SciSparc Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. The audited consolidated financial statements are prepared under IFRS, in U.S. dollars; amounts below are in millions unless stated otherwise. This is an annual report, not a standalone fourth-quarter filing. Share figures reflect the 26-for-1 reverse split effective September 28, 2023.
Business context
SciSparc is a clinical-stage pharmaceutical company developing cannabinoid-based candidates: SCI-110 for Tourette syndrome and Alzheimer’s disease agitation, SCI-210 for autism spectrum disorder and status epilepticus, and SCI-160 for pain. Its only reported revenue came from online sales of hemp-based Wellution products through SciSparc Nutraceuticals, in which SciSparc held approximately 51% at year-end. The company reported no pharmaceutical-candidate sales.
Financial results and liquidity
| Metric | FY2023 | FY2022 | Change / note |
|---|---|---|---|
| Revenue | $2.879 | $1.347 | Up 114%; entirely from online sales |
| Cost of goods sold | $0.683 | $0.322 | Gross margin was about 76.3%, versus 76.1% |
| Research and development | $1.641 | $2.803 | Down 41%; management expects spending to increase as trials progress |
| Sales and marketing | $1.297 | $0.537 | Up 135%; Wellution-related |
| General and administrative | $5.031 | $5.972 | Down 16% |
| Intangible-asset impairment | $1.042 | — | Wellution brand impairment |
| Operating loss | $6.815 | $8.287 | Improved 18% |
| Net loss | $5.883 | $2.592 | Worsened; FY2022 included substantially greater net financial income |
| Net cash used in operating activities | $5.887 | $7.917 | Cash burn declined |
| Cash and cash equivalents | $2.076 | $3.574 | At December 31 |
| Short-term bank deposits | $3.000 | — | Additional year-end liquidity; restricted deposit was $0.065 |
Current assets were $6.445 million and current liabilities $1.571 million, implying working capital of approximately $4.874 million. Total liabilities were approximately $1.595 million, including $0.076 million of lease liabilities and $0.532 million of warrant liabilities; the filing reports no material conventional borrowing balance at year-end. Total equity was $9.587 million. Financing activities provided $5.498 million, principally from share and warrant issuances; cash declined by $1.498 million during the year.
FY2023 finance income was $2.219 million and finance expense $1.055 million, for net financial income of $1.164 million, compared with net financial income of $5.818 million in FY2022. The decrease in reported net financial income—primarily reflecting changes in warrant and investment fair values—helps explain why net loss increased even as operating loss improved. The Wellution impairment and changes in fair value are notable non-operating or non-cash items.
Material changes, outlook and risks
- Funding and going concern: The auditor’s report highlights substantial doubt about SciSparc’s ability to continue as a going concern. Management states that year-end cash and cash equivalents are insufficient to fund planned operations for at least 12 months beyond the financial-statement filing date and that additional financing is required. The company expects continued losses and no significant pharmaceutical revenue in the near term.
- Capital raising and dilution: FY2023 included approximately $5.5 million of net proceeds from securities issuance. After year-end, SciSparc entered a standby equity purchase agreement for up to $20 million; as of the financial-statement issuance date it had sold 925,159 shares under the agreement. The filing also reports up to 3,268,244 shares underlying warrants as of March 28, 2024. These instruments may create substantial dilution.
- Development: The SCI-110 Phase IIb Tourette syndrome trial began in September 2023, with 86 planned participants and an estimated 18–24-month duration. The randomized SCI-210 autism trial began in July 2023; patient enrollment began after year-end. In June 2023, the company reported positive topline results from an 18-patient, open-label Phase IIa SCI-110 Alzheimer’s agitation study; these findings are preliminary and require confirmation.
- Restructuring and proposed acquisition: The company was pursuing a restructuring plan involving potential transfer of pharmaceutical activities to a new subsidiary and a possible listing. It also signed a non-binding LOI to acquire an Israeli vehicle importer, AutoMax; completion was uncertain. After year-end, SciSparc lent the target $1.4 million at 7% annual interest, increasing to 9% if the acquisition is not completed before repayment. The loan is exposed to repayment and transaction risk.
- Intellectual property: On February 5, 2024, Dekel gave notice purporting to terminate a license, alleging failure to provide reports. SciSparc disputes the allegations and was assessing the impact. The license covers certain technology relevant to its business, so the dispute could affect development or commercialization.
- Legal and operating risks: Capital Point’s lawsuit seeks NIS 10 million (approximately $2.75 million), among other relief, over a disputed warrant. The company cannot predict the outcome. The October 2023 war in Israel delayed the SCI-210 autism trial at Soroka Medical Center by about three months; further disruption, staffing, supply, shipping, currency and financing effects remain possible.
- Other risks: Drug-development and regulatory outcomes are uncertain; the company relies on third-party clinical, manufacturing and distribution providers. Wellution depends heavily on Amazon and had declining brand value reflected in the impairment. The company says it does not expect material CannAmide revenue.
Key facts for investors to verify
- Reconcile the stated cash runway and going-concern warning with the $3.0 million short-term deposit and approximately $4.9 million working capital; confirm restrictions, availability and subsequent cash use.
- Review the assumptions and valuation supporting the $1.042 million Wellution impairment, and current sales, margins and operating performance of the online business.
- Check the latest cash-burn forecasts, funding needs, SEPA share issuances and pricing, warrant overhang, and resulting fully diluted share count.
- Confirm clinical-trial enrollment, timelines, costs and results for SCI-110 and SCI-210, and distinguish preliminary open-label findings from controlled evidence.
- Assess the status and consequences of the Dekel license dispute, Capital Point litigation, AutoMax bridge loan and proposed acquisition, and pharmaceutical restructuring plan.
- Verify the extent of Israel-related operating disruption and the company’s ability to maintain trial, supplier and service-provider continuity.