F-1: SciSparc Eyes $8.82 Million Through Share Offering with YA II PN, Extends AutoMax Merger Deadline

SciSparc Ltd. is offering up to 21,000,000 ordinary shares for resale by YA II PN, LTD., aiming to raise up to $8.82 million, and has extended the merger agreement end date with AutoMax Motors Ltd. to November 30, 2024.

Summary

• SciSparc Ltd. has filed a registration statement for the offer and sale of up to 21,000,000 ordinary shares by YA II PN, LTD.
• YA II PN, LTD. is a fund managed by Yorkville Advisors Global, LP.
• The offering is related to a Standby Equity Purchase Agreement (SEPA) entered into on January 21, 2024, and amended on February 26, 2024, which allows SciSparc to sell up to $20.0 million of its ordinary shares.
• To date, SciSparc has sold 5,402,887 ordinary shares under the SEPA, including 55,293 commitment shares issued for a $200,000 commitment fee.
• SciSparc will not receive any proceeds from the sale of shares by the selling shareholder but may receive up to $8.82 million in gross proceeds from sales of its ordinary shares to the selling shareholder under the SEPA.
• The shares will be purchased by the selling shareholder at 97% of the market price, defined as the lowest daily volume-weighted average price during the three consecutive trading days following SciSparc's delivery of an advance notice.
• SciSparc also entered into an Agreement and Plan of Merger with AutoMax Motors Ltd. on April 10, 2024.
• The merger's end date has been extended from August 30, 2024, to November 30, 2024.
• The company intends to use any proceeds that we receive under the SEPA for working capital, which includes research and development to advance our technology, general corporate purposes, and pursuing strategic opportunities which include expanding our pipeline and investments in other companies that may not necessarily be aligned with our current business strategy.

Sentiment

Score: 5

Explanation: The document presents both positive aspects (potential capital raise, merger extension) and negative aspects (potential dilution, market risks), resulting in a neutral sentiment.

Positives

• SciSparc has the potential to raise up to $8.82 million through the SEPA with YA II PN, LTD.
• The SEPA provides flexibility, allowing SciSparc to sell shares at its discretion.
• The extension of the merger agreement with AutoMax provides more time to finalize the transaction.
• The company intends to use any proceeds that we receive under the SEPA for working capital, which includes research and development to advance our technology, general corporate purposes, and pursuing strategic opportunities which include expanding our pipeline and investments in other companies that may not necessarily be aligned with our current business strategy.

Negatives

• SciSparc will not receive any proceeds from the sale of shares by the selling shareholder.
• The actual gross proceeds from the sale of all such shares may be substantially less than the $20.0 million total commitment under the SEPA, which could materially adversely affect our liquidity.
• The market price of SciSparc's ordinary shares could decline due to the resale of shares by YA II PN, LTD.
• The company is dependent on its operating subsidiaries ability to generate sufficient cash and raise additional financial sources in order to develop its activities.
• The company may be exposed to the risk that its customers will not meet their obligations to repay the full amount of the loan made available to them for the purpose of purchasing the vehicles.

Risks

• The market price of SciSparc's ordinary shares could decline due to the resale of shares by YA II PN, LTD.
• SciSparc may require additional financing to sustain operations.
• Future sales and issuances of ordinary shares could result in significant dilution.
• Management has broad discretion over the use of proceeds.
• The company may be exposed to the risk that its customers will not meet their obligations to repay the full amount of the loan made available to them for the purpose of purchasing the vehicles.
• The company is dependent on its operating subsidiaries ability to generate sufficient cash and raise additional financial sources in order to develop its activities.

Future Outlook

SciSparc intends to use any proceeds that we receive under the SEPA for working capital, which includes research and development to advance our technology, general corporate purposes, and pursuing strategic opportunities which include expanding our pipeline and investments in other companies that may not necessarily be aligned with our current business strategy.

Industry Context

SciSparc is operating in the specialty clinical-stage pharmaceutical industry, focusing on cannabinoid therapies, while also venturing into the vehicle import market through a merger with AutoMax Motors Ltd.

Comparison to Industry Standards

• SciSparc's focus on cannabinoid therapies aligns with a growing trend in the pharmaceutical industry, with companies like GW Pharmaceuticals (acquired by Jazz Pharmaceuticals) pioneering cannabinoid-based medicines.
• The merger with AutoMax Motors Ltd. is an unusual move for a pharmaceutical company, as it diversifies into a completely different industry.
• AutoMax operates in the Israeli vehicle market, which is characterized by high import duties and a relatively large number of vehicle importers compared to other sectors in the economy.
• The company competes with approximately 41 different vehicle importers, of which approximately 19 are direct importers and 22 indirect importers.

Related Party Transactions

• The SEPA with YA II PN, LTD. involves the potential sale of shares to a related party.
• The loan agreement between SciSparc Ltd. and AutoMax Motors Ltd. is a related party transaction.

Stakeholder Impact

• Shareholders may experience dilution if SciSparc issues additional shares.
• The merger with AutoMax Motors Ltd. could impact the company's strategic direction.
• Employees may be affected by the integration of SciSparc and AutoMax Motors Ltd.

Next Steps

• SciSparc needs to complete the merger with AutoMax Motors Ltd. by November 30, 2024.
• SciSparc may elect to sell Ordinary Shares to YA II PN, LTD. under the SEPA.
• SciSparc needs to monitor market conditions and manage the potential dilution from the share offering.

Key Dates

Keywords

SciSparc, YA II PN LTD, AutoMax Motors, SEPA, ordinary shares, merger, share offering, Yorkville Advisors, pharmaceutical, cannabinoid