20-F: SciSparc Ltd. Reports Financial Results for Fiscal Year 2023, Outlines Key Developments

SciSparc Ltd. reports a net loss of $5.9 million for 2023, alongside progress in cannabinoid therapy development and e-commerce operations.

Summary

• SciSparc Ltd., a clinical-stage pharmaceutical company focused on cannabinoid therapies, reported a net loss of approximately $5.9 million for the year ended December 31, 2023.
• This compares to a net loss of $2.6 million for the year ended December 31, 2022, and $5.8 million for the year ended December 31, 2021.
• As of December 31, 2023, the company had an accumulated deficit of approximately $69 million.
• The company's cash was approximately $2.1 million as of December 31, 2023.
• Revenues for the year ended December 31, 2023, were $2.9 million, generated through its subsidiary SciSparc Nutraceuticals.
• The company is developing three main proprietary combinations: SCI-110 for Tourette syndrome and Alzheimer's agitation, SCI-160 for pain, and SCI-210 for Autism Spectrum Disorder and Status Epilepticus.
• SciSparc holds a 50.86% controlling stake in SciSparc Nutraceuticals Inc., which focuses on hemp-based products on Amazon.com.
• The company completed a reverse stock split of its share capital in the ratio of 26:1 on September 28, 2023.
• The report from the independent registered public accounting firm includes an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there is revenue generation from the e-commerce business and progress in clinical trials, the increasing net loss, accumulated deficit, and auditor's going concern warning weigh heavily on the sentiment.

Positives

• SciSparc Nutraceuticals generated $2.9 million in revenue for the year ended December 31, 2023.
• The company is progressing with clinical trials for SCI-110, SCI-160, and SCI-210.
• SciSparc has a portfolio of seven granted patents with the U.S. Patent and Trademark Office, nine patent families and two trademarks.

Negatives

• SciSparc Ltd. reported a net loss of $5.9 million for the year ended December 31, 2023.
• The company had an accumulated deficit of approximately $69 million as of December 31, 2023.
• The auditor's report expresses substantial doubt about SciSparc's ability to continue as a going concern.
• The company may not be able to obtain orphan drug designation for TS, any future rare indications or orphan exclusivity upon approval of any of our pharmaceutical product candidates that have already obtained designation.

Risks

• The company's ability to continue as a going concern is dependent on obtaining additional funding.
• Clinical drug development is a lengthy and expensive process with an uncertain outcome.
• The company faces intense competition and rapid technological change.
• Political, economic, and military instability in Israel could adversely affect the company's operations.
• The Restructuring Plan may not be completed in accordance with the expected plans or anticipated timeline, or at all, and may not achieve the expected results.

Future Outlook

SciSparc expects to require substantial additional capital to complete the development of, and to commercialize, its product candidates. The company is exploring potential new opportunities, activities and investments in a variety of sectors.

Industry Context

The company operates in the competitive biotechnology and pharmaceutical industries, facing competition from companies with greater resources and experience. The company's product candidates may also compete with medical and recreational marijuana in markets where such use is legal.

Comparison to Industry Standards

• GW Pharmaceuticals (now part of Jazz Pharmaceuticals) developed Sativex and Epidiolex, botanical cannabinoid-based drugs, setting a precedent for regulatory approval in the cannabinoid space.
• Zynerba Pharmaceuticals is developing a transdermal cannabidiol formulation, indicating a trend towards alternative delivery methods.
• Skye Bioscience is focused on synthetic cannabinoid-derived molecules, highlighting the potential of synthetic alternatives.
• Corbus Pharmaceuticals Holdings is seeking FDA approval for synthetic cannabinoids for various systemic conditions, showcasing the breadth of potential applications.
• RespireRx Pharmaceutical Inc. is developing dronabinol for OSA treatment, demonstrating the exploration of cannabinoids for sleep disorders.
• Synendos Therapeutics AG is developing endocannabinoid modulators for CNS disorders, reflecting a focus on endogenous cannabinoid system modulation.
• Inversago Pharma is focused on peripheral cannabinoid (CB1) receptor antagonist/inverse agonist for metabolic diseases, indicating a targeted approach to metabolic disorders.

Legal Proceedings

• Capital Point Ltd. filed a lawsuit against SciSparc in connection with a warrant issued to Capital Point, claiming damages of approximately $2.75 million.

Related Party Transactions

• The company has entered into a cooperation agreement with Clearmind, a company in which Dr. Adi Zuloff-Shani, our Chief Technologies Officer, Mr. Weiss, our President, and Mr. Adler, our Chief Executive Officer and Chief Financial Officer serve as officers and directors.
• Mr. Oz Adler, our Chief Executive Officer and Chief Financial Officer, is the chairman of the board of directors of Jeffs Brands, Mr. Amitay Weiss, our chairman of the board of directors and Mr. Moshe Revach, a member of our board of directors, are both directors in Jeffs Brands.
• Mr. Amitay Weiss, our chairman of the board of directors is the chairman of the board of directors of AutoMax.

Stakeholder Impact

• Shareholders may experience dilution from future capital raises.
• Employees may be affected by potential restructuring or changes in business strategy.
• Customers may benefit from the development of new cannabinoid-based therapies.
• Suppliers may be impacted by changes in manufacturing or outsourcing strategies.
• Creditors face increased risk due to the company's financial condition and going concern uncertainty.

Next Steps

• Continue clinical trials for SCI-110, SCI-160, and SCI-210.
• Explore potential new opportunities, activities and investments in a variety of sectors.
• Pursue the Restructuring Plan, which may involve transferring pharmaceutical activities to NewCo and listing NewCo on a stock exchange.
• Continue to monitor the situation closely and examine the potential disruptions that could adversely affect our operations.

Key Dates

Keywords

SciSparc, cannabinoid therapies, pharmaceutical, clinical trials, SPRC, reverse stock split, net loss, revenue, going concern, Orphan Drug Act, SCI-110, SCI-160, SCI-210, Wellution, eCommerce