Business Context and Reporting Period
SciSparc Ltd. (SPRC) is a specialty clinical-stage pharmaceutical company incorporated in Israel, focusing on cannabinoid-based therapies for conditions such as Tourette syndrome (TS), Alzheimer's disease, and Autism Spectrum Disorder (ASD). The company also operates a majority-owned subsidiary, SciSparc Nutraceuticals, which sells hemp-based products via Amazon Marketplace under the Wellution brand. This Form 20-F covers the fiscal year ended December 31, 2024.
Key Financial Metrics
| Metric (USD in thousands) | 2024 | 2023 |
|---|---|---|
| Revenues | $1,306 | $2,879 |
| Cost of Goods Sold | $800 | $683 |
| Gross Profit | $506 | $2,196 |
| Operating Loss | $(7,316) | $(6,815) |
| Net Loss (Attributable to Equity Holders) | $(6,284) | $(5,122) |
| Accumulated Deficit | $(74,975) | $(68,691) |
| Cash and Cash Equivalents | $1,540 | $2,076 |
| Working Capital | $6,104 | $4,874 |
Note: Working Capital calculated as Current Assets ($7,503) minus Current Liabilities ($1,399) for 2024.
Material Changes vs. Prior Period
- Revenue Decline: Total revenue decreased by 55% to $1.3 million, primarily due to operational difficulties that temporarily took the Wellution brand offline from Amazon Marketplace.
- Impairment Charges: The company recognized an impairment loss of $1.34 million on intangible assets (Wellution brand), an increase of $302,000 from the prior year, reflecting continued losses in the e-commerce segment.
- Other Income: A significant non-operating gain of $1.27 million was recorded in 2024 from the sale of Polyrizon shares and warrants, offsetting some operating losses.
- Expense Increases: General and administrative expenses rose 18% to $4.5 million, driven by higher share-based compensation ($419k vs $68k) and professional fees ($3.0M vs $2.6M).
Guidance, Outlook, and Risks
Going Concern Warning
The independent auditor has issued an explanatory paragraph regarding substantial doubt about the Company's ability to continue as a going concern. As of December 31, 2024, cash balances of $1.54 million are insufficient to fund planned operations for at least one year. The company requires substantial additional financing to continue clinical trials and operations.
Strategic Transactions
- AutoMax Merger: SciSparc is pursuing a merger with AutoMax Motors Ltd. (an automotive importer). The merger agreement has been amended multiple times, with the termination deadline extended to September 30, 2025. SciSparc has provided bridge loans totaling $4.25 million to AutoMax, which may be set off against closing financing.
- Restructuring Plan: The company is exploring a spin-off of its pharmaceutical portfolio to a new entity (NewCo) or a transaction with Miza III Ventures Inc., with a deadline to close extended to July 31, 2025.
- MitoCareX Sale: A definitive agreement was signed in February 2025 to sell SciSparc's entire stake in MitoCareX to N2OFF, Inc., for cash and stock.
Key Risks
- Regulatory Approval: No product candidates have received regulatory approval. Success depends on clinical trial outcomes (e.g., Phase IIb for SCI-110 in TS) and FDA/EMA approvals.
- Geopolitical Instability: Operations are based in Israel. Ongoing conflicts and military service requirements for reservists pose risks to operations and supply chains.
- Nasdaq Compliance: The company received a notice of non-compliance with the minimum bid price requirement ($1.00) and has been granted an extension until July 14, 2025, to regain compliance.
Investor Verification Checklist
- Liquidity Runway: Verify the sufficiency of the $1.54 million cash balance against the burn rate and the timeline for the next capital raise.
- Merger Status: Confirm the progress of the AutoMax merger, including shareholder approval status and the likelihood of closing by September 2025.
- Clinical Trial Data: Review upcoming topline results for the SCI-110 Phase IIb trial in Tourette syndrome and SCI-210 trial in ASD.
- Wellution Viability: Assess the recovery of the Wellution e-commerce business following the Amazon Marketplace suspension and the rationale for the $1.34 million impairment.
- Related Party Transactions: Scrutinize the terms of the $4.25 million bridge loans to AutoMax and the potential for dilution or loss of capital if the merger fails.