended June 30, 2023, was $1,828, compared to net loss of $1,526 for the six months ended June 30, 2022, an increase of $302 or 19.7%. The increase was primarily attributable to an increase in operating expenses and a decrease in gross profit, as described above.

 

Critical Accounting Estimates

 

We describe our significant accounting policies more fully in Note 2 to our unaudited financial statements for the six months ended June 30, 2023. There have been no material changes to our critical accounting policies as described in our Annual Report other than as described in Note 2 to our unaudited consolidated financial statements for the six months ended June 30, 2023. We believe that the accounting policies described below and in Note 2 to unaudited financial statements for the six months ended June 30, 2023, 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.

 

5

 

 

Liquidity and Capital Resources

 

Overview

 

Since Jeffs’ Brands’ inception in March 2021 to date, we have financed our operations primarily through funds we received from loans and proceeds from sales on Amazon (after deducting FBA fees and advertising fees) and the issuance of Ordinary Shares and warrants. As of June 30, 2023 and 2022, we had approximately $2,153 and $67, respectively, in cash and cash equivalents.

 

The table below presents our cash flow for the periods indicated:

   Six Months Ended
June 30,		 
U.S. dollars in thousands  2023   2022 
Net cash used in operating activities  $(1,169)  $(1,054)
Net cash used in investing activities   (4,683)   (3)
Net cash from (used in) financing activities   (86)   731 
Net decrease in cash and cash equivalents   (5,938)   (326)

 

We expect that for the foreseeable future we will finance our activities using the proceeds we received from our initial public offering, or IPO, and proceeds from sales of our existing and future new brands.

 

Operating Activities

 

Our net cash used in operating activities was $1,169 for the six months ended June 30, 2023, compared to net cash from operating activities of $1,054 for the six months ended June 30, 2022, representing an increase of $115 or 11%. The increase is mainly attributable to an increase in net loss for the period of $302 thousand, change in fair value of derivative liabilities of $341 thousand, partially offset by an increase in accounts payable and other payables of $503 thousand.

 

Investing Activities

 

Our net cash used in investing activities was $4,683 for the six months ended June 30, 2023, compared to net cash used in financing activities of $3 for the six months ended June 30, 2022, representing an increase of $4,680. The increase is mainly attributable to the acquisition of an interest in SciSparc Nutraceuticals Inc. for $2,993 and the acquisition of Fort for $1,682.

 

Financing Activities

 

Our net cash used in financing activities was $86 for the six months ended June 30, 2023, compared to net cash provided by investing activities of $731 for the six months ended June 30, 2022, representing an increase of $817. The change is attributable to the repayment of $86 in loans during the six months ended June 30, 2023.

 

Financial Arrangements 

  

On February 22, 2022, the Company entered into a loan agreement with Bank Leumi Le-Israel to provide for a line of credit in an aggregate amount of up to $1.0 million, which we may draw in two tranches at our request, but in no event after July 21, 2022. Pursuant to the loan agreement, amounts drawn bear interest at a rate of Secured Overnight Financing Rate, or SOFR plus 3.25% per annum. Unless otherwise provided with respect to a particular draw, any unpaid principal together with accrued and unpaid interest under the line of credit is required to be repaid no later than August 21, 2022. In order to induce the Bank to provide the loan, the Company and certain of our shareholders entered into a controlling shareholders’ comfort letter, subordination agreements and a negative pledge. On March 3, 2022, we drew $0.4 million under the line of credit. On June 2, 2022, we drew another $0.2 million under the line of credit. Following an agreement with Bank Leumi Le-Israel, the loan was extended until October 31, 2022. All amounts outstanding under the line of credit were fully repaid on September 6, 2022.

 

On April 29, 2022, and August 24, 2022, Medigus advanced $80,000 and $70,000, respectively, to the Company for certain working capital matters, which the Company fully repaid on September 6, 2022.

 

6

 

 

On May 3, 2022, we entered into Assignments to Loan Agreements with Smart Repair Pro, Medigus, Mr. Hakmon and L.I.A. Pure Capital Ltd., pursuant to which we assumed Smart Repair Pro’s obligations under the outstanding loans and we agreed that unless earlier repaid pursuant to the terms of the respective loan agreements with such parties, effective immediately upon the consummation of the IPO, all outstanding principal due to each such party automatically converted into a number of Ordinary Shares equal to the quotient obtained by dividing the outstanding principal amount due to such party, by the per Ordinary Share price of $3.46 per share, obtained by dividing $10,000,000 by the issued and outstanding Ordinary Shares immediately prior to the completion of the IPO. As of August 30, 2022, Smart Repair Pro had outstanding loans to Medigus, Mr. Hakmon and L.I.A. Pure Capital Ltd. of $4,010,000, $940,000 and $109,000, respectively. In accordance with such assignment agreements, on August 30, 2022, the outstanding amounts due to Medigus, Mr. Hakmon and L.I.A. Pure Capital Ltd. were converted into 1,160,133 Ordinary Shares, 271,951 Ordinary Shares and 31,535 Ordinary Shares, respectively. Any accrued and unpaid interest due to each such party at that time was paid in cash.

 

On May 9, 2022, Smart Repair Pro entered into a loan agreement with Amazon, pursuant to which, Smart Repair Pro received from Amazon an aggregate amount of $153. The loan bares an interest at an annual rate of 9.99%. In order to secure the loan, Smart Repair Pro pledged its financial balances on its Amazon account and its inventories held in Amazon’s warehouses, in favor of Amazon. As June 30, 2023, the loan was fully repaid on February 27, 2023.

   

Current Outlook

 

We have financed our operations to date primarily through proceeds from the IPO and proceeds from sales on Amazon.com (after FBA fees and advertising fees)

 

As of June 30, 2023, our cash and cash equivalents were $2,153. We expect that our existing cash and cash equivalents as of June 30, 2023, will be sufficient to fund our current operations for the next twelve months. In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future capital requirements will depend on many factors, including:

 

  ● the progress and costs of purchasing new brands and their development plans;

 

  ● the costs of manufacturing and shipment of our products;

 

  ● the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

  

  ● the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and

 

  ● the magnitude of our general and administrative expenses.

 

Quantitative and Qualitative Disclosures about Market Risk

 

We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of U.S. dollar/NIS exchange rates and U.S. dollar/GBP, 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 2023. To date, we have not been subject to inflationary pressures. We cannot assure you that we will not be adversely affected in the future.

 

As of June 30, 2023, the annual rate of inflation in Israel was 4.2%. The NIS revaluated against the U.S. dollar by approximately 13.15% in 2022 and 3.26% in 2021.

 

 

7

 

 

v3.23.3
Document And Entity Information
 6 Months Ended
Jun. 30, 2023
Document Information Line Items  
Entity Registrant Name Jeffs’ Brands Ltd
Document Type 6-K
Current Fiscal Year End Date --12-31
Amendment Flag false
Entity Central Index Key 0001885408
Document Period End Date Jun. 30, 2023
Document Fiscal Year Focus 2023
Document Fiscal Period Focus Q2
Entity File Number 001-41482
v3.23.3
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
CURRENT ASSETS:    
Cash and cash equivalents $ 2,153 $ 8,137
Trade receivables 131 327
Other receivables 560 779
Inventory 2,542 1,791
Total current assets 5,386 11,034
NON-CURRENT ASSETS:    
Property and equipment, net 47 41
Investment in SciSparc Nutraceuticals Inc. accounted for using the equity method 2,944
Investment in SciSparc Ltd. at fair value 198
Intangible assets, net 6,136 4,452
Deferred taxes 137 110
Operating lease right-of-use assets 167 138
Total non-current assets 9,629 4,741
TOTAL ASSETS 15,015 15,775
CURRENT LIABILITIES:    
Trade payables 643 131
Other payables 1,098 391
Related party payables 30 32
Short-term loans 86
Total current liabilities 1,771 640
NON-CURRENT LIABILITIES:    
Derivative liabilities 1,875 2,216
Operating lease liabilities 88 98
Total non-current liabilities 1,963 2,314
TOTAL LIABILITIES 3,734 2,954
SHAREHOLDERS’ EQUITY:    
Ordinary shares, no par value per share - Authorized: 43,567,567 as of June 30, 2023 and December 31, 2022; Issued and outstanding: 8,321,632 shares as of June 30, 2023; and 8,074,217 shares as of December 31, 2022
Additional paid-in-capital 16,787 16,499
Accumulated deficit (5,506) (3,678)
TOTAL SHAREHOLDERS’ EQUITY 11,281 12,821
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 15,015 $ 15,775
v3.23.3
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares
Jun. 30, 2023
Dec. 31, 2022
Statement of Financial Position [Abstract]    
Ordinary shares, par value (in Dollars per share)
Ordinary shares, Authorized 43,567,567 43,567,567
Ordinary shares, Issued 8,321,632 8,074,217
Ordinary shares, outstanding 8,321,632 8,074,217
v3.23.3
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Income Statement [Abstract]    
Revenues [1] $ 3,871 $ 2,343
Cost of sales [1] 3,498 1,933
Gross profit [1] 373 410
Operating expenses:    
Sales and marketing [1] 342 617
General and administrative [1] 2,067 891
Equity losses [1] 89
Other income, net [1] (158)
Operating loss [1] (1,967) (1,098)
Financial expenses (income), net [1] (148) 335
Loss before taxes [1] (1,819) (1,433)
Tax expenses [1] 9 93
Net loss for the period [1] $ (1,828) $ (1,526)
Loss per ordinary share (basic and diluted) (in Dollars per share) [1] $ (0.22) $ (0.53)
Weighted-average ordinary shares used in computing net loss per share, basic and diluted (in Shares) [1] 8,211,670 2,893,125
[1] Except share and per share information
v3.23.3
Condensed Consolidated Statements Of Changes In Shareholders’ Equity - USD ($)
$ in Thousands
Ordinary Shares
Additional paid-in-capital
Retained earnings (Accumulated deficit)
Total
Balance at Dec. 31, 2021 $ 2,730 $ (1,477) $ 1,253
Balance (in Shares) at Dec. 31, 2021 2,893,125      
Net loss for the period (1,526) (1,526) [1]
Debt extinguishment of shareholders’ loans 769 769
Balance at Jun. 30, 2022 3,499 (3,003) 496
Balance (in Shares) at Jun. 30, 2022 2,893,125      
Balance at Dec. 31, 2022 16,499 (3,678) $ 12,821
Balance (in Shares) at Dec. 31, 2022 8,074,217     8,074,217
Net loss for the period (1,828) $ (1,828) [1]
Issuance of ordinary shares to SciSparc Ltd. (Note 3b.) 288 288
Issuance of ordinary shares to SciSparc Ltd. (Note 3b.) (in Shares) 247,415      
Balance at Jun. 30, 2023 $ 16,787 $ (5,506) $ 11,281
Balance (in Shares) at Jun. 30, 2023 8,321,632     8,321,632
[1] Except share and per share information
v3.23.3
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
CASH FLOWS USED IN OPERATING ACTIVITIES:    
Net loss for the period [1] $ (1,828) $ (1,526)
Adjustments to reconcile net loss to net cash from (used in) operating activities:    
Exchange differences on cash and cash equivalent 46
Amortization of intangible assets 347 284
Depreciation 3
Accrued interest and amortization of discount on third party, related party and shareholders’ loans 135
Loss from change in the fair value of a financial asset at fair value 90
Equity losses [1] 89
Change in fair value of derivative liabilities (341)
Changes in deferred taxes, net (27) 11
Changes in operating assets and liabilities:    
Decrease in trade receivables 196 349
Decrease (increase) in related parties balance (2) 45
Operating lease right-of-use assets (30)
Operating lease liabilities 31
Decrease (increase) in other receivables 219 (35)
Increase in inventory (752) (604)
Increase in accounts payable and other payables 790 287
Net cash used in operating activities (1,169) (1,054)
CASH FLOWS USED IN INVESTING ACTIVITIES:    
Purchase of property and equipment (8) (3)
Purchase of SciSparc Nutraceuticals Inc.(see note 3.a) (2,993)
Purchase of intangible asset (see note 3.c) (1,682)
Net cash used in investing activities (4,683) (3)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:    
Short term loan received 731
Short term loan repaid (86)
Net cash from (used in) financing activities (86) 731
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,938) (326)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 8,137 393
LOSSES FROM EXCHANGE DIFFERENCES ON CASH AND CASH EQUIVALENTS (46)
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 2,153 67
Supplemental disclosure of cash flow information:    
Taxes paid 28 15
Interest paid 2 36
Supplemental disclosure of noncash investing and financing activities:    
Deferred offering costs included in other payables 497
Issuance of 247,415 ordinary shares to SciSparc Ltd. in consideration for 360,297 ordinary shares (see note 3.b) 288
Consideration payable to sellers of Fort Products Ltd. included in other payables 349
Consideration payable to seller of SciSparc Nutraceuticals Inc. shares included in other payables 41
Substantial modification of shareholders’ loans recorded in equity $ 982
[1] Except share and per share information
v3.23.3
Condensed Consolidated Statements of Cash Flows (Parentheticals) - shares
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Statement of Cash Flows [Abstract]    
Issuance of ordinary shares 247,415
Consideration for ordinary shares 360,297
v3.23.3
General Information
 6 Months Ended
Jun. 30, 2023
General Information [Abstract]  
GENERAL INFORMATION

NOTE 1 — GENERAL INFORMATION

 

a.      General

 

Jeffs’ Brands Ltd (the “Company” or “Jeffs’ Brands”) was incorporated in Israel on March 7, 2021. As of September 26, 2023, the Company had five wholly owned subsidiaries — Smart Repair Pro (“Smart Pro”), Top Rank Ltd. (“Top Rank”), Jeffs’ Brands Holdings Inc. (“Jeffs’ Brands Holdings”), Fort Products Ltd. (“Fort”) and Fort Products LLC (“Fort US”), and together with Smart Pro, Top Rank and Jeffs’ Brands Holdings, the “Subsidiaries”. The Company and the Subsidiaries (“Group”) are engaged in the acquisition, improvement and operation of virtual stores (the “Brands”) mainly on the Amazon.com (“Amazon”) website.

 

Smart Pro, a private corporation incorporated under the laws of the State of California, was established on December 20, 2017, and commenced its operations in June 2019. As of June 30, 2023, Smart Pro operated four Brands on the Amazon website.

 

In April 2021, Top Rank, an Israeli company, was incorporated as a wholly owned subsidiary of Jeffs’ Brands.

 

On February 23, 2023, Jeffs’ Brands Holdings, was incorporated and registered under the laws of the State of Delaware as a wholly owned subsidiary of Jeffs’ Brands.

 

On 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 3.c.

 

On April 23, 2023, Fort US was incorporated and registered under the laws of the State of Delaware as a wholly owned subsidiary of Jeffs’ Brands Holdings.

 

On February 23, 2023, the Company purchased approximately 49% of the issued and outstanding shares of common stock of SciSparc Nutraceuticals Inc. (“Wellution”). For additional information see note 3a.

 

b.      Concentration Risk

 

The Group’s activities are mainly conducted through Amazon’s commercial platform. Any material change, whether temporary or permanent, including changes in Amazon’s terms of use and/or its policies, may affect sales performance, and may have a material effect on the Group’s financial position and the results of its operations.

 

In addition, the Group is engaged with a small number of suppliers as part of the production process of its brands. Any material changes in the supply process, whether temporary or permanent, may affect sales performance, and may have a material effect on the Group’s financial position and the results of its operations.

 

c.      Liquidity

 

During the six months ended June 30, 2023, the Group incurred a net loss of $ 1,828 thousand and cash flows used in operating activities were $ 1,169 thousand. As of June 30, 2023, the Group had an accumulated deficit of approximately $5,506 thousand.

 

The Group intends to continue to finance its operating activities through the sale of products via the Brands and through raising additional capital, as needed.

 

Management believes that expected cash flows are sufficient to support the Group’s current operations for more than 12 months from September 26, 2023, the issuance date of these condensed consolidated financial statements.
v3.23.3
Basis of Presentation and Significant Accounting Policies
 6 Months Ended
Jun. 30, 2023
Basis of Presentation and Significant Accounting Policies [Abstract]  
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

 

a.      Unaudited Interim Financial Statements

 

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2022.

 

b.       Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Group. All intercompany balances and transactions have been eliminated in consolidation.

 

c.       Use of estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment, derivative liability, useful lives of intangible assets, intangible assets impairment as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates.

 

In the preparation of these condensed consolidated financial statements, the significant judgments exercised by management in the application of the Group’s accounting policies and the uncertainty involved in the key sources of those estimates were identical to the ones used in the Group’s consolidated financial statements for the year ended December 31, 2022.

 

d.       Significant Accounting Policies

 

The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the Group’s financial statements for the year ended December 31, 2022.

 

Affiliates

 

The investment in affiliated company is accounted for by the equity method under ASC Subtopic 323-30, “Investments - Equity Method and Joint Ventures: Partnerships, Joint Ventures, and Limited Liability Entities”. Upon initial recognition, the cost of investment is based on the direct costs of acquiring the investment including amounts incurred on behalf of the investee.

 

Following an acquisition, the Company recognizes its proportionate share of the affiliated company’s net income or loss after the date of investment.

 

Fair value measurement

 

Shares of an entity held by the Company, over which the Company does not have significant influence, are accounted for as financial assets at fair value.

 

The Group’s financial asset in respect of the investment in SciSparc Ltd. (“SciSparc”) 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.

 

e.       Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Group’s condensed consolidated financial statements.
v3.23.3
Significant Events During the Period
 6 Months Ended
Jun. 30, 2023
Basis of Presentation and Significant Accounting Policies [Abstract]  
SIGNIFICANT EVENTS DURING THE PERIOD

NOTE 3 — SIGNIFICANT EVENTS DURING THE PERIOD

 

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, pursuant to which, on March 22, 2023, Jeffs’ Brands Holdings acquired from SciSparc 57 shares of common stock of Wellution , a wholly-owned subsidiary of SciSparc that owns and operates Wellution, an Amazon food supplements and cosmetics brand, representing approximately 49% of the issued and outstanding common stock of Wellution, for approximately $3.0 million in cash. The Company reviewed the transaction and deemed it to be the purchase of assets for accounting purposes under ASC Subtopic 805 “Business Combinations” (“ASC 805”), and not as a business combination. The Company reviewed the guidance under ASC 805 for the transaction and determined that the fair value of the gross assets acquired was concentrated in a single identifiable asset, a brand.

 

In connection with the closing of the Wellution Agreement, on March 22, 2023, the Company entered into a consulting agreement with Wellution (the “SciSparc Consulting Agreement”), pursuant to which the Company will provide management services to Wellution for the Wellution brand for a monthly fee of $20 thousand and the Company received a one-time signing bonus in the amount of $51 thousand. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days advance notice.

 

The investment in Wellution was accounted for as an equity investment under ASC Subtopic 323-30, “Investments - Equity Method and Joint Ventures: Partnerships, Joint Ventures, and Limited Liability Entities”. Upon initial recognition, the cost of investment is based on the direct costs of acquiring the investment including amounts incurred on behalf of the investee.  

 

The activity in the investment in Wellution account was as follows:

 

   February 23, 2023 – June 30,
2023		 
   USD in
thousands		 
Balance as of January 1, 2023   
-
 
Purchase on February 23, 2023   3,033 
Equity losses   (89)
Balance as of June 30, 2023   2,944 

 

Summarized financial information:

 

Summarized statement of statement of operation:

 

   February 23,
2023 –
June 30,
2023		 
   USD in
thousands		 
Revenues   1,186 
Net loss   (151)

 

b.Pursuant to the Wellution Agreement, in connection with the closing of the Wellution Agreement, on March 22, 2023, the Company issued 247,415 ordinary shares, no par value per share (“Ordinary Shares”) to SciSparc and SciSparc issued 360,297 of its ordinary shares to the Company in a share exchange, (collectively, the “Exchange Shares”), representing approximately 2.97% and 4.99%, respectively, of the Company’s and SciSparc’s issued and outstanding ordinary shares. The number of Exchange Shares acquired by each company was calculated by dividing $288 thousand 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.

 

The investment in SciSparc was accounted for as financial asset through profit and loss.

 

The activity in the investment in SciSparc shares was as follows:

 

   March 23,
2023 –
June 30,
2023		 
   USD in
thousands		 
Balance as of January 1, 2023   - 
Purchase on March 23, 2023   288 
Revaluation losses   (90)
Balance as of June 30, 2023   198 

  

c.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 £2 million (approximately $2.4 million) (the “Fort Acquisition”).

 

Although employees were on the payroll of Fort, as part of the Fort SPA, the employment of these employees were terminated within three months, with all termination costs to be borne by the Sellers.

  

Also, in connection with the closing of the Fort Acquisition, on March 9, 2023, Fort and the Sellers entered into a consulting agreement, pursuant to which the Sellers will provide the Company with consultancy services for a period of six months following the closing, at a monthly fee of £2.5 thousand (approximately $3 thousand). On September 20 ,2023, the Company and the Sellers entered into a new consulting agreement for indefinite period at a monthly fee of £3.5 thousand (approximately $4.5 thousand) effective as of June 1, 2023 (the “Fort Consulting Agreement”).

 

The Company reviewed the transaction and deemed it to be the purchase of assets for accounting purposes under ASC 805 and not as a business combination. The Company reviewed the guidance under ASC 805 for the transaction and determined that the fair value of the gross assets acquired was concentrated in a single identifiable asset, a brand.

 

d.On May 30, 2023, the Company received a written notification from the Listing Qualifications Department of the Nasdaq Stock Market LLC notifying that the Company was not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Stock Market LLC, as set forth under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), because the closing bid price of the Company Ordinary Shares was below $1.00 per Ordinary Share for the previous 30 consecutive business days. The Company was granted 180 calendar days, or until November 27, 2023, to regain compliance with the Minimum Bid Price Requirement. The Company can regain compliance if, at any time during this 180-day period, the closing bid price of the Company Ordinary Shares is at least $1.00 for a minimum of ten consecutive business days, in which case the Company will be provided with written confirmation of compliance and this matter will be closed.

  

However, the Nasdaq Stock Market LLC may, in its discretion, require the Company Ordinary Shares to maintain a bid price of at least $1.00 for a period in excess of ten consecutive business days, but generally no more than 20 consecutive business days, before determining that the Company did not demonstrate an ability to maintain long-term compliance. In the event that the Company does not regain compliance after the initial 180-day period, the Company may then be eligible for an additional 180-day compliance period if the Company meets the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, with the exception of the minimum bid price requirement. In this case, the Company will need to provide written notice of its intention to cure the deficiency during the second compliance period.
v3.23.3
Intangible Assets
 6 Months Ended
Jun. 30, 2023
Intangible Assets [Abstract]  
INTANGIBLE ASSETS

NOTE 4 — INTANGIBLE ASSETS

  

Total intangible assets consisted of the following as of June 30, 2023 and December 31, 2022:

 

   June 30,
2023		 
   Gross Amount   Accumulated Amortization   Net Balance 
   U.S. dollars in thousands 
Brands   7,814    (1,678)   6,137 

  

   December 31,
2022		 
   Gross Amount   Accumulated Amortization   Net Balance 
   U.S. dollars in thousands 
Brands   5,783    (1,331)   4,452 

 

On March 9, 2023, the Company recognized the amount of $2,031 thousand paid in connection with the Fort Acquisition amortized over a period of 10 years.

 

Amortization expense was $347 thousand and $282 thousand, for the six months ended June 30, 2023, and 2022, respectively.
v3.23.3
Derivative Liabilities
 6 Months Ended
Jun. 30, 2023
Derivative Liabilities [Abstract]  
DERIVATIVE LIABILITIES

NOTE 5 — DERIVATIVE LIABILITIES

 

On November 28, 2022, the Company issued additional warrants (the “Additional Warrants”), issued 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 2,824,525 Ordinary Shares to certain qualified buyers, as defined in the IPO Warrants. The term of each Additional Warrant is five (5) years from the issuance date. Each Additional Warrant holder receives semi-annual payments equal to approximately 2% of the Company’s gross revenues, calculated for the first and second six-month fiscal periods, shared pro rata among qualified holders ("Revenue Sharing Payment"). As of June 30, 2023, the Revenue Sharing Payment was equal to approximately 2.3% of the Company’s revenues for the six months ended June 30, 2023. The Company determined that the Additional Warrants preclude equity classification. The derivative liability is recorded at fair value and amounted to $1,875 thousands as of June 30, 2023.

 

The following table presents changes in the fair value of the derivative warrant liability during the period (in thousands)

 

Balance as of December 31, 2022   (2,216)
Change in fair value   341
Balance as of June 30, 2023   (1,875)

  

The following table lists the significant unobservable inputs used for calculation of fair value of the Additional Warrants during the six months ended June 30, 2023:

 

   June 30,
2023		 
Expected volatility   100%
Exercise price   2.02 
Share price  $0.75 
Risk-free interest rate   5.4%
Dividend yield   
-
 
Expected life   4.41 
Weighted average cost of capital (WACC)   23.20%

 

Additionally, the revenue forecast over the life of the Additional Warrants is a significant input in determining the price of the Additional Warrants as of June 30, 2023. 
v3.23.3
Related Parties — Transactions and Balances
 6 Months Ended
Jun. 30, 2023
Related Parties Transactions and Balances [Abstract]  
RELATED PARTIES — TRANSACTIONS AND BALANCES

NOTE 6 — RELATED PARTIES — TRANSACTIONS AND BALANCES

 

a.Transactions with interested and related parties:

 

   Six months ended
June 30,		 
   2023   2022 
   U.S. dollars in thousands 
Labor cost and related expenses   133    66 
Directors’ fees   158    
-
 
Inventory storage (included in cost of sale) (a1)   313    
-
 
Consulting fees (a1)   95    
-
 
Other income (a2)   (158)   
-
 
Revenue Sharing Payment (a3)   19    
-
 
Interest expenses on loans from related parties and shareholders   
-
    311 
    560    377 

 

(a1) On October 26, 2022, the Company and Pure Capital Ltd. (“Pure Capital”) entered into a consulting agreement (the “Pure Capital Consulting Agreement”), pursuant to which Pure Capital will provide consultancy services to the Company for a monthly fee of NIS 57.75 thousand (approximately $16 thousand). Pursuant to the Pure Capital Consulting Agreement, Pure Capital is also entitled during the term of the consulting agreement 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 based on agreement with Pure Capital. In March 2023, the Company paid to Pure Capital $352 thousand in accordance with the terms of the Pure Capital Consulting Agreement. The consultancy fees were paid in consideration with the investments in Fort and SciSparc. Additionally, on October 26, 2022, the Company and Pure NJ Logistics LLC, a company wholly-owned by Pure Capital and a director of the Company, entered into a warehouse lease agreement located in the U.S.

 

(a2) On March 22, 2023, the Company entered into the SciSparc Consulting Agreement, pursuant to which the Company will provide management services to Wellution for the Wellution brand for a monthly fee of $20 thousand and the Company received a one-time signing bonus in the amount of $51 thousand. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days advance notice. The consultancy services fees paid according to the SciSparc Consulting Agreement are -included in other income.

 

(a3) Comprised of $11 thousand to Medigus Ltd. (“Medigus”) and $8 thousand to Pure Capital.

 

b.Balances with interested and related parties:

 

  

Period ended

 
   June 30,
2023		   December 31,
2022		 
   U.S. dollars in thousands 
ASSETS:        
Advances to suppliers   
-
    228 
Wellution (included in other receivables) (a2)   158    
-
 
    158    228 
LIABILITIES:          
Medigus (included in related party liability)   30    32 
Liability to SciSparc (included in other accounts payable)   50    
-
 
Revenue Sharing Payment liability in connection with Additional Warrants held by Medigus (included in other account payable)   7    
-
 
Revenue Sharing Payment liability in connection with Additional Warrants held by Pure Capital (included in other account payable)    6    
-
 
Liability to supplier (included in other account payable) (a1)   42      
    135    32 
v3.23.3
Subsequent Events
 6 Months Ended
Jun. 30, 2023
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

NOTE 7 — SUBSEQUENT EVENTS

 

a.On September 5, 2023, the shareholders of the Company approved at the annual general meeting a reverse split of the Company’s issued and outstanding Ordinary Shares at a ratio of between 1:2 and 1:10, to be effected at the discretion of, and at such ratio and on such date to be determined by, the board of directors.
v3.23.3
Accounting Policies, by Policy (Policies)
 6 Months Ended
Jun. 30, 2023
Basis of Presentation and Significant Accounting Policies [Abstract]  
Unaudited Interim Financial Statements

a.      Unaudited Interim Financial Statements

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 20-F for the year ended December 31, 2022.
Principles of Consolidation

b.       Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Group. All intercompany balances and transactions have been eliminated in consolidation.
Use of estimates

c.       Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment, derivative liability, useful lives of intangible assets, intangible assets impairment as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates.

 

In the preparation of these condensed consolidated financial statements, the significant judgments exercised by management in the application of the Group’s accounting policies and the uncertainty involved in the key sources of those estimates were identical to the ones used in the Group’s consolidated financial statements for the year ended December 31, 2022.
Significant Accounting Policies

d.       Significant Accounting Policies

The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the Group’s financial statements for the year ended December 31, 2022.

Affiliates

The investment in affiliated company is accounted for by the equity method under ASC Subtopic 323-30, “Investments - Equity Method and Joint Ventures: Partnerships, Joint Ventures, and Limited Liability Entities”. Upon initial recognition, the cost of investment is based on the direct costs of acquiring the investment including amounts incurred on behalf of the investee.

Following an acquisition, the Company recognizes its proportionate share of the affiliated company’s net income or loss after the date of investment.

Fair value measurement

Shares of an entity held by the Company, over which the Company does not have significant influence, are accounted for as financial assets at fair value.

The Group’s financial asset in respect of the investment in SciSparc Ltd. (“SciSparc”) 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.
Recent Accounting Pronouncements

e.       Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Group’s condensed consolidated financial statements.
v3.23.3
Significant Events During the Period (Tables)
 6 Months Ended
Jun. 30, 2023
Significant Events During the Period (Tables) [Line Items]  
Schedule of Summarized Statement of Operation Summarized statement of statement of operation:
   February 23,
2023 –
June 30,
2023		 
   USD in
thousands		 
Revenues   1,186 
Net loss   (151)
Wellution Account [Member]  
Significant Events During the Period (Tables) [Line Items]  
Schedule of Activity in the Investment in SciSparc Shares The activity in the investment in Wellution account was as follows:
   February 23, 2023 – June 30,
2023		 
   USD in
thousands		 
Balance as of January 1, 2023   
-
 
Purchase on February 23, 2023   3,033 
Equity losses   (89)
Balance as of June 30, 2023   2,944 

 
SciSparc Shares [Member]  
Significant Events During the Period (Tables) [Line Items]  
Schedule of Activity in the Investment in SciSparc Shares The activity in the investment in SciSparc shares was as follows:
   March 23,
2023 –
June 30,
2023		 
   USD in
thousands		 
Balance as of January 1, 2023   - 
Purchase on March 23, 2023   288 
Revaluation losses   (90)
Balance as of June 30, 2023   198 
v3.23.3
Intangible Assets (Tables)
 6 Months Ended
Jun. 30, 2023
Disclosure Of Intangible Assets Text Block [Abstract]  
Schedule of Total Intangible Assets Total intangible assets consisted of the following as of June 30, 2023 and December 31, 2022:
   June 30,
2023		 
   Gross Amount   Accumulated Amortization   Net Balance 
   U.S. dollars in thousands 
Brands   7,814    (1,678)   6,137 
   December 31,
2022		 
   Gross Amount   Accumulated Amortization   Net Balance 
   U.S. dollars in thousands 
Brands   5,783    (1,331)   4,452 
v3.23.3
Derivative Liabilities (Tables)
 6 Months Ended
Jun. 30, 2023
Derivative Liabilities [Abstract]  
Schedule of Fair Value of the Derivative Warrant Liability The following table presents changes in the fair value of the derivative warrant liability during the period (in thousands)
Balance as of December 31, 2022   (2,216)
Change in fair value   341
Balance as of June 30, 2023   (1,875)

  
Schedule of Significant Unobservable Inputs Used for Calculation of Fair Value of the Additional Warrants The following table lists the significant unobservable inputs used for calculation of fair value of the Additional Warrants during the six months ended June 30, 2023:
   June 30,
2023		 
Expected volatility   100%
Exercise price   2.02 
Share price  $0.75 
Risk-free interest rate   5.4%
Dividend yield   
-
 
Expected life   4.41 
Weighted average cost of capital (WACC)   23.20%
v3.23.3
Related Parties — Transactions and Balances (Tables)
 6 Months Ended
Jun. 30, 2023
Related Parties Transactions and Balances [Abstract]  
Schedule of Transactions with Interested and Related Parties Transactions with interested and related parties:
   Six months ended
June 30,		 
   2023   2022 
   U.S. dollars in thousands 
Labor cost and related expenses   133    66 
Directors’ fees   158    
-
 
Inventory storage (included in cost of sale) (a1)   313    
-
 
Consulting fees (a1)   95    
-
 
Other income (a2)   (158)   
-
 
Revenue Sharing Payment (a3)   19    
-
 
Interest expenses on loans from related parties and shareholders   
-
    311 
    560    377 

(a1) On October 26, 2022, the Company and Pure Capital Ltd. (“Pure Capital”) entered into a consulting agreement (the “Pure Capital Consulting Agreement”), pursuant to which Pure Capital will provide consultancy services to the Company for a monthly fee of NIS 57.75 thousand (approximately $16 thousand). Pursuant to the Pure Capital Consulting Agreement, Pure Capital is also entitled during the term of the consulting agreement 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 based on agreement with Pure Capital. In March 2023, the Company paid to Pure Capital $352 thousand in accordance with the terms of the Pure Capital Consulting Agreement. The consultancy fees were paid in consideration with the investments in Fort and SciSparc. Additionally, on October 26, 2022, the Company and Pure NJ Logistics LLC, a company wholly-owned by Pure Capital and a director of the Company, entered into a warehouse lease agreement located in the U.S.

(a2) On March 22, 2023, the Company entered into the SciSparc Consulting Agreement, pursuant to which the Company will provide management services to Wellution for the Wellution brand for a monthly fee of $20 thousand and the Company received a one-time signing bonus in the amount of $51 thousand. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days advance notice. The consultancy services fees paid according to the SciSparc Consulting Agreement are -included in other income.

(a3) Comprised of $11 thousand to Medigus Ltd. (“Medigus”) and $8 thousand to Pure Capital.

 
Schedule of Balances with Interested and Related Parties Balances with interested and related parties:
  

Period ended

 
   June 30,
2023		   December 31,
2022		 
   U.S. dollars in thousands 
ASSETS:        
Advances to suppliers   
-
    228 
Wellution (included in other receivables) (a2)   158    
-
 
    158    228 
LIABILITIES:          
Medigus (included in related party liability)   30    32 
Liability to SciSparc (included in other accounts payable)   50    
-
 
Revenue Sharing Payment liability in connection with Additional Warrants held by Medigus (included in other account payable)   7    
-
 
Revenue Sharing Payment liability in connection with Additional Warrants held by Pure Capital (included in other account payable)    6    
-
 
Liability to supplier (included in other account payable) (a1)   42      
    135    32 
v3.23.3
General Information (Details) - USD ($)
$ in Thousands
 6 Months Ended
Feb. 23, 2023
Jun. 30, 2023
Jun. 30, 2022
Dec. 31, 2022
General Information [Abstract]        
Issued and outstanding shares, percentage 49.00%      
Net loss [1]   $ (1,828) $ (1,526)  
Cash flows used in operating activities   (1,169) $ (1,054)  
Accumulated deficit   $ (5,506)   $ (3,678)
[1] Except share and per share information
v3.23.3
Significant Events During the Period (Details)
 1 Months Ended
Mar. 09, 2023
USD ($)
Mar. 09, 2023
EUR (€)
Mar. 02, 2023
USD ($)
Mar. 02, 2023
EUR (€)
Feb. 23, 2023
USD ($)
shares
Sep. 20, 2023
USD ($)
Sep. 20, 2023
EUR (€)
Mar. 22, 2023
USD ($)
$ / shares
shares
Jun. 30, 2023
$ / shares
shares
May 30, 2023
$ / shares
Dec. 31, 2022
$ / shares
shares
Significant Events During the Period (Details) [Line Items]                      
Shares acquired (in Shares) | shares         57            
Share issued and outstanding percentage         49.00%     2.97%      
Cash         $ 3,000,000            
Management services monthly fee               $ 20,000      
Bonus amount               $ 51,000      
Ordinary shares issued (in Shares) | shares               247,415 8,321,632   8,074,217
Ordinary shares par value (in Dollars per share) | $ / shares                
Share exchange (in Shares) | shares               360,297      
Number of exchange shares acquired               $ 288,000      
Shares acquired amount     $ 2,400,000 € 2,000,000              
Consultancy services fee $ 3,000 € 2,500                  
Per share (in Dollars per share) | $ / shares                 $ 1 $ 1  
SciSparc [Member]                      
Significant Events During the Period (Details) [Line Items]                      
Share issued and outstanding percentage               4.99%      
Minimum Bid Price Requirement [Member]                      
Significant Events During the Period (Details) [Line Items]                      
Per share (in Dollars per share) | $ / shares                   $ 1  
Forecast [Member]                      
Significant Events During the Period (Details) [Line Items]                      
Consultancy services fee           $ 4,500 € 3,500        
v3.23.3
Significant Events During the Period (Details) - Schedule of Activity in the Investment in Wellution Account - Wellution Account [Member]
$ in Thousands
 4 Months Ended
Jun. 30, 2023
USD ($)
Schedule of Activity in the Investment in Wellution Account [Abstract]  
Balance as of January 1, 2023
Purchase on February 23, 2023 3,033
Equity losses (89)
Balance as of June 30, 2023 $ 2,944
v3.23.3
Significant Events During the Period (Details) - Schedule of Summarized Statement of Operation - Wellution Account [Member]
$ in Thousands
 4 Months Ended
Jun. 30, 2023
USD ($)
Schedule of Summarized Statement of Operation [Abstract]  
Revenues $ 1,186
Net loss $ (151)
v3.23.3
Significant Events During the Period (Details) - Schedule of Activity in the Investment in SciSparc Shares - SciSparc Shares [Member]
$ in Thousands
 3 Months Ended
Jun. 30, 2023
USD ($)
Schedule of Activity in the Investment in Scisparc Shares [Abstract]  
Balance as of January 1, 2023
Purchase on March 23, 2023 288
Revaluation losses (90)
Balance as of June 30, 2023 $ 198
v3.23.3
Intangible Assets (Details) - USD ($)
$ in Thousands
 6 Months Ended
Mar. 09, 2023
Jun. 30, 2022
Intangible Assets [Abstract]    
Amount paid in connection $ 2,031  
Amortized over a period 10 years  
Amortization expense $ 347 $ 282
v3.23.3
Intangible Assets (Details) - Schedule of Total Intangible Assets - USD ($)
$ in Thousands
Jun. 30, 2023
Jun. 30, 2022
Finite-Lived Intangible Assets [Line Items]    
Gross Amount $ 7,814 $ 5,783
Accumulated Amortization (1,678) (1,331)
Net Balance $ 6,137 $ 4,452
v3.23.3
Derivative Liabilities (Details) - USD ($)
$ in Thousands
Nov. 28, 2022
Jun. 30, 2023
Dec. 31, 2022
Derivative Liabilities (Details) [Line Items]      
Warrants term 5 years    
Revenues percentage 2.00% 2.30%  
Derivative liabilities (in Dollars)   $ 1,875 $ 2,216
IPO [Member]      
Derivative Liabilities (Details) [Line Items]      
Warrants issued (in Shares) 2,824,525    
v3.23.3
Derivative Liabilities (Details) - Schedule of Fair Value of the Derivative Warrant Liability
$ in Thousands
 6 Months Ended
Jun. 30, 2023
USD ($)
Schedule of Fair Value of the Derivative Warrant Liability [Abstract]  
Balance as of December 31, 2022 $ (2,216)
Change in fair value 341
Balance as of June 30, 2023 $ (1,875)
v3.23.3
Derivative Liabilities (Details) - Schedule of Significant Unobservable Inputs Used for Calculation of Fair Value of the Additional Warrants
 6 Months Ended
Jun. 30, 2023
$ / shares
Schedule of Significant Unobservable Inputs Used for Calculation of Fair Value of the Additional Warrants [Abstract]  
Expected volatility 100.00%
Exercise price (in Dollars per share) $ 2,020.00
Share price (in Dollars per share) $ 750
Risk-free interest rate 5.40%
Dividend yield
Expected life 4 years 4 months 28 days
Weighted average cost of capital (WACC) 23.20%
v3.23.3
Related Parties — Transactions and Balances (Details)
$ in Thousands
 1 Months Ended 6 Months Ended
Mar. 22, 2023
USD ($)
Oct. 26, 2022
USD ($)
Oct. 26, 2022
ILS (₪)
Mar. 31, 2023
USD ($)
Jun. 30, 2023
USD ($)
Pure Capital Ltd. [Member]          
Related Parties — Transactions and Balances (Details) [Line Items]          
Consultancy services fee   $ 16 ₪ 57,750    
Percentage of gross proceed   7.00% 7.00%    
Percentage of total consideration paid   8.00% 8.00%    
Paid to pure capital         $ 8
Pure Capital Ltd. [Member] | Pure Capital Consulting Agreement [Member]          
Related Parties — Transactions and Balances (Details) [Line Items]          
Paid to pure capital       $ 352  
SciSparc Ltd [Member]          
Related Parties — Transactions and Balances (Details) [Line Items]          
Management services fee $ 20        
Bonus $ 51        
Medigus Ltd [Member]          
Related Parties — Transactions and Balances (Details) [Line Items]          
Paid to pure capital         $ 11
v3.23.3
Related Parties — Transactions and Balances (Details) - Schedule of Transactions with Interested and Related Parties - USD ($)
$ in Thousands
 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Related Party Transaction [Line Items]    
Labor cost and related expenses $ 133 $ 66
Directors’ fees 158
Inventory storage (included in cost of sale) [1] 313
Consulting fees [1] 95
Other income [2] (158)
Revenue Sharing Payment [3] 19
Interest expenses on loans from related parties and shareholders 311
Total transactions with interested and related parties $ 560 $ 377
[1] On October 26, 2022, the Company and Pure Capital Ltd. (“Pure Capital”) entered into a consulting agreement (the “Pure Capital Consulting Agreement”), pursuant to which Pure Capital will provide consultancy services to the Company for a monthly fee of NIS 57.75 thousand (approximately $16 thousand). Pursuant to the Pure Capital Consulting Agreement, Pure Capital is also entitled during the term of the consulting agreement 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 based on agreement with Pure Capital. In March 2023, the Company paid to Pure Capital $352 thousand in accordance with the terms of the Pure Capital Consulting Agreement. The consultancy fees were paid in consideration with the investments in Fort and SciSparc. Additionally, on October 26, 2022, the Company and Pure NJ Logistics LLC, a company wholly-owned by Pure Capital and a director of the Company, entered into a warehouse lease agreement located in the U.S.
[2] On March 22, 2023, the Company entered into the SciSparc Consulting Agreement, pursuant to which the Company will provide management services to Wellution for the Wellution brand for a monthly fee of $20 thousand and the Company received a one-time signing bonus in the amount of $51 thousand. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days advance notice. The consultancy services fees paid according to the SciSparc Consulting Agreement are -included in other income.
[3] Comprised of $11 thousand to Medigus Ltd. (“Medigus”) and $8 thousand to Pure Capital.
v3.23.3
Related Parties — Transactions and Balances (Details) - Schedule of Balances with Interested and Related Parties - USD ($)
$ in Thousands
Jun. 30, 2023
Dec. 31, 2022
ASSETS:    
Total Assets $ 158 $ 228
LIABILITIES:    
Total liabilities 135 32
Suppliers [Member]    
ASSETS:    
Total Assets 228
LIABILITIES:    
Total liabilities [1] 42  
Wellution [Member]    
ASSETS:    
Total Assets [2] 158
Medigus [Member]    
LIABILITIES:    
Medigus (included in related party liability) 30 32
Total liabilities 7
SciSparc Ltd [Member]    
LIABILITIES:    
Total liabilities 50
Pure Capital Ltd. [Member]    
LIABILITIES:    
Total liabilities $ 6
[1] On October 26, 2022, the Company and Pure Capital Ltd. (“Pure Capital”) entered into a consulting agreement (the “Pure Capital Consulting Agreement”), pursuant to which Pure Capital will provide consultancy services to the Company for a monthly fee of NIS 57.75 thousand (approximately $16 thousand). Pursuant to the Pure Capital Consulting Agreement, Pure Capital is also entitled during the term of the consulting agreement 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 based on agreement with Pure Capital. In March 2023, the Company paid to Pure Capital $352 thousand in accordance with the terms of the Pure Capital Consulting Agreement. The consultancy fees were paid in consideration with the investments in Fort and SciSparc. Additionally, on October 26, 2022, the Company and Pure NJ Logistics LLC, a company wholly-owned by Pure Capital and a director of the Company, entered into a warehouse lease agreement located in the U.S.
[2] On March 22, 2023, the Company entered into the SciSparc Consulting Agreement, pursuant to which the Company will provide management services to Wellution for the Wellution brand for a monthly fee of $20 thousand and the Company received a one-time signing bonus in the amount of $51 thousand. The SciSparc Consulting Agreement is for an undefined period of time and may be terminated by either party with 30 days advance notice. The consultancy services fees paid according to the SciSparc Consulting Agreement are -included in other income.
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