Full Press Release Details
The following risk factors update and supplement, and should
be read together with, the risk factors previously provided under "Risk Factors" in Part I, Item 3.D. in SciSparc Ltd.'s
Annual Report on Form 20-F for the year ended December 31, 2021:
Risks Related to Our Business Operations
From time to time, we may sign letters of
intent and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements. There can
be no assurance that we will enter into any such definitive agreements. Similarly, we may strategically invest in transactions from time
to time, and there can be no assurance that the value of our investment will increase or that it will not fluctuate.
From time to time, we may
sign letters of intent and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements.
We may never enter into definitive agreements after signing a letter of intent and/or entering into a term sheet or other similar arrangement
for a multitude of reasons, including, but not limited to, regulatory, operational, financial and other considerations. There may also
be forces outside of our control that have an effect on our ability or decision as to whether we enter into such definitive agreements.
As a result, there can be no assurance that upon signing a letter of intent and/or entering into a term sheet or similar arrangement,
that we will enter into definitive documents. This could have a material adverse effect on our reputation and could cause us to incur
expenses if any legal claims arise as a result thereof. For example, in November 2019, we entered into a memorandum of understanding with
Heavenly Rx, Ltd., or Heavenly Rx, pursuant to which we and Heavenly Rx agreed to pursue a business combination. In accordance with the
memorandum of understanding between the parties, any transaction between the parties remained subject to entry into definitive agreements,
and to shareholder and regulatory approvals. We never entered into definitive agreements and do not expect to do so.
Similarly, we may strategically invest into various
pharmaceutical companies. However, we can offer no assurance that the value of our investment will increase or that it will not fluctuate
because the value of our investments may be adversely affected by a number of factors, such as negative changes in a company's results
of operations, cash flows, financial position and accounting impairment. For example, on March 31, 2022, we entered into an agreement
with and invested in MitoCare X Bio Ltd., or MitoCare X, a newly founded company expected to focus on the discovery and development of
potential drugs for cancers and other life-threatening conditions. The potential benefits of the agreement with MitoCareX or other potential
investments may not be realized to the full extent, in a timely fashion, or at all, which may have a material adverse effect on our results
of operations, cash flows and financial position. Furthermore, on December 14, 2022 we have entered into a letter of intent with Jeffs'
Brands Ltd. for the sale of a 50% interest in our wholly owned subsidiary, SciSparc Nutraceuticals Inc., which owns WellutionTM,
for $3 million in cash or a combination of cash and ordinary shares of Jeffs' Brands Ltd., subject to an execution of a definitive
agreement by the parties. The potential benefits of an agreement with Jeffs' Brands Ltd., or other potential ventures may not materialize
or may not be realized to the full extent, in a timely fashion, or at all, which may have a material adverse effect on our results of
operations, cash flows and financial position.
Risks Related to Our Intended Corporate Restructuring
The intended restructuring plan which involves transferring our pharmaceutical
activities to a new wholly-owned subsidiary may not be completed in accordance with the expected plans or anticipated timeline, or at
all, and may not achieve the expected results.
On January 25, 2023, we announced that our board of
directors resolved to pursue a restructuring plan which involves transferring our pharmaceutical activities to a new wholly-owned subsidiary,
or NewCo. As part of the restructuring plan, we will examine the possibility of listing NewCo on a leading stock exchange, while maintaining
our controlling interest in NewCo such that we will continue to control our current business activities. We also intend to explore other
potential new opportunities, activities and investments in a variety of sectors.
Any restructuring and possible listing of NewCo on
a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory approvals, receipt
of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions to effectuate such corporate
restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended restructuring and listing
of NewCo or that they will be completed at all.
Unanticipated developments or changes, including but
not limited to, changes in the general or financial market conditions, possible delays in obtaining various regulatory and tax approvals,
changes in the law, and challenges in executing the intended restructuring could delay or prevent the completion of the restructuring
and listing of NewCo, or cause the restructuring and listing of NewCo to occur on terms or conditions that are different or less favorable
than initially expected. These or other developments could cause us not to realize some or all of the expected benefits of the restructuring
and listing of NewCo or to realize them on a different timeline than expected. If the restructuring and listing of NewCo do not occur,
we could pursue other transactions involving our pharmaceutical activities.
The restructuring and listing of NewCo may not achieve the anticipated
benefits and may expose us to additional risks.
We may not realize the anticipated strategic, financial,
operational or other benefits of the restructuring and listing of NewCo. We cannot predict with certainty when the benefits expected from
these transactions will occur or the extent to which they will be achieved. There is no assurance that following the restructuring and
listing of NewCo that each separate company will be successful. Whether or not the restructuring and listing of NewCo is completed, we
may face material challenges in connection with the intended transactions, including but not limited to, the diversion of management time
on matters relating to the restructuring and listing of NewCo, the impact of having to operate under the terms of any transition service
agreements, the impact on our ability to retain talent and potential impacts on our relationships with customers, suppliers, employees
and other counterparties. In addition, we will incur one-time costs and ongoing costs in connection with, or as a result of, the restructuring
and listing of NewCo, including costs of operating as independent, publicly-traded companies that the separate businesses will no longer
be able to share. Those costs may exceed our estimates or could negate some of the benefits we expect to realize. Further, we have not
yet analyzed whether the restructuring and listing of NewCo will be tax-free to our shareholders for U.S. federal income tax or Israeli
tax purposes and there is no assurance that the restructuring and listing of NewCo will qualify for this treatment. If the restructuring
and listing of NewCo is ultimately determined to be taxable, any of NewCo, our shareholders or us could incur income tax liabilities that
could be significant. If we do not realize the anticipated benefits of the restructuring and listing of NewCo it could adversely affect
our business, results of operations, cash flows and financial condition.
Following any restructuring and listing of NewCo, the trading price
of our ordinary shares may fluctuate significantly.
We cannot predict whether the market value of our ordinary
shares after any restructuring and listing of NewCo will be, in the aggregate, less than, equal to or greater than the market value of
our ordinary shares prior to such transactions. The trading price of our ordinary shares may be more volatile around the time of the intended
Risks Related to Our Subsidiary's eCommerce Operations
We may be unable to successfully pursue,
integrate, or execute upon our new subsidiary's eCommerce operations business.
2022, we purchased Wellution , a business and brand which sells hemp-based products on the Amazon.com marketplace.
management has limited prior experience in eCommerce business operations. There can be no assurance that we will be able to successfully
implement our new business ventures or successfully operate within this industry. The successful
integration of a new business also depends on our ability to manage the new business, realize forecasted synergies and full value from
the combined business. Our business, results of operations, financial condition and cash flows could be materially adversely affected
if we are unable to successfully integrate this new eCommerce business to our existing operations.
may be unable to successfully integrate Wellution and any inability to do so may hinder our ability to grow, divert the attention of management
and our key personnel, disrupt our business and impair our financial results.
Our subsidiary's eCommerce operations
rely on the Amazon.com marketplace and fulfillment by Amazon.com and changes to the Amazon.com marketplace, Amazon's services and
Wellution's products
are sold predominantly on the Amazon.com marketplace and orders are fulfilled entirely by Amazon.com utilizing the fulfilled by Amazon,
or FBA, model. In order to continue to utilize the Amazon.com marketplace and FBA, we must comply with the applicable policies and terms
changes regarding the cost of securing these services, and changes that increase the burden of compliance with its requirements, may cause
us to significantly alter our business model or incur additional costs in order to comply, which could negatively impact our results of
and suspension of fulfillment services either of which could have a material adverse effect on our business and results of our operations.
Although we exert efforts in order to ensure ongoing compliance and no notices of non-compliance have been received to date, we cannot
assure you that events of this kind will not occur in the future.
Our subsidiary's eCommerce operations
rely on other information technologies and systems to operate its business and to maintain its competitiveness, and any failure to invest
in and adapt to technological developments and industry trends could harm our business.
We depend on sophisticated