As filed with the Securities and Exchange Commission on August 28, 2024
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form F-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
SCISPARC LTD.
(Exact name of registrant as specified in its
charter)
State of Israel |
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2834 |
|
Not Applicable |
(State or other jurisdiction of
incorporation or organization) |
|
(Primary Standard Industrial
Classification Code Number) |
|
(I.R.S. Employer
Identification Number) |
20 Raul Wallenberg Street, Tower A,
Tel Aviv 6971916, Israel
Tel: (+972) (3) 610-3100 |
|
Puglisi & Associates
850 Library Ave., Suite 204
Newark, DE 19711
Tel: (302) 738-6680 |
(Address, including zip code, and telephone number,
including area code, of Registrant’s principal executive offices) |
|
(Name, address, including zip code, and telephone number,
including area code, of agent for service) |
Copies to:
Oded Har-Even, Esq.
Howard E. Berkenblit, Esq.
Sullivan & Worcester LLP
1251 Avenue of the Americas
New York, NY 10020
Tel: (212) 660-3000 |
|
Dr. Shachar Hadar, Adv.
Meitar | Law Offices
16 Abba Hillel Silver Rd.
Ramat Gan 52506, Israel
Tel: (+972) (3) 610-3100 |
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the effective date hereof.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
☒
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☐
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards † provided pursuant to Section 7(a)(2)(B) of the Securities
Act. ☐
† |
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012. |
The registrant hereby
amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section
8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
The information in
this prospectus is not complete and may be changed. The Selling Shareholder may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS |
SUBJECT
TO COMPLETION |
DATED
AUGUST 28, 2024 |
Up to 21,000,000 Ordinary Shares
SciSparc Ltd.
This prospectus relates to
the offer and sale of up to 21,000,000 of our ordinary shares, no par value, or the Ordinary Shares, by YA II PN, LTD., a Cayman Islands
exempt limited partnership, or YA or the Selling Shareholder. The Selling Shareholder is a fund managed by Yorkville Advisors Global,
LP.
On January 21, 2024, we entered
into a Standby Equity Purchase Agreement, as amended on February 26, 2024, or the SEPA, with the Selling Shareholder, which provided for
the sale of up to $20.0 million of our Ordinary Shares. Of the $20.0 million eligible to be sold pursuant to the SEPA, or the Commitment
Amount, to date we have sold 5,402,887 Ordinary Shares, which includes 55,293 of our Ordinary Shares, or the Commitment Shares, which
we issued in satisfaction of the payment of the commitment fee amount of $200,000. On February 27, 2024, we filed a Registration Statement
on Form F-1 (File No. 333-277394) to register 5,402,887 of our Ordinary Shares to be offered and sold by the Selling Shareholder in connection
with the SEPA, which was originally declared effective by the Securities and Exchange Commission, or SEC, on March 6, 2024, or the Original
SEPA Form F-1. As of the date of this prospectus, 5,402,887 Ordinary Shares have been sold pursuant to the Original SEPA Form F-1 and
the Registration Statement, of which this prospectus forms a part, on Form F-1 relates to the offer and sale of up to an additional 21,000,000
Ordinary Shares by the Selling Shareholder in connection with the SEPA.
In connection with the SEPA,
we may request pre-paid advances of the Commitment Amount, in an amount up to $5.0 million, each a Pre-Paid Advance. Each Pre-Paid Advance
will be evidenced by a promissory note, each, a Promissory Note. Each Promissory Note will fully mature 24-months following its issuance
and shall accrue interest on the outstanding principal balance thereon at a rate of 5% per annum, increasing to 18% per annum upon an
Event of Default (as defined in the Promissory Note). Beginning 150 days after the issuance of a Promissory Note, we shall pay to YA a
monthly installment payment of 10% of the original principal amount of the Promissory Note and accrued interest, payable in cash or by
submitting an Advance Notice, where YA will offset the amount due to be paid to us under such notice against an equal amount of the monthly
installment amount, at our option. If we elect to pay in cash, the installment amount shall also include a payment premium in the amount
of 5% of the principal amount of the installment payment. The Promissory Note contains our customary representations and warranties and
Events of Default.
The Ordinary Shares being
offered by the Selling Shareholder may be issued pursuant to the SEPA. We are not selling any securities under this prospectus and will
not receive any of the proceeds from the sale of our Ordinary Shares by the Selling Shareholder. However, we may receive up to $8.82 million
in aggregate gross proceeds from sales of our Ordinary Shares to the Selling Shareholder that we may make under the SEPA, from time to
time after the date of this prospectus. The shares that may be offered pursuant to this prospectus would be purchased by the Selling Shareholder
pursuant to the SEPA at 97% of the market price, which is defined as the lowest daily volume weighted average price of the Ordinary Shares
during the three consecutive trading days commencing on the trading day immediately following our delivery of an advance notice to the
Selling Shareholder.
The Selling Shareholder may
sell the Ordinary Shares included in this prospectus in a number of different ways and at varying prices. We provide more information
about how the Selling Shareholder may sell the shares in the section entitled “Plan of Distribution.” The Selling Shareholder
is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended, or the Securities Act.
The Selling Shareholder will
pay all brokerage fees and commissions and similar expenses in connection with the offer and sale of the Ordinary Shares by the Selling
Shareholder pursuant to this prospectus. We will pay the expenses (except brokerage fees and commissions and similar expenses) incurred
to register under the Securities Act the offer and sale of the Ordinary Shares included in this prospectus by the Selling Shareholder.
See “Plan of Distribution.”
Our Ordinary Shares are listed
on the Nasdaq Capital Market, or Nasdaq, under the symbol “SPRC”. On August 27, 2024, the last reported sale price of our
Ordinary Shares on Nasdaq was $0.42 per share.
Investing in our securities
involves risk. See “Risk Factors” beginning on page 8 of this prospectus and “Item 3. — Key Information
— D. Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2023, or the 2023 Annual Report, incorporated
by reference in this prospectus for a discussion of the factors you should consider carefully before deciding to purchase these securities.
Neither the SEC nor any
state or other foreign securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is ,
2024
TABLE OF CONTENTS
You
should rely only on the information contained in this prospectus, including information incorporated by reference herein, and any free
writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Shareholder have authorized
anyone to provide you with information that is different. The Selling Shareholder is offering to sell the securities, and seeking offers
to buy the securities, only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the securities.
For
investors outside of the United States: Neither we nor the Selling Shareholder have done anything that would permit this offering or possession
or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You
are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.
In
this prospectus, “we,” “us,” “our,” the “Company” and “SciSparc” refer to
SciSparc Ltd. and its consolidated subsidiaries.
All
trademarks or trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, the trademarks
and trade names in this prospectus are referred to without the ® and ™ symbols, but
such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable
law, their rights thereto. We do not intend the use or display of other companies’ trademarks and trade names to imply a relationship
with, or endorsement or sponsorship of us by, any other companies.
Our
reporting currency and functional currency is the U.S. dollar. Unless otherwise expressly stated or the context otherwise requires,
references in this prospectus to “NIS” are to New Israeli Shekels, and references to “dollars” or “$”
mean U.S. dollars.
On
September 28, 2023, we completed a reverse split of our share capital in the ratio of 26:1, or the Reverse Split. Unless the context expressly
indicates otherwise, all references to share and per share amounts referred to herein reflect the amounts after giving effect to the Reverse
Split.
This
prospectus includes statistical, market and industry data and forecasts which we obtained from publicly available information and independent
industry publications and reports that we believe to be reliable sources. These publicly available industry publications and reports generally
state that they obtain their information from sources that they believe to be reliable, but they do not guarantee the accuracy or completeness
of the information.
We
report financial information under International Financial Reporting Standards, or IFRS, 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.
PROSPECTUS SUMMARY
This summary highlights
information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing
in our Ordinary Shares. Before you decide to invest in our Ordinary Shares, you should read the entire prospectus carefully, including
the “Risk Factors” section, and the financial statements and related notes thereto and the other information incorporated
by reference herein.
Our Company
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 developing and testing pharmaceutical compositions comprised of
N-acylethanolamines and cannabinoids such as Palmitoylethanolamide, or PEA, and/or Δ9-tetrahydrocannabinol, or THC, and/or non-psychoactive
cannabidiol, or CBD, and/or other cannabinoid receptor agonists, from which we have derived three main proprietary combinations: SCI-110
for the treatment of Tourette syndrome 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. We hold a 50.86% controlling stake in our subsidiary SciSparc Nutraceuticals Inc.,
which focuses on the sale of hemp-based products on Amazon Marketplace.
SCI-110
is a proprietary drug 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 reaction known
as the “sparing effect,” which has strong potential to treat various diseases such as TS and Alzheimer’s disease and
agitation.
SCI-210
is a proprietary drug candidate based on two components: (1) CBD, and (2) CannAmide™. We believe that the combination of CBD and
PEA may also induce a sparing effect reaction, which has strong potential to treat various diseases such as ASD and SE.
SCI-160
is a novel pharmaceutical preparation containing a cannabinoid receptor type 2, or 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. We believe that modulating CB2 receptor activity by selective CB2 receptor agonists
holds unique therapeutic potential for addressing pain conditions.
Pursuant
to the positive results obtained in a phase IIa TS study conducted at Yale School of Medicine, we developed a regulatory dossier that
was submitted to the German Federal Institute for Drugs and Medical Devices, or BfArM, and the Israeli Ministry of Health, or MoH, for
our SCI-110 program for TS. Both agencies approved the program. We plan to submit this regulatory dossier to the U.S. Food and Drug Administration,
or the FDA.
Standby Equity Purchase
Agreement with YA
On
January 21, 2024, we entered into the SEPA with YA, as amended on February 26, 2024. Pursuant to the SEPA, we will be able to sell up
to $20.0 million of our Ordinary Shares, at our sole option, any time during the three-year period following the execution date of the
SEPA. Of the Commitment Amount, to date we have sold 5,402,887 Ordinary Shares. Pursuant to the terms of the SEPA, any Ordinary Shares
sold to YA will be priced at 97% of the market price, which is defined as the lowest daily volume weighted average price of the Ordinary
Shares during the three consecutive trading days commencing on the trading day immediately following our delivery of an advance notice
to YA, or the Advance Price. Any sale of Ordinary Shares pursuant to the SEPA is subject to certain limitations, including that YA is
not permitted to purchase any Ordinary Shares that would result in it owning more than 9.99% of our Ordinary Shares.
Subject
to certain conditions precedent as described in the SEPA, we may request Pre-Paid Advances. Each Pre-Paid Advance will be evidenced by
a Promissory Note. Each Promissory Note will fully mature 24-months following its issuance and shall accrue interest on the outstanding
principal balance thereon at a rate of 5% per annum, increasing to 18% per annum upon an Event of Default (as defined in the Promissory
Note). Beginning 150 days after the issuance of a Promissory Note, we shall pay to YA a monthly installment payment of 10% of the original
principal amount of the Promissory Note and accrued interest, payable in cash or by submitting an Advance Notice, where YA will offset
the amount due to be paid to us under such notice against an equal amount of the monthly installment amount, at our option. If we elect
to pay in cash, the installment amount shall also include a payment premium in the amount of 5% of the principal amount of the installment
payment. The Promissory Note contains our customary representations and warranties and Events of Default.
We
are not obligated to utilize any of the $20.0 million available under the SEPA and there are no minimum commitments or minimum use penalties.
The total amount of funds that ultimately can be raised under the SEPA over the three-year term will depend on the market price for the
Ordinary Shares and the number of Ordinary Shares actually sold. The SEPA does not impose any restrictions on our operating activities.
During the term of the SEPA, YA, and its affiliates, are prohibited from engaging in any short selling or hedging transactions related
to the Ordinary Shares.
In
addition, we also agreed to pay YA a commitment fee equal to $200,000, or 1.0% of the aggregate amount available to be sold under the
SEPA, as consideration for its irrevocable commitment to purchase our Ordinary Shares under the SEPA, payable in an amount of our Ordinary
Shares equal to $200,000 divided by the daily volume-weighted average price of the Ordinary Shares on the trading day immediately prior
to the SEPA and also agreed to pay to YA a structuring fee in the amount of $10,000. As satisfaction of the commitment fee, we issued
55,293 of our Ordinary Shares as the Commitment Shares to YA.
Pursuant
to the SEPA, we are required to register resales of the Ordinary Shares eligible to be sold pursuant to the SEPA and Commitment Shares,
collectively referred to as the Registrable Shares. We filed the Original SEPA Form F-1 on February 27, 2024, which was originally declared
effective by the SEC on March 6, 2024, and are filing the Registration Statement, of which this prospectus forms a part, in order to register
resales of up to an additional 21,000,000 Ordinary Shares under the SEPA. We shall not have the ability to request any further advances
under the SEPA until the registration statement, of which this prospectus forms a part, is declared effective.
As
of the date of this prospectus, we have received $6,117,373 in gross proceeds under the SEPA from sales made to YA pursuant to the SEPA.
AutoMax Agreement
and Plan of Merger
On April 10, 2024, we entered
into an Agreement and Plan of Merger, or the Merger Agreement, with AutoMax Motors Ltd., an Israeli limited company and a leading vehicle importer
company in Israel, or AutoMax, and SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of the Company, or
Merger Sub. Upon the terms and subject to the satisfaction of the conditions described in the Merger Agreement, including approval of
the transaction by our shareholders and AutoMax’s shareholders, Merger Sub will be merged with and into AutoMax, with AutoMax surviving
the Merger as a wholly-owned subsidiary of the Company, or the Merger. Pursuant to the Merger Agreement, both companies will continue
to pursue their respective business and operations until the Merger becomes effective. After consummation of the Merger, we anticipate
that our current ongoing business operations, including our clinical stage pharmaceutical business, will continue along with the business
of AutoMax.
AutoMax’s Business
Overview
AutoMax
imports and markets a variety of private vehicle models, from various categories such as small vehicles, crossovers, executive vehicles,
premium vehicles, work vehicles, and buses manufactured by TEMSA Skoda Sabancı Ulaşım
Araçları A.Ş. AutoMax’s operations are conducted in Israel. AutoMax believes there are several primary
factors that contribute to the success of vehicle importers in Israel, including: (i) innovative vehicle models and the manner in which
these are branded among customers; (ii) trade conditions, especially the exchange rates of the foreign currencies in which the importer
imports in comparison to the currency exchange rates of competitors; (iii) the existence of good relations with the manufacturer and/or
the agent which is also reflected in import prices; (iv) the technological quality of the imported vehicles; (v) high marketing ability
of the importer, which is also reflected in the adjustment of the vehicle and the prices to market demands; (vi) the level of provided
service and the reputation of the importer; (vii) good geographical layout of purchasing agencies across the world (especially true for
indirect importers); and (viii) the geopolitical situation in the countries from which the vehicles are imported. AutoMax’s clients
range from private customers to institutional customers, including companies that lease, rent, and operate vehicle fleets, and car dealerships.
AutoMax
operates through various subsidiaries, which include Dalhom Automax Ltd., of which it holds 50% of the voting rights, or Dalhom Automax;
AutoMax Trade-In Ltd., of which it holds 80% of the voting rights, or AutoMax Trade-In; Automax Leasing Ltd., a wholly owned subsidiary,
or Automax Leasing; and Global Automax Ltd., a wholly owned subsidiary, or Global Automax.
Global
Automax holds a number of subsidiaries: Automax HaShfela Ltd., in which it holds 50% of the voting rights; Automax Netanya Ltd., a wholly
owned subsidiary; Automax Fleet Vehicles Ltd., in which Global Automax holds 50% of the voting rights; and Automax HaSharon Ltd., in which
Global Automax holds 67% of the voting rights.
Industry Overview
The
vehicle market in Israel differs from most vehicle markets in the world due to its geographical isolation (the absence of open land borders
for free trade in vehicles) and the existence of high import duties. The percentage of vehicle ownership in Israel is relatively low compared
to various Western countries, due to, among other things, the relatively high price of vehicles, mainly due to high taxation, inferior
road infrastructure compared to other Western countries, and high population density.
Furthermore,
the vehicle market in Israel includes a relatively large number of vehicle importers (compared to other sectors in the economy) that import
vehicles that are manufactured in different countries around the world. Most vehicle importers import several brands and products.
The
development of the automotive market in Israel is characterized by fluctuations resulting from changes in the macroeconomic environment
of the economy, among other factors. The main characteristics of the automotive market that affect AutoMax’s activity and the competitors
in this market are:
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High dependence on suppliers. The success of vehicle importers depends mainly on the relationship with manufacturers of the vehicles imported and the strategy of the manufacturers’ activity in relation to the launch of new products, brand positioning in the world, model policy, trade conditions, price policy and marketing support. It should be noted that the dependence on the vehicle manufacturers is mainly relevant to the direct importers who have, in practice, exclusive franchise agreements with manufacturers whose products they import to Israel. AutoMax believes that it has no significant reliance on the activity of a particular vehicle manufacturer. |
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Changes in consumer preferences. The vehicle preferences in Israel are subject to frequent changes, resulting from the preference of certain models by consumers, and due to a variety of factors, including but not limited to, engine type (diesel, oil, electric, hybrid or gasoline), the size of the vehicle, its design, technological advantages, environmental rating, fuel economy, safety standard, price and marketability on the resale market. |
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Taxation of vehicles. The importing of most private vehicles in Israel is subject to purchase taxes, Value Added Tax and customs imposed at cumulative rates of approximately 30%-130% (or, oftentimes, more), of the cost of the vehicles. The aforementioned tax rates are among the highest in the world. Changes in tax rates, including the reduction in tax rates of vehicles of a certain type, have a direct impact on the preferences of customers in the area of activity. In addition, changes in taxation on vehicles provided to employees as part of their employment conditions may affect their preference in relation to receiving vehicles from the workplace versus purchasing. |
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Fuel and electricity prices. Changes in fuel and electricity prices may have an impact on consumer preferences in the long term. Vehicle model preferences vary depending on the type of energy used (i.e., diesel, gas, gasoline, or electricity) and each such energy price. |
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Regulation. The automotive industry in Israel is characterized by vast regulation and strict regulatory requirements, including the standardization requirements, which may affect the Company’s expenditure and the results of its operations. |
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Infrastructure levels and density of the roads. According to research conducted by the Bank of Israel, the roads in Israel are characterized by high levels of density, especially in the areas with greater population concentration. This affects the scope of vehicle purchases and is expected to affect it in the future as well. |
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Changes in currency and interest rates as well as the economic environment. |
Based on data provided for AutoMax, within the
private vehicle market in Israel, taking into account only importers that imported 20 vehicles or more as of June 2024, there are approximately
41 different vehicle importers, of which approximately 19 are direct importers and 22 indirect importers.
The vehicle market in Israel is characterized
by vast regulations, one of which is the Committee for Increasing Competitiveness in the Economy under the Ministry of Finance of the
State of Israel. In order to increase the competitiveness in the field of the automotive industry and decrease the price of vehicles and
spare parts, while increasing the existing variety in the Israeli market, one of the laws that was adopted for this purpose was the Vehicle
Services Licensing Law, which was enacted to regulate the licensing of automotive services in the industry. The law came into effect by
supervisory orders by virtue of the Supervision of Commodities and Services Law, 5717-1957, or the Vehicle Services Law.
The Vehicle Services Law defined three types of importers: (i) direct
importers – an importer operating according to an agreement with the vehicle manufacturer; (ii) indirect importer – an importer
operating according to an agreement with an authorized agent of the vehicle manufacturer; and (iii) small importer – an importer
who imports up to 20 vehicles per year, operating according to an agreement with an individual in a foreign country. The Vehicle Services
Law further mandates that when granting an import license, the director of the Vehicle and Maintenance Services Department at the Ministry
of Transportation, may consider, inter alia, aspects related to promoting competition in the automotive industry, after consulting with
the competition commissioner.
Competition
AutoMax
operates in two highly competitive industries, the vehicle industry in Israel as an importer and seller and in the international vehicle
industry as a purchaser of vehicles.
The
value chain in the automotive industry includes international vehicle manufacturers, vehicle importers, vehicle dealers (over 8,000 authorized
vehicle dealers), financing entities and end users: households, corporate firms and public organizations. According to the Automotive
Industry Review published by Dun & Bradstreet in February 2024, or the Automotive Industry Review, there are approximately 20 official
import groups representing various manufacturers in Israel, which are responsible for approximately 97% of the automotive imports to Israel.
Alongside these, there are several dozen indirect importers who are collectively responsible for approximately 3% of the imports. Additionally,
there are vehicle leasing and rental companies, consisting of approximately five primary companies, alongside smaller companies.
According
to the Automotive Industry Review, as of mid-2023, there were approximately 4.1 million vehicles on the roads in Israel, of which, approximately
86% are private vehicles. According to the State of Israel Central Bureau of Statistics, despite a relatively low level of vehicle ownership
in Israel, based on the number of vehicles per 1,000 residents, the traffic density remains among the highest in the world. Based on studies
conducted in previous years, as detailed in Automotive Industry Review, the density is 3.5 times higher than the Organization for Economic
Co-operation and Development, or the OECD, average. The main contributors are the concentration of population in central Israel, an underdeveloped
public transportation system and the lack of correlation between the construction of roads and the increase in population.
Operating and Growth Strategy
According
to the Automotive Industry Review, the total number of motorized vehicles in Israel consists of approximately: 3.5 million private vehicles
(representing approximately 86%), 310,000 trucks (representing approximately 8%), 169,000 motorcycles (representing approximately 4%),
and 64,000 buses and taxis in aggregate (representing approximately 2%). The Automotive Industry Review – 2023, published in Dun
& Bradstreet detailed that in the first part of the year 2023, the volume of automobile deliveries resembled that of the peak year
in 2021; however, commencing from June 2023 there was a slowdown in the volume of deliveries. This deceleration was a result of events
that impacted the economy in 2023, adversely affecting the purchasing power of households, high interest rates prevailing in the economy
in 2023, peaking at 4.75% in the latter half of the year, diminished both purchasing power and financing capabilities, the proposed judicial
reforms in Israel creating significant uncertainty in the economy and threatening Israel’s credit rating, also affecting the shekel-dollar
exchange rate and increasing the cost of imported goods, including automobiles; and the outbreak of Israel’s current war against
Hamas that became known as the ‘Iron Swords’ war in Israel (for more information, see “Risk Factors – Risks
Related to AutoMax’s Operations in Israel – Conditions in Israel, including the ongoing war between Israel and Hamas, and
other conflicts in the region, may adversely affect AutoMax’s operations and limit its ability to market its products, which would
lead to a decrease in revenues”), which resulted in reduced demand.
According
to an article titled Taxation of Vehicles in Israel for the Year 2023 published on the Israel Transportation Managers website on February
18, 2024, in the year 2023 there was an aggregate of 270,023 passenger vehicles imported to Israel, compared to 268,131 in the year 2022,
representing an increase of 0.7%. Based on AutoMax’s financial results, the import of vehicles in the first three quarters of 2023
showed an increase compared to the first three quarters of 2022 and declined in the last quarter due to the outbreak of the ‘Iron
Swords’ war, which resulted in reduced demand, delays, and increased transportation costs, coupled with security threats associated
with transportation in the Red Sea.
Additionally,
the ‘Iron Swords’ war that began in the fourth quarter of 2023 created market uncertainties and weakened consumer sentiment.
At the onset of the war, numerous employees were put on unpaid leave, many businesses in the commercial sector reduced their workforce
or at least halted recruitments, reducing the inclination to acquire new cars. Due to the reduction in manpower, the number of employed
individuals in the commercial sector holding leased vehicles on behalf of the employer, who constitute major clients of leasing services,
has slowed down, and according to Automotive Industry Review, this is expected to further dampen the demand for leasing services in the
year 2024.
AutoMax
currently operates eight branches, five of which are operated directly by Global AutoMax, two are operated through joint companies of
Global AutoMax and third parties, and one that is located in Beer-Sheva and Acre, Israel, is operated by authorized representatives. AutoMax
agreements with its authorized representatives are typically for a term between three and five years.
AutoMax’s
main strategies to help enable its growth include:
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Building and preserving an inventory of products and models in accordance with customer preferences, and technological advancements and market developments. AutoMax frequently monitors trend changes and consumer preferences, in order to expand the range of products and services it offers. |
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Integrating activity sectors in the vehicle industry synergistic to its activity and the deployment of supply sources on sales centers, while examining their contribution to its profitability. |
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Obtaining a leasing license and entering the leasing market. |
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Forming partnerships and/or collaborations with representatives and manufacturers of internationally leading brands in the automotive industry as well as investment fields. |
AutoMax’s Competitive Advantages
Unlike
direct importers who are guaranteed a certain vehicle inventory, pursuant to agreements with manufacturers, AutoMax is required to purchase
its vehicle inventory from authorized dealers and various suppliers in various international markets, under more competitive conditions.
AutoMax is able to operate in a larger number of markets with different characteristics, with a variety of products, while aiming to increase
its geographical purchase sources.
While
direct importers are bound to agreements with manufacturers, and therefore subject to such manufacturers’ framework with a predetermined
model cascade, which limits the vehicle models they can import. Indirect importers, such as AutoMax, have greater flexibility with regards
to the brands and models selected for import. The number of indirect importers remains relatively low in Israel, reducing AutoMax’s
competition in this category. The high profit margins characterized by vehicles sold by direct importers allow AutoMax to sell its imported
vehicles at competitive prices, thus gaining consumer preference. Furthermore, its ability to find convenient procurement sources in terms
of price and transportation, distribution, and sales network provides AutoMax with a competitive advantage over other indirect importers.
AutoMax is currently the leading and largest company in the indirect sectors in terms of product licenses, volume of vehicle imports and
sales.
Employees and Human Capital
The
following table presents the number of employees employed by AutoMax as of December 31, 2021, 2022, and 2023, by departments. None of
AutoMax’s employees are represented by a labor union.
| |
Number of employees (including part-time positions) | |
Department | |
December 31, 2021 | | |
December 31, 2022 | | |
December 31, 2023 | |
Management, headquarters and finances | |
| 12 | | |
| 16 | | |
| 14 | |
Pre-delivery inspections | |
| 12 | | |
| 17 | | |
| 14 | |
Sales | |
| 41 | | |
| 93 | | |
| 43 | |
Total: | |
| 65 | | |
| 126 | | |
| 71 | |
Environmental Matters
In
recent years, as part of the global trend, there has also been a trend in Israel aimed at reducing the environmental damage caused by
the use of vehicles. As part of this trend, the global automotive industry is investing in increasing alternative sources of propulsion,
starting with hybrid vehicles and ending with vehicles powered by gas or electricity. Similarly, governments around the world have joined
the environmental effort, by way of activating regulatory tools to encourage the development, production and purchase of vehicles with
less environmental damage.
According
to an article published on the website Walla vehicles, titled Summary 2023: 1,000 New Cars Every Day. What Was the Most Sold Vehicle,
published on January 1, 2024, in the course of 2023, approximately 276,500 new vehicles were supplied in Israel, representing an increase
in 2% compared to 2022. Based on an article published on the Israel Transportation Managers’ website, approximately 40% of these
vehicles were environmentally friendly, which are therefore eligible for a reduced tax rate. This figure indicates the continuation of
the trend of the public preference to switch regular petrol vehicles to electric vehicles.
Over
the last two years, the electric vehicle market began to develop in Israel. As of the date of this prospectus, the electric vehicle category
is mainly dominated by Chinese brands. From the data of the automobile industry for the year 2023, it is evident that electric technology
was widely implemented in the market during this year, as 48,000 electric cars were delivered, accounting for approximately 18% of all
deliveries, compared to 2022 in which approximately 27,600 electric cars were delivered. According to the Automotive Industry Review,
there is currently a high adoption rate of electric vehicles, represented by a growth of approximately 74%.
Seasonality
There
is usually a seasonality in vehicle sales in Israel that is manifested in a decrease in vehicle sales towards the end of the calendar
year (in the fourth quarter of the year) and an increase in sales at the beginning of the calendar year (in the first quarter of the year).
This trend stems, to the best of AutoMax’s knowledge, from the consumers’ preference to postpone the purchase of the vehicle
until the beginning of the next calendar year, so that the registration, as will appear on the vehicle license, will be of a more advanced
calendar year.
However,
in the years 2020 through 2023, the Israeli government decided to reduce the purchase tax discounts for hybrid vehicles starting from
the beginning of the first quarter of the following year. Therefore, buyers of this type of vehicle chose to purchase the vehicles at
a lower price in the fourth quarter of that year. At the same time, importers preferred to release from ports and bonded warehouses a
large number of vehicles for inventory at a lower cost.
Governmental Regulations
AutoMax
operates in a highly regulated environment and is subject to many governmental regulations and laws that can impact its competitive position
and earnings. These regulations are designed to increase competition in the local market and protect consumers. AutoMax is subject to
consumer protection laws, laws regulating the import of spare parts, laws regulating services and recall obligations and regulations by
the Committee for Increasing Competitiveness in the Economy under the Ministry of Finance of the State of Israel.
Furthermore,
governments across the globe, including in Israel, have started adopting new regulations aimed at environmental matters in an attempt
to slow climate change. Over the years AutoMax has seen certain tax repercussions on vehicles pursuant to these regulations, for example
the Green Tax as adopted in Israel in 2009, pursuant to which the taxation on a vehicle is set by the level of pollution for such vehicle.
This Green Tax was adopted to encourage consumers to lean towards ecofriendly vehicles. Additionally, AutoMax is subject to governmental
regulations in the countries from which it imports its vehicles. The European union has adopted the Worldwide Harmonized Light Vehicle
Test Procedure, or WLTP, which is used to measure fuel consumption and CO2 emissions. All vehicles imported to Israel are subject
to the WLTP test to determine the Green Tax for such model.
In
order to increase the competitiveness in the field of the automotive industry and decrease the price of vehicles and spare parts, while
increasing the existing variety in the Israeli market, the Vehicle Services Licensing Law, was enacted to regulate the licensing of automotive
services in the industry. The law came into effect by supervisory orders by virtue of the Supervision of Commodities and Services Law,
5717-1957, or the Vehicle Services Law.
In addition, AutoMax is
subject to various advertising, sales, employment, financing and privacy laws, all of which could affect its ability to obtain the required
licenses and permits to operate its business.
Intellectual Property and Proprietary Rights
AutoMax’s
business name and brand image are critical elements to its business strategy. In Israel, it holds a registered tradename “AUTOMAX”
in English, and “Global Automax” in Hebrew, which is set to expire on November 25, 2029. AutoMax’s business is also
affected by innovation and technology which have become increasingly important. AutoMax relies on its tradename, domain names and certain
copyrights to protect its branding and differentiate it from other brands in Israel.
Company Information
Our
legal and commercial name is SciSparc Ltd. We were incorporated in the State of Israel on August 23, 2004, and are subject to the Israeli
Companies Law, 5759-1999, or the Companies Law.
Our
Ordinary Shares are listed on Nasdaq under the symbol “SPRC”. Our principal executive offices are located at 20 Raul Wallenberg
St., Tower A, 2nd Floor, Tel Aviv 6971916 Israel. Our telephone number in Israel is: (+972) (3) 717 5777. Our website address is http://www.scisparc.com.
The information contained on our website or available through our website is not incorporated by reference into and should not be considered
a part of this prospectus.
THE OFFERING
Ordinary Shares currently outstanding |
|
10,357,108 Ordinary Shares. |
|
|
|
Ordinary Shares offered by the selling shareholder |
|
Up to 21,000,000 Ordinary Shares that we may sell
to YA under this SEPA from time to time.
|
|
|
|
Ordinary Shares to be outstanding after this offering(1) |
|
31,357,108 Ordinary Shares, assuming the sale of a total 21,000,000 Ordinary Shares to YA pursuant to the SEPA (at an assumed price per share of $0.42, which is the last reported sales price of our Ordinary Shares on Nasdaq on August 27, 2024). |
Use of proceeds |
|
We will not receive any proceeds from the sale of the Ordinary Shares included in this prospectus by the Selling Shareholder. We may receive up to $20.0 million aggregate gross proceeds under the SEPA from sales of the Ordinary Shares that we elect to make to YA pursuant to the SEPA, if any, from time to time in our sole discretion, although the actual amount of proceeds that we may receive cannot be determined at this time and will depend on the number of shares we sell under the SEPA and market prices at the times of such sales. In connection with the SEPA, we may request Pre-Paid Advances of the Commitment Amount in an amount up to $5.0 million. Any proceeds that we receive from sales of our Ordinary Shares to YA or Pre-Paid Advances under the SEPA will be used for working capital and general corporate purposes. See “Use of Proceeds.” |
|
|
|
Risk factors |
|
Investing in our securities involves a high degree of risk. You should read the “Risk Factors” section starting on page 8 of this prospectus, and “Item 3. — Key Information — D. Risk Factors” in our 2023 Annual Report, incorporated by reference herein, and other information included or incorporated by reference in this prospectus for a discussion of factors to consider carefully before deciding to invest in the Ordinary Shares, for a discussion of factors to consider carefully before deciding to invest in the Ordinary Shares. |
|
|
|
Listing |
|
Our Ordinary Shares are listed on Nasdaq under the symbol “SPRC”. |
(1) |
The number of the Ordinary Shares to be outstanding immediately after this offering as shown above assumes that all of the Ordinary Shares offered hereby are sold and is based on 10,357,108 Ordinary Shares outstanding as of August 27, 2024. This number excludes: |
|
●
|
7,013 Ordinary Shares issuable upon the exercise
of options outstanding under our 2015 Share Option Plan, at a weighted average exercise price of $166.28 per share;
|
|
|
|
|
● |
80,000 Ordinary Shares issuable upon the vesting
of restricted share units outstanding under our 2023 Share Option Plan; |
|
|
|
|
● |
933,787 Ordinary Shares reserved for issuance and available for future grant under our 2023 Share Option Plan; |
|
|
|
|
● |
364,694 Ordinary Shares issuable upon the exercise of outstanding warrants, with exercise prices ranging from $68.38 to $637 per Ordinary Share; and |
|
|
|
|
● |
449,193 Ordinary Shares issuable upon the exercise of outstanding pre-funded warrants, with exercise prices ranging from $0.001 to $0.026 per Ordinary Share. |
RISK FACTORS
Investing in our securities
involves risks. Please carefully consider the risk factors described below and in our periodic reports filed with the SEC, including those
set forth under the caption “Item 3. Key Information – D. Risk Factors” in our 2023 Annual Report, which is incorporated
by reference in this prospectus. Before making an investment decision, you should carefully consider these risks as well as other information
we include or incorporate by reference in this prospectus. You should be able to bear a complete loss of your investment.
Risks Related to an Investment in Our Securities
and this Offering
It is not possible
to predict the actual number of shares we will sell under the SEPA to the Selling Shareholder, or the actual gross proceeds resulting
from those sales.
On
January 21, 2024, we entered into the SEPA with YA, pursuant to which YA has committed to purchase up to $20.0 million of our Ordinary
Shares, subject to certain limitations and conditions set forth in the SEPA. Of the Commitment Amount, to date we sold 5,402,887 Ordinary
Shares (including the Commitment Shares). The Ordinary Shares that may be issued under the SEPA may be sold by us to YA at our discretion
from time to time over an approximately 36-month period commencing on the date of the SEPA.
We
generally have the right to control the timing and amount of any sales of our Ordinary Shares to YA under the SEPA. Sales of our Ordinary
Shares, if any, to YA under the SEPA will depend upon market conditions and other factors. We may ultimately decide to sell to YA all,
some or none of the Ordinary Shares that may be available for us to sell to YA pursuant to the SEPA.
Because
the purchase price per share to be paid by YA for the Ordinary Shares that we may elect to sell to YA under the SEPA, if any, will fluctuate
based on the market prices of Ordinary Shares during the applicable purchase valuation period for each purchase made pursuant to the SEPA,
if any, it is not possible for us to predict, as of the date of this prospectus and prior to any such sales, the total number of Ordinary
Shares that we will sell to YA under the SEPA, the purchase price per share that YA will pay for shares purchased from us under the SEPA,
or the aggregate gross proceeds that we will receive from those purchases by YA under the SEPA.
Moreover,
although the SEPA provides that we may sell up to an aggregate of $20.0 million of our Ordinary Shares to YA, other than the Commitment
Shares only an aggregate of 21,000,000 Ordinary Shares are being registered under this Registration Statement that we may elect to sell
to YA, in our sole discretion, from time to time from and after the date of, and pursuant to, the SEPA. Even if we elect to sell to YA
all of the Ordinary Shares being registered for resale under this prospectus, depending on the market prices of our Ordinary Shares at
the time of such sales, 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.
As
of the date of this prospectus, 5,402,887 Ordinary Shares have been sold pursuant to the Original SEPA Form F-1 and the Registration Statement,
of which this prospectus forms a part, on Form F-1 relates to the offer and sale of up to an additional 21,000,000 Ordinary Shares by
the Selling Shareholder in connection with the SEPA. If we desire to issue and sell to YA under the SEPA more than the 21,000,000 Ordinary
Shares offered for resale under this prospectus, we will need to file with the SEC one or more additional registration statements to register
under the Securities Act the resale by YA of any such additional Ordinary Shares and the SEC would have to declare such registration statement
or statements effective before we could sell additional shares.
Any
issuance and sale by us under the SEPA of a substantial number of Ordinary Shares in addition to the Ordinary Shares being registered
for resale by YA under this prospectus could cause additional substantial dilution to our shareholders. The number of Ordinary Shares
ultimately offered for sale by YA is dependent upon the number of Ordinary Shares, if any, we ultimately sell to YA under the SEPA.
Further,
the resale by YA of a significant number of shares registered for resale in this offering at any given time, or the perception that these
sales may occur, could cause the market price of our Ordinary Shares to decline and to be highly volatile.
Investors who buy
shares at different times will likely pay different prices.
Pursuant
to the SEPA, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to YA. If and when
we do elect to sell Ordinary Shares to YA pursuant to the SEPA, YA may resell all, some or none of such shares at any time or from time
to time in its discretion and at different prices. As a result, investors who purchase shares from YA in this offering at different times
will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution
and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from YA
in this offering as a result of future sales made by us to YA at prices lower than the prices such investors paid for their shares in
this offering.
We may require
additional financing to sustain our operations and without it we will not be able to continue operations.
The
extent to which we rely on YA as a source of funding will depend on a number of factors, including the prevailing market price of our
Ordinary Shares, our ability to meet the conditions necessary to deliver advance notices under the SEPA and the extent to which we are
able to secure funding from other sources. Regardless of the amount of funds we ultimately raise under the SEPA, if any, we expect to
continue to seek other sources of funding. Even if we were to sell to YA the total commitment of $20.0 million, of which to date we have
sold 5,402,887 Ordinary Shares (including the Commitment Shares), under the SEPA we will still need additional capital to fully implement
our business plan.
Future sales and
issuances of our Ordinary Shares or other securities might result in significant dilution and could cause the price of our Ordinary Shares
to decline.
To
raise capital, we may sell Ordinary Shares, convertible securities or other equity securities in one or more transactions other than those
contemplated by the SEPA, at prices and in a manner we determine from time to time. We may sell shares or other securities in any other
offering at a price per share that is less than the price per share paid by investors in this offering, and investors purchasing shares
or other securities in the future could have rights superior to existing stockholders. The price per share at which we sell additional
Ordinary Shares, or securities convertible or exchangeable into Ordinary Shares, in future transactions may be higher or lower than the
price per share paid by investors in this offering. Any sales of additional shares will dilute our stockholders.
Sales
of a substantial number of Ordinary Shares in the public market or the perception that these sales might occur could depress the market
price of our Ordinary Shares and could impair our ability to raise capital through the sale of additional equity securities. We are unable
to predict the effect that sales may have on the prevailing market price of our Ordinary Shares. In addition, the sale of substantial
numbers of our Ordinary Shares could adversely impact their price.
Management will
have broad discretion as to the use of the proceeds from the SEPA or any potential Pre-Paid Advance and uses may not improve our financial
condition or market value.
Because
we have not designated the amount of net proceeds or potential Pre-Paid Advance from the SEPA to be used for any particular purpose, our
management will have broad discretion as to the application of such proceeds. Our management may use the proceeds for working capital
and general corporate purposes that may not improve our financial condition or advance our business objectives.
Risks Related to the Ownership of our Ordinary
Shares
We cannot assure
you that our Ordinary Shares will remain listed on Nasdaq or any other securities exchange.
On
July 16, 2024, we received a written notice, or the Notice, from Nasdaq indicating that we are not in compliance with the minimum bid
price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain a minimum
bid price of $1.00 per share. Under Nasdaq Listing Rule 5810(c)(3)(A), we were granted a period of 180 calendar days to regain compliance
with the minimum bid price requirement.
Our
American Depository Shares, or ADSs, which previously represented our Ordinary Shares, were listed on Nasdaq from March 2017 through July
2020. On September 21, 2020, our ADSs were delisted from Nasdaq as a result of not meeting the shareholders equity requirements of Nasdaq.
Between December 2020 and August 2021, our ADSs were quoted on the OTCQB. In August 2021, our ADR program was terminated and our ADSs
were converted to Ordinary Shares on a one-for-one basis. In September 2021, our Ordinary Shares began to be quoted for trading on the
OTCQB under the ticker “SPRCF”. In December 2021, our Ordinary Shares were re-listed on Nasdaq and began trading under the
symbol “SPRC”.
No
assurance can be given that we will remain eligible to be listed on Nasdaq. Further, because of the previous delisting of our ADSs from
Nasdaq, if we fall out of compliance with Nasdaq requirements in the future, our Ordinary Shares may be more likely to be subject to Nasdaq’s
delisting process and no assurance can be given that we will be able to regain compliance. Any delisting could adversely affect our ability
to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, customers and employees.
Risks Related to the Merger
If the proposed Merger with AutoMax is not
consummated, SciSparc’s share price could decline.
The
consummation of the proposed Merger with AutoMax is subject to a number of closing conditions, including the approval by our shareholders,
approval by Nasdaq of SciSparc’s listing of additional securities application of our ordinary shares issued in connection with the
Merger, and other customary closing conditions. In addition, at the closing date of the Merger, the net cash held by SciSparc, as described
in the Merger Agreement, shall be no less than $4,250,000 (less any amount owned by AutoMax to SciSparc under any loan agreement between
the parties) and the sum of $4,250,000 (less any amount owned by AutoMax to SciSparc under any loan agreement between the parties). SciSparc
is targeting a closing of the transaction in the fourth quarter of 2024.
If
the proposed Merger is not consummated, SciSparc may be subject to a number of material risks, and its share price could be adversely
affected, as follows:
|
● |
SciSparc has incurred and expects to continue to incur significant expenses related to the proposed Merger with AutoMax, even if the Merger is not consummated. |
|
● |
The Merger Agreement contains covenants restricting SciSparc’s solicitation of competing acquisition proposals and the conduct of SciSparc’s business between the date of signing the Merger Agreement and the closing of the Merger. As a result, significant business decisions and transactions before the closing of the Merger require the consent of AutoMax. Accordingly, SciSparc may be unable to pursue business opportunities that would otherwise be in its best interest as a standalone company. SciSparc has invested significant time and resources in the transaction process and if the Merger Agreement is terminated SciSparc will have a limited ability to continue its current operations without obtaining additional financing. |
|
● |
SciSparc’s collaborators and other business partners and investors in general may view the failure to consummate the Merger as a poor reflection on its business or prospects. |
|
● |
Some of SciSparc’s collaborators and other business partners may seek to change or terminate their relationships with SciSparc as a result of the proposed Merger or the failure thereof. |
|
● |
As a result of the Merger, current and prospective employees could experience uncertainty about their future roles within the combined company. This uncertainty may adversely affect SciSparc’s ability to retain its key employees, who may seek other employment opportunities. |
|
● |
SciSparc’s management team may be distracted
from day-to-day operations as a result of the proposed Merger.
|
|
|
|
|
● |
On
July 16, 2024, SciSparc received a written notice, or the Notice, from Nasdaq indicating that it is not in compliance with the minimum
bid price requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(2), which requires listed securities to maintain
a minimum bid price of $1.00 per share. Under Nasdaq Listing Rule 5810(c)(3)(A), SciSparc was granted a period of 180 calendar days to
regain compliance with the minimum bid price requirement. No assurance can be given that SciSparc will remain eligible to be listed on
Nasdaq. Further, because of the previous delisting of SciSparc’s ADSs from Nasdaq, if SciSparc falls out of compliance with Nasdaq
requirements in the future, its ordinary shares may be more likely to be subject to Nasdaq’s delisting process and no assurance
can be given that we will be able to regain compliance. Any delisting could adversely affect our ability to obtain financing for the continuation
of our operations and could result in the loss of confidence by investors, customers and employees. |
|
● |
Nasdaq could determine to delist SciSparc’s ordinary shares which could have an adverse effect on the value of SciSparc’s ordinary shares and any future ability to raise capital. |
In addition, if the Merger
Agreement is terminated and SciSparc’s board of directors determines to seek another business combination, it may not be able to
find a third party willing to provide equivalent or more attractive consideration than the consideration to be provided by each party
in the Merger. In such circumstances, SciSparc’s board of directors may elect to, among other things, divest all or a portion of
SciSparc’s business, and in such case, the consideration that SciSparc receives may be less attractive than the consideration to
be received by SciSparc pursuant to the Merger Agreement.
If the conditions to the Merger are not
met, the Merger will not occur.
Even if the Merger is approved
by the shareholders of SciSparc and AutoMax, specified conditions must be satisfied or waived to complete the Merger. These conditions
are set forth in the Merger Agreement. SciSparc and AutoMax cannot assure you that all of the conditions will be satisfied. If the conditions
are not satisfied or waived, the Merger will not occur or will be delayed, and SciSparc and AutoMax each may lose some or all of the intended
benefits of the Merger.
Some SciSparc and AutoMax officers and directors
have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard
to your interests.
Certain officers and directors
of SciSparc and AutoMax participate in arrangements that provide them with interests in the Merger that are different from yours, including,
among others, the continued service as an officer or director of the combined company, continued indemnification and the potential ability
to sell an increased number of shares of the combined company in accordance with Rule 144 under the Securities Act. These interests,
among others, may influence the officers and directors of SciSparc and AutoMax to support or approve the Merger.
The Merger may be completed even though
material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.
In general, either party can
refuse to complete the Merger if there is a material adverse change affecting the other party following April 10, 2024, the date of the
Merger Agreement. However, some types of changes do not permit either party to refuse to complete the Merger, even if such changes would
have a material adverse effect on SciSparc or AutoMax, to the extent they resulted from the following (unless, in some cases, they have
a disproportionate effect on SciSparc or AutoMax, as the case may be):
|
● |
changes or conditions generally affecting the industries or markets in which SciSparc and AutoMax operate, and changes in the industries in which SciSparc and AutoMax operate regardless of geographic region (including legal and regulatory changes); |
|
● |
acts of war, armed hostilities or terrorism; |
|
● |
changes in financial, banking or securities markets; |
|
● |
any change in, or any compliance with or action taken for the purpose of complying with, any federal, state, national, foreign, material local or municipal or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any governmental body (including under the authority of Nasdaq or the Financial Industry Regulatory Authority), or changes in any interpretations thereof; |
|
● |
any change in U.S. generally accepted accounting principles or interpretations thereof; |
|
● |
the announcement of the Merger Agreement or the pendency of the Merger; |
|
● |
the taking of any action required to be taken by the Merger Agreement; |
|
● |
pandemics, including any worsening thereof, man-made disasters, natural disasters, acts of God or other force majeure event; and |
|
● |
changes in U.S. or non-U.S. general economic or political conditions, or in the financial, credit or securities markets in general, including any shutdown of any governmental authority. |
If adverse changes occur but
SciSparc and AutoMax must still complete the Merger, the combined company’s share price may suffer.
The market price of the combined company’s
shares may decline as a result of the Merger.
The market price of the combined
company’s shares may decline as a result of the Merger for a number of reasons, including if:
|
● |
the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by financial or industry analysts; |
|
● |
the effect of the Merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or |
|
● |
investors react negatively to the effect on the combined company’s business and prospects from the Merger. |
SciSparc and AutoMax shareholders may not
realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.
If the combined company is
unable to realize the strategic and financial benefits currently anticipated from the Merger, SciSparc shareholders will have experienced
substantial dilution of their ownership interest without receiving any commensurate benefit. Significant management attention and resources
will be required to operate the two companies. Delays in this process could adversely affect the combined company’s business, financial
results, financial condition and share price following the Merger. Even if the combined company were able to operate the two businesses
successfully, there can be no assurance that this operation will result in the realization of the full benefits of synergies, innovation
and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period
of time.
During the pendency of the Merger, SciSparc
and AutoMax will be subject to contractual limitations set forth in the Merger Agreement that restrict the parties’ ability to enter
into business combination transactions with another party.
Covenants in the Merger Agreement
impede the ability of SciSparc or AutoMax to make acquisitions or complete other transactions that are not in the ordinary course of business
pending completion of the Merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors.
In addition, while the Merger Agreement is in effect and subject to limited exceptions, each party is prohibited from soliciting, initiating,
encouraging or taking actions designed to facilitate any inquiries or the making of any proposal or offer that could lead to the entering
into certain extraordinary transactions with any third party, such as a sale of assets, an acquisition of SciSparc’s securities,
a tender offer for SciSparc’s securities, a Merger or other business combination outside the ordinary course of business. Any such
transactions could be favorable to such party’s shareholders.
Certain provisions of the Merger Agreement
may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements
contemplated by the Merger Agreement.
The terms of the Merger Agreement
prohibit each of SciSparc and AutoMax from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover
proposals. Because the lack of a public market for AutoMax shares makes it difficult to evaluate the fairness of the Merger, the shareholders
of AutoMax may receive consideration in the Merger that is less than the fair market value of the AutoMax shares.
Certain shareholders could attempt to influence
changes within SciSparc that could adversely affect SciSparc’s operations, financial condition and the value of SciSparc’s
ordinary shares.
Our shareholders may from
time to time seek to acquire a controlling stake in our Company, engage in proxy solicitations, advance shareholder proposals or otherwise
attempt to effect changes. Campaigns by shareholders to effect changes at publicly-traded companies are sometimes led by investors seeking
to increase short-term shareholder value through actions such as financial restructuring, increased debt, special dividends, share repurchases
or sales of assets or the entire company. Responding to proxy contests and other actions by activist shareholders can be costly and time-consuming
and could disrupt our operations and divert the attention of our board of directors and senior management from the pursuit of the proposed
transaction. These actions could adversely affect our operations, financial condition, our ability to consummate the Merger and the value
of our Ordinary Shares.
SciSparc and AutoMax may become involved
in securities litigation or shareholder derivative litigation in connection with the Merger, and this could divert the attention of SciSparc
and AutoMax management and harm the combined company’s business, and insurance coverage may not be sufficient to cover all related
costs and damages.
Securities litigation or shareholder
derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business
division or announcement of a business combination transaction. SciSparc and AutoMax may become involved in this type of litigation in
connection with the Merger, and the combined company may become involved in this type of litigation in the future. Litigation often is
expensive and diverts management’s attention and resources, which could adversely affect the business of SciSparc, AutoMax and the
combined company.
If any of the events described in “Risks
Related to AutoMax’s Business and Operations” occur, those events could cause the potential benefits of the Merger not to
be realized.
AutoMax’s business is
expected to constitute a significant portion of the business of the combined company following the Merger. As a result, the risks described
below in the section entitled “Risks Related to AutoMax’s Business and Operations” beginning on page 13 are among
the most significant risks to the combined company if the Merger is completed. To the extent any of the events in the risks described
in the sections referenced in the previous sentence occur, those events could cause the potential benefits of the Merger not to be realized
and the market price of the combined company’s shares to decline.
Risks Related to AutoMax’s Business
and Operations
A decline in available financing may adversely
affect AutoMax’s business.
Many of AutoMax’s customers
finance their vehicle purchase. As the credit markets have historically experienced volatility and disruption, such downturns could adversely
affect the credit market and affect AutoMax clients’ ability to secure the required financing. A part of AutoMax’s success
is subject to the availability of affordable financing.
Additionally, AutoMax has
non-guaranteed credit lines from four banking corporations, which aggregated to approximately NIS 150 million (approximately $41.46 million)
for the year ended December 31, 2023, of which it had utilized approximately NIS 143 million (approximately $39.52 million). These credit
lines bear interest rates that vary between prime +0.5% and prime +2.25%. If the financial market or the banking system deteriorates,
AutoMax’s ability to obtain additional financing may be affected. Such a decline in available financing could have an adverse effect
on its business, operations, and financial results.
AutoMax signed certain indemnification clauses
within asset and share purchase agreements, as part of the sale of its digital media operations between the years 2017 and 2019 and if
such indemnification is sought out, AutoMax’s results of operations and financial conditions could be adversely impacted.
Between the years 2017 and
2019, AutoMax sold its digital media and advertising operations to various third parties. As part of such sales, AutoMax has agreed to
identify the buyers in case of a breach of representations provided by AutoMax. While AutoMax estimates that there is a low probability
it will be required to indemnify any such purchasers, any such indemnification could adversely impact its’ financial condition and
results of operations.
AutoMax operates in a highly competitive
industry. Failure to develop and execute strategies to remain a preferred importer and seller of vehicles and to adapt to the increasing
use of digital and online tools to market, buy, sell, lease and finance vehicles could adversely affect its business, sales and results
of operations.
The automotive imports industry
is highly competitive, including publicly and privately owned car importers, which import the same vehicle brands in a variety of models.
The value chain in the automotive industry includes international vehicle manufactures and importers. There are approximately 20 official
import groups in Israel, representing various manufactures, and responsible for approximately 97% of the automotive imports to Israel.
In addition, there are a few dozen parallel importers, who are collectively responsible for approximately 3% of the imports. AutoMax’s
competition is dynamic and changes annually based on the selection of vehicles its choses to import and hold in inventory for that year.
AutoMax’s selection of product lineup is done annually and determined by a comprehensive analysis of various factors, including
vehicle availability in the importing country, local market demand, tax advantages, currency exchange rates, and other relevant factors.
Certain of AutoMax’s competitors have access to more capital than it, which may provide them with an advantage in forging relationships
or providing customers with more competitive prices. Certain car dealers leverage relationships with vehicle manufacturers to sell used
cars as “certified pre-owned”, which could provide such competitors with an advantage over AutoMax.
Additionally, competitors
are shifting more focus to online sales, as this is becoming a consumer trend. While AutoMax currently provides online sale services,
there is no guarantee it will be successful in transitioning to online tools, for buying, selling, leasing and financing vehicles which
could adversely affect its business, sales and results of operations.
The automotive retail industry in general
and AutoMax’s business in particular are sensitive to economic conditions. These conditions could adversely affect its business,
sales, results of operations and financial condition.
The automotive retail industry
is sensitive to economic conditions such as inflation rates, increased gas prices, increased import prices, consumer credit availability,
and recessions. The recent historically high global inflation, geopolitical issues, each of the Israel – Hamas war and Russia –
Ukraine war, continuous increases in interest rates, unstable global conditions and changes in exchange rates have led to global economic
instability. In 2022, AutoMax witnessed a decrease of approximately 8% in vehicle sales, mainly due to the global chip crisis caused by
the Russia – Ukraine war. For additional information about the impact of the Israel – Hamas war on AutoMax’s business
and operations, see “AutoMax’s business and operations face many risks inherent to international maritime trade, and AutoMax’s
location in Israel including the ongoing interplay of the Israel – Hamas war, may exacerbate the import process, which is material
to the success of our business and operations” and “Disruptions on the maritime route in the Red Sea may adversely
affect AutoMax’s business.” The disruption in supply caused a shortage of new vehicles on the market, a longer waiting
period for vehicle delivery, as well as an increase in prices.
The demand for vehicles could
be affected by such material changes in supply, market prices, exchange rates and general economic conditions. As a result of high inflation
and recession, AutoMax is seeing record high levels of interest rates, unemployment and consumer spending trends are changing.
Delays or reductions in our
customers’ purchasing or shifts to lower-cost alternatives that result from tighter economic market conditions, could reduce the
demand for new vehicles and encourage consumers to remain with their current vehicles for longer periods of time, and could, consequently
have a material adverse effect on AutoMax’s business, financial condition, and results of operations.
AutoMax’s business is sensitive to
changes in the prices of new and used vehicles.
AutoMax’s business is
sensitive to various changes, specifically to changes in the prices of new and used vehicles. A decrease in the prices of new or used
vehicles, due to a reduction in import taxes or a reduced tax for purchasing vehicles could reduce its profit margins. For example, following
an update of the Pollution Regulations and the Procedure for Testing Pollutants in Vehicles in the European Union (WLTP) the Israeli green
taxation formula was updated. Pursuant to such updated taxation formula, the tax benefits in relation to vehicles with a low polluting
level and set tax benefit limits, are gradually decreasing, which causes an increase in the prices of the vehicles that benefited from
the purchase tax. For example, on January 1, 2023, the purchase tax on hybrid vehicles increased from 40% in 2022 to 50%, while the limit
of the tax benefit was reduced from NIS 40,000 (approximately $11,055) in 2021 to NIS 30,000. The purchase tax on electric vehicles was
doubled from 10% in 2022 to 20% in 2023, while the limit of the tax benefit was reduced from NIS 75,000 (approximately $20,730) in 2021
to NIS 60,000 (approximately $16,583) in 2022.
AutoMax operates in Israel,
and so the prices AutoMax sets are denominated in New Israeli Shekel, or NIS. Any depreciation of the NIS against foreign currencies in
which AutoMax purchases vehicles from manufactures and the reduction of the price of the vehicles by the manufactures or the importers
for other reasons, may adversely affect the value of the vehicles important and marketed by AutoMax. AutoMax has a policy in place to
reduce exchange risk, which includes both financial protections and options to import the same vehicle models from different suppliers
in different currencies.
These factors could lead to
a decrease in the value of AutoMax’s inventory, and a decrease in AutoMax’s sales, which could adversely affect AutoMax’s
business, sales, and results of operations.
AutoMax’s business is sensitive to
changes in consumer preferences and global trends in the automotive industry.
AutoMax may be affected by
various global trends and/or events in the environment in which it operates, on which Automax has no ability to influence, which in turn
may affect its operating results. The vehicle manufacturing industry has been characterized in recent years by significant technological
progress, especially in the fields of vehicles driven by alternative energy sources and autonomous vehicles.
In addition, there is a noticeable
increase in the cooperative economy trend and a trend of decreasing the environmental damages caused by the use of vehicles, which are
expressed, inter alia, by increase in demand for the use of electric and hybrid vehicles, by the development of new models of vehicle’
sharing, by short-term vehicle rentals, in a pay-as-you-go model, and by shared travels. Alongside this, major cities in Europe are promoting
processes intended to reduce and even limit completely the entrance of polluting vehicles into the cities. This trend has recently expanded
to Israel, as part of which, restrictions were imposed on the entry of polluting vehicles into Jerusalem and Haifa, and potentially in
other cities.
The developments described
above may create uncertainty in the long term regarding the motorization level as well as the growth rate of the vehicles’ manufacturing
industry in which manufacturers whose vehicles AutoMax imports are operating, as well as reducing, in the long term, the demand for car
ownership, which in turn may influence AutoMax’s activity and affect AutoMax’s business results.
AutoMax’s business and operations
face many risks inherent to international trade, and our location in Israel including the ongoing interplay of the Israel – Hamas
war, may exacerbate the import process, which is material to the success of AutoMax’s business and operations.
AutoMax imports, distributes
and sells vehicles in Israel, and all the vehicles AutoMax sells are manufactured outside of Israel. While AutoMax manages its inventory
of vehicles and spare parts in a manner that allows AutoMax to provide a rapid response to its customers’ needs, AutoMax’s
business remains sensitive to customary risks of importing merchandise, such as currency fluctuations, import duties, trade regulations
and restrictions, transportation costs, unforeseeable disasters, work stoppages, exchange rates, and general political conditions in other
countries. Changes in trade policies could limit AutoMax’s ability to import vehicles and/or its ability to purchase vehicles and/or
parts at reasonable prices.
Disruptions to the maritime route in the
Red Sea may adversely affect AutoMax’s business.
The Red Sea is a vital maritime
route for international trade arriving in or originating from Israel. Following Hamas’s attack on Israel and the Israeli’s
security cabinet’s declaration of war against Hamas, the Houthi movement, which controls parts of Yemen, launched a number of attacks
on marine vessels traversing the Red Sea, which marine vessels were thought to either be in route towards Israel or to be partly owned
by Israeli businesses or persons. As a result of such disruptions, and in order to mitigate continued economic harm, suppliers have changed
routes from Europe to the Middle East, and, as a result, AutoMax has experienced, and may continue to experience in the future, delays
in vehicle deliveries, extended lead times, and increased cost of freight, increased insurance costs, purchased materials and manufacturing
labor costs. All of these factors have had and may continue to have an effect on AutoMax, which is substantially reliant on its ability
to import and sell vehicles, and such delays and increased costs could have an impact on AutoMax’s inventory which may prevent AutoMax
from supplying vehicles in a timely fashion to purchasers and/or impede AutoMax’s ability to replenish its inventory based on consumer
trends. Such delays in supplying vehicles could result in purchasers cancelling orders, which could have a negative effect on AutoMax’s
results of operation. Furthermore, such increase in costs could impact AutoMax’s ability to sell vehicles at competitive prices,
which could materially affect its financial results and operations. Additionally, some of the main maritime companies have announced they
will no longer plan routes to Israel, until such time as it is safe, which could impede on AutoMax’s ability to import vehicles,
and as a result could have a material adverse effect on its business and financial results. The risk of ongoing supply disruptions may
further result in delayed deliveries of AutoMax’s products.
Turkey’s trade embargo on Israel may
adversely affect AutoMax’s business.
In May 2024, the Turkish Trade
Ministry announced an embargo on trade between Turkey and Israel, which restricts the export of goods from Turkey to Israel and the import
of products from Israel to Turkey, or the Embargo. The Embargo could have a short-term impact on the supply of vehicles and on the prices
of logistics and transportation of vehicles to Israel. As a result of the Embargo, AutoMax may experience delays in vehicle deliveries,
extended lead times, increased cost of freight, and increased insurance costs. All of these factors have had and may continue to have
an effect on AutoMax, which is substantially reliant on its ability to import and sell vehicles, and such delays and increased costs could
have an impact on AutoMax’s inventory, which may in turn prevent AutoMax from supplying vehicles in a timely fashion to purchasers
and may impede AutoMax’s ability to replenish its inventory based on consumer trends. Such delays in supplying vehicles could result
in purchasers cancelling orders, which could have a negative effect on AutoMax’s results of operations. As of the date of this prospectus,
the Embargo remains ongoing.
AutoMax’s ability to import and sell
vehicles depends in large part on agreements with suppliers and, therefore, any disruption or deterioration in its relationship with such
suppliers could impact its business.
AutoMax purchases its vehicles
and components from a limited number of suppliers. Disruption or termination of these sources could occur (due to several factors, including,
but not limited to, supplier capacity limitations, bankruptcy, acts of war, terrorism, fire, earthquake). Good relationships with such
suppliers are important for AutoMax’s business prospects. If AutoMax’s relationship with its suppliers were to deteriorate,
or if its suppliers fail to supply vehicles, its business, financial condition, commercialization and results of operations could be materially
adversely affected.
In recent years, as a result
of difficulties faced by major vehicle manufacturers, there has been an increase in consolidation of activities and mergers and acquisitions
in the automotive industry, as well as collaborations between vehicle manufacturers. The acquisition of a major supplier by a larger group
may lead to cancellation or non-renewal of franchise agreements, and concentration of the import of brands to Israel under one importer.
AutoMax’s success depends
greatly on its ability to retain and/or recruit suppliers who will provide it with a vehicle inventory, in the scope that will enable
AutoMax to remain competitive in the marketing of vehicles to its customers in Israel.
AutoMax is a holding company and as a result
are dependent on its operating subsidiaries to generate sufficient cash to fund its ongoing operations.
The continuation of AutoMax’s
activities depends on its operating subsidiaries’ ability to generate sufficient cash and raise additional financial sources in
order to develop its activities. The loss of operations or not sufficient operations of its subsidiaries could have a material adverse
effect on its business, sales and results of operations. There is no certainty that AutoMax will succeed in raising funds in the required
amount, or at all.
AutoMax is dependent on its management team
and professional personnel, and its business could be harmed if it is unable to attract and retain personnel necessary for its success.
AutoMax’s success depends
highly on its ability to attract and retain skilled, professional personnel, consultants and contractors. The departure of highly skilled
professional personnel, in particular any particular key management personnel, could have an adverse impact on AutoMax’s operations
and ability to execute its growth plan.
AutoMax’s efforts to
retain and attract professional personnel may also result in significant additional expenses, which could adversely affect its profitability.
There can be no assurance that professional personnel will continue to be employed or that AutoMax will be able to attract and retain
qualified personnel in the future. Failure to retain or attract qualified personnel could have a material adverse effect on AutoMax’s
business, financial conditions and results of operations.
Risks Related to AutoMax’s Regulatory
Matters
AutoMax’s operations are subject to
a wide range of governmental regulations and laws. Its failure to comply with or any changes to these regulations and laws, could adversely
affect AutoMax’s business, sales, results of operations and financial condition.
AutoMax operates in a highly
regulated industry and it is subject to various local laws and regulations. Additionally, the automotive industry in Israel is characterized
by vast regulation and strict regulatory requirements, including the standardization requirements, which may affect AutoMax’s expenditures
and its operational results. Changes in regulatory arrangements that apply to the automotive industry, such as changes in government taxation
policy, changes in the policy regarding the classification of vehicles as private or commercial for tax purposes or changes in the policy
regarding the value of use of a personal vehicle provided by the employer for the use of the employee, or changes in the standards of
vehicles permitted to be imported into Israel, may, in AutoMax’s estimation, lead to changes in demand for various types of vehicles,
and affect in the long term the results of its activity. In addition, regulatory changes introduced following the recommendations of the
Committee for the Increase of Competitiveness, as well as changes in the legal provisions that will completely remove or ease the barriers
to entry into the industry, will allow the entry of additional indirect importers, increase competition and, as a result, may cause a
decrease in AutoMax’s revenues and profitability.
Failure to renew AutoMax permits and licenses
or their revocation could materially adversely affect its business, results of operations, financial condition and cash flows.
AutoMax’s subsidiary,
Global Automax, operates in accordance with and subject to the permits and licenses granted to it for the purpose and within the framework
of its activity as an indirect importer, as further detailed in this prospectus. The main licenses used for the AutoMax operations are
in accordance with the Vehicle Services Licensing Law, Licensing Regulations for Services and Professions in the Automotive Industry (Vehicle
Import and Marketing and Vehicle Trade), 5775-2016 (the “Vehicle Services Licensing Law”). Since its inception, Global AutoMax
was granted the required permits and licenses, and these were extended, from time to time, new permits were obtained when required. However,
failure to meet certain criteria as detailed in the Vehicle Services Licensing Law may lead to such permits and licenses being suspended
or not eligible for renewal and/or extensions. Furthermore, such permits could be suspended or revoked until the required conditions are
met. There are currently pending legal proceedings against AutoMax that could, among other things, impede on its ability to renew or obtain
new licenses. For additional information, see “Risks Related to AutoMax’s Regulatory Matters—AutoMax is subject to
various legal proceedings. If the outcomes of these proceedings are adverse to AutoMax, it could have a material adverse effect on its
business, results of operations and financial condition.” Cancellation, conditioning, limitation or non-renewal of any of the
AutoMax licenses, due to the aforementioned reasons or for any other reason, may have an effect on its activities and business results.
Import product restrictions may impair AutoMax’s
ability to sell vehicles or parts profitably.
Many of the spare or replacement
parts AutoMax installs in its vehicles are manufactured outside of Israel. As a result, the AutoMax business is sensitive to customary
risks of importing merchandise, such as import duties, trade regulations and restrictions, transportation costs, unforeseeable disasters,
work stoppages, exchange rates, and general political conditions in other countries. Changes in trade policies could limit AutoMax’s
ability to import vehicles and/or its ability to purchase vehicles and/or parts at reasonable prices. Such restrictions could additionally
limit AutoMax’s ability to provide servicing for vehicles and decrease its sales and/or marketability for customers.
In addition, any inability
to receive the required approvals to import its vehicles or any disputes or disagreements with officials regarding the import duties,
tariffs, or similar matters, could adversely affect AutoMax’s ability to import vehicles into Israel as well as impact its profit
margins.
AutoMax is subject to various legal proceedings.
If the outcomes of these proceedings are adverse to AutoMax, it could have a material adverse effect on its business, results of operations
and financial condition.
From time to time, AutoMax
or its subsidiaries may be party to legal proceedings and claims in the ordinary course of business. While the outcomes of these matters
cannot be predicted with certainty, AutoMax does not believe they will have a material effect on its consolidated financial position,
results of operations, or cash flows.
There are currently two pending
legal proceedings against AutoMax, certain beneficial owners as well as officers of AutoMax and its subsidiaries, which AutoMax considers
material to its business.
On August 5, 2021, the Tel
Aviv District Attorney’s Office filed an indictment against Global Automax., Haim Levy Trade-In Ltd., and the following beneficial
owners and officers: Daniel Levy, CEO of AutoMax; Yinon Amit, Chief Business Officer of AutoMax; and Haim Levy, Trade and Procurement
Officer of AutoMax and the son of Daniel Levy , or together the Officers, together with Global Automax and Haim Levy Trade-In,the Defendants”.
Pursuant to the indictment:
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Global Automax was accused of committing forgery offenses according to the Penal Law, fraud under the Penal Law, smuggling according to the Customs Ordinance [new version] and money laundering offenses, according to the Money Laundering Prohibition Law. |
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Haim Levy Trade In was accused of committing forgery offences under the Penal Law, fraud under the Penal Law, smuggling under the Customs Ordinance, tax and customs violations under the Customs Ordinance (new version), Value Added Tax Law and the Purchase Tax Law (Goods and Services), and money laundering offenses according to the Prohibition of Money Laundering Law and the Penal Law. |
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The Officers were accused of forgery offences under the Penal Law, fraud under the Penal Law, smuggling under the Customs Ordinance, and money laundering offenses according to the Prohibition of Money Laundering Law and the Penal Law. |
The preliminary hearings were
completed, and the evidence trials began in March 2023 for each of the Defendants. AutoMax denies the claims against Global Automax.
We were informed that AutoMax
believes, based on the position taken by its legal counsel on this matter, that Global Automax has strong claims in order to deal with
the allegations in the indictment. Furthermore, based on information received from its legal counsel, in the event of a conviction against
Global Automax, the penal sanctions would consist of a monetary fine, and if convicted of money laundering there could be repossessions.
In addition, AutoMax could be exposed to an administrative procedure on behalf of the Israeli Ministry of Transportation and Road Safety.
Subject to Section 8 of the Vehicle Services Licensing Law, the Deputy Director General has the authority to refuse granting a license
or the renewal of a license, if the applicant has been convicted of a criminal offense that, due to its nature, severity, or circumstance
the applicant is not deemed fit to provide vehicle services or to provide services in the automotive field for which the application was
submitted. The Deputy Director General has the same authority in the event an indictment was filed, even if a final verdict has not yet
been reached. Furthermore, under Section 10(a)(7) of the Vehicle Services Licensing Law, the Deputy Director General can revoke or suspend
a license until the licensee complies with the conditions put in place.
An additional lawsuit was
filed on September 29, 2022, with the District Court in Tel Aviv in the form of a request for approval as a class action, or the Request,
against Global Automax, Union Motors Ltd., or Union, Lex Motors Ltd., or Lex, Toyota Motor Corporation, or Toyota, and Denso Corporation,
or Denso.
The applicant claims that
the defendants, Toyota as a manufacturer of vehicles; Danso as a manufacturer of allegedly defective fuel pumps, installed in Toyota and
Lexus vehicles, and are the subject of the Request. Union and Lex served as direct importers of Toyota and Lexus vehicles in Israel. Global
Automax served as an indirect importer of Toyota vehicles in Israel, and Global Automax imported the applicant’s vehicle to Israel.
The applicant claims that each of Lex, Union and Global Automax, breached their obligations towards the group represented in the class
action, inter alia, producing and/or importing and/or marketing and/or selling vehicles in which a defective fuel pump was installed,
refraining from performing a service recall on all vehicles in which defective pumps were installed, avoided bearing the costs of damages
caused by the defective fuel pumps and the service recall, etc.
This, according to the applicant,
is in breach of the defendants’ obligations according to the Liability for Defective Products Law, 5740-1980, the Sales Law, 5728-1968,
the Contracts Law (General Part), 5733-1973, the Licensing of Services and Professions in the Automotive Industry Law, 5776-2016 and other
laws.
The applicant estimates the
total damages for all members of the claim exceed an aggregate of NIS 2.5 million (approximately $691,000), and as such that cannot be
estimated by him.
In November 2023, Global Automax
submitted a reply to the Request, in which it rejected all of the applicant’s claims in the Request. In February 2024, the applicant submitted
a response to the respondents’ response to the Request. A preliminary hearing is scheduled for September 2024.
While AutoMax cannot accurately
predict the outcome of this proceeding, it does not believe the claims are substantial and estimate the exposure with respect to such
claim is likely immaterial.
AutoMax’s business is subject to a
variety of local and international laws regarding privacy and data protection obligations.
AutoMax collects, uses, maintains
and otherwise processes certain data about candidates and employees. AutoMax’s ability to collect, use, maintain or otherwise process
personal data has been, and could be further, restricted by existing and new laws and regulations relating to privacy and data collection
and protection, including the Israeli Privacy Protection Law, 5741-1981, or the Privacy Law. AutoMax implements measures for the purpose
of adapting the relevant aspects of its activity to the provisions applicable subject to the Privacy Protection Law and the regulations
enacted by virtue thereof, and for this purpose it recently contracted with a company that manages its information security and privacy
protection aspects.
Changes in local or foreign tax laws, changing
interpretations of existing tax laws, or adverse determinations by tax authorities could increase AutoMax’s tax burden or otherwise
adversely affect its results of operations, and financial condition.
A certain degree of judgment
is required in evaluating its tax positions and determining its provision for income taxes. In the ordinary course of business, there
are many transactions and calculations for which the ultimate tax determination is uncertain. As AutoMax operates in numerous taxing jurisdictions,
the application of tax laws can be subject to diverging and sometimes conflicting interpretations by tax authorities of these jurisdictions.
It is not uncommon for tax authorities in different countries to have conflicting views. In addition, tax laws are dynamic and subject
to change as new laws are passed and new interpretations of the law are issued or applied. For example, the work being carried out by
the OECD on base erosion and profit shifting as a response to increasing globalization of trade could result in changes in tax treaties
or the introduction of new legislation that could impose an additional tax on businesses. As a result of changes to laws or interpretations,
AutoMax’s tax positions could be challenged, and its income tax expenses could increase in the future.
There can be no assurance
that its effective tax rate for the year ended December 31, 2023 will not change over time as a result of
changes in corporate income tax rates or other changes in the tax laws of the jurisdictions in which AutoMax operates. Any changes in
tax laws could have an adverse impact on its financial results.
Environmental, social and corporate governance,
or ESG issues, including those related to climate change and sustainability, may have an adverse effect on AutoMax’s business, financial
condition and results of operations and damage AutoMax’s reputation.
Public
companies are facing increasing scrutiny related to ESG practices and disclosures from certain investors, capital providers, shareholder
advocacy groups, other market participants, and other stakeholder groups. For example, certain institutional and individual investors
have requested various ESG-related information and disclosures as they increasingly incorporate ESG criteria in making investment and
voting decisions. With this increased focus, public reporting regarding ESG practices is becoming more broadly expected. Such increased
scrutiny may result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on AutoMax’s business,
financial condition or results of operations. If AutoMax’s ESG practices and reporting do not meet investor or other stakeholder
expectations, which continue to evolve, AutoMax may be subject to investor or regulator engagement regarding such matters.
In
March 2024, the SEC published climate disclosure rules, subject to which SciSparc, upon consummation of the Merger, would be required
to disclose certain climate-related information such as governance of climate-related risks and relevant risk management processes, among
other things. While the final rules have yet to be implemented and are subject to ongoing litigation, AutoMax cannot predict the ultimate
scope and impact these rules will have on AutoMax’s business. If the SEC’s climate disclosure rules are implemented, they
would likely result in additional legal, accounting and financial compliance and increased general and administrative expenses. Moreover,
this could result in increased management time and attention to ensure AutoMax is compliant with the regulations and expectations.
Risks Related to AutoMax’s Financing
AutoMax may not be able to satisfy its debt
obligations upon the occurrence of a change in control under its debt instruments or to obtain additional financing based on existing
debt.
AutoMax
intends to continue making investments to support its business growth and will likely require additional funds to respond to business
challenges and opportunities, including the need to purchase inventory of vehicles, improve AutoMax’s operating infrastructure to
support volume growth or acquire complementary businesses and technologies. Accordingly, AutoMax may need to engage in equity or debt
financing to secure additional funds if its existing sources of cash and any funds generated from operations do not provide it with sufficient
capital. If AutoMax raises additional funds through future issuances of equity or convertible debt securities, its existing stockholders
could suffer significant dilution, and any new equity securities AutoMax issues could have rights, preferences, and privileges superior
to those of holders of its other classes of shares.
Any
future debt financing that AutoMax may secure in the future could involve restrictive covenants relating to its capital raising activities
and other financial and operational matters, which may make it more difficult for AutoMax to obtain additional capital and to pursue business
opportunities, including potential acquisitions. AutoMax may not be able to obtain additional financing on terms favorable to it, if at
all. If AutoMax is unable to obtain adequate financing or financing on terms satisfactory to it when it requires it, AutoMax’s ability
to continue to support its business growth and to respond to business challenges and opportunities could be significantly impaired, and
its business may be adversely affected.
Increases in interest rate could materially
adversely affect AutoMax’s business, financial condition, and results of operations.
The
recent inflation, geopolitical issues, increase in energy costs, increases in interest rates, unstable global conditions and changes in
currency exchange rates have led to global economic instability. Furthermore, as interest rates are reaching historically high records,
it could impede AutoMax’s ability to obtain financing or comply with its existing credit lines if the banks. Such changes, and their
impact on the global macro-economic environment, can impact AutoMax’s business, operating results, and financial condition. Furthermore,
as the majority of the customers require financing to purchase vehicles, such increase in interest rates could make it less appealing
and/or more difficult to purchase vehicles and thus decrease AutoMax’s sales, which could adversely affect AutoMax’s business,
financial condition and results of operations.
AutoMax may experience credit default or
losses if AutoMax’s customers default from the financing it provides.
As
for the date of the report, through certain subsidiaries, AutoMax provides its customers with credit lines in low volumes. However, as
is customary in the automotive industry, it is possible that according to AutoMax’s management decision, sales made to its customers
will be partially made on credit. In such cases, AutoMax 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.
New laws, regulations, or governmental policies
in response to climate change, including fuel economy and greenhouse gas emission standards, or changes to existing standards, could adversely
impact AutoMax’s business, results of operations, financial condition, cash flow, and prospects.
AutoMax
is subject to a variety of local laws and regulations that pertain to the environment. Its business involves the use, handling and disposal
of hazardous materials and wastes, including motor oil, gasoline, solvents, lubricants, paints and substances. AutoMax is subject to compliance
with regulations concerning, among other things, the operation of underground and above-ground gasoline storage tanks, gasoline dispensing
equipment, above-ground oil tanks and automotive paint booths.
The
Clean Air Law, 5768-2008, or the Clean Air Law, authorizes the Israeli Minister of Environmental Protection, or the Minister, to set provisions
regarding the prevention and reduction of air pollution from mobile emission sources, in accordance with values commonly accepted in the
developed countries of the world. The Clean Air Law determines that a person shall not sell, import or market a mobile emission source,
except in accordance with the provisions set by the Minister. This law also states that it is mandatory to include the degree of air pollution
of the vehicle and data regarding the fuel consumption of the vehicle in any new vehicle’ advertisement, as part of the advertisement
itself; and, in addition, said data must be displayed by any entity engaged in the business of selling and marketing new vehicles within
its premises. Similar provisions were established as part of the Clean Air Regulations (disclosure of air pollution data from a motor
vehicle in an advertisement), 5769-2009, as well.
To
the best of AutoMax’s understanding, it complies with the provisions of the Clean Air Law and the regulations established by virtue
thereof and includes the required data in its publications. In addition, the Clean Air Regulations (air pollution from vehicles), 5772-2012
determines what constitutes unreasonable air pollution from a vehicle and regulates the obligation to carry out an air pollution test
for a vehicle before registering it, issuing a license, and renewing it. It should be noted that new vehicles imported to Israel undergo
inspections to verify their suitability for delivery and registration.
In
addition, there is a noticeable increase in the cooperative economy trend and a trend of decreasing the environmental damages caused by
the use of vehicles, which are expressed, inter alia, by increase in demand for the use of electric and hybrid vehicles, by the development
of new models of vehicle’ sharing, by short-term vehicle rentals, in a pay-as-you-go model, and by shared travels. Alongside this,
major cities in Europe are promoting processes intended to reduce and even limit completely the entrance of polluting vehicles into the
cities. This trend has recently expanded to Israel, as part of which, restrictions were imposed on the entry of polluting vehicles into
Jerusalem and Haifa, and potentially, in other cities. The developments described above may create uncertainty in the long term regarding
the motorization level as well as the growth rate of the vehicles’ manufacturing industry in which manufacturers whose vehicles
AutoMax imports are operating, as well as reducing, in the long term, the demand for car ownership, and thus influence AutoMax’s
activity.
Risks Related to AutoMax’s Cybersecurity
Failure to maintain the security and functionality
of AutoMax’s information systems, or to defend against or otherwise prevent a cybersecurity attack or data breach, could adversely
affect its business, financial position, results of operations and liquidity.
AutoMax’s
activities are linked by information systems, including telecommunications, the internet, network communications, emails and various computer
hardware and software applications. As such, it could suffer damage to the aforementioned communication systems. In the current environment,
there are numerous and evolving risks with regards to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored
intrusions, industrial espionage, employee malfeasance and human or technological error. While AutoMax implements various measures
to minimize and even prevent these risks, including having a detailed action policy, it cannot guarantee no cyber-attack may be carried
out. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently
induce employees, customers, sub-contractors, agents, distributors or others to disclose information or unwittingly provide access to
systems or data.
Although
AutoMax has invested in measures to reduce these risks, it can provide no assurance that its current IT systems are fully protected against
third-party intrusions, viruses, hacker attacks, information or data theft or other similar threats. The cost and operational consequences
of implementing, maintaining and enhancing further data or system protection measures could increase significantly to overcome increasingly
intense, complex, and sophisticated global cyber threats.
Despite
its best efforts, AutoMax is not fully insulated from data breaches and system disruptions and, accordingly, it has experienced and expects
to continue to experience actual or attempted cyberattacks of its IT networks. To the best of AutoMax’s knowledge, no cybersecurity
incidents were detected. Although no attempted cyberattacks has had a material adverse effect on its operations or financial condition
thus far, AutoMax cannot guarantee that any such incidents will not have a material adverse effect on AutoMax’s operations or financial
condition in the future.
As
such, its tools and servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with the
AutoMax computer systems and tools located at its facility, at cloud services or at customer sites, or could be subject to system failures
or malfunctions for other reasons. Increased information technology security threats and more sophisticated computer crime pose a risk
to the security of AutoMax’s systems and networks and the confidentiality, availability and integrity of AutoMax’s data or
customer data. Cybersecurity attacks could also include attacks targeting the security, integrity and/or reliability of the hardware and
software installed in its products. System failures or malfunctioning could disrupt AutoMax’s operations and its ability to timely
and accurately process and report key components of its financial results.
AutoMax’s collection, use, storage,
disclosure, transfer and other processing of personal information, could give rise to significant costs, liabilities and other risks,
including as a result of investigations, inquiries, litigation, fines, legislative and regulatory action and negative press about its
privacy and data protection practices, which may harm AutoMax’s business, financial conditions, results of operations and prospects.
AutoMax’s
operations are dependent on secure processing, transmission, storing on its computers and networks proprietary and confidential information.
AutoMax uses various third-party storage platforms which could make it more vulnerable to such cyberattacks. Furthermore, AutoMax relies
on digital technologies to process payments, both on its networks and third-party systems.
Privacy
laws are ever changing and continue to create new individual privacy rights, including regulations regarding the manner in which such
personal information should be handled. As part of its ongoing operations, AutoMax gathers certain personal information from customers,
vendors, manufactures and others. AutoMax has invested in implementing security controls and adapting its systems, amongst others, by
engaging Integrity Consulting and Risk Management (I.C.M.) Ltd., which manages information security and privacy protection within the
company. However, any misuse of such information or storing it inappropriately and not adequately protecting it could lead to inquiries,
litigation, fines, legislative and regulatory action against AutoMax.
In
light of the stated, there is a certain dependence on the information security, backup and retrieval capabilities of those providers.
In this aspect, AutoMax has a system of backups, designed to create a recovery mechanism from a situation where one backup environment
cannot, for whatever reason, support the provision of services.
AutoMax’s General Risk Factors
Macroeconomic factors such as fluctuation
in vehicle prices, fuel prices, supply chain disruptions, and vehicle-related technology advancements could have an adverse effect on
AutoMax’s revenues and operating results.
Macroeconomic
factors that affect oil prices and the automobile and commodity markets can have adverse effects on AutoMax’s revenues, revenue
growth rates (if any), and operating results. Significant increases in the cost of fuel could lead to a reduction in miles driven per
car and a reduction in accident rates. A material reduction in accident rates, whether due to, among other things, a reduction in miles
driven per car, vehicle-related technological advances such as accident avoidance systems and, to the extent widely adopted, the advent
of autonomous vehicles, could have a material impact on revenue growth. Similarly, a reduction in total loss frequency rates, due to among
other things, sharp increases in used car prices that make it less economical for insurance company sellers to declare a vehicle involved
in an accident a total loss, could also have a material impact on revenue growth. In addition, under the AutoMax Percentage Incentive
Program contracts, or the PIP, the cost of transporting the vehicle to one of AutoMax’s facilities is included in PIP fee. AutoMax
may incur increased fees, which it may not be able to pass on to its vehicle sellers. A material increase in transportation rates could
have a material impact on AutoMax’s operating results. Volatility in fuel, commodity, and used car prices could have a material
adverse effect on its revenues and revenue growth rates in future periods.
Exchange rate fluctuations between the U.S,
dollar, Euro and the New Israeli Shekel currencies may negatively affect AutoMax’s earnings.
As a result of the international
nature of AutoMax’s business, it is exposed to risks associated with changes in foreign currency exchange rates. Substantially all
its cost of purchases are either in U.S. dollars or Euros while the majority of its revenues and AutoMax’s management, marketing,
sales and research and development costs are in New Israeli Shekels. AutoMax is therefore exposed to foreign currency risk due to fluctuations
in exchange rates. This may result in gains or losses with respect to movements in exchange rates, which may be significant and may also
cause fluctuations in reported financial information that are not necessarily related to its operating results.
Risks Related to AutoMax’s Operations
in Israel
Conditions in Israel, including the ongoing
war between Israel and Hamas, and other conflicts in the region, may adversely affect AutoMax’s operations and limit its ability
to market its products, which would lead to a decrease in revenues.
AutoMax is incorporated under
the laws of the State of Israel, and its employees, including management members, operate from their offices that are located in Tel Aviv,
Israel. In addition, a number of its officers and directors are residents of Israel. Accordingly, AutoMax’s business and operations
are directly affected by economic, political, geopolitical and military conditions in Israel. Since the establishment of the State of
Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations active
in the region. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various
parts of Israel, which have negatively affected business conditions in Israel.
In October 2023, Hamas terrorists
infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas
also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza
Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians
and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist
organizations commenced in parallel to their continued rocket and terror attacks. As a result of the war, operations at two of AutoMax’s
branch locations were closed and have not reopened as of the date of this prospectus.
The intensity and duration
of Israel’s current war against Hamas is difficult to predict, as are such war’s economic implications on AutoMax’s
business and operations and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications
of a deterioration of Israel’s economic standing, for instance, a downgrade in Israel’s credit rating by rating agencies (such
as the recent downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating
from “stable” to “negative” and the S&P Global lowered its long-term credit rating from AA- to A+, as well
as a downgrade of its short-term credit ratings from A-1+ to A-1, with an outlook on the long-term ratings “negative”). which
may have a material adverse effect on AutoMax and its ability to effectively conduct its operations. As many of AutoMax’s customers
purchase their vehicles through credit financing, an adverse material effect on Israel’s economy could impact the ability to obtain
such credit financing on favorable terms, which in turn could lead to a decrease in AutoMax sales.
In connection with the Israeli
security cabinet’s declaration of war against Hamas and possible hostilities with other organizations, several hundred thousand
Israeli military reservists were drafted to perform immediate military service. As of the date of this prospectus, none of AutoMax’s
current employees have been called to active military duty. AutoMax also relies on service providers located in Israel and have entered
into certain agreements with Israeli counterparts. AutoMax’s employees and consultants in Israel, in addition to employees of AutoMax’s
service providers located in Israel may be called for service in the current or future wars or other armed conflicts with Hamas and others,
and such persons may be absent for an extended period of time. As a result, its operations may be disrupted by such absences, which disruption
may materially and adversely affect its business and results of operations. Additionally, the absence of employees of AutoMax’s
Israeli suppliers and contract manufacturers due to their military service in the current or future wars or other armed conflicts may
disrupt their operations, which in turn may materially and adversely affect its ability to deliver or provide products and services to
customers.
Following the attack by Hamas
on Israel’s southern border, Hezbollah in Lebanon also launched missile, rocket, drone and shooting attacks against Israeli military
sites, troops and Israeli towns in northern Israel. In response to these attacked, the Israeli army has carried out a number of targeted
strikes on sites belonging to Hezbollah in Lebanon. Recently, Iran has directly joined the hostilities against Israel by firing hundreds
of drones, ballistic missiles and guided missiles to Israel causing further uncertainty in the region. While currently no damages were
registered in Israel from such attack, the situation is developing and could lead to additional wars and hostilities in the Middle East.
It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank will join the hostilities.
Such hostilities may include terror and missile attacks. In the event that AutoMax’s facilities are damaged as a result of hostile
actions, or hostilities otherwise disrupt its ongoing operations, its ability to deliver or provide products and services in a timely
manner to meet AutoMax’s contractual obligations towards customers and vendors could be materially and adversely affected. AutoMax’s
commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli
government currently covers the reinstatement value of certain direct damages that are caused by terrorist attacks or acts of war, AutoMax
cannot assure you that such government coverage will be maintained or that it will sufficiently cover its potential damages. Any losses
or damages incurred by AutoMax could have a material adverse effect on its business.
Provisions of Israeli law may make it easy
for AutoMax’s shareholders to demand that AutoMax convenes a shareholders meeting, and/or allow shareholders to convene a shareholder
meeting without the consent of AutoMax’s management, which may disrupt AutoMax’s management’s ability to run the company.
Israeli law may allow any
one or more of AutoMax’s shareholders holding, in the aggregate, at least 5% of AutoMax’s voting rights to demand that AutoMax
convenes a special shareholders meeting. Also, in the event that AutoMax chooses not to convene a special shareholders meeting pursuant
to such a request, Sections 64-65 of the Companies Law provide, among others, that such shareholders may independently convene a special
shareholders meeting within three months (or under court’s ruling) and require AutoMax to cover the costs, within reason, and as
a result thereof, AutoMax’s directors might be required to repay such costs. If AutoMax’s shareholders decide to exercise
these rights in a way inconsistent with AutoMax’s management’s strategic plans, AutoMax’s management’s ability
to run the company may be disrupted, and this process may entail significant costs to AutoMax.
It may be difficult to enforce
a judgment of a United States court against us and AutoMax’s officers and directors in Israel or the United States when asserting
United States securities laws claims in Israel to serving process on AutoMax’s officers and directors and these experts.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements made
under “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” and elsewhere in this prospectus, including
in our 2023 Annual Report, incorporated by reference herein, and other information included or incorporated by reference in this prospectus,
constitute forward-looking statements. 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 product candidates, 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.
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:
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our ability to raise capital through the issuance of additional securities and ability to continue as a going concern; |
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our ability to advance the development our pharmaceutical product candidates, including the anticipated starting and ending dates of our anticipated clinical trials; |
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our assessment of the potential of our pharmaceutical product candidates to treat certain indications; |
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our ability to successfully receive approvals from the FDA, 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; |
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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; |
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our ability to commercialize our existing product candidates and future sales of our existing product candidates or any other future potential product candidates; |
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our ability to meet our expectations regarding the commercial supply of our product candidates; |
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our ability to integrate our new eCommerce operations business, which focuses on the sale of hemp-based products on the Amazon.com marketplace; |
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our ability to pursue a restructuring plan which involves transferring our pharmaceutical activities to a new wholly-owned subsidiary and listing it on a leading stock exchange; |
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our planned Merger; |
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our ability to comply with continued listing requirements and standards of Nasdaq; |
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the overall global economic environment; |
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general market, political and economic conditions in the countries in which we operate including those related to recent unrest and actual or potential armed conflict in Israel and other parts of the Middle East, such as the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them and hostilities with Hezbollah on the northern border of Israel; |
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projected capital expenditures and liquidity; |
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changes in our strategy; |
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litigation; and |
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those factors discussed in the section “Risk Factors” beginning on page 8 of this prospectus. |
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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 “Item 3. — Key Information — D. Risk Factors”
in our Annual Report and in this prospectus in greater detail under the heading “Risk Factors” on page 8 of the prospectus.
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, levels
of activity, 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 prospectus.
USE OF PROCEEDS
This prospectus relates to
our Ordinary Shares that may be offered and sold from time to time by YA, the Selling Shareholder. All of the Ordinary Shares offered
by the Selling Shareholder pursuant to this prospectus will be sold by the Selling Shareholder for its own account. We will not receive
any of the proceeds from these sales.
We
may receive up to $20.0 million aggregate gross proceeds under the SEPA from any sales we make to YA pursuant to the SEPA. To date,
we sold 5,404,887 Ordinary Shares (including the Commitment Shares), pursuant to the SEPA for which we have received $6,177,373 in gross
proceeds.
We are unable to estimate
the total amount of proceeds that we may receive, as it will depend on the number of shares that we choose to sell, our ability to meet
the conditions to purchases set forth in SEPA, market conditions and the price of our Ordinary Shares, among other factors.
We expect 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. The use of any proceeds received under the SEPA are anticipated to be used for our existing
business and may also be used to provide a bridge loan to AutoMax until the closing of the Merger with AutoMax. However, we cannot provide
any assurance that we will be able to carry out any potential investments we may identify. As of the date of this prospectus, we cannot
specify with certainty all of the particular uses, and the respective amounts we may allocate to those uses, for any net proceeds we receive.
Accordingly, we will retain broad discretion over the use of these proceeds.
CAPITALIZATION
The following table sets forth our cash and cash
equivalents and our capitalization as of December 31, 2023:
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on a pro forma basis to give effect to (i) the extension of a $2.4 million bridge loan to AutoMax; (ii) the issuance of 55,293 Commitment Shares to YA; (iii) the issuance of 5,402,887 ordinary shares sold under the SEPA; and (iv) the exercise of 3,534,503 pre-funded warrants and issuance of 3,534,503 Ordinary Shares. |
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on a pro forma as adjusted basis to give effect to bridge loan and issuances described above and the additional issuance of 21,000,000 Ordinary Shares under the SEPA, at an assumed public offering price of $0.42 per Ordinary Share, which is the last reported sales price on Nasdaq of our Ordinary Shares on August 27, 2024, and after deducting estimated offering expenses, as if the sale of the Ordinary Shares had occurred on December 31, 2023. |
The information in this table
should be read in conjunction with and is qualified by reference to the financial information thereto and other financial information
incorporated by reference into this prospectus.
| |
| | |
As of December 31, 2023 (U.S. dollars in thousands) | |
| |
Actual | | |
Pro Forma | | |
Pro Forma As Adjusted | |
Cash and cash equivalents | |
$ | 2,076 | | |
$ | 5,755 | | |
$ | 14,575 | |
Total assets | |
$ | 11,182 | | |
$ | 17,261 | | |
$ | 26,081 | |
Total liabilities | |
$ | 1,595 | | |
$ | 1,595 | | |
$ | 1,595 | |
Shareholders’ equity: | |
| | | |
| | | |
| | |
Share capital and premium | |
$ | 64,526 | | |
$ | 70,605 | | |
$ | 79,425 | |
Ordinary Shares, no par value: 706,683 Ordinary Shares issued and
outstanding (actual); 10,357,108 Ordinary Shares issued and outstanding (pro forma); and 31,357,108 Ordinary Shares issued and
outstanding (pro forma as adjusted) | |
| − | | |
| − | | |
| − | |
Reserve for share-based payment transactions | |
$ | 5,282 | | |
$ | 5,282 | | |
$ | 5,282 | |
Warrants | |
$ | 5,190 | | |
$ | 5,190 | | |
$ | 5,190 | |
Foreign currency translation reserve | |
$ | 497 | | |
$ | 497 | | |
$ | 497 | |
Transactions with non-controlling interests | |
$ | 810 | | |
$ | 810 | | |
$ | 810 | |
Accumulated loss | |
$ | (68,691 | ) | |
$ | (68,691 | ) | |
$ | (68,691 | ) |
Non-controlling interests | |
$ | 1,973 | | |
$ | 1,973 | | |
$ | 1,973 | |
Total equity | |
$ | 9,587 | | |
$ | 15,666 | | |
$ | 24,486 | |
The table above is based on
706,683 Ordinary Shares outstanding as of December 31, 2023. This number excludes:
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7,013 Ordinary Shares issuable upon the exercise
of options outstanding under our 2015 Share Option Plan, at a weighted average exercise price of $166.28 per share; |
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80,000 Ordinary Shares issuable upon the vesting
of restricted share units outstanding under our 2023 Share Option Plan; |
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933,787 Ordinary Shares reserved for issuance and available for future grant under our 2023 Share Option Plan; |
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364,694 Ordinary Shares issuable upon the exercise of outstanding warrants, with exercise prices ranging from $68.38 to $637 per Ordinary Share; and |
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449,193 Ordinary Shares issuable upon the exercise of outstanding pre-funded warrants, with exercise prices ranging from $0.001 to $0.026 per Ordinary Share. |
SELLING SHAREHOLDER
This
prospectus relates to the possible resale from time to time by YA of any or all of the Ordinary Shares that have been or may be issued
by us to YA under the SEPA. For additional information regarding the issuance of Ordinary Shares covered by this prospectus, see the section
titled “Prospectus Summary —Standby Equity Purchase Agreement with YA” above. Except for the transactions contemplated
by the SEPA, YA does not, and has not had, any material relationship with us.
The
table below presents information regarding the Selling Shareholder and the Ordinary Shares that it may offer from time to time under this
prospectus. This table is prepared based on information supplied to us by the Selling Shareholder. The number of shares in the column
“Maximum Number of Ordinary Shares to be Offered Pursuant to this Prospectus” represents all of the Ordinary Shares that the
Selling Shareholder may offer under this prospectus. The Selling Shareholder may sell some, all or none of its shares in this offering.
We do not know how long the Selling Shareholder will hold the shares before selling them, and we currently have no agreements, arrangements
or understandings with the Selling Shareholder regarding the sale of any of the shares.
Beneficial
ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act and includes Ordinary Shares with
respect to which the Selling Shareholder has voting and investment power. The percentage of Ordinary Shares beneficially owned by the
Selling Shareholder prior to the offering shown in the table below is based on an aggregate of 10,357,108 of our Ordinary Shares outstanding
on August 27, 2024. The number of shares that may actually be sold by us under the SEPA may be fewer than the number of shares being offered
by this prospectus. The fourth column assumes the sale of all of the shares offered by the Selling Shareholder pursuant to this prospectus.
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Number of Shares of
Ordinary Shares Owned
Prior to Offering |
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|
Maximum Number of
Ordinary Shares to be
Offered Pursuant
to this Prospectus |
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Number of Ordinary
Shares Owned After
Offering |
|
Name of Selling Shareholder |
|
Number(1) |
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|
Percent |
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Number |
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Number(2) |
|
|
Percent |
|
YA II PN, LTD.(3) (4) |
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0 |
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0 |
% |
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21,000,000 |
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|
0 |
|
|
|
0 |
% |
(1) |
We have excluded from the number of shares beneficially owned prior to the offering all of the shares that YA may be required to purchase under the SEPA, because the issuance of such shares is solely at our discretion and is subject to conditions contained in the SEPA, the satisfaction of which are entirely outside of YA’s control, including the registration statement that includes this prospectus becoming and remaining effective. |
(2) |
Assumes the sale of all shares being offered pursuant to this prospectus. Depending on the price per share at which we sell our Ordinary Shares to YA pursuant to the SEPA, we may need to sell to YA under the SEPA more shares of our Ordinary Shares than are offered under this prospectus in order to receive aggregate gross proceeds equal to the $20.0 million total commitment under the SEPA. If we choose to do so and otherwise satisfy the conditions in the SEPA, we must first register for resale under the Securities Act such additional shares. The number of shares ultimately offered for resale by YA is dependent upon the number of shares we sell to YA under the SEPA. |
(3) |
YA is a fund managed by Yorkville Advisors Global, LP, or Yorkville LP. Yorkville Advisors Global II, LLC, or Yorkville LLC, is the General Partner of Yorkville LP. All investment decisions for YA are made by Yorkville LLC’s President and Managing Member, Mr. Mark Angelo. The business address of YA is 1012 Springfield Avenue, Mountainside, NJ 07092. |
(4) |
Pursuant to the SEPA, YA is not permitted to purchase nor acquire Ordinary Shares of the Company under the SEPA that would result in it beneficially owning in excess of 9.99% of the outstanding voting power or number of Ordinary Shares outstanding. |
DESCRIPTION OF SHARE CAPITAL
The
following description of our share capital and provisions of the amended and restated articles of association (the “Articles”)
are summaries and do not purport to be complete.
Registration number and purposes of the
Company
Our
registration number with the Israeli Registrar of Companies is 51-358165-2. Our purpose as set forth in our Articles is to engage in any
lawful activity.
Type and class of
securities
Our
authorized share capital consists of 75,000,000 Ordinary shares. All of our outstanding Ordinary Shares have been validly issued, are
fully paid and non-assessable.
Preemptive rights
Our
Ordinary Shares are not redeemable and are not subject to any preemptive right.
Transfer of shares
Our
fully paid Ordinary Shares are issued in registered form and may be freely transferred under our Articles, unless the transfer is restricted
or prohibited by another instrument, applicable law or the rules of a stock exchange on which the shares are listed for trade. The ownership
or voting of our Ordinary Shares by non-residents of Israel is not restricted in any way by our Articles or the laws of the State of Israel,
except for ownership by nationals of certain countries that are, or have been, in a state of war with Israel.
Liability to further capital calls
Our
board of directors may make, from time to time, such calls as it may deem fit upon shareholders with respect to any sum unpaid with respect
to shares held by such shareholders which is not payable at a fixed time. Such shareholder has to pay the amount of every call so made
upon him or her.
Election of directors
Under
our Articles, our board of directors must consist of at least three (3) and not more than eight (8) directors, including, if applicable,
two external directors appointed as required under the Companies Law 5759-1999 (the “Companies Law”). Other than our external
directors (if any), our directors are divided into three classes with staggered three-year terms. Each class of directors consists, as
nearly as possible, of one third of the total number of directors constituting the entire board of directors. At each annual general meeting
of our shareholders, the election or re-election of directors following the expiration of the term of office of the directors of that
class of directors is for a term of office that expires on the third annual general meeting following such election or re-election, such
that from 2020 and after, at each annual general meeting the term of office only one class of directors will expire. Each director, holds
office until the annual general meeting of our shareholders for the year in which his or her term expires and until his or her successor
is duly appointed, unless the tenure of such director expires earlier pursuant to the Companies Law upon the occurrence of certain events
or unless removed from office by a vote of the holders of at least 65% of the total voting power of our shareholders at a general meeting
of our shareholders in accordance with our amended and restated Articles.
Further, our shareholders approved
an approval mechanism similar to a mechanism that exists in the Delaware Generate Corporate Law, which requires an affirmative vote of
the board of directors (by 75% of the members) in addition to the approval of our shareholders in order to amend such provisions.
In
addition, if a director’s office becomes vacant, the remaining serving directors may continue to act in any manner, provided that
the number of the serving directors shall not be less than three (3). If the number of serving Directors is lower than their minimal one,
the Board shall not be permitted to act, other than for the purpose of convening a general meeting of the Company’s shareholders
for the purpose of appointing additional Directors. For further information on the election and removal of directors see “Item 6.
Directors, Senior Management and Employees—C. Board Practices” of the Company’s Annual Report.
Contested election
Under
our Articles, in the event of a contested election, our board of directors in its discretion, will set the method of calculation of the
votes and the manner in which the resolutions will be presented to our shareholders at the general meeting. In the event that our board
of directors does not or is unable to make a determination on such matter, then the directors will be elected by a plurality of the voting
power represented at the general meeting in person or by proxy and voting on the election of directors.
Dividend and liquidation rights
We
may declare a dividend to be paid to the holders of our Ordinary Shares in proportion to their respective shareholdings. Under the Companies
Law, dividend distributions are determined by the board of directors and do not require the approval of the shareholders of a company
unless the Company’s articles of association provide otherwise. Our Articles do not require shareholder approval of a dividend distribution
and provide that dividend distributions may be determined by our board of directors.
Pursuant
to the Companies Law, the distribution amount is limited to the greater of retained earnings or earnings generated over the previous two
years, according to our then last reviewed or audited consolidated financial statements, provided that the date of the financial statements
is not more than six months prior to the date of the distribution, or we may distribute dividends that do not meet such criteria only
with court approval. In each case, we are only permitted to distribute a dividend if our board of directors and the court, if applicable,
determines that there is no reasonable concern that payment of the dividend will prevent us from satisfying our existing and foreseeable
obligations as they become due.
In
the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be distributed to the holders of our Ordinary
Shares in proportion to their shareholdings. This right, as well as the right to receive dividends, may be affected by the grant of preferential
dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorized in the future.
Exchange controls
There
are currently no Israeli currency control restrictions on remittances of dividends on our Ordinary Shares, proceeds from the sale of the
shares or interest or other payments to non-residents of Israel, except for shareholders who are subjects of certain countries that are,
or have been, in a state of war with Israel.
DESCRIPTION OF RIGHTS TO PURCHASE THE ORDINARY
SHARES
Rights and Rights Agreement
Our board of directors authorized,
pursuant to the Rights Plan, (i) the issuance, on December 8, 2023, of one special purchase right , or a “Right for each Ordinary
Share outstanding at the Close of Business on December 8, 2023, or the “Record Date, as well as (ii) the issuance of one Right for
each Ordinary Share issued after the Record Date and prior to the earliest of the Issuance Date, the Redemption Date (as defined below)
and the Final Expiration Date (as defined below) (including Ordinary Shares issued pursuant to the exercise, conversion or settlement
of securities exercisable for, convertible into or that may be settled for, Ordinary Shares or rights, in each case, issued or granted
prior to, and outstanding as of, the Issuance Date). Each Right will represent the right to purchase one (1) Ordinary Share, at the price
of $0.001 per share upon the terms and subject to the conditions described below.
The Rights were issued pursuant
to a Rights Agreement, dated as of November 28, 2023, or the Rights Agreement, between the Company and Vstock Transfer LLC, as rights
agent, or the “Rights Agent. Each Right will allow its holder to purchase from the Company one (1) Ordinary Share, at a purchase
price of $0.001 per Ordinary Share, once the Rights become exercisable. Prior to exercise, each Right does not give its holder any dividend,
voting, liquidation or other rights as a shareholder of the Company.
Exercise Period; Rights Certificates
The Rights will not be exercisable
until the close of business on the tenth (10th) day after the public announcement or public disclosure that a person or group
has become an “Acquiring Person” by obtaining beneficial ownership of 10% or more of the Company’s outstanding Ordinary
Shares (subject to the parameters and exceptions described below and in the Rights Agreement, referred here as an “Acquiring Person”),
except if such person or group has become an Acquiring Person pursuant to an offer approved by the majority of the board of directors
(such date, upon which the Rights become exercisable, is referred to as the “Issuance Date”).
If a Person’s beneficial
ownership of the then-outstanding Ordinary Shares as of the time of the public announcement of the Rights Plan is at or above 10% (including
through entry into certain derivative positions), that person or group’s then-existing ownership percentage would be grandfathered
and would not trigger the exercisability of the Rights, as that Person will not be deemed to be an Acquiring Person. However, the Rights
would become exercisable (and such Person will be deemed to be an Acquiring Person) if at any time after such announcement, that shareholder
increases its beneficial ownership percentage of Ordinary Shares of the Company by 0.5% or if at any time after such announcement, such
shareholder’s beneficial ownership of Ordinary Shares is reduced to an amount that is less than 10% of the then-outstanding Ordinary
Shares and thereafter such shareholder becomes an Acquiring Person.
Until the Issuance Date, the
balances in the book-entry accounting system of the transfer agent for our Ordinary Shares or, in the case of certificated shares, Ordinary
Shares certificates, will also evidence the Rights, and any transfer of Ordinary Shares or, in the case of certificated shares, certificates
for Ordinary Shares, will constitute a transfer of Rights. After that date, the Rights will separate from the Ordinary Shares and be evidenced
solely by Rights Certificates that we will mail to all eligible holders of Ordinary Shares, or we may choose to use book-entry in lieu
of physical certificates. Under certain circumstances, any Rights held by an Acquiring Person or any Associate or Affiliate thereof are
void and may not be exercised. The Rights shall not be exercisable, and shall be void so long as held, by a holder in any jurisdiction
where the requisite qualification for the issuance to such holder, or the exercise by such holder of the Rights in such jurisdiction,
shall not have been obtained or be obtainable.
In addition, in connection
with the issuance or sale of Ordinary Shares following the Issuance Date and prior to the redemption, exchange, or expiration of the Rights,
the Company (a) shall, with respect to Ordinary Shares so issued or sold pursuant to the exercise of share options or pursuant to any
other award or right under any employee benefit plan or arrangement, granted or awarded as of the Issuance Date (including, for example,
upon the or purchase of Ordinary Shares under the Company’s share incentive plans), or upon the exercise, conversion or exchange
of securities hereinafter issued by the Company (except as may otherwise be provided in the instrument(s) governing such securities),
and (b) may, in any other case, if deemed necessary or appropriate by the board of directors, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such Rights Certificate shall be
issued if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material
adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.
Flip-In/Flip-Over
If a person or group becomes
an Acquiring Person, then beginning on the Issuance Date, all holders of Rights except the Acquiring Person or any associate or affiliate
thereof may, for a purchase price of $0.001 per one Ordinary Share, purchase one (1) Ordinary Share for each Ordinary Share of the Company
then beneficially owned by such person.
If our Company is later acquired
in a merger or similar transaction after the Issuance Date, all holders of Rights except the Acquiring Person or any associate or affiliate
thereof may, for a purchase price of $0.001 per share (subject to adjustments as provided in the Rights Agreement, purchase one (1) times
the number of shares of the acquiring corporation, that each shareholder of the Company is entitled for each Ordinary Share held.
Scope of “Acquiring Person” Definition
An “Acquiring Person”
is any Person who or which, together with all affiliates and associates of such Person, shall be the Beneficial Owner of 10% or more of
the Ordinary Shares of the Company then outstanding, but shall not include the Company, any Subsidiary of the Company, any employee benefit
or share ownership plan of the Company or any Subsidiary of the Company, or any entity holding Ordinary Shares for or pursuant to the
terms of any such plan. Notwithstanding the foregoing, no Person shall become an “Acquiring Person” as the result of an acquisition
of Ordinary Shares by the Company which, by reducing the number of Ordinary Shares of the Company outstanding, increases the proportionate
number of Ordinary Shares of the Company beneficially owned by such Person to 10% or more of the Ordinary Shares of the Company then outstanding; provided, however,
that, if a Person shall become the Beneficial Owner of 10% or more of the Ordinary Shares of the Company then outstanding by reason of
share purchases by the Company and shall, after the public disclosure of such share purchases by the Company, become the Beneficial Owner
of any additional Ordinary Shares of the Company, then such Person shall be deemed to be an “Acquiring Person.” Notwithstanding
the foregoing, if the board of directors determines in good faith that a Person who would otherwise be an “Acquiring Person”
has become such inadvertently, and such Person divests or undertakes to divest, as promptly as practicable a sufficient number of Ordinary
Shares, so that such Person would no longer be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this
paragraph, then such Person shall not be deemed to be an “Acquiring Person” for any purposes of the Rights Agreement.
If a bona fide swaps dealer
who would otherwise be an “Acquiring Person” has become so as a result of its actions in the ordinary course of its business
that the Board determines were taken without the intent or effect of evading or assisting any other Person to evade the purposes and intent
of the Rights Agreement, or otherwise seeking to control or influence the management or policies of the Company, then, and unless and
until the board of directors shall otherwise determine, such Person shall not be deemed to be an “Acquiring Person” for purposes
of the Rights Agreement. Furthermore, no Person who purchases securities of the Company either directly from the Company or from any underwriters
engaged by the Company, in each case in a securities offering transaction approved by the board of directors as an offering intended to
allow a Person or a group of Persons to beneficially own, upon the consummation of such offering, more than 10% of the Ordinary Shares
of the Company then outstanding, shall become an “Acquiring Person” unless such Person shall, after the consummation of such
offering, beneficially own additional Ordinary Shares of the Company in the amount equal to or greater than the sum of (I) the lowest
Ordinary Shares beneficially owned by such Person as a percentage of the outstanding Ordinary Shares as of immediately after the consummation
of such offering and (II) 0.5%. The definition of Acquiring Person is furthermore subject to the “grandfathering” scenarios
described under “Exercise Period; Rights Certificates” above.
Exchange
The Board may, at its option,
at any time after the Issuance Date, exchange all or part of the then outstanding and exercisable Rights (except for Rights that have
become void) for Ordinary Shares at an exchange ratio of one (1) Ordinary Share per Right, appropriately adjusted to reflect any adjustment
in the number of Rights, or the Exchange Ratio. However, the board of directors will not be empowered to effect such exchange at any time
after any Person (other than the Company, any Subsidiary of the Company, any employee benefit or share ownership plan of the Company or
any such Subsidiary, or any entity holding Ordinary Shares for or pursuant to the terms of any such plan), together with all affiliates
and associates of such Person, becomes the Beneficial Owner of 50% or more of the Ordinary Shares then outstanding.
Immediately upon the action
of the board of directors ordering the foregoing exchange, the right to exercise the Rights that are to be exchanged will terminate and
the only right thereafter of a holder of such Rights shall be to receive that number of Ordinary Shares equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. In the event that there shall not be sufficient Ordinary Shares issued but not outstanding
or authorized but unissued to permit any exchange of Rights, the Company will take all such action as may be necessary to authorize additional
Ordinary Shares for issuance upon exchange of the Rights.
Anti-Dilution Provisions
Our board of directors may
adjust the purchase price of Ordinary Shares under each Right, the number of Ordinary Shares issuable under each Right, and the number
of outstanding Rights to prevent dilution that may occur from a share dividend, a share split, or a reclassification of the Ordinary Shares.
Amendments
The terms of the Rights Agreement
may be amended by our board of directors without the consent of the holders of the Rights. After a person or group becomes an Acquiring
Person, our board of directors may not amend the Rights Agreement in a way that adversely affects holders of the Rights.
Redemption
The board of directors may
at its option, at any time prior to the Issuance Date, redeem all but not less than all the then outstanding Rights. The redemption of
the Rights by the board of directors may be made effective at such time, on such basis and with such conditions as the board of directors,
in its sole discretion, may establish (the effective date of redemption, the is referred to as the “Redemption Date”). Immediately
upon the effectiveness of the action of the board of directors ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate.
Expiration
The Rights will expire on November 27, 2024, or
the Final Expiration Date.
PLAN OF DISTRIBUTION
On January 21, 2024, we entered
into the SEPA with YA. The SEPA provides that, upon the terms and subject to the conditions set forth therein, YA is committed to purchase
up to $20.0 million of our Ordinary Shares over an approximately 36-month commitment period. Of the Commitment Amount, to date we
sold 5,402,887 Ordinary Shares (including the Commitment Shares). From time to time, and at our sole discretion, we may present YA with
advance notices to purchase our Ordinary Shares. The shares would be purchased pursuant to the SEPA at 97% of the market price, which
is defined as the lowest daily volume weighted average price of the Shares during the three consecutive trading days commencing on the
trading day immediately following our delivery of an advance notice to YA.
The Ordinary Shares offered
by this prospectus are being offered by the Selling Shareholder, YA. The Selling Shareholder is an “underwriter” within the
meaning of Section 2(a)(11) of the Securities Act. We have agreed in the SEPA to provide customary indemnification to YA.
It is possible that our shares
may be sold from time to time by YA in one or more of the following manners:
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ordinary brokerage transactions and transactions in which the broker solicits purchasers; |
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a block trade in which the broker or dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; |
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to a broker-dealer as principal and resale by the broker-dealer for its account; or |
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a combination of any such methods of sale. |
YA has agreed that, during
the term of the SEPA, it shall not engage in any short sales or hedging transactions with respect to our Ordinary Shares, provided that
upon receipt of an advance notice, YA may sell shares that it is obligated to purchase under such advance notice prior to taking possession
of such shares.
YA and any unaffiliated broker-dealer
will be subject to liability under the federal securities laws and must comply with the requirements of the Exchange Act, including without
limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases
and sales of Ordinary Shares by YA or any unaffiliated broker-dealer. Under these rules and regulations, YA and any unaffiliated broker-dealer:
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may not engage in any stabilization activity in connection with our securities; |
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must furnish each broker which offers shares of our common stock covered by the prospectus and accompanying prospectus that are a part of our Registration Statement with the number of copies of such prospectus and accompanying prospectus which are required by each broker; and |
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may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act. |
These restrictions may affect
the marketability of the Ordinary Shares by YA and any unaffiliated broker-dealer.
We will pay the expenses incident
to the registration under the Securities Act of the offer and sale of the Ordinary Shares covered by this prospectus by the Selling Shareholder.
We estimate that our total expenses for the offering will be approximately $29,500.
EXPENSES
Set forth below is an itemization of the total
expenses expected to be incurred by us in connection with the offer and sale of the securities. With the exception of the SEC registration
fee, all amounts are estimates:
SEC registration fee | |
$ | 1,301.83 | |
Printer fees and expenses | |
$ | 3,000 | |
Legal fees and expenses | |
$ | 15,000 | |
Accounting and professional fees and expenses | |
$ | 7,500 | |
Miscellaneous | |
$ | 2,500 | |
Total | |
$ | 29,301.83 | |
LEGAL MATTERS
Certain legal matters concerning
the SEPA will be passed upon for us by Sullivan & Worcester LLP, New York, New York. Certain legal matters with respect to the validity
of the Ordinary Shares offered by this prospectus will be passed upon for us by Meitar | Law Offices, Ramat Gan, Israel.
EXPERTS
The consolidated financial
statements of SciSparc Ltd. appearing in SciSparc Ltd.’s Annual Report (Form 20-F) for the year ended December 31, 2023, have been
audited by Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, independent registered public accounting firm, as set
forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The consolidated financial
statements of AutoMax Motors Ltd. as of December 31, 2023 and 2022 and the Years ended December 31, 2023 and 2022, incorporated by reference
in this prospectus have been audited by Ben David Shalvi Kop & Co, independent registered public accounting firm, as set forth in
their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated under
the laws of the State of Israel. Service of process upon us and upon our directors and officers and the Israeli experts named in the registration
statements of which this prospectus forms a part, a substantial majority of whom reside outside of the United States, may be difficult
to obtain within the United States. Furthermore, because substantially all of our assets and a substantial of our directors and officers
are located outside of the United States, any judgment obtained in the United States against us or any of our directors and officers may
not be collectible within the United States.
We have been informed by our
legal counsel in Israel, Meitar | Law Offices, that it may be difficult to assert U.S. securities law claims in original actions instituted
in Israel. Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws reasoning Israel is not the
most appropriate forum to bring such a claim. In Israeli courts, the content of applicable U.S. law must be proved as a fact which can
be a time-consuming and costly process and certain matters of procedure will also be governed by Israeli law.
Subject to specified time
limitations and legal procedures, Israeli courts may enforce a U.S. judgment in a civil matter which, subject to certain exceptions, is
non-appealable, including judgments based upon the civil liability provisions of the Securities Act and the Exchange Act and including
a monetary or compensatory judgment in a non-civil matter, provided that among other things:
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the judgment was rendered by a court which was, according to the laws of the state of the court, competent to render the judgment; |
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the obligation imposed by the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy; and |
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the judgment is executory in the state in which it was given. |
Even if these conditions are
met, an Israeli court will not declare a foreign civil judgment enforceable if:
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the judgment was given in a state whose laws do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases); |
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the enforcement of the judgment is likely to prejudice the sovereignty or security of the State of Israel; |
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the judgment was obtained by fraud; |
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the opportunity given to the defendant to bring its arguments and evidence before the court was not reasonable in the opinion of the Israeli court; |
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the judgment was rendered by a court not competent to render it according to the laws of private international law as they apply in Israel; |
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the judgment is contradictory to another judgment that was given in the same matter between the same parties and that is still valid; or |
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at the time the action was brought in the foreign court, a lawsuit in the same matter and between the same parties was pending before a court or tribunal in Israel. |
If a foreign judgment is enforced
by an Israeli court, it generally will be payable in Israeli currency, which can then be converted into non-Israeli currency and transferred
out of Israel. The usual practice in an action before an Israeli court to recover an amount in a non-Israeli currency is for the Israeli
court to issue a judgment for the equivalent amount in Israeli currency at the rate of exchange in force on the date of the judgment,
but the judgment debtor may make payment in foreign currency. Pending collection, the amount of the judgment of an Israeli court stated
in Israeli currency ordinarily will be linked to the Israeli consumer price index plus interest at the annual statutory rate set by Israeli
regulations prevailing at the time. Judgment creditors must bear the risk of unfavorable exchange rates.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC
a registration statement on Form F-1 under the Securities Act relating to this offering of our Ordinary Shares. This prospectus does
not contain all of the information contained in the registration statement. The rules and regulations of the SEC allow us to omit certain
information from this prospectus that is included in the registration statement. Statements made in this prospectus concerning the contents
of any contract, agreement or other document are summaries of all material information about the documents summarized, but are not complete
descriptions of all terms of these documents. If we filed any of these documents as an exhibit to the registration statement, you may
read the document itself for a complete description of its terms. The SEC maintains an Internet website that contains reports and other
information regarding issuers that file electronically with the SEC. Our filings with the SEC are also available to the public through
the SEC’s website at www.sec.gov.
We are subject to the information
reporting requirements of the Exchange Act that are applicable to foreign private issuers, and under those requirements are filing reports
with the SEC. Those other reports or other information may be inspected without charge at the locations described above. As a foreign
private issuer, we are exempt from the rules under the Exchange Act related to the furnishing and content of proxy statements, and our
officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act. In addition, we are not required under the Exchange Act to file annual, quarterly and current reports and financial
statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However,
we are required to file with the SEC, within 120 days after the end of each fiscal year, or such applicable time as required by the
SEC, an annual report on Form 20-F containing financial statements audited by an independent registered public accounting firm, and
will submit to the SEC, on Form 6-K, unaudited interim financial information.
We
maintain a corporate website at www.scisparc.com. Information contained on, or that can be accessed through, our website does not constitute
a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference. We will post
on our website any materials required to be so posted on such website under applicable corporate or securities laws and regulations, including,
posting any XBRL interactive financial data required to be filed with the SEC and any notices of general meetings of our shareholders.
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
The SEC allows us to incorporate
by reference information into this document. This means that we can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by reference is considered to be a part of this document, except
for any information superseded by information that is included directly in this prospectus or incorporated by reference subsequent to
the date of this prospectus.
We incorporate by reference
the following documents or information that we have filed with the SEC:
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Our Annual Report on Form 20-F for the year ended December 31, 2023, filed on April 1, 2024 (File No. 001-38041), as amended by the Form 20-F/A filed with the SEC on May 2, 2024; |
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our Reports of Foreign Private Issuer on Form 6-K filed on April 11, 2024, May 2, 2024, June 3, 2024, June 14, 2024, July 8, 2024, July 16, 2024 (with respect to first paragraph and section titled “Forward-Looking Statements” in the press release attached as Exhibit 99.1), July 16, 2024, July 17, 2024 (with respect to the first two paragraphs and section titled “Forward-Looking Statements” in the press release attached as Exhibit 99.1), July 23, 2024 (with respect to the first, third, and fourth paragraphs and section titled “Forward-Looking Statements” in the press release attached as Exhibit 99.1), August 6, 2024, August 13, 2024, August 14, 2024, August 19, 2024 (with respect to Exhibit 10.1 and the first, second, third, fourth, and sixth paragraphs and section titled “Forward-Looking Statements” in the press release attached as Exhibit 99.1), August 20, 2024 (with respect to the first, second, third, fourth and sixth paragraphs and the section titled “Forward-Looking Statements” in the press release attached as Exhibit 99.1); August 22, 2024, and August 26, 2024 (with respect to the first, third and fourth paragraphs and the section titled “Forward-Looking Statements” in the press release attached as Exhibit 99.1); and |
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the description of our Ordinary Shares contained in our Form 8-A filed on March 21, 2017 (File No. 001-38041), including any amendments or reports filed for the purpose of updating such description. |
We will provide you without
charge, upon your written or oral request, a copy of any of the documents incorporated by reference in this prospectus, other than exhibits
to such documents which are not specifically incorporated by reference into such documents. Please direct your written or telephone requests
to us at: SciSparc Ltd., 20 Raul Wallenberg Street, Tower A, Tel Aviv 6971916, Israel, Tel: +972-(3) 610-3100.
Up to 21,000,000 Ordinary
Shares
SciSparc Ltd.
PROSPECTUS
,
2024
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 6. Indemnification of Directors, Officers and Employees
Under the Companies Law, a
company may not exculpate an office holder from liability for a breach of the duty of loyalty. An Israeli company may exculpate an office
holder in advance from liability to the Company, in whole or in part, for damages caused to the Company as a result of a breach of duty
of care but only if a provision authorizing such exculpation is included in its articles of association. Our Articles of Association contain
such a provision. An Israeli company may not exculpate a director from liability arising out of a prohibited dividend or distribution
to shareholders.
An Israeli company may indemnify
an office holder in respect of the following liabilities and expenses incurred for acts performed as an office holder, either in advance
of an event or following an event provided a provision authorizing such indemnification is contained in its articles of association:
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a financial liability imposed on him or her in favor of another person pursuant to a judgment, including a settlement or arbitrator’s award approved by a court. However, if an undertaking to indemnify an office holder with respect to such liability is provided in advance, then such an undertaking must be limited to events which, in the opinion of the board of directors, can be foreseen based on the Company’s activities when the undertaking to indemnify is given, and to an amount or according to criteria determined by the board of directors as reasonable under the circumstances, and such undertaking shall detail the abovementioned events and amount or criteria; |
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reasonable litigation expenses, including legal fees, incurred by the office holder (a) as a result of an investigation or proceeding instituted against him or her by an authority authorized to conduct such investigation or proceeding, provided that (i) no indictment was filed against such office holder as a result of such investigation or proceeding; and (ii) no financial liability, such as a criminal penalty, was imposed upon him or her as a substitute for the criminal proceeding as a result of such investigation or proceeding or, if such financial liability was imposed, it was imposed with respect to an offense that does not require proof of criminal intent; and (b) in connection with a monetary sanction; |
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reasonable litigation expenses, including legal fees, incurred by the office holder or imposed by a court (i) in proceedings instituted against him or her by the Company, on its behalf or by a third party, or (ii) in connection with criminal proceedings in which the office holder was acquitted, or (iii) as a result of a conviction for a crime that does not require proof of criminal intent; and |
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expenses, including reasonable litigation expenses and legal fees, incurred by an office holder in relation to an administrative proceeding instituted against such office holder, or certain compensation payments made to an injured party imposed on an office holder by an administrative proceeding, pursuant to certain provisions of the Israeli Securities Law. |
An Israeli company may insure
an office holder against the following liabilities incurred for acts performed as an office holder if and to the extent provided in the
Company’s articles of association:
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a breach of the duty of loyalty to the Company, to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the Company; |
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a breach of the duty of care to the Company or to a third party, including a breach arising out of the negligent conduct of the office holder; |
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a financial liability imposed on the office holder in favor of a third party; |
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a financial liability imposed on the office holder in favor of a third party harmed by a breach in an administrative proceeding; and |
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expenses, including reasonable litigation expenses and legal fees, incurred by the office holder as a result of an administrative proceeding instituted against him or her, pursuant to certain provisions of the Israeli Securities Law. |
An Israeli company may not
indemnify or insure an office holder against any of the following:
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a breach of the duty of loyalty, except to the extent that the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the Company; |
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a breach of duty of care committed intentionally or recklessly, excluding a breach arising out of the negligent conduct of the office holder; |
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an act or omission committed with intent to derive illegal personal benefit; or |
|
|
|
|
● |
a fine, monetary sanction or forfeit levied against the office holder. |
Under the Israeli Companies
Law, exculpation, indemnification and insurance of office holders must be approved by the compensation committee, the board of directors
(and, with respect to directors and the chief executive officer, by the shareholders). However, under regulations promulgated under the
Companies Law, the insurance of office holders shall not require shareholder approval and may be approved by only the compensation committee,
if the engagement terms are determined in accordance with the Company’s compensation policy and that policy was approved by the
shareholders by the same special majority required to approve a compensation policy, provided that the insurance policy is on market terms
and the insurance policy is not likely to materially impact the Company’s profitability, assets or obligations.
Our Articles of Association
allow us to exculpate, indemnify and insure our office holders for any liability imposed on them as a consequence of an act (including
any omission) which was performed by virtue of being an office holder. Our office holders are currently covered by a directors and officers’
liability insurance policy.
We have entered into agreements
with each of our directors and executive officers exculpating them in advance from liability to us for damages caused to us as a result
of a breach of duty of care, and undertaking to indemnify them. This exculpation and indemnification is limited both in terms of amount
and coverage and it covers certain amounts regarding administrative proceedings insurable or indemnifiable under the Companies Law and
our Articles of Association.
In the opinion of the SEC,
however, indemnification of directors and office holders for liabilities arising under the Securities Act, is against public policy and
therefore unenforceable.
There is no pending litigation
or proceeding against any of our office holders as to which indemnification is being sought, nor are we aware of any pending or threatened
litigation that may result in claims for indemnification by any office holder.
Item 7. Recent Sales of Unregistered Securities
Set forth below are the sales
of all securities by the Company since August 1, 2021 (the “Period”), which were not registered under the Securities Act.
The Company believes that each of such issuances was exempt from registration under the Securities Act in reliance on Section 4(a)(2)
of the Securities Act, Rule 701 and/or Regulation S under the Securities Act. The conversions described below were exempt from registration
under Securities Act in reliance on Section 3(a)(9) of the Securities Act.
On June 1, 2022, the Company
issued 136,388 units and pre-funded units at a purchase price of $73.32 per unit (or $0.026 less per pre-funded unit) to an institutional
investor, or the 2022 Private Placement. Each unit and pre-funded unit consisted of one Ordinary Share (or equivalent thereof) and two
non-tradable warrants, each with an exercise price of $66.82 per Ordinary Share (for a total of 272,777 Ordinary Shares underlying the
warrants).
On June 30, 2022, the Company
and the institutional investor entered into a letter agreement to amend certain terms of the 2022 Private Placement. On August 19, 2022,
123,504 of the pre-funded warrants were fully exercised at a nominal price of $0.026 per share, which resulted in the issuance of 123,504
Ordinary Shares.
On September 30, 2022, in
connection with the closing of the Wellution Acquisition Agreement, the Company issued the M.R.M Warrant to M.R.M to purchase up to 82,418
of our Ordinary Shares. As of the date of this Registration Statement, the warrants to purchase up to 82,418 of our Ordinary Shares have
been canceled.
On March 22, 2023, the Company
issued 13,858 Ordinary Shares in respect of the stock purchase agreement entered into by and among Jeffs’ Brands and Jeffs’
Brands Holdings Inc.
On October 12, 2023, the Company
sold units to an institutional investor at a purchase price of $3.72 per unit, consisting of 1,930,108 pre-funded Ordinary Share purchase
warrants to purchase up to 1,930,108 Ordinary Shares, and an additional accompanying pre-funded warrant to purchase up to 1,930,108 Ordinary
Shares.
The pre-funded warrants were
exercisable immediately upon issuance and have an exercise price of $0.001 per share. Following the transaction and as of August 27, 2024,
the Company has issued 3,534,503 Ordinary Shares in respect of the exercise of 3,534,503 pre-funded warrants.
During the Period, the Company
issued 768,179 Ordinary Shares to certain consultants in return for consulting services.
Item 8. Exhibits and Financial Statement Schedules
Exhibits:
Exhibit
No. |
|
Exhibit
Description |
|
Form |
|
File
No. |
|
Exhibit No. |
|
Filing
Date |
|
Filed/
Furnished |
2.1* |
|
Agreement and Plan of Merger, dated April 10, 2024, by and between SciSparc Ltd. with AutoMax Motors Ltd., and SciSparc Merger Sub Ltd. |
|
6-K |
|
001-38041 |
|
99.1 |
|
April 11, 2024 |
|
|
2.2& |
|
Addendum to the Agreement and Plan of Merger, dated
August 14, 2024, by and between SciSparc Ltd. with AutoMax Motors Ltd., and SciSparc Merger Sub Ltd. |
|
|
|
|
|
|
|
|
|
|
3.1* |
|
Amended and Restated Articles of Association of SciSparc Ltd. |
|
F-3 |
|
333-269839 |
|
3.1 |
|
February 16, 2023 |
|
|
4.1* |
|
Form of Warrant, pursuant to Securities Purchase Agreement, dated March 19, 2020 |
|
6-K |
|
001-38041 |
|
99.4 |
|
March 23, 2020 |
|
|
4.3* |
|
Form of Warrant |
|
6-K |
|
001-38041 |
|
4.2 |
|
November 24, 2020 |
|
|
4.4* |
|
Form of Pre-Funded Warrant |
|
6-K |
|
001-38041 |
|
99.4 |
|
March 2, 2021 |
|
|
4.5* |
|
Form of Series A Warrant |
|
6-K |
|
001-38041 |
|
99.5 |
|
March 2, 2021 |
|
|
4.6* |
|
Form of Series B Warrant |
|
6-K |
|
001-38041 |
|
99.6 |
|
March 2, 2021 |
|
|
4.7* |
|
Form of Ordinary Share Purchase Warrant, pursuant to Securities Purchase Agreement, dated May 27, 2022 |
|
6-K |
|
001-38041 |
|
99.5 |
|
May 27, 2022 |
|
|
4.8* |
|
Form of Pre-Funded Ordinary Share Purchase Warrant, pursuant to Securities Purchase Agreement, dated May 27, 2022 |
|
6-K |
|
001-38041 |
|
99.6 |
|
May 27, 2022 |
|
|
4.9* |
|
Share Purchase Warrant, pursuant to Assignment and Assumption Agreement dated September 12, 2022 |
|
6-K |
|
001-38041 |
|
99.4 |
|
September 30, 2022 |
|
|
4.10* |
|
Form of Pre-Funded Warrant |
|
6-K |
|
001-38041 |
|
4.1 |
|
August 14, 2023 |
|
|
4.11* |
|
Form of Pre-Funded Warrant |
|
6-K |
|
001-38041 |
|
4.1 |
|
October 12, 2023 |
|
|
4.12* |
|
Form of Promissory Note between SciSparc Ltd. and YA II PN Ltd, which includes the Repayment Schedule (Exhibit 1) |
|
6-K |
|
001-38041 |
|
4.1 |
|
January 25, 2024 |
|
|
5.1& |
|
Opinion of Meitar Law Offices. |
|
|
|
|
|
|
|
|
|
|
10.1* |
|
Form of Indemnification Agreement |
|
20-F |
|
001-38041 |
|
4.12 |
|
May 1, 2017 |
|
|
10.2* |
|
Form of Exculpation Agreement |
|
20-F |
|
001-38041 |
|
4.5 |
|
March 30, 2021 |
|
|
10.3* |
|
Compensation Policy for Executive Officers and Directors |
|
20-F |
|
001-38041 |
|
4.3 |
|
April 28, 2022 |
|
|
10.4^ |
|
License Agreement dated May 20, 2015, by and between the Company and Dekel Pharmaceuticals Ltd. |
|
F-1 |
|
333-214458 |
|
10.1 |
|
December 6, 2016 |
|
|
10.5^^ |
|
License Agreement dated July 29, 2018, by and between the Company and Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. |
|
20-F |
|
001-38041 |
|
4.2 |
|
May 15, 2019 |
|
|
10.6* |
|
Israeli Share Option Plan (2015) |
|
F-1 |
|
333-214458 |
|
10.5 |
|
November 4, 2016 |
|
|
10.7* |
|
SciSparc Share Incentive Plan (2023) |
|
F-1 |
|
333-277394 |
|
10.7 |
|
February 27, 2024 |
|
|
10.8* |
|
First Amendment to License Agreement dated as of August 19, 2015, by and between the Company and Dekel Pharmaceuticals Ltd. |
|
20-F |
|
001-38041 |
|
4.8 |
|
June 15, 2020 |
|
|
10.9* |
|
Third Amendment to License Agreement dated as of July 14, 2019, by and between the Company and Dekel Pharmaceuticals Ltd. |
|
20-F |
|
001-38041 |
|
4.9 |
|
June 15, 2020 |
|
|
10.10* |
|
Share Transfer Agreement, by and among Capital Point Ltd., Therapix Biosciences, Ltd. and Evero Health Ltd., dated May 15, 2020 |
|
6-K |
|
001-38041 |
|
99.1 |
|
May 19, 2020 |
|
|
10.11* |
|
Asset Purchase Agreement, by and between Therapix Biosciences, Ltd. and Evero Health Ltd., dated May 15, 2020 |
|
6-K |
|
001-38041 |
|
99.2 |
|
May 19, 2020 |
|
|
10.12* |
|
Warrant Agent Agreement, dated November 23, 2020 |
|
6-K |
|
001-38041 |
|
4.1 |
|
November 24, 2020 |
|
|
10.13* |
|
Stock Purchase Agreement, dated February 23, 2023, by and between SciSparc Ltd., NewCo Inc. and Jeffs’ Brands Ltd. |
|
6-K |
|
001-38041 |
|
99.2 |
|
February 27, 2023 |
|
|
10.14* |
|
Addendum No. 1 to Stock Purchase Agreement, dated March 22, 2023, by and between Jeffs’ Brands Ltd, Jeffs’ Brands Holdings Inc. and SciSparc Ltd. |
|
6-K |
|
001-38041 |
|
10.2 |
|
April 4, 2023 |
|
|
10.15* |
|
Consulting Agreement, dated March 22, 2023, by and between Jeffs’ Brands Ltd and SciSparc Nutraceuticals Inc. |
|
6-K |
|
001-38041 |
|
10.3 |
|
April 4, 2023 |
|
|
10.16* |
|
Underwriting Agreement, dated August 10, 2023, by and between the Company and the Underwriter |
|
6-K |
|
001-38041 |
|
1.1 |
|
August 14, 2023 |
|
|
10.17* |
|
Securities Purchase Agreement dated October 11, 2023 |
|
6-K |
|
001-38041 |
|
10.1 |
|
October 12, 2023 |
|
|
10.18* |
|
Registration Rights Agreement dated October 11, 2023 |
|
6-K |
|
001-38041 |
|
10.2 |
|
October 12, 2023 |
|
|
10.19* |
|
Form of Confession of Judgment |
|
6-K |
|
001-38041 |
|
10.3 |
|
October 12, 2023 |
|
|
10.20* |
|
Letter Agreement with Aegis Capital Corp. dated October 10, 2023 |
|
6-K |
|
001-38041 |
|
10.4 |
|
October 12, 2023 |
|
|
10.21* |
|
Standby Equity Purchase Agreement dated January 21, 2024 between YA II PN Ltd. and the Company |
|
6-K |
|
001-38041 |
|
10.1 |
|
January 25, 2024 |
|
|
10.22* |
|
First Amendment to the Standby Equity Purchase Agreement, dated as of February 26, 2024, between SciSparc Ltd. and YA II PN, Ltd |
|
F-1 |
|
333-277394 |
|
10.22 |
|
February 27, 2024 |
|
|
10.23* |
|
Form of Shareholder Support Agreement, dated April 10, 2024, by and between SciSparc Ltd. and each of the parties named in the Shareholder Support Agreement |
|
6-K |
|
001-38041 |
|
99.2 |
|
April 11, 2024 |
|
|
10.24* |
|
Loan Agreement, dated January 14, 2024, by and between SciSparc Ltd. and AutoMax Motors Ltd. |
|
F-1 |
|
333-277394 |
|
10.24 |
|
June 17, 2024 |
|
|
10.25* |
|
Amendment to the Loan Agreement, dated June 9, 2024, by and between SciSparc Ltd. and AutoMax Motors Ltd. |
|
F-1 |
|
333-277394 |
|
10.25 |
|
June 17, 2024 |
|
|
10.26* |
|
Exclusive Patent License Agreement, dated August 13, 2024, between SciSparc Ltd. and Polyrizon Ltd. |
|
6-K |
|
001-38041 |
|
10.1 |
|
August 19, 2024 |
|
|
21.1* |
|
List of Subsidiaries |
|
F-1 |
|
333-277394 |
|
21.1 |
|
February 27, 2024 |
|
|
23.1& |
|
Consent of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, independent registered accounting firm for the Registrant. |
|
|
|
|
|
|
|
|
|
|
23.2& |
|
Consent of Ben David Shalvi Kop & Co, independent registered accounting firm for AutoMax Motors Ltd. |
|
|
|
|
|
|
|
|
|
|
24.1& |
|
Power of Attorney |
|
|
|
|
|
|
|
|
|
|
107& |
|
Calculation of Registration Fee Table |
|
|
|
|
|
|
|
|
|
|
* |
Previously filed. |
|
|
& |
Filed herewith. |
|
|
^ |
Confidential treatment was granted with respect to certain portions of this exhibit pursuant to 17.C.F.R. §240.24b-2. Omitted portions were filed separately with the SEC. |
|
|
^^ |
Certain identified information in the exhibit has been excluded from the exhibit because it is both (i) not material and (ii) would likely cause competitive harm to SciSparc if publicly disclosed. |
Item 9. Undertakings
|
(a) |
The undersigned Registrant hereby undertakes: |
|
(1) |
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
|
i. |
If the registrant is relying on Rule 430B: |
|
A. |
Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and |
|
B. |
Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness of the date of the first contract or sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date and underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or |
|
ii. |
If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
|
(2) |
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell securities to such purchaser: |
|
i. |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
|
ii. |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
|
iii. |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
|
iv. |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
|
(b) |
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
|
(c) |
The undersigned registrant hereby undertakes that: |
|
(1) |
That for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
|
(2) |
That for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form F-1 and has duly caused this registration statement on Form F-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in Tel Aviv, State of Israel, on August 28, 2024.
|
SCISPARC LTD. |
|
|
|
|
By: |
/s/ Oz Adler |
|
|
Oz Adler |
|
|
Chief Executive Officer |
POWER OF ATTORNEY
The undersigned officers and
directors of SciSparc Ltd. hereby constitute and appoint Oz Adler as our true and lawful attorney-in-fact and agent to take any actions
to enable the Company to comply with the Securities Act, and any rules, regulations and requirements of the SEC, in connection with this
registration statement on Form F-1, including the power and authority to sign for us in our names in the capacities indicated below any
and all further amendments to this registration statement and any other registration statement filed pursuant to the provisions of Rule
462 under the Securities Act.
Pursuant to the requirements
of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates
indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Oz Adler |
|
Chief Executive Officer and Chief Financial Officer |
|
August 28, 2024 |
Oz Adler |
|
(Principal Executive Officer and Principal Accounting Officer) |
|
|
|
|
|
|
|
/s/ Amitay Weiss |
|
Chairman of the Board of Directors |
|
August 28, 2024 |
Amitay Weiss |
|
|
|
|
|
|
|
|
|
/s/ Amnon Ben Shay |
|
Director |
|
August 28, 2024 |
Amnon Ben Shay |
|
|
|
|
|
|
|
|
|
/s/ Alon Dayan |
|
Director |
|
August 28, 2024 |
Alon Dayan |
|
|
|
|
|
|
|
|
|
/s/ Moshe Revach |
|
Director |
|
August 28, 2024 |
Moshe Revach |
|
|
|
|
|
|
|
|
|
/s/ Itschak Shrem |
|
Director |
|
August 28, 2024 |
Itschak Shrem |
|
|
|
|
|
|
|
|
|
/s/ Liat Sidi |
|
Director |
|
August 28, 2024 |
Liat Sidi |
|
|
|
|
|
|
|
|
|
/s/ Lior Vider |
|
Director |
|
August 28, 2024 |
Lior Vider |
|
|
|
|
SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE
UNITED STATES
Pursuant to the Securities
Act of 1933, as amended, the undersigned, Puglisi & Associates, the duly authorized representative in the United States of SciSparc
Ltd., has signed this registration statement on August 28, 2024.
|
Puglisi & Associates |
|
|
|
|
By: |
/s/ Donald J. Puglisi |
|
|
Donald J. Puglisi |
|
|
Managing Director |
II-9
Exhibit
2.2
addendum no. 1
to
AGREEMENT AND PLAN OF MERGER
This addendum, dated August 14, 2024 (the
“Effective Date”) constitutes addendum no. 1 (the “Addendum”) to that certain Agreement and Plan
Of Merger dated April 10, 2024 (hereinafter together, the “Agreement”), by and between, SciSparc Ltd., an Israeli limited
company (the “Parent”), SciSparc Merger Sub Ltd., an Israeli limited company and wholly-owned subsidiary of
Parent (“Merger Sub”), and AutoMax Motors Ltd., an Israeli limited company (the “Company”).
| WHEREAS | the Parties wish to modify and amend certain provisions set forth in the Agreement, all as further stipulated
herein. |
NOW THEREFORE, the parties hereto agree
to amend the Agreement as follows:
Notwithstanding
Section 9.1(b) of the Agreement, the End Date shall be extended from August 30, 2024, to November 30, 2024.
| 2.1. | Any and all provisions, terms and/or conditions contained in the Agreement shall
continue in full force and effect, unless and to the extent otherwise expressly provided herein which provisions will supersede any such
provisions of the Agreement. In the event of a conflict or inconsistency between the terms of the Agreement, previous addendums/amendments
(if any), and the terms of this Addendum, the terms of the latter shall govern and prevail. |
| 2.2. | This Addendum shall be deemed for all intents and purposes an integral part of
the Agreement. |
| 2.3. | Terms used but not defined herein shall have the meanings assigned to such terms
in the Agreement. |
[Signature page to follow]
IN WITNESS WHEREOF, the undersigned have
caused this Addendum to be executed as of the Effective Date.
|
SCISPARC LTD. |
|
|
|
By: |
/s/ Oz Adler |
|
Name: |
Oz Adler |
|
Title: |
Chief Executive Officer |
|
|
|
SCISPARC
MERGER SUB LTD. |
|
|
|
By: |
/s/ Oz Adler |
|
Name: |
Oz Adler |
|
Title: |
Director |
|
|
|
AUTOMAX
MOTORS LTD. |
|
|
|
By: |
/s/ Tomer Levi |
|
Name: |
Tomer Levi |
|
Title: |
Director |
|
|
|
By: |
/s/ Yaara Alfi |
|
Name: |
Yaara Alfi |
|
Title: |
Chief Financial Officer |
Exhibit 5.1
August 28, 2024
SciSparc Ltd.
20 Raul Wallenberg Street, Tower A
Tel Aviv 6971916
Israel
Re: SciSparc Ltd.
Ladies and Gentlemen:
We have acted as Israeli counsel
to SciSparc Ltd., a company organized under the laws of the State of Israel (the “Company”), in connection with the
filing by the Company of a registration statement on Form F-1 (the “Registration Statement”) with the Securities and
Exchange Commission (the “SEC”) pursuant to Rule 415 promulgated under the Securities Act of 1933, as amended (the
“Securities Act”), relating to the resale by the selling shareholder identified in the Registration Statement (the
“Selling Shareholder”) of up to21,000,000 ordinary shares, no par value (the “Ordinary Shares”),
which may be issued from time to time by the Company to the Selling Shareholder pursuant to a Standby Equity Purchase Agreement (the “Advance
Shares” and the “SEPA”, respectively) with the Selling Shareholder, dated January 21, 2024, and as amended
on February 26, 2024.
In connection herewith, we
have examined the originals, photocopies or copies, certified or otherwise identified to our satisfaction, of: (i) the Registration Statement
to which this opinion is attached as an exhibit; (ii) the articles of association of the Company, as currently in effect (the “Articles”);
(iii) resolutions of the board of directors (the “Board”) of the Company which have heretofore been approved and relate
to the Company’s potential issuance of the Advance Shares, filing of the Registration Statement and other actions to be taken in
connection with such issuance and sale; and (iv) such other corporate records, agreements, documents and other instruments, and such certificates
or comparable documents of public officials and of officers of the Company as we have deemed relevant and necessary as a basis for the
opinions hereafter set forth. We have also made inquiries of such officers as we have deemed relevant and necessary as a basis for the
opinions hereafter set forth.
In such examination, we have
assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to us as certified copies or confirmed as photostatic copies,
and the authenticity of the originals of such latter documents. We have also assumed the truth of all facts communicated to us by the
Company and that all minutes of meetings of the Board and the shareholders of the Company that have been provided to us are true and accurate
and have been properly prepared in accordance with the Articles and all applicable laws.
We have further assumed that
at the time of issuance and to the extent any such issuance would exceed the maximum share capital of the Company currently authorized,
the number of Ordinary Shares that the Company is authorized to issue shall have been increased in accordance with the Company’s
Articles such that a sufficient number of Ordinary Shares are authorized and available for issuance under the Articles.
Based upon and subject to
the foregoing, we are of the opinion that the Advance Shares, assuming that prior to the issuance of any Advance Shares under the SEPA,
the price, number of Advance Shares and certain other terms of issuance with respect to any specific advance notice delivered under the
SEPA will be authorized and approved by the Board or a pricing committee of the Board in accordance with Israeli Law, all corporate proceedings
necessary for the authorization, issuance and delivery of the Advance Shares shall have been taken and, upon issuance pursuant to the
terms of the SEPA and in accordance with resolutions of the Board related to the offering of the Advance Shares, the Advance Shares will
be validly issued, fully paid and non-assessable.
Members of our firm are admitted
to the Bar in the State of Israel, and we do not express any opinion as to the laws of any other jurisdiction. This opinion is limited
to the matters stated herein and no opinion is implied or may be inferred beyond the matters expressly stated.
We consent to the filing of
this opinion as an exhibit to the Registration Statement and to the reference to our firm appearing under the caption “Legal Matters”
and “Enforceability of Civil Liabilities” in the prospectus forming part of the Registration Statement. In giving this consent,
we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act, the
rules and regulations of the SEC promulgated thereunder or Item 509 of the SEC’s Regulation S-K promulgated under the Securities
Act.
This opinion letter is rendered
as of the date hereof and we disclaim any obligation to advise you of facts, circumstances, events or developments that may be brought
to our attention after the date of the Registration Statement that may alter, affect or modify the opinions expressed herein.
Very truly yours, |
|
|
|
/s/ Meitar | Law Offices |
|
Meitar | Law Offices |
|
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We consent to the reference to our firm under
the caption “Experts” in the Registration Statement on Form F-1 of our report dated April 1, 2024 and the incorporation by
reference in the Registration Statement on Form F-1 of the consolidated financial statements of SciSparc Ltd. (the “Company”),
included in its Annual Report on Form 20-F, as amended, for the year ended December 31, 2023, filed with the U.S. Securities and Exchange
Commission.
August 28, 2024 |
/s/ Kost Forer Gabbay & Kasierer |
Tel-Aviv, Israel |
Kost Forer Gabbay & Kasierer |
|
Member firm of Ernst & Young Global |
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We consent
to the incorporation by reference in this Registration Statement (Form F-1) of SciSparc Ltd. of our report dated March 31, 2024, with
respect to the financial statements of AutoMax Motors Ltd. as of December 31, 2023 and 2022 and the years then ended included in a Report
of Foreign Private Issuer on Form 6-K filed by SciSparc Ltd. with the Securities and Exchange Commission. We also consent to the
reference to us under the heading “Experts” in such Registration Statement.
Jerusalem, Israel |
|
|
|
|
|
Date: August 28, 2024 |
By: |
|
|
|
Ben David Shalvi Kop & Co. |
Exhibit 107
Calculation of Filing Fee Tables
FORM F-1
(Form Type)
SCISPARC LTD.
(Exact Name of Registrant as Specified
in its Charter)
Table 1: Newly Registered and Carry Forward
Securities
|
|
Security
Type |
|
Security
Class
Title |
|
Fee
Calculation
or Carry
Forward
Rule |
|
Amount
Registered (1) |
|
|
Proposed
Maximum
Offering
Price Per
Share (2)(3) |
|
Maximum
Aggregate
Offering
Price |
|
Fee
Rate |
|
Amount of
Registration
Fee |
|
Newly Registered Securities |
Fees to Be Paid |
|
Equity |
|
Ordinary Shares, no par value per share |
|
Rule 457(c) |
|
|
21,000,000 |
(4) |
|
$ |
0.42 |
|
$ |
8,820,000.00 |
|
$ |
0.00014760 |
|
$ |
1,301.83 |
|
Fees Previously Paid |
|
- |
|
- |
|
- |
|
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Offering Amounts |
|
|
|
|
$ |
8,820,000.00 |
|
|
|
|
$ |
1,301.83 |
|
|
|
Total Fees Previously Paid |
|
|
|
|
|
|
|
|
|
|
$ |
0.00 |
|
|
|
Total Fee Offsets |
|
|
|
|
|
|
|
|
|
|
$ |
0.00 |
|
|
|
Net Fee Due |
|
|
|
|
|
|
|
|
|
|
$ |
1,301.83 |
|
| (1) | Pursuant
to Rule 416 under the Securities Act of 1933, as amended (or the Securities Act) the Ordinary Shares (or Ordinary Shares) registered
hereby also include an indeterminate number of additional Ordinary Shares as may from time to time become issuable by reason of stock
splits, stock dividends, recapitalizations or other similar transactions. |
| (2) | Estimated
solely for purposes of calculating the amount of the registration fee pursuant to Rule 457(c) under the Securities Act, based upon the
average of the high and low sales prices of the registrant’s Ordinary Shares as reported on the Nasdaq Capital Market on August
27, 2024. |
| (3) | The
Registrant will not receive any proceeds from the sale of its Ordinary Shares by the selling shareholder. |
| (4) | All
the Ordinary Shares are to be offered for resale by the selling shareholder named in the prospectus contained in this Registration Statement
on Form F-1. |
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