Scisparc Ltd. annual report, Q4 FY2018

Business context and reporting period

This is Therapix Biosciences Ltd.’s audited Form 20-F for the fiscal year ended December 31, 2018, filed May 15, 2019. It is an annual report, not a standalone fourth-quarter filing; separate Q4 results are not provided. The request metadata names Scisparc Ltd., which does not match the registrant named in the filing, Therapix Biosciences Ltd. Financial statements are prepared under IFRS in U.S. dollars.

Therapix was a clinical-stage cannabinoid-drug developer with no product revenue. Its principal programs were THX-110 for Tourette syndrome, obstructive sleep apnea and pain; THX-150 for drug-resistant bacterial infections; and THX-160 for pain. In October 2018 it gained control of Therapix Healthcare Resources (THR), a pain-clinic operator that subsequently entered liquidation.

Financial results and position

Amounts below are U.S. dollars; income statement and cash-flow amounts are in millions unless stated otherwise.

• Margins are not meaningful because the company reported no revenue. Basic loss per ordinary share was $0.06 in 2018 versus $0.05 in 2017; loss per ADS was $2.44 versus $2.14.
• At December 31, 2018, total assets were $4.560m, total liabilities $4.483m, and total equity just $0.077m. Current assets of $2.430m were below current liabilities of $4.483m, a deficit of about $2.053m. Accumulated deficit was $46.912m.
• Current liabilities included a $0.779m convertible-debenture liability and a $0.277m conversion component. The Yorkville debenture carried 5% stated interest and a conversion price tied to 95% of a recent low VWAP, subject to a $7 cap. The filing says the company was deemed in default under certain conditions, then obtained a waiver in March 2019; the later amendment also waived further closings.
• Cash used in investing activities was $2.094m, primarily for convertible loans and THR investment. Financing provided $1.536m, mainly from the debenture. Cash fell $7.710m during the year.

Changes versus the prior year

• Operating loss increased 69%, as R&D expense rose 39% and G&A expense rose 73%. Higher staffing, regulatory and preclinical costs, professional fees and business development contributed to the increases.
• Other expense rose to $0.425m, principally due to impairment of THR goodwill ($0.160m) and customer-relationship intangible assets ($0.273m).
• Net loss increased about 43%. Finance income net of expenses was $0.705m in 2018, compared with net finance expense of $0.490m in 2017, largely reflecting fair-value movements in financial instruments and exchange-rate effects.
• Operating cash use worsened by $2.553m. Year-end cash and cash equivalents declined by $7.710m from 2017.
• Therapix changed its functional currency from NIS to U.S. dollars effective October 1, 2018. Comparative figures were translated; this affects comparability of currency-related results.

Outlook, commentary and material risks

• The auditor’s report includes an explanatory paragraph expressing substantial doubt about the company’s ability to continue as a going concern. Management said additional capital was necessary and that funding for the foreseeable future had not been secured as of the financial-statement approval date.
• Management estimated that available resources, including proceeds from an April 2019 offering, would fund current operations at least through October 31, 2019. The April offering raised approximately $2.25m gross through ADSs and warrants; the filing does not establish that this was sufficient to fund the full development pipeline.
• Therapix reported no revenue since inception and expected none in the next few years. It anticipated materially higher R&D spending as it pursued additional studies and product development. No specific revenue or earnings guidance was provided.
• Clinical progress included a 16-person, open-label Phase IIa Tourette study with a reported average 21% tic-score reduction; the uncontrolled design and small sample limit conclusions. A randomized, placebo-controlled Tourette study began in 2018. The OSA Phase IIa study began in 2018, with enrollment expected to finish in Q3 2019. The company had not started the chronic low-back-pain study under its cleared investigator-initiated IND.
• THX-150 remained preclinical; THX-160 had preliminary preclinical pain results. These programs were not approved products, and the filing emphasized substantial clinical, regulatory, manufacturing and commercialization uncertainty. The company planned to pursue the FDA’s 505(b)(2) pathway for THX-110 and THX-150, but eligibility and approval were not assured. FDA orphan designation for THX-110 in Tourette syndrome remained pending.
• THR incurred significant losses, failed to maintain required operating licenses and commenced asset liquidation. Supplier claims totaled about $0.789m; a $0.250m provision was recorded. THR was in default on its leases, with reported aggregate future facility lease commitments of $4.602m. The timing and outcome of liquidation and related claims were uncertain.
• Other key risks include reliance on external clinical and manufacturing providers, controlled-substance rescheduling and compliance, limited patent protection, competition, potential dilution from further financing, foreign-exchange exposure, and political and security conditions in Israel.

Important facts for investors to verify

• Confirm the issuer identity: the filing is for Therapix Biosciences Ltd., not Scisparc Ltd.; verify that this is the intended filing.
• Reconcile the liquidity disclosures: audited year-end cash was $1.485m, plus restricted deposits, while one narrative sentence says cash “including short-term bank deposits” was $10, an apparent inconsistency with the audited statements. The filing separately describes a $10,000 restricted deposit.
• Assess the going-concern warning, operating cash burn, the stated October 31, 2019 runway estimate, and the company’s financing needs and dilution risk.
• Review Yorkville debenture terms, the March 2019 default waiver, remaining debt and conversion mechanics, alongside the April 2019 offering and warrant dilution.
• Track THR’s liquidation, lease defaults, supplier claims, outstanding loans and any additional costs or liabilities.
• Evaluate clinical-study design, enrollment and results; verify regulatory-pathway assumptions, orphan-designation status and the scope and strength of patent rights.