SciSparc Ltd 6-K, filed Nov 4, 2024
SciSparc Ltd. (SPRC)
About this 6-K
SciSparc Ltd filed this 6-K on November 4, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
Report
of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934
For
the month of November
Commission
file number:
(Translation of registrant’s name into English)
20 Raul Wallenberg Street, Tower A,
Tel Aviv 6971916 Israel
(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: (i) SciSparc Ltd.’s (the “Registrant”) Unaudited Consolidated Interim Financial Statements as of June 30, 2024, which is attached hereto as Exhibit 99.1; and (ii) the Registrant’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2024, which is attached hereto as Exhibit 99.2.
This Report of Foreign Private Issuer on Form 6-K is incorporated by reference into the Registrant’s registration statements on Form F-3 (File Nos. 333-269839, 333-266047, 333-233417, 333-248670, 333-255408 and 333-275305) and on Form S-8 (File Nos. 333-225773 and 333-278437) 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and Exchange Commission to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.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 | SciSparc Ltd.’s Unaudited Consolidated Interim Financial Statements as of June 30, 2024. | |
| 99.2 | SciSparc Ltd.’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2024. | |
| 104 | Cover Page Interactive Data File (embedded within Inline XBRL 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.
| SciSparc Ltd. | ||
| Date: November 4, 2024 | By: | /s/ Oz Adler |
| Name: | Oz Adler | |
| Title: | Chief Executive Officer and Chief Financial Officer | |
2
Exhibit 99.1
SCISPARC LTD.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2024
UNAUDITED
INDEX
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | 2023 | ||||||||||||
| Unaudited | Audited | |||||||||||||
| Note | USD in thousands | |||||||||||||
| ASSETS | ||||||||||||||
| CURRENT ASSETS: | ||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||
| Restricted deposit | ||||||||||||||
| Short-term deposit | ||||||||||||||
| Trade receivables | ||||||||||||||
| Other accounts receivable | ||||||||||||||
| Inventory | ||||||||||||||
| NON-CURRENT ASSETS: | ||||||||||||||
| Intangible asset, net | 4 | |||||||||||||
| Related parties | 5,6 | |||||||||||||
| Investment in company account for at equity | 3 | |||||||||||||
| Investments in financial assets | 5 | |||||||||||||
| Property and equipment, net | ||||||||||||||
| $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
2
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| June 30, | December 31, | |||||||||||||
| 2024 | 2023 | 2023 | ||||||||||||
| Unaudited | Audited | |||||||||||||
| Note | USD in thousands | |||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| CURRENT LIABILITIES: | ||||||||||||||
| Trade payables | $ | $ | $ | |||||||||||
| Other accounts payable | ||||||||||||||
| Warrants | 8 | |||||||||||||
| Lease liability | ||||||||||||||
| NON-LIABILITIES | ||||||||||||||
| Lease liability | ||||||||||||||
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY: | 9 | |||||||||||||
| Share capital and premium | ||||||||||||||
| Reserve from share-based payment transactions | ||||||||||||||
| Warrants | ||||||||||||||
| Foreign currency translation reserve | ||||||||||||||
| Transactions with non-controlling interests | ||||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||||
| Non-controlling interests | ||||||||||||||
| Total equity | $ | $ | $ | |||||||||||
| Total liabilities and equity | $ | $ | $ | |||||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
3
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS
| Six months ended June 30, | Year Ended December 31, | |||||||||||||
| 2024 | 2023 | 2023 | ||||||||||||
| Unaudited | Audited | |||||||||||||
| Note | USD in thousands, except per share amounts | |||||||||||||
| Revenues | $ | $ | $ | |||||||||||
| Cost of goods sold | ( | ) | ( | ) | ( | ) | ||||||||
| Gross profit | ||||||||||||||
| Research and development expenses | 10a | |||||||||||||
| Sales and marketing | ||||||||||||||
| Impairment of intangible asset | ||||||||||||||
| General and administrative expenses | 11b | |||||||||||||
| Operating loss | ||||||||||||||
| Company’s share of losses of companies accounted for at equity, net | ||||||||||||||
| Finance income | ( | ) | ( | ) | ( | ) | ||||||||
| Finance expenses | ||||||||||||||
| Loss before income taxes | ||||||||||||||
| Taxes on income | ( | ) | ||||||||||||
| Total comprehensive loss | ||||||||||||||
| Attributable to: | ||||||||||||||
| Equity holders of the Company | ||||||||||||||
| Non-controlling interests | ||||||||||||||
| Basic loss per share attributable to equity holders of the Company: | ||||||||||||||
| Loss from operations | (*) | |||||||||||||
| Diluted loss per share attributable to equity holders of the Company: | ||||||||||||||
| Loss from operations | (*) | |||||||||||||
| (*) |
The accompanying notes are an integral part of the interim consolidated financial statements.
4
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
For the six months ended June 30, 2024
| Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||
| Share capital and premium | Reserve from share-based payment transactions | Warrants | Transactions with non- controlling interests | Foreign currency translation reserve | Accumulated deficit | Total | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of shares, net of issuance expenses | ||||||||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
5
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
For the six months ended June 30, 2023
| Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||
| Share capital and premium | Reserve from share-based payment transactions | Warrants | Transactions with non- controlling interests | Foreign currency translation reserve | Accumulated deficit | Total | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Issuance of share capital in respect of investment in affiliate | ||||||||||||||||||||||||||||||||||||
| Sale of minority interest in subsidiary | ||||||||||||||||||||||||||||||||||||
| Issuance of shares, net of issuance expenses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
6
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended December 31, 2023
| Attributable to equity holders of the Company | ||||||||||||||||||||||||||||||||||||
| Share capital and premium | Reserve from share-based payment transactions | Warrants | Transactions with non- controlling interests | Foreign currency translation reserve | Accumulated deficit | Total | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||
| USD in thousands | ||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Income (loss) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Sales of minority interest in subsidiary | ||||||||||||||||||||||||||||||||||||
| Issuance of share capital in respect of investment in affiliate | ||||||||||||||||||||||||||||||||||||
| Issuance of share capital, net of issuance expenses | ||||||||||||||||||||||||||||||||||||
| Cost of share-based payment | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
7
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended June 30, | Year Ended December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Unaudited | Audited | |||||||||||
| USD in thousands | ||||||||||||
| Cash flows from operating activities: | ||||||||||||
| Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Adjustments to the profit or loss items: | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Loss on impairment of intangible asset | ||||||||||||
| Cost of share-based payment | ||||||||||||
| Finance expenses, net | ( | ) | ( | ) | ( | ) | ||||||
| Group’s share of losses of company accounted for at equity, net | ||||||||||||
| Losses from remeasurement of investment in financial assets | ||||||||||||
| Working capital adjustments: | ||||||||||||
| Decrease (increase) in other accounts receivable | ( | ) | ( | ) | ||||||||
| Increase (decrease) in trade payables | ( | ) | ||||||||||
| Increase (decrease) in other accounts payable | ( | ) | ( | ) | ||||||||
| Decrease (increase) in trade receivables | ||||||||||||
| Decrease (increase) in inventory | ( | ) | ||||||||||
| ( | ) | ( | ) | |||||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
The accompanying notes are an integral part of the interim consolidated financial statements.
8
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended June 30, | Year Ended December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Unaudited | Audited | |||||||||||
| USD in thousands | ||||||||||||
| Cash flows from investing activities: | ||||||||||||
| Investment (withdrawal) in restricted bank deposits | $ | $ | $ | ( | ) | |||||||
| Investment (withdrawal) in short-term bank deposits | ( | ) | ||||||||||
| Purchase of property and equipment | ( | ) | ||||||||||
| Investment in a company accounted for at equity | ( | ) | ( | ) | ( | ) | ||||||
| Investments in financial assets | ( | ) | ||||||||||
| Purchase of financial assets at fair value through profit or loss | ( | ) | ||||||||||
| Net cash provided by investing activities | ( | ) | ( | ) | ||||||||
| Cash flows from financing activities: | ||||||||||||
| Proceeds from issuance of share capital and warrants (net of issuance expenses) | ( | ) | ||||||||||
| Repayment of lease liability | ( | ) | ( | ) | ( | ) | ||||||
| Interest paid on lease liability | ( | ) | ||||||||||
| Proceeds from issuance of shares to minority interests in a subsidiary | (*) | |||||||||||
| Loans to related parties | ( | ) | ||||||||||
| Net cash provided by financing activities | ||||||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ( | ) | ( | ) | ||||||
| Cash and cash equivalents at the beginning of the period | ||||||||||||
| Cash and cash equivalents at the end of the period | $ | $ | $ | |||||||||
| (*) |
The accompanying notes are an integral part of the interim consolidated financial statements.
9
SCISPARC LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six months ended June 30, | Year Ended December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Unaudited | Audited | |||||||||||
| USD in thousands | ||||||||||||
| (a) Significant non-cash transactions: | ||||||||||||
| Mutual share exchange of ordinary shares (see note 10) | $ | $ | $ | |||||||||
| Right-of-use asset recognized with corresponding lease liability | $ | $ | $ | |||||||||
The accompanying notes are an integral part of the interim consolidated financial statements.
10
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 1:- GENERAL
| a. | SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) (“SciSparc” or the “Company” or the “Group”), a specialty clinical-stage pharmaceutical company, was incorporated in Israel and commenced its operations on August 23, 2004. Until March 2014, SciSparc and its subsidiaries at the time were mainly engaged in developing several innovative immunotherapy products and SciSparc’s own patents in the immunotherapy field. In August 2015, the Company decided to adopt a different business strategy and began focusing on developing a portfolio of approved drugs based on cannabinoid molecules. With this focus, the Company is currently engaged in development programs based on Δ9-tetrahydrocannabinol (“THC”) and/or non-psychoactive cannabidiol for the treatment of Tourette syndrome, Alzheimer’s disease and agitation, autism spectrum disorder and Status Epilepticus. The headquarters of the Company are located in Tel Aviv, Israel. |
|
The Company’s ordinary shares are listed on Nasdaq and are trading under the symbol “SPRC”.
As of June 30, 2024, the Company had three private subsidiaries, including an inactive company incorporated under the laws of Israel: Evero Health Ltd (“Evero”); an inactive company incorporated under the laws of Israel: Brain Bright Ltd (“Brain Bright”); and a company incorporated under the laws of the State of Delaware: SciSparc Nutraceuticals Inc. (“SciSparc Nutraceuticals”) (together with Evero and Brain Bright, the “Subsidiaries”).
On September 14, 2023, the Company’s board of directors (the “Board”) resolved that the final ratio for the Third Reverse Split (as defined below) will be 26:1, which became effective on September 28, 2023. Consequently, all share numbers, share prices, and exercise prices have been retroactively adjusted in these interim consolidated financial statements for all periods presented. |
| b. | These interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2023, and accompanying notes, that were approved on March 31, 2024, and signed on April 1, 2024 (the “2023 Annual Consolidated Financial Statements”). |
11
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 1:- GENERAL (cont.)
| c. | The Company incurred a net loss of $
The Company intends to finance operating costs over the next twelve months through a combination of actions that may include existing cash on hand and issuing equity and/or debt securities.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.
The interim consolidated financial statements for the period ended June 30, 2024, do not include any adjustments to the carrying amounts and classifications of assets and liabilities that might result should the Group be unable to continue as a going concern. |
| d. | The interim consolidated financial statements of the Company for the six-month period ended on June 30, 2024, were approved for issuance on October 22, 2024 (the “Approval Date”). In connection with the preparation of the interim consolidated financial statements and in accordance with authoritative guidance for subsequent events, the Company evaluated subsequent events after the consolidated statements of financial position date of June 30, 2024, through November 4, 2024, the date on which the unaudited interim consolidated financial statements were available to be issued. |
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. The significant accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the 2023 Annual Consolidated Financial Statements. Accordingly, these condensed consolidated financial statements should be read in conjunction with the 2023 Annual Consolidated Financial Statements. The results for any interim period are not necessarily indicative of results for any future period.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented. The results for the six-month period ended June 30, 2024, are not necessarily indicative of the results for the year ending December 31, 2024, or for any future period.
As of June 30, 2024, there have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2023 Annual Consolidated Financial Statements.
12
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 3:- INVESTMENT IN ASSOCIATE
On March 10, 2022, the Company entered
into a Founders and Investment Agreement with Dr. Alon Silberman, or the MitoCareX Agreement. Pursuant to the MitoCareX Agreement, the
Company invested an initial amount of $
On February 17, 2023, MitoCareX achieved
its first milestone pursuant to the MitoCareX Agreement. As a result of MitoCareX meeting this milestone, the Company invested an additional
sum of $
On November 25, 2023, MitoCareX achieved
its second milestone pursuant to the MitoCareX Agreement. As a result of MitoCareX meeting this milestone, the Company invested an additional
sum of $
During the six months ended June 30,
2024, and 2023, the Company recorded equity losses from the investment in MitoCareX in the amount of $
| Balance at January 1, 2023 | $ | |||
| Investment following achievement of first milestone | ||||
| Equity losses from investment in MitoCareX | ( | ) | ||
| Balance at December 31, 2023 | ||||
| Investment following achievement of second milestone | ||||
| Equity losses from investment in MitoCareX | ( | ) | ||
| Balance at June 30, 2024 | $ |
13
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 4:- INTANGIBLE ASSET
On September 30, 2022, the Company announced the closing of the acquisition (“Wellution Acquisition”) of WellutionTM, an Amazon Marketplace account and American food supplement and cosmetics brand and trademark (the “Brand”). In connection with the Wellution Acquisition, the Company incorporated a new wholly owned Delaware subsidiary, SciSparc Nutraceuticals., to hold the new assets. The definitive agreement for the acquisition of the Brand was entered into with Merhavit M.R.M Holding and Management Ltd (“M.R.M”).
At the closing, the Company paid a
cash payment of $
In addition, the Company issued to
M.R.M $
The Company reviewed the transaction
and deemed it to be the purchase of assets for accounting purposes under generally accepted accounting principles. The Company reviewed
the guidance under International Financial Reporting Standard (“IFRS”) 3, Business Combinations, for the transaction and determined
that the fair value of the gross assets acquired was concentrated in a single identifiable asset, a brand. Accordingly, the Company treated
the transaction as an asset acquisition. On the closing date of the Wellution Acquisition, the Company fully recognized the Wellution
Acquisition amount total of $
In the years ended December 31, 2022,
and 2023, the Brand recorded significant losses. As of December 31, 2023, the Company has determined there are signs of decline in the
value of the Brand and recognized a loss as a result of impairment to its intangible asset of $
The impairment loss was determined
based on the revenue projections of the Brand, using the relief from royalty approach. Under the relief from royalty approach, the fair
value of a brand is determined based on discounted future royalty payments that the owner of the asset would have been required to pay
if instead of purchasing the intangible asset it would have been licensed from a third party. Revenues were projected for a period of
| Balance at January 1, 2023 | $ | |||
| Loss on impairment of intangible asset | ( | ) | ||
| Depreciation of intangible asset | ( | ) | ||
| Balance at December 31, 2023 | ||||
| Depreciation of intangible asset | ( | ) | ||
| Balance at June 30, 2024 | $ |
During the six months ended June 30,
2024, and 2023, the Company recorded depreciation expenses with respect to intangible asset in the amount of $
14
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 5:- INVESTMENT IN FINANCIAL ASSETS
Share Purchase Agreement
On June 25, 2023, the Company entered
into a share purchase agreement (the “Share Purchase Agreement”) with AutoMax Motors Ltd. (“AutoMax”), an Israeli
company traded on the Tel Aviv Stock Exchange (“TASE”) and the leading parallel importer and distributor of vehicles in Israel,
pursuant to which, at the closing and upon the terms and conditions set forth in the Share Purchase Agreement, the Company invested NIS
Bridge Loan Agreement
On January 16, 2024, the Company entered, as a lender, into an agreement (the “Bridge Loan Agreement”) with AutoMax, pursuant to which AutoMax received from the Company a bridge loan (the “Bridge Loan”) in the amount of $
The Bridge Loan Agreement states that the principal amount of the Bridge Loan will bear interest at a rate of
On June 9, 2024, the Company entered into an amendment (the “Amendment”) to the Bridge Loan Agreement with AutoMax. Pursuant to the Amendment, the Company extended an additional loan in the amount of $
On September 5, 2024, the Company entered into a second amendment (the “Second Amendment”) to the Bridge Loan Agreement with AutoMax. Pursuant to the Second Amendment, the Company extended an additional loan in the amount of $
Merger Agreement
On April 10, 2024, the Company entered into an Agreement and Plan of Merger, as amended (the “Merger Agreement”) with AutoMax and SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of the Company (“Merger Sub”). Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, including approval of the transaction by the Company’s shareholders and AutoMax’s shareholders, Merger Sub will be merged with and into AutoMax, with AutoMax surviving the Merger as a wholly-owned subsidiary of the Company (the “Merger”) (see also note 6).
At the effective time of the Merger (the “Effective Time”, as further defined in the Merger Agreement): (a) each outstanding share of AutoMax’s share capital will be converted into the right to receive ordinary shares of the Company, equal to the exchange ratio set forth in the Merger Agreement (the “Exchange Ratio”). Under the Exchange Ratio, following the Effective Time, the former AutoMax shareholders immediately before the Merger (other than the Company) are expected to hold together approximately
15
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 6:- TRANSACTIONS AND BALANCES WITH RELATED PARTIES
| a. | Balances with related parties: |
| June 30, 2024 | December 31, 2023 | |||||||||||||||
| Key management personnel | Other related parties | Key management personnel | Other related parties | |||||||||||||
| Current assets | $ | $ | $ | $ | ||||||||||||
| Non-current assets | $ | $ | (*) | $ | $ | |||||||||||
| Current liabilities | $ | $ | - | $ | $ | |||||||||||
| (*) |
| b. |
| Six months ended | Year ended | |||||||||||
| June 30, | December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Research and development expenses | $ | $ | - | $ | ||||||||
| Sale of minority interest in subsidiary | $ | $ | - | $ | (*) | |||||||
| (*) | Sale of approximately |
| c. |
| Six months ended | Year ended | |||||||||||
| June 30, | December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Short-term benefits | $ | $ | $ | |||||||||
| Management fees | $ | $ | $ | |||||||||
| Cost of share-based payment | $ | $ | $ | |||||||||
| d. | On February 23, 2023, the Company entered into an agreement with Jeffs’ Brands Ltd. (“Jeffs’ Brands”) and Jeffs’ Brands Holdings Inc. (“Jeffs’ Holdings”), a newly-formed wholly owned subsidiary of Jeffs’ Brands, in which Jeffs’ Holdings acquired from the Company common stock of SciSparc Nutraceuticals equal to approximately a 49% for a cash consideration of $ |
16
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 6:- TRANSACTIONS AND BALANCES WITH RELATED PARTIES (cont.)
| e. | On March 7, 2022, the Company entered into a cooperation agreement with Clearmind Medicine Inc. (“Clearmind”) in which the Company and Clearmind test and integrate their core technologies with a view to developing novel psychedelic drug candidates (the “Cooperation Agreement”). Dr. Adi Zuloff-Shani, our Chief Technologies Officer, Mr. Amitai Weiss, our President, and Mr. Adler, our Chief Executive Officer and Chief Financial Officer serve as officers and directors of Clearmind.
During the six-month period ended June 30, 2024, the Company recognized expenses in respect of the Cooperation Agreement in the amount of $
| |
| f. | Mr. Weiss, our chairman of the board of directors, is the chairman of the board of directors of AutoMax (see Note 5). |
NOTE 7:- FINANCIAL INSTRUMENTS
Classification of financial assets and financial liabilities:
| June 30, | December 31, | |||||||||||||||
| 2024 | 2023 | 2023 | ||||||||||||||
| Unaudited | Audited | |||||||||||||||
| Note | USD in thousands | |||||||||||||||
| Financial assets: | ||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||||||
| Short-term deposits | ||||||||||||||||
| Loans to related party | ||||||||||||||||
| Trade receivables | ||||||||||||||||
| Government authorities | ||||||||||||||||
| Other receivables | ||||||||||||||||
| Investments in financial assets | ||||||||||||||||
| $ | $ | $ | ||||||||||||||
| Financial liabilities: | ||||||||||||||||
| Credit from others | $ | $ | $ | |||||||||||||
| Warrants liability | ||||||||||||||||
| Lease liability | ||||||||||||||||
| Total financial and lease liabilities | $ | $ | $ | |||||||||||||
17
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 8:- WARRANTS
On June 1, 2022, the Company completed
a private offering with an investor for gross proceeds of $
The June 2022 Warrants have an exercise
price of $
General Overview of Valuation Approaches used in the Valuation:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Economic methodology:
| December 31, 2023 | June 30, 2024 | |||||||
| Dividend yield (%) | ||||||||
| Expected volatility (%) | ||||||||
| Risk-free interest rate (%) | ||||||||
| Underlying share price ($) | ||||||||
| Exercise price ($) | ||||||||
| Warrants fair value ($) | ||||||||
The June 2022 Warrants are classified as current warrant liability in the Company’s balance sheet, as they are exercisable at any given time.
During the six months ended June 30,
2024, and 2023, the Company recorded finance income from the change in fair value of the June 2022 Warrants in the amount of $
18
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 9:- EQUITY
Reverse Share Split
On August 18, 2023, the Company convened
a general meeting of its shareholders, whereby the shareholders approved, inter alia, a reverse split of the Company’s share capital
up to a ratio of
On September 14, 2023, the Company’s Board resolved that the final ratio for the Reverse Split will be 26:1, which became effective on September 28, 2023.
| a. |
| June 30, 2024 | December 31, 2023 | June 30, 2023 | |||||||||||||||||||||||
| Authorized | Issued and outstanding | Authorized | Issued and outstanding | Authorized | Issued and outstanding | ||||||||||||||||||||
| Number of shares | |||||||||||||||||||||||||
| Ordinary shares, no par value | |||||||||||||||||||||||||
| b. | Changes in share capital: |
| Number of ordinary shares | ||||
| Balance at January 1, 2024 | ||||
| Issuance of share capital – in respect of Standby Equity Purchase Agreement (Note 6j) | ||||
| Shares issued to consultants (Note 6e) | ||||
| Issuance of share in respect of exercise of pre-funded October 2023 Warrants (Note 6i) | ||||
| Balance at June 30, 2024 | ||||
19
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 9:- EQUITY (cont.)
| c. | Rights attached to shares: |
Voting rights at shareholders meetings, right to dividends, rights upon liquidation of the Company and right to nominate the directors in the Company.
| d. | Capital management in the Company: |
The Company’s capital management objectives are to preserve the Company’s ability to ensure business continuity thereby creating a return for the shareholders, investors and other interested parties. The Company is not under any minimal equity requirements nor is it required to attain a certain level of capital return.
| e. | Additional issuance of ordinary shares: |
On February 26, 2024, the Company issued
a consultant
On April 9, 2024, the Company issued
| f. | March 2021 Financing Round |
On March 4, 2021, the Company completed
a private offering with several accredited and institutional investors for gross proceeds of $
The Series A Warrants have an exercise
price of $
The March 2021 Warrants are classified as issued warrants in the Company’s equity.
During the six-month period ended June 30, 2024, and the year ended December 31, 2023, there were no exercises of the 2021 Series A Warrants.
| g. | June 2022 Financing Round (see also note 8) |
On June 1, 2022, the Company completed
the June 2022 Private Placement with an investor for gross proceeds of $
The June 2022 Warrants have an exercise
price of $
The June 2022 Warrants are classified as current warrant liability in the Company’s balance sheet, as they are exercisable at any given time.
During the six-month period ended June 30, 2024, and the year ended December 31, 2023, there were no exercises of the June 2022 Warrants.
20
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 9:- EQUITY (cont.)
| h. | August 2023 Financing Round |
On August 14, 2023, the Company closed
an underwritten public offering (the “2023 Public Offering”) of
| i. | October 2023 Financing Round |
On October 13, 2023, the Company announced
the closing of a private placement with an institutional investor with gross cash proceeds to the Company of approximately $
In connection with the private placement,
the Company issued an aggregate of
During the six-month period ended June
30, 2024,
During the period between July 1, 2024,
and through to the date of this report,
| j. | January 2024 Standby Equity Purchase Agreement |
On January 21, 2024, the Company entered
into a Standby Equity Purchase Agreement (“SEPA”), as amended on February 26, 2024, with YA II PN, LTD. (“YA”),
which provided for the sale of up to $
In connection with the SEPA, the Company
may request pre-paid advances of the Commitment Amount, in an amount up to $
In addition, pursuant to the SEPA,
the Company issued to YA an aggregate of
YA will pay all brokerage fees and commissions and similar expenses in connection with the offer and sale of Ordinary Shares by YA pursuant to the SEPA. The Company will pay the expenses (except brokerage fees and commissions and similar expenses) incurred and register pursuant to the Securities Act of 1933, as amended, the offer and sale of the Ordinary Shares pursuant to the SEPA by YA. See also note 11b.
21
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 10:- ADDITIONAL INFORMATION TO THE ITEMS OF PROFIT OR LOSS
| Six months ended June 30, | Year Ended December 31, | |||||||||||
| 2024 | 2023 | 2023 | ||||||||||
| Unaudited | Audited | |||||||||||
| USD in thousands | ||||||||||||
| a. Research and development expenses: | ||||||||||||
| Wages and related expenses | $ | $ | $ | |||||||||
| Share-based payment | ||||||||||||
| Clinical studies | ||||||||||||
| Regulatory, professional and other expenses | ||||||||||||
| Research and preclinical studies | ||||||||||||
| Chemistry and formulations | ||||||||||||
| b. General and administrative expenses: | ||||||||||||
| Wages and related expenses | ||||||||||||
| Share-based payment | ||||||||||||
| Professional and directors’ fees | ||||||||||||
| Business development expenses | ||||||||||||
| Office maintenance, rent and other expenses | ||||||||||||
| Investor relations and business expenses | ||||||||||||
| Wellution operating expenses | ||||||||||||
| Amazon fees | ||||||||||||
| Regulatory expenses | ||||||||||||
| $ | $ | |||||||||||
22
SCISPARC LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)
NOTE 11:- EVENTS AFTER THE REPORTING PERIOD
| a. | On July 8, 2024, the Company announced that it signed a non-binding letter of intent (the “LOI”) to spin off its advanced clinical stage pharmaceutical portfolio and its equity stake in SciSparc Nutraceuticals Inc. (collectively, the “Target Assets”). The LOI references a proposed asset and share purchase agreement (the “Asset and Share Purchase Agreement”), the definitive agreement of which is to be negotiated between the Company and Miza III Ventures Inc. (“Miza”) (TSXV: MIZA.P), a publicly traded company on the Toronto Stock Exchange Venture in Canada.
The Asset and Share Purchase Agreement is based on the approximate total USD
Pursuant to the LOI, SciSparc will sell,
assign, convey and transfer to Miza the Target Assets in consideration for | |
| b. | From July 16, 2024, through September 17,
2024, the Company has sold | |
| c. | On August 13, 2024, the Company entered into
an exclusive patent license agreement (the “License Agreement”) for the out-licensing of its SCI-160 program (the “Assets”)
with Polyrizon Ltd. (the “Licensee”). According to the License Agreement, SciSparc granted the Licensee a royalty-bearing,
exclusive, sub-licensable right and license to the Assets (the “License”). In consideration for the License, the Company
received and will receive certain shares of the Licensee, reflecting an issue price of $ | |
| d. | On September 26, 2024, the Company signed
a non-binding letter of intent (“LOI”) to sell its entire ownership interest in MitoCareX to a publicly-traded company in
the United States (“the Purchaser”). SciSparc currently owns |
23
Exhibit 99.2
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations provides information that we believe to be relevant to an assessment and understanding of our results of operations and financial condition for the periods described. This discussion should be read in conjunction with our interim consolidated financial statements and the notes to such financial statements, which are included in this Report on Form 6-K. In addition, this information should also be read in conjunction with the information contained in our Annual Report on Form 20-F for the year ended December 31, 2023, or the Annual Report, including the consolidated annual financial statements as of December 31, 2023, and their accompanying notes included therein, filed with the Securities and Exchange Commission, or the SEC, on April 1, 2024.
Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “SciSparc”, “the Company” and “our Company” refer to SciSparc Ltd. and its wholly-owned subsidiaries. References to “Ordinary Shares, and “warrants” refer to the ordinary shares, and warrants, respectively, of SciSparc.
We report financial information under International Financial Reporting Standards, as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles in the United States.
References to “U.S. dollars,” “USD” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwise indicated, U.S. dollar translations of NIS amounts presented herein are translated using the rate of NIS 3.759 to $1.00, the exchange rate reported by the Bank of Israel on June 30, 2024.
On August 18, 2023, the Company convened a general meeting of its shareholders, whereby the shareholders approved, inter alia, a reverse split of the Company’s share capital up to a ratio of 30:1, or the Reverse Share Split. Following the implementation of the Reverse Split, the Company’s authorized share capital was not adjusted under the Company’s Articles, which as of the date of these financial statements consisted of 75,000,000 ordinary shares, no par value.
On September 14, 2023, the Company’s Board resolved that the final ratio for the Reverse Split will be 26:1 and the Reverse Share Split became effective on September 28, 2023.
Consequently, share numbers, share prices, and exercise prices have been retroactively adjusted in this Management’s Discussion and Analysis of Financial Condition and Results of Operation for all periods presented.
Forward-Looking Statements
The following discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. 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 and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
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 and ability to continue as a going concern; |
| ● | our ability to advance the development our product candidates, including the anticipated starting and ending dates of our anticipated clinical trials; |
| ● | our assessment of the potential of our product candidates to treat certain indications; |
| ● | our ability to successfully receive approvals from the U.S. Food and Drug Administration, or other regulatory bodies, including approval to conduct clinical trials, the scope of those trials and the prospects for regulatory approval of, or other regulatory action with respect to our product candidates, including the regulatory pathway to be designated to our product candidates; |
| ● | the regulatory environment and changes in the health policies and regimes in the countries in which we operate, including the impact of any changes in regulation and legislation that could affect the pharmaceutical industry; |
| ● | our ability to commercialize our existing product candidates and future sales of our existing product candidates or any other future potential product candidates; |
| ● | our ability to meet our expectations regarding the commercial supply of our product candidates; | |
| ● | our ability to integrate successfully our e-Commerce business of the WellutionTM brand, which focuses on the sale of hemp-based products on Amazon Marketplace through our subsidiary, SciSparc Nutraceuticals Inc., or SciSparc Nutraceuticals in which we hold a controlling interest; | |
| ● | our ability to list an entity to which we would transfer our pharmaceutical activities under a proposed restructuring plan, on a leading stock exchange; | |
| ● | our planned merger with AutoMax Motors Ltd., or AutoMax; | |
| ● | our ability to comply with continued listing requirements and standards of Nasdaq; |
| ● | the overall global economic environment; |
| ● | general market, political and economic conditions in the countries in which we operate including those related to recent unrest and actual or potential armed conflict in Israel and other parts of the Middle East, such as the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, hostilities with Hezbollah on the northern border of Israel, and potential attacks by Iran, as well as the downgrade by Moody’s of its credit rating of Israel; |
| ● | projected capital expenditures and liquidity; |
| ● | changes in our strategy; |
| ● | litigation; and |
| ● | those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects,” of the Annual Report as well other factors in the Annual Report. |
2
These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in the Annual Report. You should not rely upon forward-looking statements as predictions of future events.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Report of Foreign Private Issuer on Form 6-K.
Overview
We are a specialty clinical-stage pharmaceutical company. Our focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. With this focus, we are currently engaged in the following development programs based on THC, and/or CBD and/or other CBR agonists: SCI-110 for the treatment of TS and for the treatment of Alzheimer’s disease and agitation; SCI-160 for the treatment of pain; and SCI-210 for the treatment of ASD. We also hold a 50.86% controlling stake in our subsidiary SciSparc Nutraceuticals, whose business focuses on the sale of hemp seeds oil-based products and others on Amazon Marketplace.
SCI-110 is a proprietary drug candidate based on two components: (1) THC, which is the major cannabinoid molecule in the cannabis plant, and (2) CannAmide™, a proprietary PEA, formulation. PEA is an endogenous fatty acid amide that belongs to the class of nuclear factor agonists, which are molecules that regulate the expression of genes. We believe that the combination of THC and PEA may induce a reaction known as the “sparing effect,” which has strong potential to treat various diseases of the central nervous system such as TS and Alzheimer’s disease and agitation.
SCI-210 is a proprietary drug candidate based on two components: (1) CBD, and (2) CannAmide™. We believe that the combination of CBD and PEA may also induce a sparing effect reaction, which has strong potential to treat various diseases such as ASD and SE.
SCI-160 is a novel pharmaceutical preparation containing a cannabinoid receptor type 2, or CB2 receptor, agonist for the treatment of pain. This innovative CB2 receptor agonist was synthesized by the late Raphael Mechoulam, who was a professor of medicinal chemistry at the Hebrew University.
We believe that modulating CB2 receptor activity by selective CB2 receptor agonists holds unique therapeutic potential for addressing pain conditions.
Recent Developments
On January 21, 2024, the Company entered into a Standby Equity Purchase Agreement, or SEPA, as amended on February 26, 2024, with YA II PN, LTD, or YA, which provided for the sale of up to $20 million of the Company’s Ordinary Shares, or the Advance Shares. As of June 30, 2024, of the $20 million eligible to be sold pursuant to the SEPA, or the Commitment Amount, the Company has sold 925,159 ordinary shares. The Advance Shares to be purchased or purchased by YA pursuant to the SEPA are for a share price of 97% of the market price, which is defined as the lowest daily volume weighted average price of the Ordinary Shares during the three consecutive trading days commencing on the trading day immediately following the delivery of an advance notice to YA.
On April 10, 2024, we entered into an Agreement and Plan of Merger, or the Merger Agreement, as amended, with AutoMax and SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of the Company, or the Merger Sub. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, including approval of the transaction by the Company’s shareholders and AutoMax’s shareholders, Merger Sub will be merged with and into AutoMax, with AutoMax surviving the Merger as a wholly-owned subsidiary of the Company. AutoMax’s share capital will be converted into the right to receive ordinary shares of the Company, equal to the exchange ratio set forth in the Merger Agreement. The Merger Agreement contemplates that at the closing, the Company shall deliver to AutoMax an amount of $4.25 million (less any amount due by AutoMax to the Company under any loan agreement between the parties) through a wire transfer of the immediate available funds to an account for AutoMax’s ongoing capital requirements and operational expenses. At the effective time of the Merger, or the Effective Time, as further defined in the Merger Agreement, each outstanding share of AutoMax’s share capital will be converted into the right to receive ordinary shares of the Company, equal to the exchange ratio set forth in the Merger Agreement, or the Exchange Ratio. Under the Exchange Ratio, following the Effective Time, the former AutoMax shareholders immediately before the Merger (other than the Company) are expected to hold together approximately 47.49% (minus the Finder Fee, as defined in the Merger Agreement) of the aggregate number of the outstanding ordinary shares of the Company on fully diluted basis (subject to certain exceptions). The shareholders of the Company, together with the holders of the Company’s convertible securities, immediately before the Merger are expected to hold together approximately 52.51% of the aggregate number of the outstanding ordinary shares of the Company on fully diluted basis (subject to certain exceptions).
3
On July 8, 2024, we announced that we signed a non-binding letter of intent, or the LOI, to spin off our advanced clinical stage pharmaceutical portfolio and our equity stake in SciSparc Nutraceuticals. The LOI references a proposed asset and share purchase agreement, the definitive agreement of which is to be negotiated between the Company and Miza III Ventures Inc., or Miza (TSXV: MIZA.P).
On August 13, 2024, we entered into an exclusive patent license agreement, or the License Agreement for the out-licensing of our SCI-160 program, or the Assets with Polyrizon Ltd., or the Licensee. According to the License Agreement, we granted the Licensee a royalty-bearing, exclusive, sub-licensable right and license to the Assets (the “License”). In consideration for the License, we received and will receive certain shares of the Licensee, reflecting an issue price of $3 million, and royalties from sales related to and income generated from the Assets. Further, the Licensee will pay SciSparc pre-determined fees upon the completion of certain development milestones relating to the Assets.
On September 5, 2024, we entered into a second amendment, or the Second Amendment to the bridge loan agreement, dated January 16, 2024, and as previously amended on June 9, 2024, or the Bridge Loan Agreement with AutoMax. Pursuant to the Second Amendment, we extended an additional loan in the amount of $1.85 million to AutoMax under terms similar to the Bridge Loan Agreement, bringing the total Bridge Loan amount to $4.25 million, or the Loan Amount. In consideration for the Loan Amount, AutoMax established a first ranking fixed charge security interest on AutoMax’s shares of its wholly-owned subsidiary AutoMax Leasing Ltd. in favor of the Company. The Bridge Loan Agreement states that the principal amount of the bridge loan would bear interest at a rate of 7% per annum (or 9% per annum if the closing of the Merger Agreement does not occur prior to the repayment date) compounded annually. The Bridge Loan amount, together with any accrued interest, may be repaid in part or in whole prior to the repayment date, contingent on whether the closing of the Merger Agreement occurs. The repayment date shall be at the earlier date of: (a) the Closing (as defined below), in which the Owed Amount shall be deemed a part of, and set-off against, the financing amount the Company will provide AutoMax with upon consummation of the Merger, which is expected to be $4.25 million; or (b) if the definitive agreement for the AutoMax Acquisition is terminated in accordance with its terms, within three months from such termination date.
On September 26, 2024, we signed a non-binding letter of intent, or LOI, to sell our entire ownership interest in MitoCareX Bio Ltd., or MitoCareX, to a publicly-traded company in the United States, or the Purchaser. We currently own 52.73% of the issued and outstanding share capital of MitoCareX. Pursuant to the terms of the LOI, initially, in exchange for transferring and selling to the Purchaser a number of ordinary shares of MitoCareX that constitute 27% of our ownership in MitoCareX, we will receive in cash consideration of $700,000. Subsequent to this first phase, we will transfer to the Purchaser the remaining 73% of our ownership stake in MitoCareX in exchange for a certain number of shares based on the valuation of the Purchaser equal to $8,000,000 and a valuation of MitoCareX equal to $5,000,000 (the latter of which includes the $700,000 in cash consideration for our shares described above). The LOI also includes provisions for additional milestones that, upon achievement, could increase the consideration paid by the Purchaser to us from $5 million to $7 million. The details of the full terms of this transaction are subject to negotiation and execution of definitive agreements.
Operating Results
Total revenues recognized in the six months ended June 30, 2024, amounted to $840 thousand.
To date, we have not generated revenue from our drug development segment from the sale of any pharmaceutical product candidates, and we do not expect to generate significant revenue in this business within the next year at least. As of June 30, 2024, we had an accumulated deficit of approximately $72 million. Our operating activities are described below under “Operating Expenses.”
Revenues
During the six months ended June 30, 2024, we generated revenues in the amount of $840 thousand, compared to $1,972 thousand of revenue recorded during the six months ended June 30, 2023. Revenues in the six months ended June 30, 2024, and 2023, were primarily attributable to our subsidiary SciSparc Nutraceuticals, which owns the Wellution™ brand.
4
Cost of goods sold
The cost of goods sold comprises mainly purchases of Wellution™ brand products, Amazon transaction fees, storage and transportation costs to the Company’s warehouse. The cost of goods sold in the six months ended June 30, 2024, amounted to $366 thousand, compared to $508 thousand of cost of goods sold recorded during the six months ended June 30, 2023.
Operating Expenses (in thousands of dollars)
Our current operating expenses consist of two components – research and development expenses, and general and administrative expenses, including sales and marketing expenses through our subsidiary SciSparc Nutraceuticals.
Research and Development Expenses
Our research and development expenses consist primarily of salaries and related personnel expenses, regulatory and other expenses and clinical studies expenses.
The following table discloses the breakdown of research and development expenses:
| Six month period ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (unaudited) | (unaudited) | |||||||
| (in thousands of USD) | ||||||||
| Wages and related expenses | 224 | 202 | ||||||
| Share-based payments | 8 | 23 | ||||||
| Clinical studies | 117 | 145 | ||||||
| Research and preclinical studies | 100 | 45 | ||||||
| Chemistry and formulations | 6 | - | ||||||
| Regulatory and other expenses | 386 | 366 | ||||||
| Total | 841 | 781 | ||||||
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, share-based compensation expense, professional service fees for accounting, legal, bookkeeping, facilities and other general and administrative expenses.
The following table discloses the breakdown of general and administrative expenses:
| Six month period ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (unaudited) | (unaudited) | |||||||
| (in thousands of USD) | ||||||||
| Wages and related expenses | 311 | 217 | ||||||
| Share-based payment | 8 | 45 | ||||||
| Professional and directors’ fees | 1,670 | 1,366 | ||||||
| Investor relations and business expenses | 57 | 310 | ||||||
| Office maintenance, rent and other expenses | 68 | 48 | ||||||
| Regulatory expenses | 67 | 104 | ||||||
| Wellution operating expenses | 101 | 107 | ||||||
| Amazon fees | 297 | 686 | ||||||
| Business development | 53 | 38 | ||||||
| Total | 2,632 | 2,921 | ||||||
5
Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023
Research and Development Expenses, net
Our research and development expenses for the six months ended June 30, 2024, amounted to $841 thousand, representing an increase of $60 thousand, or 8%, compared to $781 thousand for the six months ended June 30, 2023. The increase is primarily due to the increase in research and pre-clinical studies, that are derived from the purchase of raw materials.
General and Administrative Expenses
Our general and administrative expenses totaled $2,632 thousand for the six months ended June 30, 2024, a decrease of $289 thousand, or 10%, compared to $2,921 thousand for the six months ended June 30, 2023. The decrease was primarily attributable to a decrease of $253 thousand in investor relations and business expenses, and a decrease of $389 thousand in Amazon fees related to Wellution, offset in part by an increase of $304 thousand in professional and director fees.
Sales and marketing
The sales and marketing expenses comprise mainly of advertising and promotional rebates on Amazon Marketplace. The sales and marketing expenses in the six months ended June 30, 2024, amounted to $528 thousand, compared to $729 thousand during the six months ended June 30, 2023.
Operating Loss
As a result of the foregoing, our operating loss for the six months ended June 30, 2024, was $3,527 thousand, compared to an operating loss of $2,967 thousand for the six months ended June 30, 2023, an increase of $560 thousand, or 19%.
Finance Expense and Income
Finance expenses and income consist of revaluation of debt instruments presented at fair value, related issuance expenses of debt instruments and bank fees.
We recognized finance income, net for the six months ended June 30, 2024, of $51 thousand, representing a decrease of $96 thousand compared to finance income of $147 thousand for the six months ended June 30, 2023. Finance income is mainly due to changes in the fair value of the warrants we issued in June 2022, and interest from bank deposits and loans to a related party. Finance expenses are mainly due to changes in the fair value of the Company’s financial assets.
Total Comprehensive Loss
Our total comprehensive loss for the six months ended June 30, 2024, was $3.7 million, representing an increase of $0.75 million, or 25%, compared to $2.93 million for the six months ended June 30, 2023.
Liquidity and Capital Resources
Overview
As of June 30, 2023, we had $2.624 million in cash, including short-term restricted deposits and short-term deposits.
The table below presents our cash flows:
| Six months ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| (unaudited) | (unaudited) | |||||||
| (in thousands of USD) | ||||||||
| Net cash used in operating activities | (2,226 | ) | (3,233 | ) | ||||
| Net cash provided by (used in) investing activities | 92 | (1,071 | ) | |||||
| Net cash provided by financing activities | 310 | 2,811 | ||||||
6
Operating Activities
Net cash used in operating activities was $2,226 thousand for the six months ended June 30, 2024, compared with net cash used in operating activities of $3,233 thousand for the six months ended June 30, 2023. The decrease is primarily due to decreases in adjustments to the profit or loss item of finance expenses relating to the change in fair value of warrants of $253 thousand, offset in part by losses from remeasurement of investment in financial assets of $256 thousand, and in adjustments to the working capital in the amount of $1,002 thousand.
Investing Activities
Net cash provided by investing activities was $92 thousand for the six months ended June 30, 2024, compared with $1,071 thousand cash used in investing activities for the six months ended June 30, 2023. Net cash provided by investing activities is due to a decrease in short-term deposits in the amount of $692 thousand, offset in part by our investment in MitoCareX Bio Ltd. in the amount of $600 thousand. Net cash used in investing activities for the six months ended June 30, 2023 was due to our investment in MitoCareX Bio Ltd. and our investment in financial assets of $687 thousand.
Financing Activities
Net cash provided by financing activities was $310 thousand in the six months ended June 30, 2024, primarily from proceeds from issuance of share capital in the amount of $2,772 thousand, offset in part by loans granted to AutoMax in the amount of $2,400 thousand. Net cash provided by financing activities of $2,811 thousand in the six months ended June 30, 2023, primarily from the sale of a minority interest in a subsidiary pursuant to the Wellution Sales Agreement in the amount of $2,887 thousand, offset by issuance expenses in respect of a public offering under our shelf registration statement in the amount of $50 thousand and by repayment of lease liability in the amount of $26 thousand.
Standby Equity Purchase Agreement
On January 21, 2024, the Company entered into a SEPA, as amended on February 26, 2024, with YA, which provided for the sale of up to $20 thousand of Advance Shares. As of June 30, 2024, of the Commitment Amount, the Company has sold 925,159 ordinary shares. The Advance Shares to be purchased or purchased by YA pursuant to the SEPA are for a share price of 97% of the market price, which is defined as the lowest daily volume weighted average price of the Ordinary Shares during the three consecutive trading days commencing on the trading day immediately following the delivery of an advance notice to YA.
Bridge Loan Agreement
On September 5, 2024, we entered into the Second Amendment to the Bridge Loan Agreement, dated January 14, 2024, and as amended on June 9, 2024 with AutoMax. Pursuant to the Second Amendment, the Company extended an additional loan in the amount of $1.85 million to AutoMax under terms similar to the Bridge Loan Agreement, bringing the Bridge Loan amount to $4.25 million. In consideration for the Bridge Loan amount, AutoMax established a first ranking fixed charge security interest on AutoMax’s shares of its wholly-owned subsidiary AutoMax Leasing Ltd. in favor of the Company.
Current Outlook
On January 21, 2024, the Company entered into a SEPA with YA, which provided for the sale of up to $20 million of the Advance Shares. As of June 30, 2024, of the Commitment Amount, the Company has sold 925,159 ordinary shares. The Advance Shares to be purchased or purchased by YA pursuant to the SEPA are for a share price of 97% of the market price.
On April 10, 2024, we entered into a Merger Agreement, as amended, with AutoMax and the Merger Sub. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, Merger Sub will be merged with and into AutoMax, with AutoMax surviving the Merger as a wholly-owned subsidiary of the Company. AutoMax’s share capital will be converted into the right to receive ordinary shares of the Company, equal to the exchange ratio set forth in the Merger Agreement. The Merger Agreement contemplates that at the closing, the Company shall deliver to AutoMax an amount of $4.25 million (less any amount due by AutoMax to the Company under any loan agreement between the parties) through a wire transfer of the immediate available funds to an account for AutoMax’s ongoing capital requirements and operational expenses, or the Closing Financing. In light of the Bridge Loan and amendments thereto, no Closing Financing will take place.
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On July 8, 2024, we announced that we signed an LOI, to spin off our advanced clinical stage pharmaceutical portfolio and our equity stake in SciSparc Nutraceuticals. The LOI references a proposed asset and share purchase agreement, the definitive agreement of which is to be negotiated between the Company and Miza.
On August 13, 2024, we entered into the License Agreement for the out-licensing of certain Assets with the Licensee. According to the License Agreement, we granted the Licensee License, in consideration for which, we received, and will receive certain shares of the Licensee, reflecting an issue price of $3 million, and royalties from sales related to and income generated from the Assets. Further, the Licensee will pay SciSparc pre-determined fees upon the completion of certain development milestones relating to the Assets.
On September 5, 2024, we entered into a Second Amendment to the Bridge Loan Agreement. Pursuant to the Second Amendment, we extended an additional loan in the amount of $1.85 million to AutoMax under terms similar to the Bridge Loan Agreement, bringing the total Loan Amount to $4.25 million.
On September 26, 2024, we signed an LOI to sell our entire ownership interest in MitoCareX to a Purchaser. Pursuant to the terms of the LOI, initially, in exchange for transferring and selling to the Purchaser a number of ordinary shares of MitoCareX, in tranches, for cash consideration, in addition to milestone achievements which could increase the consideration. The details of the full terms of this transaction are subject to negotiation and execution of definitive agreements.
We have financed our operations to date primarily through proceeds from sales of our ordinary shares and, prior to August 13, 2021, American Depositary Shares, or ADSs, as well as exercises of warrants and options to purchase ordinary shares or ADSs, as the case may be. We have incurred losses and generated negative cash flows from operations since August 2004. Since August 2004, we have not generated any revenue from the sale of our pharmaceutical product candidates and we do not expect to generate revenues from sale of our pharmaceutical product candidates in the next few years.
As of June 30, 2024, our cash, including short-term bank deposits, was $2,624 thousand.
We believe that our existing cash resources will not be sufficient to finance our operating activities in the foreseeable future, and we expect that we will require substantial additional capital to complete the development of, and to commercialize, our product candidates. If we do seek to raise additional capital, there can be no guarantee or assurance that we will be successful in raising such additional capital or that the term of such capital raise will be on terms favorable to us.
Research and development, patents and licenses, etc.
A comprehensive discussion of our research and development, patents and licenses, etc., is included in “Item 5. Operating and Financial Review and Prospects - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.
Critical Accounting Policies
The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, obligations and expenses during the reporting periods. A comprehensive discussion of our critical accounting policies is included in “Item 5. Operating and Financial Review and Prospects - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.
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