UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer 

Pursuant to Rule 13a-16 or 15d-16 

Under the Securities Exchange Act of 1934

 

For the month of: December 2022 (Report No. 3)

 

Commission file number: 001- 38041

 

SCISPARC LTD.

(Translation of registrant’s name into English)

 

20 Raul Wallenberg Street, Tower A,

Tel Aviv 6971916, Israel

(Address of principal executive offices)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

 

Form 20-F ☒       Form 40-F ☐

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(1):_____

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulations S-T Rule 101(b)(7):_____

 

 

 

 

 

 

CONTENTS

 

This Report of Foreign Private Issuer on Form 6-K consists of: (i) the Registrant’s third quarter operating and financial summary (ii) the Registrant’s Unaudited Consolidated Interim Financial Statements as of June 30, 2022, which is attached hereto as Exhibit 99.1; and (iii) the Registrant’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the six months ended June 30, 2022, which is attached hereto as Exhibit 99.2.

 

1

 

 

SUMMARY OF CONSOLIDATED STATEMENTS OF PROFIT OR LOSS:

 

    Nine months ended
September 30,
2022
Unaudited
USD in thousands
 
Revenues   $ 179  
Cost of goods sold     38  
Research and development expenses     2,144  
General and administrative expenses     4,572  
Other expenses     76  
Operating loss     6,651  
Finance income     6,156  
Finance expenses     19  
Net Loss   $ 514  

 

SUMMARY OF CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

    September 30,
2022
Unaudited
USD in thousands
 
Cash   $ 7,555  
Total assets   $ 14,105  
Total liabilities   $ 5,756  
Shareholders’ equity:        
Share capital and premium   $ 58,550  
Reserve from share-based payment transactions     5,044  
Warrants     497  
Foreign currency translation reserve     559  
Transactions with non-controlling interests     5,190  
Accumulated deficit     (61,491 )
Total equity   $ 8,349  

 

This Report on Form 6-K is incorporated by reference into the registration statements on Form F-3 (File No. 333-266047, File No. 333-233417 and File No. 333-248670) and on Form S-8 (File No. 333-225773) of the Registrant, filed with the Securities and Exchange Commission, to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

 

Exhibit No.    
99.1   SciSparc Ltd.’s Unaudited Consolidated Interim Financial Statements as of June 30, 2022.
     
99.2   SciSparc Ltd.’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended June 30, 2022.

 

2

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SciSparc Ltd.
   
Date: December 29, 2022 By /s/ Oz Adler
  Name:   Oz Adler
  Title: Chief Executive Officer

 

 

3

 

 

 

 

001-38041

Exhibit 99.1

 

SCISPARC LTD.

 

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

AS OF JUNE 30, 2022

 

UNAUDITED

 

INDEX 

 

  Page
   
Consolidated Statements of Financial Position 2-3
   
Consolidated Statements of Profit or Loss and Other Comprehensive Loss 4
   
Consolidated Statements of Changes in Equity (Deficit) 5-7
   
Consolidated Statements of Cash Flows 8-10
   
Notes to Interim Consolidated Financial Statements 11-18

 

 

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

       June 30,   December 31, 
       2022   2021   2021 
       Unaudited   Audited 
   Note   USD in thousands 
                 
ASSETS                
                 
CURRENT ASSETS:                
Cash and cash equivalents        $12,945   $7,590   $6,875 
Restricted deposit        40    11    45 
Other accounts receivable        699    731    2,904 
                     
         13,684    8,332    9,824 
                     
NON-CURRENT ASSETS:                    
Investment in associate   3    659    
-
    
-
 
Property and equipment, net        79    10    92 
                     
         738    10    92 
                     
        $14,422   $8,342   $9,916 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

2

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

      June 30,   December 31, 
      2022   2021   2021 
      Unaudited   Audited 
   Note  USD in thousands 
                
LIABILITIES AND EQUITY               
                
CURRENT LIABILITIES:               
Trade payables     $874   $354   $1,199 
Other accounts payable      214    34    154 
Warrants  4, 5e   10,252    366    359 
                     
Lease liability      45    
-
    45 
                   
       11,385    754    1,757 
                   
NON- CURRENT LIABILITIES:                  
Lease liability      
-
    
-
    18 
                   
                   
                   
EQUITY (DEFICIT) ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:  5               
Share capital and premium      58,547    53,802    58,541 
Reserve from share-based payment transactions      4,980    4,312    4,331 
Warrants      5,190    6,256    5,190 
Foreign currency translation reserve      497    497    497 
Transactions with non-controlling interests      559    559    559 
Accumulated deficit      (66,736)   (57,838)   (60,977)
                   
Total equity (deficit)      3,037    7,588    8,141 
                   
      $14,422   $8,342   $9,916 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

3

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS

 

 

      Six months ended June 30,   Year Ended December 31, 
      2022   2021   2021 
      Unaudited   Audited 
   Note  USD in thousands, except per share amounts 
                
Research and development expenses  6a    $1,474   $962   $1,990 
General and administrative expenses  6b     3,339    1,665    3,778 
Operating loss      4,813    2,627    5,768 
Company’s share of losses of companies accounted for at equity, net      41    
-
    
-
 
Finance expenses      905    23    21 
Loss from operations      5,759    2,650    5,789 
                   
Loss      5,759    2,650    5,789 
Total comprehensive loss      5,759    2,650    5,789 
Attributable to:                  
   Equity holders of the Company      5,759    2,650    5,789 
Basic loss per share attributable to equity holders of the Company:                  
Loss from operations      1.80    1.52    2.83 
Diluted loss per share attributable to equity holders of the Company:                  
Loss from operations      1.80    1.52    2.83 

  

The accompanying notes are an integral part of the interim consolidated financial statements.

 

4

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

For the six months ended June 30, 2022

 

   Attributable to equity holders of the Company         
   Share
capital
and
premium
   Reserve
from
share-based
payment
transactions
   Warrants   Transactions
with non-
controlling
interests
   Foreign
currency
translation
reserve
   Accumulated
deficit
   Total   Non-
controlling
interests
   Total
equity
 
   USD in thousands 
Balance at January 1, 2022  $58,541    4,331    5,190    559    497    (60,977)   8,141          -    8,141 
                                              
Income (loss)   
-
    
-
    
-
    
-
    
-
    (5,759)   (5,759)   -    (5,759)
Expiration of share options   6    (6)   -    
-
    
-
    
-
    
-
    
-
    
-
 
Cost of share-based payment   
-
    655    -    
-
    
-
    
-
    655    -    655 
                                              
Balance at June 30, 2022  $58,547    4,980    5,190    559    497    (66,736)   3,037    -    3,037 

   

The accompanying notes are an integral part of the interim consolidated financial statements.

 

5

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the six months ended June 30, 2021

 

   Attributable to equity holders of the Company         
   Share
capital
and
premium
   Reserve
from
share-based
payment
transactions
   Warrants   Transactions
with non-
controlling
interests
   Foreign
currency
translation
reserve
   Accumulated
deficit
   Total   Non-
controlling
interests
   Total
equity
 
   USD in thousands 
Balance at January 1, 2021  $49,040    4,315    2,207    559    497    (55,188)   1,430            -    1,430 
                                              
Income (loss)   
-
    
-
    
-
    
-
    
-
    (2,650)   (2,650)   -    (2,650)
Issue of share capital, net of issue expenses (*)(Note 5d)
   3,365    
-
    4,334    
-
    
-
    
-
    7,699    
-
    7,699 
Exercise of warrants (Note 5c)   1,370    
-
    (285)   
-
    
-
    
-
    1,085    
-
    1,085 
Expiration of share options   27    (27)   
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Cost of share-based payment   
-
    24    
-
    
-
    
-
    
-
    24    
-
    24 
Balance at June 30, 2021  $53,802    4,312    6,256    559    497    (57,838)   7,588    -    7,588 

 

(*)Net of issue expenses of $449 thousand.

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

6

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the year ended December 31, 2021

 

   Attributable to equity holders of the Company         
   Share
capital
and
premium
   Reserve
from
share-based
payment
transactions
   Warrants   Transactions
with non-
controlling
interests
   Foreign
currency
translation
reserve
   Accumulated
deficit
   Total   Non-
controlling
interests
   Total
equity
 
   USD in thousands 
Balance at January 1, 2021  $49,040    4,315    2,207    559    497    (55,188)   1,430             -    1,430 
                                              
Income (loss)   
-
    
-
    
-
    
-
    
-
    (5,789)   (5,789)   
-
    (5,789)
Exercise of warrants   6,110    
-
    (1,352)   
-
    
-
    
-
    4,758    
-
    4,758 
Issue of share capital, net of issue expenses (1)
   3,364    
-
    4,335    
-
    
-
    
-
    7,699    
-
    7,699 
Expiration of share options   27    (27)   
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Cost of share-based payment   
-
    43    
-
    
-
    
-
    
-
    43    
-
    43 
                                              
Balance at December 31, 2021  $58,541    4,331    5,190    559    497    (60,977)   8,141    -    8,141 

 

(1)Net of issue expenses of $449 thousand.

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

7

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    Six months ended
June 30,
    Year Ended
December 31,
 
    2022     2021     2021  
    Unaudited     Audited  
    USD in thousands  
                   
Cash flows from operating activities:                  
                   
Loss   $ (5,759 )   $ (2,650 )   $ (5,789 )
                         
Adjustments to reconcile net loss to net cash used in operating activities:                        
                         
Adjustments to the profit or loss items:                        
                         
Depreciation and amortization     21       1       33  
Cost of share-based payment     655       24       43  
Finance expenses, net     913       13       9  
Equity losses in investment in associate     41      
-
     
-
 
                         
      1,630       38       85  
                         
Working capital adjustments:                        
                         
Decrease (increase) in other accounts receivable     2,205       (137 )     170  
Increase (decrease) in trade payables     (324 )     (202 )     353  
Decrease in other accounts payable     60      
-
      120  
                         
      1,941       (339 )     643  
                         
Net cash used in operating activities   $ (2,188 )   $ (2,951 )   $ (5,061 )

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

8

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Six months ended June 30,   Year Ended
December 31,
 
   2022   2021   2021 
   Unaudited   Audited 
   USD in thousands     
             
Cash flows from investing activities:            
             
Investment (withdrawal) in restricted bank deposits   (8)  $(1)  $(35)
Investment in associate   (700)   
-
    (35)
                
Net cash provided by investing activities   (708)   (1)   (70)
                
Cash flows from financing activities:               
                
Proceeds from issue of share capital and warrants (net of issuance expenses) (Note 5)   9,005    7,699    7,699 
Repayment of lease liability   (39)   
-
    (19)
Exercise of warrants (Note 5c)   
-
    1,085    2,568 
Repayment of short-term credit   
-
    (188)   (188)
                
Net cash provided by financing activities   8,966    8,596    10,060 
                
                
Increase (decrease) in cash and cash equivalents   6,070    5,644    4,929 
Cash and cash equivalents at the beginning of the period   6,875    1,946    1,946 
                
Cash and cash equivalents at the end of the period   12,945   $7,590   $6,875 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

9

 

 

SCISPARC LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

   Six months ended
June 30,
   Year Ended
December 31,
 
   2022   2021   2021 
   Unaudited   Audited 
   USD in thousands 
             
(a) Significant non-cash transactions:            
             
Right-of-use asset recognized with corresponding lease liability  $
   -
   $
   -
   $78 
                
Registration of warrants  $
-
   $
-
   $2,480 
                
Unpaid issue expenses  $
-
   $
-
   $290 

 

The accompanying notes are an integral part of the interim consolidated financial statements.

 

10

 

 

SCISPARC LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)

 

NOTE 1:- GENERAL

 

  a. SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) (“SciSparc” or the “Company”), a pharmaceutical company, was incorporated in Israel and commenced its operations on August 23, 2004. Until March 2014, SciSparc and its subsidiaries at the time (the “Group”) were mainly engaged in developing several innovative immunotherapy products and SciSparc’s own patents in the immunotherapy field. In August 2015, the Company decided to adopt a different business strategy and began focusing on developing a portfolio of approved drugs based on cannabinoid molecules. With this focus, the Company is currently engaged in the following development programs based on Δ9-tetrahydrocannabinol (“THC”) and/or non-psychoactive cannabidiol for the treatment of Tourette syndrome, Alzheimer’s disease and agitation, obstructive sleep apnea, pain, Autism Spectrum Disorder and Status Epilepticus. The headquarters of the Company are located in Tel Aviv, Israel.

 

    On January 24, 2021, the Company changed its name from Therapix Biosciences Ltd. to SciSparc Ltd.

 

   

The Company was previously a dual-listed company, whereby it listed (a) its ordinary shares, no par value each (“ordinary shares”), on the Tel-Aviv Stock Exchange (“TASE”) from December 26, 2005 until its delisting on August 7, 2018, and (b) its American Depository Shares (“ADSs”) on the Nasdaq Capital Market (“Nasdaq”) following its initial public offering (“IPO”) on March 27, 2017, at which time it raised $13,700, until its suspension from listing, and subsequent delisting, from Nasdaq on July 2, 2020 and September 21, 2020, respectively. Following the delisting of the ADSs from Nasdaq, the Company’s ADSs were listed on the Pink Sheets and then subsequently upgraded to the OTCQB on December 8, 2020. On August 26, 2021, the Company’s ADSs were mandatorily cancelled and were exchanged for ordinary shares at a one-for-one ratio. On December 22, 2021, the Company’s ordinary shares were re-listed on Nasdaq and began trading under the symbol “SPRC”.

 

As of June 30, 2022, the Company had two subsidiaries, both of which are companies incorporated under the laws of Israel: (1) Brain Bright Ltd. (“Brain Bright”); and (2) Evero Health Ltd. (“Evero” and together with Brain Bright, the “Subsidiaries”).

 

Both of the Subsidiaries are private companies and as of the date of these financial statements Brain Bright is an inactive company with no assets or liabilities.

 

  b.

These interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2021, and accompanying notes, that were filed with the Securities and exchange commission on April 28, 2022. (the “2021 Annual Consolidated Financial Statements”).

 

11

 

 

SCISPARC LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)

 

NOTE 1:- GENERAL (cont.) 

 

  c.

The Company incurred a net loss of approximately $5,759 and had negative cash flows from operating activities of approximately $2,188 for the six-month period ended June 30, 2022. As of June 30, 2022, the Company had an accumulated deficit of approximately $66,736 as a result of recurring operating losses. As the Company presently has no activities that generate revenues, the Company’s continued operation is dependent on its ability to raise funding from external sources. This dependency will continue until the Company will be able to finance its operations by selling its products or commercializing its technology. In addition, the Company’s management believes that the cash balance held by the Company as of December 28, 2022 (the “Approval Date”), in which the interim consolidated financial statements for the period ended June 30, 2022, were approved, will be sufficient to finance its operating activities in the foreseeable future.

 

  d.

The interim consolidated financial statements of the Company for the six-month period ended on June 30, 2022, were approved for issuance on the Approval Date. In connection with the preparation of the interim consolidated financial statements and in accordance with authoritative guidance for subsequent events, the Company evaluated subsequent events after the consolidated statements of financial position date of June 30, 2022, through December 28, 2022, the date on which the unaudited interim consolidated financial statements were available to be issued.

 

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

  

Unaudited Interim Financial Information

 

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with International Accounting Standard (“IAS”) 34, “Interim Financial Reporting”. The significant accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the 2021 Annual Consolidated Financial Statements. Accordingly, these condensed consolidated financial statements should be read in conjunction with the 2021 Annual Consolidated Financial Statements. The results for any interim period are not necessarily indicative of results for any future period.

 

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position and results of operations for the interim periods presented. The results for the six month period ended June 30, 2022, are not necessarily indicative of the results for the year ending December 31, 2022, or for any future period.

 

As of June 30, 2022, there have been no material changes in the Company’s significant accounting policies from those that were disclosed in the 2021 Annual Consolidated Financial Statements.

 

12

 

 

SCISPARC LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)

 

NOTE 3:- INVESTMENT IN ASSOCIATE

 

On March 10, 2022, the Company entered into a Founders and Investment Agreement with Dr. Alon Silberman, or the MitoCareX Agreement. Pursuant to the MitoCareX Agreement, the Company invested an initial amount of $700, and agreed to invest over the next two years, an additional $1,000, subject to the achievement of certain pre-determined milestones as agreed upon in the MitoCareX Agreement, for up to a 50.01% ownership in MitoCare X Bio Ltd. (“MitoCareX”). MitoCareX will focus on the discovery and development of potential drugs for cancers and other life-threatening conditions. The MitoCareX Agreement also contains customary representations, warranties, covenants and indemnification provisions. On March 31, 2022, the closing conditions were met and the Company paid the initial investment amount of $700 to MitoCareX. As of June 30, 2022, the Company owns 29% of the outstanding shares of Mitocare X.

 

During the six months ended June 30, 2022, the Company recorded equity losses from the investment in MitoCareX in the amount of $41.

 

NOTE 4:- CONVERTIBLE LOANS

 

On March 19, 2020, the Company entered into a securities purchase agreement with Dekel Pharmaceutical Ltd. (“Dekel”) pursuant to which Dekel agreed to invest in the Company through a private placement transaction (the “Private Placement”). At the time of the Private Placement, Dekel was considered a related party of the Company; however, it is no longer a related party of the Company. In connection with the Private Placement, Dekel received convertible promissory notes (the “Notes”), with an aggregate original principal amount of approximately $350, at an aggregate purchase price of $315 to be paid in several tranches spread across a twelve-month period. In addition, the Company issued a warrant to purchase up to 314,285 ordinary shares of the Company (the “Private Placement Warrant”) and 40,000 ordinary shares. The initial tranche of the Private Placement was for a principal amount of $220 at a purchase price of $198.The Private Placement Warrant is exercisable at any time on or after the actual closing date and on or prior to the close of business on the five-year anniversary of the date of issuance, at an initial exercise price of $0.35 per ordinary share, subject to adjustment.

 

General Overview of Valuation Approaches used in the Valuation:

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

Economic methodology:

 

The Private Placement Warrant’s’ fair value was calculated using the Black–Scholes option pricing model, which takes into account the parameters as disclosed below for each period valuated, in which a valuation was performed at (i) the issuance date, and (ii) each reporting date with the following assumptions:

 

   June 30,
2022
   December 31,
2021
 
Dividend yield (%)   0    0 
Expected volatility (%)   159    148 
Risk-free interest rate (%)   3.00    0.87 
Underlying share price ($)   2.13    6.23 
Exercise price ($)   24.50    24.50 
Warrants fair value ($)   1.11    4.15 

 

13

 

 

SCISPARC LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)

 

NOTE 5: EQUITY

 

  a. Composition of share capital as of June 30, 2022, June 30, 2021, and December 31, 2021:

 

   June 30, 2022   December 31, 2021   June 30, 2021 
   Authorized   Issued and
outstanding
   Authorized   Issued and
outstanding
   Authorized   Issued and
outstanding
 
   Number of shares 
Ordinary Shares of no par value each   25,714,285    3,526,740    25,714,285    3,091,740    25,714,285    2,269,190 

 

Reverse Share Split

 

On March 2, 2021, the Company convened a special general meeting of its shareholders, whereby the shareholders approved to eliminate the par value of the Ordinary Shares and an increase to the Company’s share capital from 1,800,000,000 ordinary shares to 3,600,000,000 ordinary shares.

 

On July 19, 2021, the Company convened a special general meeting of its shareholders, whereby the shareholders approved a reverse split of the Company’s share capital by a ratio of 140:1 (the “Second Reverse Split”).

 

On July 30, 2021, the Company’s Board resolved that the final ratio for the Second Reverse Split will be 140:1, which went effective on August 9, 2021. Concurrently with the Second Reverse Split, a change to the ratio of the Company’s ADSs to its ordinary shares was effected from each ADS representing 140 ordinary shares to each ADS representing 1 ordinary share.

 

On August 26, 2021, the Company’s ADSs were mandatorily cancelled and were exchanged for ordinary shares at a one-for-one ratio.

 

 Consequently, all share numbers, share prices, and exercise prices have been retroactively adjusted in these consolidated financial statements for all periods presented.

 

Issued and outstanding share capital:

 

   Number of
ordinary
shares
 
Balance at January 1, 2022   3,091,740 
      
Issuance of share capital – June 2022 Financing Round (Note 5e)   335,000 
      
Exercise of Pre-funded March 2021 warrants (Note 5d)   100,000 
      
Balance at June 30, 2022   3,526,740 

 

14

 

 

SCISPARC LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)

 

NOTE 5: EQUITY (cont.)

 

  b.

On April 1, 2020, the Company entered into a definitive securities purchase agreement (the “April 2020 Purchase Agreement”) with institutional investors to purchase 4,166,668 units, each consisting of (i) one pre-funded warrant to purchase one ADS and (ii) one Series B warrant to purchase one ADS, at a purchase price of $0.2999 per unit. The Series B warrants have an exercise price of $0.43 per ADS, are exercisable upon issuance and expire five years from the date of issuance. The offering resulted in gross proceeds to the Company of approximately $1,250. The closing of the sale of the securities took place on April 3, 2020. After the closing of the April 2020 Purchase Agreement and until the Approval Date, all pre-funded warrants were exercised. In addition, 4,161,668 of the Series B warrants were exercised pursuant to a cashless exercise mechanism as described in the April 2020 Purchase Agreement for no further consideration to the Company. As of the Approval Date, there were 5,000 Series B warrants unexercised

 

The Series B warrants are classified as a financial liability that will be measured at fair value, through profit or loss, as of the issuance date and on any following financial reporting date (accordingly, issue expenses related to the Series B warrants will be recorded through profit or loss). No consideration will be left to attribute to the pre-funded warrants, which is an equity instrument.

 

The valuation of the conversion component of the Series B warrants was set at fair value, as required in International Financial Reporting Standards (“IFRS 9”), and in accordance with IFRS 13, and was categorized as Level 3 by the Company.

 

  c.

On November 20, 2020, the Company completed an offering for gross proceeds of $4,200 by way of the issuance of an aggregate of 835,447 units, each consisting of (i) one ADS and (ii) two warrants to purchase one ADS each, at a purchase price of $5.02 per unit (“November 2020 Warrants”). The November 2020 Warrants have an exercise price of $5.02 per ADS, will be exercisable upon issuance and will expire five years from the date of issuance.

 

The November 2020 Warrants are classified as issued warrants in the Company’s equity.

 

During the year ended December 31, 2021, the Company issued 1,004,494 ordinary shares in respect of the exercise of 1,004,494 November 2020 Warrants.

During the six months ended June 30, 2022, there were no exercises of additional November 2020 Warrants.

 

  d. On March 4, 2021, the Company completed a private offering with several accredited and institutional investors for gross proceeds of $8,150, providing for the issuance of an aggregate of 1,152,628 units, as follows: (a) 916,316 units at a price of $7.07 per unit, consisting of (i) one ordinary share of the Company, and (ii) a Series A Warrant to purchase an equal number of units purchased (the “2021 Series A Warrants”) and a Series B Warrant (the “2021 Series B Warrants” and, collectively with the 2021 Series A Warrants, the March 2021 Warrants) to purchase half the number of units, and (b) 236,312 pre-funded units at a price of $7.069 per unit, consisting of (i) one pre-funded warrant to purchase one ordinary share and (ii) one 2021 Series A Warrant and one 2021 Series B Warrant.

 

The Series A Warrants have an exercise price of $7.07 per ordinary share and the Series B Warrants have an exercise price of $10.60 per ordinary share). Both were exercisable upon issuance and will expire five years from the date of issuance. 

 

The March 2021 Warrants are classified as issued warrants in the Company’s equity.

 

During the year ended December 31, 2021, the Company issued 128,156 ordinary shares in respect of the exercise of 10,000 2021 Series A Warrants and the exercise of 118,156 of pre-funded warrants.

 

During the six months ended June 30, 2022, the Company issued 100,000 ordinary shares in respect of the exercise of 100,000 pre-funded warrants.

 

15

 

 

SCISPARC LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)

 

NOTE 5: EQUITY (cont.)

 

  e.

On June 1, 2022, the Company completed a private offering with an investor for gross proceeds of $10,210 (the “June 2022 Private Placement”), providing for the issuance of an aggregate of 3,546,100 units and pre-funded units, as follows: (a) 335,000 units at a price of $2.88 per unit, each consisting of (i) one ordinary share of the Company, and (ii) two warrants each to purchase one ordinary share (the “June 2022 Warrants”), and (b) 3,211,100 pre-funded units at a price of $2.819 per unit, each consisting of (i) one pre-funded warrant to purchase one ordinary share and (ii) two June 2022 Warrants.

 

The June 2022 Warrants have an exercise price of $2.63 per ordinary share. The June 2022 Warrants were exercisable upon issuance and will expire seven years from the date of issuance. 

 

General Overview of Valuation Approaches used in the Valuation:

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

Economic methodology:

 

The June 2022 Warrants’ fair value was calculated using the Black–Scholes option pricing model, which takes into account the parameters as disclosed below for each period valuated, in which a valuation was performed at (i) the issuance date, and (ii) each reporting date with the following assumptions:

 

    June 30,
2022
    June 1,
2022
 
Dividend yield (%)     0       0  
Expected volatility (%)     72       72  
Risk-free interest rate (%)     3.03       2.74  
Underlying share price ($)     2.13       3.07  
Exercise price ($)     2.63       2.63  
Warrants fair value ($)     9,906       9,005  

 

The June 2022 Warrants are classified as current warrant liability in the Company’s balance sheet, as they are exercisable at any given time.

 

NOTE 6:- ADDITIONAL INFORMATION TO THE ITEMS OF PROFIT OR LOSS

 

   Six months ended
June 30,
   Year Ended
December 31,
 
   2022   2021   2021 
   Unaudited   Audited 
   USD in thousands 
a. Research and development expenses:            
             
Wages and related expenses  $243   $183   $357 
Share-based payment   224    17    27 
Clinical studies   106    49    172 
Regulatory, professional and other expenses   373    322    934 
Research and preclinical studies   410    142    165 
Chemistry and formulations   118    249    335 
                
    1,474    962    1,990 
                
b. General and administrative expenses:               
                
Wages and related expenses   245    99    256 
Share-based payment   431    7    16 
Professional and directors’ fees   1,292    884    2,417 
Business development expenses   2    
-
    5 
Office maintenance, rent and other expenses   63    55    135 
Investor relations and business expenses   1,193    562    784 
Regulatory expenses   113    58    165 
                
   $3,339   $1,665    3,778 

 

16

 

 

SCISPARC LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (USD in thousands, except per share and per unit amounts)

 

NOTE 7:- SIGNIFICANT EVENTS DURING THE REPORTING PERIOD

 

  a.

There has been no material impact of the COVID-19 pandemic on the Company’s operations during the reporting period, other than for a single incident with a supplier that caused a delay in the development and production of a research drug.

 

While the final implications of the COVID-19 pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. Due to the new outbreak of COVID-19 in Asia in late 2022, the Company cannot estimate, the impact, if any, the outbreak and any measures taken by governments, health officials or by the Company in response to such outbreak, could have on the Company’s business, results of operations and financial condition. The Company’s wide geographical spread of its clinical sites may mitigate the potential risk of significant damage to its business devolvement, however there is no guarantee these measures will be successful.

 

The COVID-19 pandemic and the new outbreak in Asia and its mitigation measures have also negatively impacted global economic conditions, which, in turn, could adversely affect the Company’s business, results of operations and financial condition. The extent to which the COVID-19 outbreak continues to impact the Company’s financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity, longevity and impact of the COVID-19 pandemic on economic activity.

 

  b. On January 3, 2022 (the “2022 Grant Date”), the Board approved the grant of 178,140 share options to purchase ordinary shares under the Company’s 2015 Share Option Plan to certain directors, officers, employees and consultants, some of which required the approval of the general meeting of the Company’s shareholders, which was obtained on February 10, 2022. The vesting commencement date for all of the options granted, is April 21, 2021. The share options vest on a quarterly basis over a period of three years and expire on January 3, 2028. The exercise price was set at $6.50 per share.

 

17

 

 

NOTE 8:- EVENTS AFTER THE REPORTING PERIOD

 

 

a.

 

On August 19, 2022, the Company issued 3,211,100 ordinary shares for the exercise of 3,211,100 pre-funded warrants of the Company. The exercised warrants were issued as part of the June 2022 Private Placement financing for gross proceeds of $10,000, which closed on June 1, 2022.

 

  b. On September 15, 2022, the Company convened an annual general meeting of its shareholders, whereby the shareholders approved to increase to the Company’s share capital to 75,000,000 ordinary shares with no par value.

 

 

c.

On September 30, 2022, the Company announced the closing of the acquisition of WellutionTM, a top seller Amazon.com Marketplace account (the “Brand”), American food supplements and cosmetics brand and trademark (the “Acquisition”). In connection with the Acquisition, the Company incorporated a new wholly owned Delaware subsidiary, SciSparc Nutraceuticals Inc., to hold the new assets. The definitive agreement for the acquisition of the Brand was entered into with Merhavit M.R.M Holding and Management Ltd (“M.R.M”).

 

At the closing, the Company paid a base cash payment of $4,590 and in 12 months following the closing agreed to pay an additional deferred cash payment equal to a multiple of 3 times the amount by which the Brand’s EBITDA exceeds $1,120 during the 12 month period following the closing of the Acquisition.

 

In addition, the Company issued to M.R.M $15,000 worth of warrants to purchase ordinary shares of the Company at an exercise price of $7.00 per share (with a cashless exercise mechanism) and with an exercise period of five years from the closing of the Acquisition (the “September 2022 Warrants”). The September 2022 Warrants will become exercisable upon the achievement of a milestone of $100,000 of sales of the Brand in the aggregate or when the price of the Company’s ordinary shares closes at $10.00 or above.

 

d.

On November 17, 2022 the Company invested $1,500 in the Initial Public Offering of Clearmind Medicine Inc. (“Clearmind”) and received 230,769 common shares of Clearmind, resulting in the Company holding 9.33% of share capital of Clearmind.

 

 

18

 

449000 449000 false --12-31 Q2 2022-06-30 0001611746 0001611746 2022-01-01 2022-06-30 0001611746 2022-06-30 0001611746 2021-06-30 0001611746 2021-12-31 0001611746 2021-01-01 2021-06-30 0001611746 2021-01-01 2021-12-31 0001611746 ifrs-full:SharePremiumMember 2021-12-31 0001611746 ifrs-full:ReserveOfSharebasedPaymentsMember 2021-12-31 0001611746 sprcy:WarrantsMember 2021-12-31 0001611746 ifrs-full:OtherEquityInterestMember 2021-12-31 0001611746 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 2021-12-31 0001611746 ifrs-full:RetainedEarningsMember 2021-12-31 0001611746 sprcy:TotalEquityHolderMember 2021-12-31 0001611746 ifrs-full:SharePremiumMember 2022-01-01 2022-06-30 0001611746 ifrs-full:ReserveOfSharebasedPaymentsMember 2022-01-01 2022-06-30 0001611746 sprcy:WarrantsMember 2022-01-01 2022-06-30 0001611746 ifrs-full:OtherEquityInterestMember 2022-01-01 2022-06-30 0001611746 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 2022-01-01 2022-06-30 0001611746 ifrs-full:RetainedEarningsMember 2022-01-01 2022-06-30 0001611746 sprcy:TotalEquityHolderMember 2022-01-01 2022-06-30 0001611746 ifrs-full:NoncontrollingInterestsMember 2022-01-01 2022-06-30 0001611746 ifrs-full:SharePremiumMember 2022-06-30 0001611746 ifrs-full:ReserveOfSharebasedPaymentsMember 2022-06-30 0001611746 sprcy:WarrantsMember 2022-06-30 0001611746 ifrs-full:OtherEquityInterestMember 2022-06-30 0001611746 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 2022-06-30 0001611746 ifrs-full:RetainedEarningsMember 2022-06-30 0001611746 sprcy:TotalEquityHolderMember 2022-06-30 0001611746 ifrs-full:SharePremiumMember 2020-12-31 0001611746 ifrs-full:ReserveOfSharebasedPaymentsMember 2020-12-31 0001611746 sprcy:WarrantsMember 2020-12-31 0001611746 ifrs-full:OtherEquityInterestMember 2020-12-31 0001611746 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 2020-12-31 0001611746 ifrs-full:RetainedEarningsMember 2020-12-31 0001611746 sprcy:TotalEquityHolderMember 2020-12-31 0001611746 2020-12-31 0001611746 ifrs-full:SharePremiumMember 2021-01-01 2021-06-30 0001611746 ifrs-full:ReserveOfSharebasedPaymentsMember 2021-01-01 2021-06-30 0001611746 sprcy:WarrantsMember 2021-01-01 2021-06-30 0001611746 ifrs-full:OtherEquityInterestMember 2021-01-01 2021-06-30 0001611746 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 2021-01-01 2021-06-30 0001611746 ifrs-full:RetainedEarningsMember 2021-01-01 2021-06-30 0001611746 sprcy:TotalEquityHolderMember 2021-01-01 2021-06-30 0001611746 ifrs-full:NoncontrollingInterestsMember 2021-01-01 2021-06-30 0001611746 ifrs-full:SharePremiumMember 2021-06-30 0001611746 ifrs-full:ReserveOfSharebasedPaymentsMember 2021-06-30 0001611746 sprcy:WarrantsMember 2021-06-30 0001611746 ifrs-full:OtherEquityInterestMember 2021-06-30 0001611746 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 2021-06-30 0001611746 ifrs-full:RetainedEarningsMember 2021-06-30 0001611746 sprcy:TotalEquityHolderMember 2021-06-30 0001611746 ifrs-full:SharePremiumMember 2021-01-01 2021-12-31 0001611746 ifrs-full:ReserveOfSharebasedPaymentsMember 2021-01-01 2021-12-31 0001611746 sprcy:WarrantsMember 2021-01-01 2021-12-31 0001611746 ifrs-full:OtherEquityInterestMember 2021-01-01 2021-12-31 0001611746 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 2021-01-01 2021-12-31 0001611746 ifrs-full:RetainedEarningsMember 2021-01-01 2021-12-31 0001611746 sprcy:TotalEquityHolderMember 2021-01-01 2021-12-31 0001611746 ifrs-full:NoncontrollingInterestsMember 2021-01-01 2021-12-31 0001611746 2017-03-27 2017-03-27 0001611746 2022-03-01 2022-03-10 0001611746 sprcy:MitoCareXBioLtdMember 2022-03-01 2022-03-10 0001611746 sprcy:MitoCareXMember 2022-03-01 2022-03-31 0001611746 sprcy:MitoCareXMember 2022-01-01 2022-06-30 0001611746 2020-03-01 2020-03-19 0001611746 sprcy:PrivatePlacementsMember 2020-03-01 2020-03-19 0001611746 ifrs-full:BottomOfRangeMember 2021-02-02 2021-03-02 0001611746 ifrs-full:TopOfRangeMember 2021-02-02 2021-03-02 0001611746 2020-09-01 2020-09-17 0001611746 sprcy:AprilTwoThousandTwentyPurchaseAgreementMember 2020-04-01 2020-04-01 0001611746 2020-11-02 2020-11-20 0001611746 2020-11-20 0001611746 sprcy:November2020WarrantsMember 2021-12-31 0001611746 2021-03-04 2021-03-04 0001611746 sprcy:SeriesAWarrantsMember 2022-01-01 2022-06-30 0001611746 sprcy:SeriesBWarrantsMember 2022-01-01 2022-06-30 0001611746 sprcy:SeriesAWarrantsMember 2021-12-31 0001611746 sprcy:SeriesAWarrantsMember 2021-01-01 2021-12-31 0001611746 sprcy:March2021WarrantsMember 2022-06-30 0001611746 sprcy:March2021WarrantsMember 2022-01-01 2022-06-30 0001611746 sprcy:PurchaseAgreementMember 2022-06-01 2022-06-01 0001611746 sprcy:June2022WarrantsMember 2022-01-01 2022-06-30 0001611746 sprcy:June2022WarrantsMember 2022-06-30 0001611746 2022-06-02 2022-06-30 0001611746 2022-05-01 2022-06-01 0001611746 sprcy:WagesAndRelatedExpensesMember 2022-01-01 2022-06-30 0001611746 sprcy:WagesAndRelatedExpensesMember 2021-01-01 2021-06-30 0001611746 sprcy:WagesAndRelatedExpensesMember 2021-01-01 2021-12-31 0001611746 sprcy:ShareBasedPaymentMember 2022-01-01 2022-06-30 0001611746 sprcy:ShareBasedPaymentMember 2021-01-01 2021-06-30 0001611746 sprcy:ShareBasedPaymentMember 2021-01-01 2021-12-31 0001611746 sprcy:ClinicalStudiesMember 2022-01-01 2022-06-30 0001611746 sprcy:ClinicalStudiesMember 2021-01-01 2021-06-30 0001611746 sprcy:ClinicalStudiesMember 2021-01-01 2021-12-31 0001611746 sprcy:RegulatoryAndOtherExpensesMember 2022-01-01 2022-06-30 0001611746 sprcy:RegulatoryAndOtherExpensesMember 2021-01-01 2021-06-30 0001611746 sprcy:RegulatoryAndOtherExpensesMember 2021-01-01 2021-12-31 0001611746 sprcy:ResearchAndPreclinicalStudiesMember 2022-01-01 2022-06-30 0001611746 sprcy:ResearchAndPreclinicalStudiesMember 2021-01-01 2021-06-30 0001611746 sprcy:ResearchAndPreclinicalStudiesMember 2021-01-01 2021-12-31 0001611746 sprcy:ChemistryAndFormulationsMember 2022-01-01 2022-06-30 0001611746 sprcy:ChemistryAndFormulationsMember 2021-01-01 2021-06-30 0001611746 sprcy:ChemistryAndFormulationsMember 2021-01-01 2021-12-31 0001611746 sprcy:ProfessionalAndDirectorsFeesMember 2022-01-01 2022-06-30 0001611746 sprcy:ProfessionalAndDirectorsFeesMember 2021-01-01 2021-06-30 0001611746 sprcy:ProfessionalAndDirectorsFeesMember 2021-01-01 2021-12-31 0001611746 sprcy:BusinessDevelopmentExpensesMember 2022-01-01 2022-06-30 0001611746 sprcy:BusinessDevelopmentExpensesMember 2021-01-01 2021-06-30 0001611746 sprcy:BusinessDevelopmentExpensesMember 2021-01-01 2021-12-31 0001611746 sprcy:ImpairmentOfInvestmentInAssociateMember 2022-01-01 2022-06-30 0001611746 sprcy:ImpairmentOfInvestmentInAssociateMember 2021-01-01 2021-06-30 0001611746 sprcy:ImpairmentOfInvestmentInAssociateMember 2021-01-01 2021-12-31 0001611746 sprcy:InvestorRelationsAndBusinessExpensesMember 2022-01-01 2022-06-30 0001611746 sprcy:InvestorRelationsAndBusinessExpensesMember 2021-01-01 2021-06-30 0001611746 sprcy:InvestorRelationsAndBusinessExpensesMember 2021-01-01 2021-12-31 0001611746 sprcy:RegulatoryExpensesMember 2022-01-01 2022-06-30 0001611746 sprcy:RegulatoryExpensesMember 2021-01-01 2021-06-30 0001611746 sprcy:RegulatoryExpensesMember 2021-01-01 2021-12-31 0001611746 sprcy:SubsequentMember 2022-01-01 2022-01-03 0001611746 sprcy:MitoCareXMember sprcy:SubsequentMember 2022-01-01 2022-01-03 0001611746 ifrs-full:MajorBusinessCombinationMember 2022-08-19 0001611746 ifrs-full:MajorBusinessCombinationMember 2022-08-01 2022-08-19 0001611746 ifrs-full:MajorBusinessCombinationMember 2022-09-01 2022-09-15 0001611746 ifrs-full:MajorBusinessCombinationMember 2022-09-01 2022-09-30 0001611746 ifrs-full:MajorBusinessCombinationMember 2022-11-17 0001611746 ifrs-full:MajorBusinessCombinationMember 2022-11-01 2022-11-17 iso4217:USD iso4217:USD xbrli:shares xbrli:pure xbrli:shares

Exhibit 99.2

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations provides information that we believe to be relevant to an assessment and understanding of our results of operations and financial condition for the periods described. This discussion should be read in conjunction with our interim consolidated financial statements and the notes to such financial statements, which are included in this Report on Form 6-K. In addition, this information should also be read in conjunction with the information contained in our Annual Report on Form 20-F for the year ended December 31, 2021, or the Annual Report, including the consolidated annual financial statements as of December 31, 2021, and their accompanying notes included therein, filed with the Securities and Exchange Commission, or the SEC, on April 28, 2022.

 

Unless otherwise indicated, all references to the terms “we”, “us”, “our”, “SciSparc”, “the Company” and “our Company” refer to SciSparc Ltd. and its wholly-owned subsidiaries. References to “Ordinary Shares, and “warrants” refer to the ordinary shares, and warrants, respectively, of SciSparc.

 

We report financial information under International Financial Reporting Standards, as issued by the International Accounting Standards Board and none of the financial statements were prepared in accordance with generally accepted accounting principles in the United States.

 

References to “U.S. dollars,” “USD” and “$” are to currency of the United States of America, and references to “NIS” are to New Israeli Shekels. Unless otherwise indicated, U.S. dollar translations of NIS amounts presented herein are translated using the rate of NIS 3.50 to $1.00, the exchange rate reported by the Bank of Israel on June 30, 2022.

 

Forward-Looking Statements

 

The following discussion contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are often characterized by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue,” “believe,” “should,” “intend,” “project” or other similar words, but are not the only way these statements are identified. These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our products, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

 

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

 

  our ability to raise capital through the issuance of additional securities;

 

  our ability to advance the development our product candidates, including the anticipated starting and ending dates of our anticipated clinical trials;

 

  our assessment of the potential of our product candidates to treat certain indications;

 

 

 

 

our ability to successfully receive approvals from the U.S. Food and Drug Administration, or other regulatory bodies, including approval to conduct clinical trials, the scope of those trials and the prospects for regulatory approval of, or other regulatory action with respect to our product candidates, including the regulatory pathway to be designated to our product candidates;

 

the regulatory environment and changes in the health policies and regimes in the countries in which we operate, including the impact of any changes in regulation and legislation that could affect the pharmaceutical industry;

 

our ability to commercialize our existing product candidates and future sales of our existing product candidates or any other future potential product candidates;

 

  our ability to meet our expectations regarding the commercial supply of our product candidates;
     
  our ability to integrate successfully the business of the WellutionTM brand, held by our wholly owned, SciSparc Nutraceuticals Inc.

 

  the overall global economic environment;

 

  the impact of COVID-19 and resulting government actions on us;

 

  the impact of competition and new technologies;

 

  general market, political and economic conditions in the countries in which we operate;

 

  projected capital expenditures and liquidity;

 

  the impact of competition and new technologies;

 

  changes in our strategy;

 

  litigation;

 

  our ongoing ability to remain eligible to list our ordinary shares on Nasdaq; and

 

  those factors referred to in “Item 3. Key Information – D. Risk Factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects,” of the Annual Report as well other factors in the Annual Report.

 

These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in the Annual Report. You should not rely upon forward-looking statements as predictions of future events. 

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Report of Foreign Private Issuer on Form 6-K.

 

Overview

 

We are a specialty clinical-stage pharmaceutical company. Our focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. With this focus, we are currently engaged in the development of the following pharmaceutical compositions comprising N-acylethanolamines and cannabinoids, such as Palmitoylethanolamide (PEA) and/or Δ9-tetrahydrocannabinol (THC) and/or non-psychoactive cannabidiol (CBD) and/or other cannabinoid receptor agonists: SCI-110 for the treatment of Tourette syndrome, or TS and Alzheimer’s disease and agitation; SCI-160 for the treatment of pain; and SCI-210 for the treatment of Autism Spectrum Disorder, or ASD, and Status Epilepticus, or SE.

 

2

 

   

SCI-110 is a combination therapy candidate based on two components: (1) THC, which is the major cannabinoid molecule in the cannabis plant, and (2) CannAmide™, a proprietary PEA formulation. PEA is an endogenous fatty acid amide that belongs to the class of nuclear factor agonists, which are molecules that regulate the expression of genes. We believe that the combination of THC and PEA may induce a synergistic effect, which has strong potential to treat TS and Alzheimer’s disease and agitation.

 

SCI-160 is a novel pharmaceutical preparation containing a CB2 receptor agonist for the treatment of pain. This innovative CB2 receptor agonist was synthesized by Raphael Mechoulam, Ph.D., Professor of Medicinal Chemistry at the Hebrew University, a member of the SciSparc Scientific Advisory Board.

 

Pursuant to the positive results obtained in the phase IIa TS study conducted at Yale School of Medicine, we are developing a regulatory dossier to be submitted to the U.S. Food and Drug Administration, German Federal Institute for Drugs and Medical Devices and the Israeli Ministry Of Health for our SCI-110 program for TS.. In February 2021, we announced an agreement with The Israeli Medical Center for Alzheimer’s, to conduct a phase IIa clinical trial to evaluate the potential safety, tolerability and efficacy of SCI-110 in patients with Alzheimer’s disease and agitation using our proprietary cannabinoid-based technology. Sporadic observation in healthy or sick individuals indicated that cannabis products and in particular THC have calming and anti-anxiety effects. Based on our pre-clinical and clinical experience using SCI-110 we believe that this treatment may potentially be found to be more safe and efficacious than THC alone. In addition, we announced in November 2022 positive interim results from our Phase IIa clinical study in Alzheimer’s Disease Patients with Agitation, At the interim analysis, the study met its primary endpoints of safety, including non-treatment related adverse events and drop out patients from the study; specifically, SCI-110 did not cause delirium, oversedation, hypotension or falls even in the highest dose tested (12.5MG Dronabinol+400mg PEA). In addition, SCI-110 treatment was also found to reduce agitation - 75% of patients did not need to use additional medication to control agitation and 75% of patients experienced increased appetite. Similarly, following positive results in a pre-clinical study that consisted of in vitro tests which showed synergy between CBD and PEA, we announced in December 2019 progression of SCI-210 into a clinical stage, and our plans to initiate a randomized, double blind placebo controlled study to evaluate the potential efficacy, safety and tolerability of SCI-210 in treating patients with ASD. In addition, in March 2021, we announced an agreement with The Sheba Fund for Health Services and Research at Chaim Sheba Medical Center, to examine the potential role of SCI-210 on status epilepticus. In December 2022, we announced positive study results from our pre-clinical study in SE indicating differences in mortality rate as well as seizure rates over time in comparison to CBD monotherapy in two different doses and in an untreated control group. In the low-CBD group, a higher mortality rate (although not significant) was found and therefore it is reasonable to believe that no significant impact on neuronal protection was achieved. In the high-CBD group, greater, although not significant, levels of neuronal protection were found together with a decreased mortality rate when compared to the control groups. The level of neuronal protection in the SCI-210 treatment was significantly higher compared to the control group and no mortality was found in this group.

 

We also hold 100% of the share capital of SciSparc Nutraceuticals Inc., a Delaware limited liability company, which owns Wellution™, a brand that sells dozens of hemp-based products, including hemp gummies, hemp oil capsules, hemp gel, hemp cream, detox pills, height pills, antibacterial creams, anti-aging creams, among other beauty and hair treatment products that are all manufactured in the United States. Wellution™ offers eight variations of natural hemp candy supplements under two parent Amazon Standard Identification Numbers (“ASINs”) on Amazon that are differentiated by their hemp oil potency.

 

Operating Results

 

To date, we have not generated revenue from the sale of any product, and we do not expect to generate significant revenue within the next year at least. As of June 30, 2022, we had an accumulated deficit of approximately $66.7 million. Our financing activities are described below under “Liquidity and Capital Resources – Financing Activities.”

 

Operating Expenses

 

Our current operating expenses consist of two components – research and development expenses, and general and administrative expenses.

 

Research and Development Expenses

 

Our research and development expenses consist primarily of salaries and related personnel expenses, share-based compensation expenses, consulting and subcontractor expenses and other related research and development expenses.

 

3

 

 

The following table discloses the breakdown of research and development expenses:

 

   Six-month period ended
June 30,
 
   2022   2021 
   (unaudited)   (unaudited) 
   (in thousands of USD) 
     
Wages and related expenses   243    183 
Share-based payments   224    17 
Clinical studies   106    49 
Research and preclinical studies   410    142 
Chemistry and formulations   118    249 
Regulatory and other expenses   373    322 
    1,474    962 

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of salaries, share-based compensation expense, professional service fees for accounting, legal, bookkeeping, facilities and other general and administrative expenses.

 

The following table discloses the breakdown of general and administrative expenses:

 

   Six-month period ended
June 30,
 
   2022   2021 
   (unaudited)   (unaudited) 
   (in thousands of USD) 
     
Wages and related expenses   245    99 
Share-based payment   431    7 
Professional and directors fees   1,292    884 
Investor relations and business expenses   1,193    562 
Office maintenance, rent and other expenses   63    55 
Regulatory expenses   113    58 
Business development   2    - 
Total   3,339    1,665 

 

Comparison of the six-months ended June 30, 2022 to the six-months ended June 30, 2021

 

Research and Development Expenses, net

 

Our research and development expenses for the six months ended June 30, 2022, amounted to $1,474,000, representing an increase of $512,000, or 53%, compared to $962,000 for the six months ended June 30, 2021. The increase was primarily attributable to an increase of $207,000 in share-based expenses, an increase of $231,000 in regulatory, professional and other expenses, an increase of $161,000 in research and pre-clinical studies, an increase of $57,000 in clinical studies, and an increase of $60,000 in wages and related expenses, offset by a decrease of $204,000 in chemistry and formulations.

 

General and Administrative Expenses

 

Our general and administrative expenses totaled $3,339,000 for the six months ended June 30, 2022, an increase of $1,674,000, or 101%, compared to $1,665,000 for the six months ended June 30, 2021. The increase resulted primarily from an increase of $631,000 in investor relations and business expenses, an increase of $424,000 in share-based expenses, an increase of $408,000 in professional and director fees, and an increase of $146,000 in wages and related expenses.

 

4

 

 

Operating Loss

 

As a result of the foregoing, our operating loss for the six months ended June 30, 2022, was $4.86 million, compared to an operating loss of $2.63 million for the six months ended June 30, 2021, an increase of $2.23 million, or 85%.

 

Finance Expense and Income

 

Financial expense and income consist of revaluation of debt instruments presented at fair value, related issuance expenses of debt instruments and bank fees.

  

We recognized financial expenses, net for the six months ended June 30, 2022, of $905,000, representing an increase of $882,000 compared to financial expenses of $23,000 for the six months ended June 30, 2021. The increase was primarily due to a change in the fair value of the June 2022 Warrants (as defined below).

 

Total Comprehensive Loss

 

Our total comprehensive loss for the six months ended June 30, 2022, was $5.76 million, representing an increase of $3.09 million, or 116%, compared to $2.66 million for the six months ended June 30, 2021.

 

Liquidity and Capital Resources

 

Overview

 

As of June 30, 2022, we had $12,985,000 in cash, including short term restricted deposits.

 

The table below presents our cash flows:

 

   Six months ended
June 30,
 
   2022   2021 
   (unaudited)   (unaudited) 
   (in thousands of USD) 
     
Net cash used in operating activities   (2,188)   (2,951)
           
Net cash used in investing activities   (708)   (1)
           
Net cash provided by financing activities   8,966    8,596 

 

Operating Activities

 

Net cash used in operating activities was $2.19 million for the six months ended June 30, 2022, compared with net cash used in operating activities of $2.95 million for the six months ended June 30, 2021. The decrease is primarily due to decreases in adjustments to the profit or loss item of cost of share-based expenses of $0.7 million and in adjustments to the working capital item of change in other accounts payable of $2.2 million, offset in part by the increase in net loss of $2.2 million.

 

5

 

 

Investing Activities

 

Net cash used in investing activities was $708,000 for the six months ended June 30, 2022, compared with $1,000 cash used by investing activities for the six months ended June 30, 2021. The increase is due primarily from the investment in MitoCare X Bio Ltd. in the amount of $700,000.

 

Financing Activities

 

Net cash provided by financing activities of $8.97 million in the six months ended June 30, 2022, consisted mainly of $9.0 million of net proceeds from the issuance of share capital and warrants, offset by repayment of lease liability in the amount of $39,000. Net cash provided by financing activities in the six months ended June 30, 2021, consisted of $7.7 million of net proceeds from the issuance of share capital and warrants, and $1.09 million from the exercise of warrants, offset in part by repayment of lease liability in the amount of $188,000.

 

On June 1, 2022, the Company completed a private offering with an investor for gross proceeds of $10.2 million providing for the issuance of an aggregate of 3,546,100 units and pre-funded units as follows: (a) 335,000 units at a price of $2.82 per unit, each consisting of (i) one ordinary share of the Company, and (ii) two warrants each to purchase one ordinary share (the “June 2022 Warrants”), and (b) 3,211,100 pre-funded units at a price of $2.819 per unit, each consisting of (i) one pre-funded warrant to purchase one ordinary share and (ii) two June 2022 Warrants.

 

The June 2022 Warrants have an exercise price of $2.63 per ordinary share. The June 2022 Warrants were exercisable upon issuance and will expire five years from the date of issuance. 

  

Current Outlook

 

We have financed our operations to date primarily through proceeds from sales of our ordinary shares as well as exercises of warrants and options to purchase ordinary shares, as the case may be. We have incurred losses and generated negative cash flows from operations since August 2004. Since August 2004, we have not generated any revenue from the sale of product candidates and we do not expect to generate revenues from sale of our product candidates in the next few years.

 

As of June 30, 2022, our cash balance was $12,945,000.

 

We believe that our existing cash resources will be sufficient to finance our operating activities in the foreseeable future; however, we expect that we will require substantial additional capital to complete the development of, and to commercialize, our product candidates. If we do seek to raise additional capital, there can be no guarantee or assurance that we will be successful in raising such additional capital or that the term of such capital raise will be on terms favorable to us. In addition, as we continue to assess the effects of the COVID-19 pandemic and its impact on capital market transactions in the United States, although we were able to raise financing in April 2020, November 2020, March 2021 and June 2022 offerings, all of which were during the COVID-19 pandemic, there can be no assurance that we will be able to raise financing again during the COVID-19 pandemic, or even after COVID-19 is no longer a “pandemic” if, for example, there is a downturn in the U.S. or global economy.

 

There has been no material impact of the COVID-19 pandemic on the Company’s operations during the reporting period, other than for a single incident with a supplier that caused a delay in the development and production of a research drug.

 

While the final implications of the COVID-19 pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. Due to the new outbreak of COVID-19 in Asia in late 2022, the Company cannot estimate, the impact, if any, the outbreak and any measures taken by governments, health officials or by the Company in response to such outbreak, could have on the Company’s business, results of operations and financial condition. The Company’s wide geographical spread of its clinical sites may mitigate the potential risk of significant damage to its business devolvement, however there is no guarantee these measures will be successful.

 

6

 

 

The COVID-19 pandemic and the new outbreak in Asia and its mitigation measures have also negatively impacted global economic conditions, which, in turn, could adversely affect the Company’s business, results of operations and financial condition. The extent to which the COVID-19 outbreak continues to impact the Company’s financial condition will depend on future developments that are highly uncertain and cannot be predicted, including new government actions or restrictions, new information that may emerge concerning the severity, longevity and impact of the COVID-19 pandemic on economic activity.

 

In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional financing sooner than planned. Following actions taken during fiscal year 2020 to reduce our operating expenses in the short term as a result of the COVID-19 pandemic, we are currently looking to expand our operations including planned clinical trials and early commercialization efforts for our proprietary PEA oral tablets CannAmide™. There can be no assurance that the analysis that we have undertaken or remedial measures that have been enacted will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular. In addition, our efforts to commercialize our proprietary PEA oral tablets CannAmide™ may not lead to any revenue or revenue at the level at which we are expecting. In addition to the COVID-19 pandemic, our future capital requirements will depend on many factors, including:

 

the progress and costs of our research and development activities;

 

the costs of manufacturing our product candidates;

 

the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;

 

the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and

 

the magnitude of our general and administrative expenses.

 

Until we can generate significant recurring revenues, we expect to satisfy our future cash needs through debt and/or equity financings (such as our March 2017, March 2019, December 2019, April 2020, November 2020, March 2021 and June 2022 offerings of ordinary shares and/or warrants). We cannot be certain that additional funding will be available to us on acceptable terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans for, or commercialization efforts with respect to our product candidates.

 

Research and development, patents and licenses, etc.

 

A comprehensive discussion of our research and development, patents and licenses, etc., is included in “Item 5. Operating and Financial Review and Prospects - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report. 

 

Critical Accounting Policies

 

The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, obligations and expenses during the reporting periods. A comprehensive discussion of our critical accounting policies is included in “Item 5. Operating and Financial Review and Prospects - Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

 

 

7