Scisparc Ltd. annual report, Q4 FY2020

SciSparc Ltd. — FY2020 Form 20-F

Reporting period: Fiscal year ended December 31, 2020; this is an annual report, not a standalone Q4 filing. The company reports under IFRS in U.S. dollars; financial statement amounts below are in millions unless stated otherwise. The company was then known as Therapix Biosciences Ltd. and changed its name in January 2021.

Business context

SciSparc is a clinical-stage pharmaceutical company developing cannabinoid-based therapies. Its programs include SCI-110 for Tourette syndrome (TS), obstructive sleep apnea (OSA), and Alzheimer’s disease with agitation; SCI-160 for pain; and SCI-210 for autism spectrum disorder (ASD) and epilepsy. CannAmide, a PEA oral tablet, had a Canadian natural health product license, but the company said it did not expect material revenue from its early commercialization efforts.

Financial results and liquidity

MetricFY2020FY2019
RevenueNone reportedNone reported
Research and development expense$0.649$1.639
General and administrative expense$1.902$2.469
Other expense$0.742—
Operating loss$3.293$4.108
Net loss$3.535$4.686
Net cash used in operating activities$4.307$4.696
Cash provided by financing activities$5.359$2.804

At year-end, cash was $1.946 million, with restricted deposits of $0.010 million; current assets were $2.550 million and current liabilities were $1.131 million, giving working capital of approximately $1.42 million. Total assets were $2.561 million, total liabilities $1.131 million, and equity $1.430 million. Current liabilities included a $0.188 million short-term loan and $0.353 million of warrant liabilities. The filing reports an accumulated deficit of $55.188 million. No meaningful revenue or operating margin was reported; profitability metrics are not informative for this pre-commercial company.

The company reported no long-term liabilities at December 31, 2020. Its financial statements note that all financial liabilities were expected to be settled within one year. Management said year-end cash was expected to fund operations at least through March 31, 2022; separately, the notes report $7.78 million in cash as of the March 2021 financial-statement approval date, following subsequent financing.

Changes versus FY2019

  • Net loss narrowed by about 25%, and operating loss by about 20%, primarily as R&D and G&A spending declined.
  • R&D expense fell 60%; no new clinical studies were initiated in 2020. Management said preparations accelerated in the second half of the year for studies planned for 2021.
  • G&A expense fell 23%, including lower business development, wages, and share-based compensation, partly offset by higher professional and directors’ fees, primarily related to directors’ and officers’ insurance.
  • Other expense of $0.742 million reflected impairment of the company’s investment in Lara Pharm. Discontinued-operation loss was zero in 2020, compared with $0.207 million in 2019, following the liquidation and dissolution of THR.
  • Cash increased to $1.946 million from $0.870 million, chiefly due to equity and warrant financing. Operating cash use remained substantial.

Outlook, developments, and risks

  • Funding and financial condition: The company disclosed that it filed for economic rehabilitation in Israel in July 2020, stating it was insolvent under the cash-flow test and unable to pay creditors. A court-approved proposal provided a $1.5 million deposit from Pure Capital and a board replacement. SciSparc also raised approximately $4.2 million gross in November 2020 and $8.15 million gross in March 2021. It remains dependent on external capital; further financing may dilute shareholders or may not be available on acceptable terms.
  • Listing and capital structure: ADSs were suspended from Nasdaq in July 2020 for failure to meet shareholder-equity requirements and delisted in September; they moved to OTCQB in December under SPRCY. A 20-for-1 reverse share split and change in ADS ratio took effect in October 2020. The filing identifies limited liquidity and possible relisting uncertainty as investor risks.
  • Pipeline: SCI-110’s open-label Phase IIa TS study at Yale reported a 21% average tic-score reduction among 16 participants; the filing describes these results as positive but they are early-stage and from a small, uncontrolled study. In the OSA Phase IIa study, nine of ten enrolled patients completed treatment; the company reported a roughly 54% mean AHI reduction among completers, with one withdrawal due to dizziness. Further development strategy for OSA was under assessment. SCI-160 remained preclinical.
  • Post-period plans: The company announced plans for a Phase IIa SCI-110 study in Alzheimer’s agitation, clinical development of SCI-210 for ASD, and a preclinical SCI-210 study for status epilepticus. It also reported starting CannAmide commercial production in February 2021 and a manufacturing-development agreement for softgel products. These are forward-looking plans, not established outcomes.
  • Key risks: No product candidate has received marketing approval, the company has never generated product sales, and clinical outcomes and regulatory pathways are uncertain. Other material risks include dependence on third-party manufacturers and research organizations, COVID-19-related disruption, competition, patent and license uncertainty, controlled-substance regulation, and political and economic risks in Israel.
  • Contingencies and unusual items: The filing discloses approximately $1.2 million of contingent IIA grant obligations, including interest, subject to royalties and restrictions on transferring grant-funded technology. It also describes an approximately $85,000 demand from a former service provider, which the company disputed and for which it recorded no provision. Management reported no pending claims requiring a provision at year-end.
  • Audit and controls: The auditor issued an unqualified IFRS opinion and identified liquidity and capital resources as a critical audit matter. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not provide an internal-control attestation, citing the emerging-growth-company exemption.

Most important facts for investors to verify

  • Current cash, operating cash burn, outstanding obligations, and the runway assumptions underlying management’s liquidity statements, including the effect of the March 2021 financing.
  • Fully diluted share count and potential dilution from outstanding warrants, pre-funded warrants, and other securities; confirm share and ADS figures after the reverse split and subsequent offerings.
  • Whether planned SCI-110 and SCI-210 studies received approvals, began on schedule, and produced adequately controlled, reproducible results.
  • Commercial distribution arrangements and actual sales, margins, and regulatory status for CannAmide; the filing says material revenue was not expected.
  • Status and potential cost of IIA grant obligations, the disputed service-provider demand, and the Dekel intellectual-property license relationship.
  • Any progress toward Nasdaq relisting and whether OTCQB trading provides adequate liquidity for investors.