SciSparc Ltd. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing; the supplied filing does not provide separate Q4 financial results. Financial statements are prepared under IFRS and amounts below are in U.S. dollars unless stated otherwise.
Business context
SciSparc is an Israel-based, clinical-stage pharmaceutical company developing cannabinoid-related candidates: SCI-110 for Tourette syndrome, Alzheimer’s disease agitation and obstructive sleep apnea; SCI-210 for autism spectrum disorder and status epilepticus; and SCI-160 for pain. In September 2022, it acquired the Wellution hemp-products brand, which sells on Amazon, creating a second reportable segment. The company had 6,798,840 ordinary shares outstanding at year-end.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $1.347 million | None |
| Cost of goods sold / gross profit | $0.322 million / $1.025 million | None |
| Gross margin | About 76% | Not applicable |
| Research and development expense | $2.803 million | $1.990 million |
| General and administrative expense | $6.509 million | $3.778 million |
| Operating loss | $8.287 million | $5.768 million |
| Net loss | $2.592 million | $5.789 million |
| Cash used in operating activities | $7.917 million | $5.061 million |
| Cash used in investing activities | $7.084 million | $0.070 million |
| Cash provided by financing activities | $11.700 million | $10.060 million |
The reported loss narrowed, despite a larger operating loss, mainly because FY2022 included $7.832 million of finance income, principally from changes in the fair value of warrants. Finance expenses were $2.014 million, including $1.204 million of warrant issuance expenses and $0.770 million of losses on the Clearmind investment. These fair-value and financing items make the net-loss comparison less indicative of operating performance.
At December 31, 2022, cash was $3.574 million and restricted deposits were $0.060 million. Current assets were $4.510 million and current liabilities $4.156 million in the audited balance sheet. Current liabilities included a $2.737 million warrant liability, $1.199 million of trade payables, $0.193 million of other payables and a $0.027 million lease liability. Total assets were $10.605 million; equity was $6.449 million. The filing reports an accumulated deficit of $63.569 million on the balance sheet, while another note gives approximately $64.009 million.
Management and the auditor both identify substantial doubt about the company’s ability to continue as a going concern. The auditor states that year-end cash was insufficient to fund planned operations for at least one year beyond the financial-statement issuance date. The company expects to need additional financing; it reports no material pharmaceutical-product revenue to date and does not expect significant such revenue in the near term.
Material changes and unusual items
- Revenue began with the Wellution acquisition; the online-sales segment generated $1.347 million in FY2022 and reported a segment gain of $0.118 million. The drug-development segment reported a loss of $8.405 million.
- R&D expense increased 41% to $2.803 million, reflecting higher clinical and preclinical work and share-based compensation. G&A rose 72% to $6.509 million, including Wellution operating costs, higher investor-relations and business expenses, and share-based compensation.
- Investing cash outflow included $4.861 million for Wellution, $0.700 million invested in MitoCareX and $1.500 million invested in Clearmind. The Clearmind investment was valued at a loss of approximately $0.771 million at year-end.
- Financing included a June 2022 private placement with approximately $10.210 million in gross proceeds and warrant exercises. Ordinary shares outstanding increased from 3,091,740 at the end of 2021 to 6,798,840 at the end of 2022.
- In November 2022, SciSparc reported positive interim Phase IIa results for SCI-110 in Alzheimer’s-related agitation: six of eight enrolled patients showed improvement on the agitation measure, with no reported delirium, oversedation, hypotension or falls at the interim analysis. The study is open-label and planned to enroll 20 patients.
- SciSparc reported positive preclinical SCI-210 results in a mouse status-epilepticus study; the filing describes significantly higher neuronal protection and no mortality in the SCI-210 group. SCI-160 results were also preclinical, not human efficacy evidence.
Outlook, risks and contingencies
- The company expects R&D spending to increase as clinical trials and product development continue. Its candidates remain in preclinical or early clinical stages; none had reached pivotal trials, and no pharmaceutical candidate had regulatory approval.
- Funding availability is a central risk. Additional equity could dilute shareholders; debt or partnering could impose restrictions or require the company to relinquish rights. The going-concern uncertainty could also impair access to financing.
- On January 25, 2023, the board resolved to pursue a restructuring that would transfer pharmaceutical activities to a new subsidiary and examine a possible listing, while SciSparc retains control. The plan had not been initiated as of the report date and may not proceed.
- In March 2023, Jeffs’ Brands acquired an approximately 49% interest in SciSparc Nutraceuticals for $2.5 million plus approximately $0.489 million of purchase-price adjustments; SciSparc reported retaining approximately 51%. Jeffs’ Brands also agreed to provide management services for $20,000 monthly plus a one-time $51,000 signing bonus. The filing describes the closing date inconsistently in different sections; verify the definitive transaction documents.
- Wellution depends predominantly on Amazon’s marketplace and fulfillment services, exposing it to platform-policy, fee, listing, inventory, customer-reputation and seasonal-demand risks.
- SciSparc disclosed a lawsuit filed against six former directors seeking approximately NIS 13.1 million (about $4.12 million) over a 2018 transaction. The filing does not establish the outcome.
- The company received a Nasdaq notice in March 2023 for noncompliance with the $1.00 minimum bid-price requirement and was granted 180 calendar days to regain compliance. Warrants also create potential dilution; as of April 24, 2023, the filing reported warrants exercisable for up to 9,500,188 shares.
- Other key risks include uncertain clinical and regulatory outcomes, reliance on third-party research and manufacturers, competition, intellectual-property protection, Israeli political and security conditions, and foreign-exchange exposure. Management reported disclosure controls and internal control over financial reporting as effective at year-end; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Reconcile the accumulated-deficit figures ($63.569 million on the balance sheet versus approximately $64.009 million in a note) and the filing’s conflicting working-capital statements; the audited balance-sheet totals imply positive working capital of $0.354 million.
- Confirm available cash, near-term cash burn and the timing and terms of required financing, given the explicit going-concern warning.
- Assess the composition and accounting effects of warrant liabilities and fair-value changes, and the dilution from outstanding warrants and future share issuance.
- Check Wellution’s post-acquisition sales, profitability, deferred consideration calculation and March 2023 transaction terms, including the reported closing-date discrepancy.
- Review the full clinical-trial data and regulatory status behind the preliminary SCI-110 and preclinical SCI-210/SCI-160 announcements; small or nonclinical results do not establish efficacy or approval prospects.
- Verify the status of Nasdaq minimum-bid-price compliance and any subsequent restructuring or NewCo listing developments.