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</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>UNITED STATES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>SECURITIES AND EXCHANGE COMMISSION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>WASHINGTON, DC 20549</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType">20-F</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentRegistrationStatement">&#9744;</ix:nonNumeric>
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:DocumentAnnualReport">&#9746;</ix:nonNumeric>
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">For
the fiscal year ended <ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-year-en" name="dei:DocumentPeriodEndDate"><ix:nonNumeric contextRef="c0" format="ixt:date-monthname-day-en" name="dei:CurrentFiscalYearEndDate">December 31</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" name="dei:DocumentFiscalYearFocus">2022</ix:nonNumeric></ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentTransitionReport">&#9744;</ix:nonNumeric>
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>OR</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:DocumentShellCompanyReport">&#9744;</ix:nonNumeric>
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">Commission
File No.: <ix:nonNumeric contextRef="c0" name="dei:EntityFileNumber">001-38041</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityRegistrantName"><span style="font-family: Times New Roman, Times, Serif"><b>SCISPARC
LTD.</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><i>(Exact
name of registrant as specified in its charter)</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><i>Translation
of registrant&#8217;s name into English:</i> Not applicable</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>State
of <ix:nonNumeric contextRef="c0" format="ixt-sec:edgarprovcountryen" name="dei:EntityIncorporationStateCountryCode">Israel</ix:nonNumeric>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><i>(Jurisdiction
of incorporation or organization)</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine1"><span style="font-family: Times New Roman, Times, Serif"><b>20
Raul Wallenberg St.</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:EntityAddressAddressLine2"><span style="font-family: Times New Roman, Times, Serif"><b>Tower
A, 2<sup>nd</sup> Floor</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b><ix:nonNumeric contextRef="c0" name="dei:EntityAddressCityOrTown">Tel
Aviv</ix:nonNumeric> <ix:nonNumeric contextRef="c0" name="dei:EntityAddressPostalZipCode">6971916</ix:nonNumeric>, <ix:nonNumeric contextRef="c0" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">Israel</ix:nonNumeric>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><i>(Address
of principal executive offices)</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelName"><span style="font-family: Times New Roman, Times, Serif"><b>Oz
Adler</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>Chief
Executive Officer</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>Tel:
<ix:nonNumeric contextRef="c1" name="dei:CityAreaCode">+972</ix:nonNumeric>-<ix:nonNumeric contextRef="c1" name="dei:LocalPhoneNumber">3-7175777</ix:nonNumeric></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b>Email:
<ix:nonNumeric contextRef="c1" name="dei:ContactPersonnelEmailAddress">oz@scisparc.com</ix:nonNumeric></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine1"><span style="font-family: Times New Roman, Times, Serif"><b>20
Raul Wallenberg St.</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><ix:nonNumeric contextRef="c1" name="dei:EntityAddressAddressLine2"><span style="font-family: Times New Roman, Times, Serif"><b>Tower
A, 2<sup>nd</sup> Floor</b></span></ix:nonNumeric></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><b><ix:nonNumeric contextRef="c1" name="dei:EntityAddressCityOrTown">Tel
Aviv</ix:nonNumeric> <ix:nonNumeric contextRef="c1" name="dei:EntityAddressPostalZipCode">6971916</ix:nonNumeric>, <ix:nonNumeric contextRef="c1" format="ixt-sec:countrynameen" name="dei:EntityAddressCountry">Israel</ix:nonNumeric>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif"><i>(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)</i></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif">Securities
to be registered or to be registered pursuant to Section 12(b) of the Act: None</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif">Securities
registered or to be registered pursuant to Section 12(g) of the Act:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font-family: Times New Roman, Times, Serif; vertical-align: bottom"> <td style="font-family: Times New Roman, Times, Serif; border-bottom: black 1.5pt solid; text-align: center; width: 32%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Title of each class</b></span></td> <td style="font-family: Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td> <td style="font-family: Times New Roman, Times, Serif; border-bottom: black 1.5pt solid; text-align: center; width: 32%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Trading Symbol(s)</b></span></td> <td style="font-family: Times New Roman, Times, Serif; width: 2%"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td> <td style="font-family: Times New Roman, Times, Serif; border-bottom: black 1.5pt solid; text-align: center; width: 32%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Name of each exchange on which registered</b></span></td></tr> <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top; background-color: #CCEEFF"> <td style="font-family: Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" name="dei:Security12gTitle">Ordinary Shares, no par value</ix:nonNumeric>&#160;</span></td> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td> <td style="font-family: Times New Roman, Times, Serif; text-align: center"><ix:nonNumeric contextRef="c0" name="dei:TradingSymbol"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SPRC</span></ix:nonNumeric></td> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td> <td style="font-family: Times New Roman, Times, Serif; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The <ix:nonNumeric contextRef="c0" format="ixt-sec:exchnameen" name="dei:SecurityExchangeName">Nasdaq</ix:nonNumeric> Capital Market</span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><span style="font-family: Times New Roman, Times, Serif">Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act: None</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
the number of outstanding shares of each of the issuer&#8217;s classes of capital or common stock as of the close of the period covered
by the annual report.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif"><ix:nonFraction contextRef="c2" decimals="INF" format="ixt:num-dot-decimal" name="dei:EntityCommonStockSharesOutstanding" scale="0" unitRef="shares">6,798,840</ix:nonFraction>
Ordinary Shares, no par value, as of December 31, 2022</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">Yes
&#9744; &#160;<ix:nonNumeric contextRef="c0" name="dei:EntityWellKnownSeasonedIssuer">No</ix:nonNumeric> &#9746;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act of 1934.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">Yes
&#9744;&#160; <ix:nonNumeric contextRef="c0" name="dei:EntityVoluntaryFilers">No</ix:nonNumeric> &#9746;</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c0" name="dei:EntityCurrentReportingStatus">Yes</ix:nonNumeric>
&#9746;&#160;&#160;No &#9744;</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c0" name="dei:EntityInteractiveDataCurrent">Yes</ix:nonNumeric>
&#9746;&#160;&#160;No &#9744;</span></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions of &#8220;large accelerated filer,&#8221; &#8220;accelerated filer,&#8221; and &#8220;emerging growth company&#8221;
in Rule 12b-2 of the Exchange Act.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top"> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large accelerated filer </span></td> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated filer </span></td> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td></tr> <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top"> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory">Non-accelerated filer</ix:nonNumeric>&#160;</span></td> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></td> <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging growth company </span></td> <td style="font-family: Times New Roman, Times, Serif"><ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityEmergingGrowthCompany"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></ix:nonNumeric></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">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 13(a) of the Exchange Act. &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#8224;
The term &#8220;new or revised financial accounting standard&#8221; refers to any update issued by the Financial Accounting
Standards Board to its Accounting Standards Codification after April 5, 2012.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant has filed a report on and attestation to its management&#8217;s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:IcfrAuditorAttestationFlag">&#9744;</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant&#8217;s executive officers during the relevant recovery period pursuant to &#167;240.10D-1(b). &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">U.S.
GAAP &#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif"><span style="-sec-ix-hidden: hidden-fact-0">International
Financial Reporting Standards as issued by the International Accounting Standards Board</span> &#9746;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">Other
&#9744;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">If
&#8220;Other&#8221; has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#9744;
Item 17&#160;&#9744; Item 18</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">If
this is an annual report, indicate by check mark whether the registrant is a shell company.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">Yes
&#9744;&#160;No <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityShellCompany">&#9746;</ix:nonNumeric></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>


</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0; margin-bottom: 0">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>


</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="text-align: center; margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt"><b>TABLE OF CONTENTS</b></span></p><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: top">
    <td style="padding-bottom: 1.5pt; text-align: right; width: 12%">&#160;</td>
    <td style="width: 80%; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; width: 8%; text-align: center"><span style="font-size: 10pt">Page</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_001"><span style="font-size: 10pt">INTRODUCTION</span></a></td>
    <td style="text-align: center">iii</td></tr>
  <tr style="vertical-align: top; ">
    <td colspan="2"><a href="#a_002"><span style="font-size: 10pt">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</span></a></td>
    <td style="text-align: center">iv</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td colspan="2"><a href="#a_003"><span style="font-size: 10pt">SUMMARY RISK FACTORS</span></a></td>
    <td style="text-align: center">v</td></tr>
  <tr style="vertical-align: top; ">
    <td colspan="2">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="text-align: right">&#160;</td>
    <td style="text-align: center"><a href="#a_004"><span style="font-size: 10pt">PART I</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; ">
    <td style="text-align: right">&#160;</td>
    <td style="text-align: center">&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 1.</span></td>
    <td><a href="#a_005"><span style="font-size: 10pt">IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 2.</span></td>
    <td><a href="#a_006"><span style="font-size: 10pt">OFFER STATISTICS AND EXPECTED TIMETABLE</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 3.</span></td>
    <td><a href="#a_007"><span style="font-size: 10pt">KEY INFORMATION</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_008"><span style="font-size: 10pt">[Reserved]</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_009"><span style="font-size: 10pt">Capitalization and Indebtedness</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><a href="#a_010"><span style="font-size: 10pt">Reasons for the Offer and Use of Proceeds</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">D.</span></td>
    <td><a href="#a_011"><span style="font-size: 10pt">Risk Factors</span></a></td>
    <td style="text-align: center">1</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 4.</span></td>
    <td><a href="#a_012"><span style="font-size: 10pt">INFORMATION ON THE COMPANY</span></a></td>
    <td style="text-align: center">48</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_013"><span style="font-size: 10pt">History and Development of the Company</span></a></td>
    <td style="text-align: center">48</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_014"><span style="font-size: 10pt">Business Overview</span></a></td>
    <td style="text-align: center">48</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><a href="#a_015"><span style="font-size: 10pt">Organizational Structure</span></a></td>
    <td style="text-align: center">82</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">D.</span></td>
    <td><a href="#a_016"><span style="font-size: 10pt">Property, Plants and Equipment</span></a></td>
    <td style="text-align: center">82</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 4A.</span></td>
    <td><a href="#a_017"><span style="font-size: 10pt">UNRESOLVED STAFF COMMENTS</span></a></td>
    <td style="text-align: center">82</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 5.</span></td>
    <td><a href="#a_018"><span style="font-size: 10pt">OPERATING AND FINANCIAL REVIEW AND PROSPECTS</span></a></td>
    <td style="text-align: center">82</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_019"><span style="font-size: 10pt">Operating Results</span></a></td>
    <td style="text-align: center">83</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_020"><span style="font-size: 10pt">Liquidity and Capital Resources</span></a></td>
    <td style="text-align: center">85</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><a href="#a_021"><span style="font-size: 10pt">Research and development, patents and licenses, etc.</span></a></td>
    <td style="text-align: center">88</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">D.</span></td>
    <td><a href="#a_022"><span style="font-size: 10pt">Trend information</span></a></td>
    <td style="text-align: center">88</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">E.</span></td>
    <td><a href="#a_023"><span style="font-size: 10pt">Critical Accounting Estimates</span></a></td>
    <td style="text-align: center">88</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 6.</span></td>
    <td><a href="#a_024"><span style="font-size: 10pt">DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES</span></a></td>
    <td style="text-align: center">90</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_025"><span style="font-size: 10pt">Directors and Senior Management</span></a></td>
    <td style="text-align: center">90</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_026"><span style="font-size: 10pt">Compensation</span></a></td>
    <td style="text-align: center">94</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><a href="#a_027"><span style="font-size: 10pt">Board Practices</span></a></td>
    <td style="text-align: center">96</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">D.</span></td>
    <td><a href="#a_028"><span style="font-size: 10pt">Employees</span></a></td>
    <td style="text-align: center">109</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">E.</span></td>
    <td><a href="#a_029"><span style="font-size: 10pt">Share Ownership</span></a></td>
    <td style="text-align: center">109</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 7.</span></td>
    <td><a href="#a_030"><span style="font-size: 10pt">MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS</span></a></td>
    <td style="text-align: center">109</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_031"><span style="font-size: 10pt">Major Shareholders</span></a></td>
    <td style="text-align: center">109</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_032"><span style="font-size: 10pt">Related Party Transactions</span></a></td>
    <td style="text-align: center">112</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><a href="#a_033"><span style="font-size: 10pt">Interests of Experts and Counsel</span></a></td>
    <td style="text-align: center">112</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 8.</span></td>
    <td><a href="#a_034"><span style="font-size: 10pt">FINANCIAL INFORMATION</span></a></td>
    <td style="text-align: center">113</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_035"><span style="font-size: 10pt">Consolidated Statements and Other Financial Information</span></a></td>
    <td style="text-align: center">113</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_036"><span style="font-size: 10pt">Significant Changes</span></a></td>
    <td style="text-align: center">114</td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

</div><!-- Field: Page; Sequence: 3; Options: NewSection; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; border-collapse: collapse; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="width: 12%"><span style="font-size: 10pt">ITEM 9.</span></td>
    <td style="width: 80%"><a href="#a_037"><span style="font-size: 10pt">THE OFFER AND LISTING</span></a></td>
    <td style="text-align: center; width: 8%">114</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_038"><span style="font-size: 10pt">Offer and Listing Details</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_039"><span style="font-size: 10pt">Plan of Distribution</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><a href="#a_040"><span style="font-size: 10pt">Markets</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">D.</span></td>
    <td><a href="#a_041"><span style="font-size: 10pt">Selling Shareholders</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">E.</span></td>
    <td><a href="#a_042"><span style="font-size: 10pt">Dilution</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">F.</span></td>
    <td><a href="#a_043"><span style="font-size: 10pt">Expenses of the Issue</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 10.</span></td>
    <td><a href="#a_044"><span style="font-size: 10pt">ADDITIONAL INFORMATION</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><a href="#a_045"><span style="font-size: 10pt">Share Capital</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><a href="#a_046"><span style="font-size: 10pt">Memorandum and Articles of Association</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><a href="#a_047"><span style="font-size: 10pt">Material Contracts</span></a></td>
    <td style="text-align: center">114</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">D.</span></td>
    <td><a href="#a_048"><span style="font-size: 10pt">Exchange Controls</span></a></td>
    <td style="text-align: center">115</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">E.</span></td>
    <td><a href="#a_049"><span style="font-size: 10pt">Taxation</span></a></td>
    <td style="text-align: center">115</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">F.</span></td>
    <td><a href="#a_050"><span style="font-size: 10pt">Dividends and Paying Agents</span></a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">G.</span></td>
    <td><a href="#a_051"><span style="font-size: 10pt">Statement by Experts</span></a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">H.</span></td>
    <td><a href="#a_052"><span style="font-size: 10pt">Documents on Display</span></a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">I.</span></td>
    <td><a href="#a_053"><span style="font-size: 10pt">Subsidiary Information</span></a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">J.</span></td>
    <td><a href="#a_054"><span style="font-size: 10pt">Annual Report to Security Holders</span></a></td>
    <td style="text-align: center">124</td></tr>

<tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 11.</span></td>
    <td><a href="#a_055"><span style="font-size: 10pt">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</span></a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 12.</span></td>
    <td><a href="#a_055"><span style="font-size: 10pt">DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES</span></a></td>
    <td style="text-align: center">124</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">A.</span></td>
    <td><span style="font-size: 10pt">Debt Securities</span></td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">B.</span></td>
    <td><span style="font-size: 10pt">Warrants and rights</span></td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">C.</span></td>
    <td><span style="font-size: 10pt">Other Securities</span></td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">D.</span></td>
    <td><span style="font-size: 10pt">American Depositary Shares</span></td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center"><a href="#a_057"><span style="font-size: 10pt">PART II</span></a></td>
    <td style="vertical-align: bottom; text-align: center">125</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 13.</span></td>
    <td><a href="#a_058"><span style="font-size: 10pt">DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES</span></a></td>
    <td style="text-align: center">125</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top"><span style="font-size: 10pt">ITEM 14.</span></td>
    <td style="vertical-align: top"><a href="#a_059"><span style="font-size: 10pt">MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS</span></a></td>
    <td style="vertical-align: bottom; text-align: center">125</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 15.</span></td>
    <td><a href="#a_060"><span style="font-size: 10pt">CONTROLS AND PROCEDURES</span></a></td>
    <td style="text-align: center">125</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 16.</span></td>
    <td><a href="#a_061"><span style="font-size: 10pt">[Reserved].</span></a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 16A.</span></td>
    <td><a href="#a_062"><span style="font-size: 10pt">AUDIT COMMITTEE FINANCIAL EXPERT</span></a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 16B.</span></td>
    <td><a href="#a_063"><span style="font-size: 10pt">CODE OF ETHICS</span></a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 16C.</span></td>
    <td><a href="#a_064"><span style="font-size: 10pt">PRINCIPAL ACCOUNTANT FEES AND SERVICES</span></a></td>
    <td style="text-align: center">126</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 16D.</span></td>
    <td><a href="#a_065"><span style="font-size: 10pt">EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES</span></a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 16E.</span></td>
    <td><a href="#a_066"><span style="font-size: 10pt">PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS</span></a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 16F.</span></td>
    <td><a href="#a_067"><span style="font-size: 10pt">CHANGE IN REGISTRANT&#8217;S CERTIFYING ACCOUNTANT</span></a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 16G.</span></td>
    <td><a href="#a_068"><span style="font-size: 10pt">CORPORATE GOVERNANCE</span></a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 16H.</span></td>
    <td><a href="#a_069"><span style="font-size: 10pt">MINE SAFETY DISCLOSURE</span></a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 16I.</span></td>
    <td><a href="#a_070"><span style="font-size: 10pt">DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS</span></a></td>
    <td style="text-align: center">127</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td></tr>
  <tr>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center"><a href="#a_071"><span style="font-size: 10pt">PART III</span></a></td>
    <td style="vertical-align: bottom; text-align: center">128</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: bottom; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 17.</span></td>
    <td><a href="#a_072"><span style="font-size: 10pt">FINANCIAL STATEMENTS</span></a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-size: 10pt">ITEM 18.</span></td>
    <td><a href="#a_073"><span style="font-size: 10pt">FINANCIAL STATEMENTS</span></a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="vertical-align: top; ">
    <td><span style="font-size: 10pt">ITEM 19.</span></td>
    <td><a href="#a_074"><span style="font-size: 10pt">EXHIBITS</span></a></td>
    <td style="text-align: center">128</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td colspan="2" style="vertical-align: top"><a href="#a_075"><span style="font-size: 10pt">SIGNATURES</span></a></td>
    <td style="vertical-align: bottom; text-align: center">130</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>INTRODUCTION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a specialty clinical-stage
pharmaceutical company. Our focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. With
this focus, we are currently engaged in the development of the following pharmaceutical compositions comprising N-acylethanolamines and
cannabinoids, such as Palmitoylethanolamide and/or &#916;9-tetrahydrocannabinol, or THC, and/or non-psychoactive cannabidiol, or CBD,
and/or other cannabinoid receptor, or CBR, agonists: SCI-110 for the treatment of Tourette syndrome, or TS, and Alzheimer&#8217;s disease
and agitation; SCI-160 for the treatment of pain; and SCI-210 for the treatment of Autism Spectrum Disorder, or ASD, and Status Epilepticus,
or SE. We also have a majority-owned subsidiary whose business focuses on the sale of hemp-based products on the Amazon.com marketplace.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 14, 2022, we
entered into a definitive agreement, or the Wellution Acquisition Agreement, to acquire Wellution&#8482;, or the Brand, a top-seller account
on Amazon.com marketplace, or Amazon, for a base cash consideration of $4.59 million and certain additional deferred payments, based on
the Brand&#8217;s EBITDA in the 12 month period following the closing, which was on September 30, 2022. In connection with the Wellution
Acquisition Agreement, we established a new wholly owned subsidiary,&#160;SciSparc Nutraceuticals Inc., or SciSparc Nutraceuticals, to
hold the new assets. The Brand sells hemp-based products, including hemp gummies, hemp oil capsules, hemp gel, hemp cream, detox pills,
height pills, antibacterial creams, and anti-aging creams, among other beauty and hair treatment products that are all manufactured in
the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in; ">On February 23, 2023,
we signed a stock purchase agreement, or the Agreement, with Jeffs&#8217; Brands Holdings Inc., a recently newly-formed wholly owned subsidiary,
or Jeffs&#8217; Brands Holdings, of Jeffs&#8217; Brands Ltd., or Jeffs&#8217; Brands, and Jeffs&#8217; Brands, which closed on March 22,
2023. Pursuant to the Agreement, Jeffs&#8217; Brands Holdings acquired from us a number of shares of stock equal to approximately a 49%
interest in our wholly owned subsidiary, SciSparc Nutraceuticals Inc., which owns Wellution<sup>TM</sup>, for $2.5 million in cash, and
additional deferred cash payments of approximately $489,330 accounting for price adjustments related to inventory and working capital,
which will be paid in five equal monthly installments beginning in May 2023. In addition, in connection with the closing of the transaction,
we and Jeffs&#8217; Brands, engaged in a mutual share exchange in the amount of $288,238 of ordinary shares from each of us and Jeffs&#8217;
Brands. The number of shares in the share exchange was calculated based on the average closing price of the relevant company&#8217;s shares
for 30 consecutive trading days ending on the third trading day immediately prior to the closing. Accordingly, we acquired 247,415 ordinary
shares of Jeffs&#8217; Brands and Jeffs&#8217; Brands acquired 360,297 ordinary shares of us having an aggregate value of $288,238, which
was adjusted from $300,000 according to the 4.99% ownership limit included in the definitive agreements, or the Share Exchange. Following
the Share Exchange, we hold approximately 51% of SciSparc Nutraceuticals Inc. As part of the Agreement, Jeffs Brands and SciSparc Nutraceuticals
Inc. entered into a consulting agreement, pursuant to which Jeffs&#8217; Brands will provide management services to SciSparc Nutraceuticals
Inc. for the Wellution<sup>TM</sup> brand for a monthly fee of $20,000 and Jeffs&#8217; Brands will receive a one-time signing bonus in
the amount of $51,000. The consulting agreement will be for an undefined period of time and may be terminated by either party with 30
days advance notice.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">On January 25, 2023, we announced that our board
of directors resolved to pursue a restructuring plan, or the Restructuring Plan, which involves transferring our pharmaceutical activities
to a new wholly-owned subsidiary, or NewCo. As part of the Restructuring Plan, we intend to examine the possibility of listing NewCo on
a leading stock exchange, while maintaining our controlling interest in NewCo such that we will continue to control our current business
activities. We also intend to explore other potential new opportunities, activities and investments in a variety of sectors. Any restructuring
and possible listing of NewCo on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses,
regulatory approvals, receipt of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions
to effectuate such corporate restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended
Restructuring Plan and listing of NewCo or that they will be completed at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were incorporated under
the laws of the State of Israel on August 23, 2004. Our Ordinary Shares are listed on the Nasdaq under the symbol &#8220;SPRC&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unless otherwise indicated,
all references to the &#8220;Company,&#8221; &#8220;we,&#8221; &#8220;us, &#8220;our&#8221; and &#8220;SciSparc&#8221; refer to SciSparc
Ltd. (formerly known as Therapix Biosciences Ltd.) and its subsidiaries.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">References to &#8220;U.S.
dollars&#8221; and &#8220;$&#8221; are to currency of the United States of America, and references to &#8220;NIS&#8221; are to New Israeli
Shekels. References to &#8220;Ordinary Shares&#8221; are to our Ordinary Shares, no par value. 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. Unless derived from our financial statements
or otherwise indicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 20-F, or the Annual Report, are
translated using a rate of NIS 3.52 to USD 1.00, the last exchange rate published by the Bank of Israel on December 30, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 19, 2021, our shareholders
approved a reverse split of our share capital by a ratio of to 140:1, or the Reverse Split, to be effective at the date to be determined
by our Board of Directors. The Reverse Split became effective after the close of business on August 9, 2021. Concurrently with the Reverse
Split, we changed the ratio of the ADSs to our Ordinary Shares from each ADS representing 140 Ordinary Shares to each ADS representing
1 Ordinary Share. On August 26, 2021, our ADSs were mandatorily cancelled and were exchanged for Ordinary Shares at a one-for-one ratio,
or the ADS Exchange. All descriptions of our share capital, including share amounts and per share amounts in this Annual Report are presented
after giving effect to the Reverse Split and ADS Exchange, and the transition of the trading our Ordinary Shares in lieu of our ADSs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">C<span style="font-family: Times New Roman, Times, Serif">ertain
information included or incorporated by reference in this Annual Report may be deemed to be &#8220;forward-looking statements&#8221;
within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are
often characterized by the use of forward-looking terminology such as &#8220;may,&#8221; &#8220;will,&#8221; &#8220;expect,&#8221; &#8220;anticipate,&#8221;
&#8220;estimate,&#8221; &#8220;continue,&#8221; &#8220;believe,&#8221; &#8220;should,&#8221; &#8220;intend,&#8221; &#8220;project&#8221;
or other similar words, but are not the only way these statements are identified.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">Forward-looking
statements include, but are not limited to, statements about:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our ability to raise capital through the issuance of additional securities
and ability to continue as a going concern;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    ability to advance the development our pharmaceutical product candidates, including the anticipated starting and ending dates of
    our anticipated clinical trials;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    assessment of the potential of our pharmaceutical product candidates to treat certain indications;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    ability to successfully receive approvals from the U.S. Food and Drug Administration, or 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;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">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;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    ability to commercialize our existing product candidates and future sales of our existing product candidates or any other future
    potential product candidates;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    ability to meet our expectations regarding the commercial supply of our product candidates;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    ability to integrate our new eCommerce operations business, which focuses on the sale of hemp-based products on the Amazon.com marketplace;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;our
    ability to pursue a Restructuring Plan and list NewCo on a leading stock exchange;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    overall global economic environment;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    impact of competition and new technologies;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">general
    market, political and economic conditions in the countries in which we operate;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">projected
    capital expenditures and liquidity;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">changes
    in our strategy;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">litigation;
    and</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">those
    factors referred to in &#8220;Item 3. Key Information - D. Risk Factors,&#8221; &#8220;Item 4. Information on the Company,&#8221;
    and &#8220;Item 5. Operating and Financial Review and Prospects,&#8221; as well as in this Annual Report.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">These
statements are only current predictions and are subject to known and unknown risks,</span> uncertainties, and other factors that may
cause our or our industry&#8217;s actual results, levels of activity, performance or achievements to be materially different from those
anticipated by the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Readers are urged to carefully
review and consider the various disclosures made throughout this Annual Report which are designed to advise interested parties of the
risks and factors that may affect our business, financial condition, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">You should not put undue reliance
on any forward-looking statements. Any forward-looking statements in this Annual Report are made as of the date hereof, and we undertake
no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise,
except as required by law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 6; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->iv<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Summary Risk Factors </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The risk factors described
below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should
carefully consider these risk factors, together with the risk factors set forth in Item 3.D <span style="font-family: Times New Roman, Times, Serif">of
this Annual Report and the other reports and documents filed by us with the SEC.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to Our Financial Condition and Capital Requirements</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    are a specialty clinical-stage pharmaceutical company and have a limited operating history on which to assess the prospects for our
    business, have incurred significant losses since the date of our inception, and anticipate that we will continue to incur significant
    losses until we are able to successfully commercialize our product candidates.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    have not generated any revenue from the sale of our current product candidates and may never be profitable.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    expect that we will need to raise substantial additional funding before we can expect to become profitable from sales of our product
    candidates. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product candidate
    development efforts or other operations.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif">&#160;</td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify">&#160;</td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify">&#160;</td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif">&#160;</td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify">&#9679;</td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><p style="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">The report of our independent registered public accounting firm contains
an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining
new financing on reasonable terms or at all.</p></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to the Discovery and Development of Our Pharmaceutical Product Candidates</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    are heavily dependent on the success of our pharmaceutical product candidates, which are in the late stages of pre-clinical development
    or early stages of clinical development. We cannot give any assurance that any of our product candidates will receive regulatory
    approval, which is necessary before they can be commercialized.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Clinical
    drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive
    of future study results. We may also find it difficult to enroll patients in our clinical studies. Difficulty in enrolling patients
    could delay or prevent clinical studies of our pharmaceutical product candidates.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
    the FDA does not conclude that our pharmaceutical product candidates satisfy the requirements for the Section 505(b)(2) regulatory
    approval pathway, or if the requirements for our pharmaceutical product candidates under Section 505(b)(2) are not as we expect,
    the approval pathway would likely take significantly longer, cost significantly more and entail significantly greater complications
    and risks than anticipated and in either case may not be successful.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
    respect of our pharmaceutical product candidates targeting rare indications, orphan drug exclusivity may afford limited protection,
    and if another party obtains orphan drug exclusivity for the drugs and indications we are targeting, we may be precluded from commercializing
    our pharmaceutical product candidates in those indications during that period of exclusivity. </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to Our Reliance on Third Parties</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    rely on third parties to conduct our preclinical and clinical studies and perform other tasks for us. If these third parties do not
    successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able
    to obtain regulatory approval for or commercialize our pharmaceutical product candidates and our business could be substantially
    harmed.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    will rely on third parties to manufacture our active pharmaceutical ingredient, or API, and formulations. Our business could be harmed
    if those third parties fail to provide us with sufficient quantities of our needed supplies, or fail to do so at acceptable quality
    levels or prices.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif"><b><i>&#160;</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to Commercialization of Our Pharmaceutical Product Candidates</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
    the market opportunities for our pharmaceutical product candidates are smaller than we believe they are, our revenue may be adversely
    affected, and our business may suffer.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    face intense competition and rapid technological change and the possibility that our competitors may discover, develop or commercialize
    therapies that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our
    ability to successfully commercialize our pharmaceutical product candidates.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif"><b><i>&#160;</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 7; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->v<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif"><b><i>&#160;</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to Our Intellectual Property</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">If
    we are unable to obtain and maintain effective patent rights for our product candidates, we may not be able to compete effectively
    in our markets. Further, if we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information
    may be used by others to compete against us.</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    may not be able to identify infringements of our patents and accordingly the enforcement of our intellectual property rights may
    be difficult.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to Our Pharmaceutical Business Operations</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif"><p style="text-align: justify; margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">From time to time, we may sign letters of intent and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements. There can be no assurance that we will enter into any such definitive agreements. Similarly, we may strategically invest in transactions from time to time, and there can be no assurance that the value of our investment will increase or that it will not fluctuate.</span></p>
                                                           <p style="margin-top: 0; margin-bottom: 0"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></p></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    may strategically invest in transactions from time to time, and there can be no assurance that the value of our investment will increase
    or that it will not fluctuate or that we will be able to successfully integrate or operate any new business we acquire. </span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">We
    will need to expand our organization and we may experience difficulties in recruiting needed additional employees and consultants,
    which could disrupt our operations.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.65pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
    Related to our Intended Corporate Restructuring Plan</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.65pt"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.65pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">The intended Restructuring Plan which involves transferring
our pharmaceutical activities to NewCo may not be completed in accordance with the expected plans or anticipated timeline, or at all,
and may not achieve the expected results.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
    Related to Our Subsidiary&#8217;s eCommerce Operations</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.65pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">We
may be unable to successfully integrate or execute our new subsidiary&#8217;s eCommerce operations business.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.65pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Our
subsidiary&#8217;s eCommerce operations rely on the Amazon.com marketplace and fulfillment by Amazon.com and changes to the Amazon.com
marketplace, Amazon&#8217;s services and their terms of use may harm our business.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 7.65pt"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to the Ownership of Our Securities</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    will need additional capital in the future. Raising additional capital by issuing securities may cause dilution to existing shareholders.
    </span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We
    do not know whether a market for the Ordinary Shares will be sustained or what the trading price of the Ordinary Shares will be and
    as a result it may be difficult for you to sell your Ordinary Shares</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in"><span style="font-family: Times New Roman, Times, Serif"><b><i>Risks
Related to Israeli Law and Our Operations in Israel</i></b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; padding-bottom: 10pt; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Provisions
    of Israeli law may make it easy for our shareholders to demand that we convene a shareholders meeting, and/or allow shareholders
    to convene a shareholder meeting without the consent of our management, which may disrupt our management&#8217;s ability to run our
    company.</span></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
    principal executive offices, most of our research and development activities and other significant operations are located in Israel,
    and, therefore, our results may be adversely affected by political, economic and military instability in Israel.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><!-- Field: Page; Sequence: 8; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->vi<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART I</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>ITEM 3. KEY INFORMATION </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>A.</b> [Reserved]</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>B. Capitalization and Indebtedness</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>C. Reasons for the Offer and Use of Proceeds</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>D. Risk Factors </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">You should carefully consider
the risks described below, together with all of the other information in this Annual Report. The risks described below are not the only
risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially
and adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer
and the price of our Ordinary Shares could decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to Our Financial Condition and
Capital Requirements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are a specialty clinical</i></b>-<b><i>stage
pharmaceutical company and have incurred significant losses since the date of our inception, and anticipate that we will continue to incur
significant losses until we are able to successfully commercialize our product candidates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have historically incurred
substantial net losses; including net losses of approximately $2.6 million for the year ended December 31, 2022, and net losses of approximately
$5.8 million in 2021. As of December 31, 2022, we had an accumulated deficit of approximately $63.6 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have devoted substantially
all of our financial resources to develop our product candidates, and more recently, to a lesser degree, we have been searching for strategic
transactions. We have financed our operations primarily through the issuance of equity securities. The amount of our future net losses
will depend, in part, on completing the development of our product candidates, the demand for our product candidates, the rate of our
future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. Pharmaceutical
product development is a highly speculative undertaking and involves a substantial degree of risk. We are in the late stages of preclinical
and at the early stages of clinical development for our product candidates, we have not yet commenced pivotal clinical studies for any
product candidate. Although we have begun early commercialization efforts for our proprietary PEA oral tablets formulation, CannAmide&#8482;,
which we expect will be marketed to pharmacies and other retail outlets across Canada following our entering into a distribution agreement(s),
it may be several years, if ever, before we complete pivotal clinical studies and have our lead product candidate approved for commercialization.
Even if we obtain regulatory approval to market a product candidate, our future revenue will depend upon the size of the markets for which
our product candidates may receive approval and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party
payors and adequate market share for our product candidates in those markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect to continue to incur
significant losses until we are able to commercialize our main pharmaceutical product candidates, which we may not be successful in achieving.
We anticipate that our expenses will increase substantially if and as we:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have not generated any revenue from the
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not yet commercialized
any of our pharmaceutical product candidates and have not generated any revenue from sales of our pharmaceutical product candidates since
the date of our inception. Although we have begun early commercialization efforts for our proprietary PEA oral tablets formulation. CannAmide&#8482;,
we do not currently expect the sale of CannAmide to result in material revenues, nor is CannAmide&#8482; our lead pharmaceutical product
candidate. We do not know whether or when we will become profitable. Our ability to generate revenue and achieve profitability depends
on our ability to successfully complete the development of, and to commercialize, our pharmaceutical product candidates and on the demand
for our pharmaceutical product candidates. Our ability to generate revenue and achieve profitability depends on our ability, alone or
with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals
necessary to commercialize, one or more of our pharmaceutical product candidates. Our ability to generate future revenue from pharmaceutical
product candidate sales depends heavily on our success in many areas, including but not limited to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><!-- Field: Page; Sequence: 10; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even if one or more of the
pharmaceutical product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated
with commercializing any approved pharmaceutical product candidate. Our expenses could increase beyond expectations if we are required
by the FDA, the European Medicines Agency, or the EMA, or other regulatory agencies, domestic or foreign, to perform clinical, nonclinical
or other types of studies in addition to those that we currently anticipate. In cases where we are successful in obtaining regulatory
approvals to market one or more of our pharmaceutical product candidates, our revenue will be dependent, in part, upon the size of the
markets in the territories for which we gain regulatory approval, the accepted price for the pharmaceutical product candidate, the ability
to get reimbursement at an acceptable price and whether we own the commercial rights for that territory. If the number of our addressable
patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably
expected population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant
revenue from sales of such pharmaceutical product candidates, even if approved. Additionally, if we are not able to generate revenue from
the sale of any approved pharmaceutical product candidates, we may be forced to cease operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We expect that we will need to raise substantial
additional funding before we can expect to become profitable from sales of our pharmaceutical product candidates. This additional financing
may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit
or terminate our pharmaceutical product candidate development efforts or other operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, our
cash was approximately $3.6 million, other accounts receivable was approximately $0.2 million, we had a negative working capital of approximately
$131 thousand and an accumulated deficit of approximately $634.6 million. Based upon our currently expected level of operating expenditures,
we do not expect that our existing cash will be sufficient to fund operations for at least the next 12 months. We expect that we will
require substantial additional capital to commercialize our pharmaceutical product candidates. In addition, our operating plans may change
as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future
funding requirements will depend on many factors, including but not limited to:</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any additional fundraising
efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize
our pharmaceutical product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts
or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders
of our securities and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause
the market price of our Ordinary Shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations,
and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations
on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our
ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise
at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or pharmaceutical
product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating
results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional
capital if market conditions are favorable or if we have specific strategic considerations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we are unable to obtain
funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development
programs or the commercialization of any pharmaceutical product candidates or be unable to expand our operations or otherwise capitalize
on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><b><i>The report of our
independent registered public accounting firm contains an explanatory paragraph regarding substantial doubt about our ability to continue
as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">The
report of our independent registered public accounting firm on our audited consolidated financial statements for the period ended&#160;December
31,&#160;2022 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.&#160;Our
consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability
to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance
of equity or debt securities or otherwise. Further reports on our consolidated financial statements may include an explanatory paragraph
with respect to our ability to continue as a going concern. Until we can generate significant recurring revenues, we expect to satisfy
our future cash needs through debt or equity financing. We cannot be certain that additional funding will be available to us on acceptable
terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans
for, or commercialization efforts with respect to our products. This may raise substantial doubts about our ability to continue as a going
concern.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to the Discovery and Development
of Our Pharmaceutical Product Candidates </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are heavily dependent on the success
of our pharmaceutical product candidates, which are in the late stages of pre-clinical development or early stages of clinical development.
We cannot give any assurance that any of our pharmaceutical product candidates will receive regulatory approval, which is necessary before
they can be commercialized.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To date, we have invested
substantially all of our efforts and financial resources to design and develop our pharmaceutical product candidates, including conducting
preclinical studies and providing general and administrative support for these operations. Our future success is dependent on our ability
to successfully develop, obtain regulatory approval for, and then successfully commercialize one or more pharmaceutical product candidates.
We currently generate no revenue from sales of any pharmaceutical product candidate, and we may never be able to develop or commercialize
a marketable pharmaceutical product candidate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each of our pharmaceutical
product candidates is in the late stages of pre-clinical development or early stages of development and will require additional clinical
development (and in some cases additional preclinical development), management of nonclinical, clinical and manufacturing activities,
regulatory approval, obtaining adequate manufacturing supply, building of a commercial organization and significant marketing efforts
before we generate any revenue from pharmaceutical product candidate sales. It may be years before a pivotal study is initiated, if at
all. Any clinical trials in the United States will require the approval of an Investigational New Drug, or IND, application by the FDA,
and we cannot assure that we will obtain such approval in a timely manner, or at all. We are not permitted to market or promote any of
our pharmaceutical product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities,
and we may never receive such regulatory approval for any of our pharmaceutical product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We as a company have never
submitted marketing applications to the FDA or comparable foreign regulatory authorities. We cannot be certain that any of our pharmaceutical
product candidates will be successful in clinical studies or receive regulatory approval or what regulatory pathway the regulatory authorities
shall designate for our pharmaceutical product candidates. Further, our pharmaceutical product candidates may not receive regulatory approval
even if they are successful in clinical studies. If we do not receive regulatory approvals for our pharmaceutical product candidates,
we may not be able to continue our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We generally plan to seek
regulatory approval to commercialize our pharmaceutical product candidates in the United States, the European Union and in additional
foreign countries. To obtain regulatory approvals we must comply with the numerous and varying regulatory requirements of such countries
regarding safety, efficacy, chemistry, manufacturing and controls, clinical studies, commercial sales, pricing and distribution of our
product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval
in any other jurisdictions. If we are unable to obtain approval for our pharmaceutical product candidates in multiple jurisdictions, our
revenue and results of operations would be negatively affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The regulatory approval processes of the
FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain
regulatory approval for our pharmaceutical product candidates, our business will be substantially harmed.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The time required to obtain
approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement of clinical
studies and depends upon numerous factors. In addition, approval policies, regulations or the type and amount of clinical data necessary
to gain approval may change during the course of a pharmaceutical product candidate&#8217;s clinical development and may vary among jurisdictions,
which may cause delays in the approval or the decision not to approve an application. We have not obtained regulatory approval for any
pharmaceutical product candidate, and it is possible that none of our existing pharmaceutical product candidates or any pharmaceutical
product candidates we may seek to develop in the future will ever obtain regulatory approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Applications for our pharmaceutical
product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical studies;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">we may be unable to demonstrate to the FDA or comparable foreign regulatory authorities that a pharmaceutical product candidate&#8217;s safety-benefit ratio for its proposed indication is acceptable;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical studies;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the data collected from clinical studies of our pharmaceutical product candidates may not be sufficient to support the submission of a New Drug Application, or NDA, in the United States or elsewhere;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This lengthy approval process,
as well as the unpredictability of the results of clinical studies, may result in our failing to obtain regulatory approval to market
any of our pharmaceutical product candidates, which would significantly harm our business, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Clinical drug development involves a lengthy
and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Clinical testing is expensive
and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical study
process. The results of preclinical studies and early clinical studies of our product candidates may not be predictive of the results
of later-stage clinical studies. Product candidates that have shown promising results in early-stage clinical studies may still suffer
significant setbacks in subsequent advanced clinical studies. There is a high failure rate for drugs proceeding through clinical studies,
and product candidates in later stages of clinical studies may fail to show the desired safety and efficacy traits despite having progressed
satisfactorily through preclinical studies and initial clinical studies. A number of companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results
in earlier studies. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses. We do not know
whether any Phase I, Phase II, Phase III or other clinical studies we may conduct will demonstrate consistent or adequate efficacy and
safety sufficient to obtain regulatory approval to market our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may find it difficult to enroll patients
in our clinical studies. Difficulty in enrolling patients could delay or prevent clinical studies of our pharmaceutical product candidates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Identifying and qualifying
patients to participate in clinical studies of our pharmaceutical product candidates is critical to our success. The timing of our clinical
studies depends in part on the speed at which we can recruit patients to participate in testing our pharmaceutical product candidates,
and we may experience delays in our clinical studies if we encounter difficulties in enrollment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some of the conditions for
which we plan to evaluate our current pharmaceutical product candidates are for rare diseases. Accordingly, there is a limited patient
pool from which to draw for clinical studies. Further, the eligibility criteria of our clinical studies will further limit the pool of
available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease
is either severe enough or not too advanced to include them in a study.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, the process
of finding patients may prove costly. We also may not be able to identify, recruit and enroll a sufficient number of patients to complete
our clinical studies because of the perceived risks and benefits of the pharmaceutical product candidate under study, the availability
and efficacy of competing therapies and clinical studies, the proximity and availability of clinical study sites for prospective patients
and the patient referral practices of physicians. If patients are unwilling to participate in our studies for any reason, the timeline
for recruiting patients, conducting studies and obtaining regulatory approval of potential pharmaceutical product candidates will be delayed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we experience delays in
the completion or termination of any clinical study of our pharmaceutical product candidates, the commercial prospects of our pharmaceutical
product candidates will be harmed, and our ability to generate pharmaceutical product candidate revenue from any of these pharmaceutical
product candidates could be delayed or prevented. In addition, any delays in completing our clinical studies will increase our costs,
slow down our product candidate development and approval process and jeopardize our ability to commence pharmaceutical product candidate
sales and generate revenue. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition,
many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to
the denial of regulatory approval of our pharmaceutical product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If the FDA does not conclude that our pharmaceutical
product candidates satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for our </i></b>pharmaceutical
<b><i>product candidates under Section 505(b)(2) are not as we expect, the approval pathway would likely take significantly longer, cost
significantly more and entail significantly greater complications and risks than anticipated and in either case may not be successful.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to seek FDA approval
through the Section 505(b)(2) regulatory pathway for our pharmaceutical product candidate- SCI-110 and potentially for our drug candidate
SCI-210. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Amendments, added Section
505(b)(2) to the Federal Food, Drug, and Cosmetic Act of 1938, as amended, or the FDC Act, or Section 505(b)(2). Section 505(b)(2) permits
the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant
and for which the applicant has not obtained a right of reference.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the FDA does not allow
us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional
data and information and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required
to obtain FDA approval, and complications and risks associated with FDA approval, would substantially increase. We may need to obtain
additional funding, which could result in significant dilution to the ownership interests of our then existing shareholders to the extent
we issue equity securities or convertible debt. We cannot assure you that we would be able to obtain such additional financing on terms
acceptable to us, if at all. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive pharmaceutical
product candidates reaching the market faster than our pharmaceutical product candidates, which could materially adversely impact our
competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that
our pharmaceutical product candidates will receive the requisite approvals for commercialization.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, notwithstanding
the approval of a number of pharmaceutical product candidates by the FDA under Section 505(b)(2) over the last few years, some pharmaceutical
companies and others have objected to the FDA&#8217;s interpretation of Section 505(b)(2). For example, several companies have previously
petitioned the FDA regarding the constitutionality of allowing others to rely upon FDA findings that are based on their proprietary data.
If the FDA&#8217;s interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies
and practices, which could require that we generate full data regarding safety and effectiveness for previously approved active ingredients
and delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry
is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors
of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and
mandatory delays in approval of our potential future NDAs for up to 30 months depending on the outcome of any litigation. It is not uncommon
for a manufacturer of an approved pharmaceutical product to file a citizen petition with the FDA seeking to delay approval of, or impose
additional approval requirements for, pending competing pharmaceutical products. If successful, such petitions can significantly delay,
or even prevent, the approval of the new pharmaceutical product. However, even if the FDA ultimately denies such a petition, the FDA may
substantially delay approval while it considers and responds to the petition. In addition, even if we are able to utilize the Section
505(b)(2) regulatory pathway for our pharmaceutical product candidates, there is no guarantee this would ultimately lead to faster pharmaceutical
product development or earlier approval. Moreover, even if these pharmaceutical product candidates are approved under the Section 505(b)(2)
pathway, as the case may be, the approval may be subject to limitations on the indicated uses for which the pharmaceutical products may
be marketed or to other conditions of approval or may contain requirements for costly post-marketing testing and surveillance to monitor
the safety or efficacy of the pharmaceutical products. Our pharmaceutical product candidates are at early stages of development and are
subject to uncertainty over what we must do on our development program in order to secure approval under Section 505(b)(2).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may encounter substantial delays in our
clinical studies, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Before obtaining marketing
approval from regulatory authorities for the sale of our pharmaceutical product candidates, we must conduct extensive clinical studies
to demonstrate the safety and efficacy of the pharmaceutical product candidates in humans. Clinical testing is expensive, time consuming
and uncertain as to outcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at
all. A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful.
Events that may prevent successful or timely completion of clinical development include but are not limited to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of human clinical studies;</span></td></tr>
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify">&#160;</td></tr>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any inability to successfully
complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenue. We may
also be required to conduct additional safety, efficacy and comparability studies before we will be allowed to start clinical studies
with our repurposed drugs. Clinical study delays could also shorten any periods during which our pharmaceutical product candidates have
patent protection and may allow our competitors to bring pharmaceutical product candidates to market before we do, which could impair
our ability to obtain orphan exclusivity and successfully commercialize our pharmaceutical product candidates and may harm our business
and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>In respect of our pharmaceutical product
candidates targeting rare indications, orphan drug exclusivity may afford limited protection, and if another party obtains orphan drug
exclusivity for the drugs and indications we are targeting, we may be precluded from commercializing our pharmaceutical product candidates
in those indications during that period of exclusivity</i>.</b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are seeking to obtain an
orphan designation for some of our pharmaceutical product candidates in the United States. Under the Orphan Drug Act, the FDA may designate
a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of
fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable
expectation that the cost of developing the drug will be recovered from sales in the United States. Additionally, designation is granted
for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic
condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the
necessary investment in developing the drug.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States, the
first NDA applicant with an orphan drug designation for a particular active moiety to treat a specific disease or condition that receives
FDA approval is entitled to a seven-year exclusive marketing period in the United States for that product candidate, for that indication.
In the European Union, orphan drug designation also entitles a party to financial incentives such as reduction of fees or fee waivers
and 10 years of market exclusivity is granted following drug approval. This period may be reduced to six years if the orphan drug designation
criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market
exclusivity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2016, we submitted
a request for orphan drug designation to the FDA for SCI-110 for the treatment of TS. In a letter dated September 29, 2016, the FDA informed
us that our request could not be granted at such time, and is being held in abeyance until and subject to us providing additional information
pertaining to the overall prevalence of TS in both children and adults, and further clinical data to support our scientific rationale
for our request for orphan drug designation within 12 months. In September 2017, we responded to such FDA letter within the designated
time frame, and provided the FDA with our articulated and reasoned responses including documentation and clinical data that supports it.
On December 26, 2017, we received the FDA&#8217;s response to our response. The FDA accepted that there is adequate scientific rationale
for the treatment of TS with SCI-110 mainly through the preliminary results of ongoing clinical trials, suggesting that SCI-110 may provide
benefit in treating TS. However, the FDA stated that it was unable to grant our request and indicated that we did not provide adequate
prevalence estimates, and any evidence to support our statement that only moderate to severe TS patients would require pharmacological
treatment. We further responded in January 2018 by providing additional information. On January 23, 2020, following additional correspondence
with the FDA, the FDA still did not grant us our request due to the fact that we have not yet provided adequate prevalence estimates.
However, the FDA did agree with our position that we could potentially qualify for orphan drug designation with respect to the moderate-to-severe
TS sub-group population only rather than the entire population. After we had provided additional prevalence estimates, the FDA raised
a concern in its letter, dated December 7, 2020, about our ability to limit the use of the pharmaceutical product to the subset of patients
we are pursuing. Due to the fact that we disagree with this concern, we requested a clarification call. In the clarification call conducted
on February 2, 2021, we agreed with the FDA concern about our ability to limit the use of the pharmaceutical product to the subset of
patients in addition to a safety concern associated with THC treatment in pediatrics population so we suggested to amend our preliminary
request and asked to include only adults in the treated population. An amendment letter was discussed and the FDA described what it would
want to see in such an amendment. In March 2021, we sent our response to the FDA. In June 2021, we received a response from the FDA explaining
that they are unable to grant our request until new information becomes available to support our request for orphan drug designation.
We will re-visit the application after we obtain clinical results from our upcoming phase IIb study in TS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no assurance that
we will successfully obtain orphan drug designation for TS, any future rare indications or orphan exclusivity upon approval of any of
our pharmaceutical product candidates that have already obtained designation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even if we do obtain orphan
exclusivity for any pharmaceutical product candidate, the exclusive marketing rights may be lost if the FDA later determines that the
request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug. Moreover,
a drug product candidate with an active moiety that is a different cannabinoid from that in our drug candidate or, under limited circumstances,
the same drug product candidate, may be approved by the FDA for the same indication during the period of marketing exclusivity. The limited
circumstances include a showing that the second drug is clinically superior to the drug with marketing exclusivity through a demonstration
of superior safety or efficacy or that it makes a major contribution to patient care. In addition, if a competitor obtains approval and
marketing exclusivity for a drug product candidate with an active moiety that is the same as that in a pharmaceutical product candidate
we are pursuing for the same indication, approval of our pharmaceutical product candidate would be blocked during the period of marketing
exclusivity unless we could demonstrate that our product candidate is clinically superior to the approved pharmaceutical product candidate.
In addition, if a competitor obtains approval and marketing exclusivity for a drug product candidate with an active moiety that is the
same as that in a pharmaceutical product candidate we are pursuing for a different orphan indication, this may negatively impact the market
opportunity for our pharmaceutical product candidate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There have been legal challenges
to aspects of the FDA&#8217;s regulations and policies concerning the exclusivity provisions of the Orphan Drug Act, and future challenges
could lead to changes that affect the protections afforded our pharmaceutical product candidates in ways that are difficult to predict.
In a recent successful legal challenge, a court invalidated the FDA&#8217;s denial of orphan exclusivity to a drug on the grounds that
the drug was not proven to be clinically superior to a previously approved pharmaceutical product candidate containing the same ingredient
for the same orphan use. In response to the decision, the FDA released a policy statement stating that the court&#8217;s decision is limited
just to the facts of that particular case and that the FDA will continue to require the sponsor of a designated drug that is the &#8220;same&#8221;
as a previously approved drug to demonstrate that its drug is clinically superior to that drug upon approval in order to be eligible for
orphan drug exclusivity, or in some cases, to even be eligible for marketing approval. In the future, there is the potential for additional
legal challenges to the FDA&#8217;s orphan drug regulations and policies, and it is uncertain how such challenges might affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>While orphan drug product candidates are
typically sold at a high price relative to other medications, the market may not be receptive to high pricing of our product candidates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We develop our product candidates
to treat rare diseases, a space where medications are usually sold at high prices compared with other medications. However, our product
candidates are repurposed drugs, which means, among other things, that they contain drug substances available in pharmacies for the purpose
of treating indications that are different from the indications for which we plan to use. Accordingly, even if regulatory authorities
approve our product candidates, the market may not be receptive to, and it may be difficult for us to achieve, a per-patient per-year
price high enough to allow us to realize a return on our investment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our product candidates may cause undesirable
side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved
label or result in significant negative consequences following marketing approval, if any.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The use of dronabinol has
been associated with seizures, paranoia, rapid heart rate and unusual thoughts and behaviors. Undesirable side effects caused by our product
candidates could cause us or regulatory authorities to interrupt, delay or halt clinical studies and could result in a more restrictive
marketing label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Potential side effects
of our cannabinoid-based treatments may include: asthenia, palpitations, tachycardia, vasodilation/facial flush, abdominal pain, nausea,
vomiting, amnesia, anxiety/nervousness, ataxia, confusion, depersonalization, dizziness, euphoria, hallucinations, paranoid reaction,
somnolence and abnormal thinking. Results of our studies may identify unacceptable severity and prevalence of these or other side effects.
In such an event, our studies could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us
to cease further development of or deny or withdraw approval of our product candidates for any or all targeted indications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Drug-related side effects
could affect patient recruitment, the ability of enrolled patients to complete the study or result in potential product candidate liability
claims.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, if one or more
of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such product
candidates, a number of potentially significant negative consequences could result, including but not limited to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">regulatory authorities may require additional warnings on the label;</span></td></tr>
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">we may be required to create a Risk Evaluation and Mitigation Strategy, or REMS, plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other Elements To Assure Safe Use, or ETASU;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any of these events could
prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm
our business, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Even if we obtain regulatory approval for
a product candidate, our product candidates will remain subject to regulatory scrutiny.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If our product candidates
are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion,
sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information, including
both federal and state requirements in the United States. In addition, manufacturers and manufacturers&#8217; facilities are required
to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current Good
Manufacturing Practices, or cGMP, regulations and Quality System Regulation, or QSR. As such, we and our contract manufacturers will be
subject to continual review and inspections to assess compliance with cGMP, QSR and adherence to commitments made in any NDA. Accordingly,
we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing,
production and quality control.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 18; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any regulatory approvals that
we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product candidate
may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase
4 clinical trials and surveillance to monitor the safety and efficacy of the product candidate. We will also be required to report certain
adverse reactions and production problems, if any, to the FDA, and to comply with requirements concerning advertising and promotion for
our product candidates. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory
restrictions and must be consistent with the information in the product candidate&#8217;s approved label. As such, we may not promote
our product candidates for indications or uses for which they do not have FDA approval. The holder of an approved NDA must also submit
new or supplemental applications and obtain FDA approval for certain changes to the approved product candidate, product candidate labeling
or manufacturing process. We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of our product
candidates in general or in specific patient subsets. If original marketing approval were obtained via the accelerated approval pathway,
we could be required to conduct a successful post-marketing clinical study to confirm clinical benefit for our product candidates. An
unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval. Furthermore,
any new legislation addressing drug safety issues could result in delays in product candidate development or commercialization or increased
costs to assure compliance. Foreign regulatory authorities impose similar requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a regulatory agency discovers
previously unknown problems with a product candidate, such as adverse events of unanticipated severity or frequency, or problems with
the facility where the product candidate is manufactured, or disagrees with the promotion, marketing or labeling of a product candidate,
such regulatory agency may impose restrictions on that product candidate or us, including requiring withdrawal of the product candidate
from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among
other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">impose civil or criminal penalties;</span></td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">refuse to approve pending applications or supplements to approved applications submitted by us;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any government investigation
of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate
revenue from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company
and our operating results will be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 19; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We are subject to numerous complex regulations
and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The research, testing, development,
manufacturing, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, marketing, distribution,
possession and use of our product candidates, among other things, are subject to regulation by numerous governmental authorities in the
United States and elsewhere. The FDA regulates drugs under the FDC Act, and implementing regulations. Noncompliance with any applicable
regulatory requirements can result in refusal to approve product candidates for marketing, warning letters, product candidate recalls
or seizure of product candidates, total or partial suspension of production, prohibitions or limitations on the commercial sale of product
candidates or refusal to allow the entering into of federal and state supply contracts, fines, civil penalties and/or criminal prosecution.
Additionally, the FDA and comparable governmental authorities have the authority to withdraw product candidate approvals that have been
previously granted. Moreover, the regulatory requirements relating to our product candidates may change from time to time and it is impossible
to predict what the impact of any such changes may be.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are developing product
candidates that are controlled substances as defined in the Controlled Substances Act of 1970, or CSA, which establishes, among other
things, certain registration, production quotas, security, recordkeeping, reporting, import, export and other requirements administered
by the Drug Enforcement Administration, or the DEA. As a result, any product candidate that is a controlled substance (or includes a controlled
substance) cannot be marketed before such substance is rescheduled by the DEA as a Schedule II, III, IV or V substance. The active ingredient
in our product candidates is dronabinol, which is a Schedule III controlled substance. See Item 4.B. &#8220;Business-Government Regulation-Controlled
Substances&#8221; for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The manufacture, shipment,
storage, sale and use, among other things, of controlled substances that are pharmaceutical product candidates are subject to a high degree
of regulation. The DEA also conducts periodic inspections of registered establishments that handle controlled substances. Facilities that
conduct research, manufacture, distribute, import or export controlled substances must be registered to perform these activities and have
the security, control and inventory mechanisms required by the DEA to prevent drug loss and diversion. Failure to maintain compliance,
particularly non-compliance resulting in loss or diversion, can result in regulatory action that could have a material adverse effect
on our business, results of operations, financial condition and prospects. The DEA may seek civil penalties, refuse to renew necessary
registrations, or initiate proceedings to suspend or revoke those registrations. In certain circumstances, violations could lead to criminal
proceedings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Individual states also have
controlled substances laws. Though state controlled substances laws often mirror federal law, because the states are separate jurisdictions,
they may separately schedule our product candidates as well. While some states automatically schedule a drug when the DEA does so, other
states schedule drugs through rulemaking or a legislative action. State scheduling may delay commercial sale of any product candidate
for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness
of such product candidate. We or our partners must also obtain separate state registrations, permits or licenses in order to be able to
obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory
requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwise arising under federal
law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to Our Reliance on Third Parties
</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We rely on third parties to conduct our
preclinical and clinical studies and perform other tasks for us. If these third parties do not successfully carry out their contractual
duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize
our product candidates and our business could be substantially harmed.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have relied upon and plan
to continue to rely upon third-party CROs to monitor and manage data for our ongoing preclinical and clinical programs, including Target
Health, Inc., FGK Clinical Research GmbH, or FGK, and others. We rely on these parties for execution of our preclinical and clinical studies,
and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted
in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us
of our regulatory responsibilities. We and our CROs and other vendors are required to comply with current cGMP, GCP, QSR and Good Laboratory
Practices, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European
Economic Area, and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities
enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and other contractors.
If we or any of our CROs or vendors fail to comply with applicable regulations, the clinical data generated in our clinical studies may
be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical studies
before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory
authority will determine that any of our clinical studies comply with GCP regulations. In addition, our clinical studies must be conducted
with product candidates which are produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat
clinical studies, which would delay the regulatory approval process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 20; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If any of our relationships
with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable
terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot
control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. These
risks may be heightened as a result of the evolving COVID-19 pandemic. If CROs do not successfully carry out their contractual duties
or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain
is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical studies
may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product
candidates. CROs may also generate higher costs than anticipated. As a result, our results of operations and the commercial prospects
for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Switching or adding additional
CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO
commences work. As a result, delays may occur, which could materially impact our ability to meet our desired clinical development timelines.
Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or
delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and
prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We will rely on third parties to manufacture
our API and formulations. Our business could be harmed if those third parties fail to provide us with sufficient quantities of our needed
supplies, or fail to do so at acceptable quality levels or prices.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not have the infrastructure
or capability internally to manufacture the API formulations, and we lack the resources and the capability to manufacture any of our product
candidates on a clinical or commercial scale. We plan to rely on third parties for such supplies. There are a limited number of manufacturers
who have the ability to produce our API and there may be a need to identify alternate manufacturers to prevent a possible disruption of
our clinical studies. Any significant delay or discontinuity in the supply of these components could considerably delay completion of
our clinical studies, product candidate testing and potential regulatory approval of our product candidates, which could harm our business
and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We and our collaborators and contract manufacturers
are subject to significant regulation with respect to manufacturing our product candidates. The manufacturing facilities on which we rely
may not continue to meet regulatory requirements and have limited capacity.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All entities involved in the
preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for our product candidates,
are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or a product candidate
used in late-stage clinical studies must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and
procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational
product candidates and products approved for sale. Poor control of production processes can lead to the introduction of contaminants or
to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We,
our collaborators or our contract manufacturers must supply all necessary documentation in support of an NDA, or Marketing Authorization
Application, or MAA, on a timely basis and must adhere to GLP and cGMP QSR regulations enforced by the FDA and other regulatory agencies
through their facilities inspection program. Some of our contract manufacturers have never produced a commercially approved pharmaceutical
product and therefore have not obtained the requisite regulatory authority approvals to do so. The facilities and quality systems of some
or all of our collaborators and third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations
as a condition of regulatory approval of our product candidates or any of our other potential product candidates. In addition, the regulatory
authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our
other potential product candidates or the associated quality systems for compliance with the regulations applicable to the activities
being conducted. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners
for compliance with the regulatory requirements. If these facilities do not pass a pre-approval plant inspection, regulatory approval
of the product candidates may not be granted or may be substantially delayed until any violations are corrected to the satisfaction of
the regulatory authority, if ever.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 21; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The regulatory authorities
also may, at any time following approval of a product candidate for sale, if ever, audit the manufacturing facilities of our collaborators
and third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation
of our product candidate specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant
regulatory authority may require remedial measures that may be costly and/or time consuming for us or a third party to implement, and
that may include the temporary or permanent suspension of a clinical study or commercial sales, or the temporary or permanent closure
of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we, our collaborators,
or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can impose
regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product, withdrawal of an
approval or suspension of production. As a result, our business, financial condition and results of operations may be materially harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, if supply from
one approved manufacturer is interrupted, an alternative manufacturer would need to be qualified through an NDA or MAA amendment, or equivalent
foreign regulatory filing, which could result in further delay. The regulatory agencies may also require additional studies if a new manufacturer
is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in
our desired clinical and commercial timelines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These factors could cause
us to incur higher costs and could cause the delay or termination of clinical studies, regulatory submissions, required approvals or commercialization
of our product candidates. Furthermore, if our suppliers fail to meet contractual requirements and we are unable to secure one or more
replacement suppliers capable of production at a substantially equivalent cost, our clinical studies may be delayed or we could lose potential
revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our reliance on third parties requires us
to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated
or disclosed.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because we rely on third parties
to develop and manufacture our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary
technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research
agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning
research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our
confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need
to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors,
are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our
proprietary position is based, in part, on our know-how and trade secrets, a competitor&#8217;s discovery of our trade secrets or other
unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to Commercialization of Our Pharmaceutical
Product Candidates</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If the market opportunities for our pharmaceutical
product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our projections of both the
number of people who have our target diseases, as well as the subset of people with these diseases who have the potential to benefit from
treatment with our pharmaceutical product candidates, are based on our beliefs and estimates. These estimates have been derived from a
variety of sources, including the scientific literature, surveys of clinics, patient foundations or market research and may prove to be
incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out
to be lower than expected. The effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately
predict the number of patients for whom treatment might be possible. Additionally, the potentially addressable patient population for
each of our pharmaceutical product candidates may be limited or may not be amenable to treatment with our pharmaceutical product candidates,
and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations
and our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We face intense competition and rapid technological
change and the possibility that our competitors may discover, develop or commercialize therapies that are similar, more advanced or more
effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The biotechnology and pharmaceutical
industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and
research organizations actively engaged in the research and development of products that may be similar to our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The first THC-based pharmaceutical,
a pill sold under the commercial name of Marinol (scientific name: dronabinol), was developed by a company called Unimed Pharmaceuticals,
with funding provided by the National Cancer Institute. In 1985, Marinol received FDA approval as a treatment for chemotherapy-related
nausea and vomiting. Today, Marinol is marketed by AbbVie, Inc. Since the introduction of Marinol into the market, other pharmaceuticals
containing THC have also been developed. These include generic oral capsules of dronabinol, such as those marketed by SVC Pharma LP and
Akorn Inc., Meda AB&#8217;s Cesamet (nabilone), a synthetic derivative of THC, and Sativex (nabiximols), a whole cannabis extract administered
as an oral spray. Furthermore, to the best of our knowledge, multiple companies that are working in the cannabis therapeutic area and
are pursuing regulatory approval for their product candidates. For example, GW Pharmaceuticals PLC, or GW, which markets Sativex, a botanical
cannabinoid oral mucosal for the treatment of spasticity due to multiple sclerosis, received FDA approval in the United States in June
2018 for Epidiolex, a liquid formulation of highly purified cannabidiol extract, as a treatment for Dravet&#8217;s Syndrome, Lennox Gastaut
Syndrome, and various childhood epilepsy syndromes. In addition, GW is developing, among others, cannabidivarin, or CBDV, based therapy
for ASD and therapy for neonatal hypoxic-ischemic encephalopathy and schizophrenia. Zynerba Pharmaceuticals, Inc., or Zynerba, is developing
a transdermal formulation of cannabidiol for Fragile X and certain refractory epilepsies and ASD. Skye Bioscience, Inc., or Skye, is focused
on developing proprietary, synthetic cannabinoid-derived molecules to treat glaucoma and other diseases with significant unmet need. Corbus
Pharmaceuticals Holdings is seeking FDA approval for their synthetic cannabinoid for systemic sclerosis, cystic fibrosis, dermatomyositis
and systemic lupus erythematosus and metabolism and solid tumors. RespireRx Pharmaceutical Inc., or RespireRx, developing dronabinol for
OSA treatment. Synendos Therapeutics AG, or Synendos, is a developer of endocannabinoid modulators for the treatment of central nervous
system, or CNS, disorders. It has developed pharmaceutical products to restore the natural function of the brain and treat neuropsychiatric
disorders. Synendos is developing small molecules as selective endocannabinoid reuptake inhibitors that increase the levels of endogenous
cannabinoids to treat CNS disorders caused by cannabinoid deficiency. Inversago Pharma (formerly GIcare Pharma) is focused on developing
peripheral cannabinoid (CB1) receptor antagonist/inverse agonist for the treatment of metabolic diseases such as obesity, insulin resistance,
and liver fibrosis. Its drug INV-101 (Inverse agonist of peripheral CB1) under phase-1.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">More established companies
may have a competitive advantage over us due to their greater size, cash flows and institutional experience. Compared to us, many of our
competitors may have significantly greater financial, technical and human resources. As a result of these factors, our competitors may
have an advantage in marketing their approved products and may obtain regulatory approval of their product candidates before we are able
to, which may limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are safer,
more effective, more widely used and less expensive than ours, and may also be more successful than us in manufacturing and marketing
their products. These advantages could materially impact our ability to develop and commercialize our product candidates successfully.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our product candidates may
also compete with medical and recreational marijuana, in markets where the recreational and/or medical use of marijuana is legal. There
is support in the United States for further legalization of marijuana. In markets where recreational and/or medical marijuana is not legal,
our product candidates may compete with marijuana purchased in the illegal drug market. We cannot assess the extent to which patients
may utilize marijuana obtained illegally for the treatment of the indications for which we are developing our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even if we successfully develop
our product candidates, and obtain marketing approval for them, other treatments or therapeutics may be preferred and we may not be successful
in commercializing our product candidates or in bringing them to market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many of our competitors have
substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing
and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in
even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than
we are able to and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove
to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase
further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in
these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective
or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization
and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates
uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We currently have no marketing and sales
organization. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and
sell our product candidates, we may be unable to generate any revenue.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although our employees may
have sold other similar products in the past while employed at other companies, we as a company have no experience selling and marketing
our product candidates and we currently have no marketing or sales organization. To successfully commercialize any products that may result
from our development programs, we will need to develop these capabilities, either on our own or with others. If our product candidates
receive regulatory approval, we intend to establish a sales and marketing organization with technical expertise and supporting distribution
capabilities to commercialize our product candidates in major markets, which will be expensive, difficult and time consuming. Any failure
or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization
of our products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, given our lack of
prior experience in marketing and selling pharmaceutical products, our initial estimate of the size of the required sales force may be
materially more or less than the size of the sales force actually required to effectively commercialize our product candidates. As such,
we may be required to hire substantially more sales representatives to adequately support the commercialization of our product candidates
or we may incur excess costs as a result of hiring more sales representatives than necessary. With respect to certain geographical markets,
we may enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable
to enter into such agreements on favorable terms, if at all. If our future collaborators do not commit sufficient resources to commercialize
our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate
sufficient product revenue to sustain our business. We may be competing with companies that currently have extensive and well-funded marketing
and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable
to compete successfully against these more established companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The commercial success of any current or
future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the
medical community.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even with the requisite approvals
from the FDA and comparable foreign regulatory authorities, the commercial success of our product candidates will depend in part on the
medical community, patients and third-party payors accepting our product candidates as medically useful, cost-effective and safe. Any
product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical
community. The degree of market acceptance of any of our product candidates, if approved for commercial sale, will depend on a number
of factors, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</table><div>

</div><p style="margin: 0">&#160;</p><div>

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</div><p style="margin: 0"></p><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">the prevalence and severity of any side effects, including any limitations or warnings contained in a product&#8217;s approved labeling;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">the clinical indications for which approval is granted;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Even if a potential product
displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product will not be fully
known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates
may require significant resources and may never be successful. If our product candidates are approved but fail to achieve an adequate
level of acceptance by physicians, patients, third-party payors and others in the medical community, we will not be able to generate sufficient
revenue to become or remain profitable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The insurance coverage and reimbursement
status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products
could limit our ability to market those products and decrease our ability to generate revenue.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The pricing, coverage and
reimbursement of our product candidates, if approved, must be adequate to support our commercial infrastructure. Our per-patient prices
must be sufficient to recover our development and manufacturing costs and potentially achieve profitability. Accordingly, the availability
and adequacy of coverage and reimbursement by governmental and private payors are essential for most patients to be able to afford expensive
treatments such as ours, assuming approval. Sales of our product candidates will depend substantially, both domestically and abroad, on
the extent to which the costs of our product candidates will be paid for by health maintenance, managed care, pharmacy benefit and similar
healthcare management organizations, or reimbursed by government authorities, private health insurers and other third-party payors. If
coverage and reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize
our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish
or maintain pricing sufficient to realize a return on our investment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is significant uncertainty
related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about coverage
and reimbursement for new drugs are typically made by the Centers for Medicare &amp; Medicaid Services, or CMS, an agency within the U.S.
Department of Health and Human Services, or DHHS, as CMS decides whether and to what extent a new drug will be covered and reimbursed
under Medicare. Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult
to predict what CMS will decide with respect to reimbursement for products such as ours.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Outside the United States,
international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the
increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the
pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms
as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United
States. Other countries allow companies to fix their own prices for medicinal products, but monitor and control company profits. Additional
foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates.
Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and
may be insufficient to generate commercially reasonable revenue and profits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, increasing efforts
by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations
to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate
payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates
due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes.
The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has
become very intense. As a result, increasingly high barriers are being erected to the entry of new products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Healthcare legislative reform measures may
have a material adverse effect on our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States, there
have been and continue to be a number of legislative initiatives to contain healthcare costs. The following are among the provisions established
by the ACA of greatest importance to the pharmaceutical and biotechnology industry:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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    <td style="text-align: justify"><span style="font-size: 10pt">an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <td style="padding-bottom: 8pt; text-align: justify">&#160;</td>
    <td style="padding-bottom: 8pt; text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the Average Manufacturer Price, or AMP, for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the AMP;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">extension of manufacturers&#8217; Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, or MCOs;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers&#8217; Medicaid rebate liability;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (now 70%) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer&#8217;s outpatient drugs to be covered under Medicare Part D;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    <td style="width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending. This center is currently focused on the following priorities:</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    <td style="width: 0.5in">&#160;</td>
    <td style="width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">implementation of the federal physician payment transparency requirements, or the Sunshine Act. The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, or the SUPPORT Act, signed into law on October 24, 2018, expanded Sunshine Act reporting to include data for physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwifes. The amendment applies to reports submitted to CMS on or after January 1, 2022.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The ACA may be modified, amended
or repealed at any time and may or may not be replaced with a different law or health care payment system. The ACA is expected to continue
to have a significant impact on the health care industry. With regard to pharmaceutical product candidates, among other things, the ACA
may expand and increase industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements under
the Medicare D program. Since the enactment of the ACA, numerous regulations have been issued providing further guidance on its requirements.
The ACA continues to be implemented through regulation and government activity but is subject to possible amendment, additional implementing
regulations and interpretive guidelines. Several states have decided not to expand their Medicaid programs and are seeking alternative
reimbursement models to provide care to the uninsured. The manner in which these issues are resolved could materially affect the extent
to which and the amount at which pharmaceuticals are reimbursed by government programs such as Medicare, Medicaid and Tricare.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2016, CMS issued a final
rule regarding the Medicaid Drug Rebate Program that, among other things, revised the manner in which the AMP is calculated by manufacturers
participating in the program and implemented certain amendments to the Medicaid rebate statute created under the ACA. In addition, on
December 21, 2020, CMS issued a final rule that made changes to the Medicaid Drug Rebate Program regulations in several areas, including
some changes to the treatment of value-based purchasing arrangements and price reporting for patient benefit programs sponsored by pharmaceutical
manufacturers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Two bills affecting the implementation
of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or the TCJA, included a provision that repealed,
effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain
qualifying health coverage for all or part of a year, that is commonly referred to as the &#8220;individual mandate.&#8217;&#8217; Additionally,
on January 22, 2018, then President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation
of certain ACA-mandated fees. Further, the Bipartisan Budget Act of 2018, among other things, amended the ACA, effective January 1, 2019,
to close the coverage gap in most Medicare drug plans, commonly referred to as the &#8220;donut hole.&#8221; In July 2018, CMS published
a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under
the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine
this risk adjustment. On April 27, 2020, the U.S. Supreme Court reversed a Federal Circuit decision that previously upheld Congress&#8217;
denial of $12 billion in &#8220;risk corridor&#8221; funding. Congress may consider additional legislation to repeal, or repeal and replace,
other elements of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued that the ACA
is unconstitutional in its entirety because the individual mandate was repealed by Congress. Thus, the ACA will remain in effect in its
current form. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a
special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed
certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among
others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary
barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to
judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden
administration will impact the ACA and our business. We continue to evaluate the ACA and its possible repeal and replacement, as the extent
to which any such changes may impact our business or financial condition remains uncertain.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, other legislative
changes have been proposed and adopted in the United States since the ACA was enacted. In 2011, the Budget Control Act of 2011 among other
things, created measures for spending reductions by Congress. This includes aggregate reductions of Medicare payments to providers of
2% per fiscal year. These reductions, known as Medicare sequestration adjustments, went into effect in 2013. However, under the Coronavirus
Aid, Relief, Economic Securities Act of 2020, and related legislation, Medicare sequestration adjustments from May 1, 2020 through March
31, 2021 have been suspended, though sequestration has been extended through 2030. Additionally, there has been heightened governmental
scrutiny recently over the manner in which manufacturers set prices for their marketed products. For example, there have been several
recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency
to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement
methodologies for drug products. At the federal level, including the former Administration&#8217;s budget for fiscal year 2020, there
were further drug price control measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part D,
to continue to allow some states to negotiate drug prices under Medicaid through supplemental rebate negotiations and other mechanisms,
and legislation was introduced to eliminate cost sharing for generic drugs for Part D low-income patients.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, in November 2020,
the U.S. DHHS, finalized a regulation aimed at lowering prescription drug prices and out-of-pocket spending for prescription drugs by
excluding rebates on prescription drugs paid by manufacturers to or purchased by Medicare Part D plan sponsors or pharmacy benefit managers,
or PBMs, acting under contract with Medicare Part D plan sponsors from the existing discount safe harbor under the federal Anti-Kickback
Statute, or the AKS. The regulation reflects the first change to the AKS Statute discount safe harbor since the Medicare Part D program
was established. In addition to the rebate exclusions, two new safe harbors were added. One of these new safe harbors protects point-of-sale
reductions in price from a manufacturer to a plan sponsor under Medicare Part D or a MCO, for a prescription drug payable, in whole or
in part, by a plan sponsor under Medicare Part D or a MCO, provided certain conditions are met. The other protects certain fixed-fee services
arrangements between manufacturers and PBMs.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Congress and the executive
branch have each indicated that it will continue to seek new legislative or administrative measures to control drug costs. At the state
level, legislatures have been increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing
cost disclosure and transparency measures, drug price increases, and, in some cases, designed to encourage importation from other countries
and bulk purchasing.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the European Union, similar
political, economic and regulatory developments may affect our ability to profitably commercialize any of our product candidates, if approved.
In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state
level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare
in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is
almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers
have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context.
In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement
of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those
wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate
post-approval activities and affect our ability to commercialize any products for which we obtain marketing approval. Political, economic
and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has
been obtained. Reference pricing used by various EU member states, and parallel trade, i.e., arbitrage between low-priced and high-priced
member states, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations
for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries.
In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted
price ceilings on specific products and therapies.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect that these and other
healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and
in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or
other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment
measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs,
once marketing approval is obtained. We cannot predict what healthcare reform initiatives may be adopted in the future. However, it is
possible that there will be further legislation or regulation that could harm the business, financial condition and results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The COVID-19 pandemic has resulted in delays
to our product development and may adversely affect any potential future revenues, results of operations and financial condition.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">COVID-19 and the various precautionary
measures taken by many governmental authorities around the world to limit its spread had a severe effect on global markets and the global
economy. The extent to which the coronavirus impacts our business and operations will depend on future developments, which are highly
uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the nature and extent
of governmental actions taken to contain or treat its impact and the availability, costs, effectiveness and public acceptance of any FDA-approved
vaccines, among others. COVID-19 and official actions taken in response to it caused a major slowdown in overall economic activity in
the U.S. and elsewhere, curtailed consumer spending and made it more challenging to adequately staff and manage our business and operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The COVID-19 pandemic impacted
our various vendors, including CROs, and caused delays in the development of our product candidates. We also experienced delays in the
preparation toward various clinical trials, including being unable to receive prioritization to conduct clinical trials, availability
of physicians and other staff members involved in our clinical trials. At this time, we do not anticipate that the COVID-19 pandemic and
official responses would cause a material adverse effect on our results of operations and financial condition but there can be no assurance
that this will be the case.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to Our Intellectual Property </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we are unable to obtain and maintain
effective patent rights for our product candidates, we may not be able to compete effectively in our markets. If we are unable to protect
the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Historically, we have relied
on trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and product
candidates. Since 2015, we have also sought patent protection for certain of our product candidates. Our success depends in large part
on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with
respect to our proprietary technology and new product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We seek to protect our proprietary
position by filing patent applications in the United States and in other countries, with respect to our novel technologies and product
candidates, which are important to our business. Patent prosecution is expensive and time consuming, and we may not be able to file and
prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will
fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not including patents and
applications which we are in the process of being assigned, we have a portfolio of seven granted patents with the U.S. Patent and Trademark
Office, or USPTO, nine patent families and two trademarks, of which four families include Patent Cooperation Treaty, or PCT, applications,
that have entered the national phase in various national entities. We cannot offer any assurances about which, if any, patent applications
will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened
by third parties. Any successful opposition to our patents after issuance could deprive us of rights necessary for the successful commercialization
of any new product candidates that we may develop and would allow other third parties to compete with us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have exclusively licensed:
(i) one U.S. patent from Dekel Pharmaceuticals Ltd., or Dekel, and (ii) one U.S. patent family from Yissum Research Development Company
of the Hebrew University of Jerusalem Ltd., or Yissum. We cannot assure you that we will ever enter into definitive license agreements
with any third party licensor. See Item 4.B. &#8220;Business Overview-Intellectual Property-In-Licensed Patents and Patent Applications.&#8221;
To the extent the licensed or future licensed patents are found to be invalid or unenforceable, we may be limited in our ability to compete
and market our product candidates. Moreover, the terms of our licenses affect our ability to control the value of any of our product candidates.
If we or any of the parties that control the enforcement of licensed patents elect not to enforce any or all of the licensed patents it
could significantly undercut the value of any of our product candidates, which would materially adversely affect our future revenue, financial
condition and results of operations. Moreover, fluctuating currency rates may create inconsistencies in the royalty payments we are obligated
to make under our licenses.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Also, there is no guarantee
that the patent registration applications that were submitted by us with regard to our technologies will result in patent registration.
In the event of failure to complete patent registration, our developments will not be proprietary, which might allow other entities to
manufacture our product candidates and compete with them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, there is no assurance
that all potentially relevant prior art relating to our patent applications has been found. Such prior art, to the extent it exists, may
invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even
if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in
such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and
any future patents may not adequately protect our intellectual property, provide exclusivity for our new product candidates, or prevent
others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which
may have an adverse impact on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we cannot obtain and maintain
effective patent rights for our product candidates, we may not be able to compete effectively, and our business and results of operations
would be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be able to identify infringements
of our patents and accordingly the enforcement of our intellectual property rights may be difficult.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The drug substance in some
of our product candidates is repurposed, which means that it is available in other pharmaceutical products for the purpose of treating
indications that are different from the indications for our product candidates. It is possible that if we receive regulatory approval
to market and sell our drug candidates, some patients that receive a prescription could be sold the same drug substance but not our product
candidate. It would be difficult, if not impossible, for us to identify such instances that may constitute an infringement of our patents.
In addition, because the drug substance of some of our product candidates is repurposed, such substance may not be eligible for patent
protection or data exclusivity. Even if we identify infringing parties, there is no guarantee that a court will agree with our arguments
and find that a third party is infringing our patents or that the court will issue an order for an adequate remedy for that infringement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we are unable to maintain effective proprietary
rights for our product candidates, we may not be able to compete effectively in our markets.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the protection
afforded by any patents currently owned and that may be granted, historically, we have relied on trade secret protection and confidentiality
agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes that are not easily known,
knowable or easily ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our
product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered
by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part,
by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve
the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining physical security of our premises
and physical and electronic security of our information technology systems. Agreements or security measures may be breached, and we may
not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently
discovered by competitors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot provide any assurances
that our trade secrets and other confidential proprietary information will not be disclosed in violation of our confidentiality agreements
or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information
and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could
impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our
trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating
any trade secret.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Intellectual property rights of third parties
could adversely affect our ability to commercialize our product candidates, and we might be required to litigate or obtain licenses from
third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially
reasonable terms.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is inherently difficult
to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely affected
if existing patents or patents resulting from patent applications issued to third parties or other third party intellectual property rights
are held to cover our product candidates or elements thereof, or our manufacturing or uses relevant to our development plans. In such
cases, we may not be in a position to develop or commercialize product candidates or our product candidates unless we successfully pursue
litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with the
intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that
if they result in issued patents, could be alleged to be infringed by our new product candidates. If such an infringement claim should
be brought and be successful, we may be required to pay substantial damages, be forced to abandon our new product candidates or seek a
license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is also possible that we
have failed to identify relevant third-party patents or applications. For example, certain U.S. patent applications that will not be filed
outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published
approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred
to as the priority date. Therefore, patent applications covering our new product candidates or platform technology could have been filed
by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations,
be later amended in a manner that could cover our platform technologies, our new product candidates or the use of our new product candidates.
Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will
be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on
terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented
from or experience substantial delays in pursuing the development of and/or marketing our new product candidates. If we fail in any such
dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new product
candidates that are held to be infringing. We might, if possible, also be forced to redesign our new product candidates so that we no
longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require
us to divert substantial financial and management resources that we would otherwise be able to devote to our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Third-party claims of intellectual property
infringement may prevent or delay our development and commercialization efforts.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our commercial success depends
in part on our avoiding infringement of the patents and proprietary rights of third parties. Numerous U.S. and foreign issued patents
and pending patent applications, which are owned by third parties, exist in the fields in which we are developing new product candidates.
As our industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement
of the patent rights of third parties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Third parties may assert that
we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims
to materials, designs or methods of manufacture related to the use or manufacture of our product candidates. There may be currently pending
patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain
patents in the future and claim that use of our technologies infringes upon these patents.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If any third-party patents
were held by a court of competent jurisdiction to cover aspects of our formulations, processes for designs, or methods of use, the holders
of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a
license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be
available on commercially reasonable terms or at all.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Parties making claims against
us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one
or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and
would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us
in the U.S. or any other relevant jurisdiction, we may have to pay substantial damages, including treble damages and attorneys&#8217;
fees for willful infringement, pay royalties, redesign our infringing product candidates or obtain one or more licenses from third parties,
which may be impossible or require substantial time and monetary expenditure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Patent policy and rule changes could increase
the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Changes in either the patent
laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue
from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to
the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual
discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing,
or in some cases not at all. We therefore cannot be certain that we were the first to file the invention claimed in our owned and licensed
patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming all
other requirements for patentability are met, in the United States prior to 2013, the first to make the claimed invention without undue
delay in filing, is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the
patent. After 2013, the United States moved to a first to file system. Changes in patent litigation could increase the uncertainties and
costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could
have a material adverse effect on our business and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be involved in lawsuits to protect
or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Competitors may infringe our
intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering one of our new product
candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent
litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity
challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement.
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant
information from the USPTO, or made a misleading statement, during prosecution. The validity of U.S. patents may also be challenged in
post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Derivation proceedings initiated
by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with respect to our patent
or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to
attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license
on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in
substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have
a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs,
license necessary technology from third parties, or enter into development partnerships that would help us bring our new product candidates
to market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, because of the
substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results
of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative,
it could have a material adverse effect on the price of our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be subject to claims challenging
the inventorship of our intellectual property.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may be subject to claims
that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current
patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have
inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates.
Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If
we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such
as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our
business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction
to management and other employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be able to protect our intellectual
property rights throughout the world.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Filing, prosecuting, and defending
patents on product candidates, as well as monitoring their infringement in all countries throughout the world would be prohibitively expensive,
and our intellectual property rights in some countries can be less extensive than those in the United States. In addition, the laws of
some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Competitors may use our technologies
in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing products
to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete
with our product candidates. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from
competing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many companies have encountered
significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection,
which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings
to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts
and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and
our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any
lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts
to monitor and enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage
from the intellectual property that we develop or license.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our former chairman and chief executive
officer, Dr. Ascher Shmulewitz, may threaten to terminate an agreement with respect to intellectual property rights that we license from
an entity controlled by Dr. Shmulewitz.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2015, we entered into
a license agreement, which, following an amendment thereto in August 2015, became effective, with Dekel, an Israeli private company controlled
by Dr. Ascher Shmulewitz, our former chairman and chief executive officer, under which we were granted an irrevocable, worldwide, exclusive,
royalty-bearing license to certain of Dekel&#8217;s technology. See Item 7.B. &#8220;Related Party Transactions-Dekel License Agreement.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not have any agreement
with Dr. Shmulewitz to notify us with business opportunities he may wish to pursue, subject only to his duties under Israeli law, and
we do not have proprietary rights to Dr. Shmulewitz&#8217; inventions that are not included under the consulting and services agreement
we previously had entered into with him (pertaining solely to the field of immunomodulators including cannabinoids to treat chronic pain
and inflammation).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 17, 2017, we
entered into an amendment to the license agreement, which, if certain conditions precedent were met by June 30, 2018, would provide for
an amendment to the compensation terms of such license agreement. We did not meet the conditions precedent required under such amendment
to the license agreement with Dekel by June 30, 2018, and as a result thereof, the amendment never went into effect. On July 14, 2019,
we entered into an amendment to the license agreement, which encompasses our and Dekel&#8217;s original intention to exclude certain consumer
packaged goods (including, inter alia, food, beverage, cosmetics, pet products and hemp based products, which are sources of nutrients
or other substances which may have a nutritional effect) from the scope of the licensed products and the field of our activity, as described
in the license agreement, which intention was not reflected in the license agreement, and therefore, desired and agreed to amend the license
agreement to reflect the foregoing clarification, as well as certain additional less material matters as discussed in the amendment. The
amendment also prescribes a specific development plan under the license agreement requiring us to invest in the licensed technology (as
defined under the license agreement) formulation development and maintain a total annual investment cap of $350,000 and for a non-compete
and non-solicitation obligation by Dekel and Dr. Shmulewitz, towards our field of activity.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2020, Dr. Shmulewitz
was replaced by Mr. Amitay Weiss, who was later replaced by Mr. Oz Adler in January 2022, each of whom was appointed as our Chief Executive
Officer. In February 2021, we received a request from Dr. Shmulewitz to provide him with information in regards to our compliance with
the Dekel license agreement. While we have no reason to believe that we are not complying with material terms of Dekel license agreement,
we cannot provide assurances that Dr. Shmulewitz will not threaten to terminate the agreement. If a dispute arises between us and Dekel
under the license agreement, we cannot assure you that our business will not impeded or materially harmed by such dispute.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to Our Pharmaceutical Business
Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>From time to time, we may sign letters of
intent and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements. There can
be no assurance that we will enter into any such definitive agreements. Similarly, we may strategically invest in transactions from time
to time, and there can be no assurance that the value of our investment will increase or that it will not fluctuate.</i></b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time, we may sign letters of intent
and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements. We may never enter
into definitive agreements after signing a letter of intent and/or entering into a term sheet or other similar arrangement for a multitude
of reasons, including, but not limited to, regulatory, operational, financial and other considerations. There may also be forces outside
of our control that have an effect on our ability or decision as to whether we enter into such definitive agreements. As a result, there
can be no assurance that upon signing a letter of intent and/or entering into a term sheet or similar arrangement, that we will enter
into definitive documents. This could have a material adverse effect on our reputation and could cause us to incur expenses if any legal
claims arise as a result thereof. For example, in November 2019, we entered into a memorandum of understanding with Heavenly Rx, Ltd.,
or Heavenly Rx, pursuant to which we and Heavenly Rx agreed to pursue a business combination. In accordance with the memorandum of understanding
between the parties, any transaction between the parties remained subject to entry into definitive agreements, and to shareholder and
regulatory approvals. We never entered into definitive agreements and do not expect to do so.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Similarly, we may strategically invest into various
pharmaceutical companies. However, we can offer no assurance that the value of our investment will increase or that it will not fluctuate
because the value of our investments may be adversely affected by a number of factors, such as negative changes in a company&#8217;s results
of operations, cash flows, financial position and accounting impairment. For example, on March 31, 2022, we entered into an agreement
with and invested in MitoCare X Bio Ltd., or MitoCareX, a company focused on the discovery and development of potential drugs for cancers
and other life-threatening conditions. In addition, on November 17, 2022, we invested in Clearmind Medicine Inc., or Clearmind, a psychedelic
pharmaceutical biotech company focused on the discovery and development of novel psychedelic-derived therapeutics to solve widespread
and underserved health problems. The potential benefits of the agreement with MitoCareX, the investment in Clearmind or other potential
investments may not be realized to the full extent, in a timely fashion, or at all, which may have a material adverse effect on our results
of operations, cash flows and financial position. The potential benefits of agreements with potential ventures may not materialize or
may not be realized to the full extent, in a timely fashion, or at all, which may have a material adverse effect on our results of operations,
cash flows and financial position.</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We will need to expand our organization
and we may experience difficulties in recruiting needed additional employees and consultants, which could disrupt our operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As our development and commercialization
plans and strategies develop and because we are so leanly staffed, we will need additional managerial, operational, sales, marketing,
financial, legal and other resources. The competition for qualified personnel in the pharmaceutical field is intense. Due to this intense
competition, we may be unable to attract and retain qualified personnel necessary for the development of our business or to recruit suitable
replacement personnel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management may need to
divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing
these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our
infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees.
Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the
development of additional pharmaceutical product candidates. If our management is unable to effectively manage our growth, our expenses
may increase more than expected, our ability to generate and/or grow revenue could be reduced and we may not be able to implement our
business strategy. Our future financial performance and our ability to commercialize pharmaceutical product candidates and compete effectively
will depend, in part, on our ability to effectively manage any future growth.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not be successful in our efforts
to identify, license or discover additional pharmaceutical product candidates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Altho<span style="font-family: Times New Roman, Times, Serif">ugh
a substantial amount of our effort will focus on the continued clinical testing, potential approval and commercialization of our existing
pharmaceutical product candidates, the success of our business also depends in part upon our ability to identify, license or discover
additional pharmaceutical product candidates. Our research programs or licensing efforts may fail to yield additional pharmaceutical
product candidates for clinical development for a number of reasons, including but not limited to the following:</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    research or business development methodology or search criteria and process may be unsuccessful in identifying potential pharmaceutical
    product candidates;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we
    may not be able or willing to assemble sufficient resources to acquire or discover additional pharmaceutical product candidates;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    pharmaceutical product candidates may not succeed in preclinical or clinical testing;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our
    potential pharmaceutical product candidates may be shown to have harmful side effects or may have other characteristics that may
    make the pharmaceutical products unmarketable or unlikely to receive marketing approval;</span></td></tr>
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    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">competitors
    may develop alternatives that render our pharmaceutical product candidates obsolete or less attractive;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">pharmaceutical
    product candidates we develop may be covered by third parties&#8217; patents or other exclusive rights;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the
    market for a pharmaceutical product candidate may change during our program so that such a pharmaceutical product may become unreasonable
    to continue to develop;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.5in"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify; width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
    pharmaceutical product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;
    and</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td></tr>
  <tr style="font-family: Times New Roman, Times, Serif; vertical-align: top">
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif">&#160;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="font-family: Times New Roman, Times, Serif; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a
    pharmaceutical product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If any of these events occur,
we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, license or discover
additional pharmaceutical product candidates, which would have a material adverse effect on our business and could potentially cause us
to cease operations. Research programs to identify new pharmaceutical product candidates require substantial technical, financial and
human resources. We may focus our efforts and resources on potential programs or pharmaceutical product candidates that ultimately prove
to be unsuccessful.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be subject, directly or indirectly,
to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable
to comply, or have not fully complied, with such laws, we could face substantial penalties.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we obtain FDA approval
for any of our pharmaceutical product candidates and begin commercializing those pharmaceutical products in the United States, our operations
may be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation,
the federal AKS, the federal False Claims Act and physician sunshine laws and regulations. These laws may impact, among other things,
our proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by both the federal
government and the states in which we conduct our business. The laws that may affect our ability to operate include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the federal AKS, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">HIPAA, as amended by the Health Information Technology and Clinical Health Act, OR HITECH and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the federal physician sunshine requirements under the ACA requires manufacturers of drugs, devices and medical supplies to report annually to the U.S. DHHS information related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers, state laws that require pharmaceutical companies to comply with the pharmaceutical industry&#8217;s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because of the breadth of
these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities
could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these
laws. For example, the ACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud
statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the
ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal AKS constitutes
a false or fraudulent claim for purposes of the False Claims Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If our operations are found
to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties,
including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare
and Medicaid, imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to
operate our business and our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Widespread public health pandemics could
have a material and adverse effect on our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 25.4pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any public health pandemic
or other disease outbreak in countries where we or our CROs operate could have a material and adverse effect on our business, financial
condition and results of operations. For example, we reduced our operating expenses at the onset of the COVID-19 pandemic and our Chief
Technologies Officer was on temporary unpaid leave between May 2020 and September 2020.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operating results and
financial condition may also be materially adversely affected by laws, regulations, orders or other governmental or regulatory actions
addressing widespread public health concerns that place restrictions on, or require us to make changes to, our operations. For example,
a significant reduction in our workforce and our compliance with instructions imposed by relevant authorities may harm our ability to
continue operating our business and materially and adversely affect our operations and financial condition. In addition, the impact of
a widespread public health crisis may cause delays to our future research and development operations, including but not limited to our
pharmaceutical products development, manufacturing, pre-clinical and clinical trials, and may make it difficult for us to recruit patients
to all of our clinical trials, and keep all of our research and development projects on time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">With respect to our suppliers,
disruptions resulting from the COVID-19 pandemic resulted and in the event of a future widespread public health crisis may result in cancellations
or delays and increased transport times for delivery of materials to our facilities. If such difficulties arise, we may need to seek alternate
suppliers, which may be more expensive, may not be available or may result in delays in shipments to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Disruptions to our business
as a result of a widespread public health crisis, as well as any global recession resulting from the impact of such a crisis, could materially
adversely affect our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 25.4pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The use of any of our pharmaceutical product
candidates and marketed products could result in product liability or similar claims that could be expensive, damage our reputation and
harm our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business exposes us to
an inherent risk of potential pharmaceutical product liability or similar claims. The pharmaceutical and nutraceuticals industries have
historically been litigious, and we face financial exposure to pharmaceutical product liability or similar claims if the use of any of
our pharmaceutical products were to cause or contribute to injury or death. There is also the possibility that defects in the design or
manufacture of any of our pharmaceutical products might necessitate a pharmaceutical product recall. Although we plan to maintain pharmaceutical
product liability insurance, the coverage limits of these policies may not be adequate to cover future claims. In the future, we may be
unable to maintain pharmaceutical product liability insurance on acceptable terms or at reasonable costs and such insurance may not provide
us with adequate coverage against potential liabilities. A pharmaceutical product liability claim, regardless of merit or ultimate outcome,
or any pharmaceutical product recall could result in substantial costs to us, damage to our reputation, customer dissatisfaction and frustration
and a substantial diversion of management attention. A successful claim brought against us in excess of, or outside of, our insurance
coverage could have a material adverse effect on our business, financial condition and results of operations.<b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If we fail to comply with environmental,
health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse
effect on the success of our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our research and development
activities and our third-party manufacturers&#8217; and suppliers&#8217; activities involve the controlled storage, use and disposal of
hazardous materials, including the components of our pharmaceutical product candidates and other hazardous compounds. We and our manufacturers
and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials.
In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers&#8217; facilities
pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization
efforts, research and development efforts, business operations and environmental damage resulting in costly clean-up and liabilities under
applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste pharmaceutical
products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these
materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate
the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages
and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials
and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended
to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently
carry biological or hazardous waste insurance coverage.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to our Intended Corporate Restructuring
Plan</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0"><b><i>The intended Restructuring Plan which involves transferring our
pharmaceutical activities to a new wholly-owned subsidiary may not be completed in accordance with the expected plans or anticipated timeline,
or at all, and may not achieve the expected results.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">On January 25, 2023, we announced that our board
of directors resolved to pursue a Restructuring Plan which involves transferring our pharmaceutical activities to NewCo. As part of the
Restructuring Plan, we intend to examine the possibility of listing NewCo on a leading stock exchange, while maintaining our controlling
interest in NewCo such that we will continue to control our current business activities. We also intend to explore other potential new
opportunities, activities and investments in a variety of sectors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">Any restructuring and possible listing of NewCo
on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory approvals, receipt
of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions to effectuate such corporate
restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended restructuring and listing
of NewCo or that they will be completed at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">Unanticipated developments or changes, including
but not limited to, changes in the general or financial market conditions, possible delays in obtaining various regulatory and tax approvals,
changes in the law, and challenges in executing the intended restructuring could delay or prevent the completion of the restructuring
and listing of NewCo, or cause the restructuring and listing of NewCo to occur on terms or conditions that are different or less favorable
than initially expected. These or other developments could cause us not to realize some or all of the expected benefits of the restructuring
and listing of NewCo or to realize them on a different timeline than expected. If the restructuring and listing of NewCo do not occur,
we could pursue other transactions involving our pharmaceutical activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The restructuring and listing of NewCo may not achieve the anticipated
benefits and may expose us to additional risks.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">We may not realize the anticipated strategic, financial,
operational or other benefits of the restructuring and listing of NewCo. We cannot predict with certainty when the benefits expected from
these transactions will occur or the extent to which they will be achieved. There is no assurance that following the restructuring and
listing of NewCo that each separate company will be successful. Whether or not the restructuring and listing of NewCo is completed, we
may face material challenges in connection with the intended transactions, including but not limited to, the diversion of management time
on matters relating to the restructuring and listing of NewCo, the impact of having to operate under the terms of any transition service
agreements, the impact on our ability to retain talent and potential impacts on our relationships with customers, suppliers, employees
and other counterparties. In addition, we will incur one-time costs and ongoing costs in connection with, or as a result of, the restructuring
and listing of NewCo, including costs of operating as independent, publicly-traded companies that the separate businesses will no longer
be able to share. Those costs may exceed our estimates or could negate some of the benefits we expect to realize. Further, we have not
yet analyzed whether the restructuring and listing of NewCo will be tax-free to our shareholders for U.S. federal income tax or Israeli
tax purposes and there is no assurance that the restructuring and listing of NewCo will qualify for this treatment. If the restructuring
and listing of NewCo is ultimately determined to be taxable, any of NewCo, our shareholders or us could incur income tax liabilities that
could be significant. If we do not realize the anticipated benefits of the restructuring and listing of NewCo it could adversely affect
our business, results of operations, cash flows and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Following any restructuring and listing of NewCo, the trading
price of our Ordinary Shares may fluctuate significantly.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">We cannot predict whether the market value of our
Ordinary Shares after any restructuring and listing of NewCo will be, in the aggregate, less than, equal to or greater than the market
value of our ordinary shares prior to such transactions. The trading price of our Ordinary Shares may be more volatile around the time
of the intended separation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to <span style="font-family: Times New Roman, Times, Serif">the
eCommerce&#160;Operations of SciSparc Nutraceuticals</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>We may be unable to successfully pursue, integrate, or execute
upon the eCommerce operations business of SciSparc Nutraceuticals.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In September 2022, we&#160;purchased Wellution&#8482;,
a business and brand which sells hemp-based products on the Amazon.com marketplace.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our management has limited prior experience in
eCommerce business operations. There can be no assurance that we will be able to successfully implement our new business ventures or successfully
operate within this industry.&#160;<span>The successful integration of a new business also depends on
our ability to manage the new business, realize forecasted synergies and full value from the combined business. Our business, results
of operations, financial condition and cash flows could be materially adversely affected if we are unable to successfully integrate&#160;</span>Wellution
into our existing operations and <span>a</span>ny inability to do so may also hinder our ability to grow,
divert the attention of management and our key personnel, disrupt our business and impair our financial results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations of SciSparc Nutraceuticals rely on the
Amazon.com marketplace and fulfillment by Amazon.com and changes to the Amazon.com marketplace, Amazon&#8217;s services and their terms
of use may harm our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Wellution&#8217;s products are sold predominantly
on the Amazon.com marketplace and orders are fulfilled entirely by Amazon.com utilizing the fulfilled by Amazon, or FBA, model. In order
to continue to utilize the Amazon.com marketplace and FBA, we must comply with the applicable policies and terms of use relating to these
services. Such policies and terms of use may be altered or amended at Amazon&#8217;s sole discretion, including changes regarding the
cost of securing these services, and changes that increase the burden of compliance with its requirements, may cause us to significantly
alter our business model or incur additional costs in order to comply, which could negatively impact our results of operations. Non-compliance
with applicable terms of use and policies can result in the removal of one or more products from the marketplace and suspension of fulfillment
services either of which could have a material adverse effect on our business and results of our operations. Although we exert efforts
in order to ensure ongoing compliance and no notices of non-compliance have been received to date, we cannot assure you that events of
this kind will not occur in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations of SciSparc Nutraceuticals rely on other
information technologies and systems to operate its business and to maintain its competitiveness, and any failure to invest in and adapt
to technological developments and industry trends could harm our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend on sophisticated information technologies
and systems, technology and systems used for Wellution&#8217;s websites and apps, customer service, logistics and fulfillment, supplier
connectivity, communications and administration. As our operations grow in size, scope and complexity, we will need to continuously improve
and upgrade our systems and infrastructure to offer an increasing number of consumer-enhanced services, features and functionalities,
while maintaining and improving the reliability and integrity of our systems and infrastructure.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our future success also depends on our ability
to use A.I. tools and infrastructure, including logistics and fulfillment platform which leverages, to meet rapidly evolving eCommerce
trends and demands. The emergence of alternative platforms may require us to continue to invest in new and costly technology. We may not
be successful, or we may be less successful than our competitors, in adopting technologies that operate effectively across multiple eCommerce
platforms, which would negatively impact our business and financial performance. New developments in other areas, such as cloud computing
providers, could also make it easier for competitors to enter our markets due to lower up-front technology costs. In addition, we may
not be able to maintain our existing systems or replace our current systems or introduce new technologies and systems as quickly or cost
effectively as we would like. Failure to invest in and adapt to technological developments and industry trends may have a material adverse
effect on our business, results of operations, financial condition and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations of SciSparc Nutraceuticals rely on data
provided by third parties, the loss of which could limit the functionality of our platforms, cause us to invest in the wrong product or
disrupt our business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We use third party software to determine market
trends and what markets to enter into. Our ability to successfully use this software depends on our ability to analyze and utilize data,
including search engine results, provided by unaffiliated third parties, primarily, Google and Amazon. Some of this data is provided to
us pursuant to third-party data sharing policies and terms of use, under data sharing agreements by third-party providers or by customer
consent. The majority of this data is sourced for free or for de minimis amounts. These sources of data allow us, along with A.I. tools,
to determine trends, performance and consumer sentiment on products and searches within eCommerce platforms. This functionality allows
us to help determine which products to market, in some cases manufacture through contract manufacturers, import and sell on eCommerce
marketplaces. The connection to multiple eCommerce platforms through application programming interfaces allow us to develop the automation
of the purchase of marketing and automate the change of pricing of product listings on those eCommerce platforms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the future, any of these third parties could
change its data sharing policies, including making them more restrictive, charging fees or altering its algorithms that determine the
placement, display and accessibility of search results and social media updates, any of which could result in the loss of, or significant
impairment to, our ability to collect useful data. These third parties could also interpret our, or our service providers&#8217;, data
collection policies or practices as being inconsistent with their policies, which could result in the loss of our ability to collect this
data. Privacy concerns may cause end users to resist providing the personal data necessary to allow us to determine market trends as well
as our ability to effectively retain existing customers. Privacy advocacy groups and the technology and other industries are considering
various new, additional or different self-regulatory standards that may place additional burdens on us. Any such changes could impair
our ability to use data and could adversely impact select functionality of our proprietary software, impairing our ability to use this
data to anticipate customer demand and market trends, as well as adversely affecting our business and our ability to generate revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations of SciSparc Nutraceuticals depend on
our ability to build and maintain strong product listings on eCommerce platforms. We may not be able to maintain and enhance our product
listings if we receive a substantial number of customer complaints, negative publicity or otherwise fail to live up to customers&#8217;
expectations, any of which could materially adversely affect our business, results of operations and growth prospects.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Maintaining and enhancing our product listings
is critical in expanding and growing our business. However, a significant portion of our perceived performance to the customer depends
on third parties outside of our control, including suppliers and logistics providers such as FedEx, UPS, postal services and other third-party
delivery agents and online retailers, mainly Amazon. Because our agreements with our online retail partners are generally terminable at
will, we may be unable to maintain these relationships, and our results of operations could fluctuate significantly from period to period.
Because we rely on third party logistics companies to deliver our products, we are subject to shipping delays or disruptions caused by
inclement weather, natural disasters, labor activism, health epidemics or bioterrorism. In addition, because we rely on national, regional
and local transportation companies for the delivery of some of our other products, we are also subject to risks of breakage or other damage
during delivery by any of these third parties. If these third parties do not meet our or our customers&#8217; expectations, our brands
may suffer irreparable damage. In addition, maintaining and enhancing our current and future brands may require us to make substantial
investments, and these investments may not be yield sufficient returns. If we fail to promote and maintain our brands, or if we incur
excessive expenses in this effort, our business, operating results and financial condition may be materially adversely affected. We anticipate
that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive.
Maintaining and enhancing our brands will depend largely on our ability to anticipate market trends and customer demand and to provide
high quality products to our customers and a reliable, trustworthy and profitable sales channel to our suppliers, which we may not be
able to do successfully.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A substantial number of customer complaints or
negative publicity about our sites, products, delivery times, customer data handling and security practices or customer support, especially
on blogs, social media websites or our sites, could rapidly and severely diminish consumer views of our products and result in harm to
our brands. Customers may also make safety-related claims regarding products sold through our online retail partners, such as Amazon,
which may result in an online retail partner removing the product from its marketplace. Such removal may materially impact our financial
results depending on the product that is removed and length of time that it is removed. We also use and rely on other services from third
parties, such as our telecommunications services, and those services may be subject to outages and interruptions that are not within our
control.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations&#8217; efforts of SciSparc Nutraceuticals
to acquire or retain customers, and our efforts to sell new products or increase sales of our existing products, may not be successful,
which could prevent us from maintaining or increasing our sales and achieving profitability.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we do not successfully promote and sustain
our new and/or existing product listings and brands through marketing and other tools, we may fail to maintain or increase our sales and
achieve profitability. Promoting and positioning our brands and product listings will depend largely on the success of our marketing efforts,
our ability to attract customers cost effectively and our ability to consistently provide a high-quality product and maintain consumer
satisfaction. We also use promotions to drive sales, which may not be effective and may adversely affect our gross margins. Our investments
in marketing may not effectively reach potential customers, potential customers may decide not to buy our products or the spending of
customers that purchase from us may not yield the intended return on investment, any of which could negatively affect our financial results.
The failure of our marketing activities could also adversely affect our ability to promote our product listings and sell our products,
and to develop and maintain relationships with our customers, retailers and brands, which may have a material adverse effect on our business,
results of operations, financial condition and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>If the eCommerce operations of SciSparc Nutraceuticals fail to
offer high-quality customer support, our business and reputation may suffer.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">High-quality education and training of customer
support personnel to deliver high-quality customer support are important for the successful retention of existing customers. Providing
this education, training and support requires that our support personnel have specific knowledge and expertise of our products and markets,
making it more difficult for us to hire experienced personnel and to scale up our support operations. The importance of high-quality customer
support will increase as we expand our business and pursue new customers. If we do not provide effective and timely ongoing support, our
ability to retain existing customers may suffer, and our reputation with existing or potential customers may be harmed, which would have
a material adverse effect on our business, results of operations, financial condition and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations&#8217; efforts of SciSparc Nutraceuticals
to expand our business into new brands, products, services, technologies and geographic regions will subject us to additional business,
legal, financial and competitive risks and may not be successful.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Wellution&#8217;s business success depends to
some extent on our ability to expand our consumer offerings by launching new brands, products and services and by expanding our existing
offerings into new geographic regions. Our strategy is to use our skills to determine which markets to enter and optimize the mix of products
and services that we offer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Launching new brands, products and services requires
significant upfront investments, including investments in marketing (namely digital marketing and Pay Per Click (PPC), information technology
and additional personnel. We operate in highly competitive industries with relatively low barriers to entry and must compete successfully
in order to grow our business. We may not be able to generate satisfactory revenue from these efforts to offset these costs. Any lack
of market acceptance of our efforts to launch new brands, products or services or to expand our existing offerings could have a material
adverse effect on our business, prospects, financial condition and results of operations. Further, as we continue to expand our fulfillment
capability or add new businesses with different requirements, our logistics networks will become increasingly complex and operating them
will become more challenging. There can be no assurance that we will be able to operate our networks effectively.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have also entered and may continue to enter
new markets and provide product offerings in which we have limited or no experience, which may not be successful or appealing to our customers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The eCommerce consumer products goods industry
is subject to evolving standards and practices, as well as changing consumer needs, requirements and preferences. Our ability to attract
new customers and increase revenue from existing customers depends, in part, on our ability to enhance and improve our existing tools
that enable us to pinpoint new markets and introduce new products. The success of any enhancements or new instruments depends on, in part,
market-accepted pricing levels and overall market acceptance. We may not be successful in these efforts, which could result in significant
expenditures that could impact our revenue or distract management&#8217;s attention from current offerings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Increased emphasis on the sale of new products
could distract us from sales of our existing products in existing markets, negatively affecting our overall sales. We have invested and
expect to continue to invest in new businesses, products, features, services and technologies. Such endeavors may involve significant
risks and uncertainties, including insufficient revenue from such investments to offset any new liabilities assumed and expenses associated
with these new investments, inadequate return of capital on our investments, distraction of management from current operations and unidentified
issues not discovered in our due diligence of such investments that could cause us to fail to realize the anticipated benefits of such
investments and incur unanticipated liabilities. Because these new strategies and offerings are inherently risky, no assurance can be
given that they will be successful. Our new features or enhancements could fail to attain sufficient market acceptance for many reasons,
including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There is no assurance that we will successfully
identify new opportunities or develop and bring new products to market on a timely basis, which could materially and adversely affect
our business and operating results and compromise our ability to generate revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations&#8217; use of social media and email
by SciSparc Nutraceuticals may adversely impact our reputation or subject us to fines or other penalties.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We use social media and email as part of our digital
marketing efforts. As laws and regulations rapidly evolve to govern the use of these channels, the failure by us, our employees or third
parties acting at on our behalf to abide by applicable laws and regulations in the use of these channels could adversely affect our reputation
or subject us to fines or other penalties. In addition, our employees or third parties acting on our behalf may knowingly or inadvertently
make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure
of proprietary, confidential or sensitive personal information of our business, employees, customers or others. Any such inappropriate
use of social media or email could also cause reputational damage.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Customers value readily available information
concerning retailers and their goods and services and often act on such information without further investigation and with no regard to
its accuracy. Our customers may engage with us online through our social media platforms, including Facebook and Instagram, by providing
feedback and public commentary about all aspects of our business. Information concerning us or our retailers and brands, whether accurate
or not, may be posted on social media platforms at any time and may have a disproportionately adverse impact on our brand, reputation
or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse
effect on our business, results of operations, financial condition and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>With respect to the eCommerce operations of SciSparc Nutraceuticals,
if our emails are not delivered and accepted or are routed by email providers less favorably than other emails, or our sites or mobile
applications are not accessible or are treated disadvantageously by Internet service providers, our business may be substantially harmed.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If email providers or Internet service providers,
or ISPs, implement new restrictive email or content delivery or accessibility policies, including with respect to net neutrality, or begin
enforcement of existing policies, it may become more difficult to deliver emails to our customers or for customers to access our sites,
products and services. For example, certain email providers, including Google, categorize our emails as &#8220;promotional&#8221;, and
these emails are directed to an alternate, and less readily accessible, section of a customer&#8217;s inbox. If email providers materially
limit or halt the delivery of our emails, or if we fail to deliver emails to customers in a manner compatible with email providers&#8217;
email handling or authentication technologies, our ability to contact customers through email could be significantly restricted. In addition,
if we are placed on &#8220;spam&#8221; lists or lists of entities that have been involved in sending unwanted, unsolicited emails, our
operating results and financial condition could be substantially harmed. Further, if ISPs prioritize or provide superior access to our
competitors&#8217; content, our business and results of operations may be negatively impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The eCommerce operations of SciSparc Nutraceuticals
are subject to risks related to online payment methods.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We accept payments using a variety of methods,
including credit card, debit card, PayPal, Payoneer, credit accounts (including promotional financing) and gift cards. For certain payment
methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs
and lower profitability. In addition, our credit card and other payment processors could impose receivable holdback or reserve requirements
in the future. We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards,
and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to
payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change
or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with the rules or requirements of any provider
of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently
accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction
fees and may lose, or face restrictions placed upon, our ability to accept credit card or debit card payments from customers or to facilitate
other types of online payments. If any of these events were to occur, our business, financial condition and operating results could be
materially adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>With respect to the eCommerce operations of SciSparc Nutraceuticals,
if we are unable to manage our inventory effectively, our operating results could be adversely affected.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To ensure timely delivery of products, we generally
enter into purchase orders in advance with manufacturers. As a result, we are vulnerable to demand and pricing shifts and to suboptimal
selection and timing of product purchases. We rely on our procurement team to order products and we rely on our data analytics to inform
the levels of inventory we purchase, including when to reorder items that are selling well and when to write off items that are not selling
well. In these instances, we may be unable to always predict the appropriate demand for our products by customers with accuracy, which
may result in inventory shortages, inventory write offs and lower gross margins.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If our sales and procurement teams do not predict
demand well or if our algorithms do not help us reorder the right products or write off the right products timely, we may not effectively
manage our inventory, which could result in inventory excess or shortages, and our operating results and financial condition could be
adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The eCommerce operations of SciSparc Nutraceuticals, including
the costs and supply chain, are subject to risks associated with sourcing, importing and warehousing.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We source the products we offer from third-party
vendors and, as a result, we may be subject to price fluctuations or demand disruptions. Our operating results could be negatively impacted
by increases in the prices of our products, and we have no guarantees that prices will not rise. In addition, as we expand into new categories
and types of products, we expect that we may not have strong purchasing power in these new areas, which could lead to higher costs than
we have historically seen in our current product categories and types. We may not be able to pass increased costs on to customers, which
could adversely affect our operating results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, we cannot guarantee that products
we receive from vendors will be of sufficient quality or free from damage or defects, or that such merchandise will not be damaged during
shipping or storage. While we take measures to ensure product quality and avoid damage, including evaluating vendor facilities, operations
and product samples, conducting inventory inspections and inspecting returned products, we cannot control merchandise while it is out
of our possession or prevent all damage while in our distribution centers. We may incur additional expenses and our reputation could be
harmed if or current or potential customers believe that our merchandise is not of high quality or may be damaged.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Risks associated with the suppliers from whom our products are
sourced could materially adversely affect our financial performance, as well as our reputation and brand.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend on our ability to provide our customers
with a wide range of products from high quality suppliers in a timely and efficient manner. Our agreements with most of our suppliers
do not provide for the long-term availability of merchandise or the continuation of particular pricing practices, nor do they usually
restrict such suppliers from selling products to other buyers or directly themselves. There can be no assurance that our current suppliers
will continue to seek to sell us products on current terms or that we will be able to establish new or otherwise extend current supply
relationships to ensure product acquisitions in a timely and efficient manner and on acceptable commercial terms. Our ability to develop
and maintain relationships with reputable suppliers and offer high quality products to our customers is critical to our success. If we
are unable to develop and maintain relationships with suppliers that would allow us to offer a sufficient amount and variety of quality
products on acceptable commercial terms, our ability to satisfy our customers&#8217; needs, and therefore our long-term growth prospects,
would be materially adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also are unable to predict whether any of the
countries in which our suppliers&#8217; products are currently manufactured or may be manufactured in the future will be subject to trade
restrictions imposed by the U.S. or foreign governments or the likelihood, type or effect of any such restrictions. Any event causing
a disruption or delay of imports from suppliers with international manufacturing operations, including the imposition of additional import
restrictions, restrictions on the transfer of funds or increased tariffs or quotas, could increase the cost or reduce the supply of merchandise
available to our customers and materially adversely affect our financial performance as well as our reputation and brand. Our competitors
may have greater existing inventory positions and other advantages that may allow them to price more competitively relative to our products.
Furthermore, some or all of our suppliers&#8217; foreign operations may be adversely affected by political and financial instability,
resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds or other trade disruptions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may not accurately forecast revenues,
profitability and appropriately plan our expenses.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We base our current and future expense levels
on our operating forecasts and estimates of future income and operating results. Income and operating results are difficult to forecast
because they generally depend on the volume and timing of the orders we receive, which are uncertain. Additionally, our business is affected
by general economic and business conditions around the world. A softening in income, whether caused by changes in consumer preferences,
a weakening in global economies or inflation, may result in decreased net revenue levels, and we may be unable to adjust our spending
in a timely manner to compensate for any unexpected shortfall in income. This inability could cause our income (loss) from operations
after tax in a given quarter to be lower or higher than expected. We also make certain assumptions when forecasting the amount of expense
we expect related to our share-based payments, which includes the expected volatility of our share price, and the expected life of equity
awards granted. These assumptions are partly based on historical results. If actual results differ from our estimates, our operating results
in a given quarter may be lower than expected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The eCommerce operation&#8217;s operating
results of SciSparc Nutraceuticals are subject to seasonal fluctuations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The eCommerce business is seasonal in nature and
the fourth quarter is a significant period for our operating results due to the holiday season. As a result, revenue generally declines
and loss from operations generally increases in the first quarter sequentially from the fourth quarter of the previous year. Any disruption
in our ability to process and fulfill customer orders during the fourth quarter could have a negative effect on our quarterly and annual
operating results. For example, if a large number of customers purchase our products in a short period of time due to increased holiday
demand, inefficient management of our inventory may prevent us from efficiently fulfilling orders, which may reduce sales and harm our
brands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>The inability to acquire, use or maintain our marks and domain
names for our sites could substantially harm our business and operating results.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently have registered trademarks for our
brands in numerous jurisdictions and have registered the Internet domain names for our websites, as well as various related domain names.
However, we have not registered our trademarks or domain names in all major international jurisdictions. Domain names generally are regulated
by Internet regulatory bodies. If we do not have, or cannot obtain on reasonable terms, the ability to use our marks in a particular country
or to use or register any of our domain names, we could be forced either to incur significant additional expenses to market our products
within that country, including the development of a new brand and the creation of new promotional materials and packaging, or to elect
not to sell products in that country. Either result could materially adversely affect our business, financial condition and operating
results.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Furthermore, the regulations governing domain
names and laws protecting marks and similar proprietary rights could change in ways that block or interfere with our ability to use relevant
domains or our current brand names. Furthermore, we might not be able to prevent third parties from registering, using or retaining domain
names that interfere with our consumer communications or infringe or otherwise decrease the value of our marks, domain names and other
proprietary rights. Regulatory bodies also may establish additional generic or country-code top-level domains or may allow modifications
of the requirements for registering, holding or using domain names. As a result, we may not be able to register, use or maintain the domain
names that utilize the Wellution name in all of the countries in which we currently or intend to conduct business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Any significant disruption in service on
our websites or apps or in our computer systems, a number of which are currently hosted or provided by third-party providers, could materially
affect our ability to operate, damage our reputation and result in a loss of customers, which would harm our business and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ability to sell and market our products relies
on FBA platform whose functionality relies upon a number of third-party related services, including those relating to cloud infrastructure,
technology services, servers, open-source libraries and vendor application programming interfaces. Any disruption or loss of any of these
third-party services could have a negative effect on our business, results of operations, financial condition and prospects. We may experience
interruptions in our systems, including server failures that temporarily slow down or interfere with the performance of our platforms
and the ability to sell on eCommerce marketplaces.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interruptions in these systems, whether due to
system failures, human input errors, computer viruses or physical or electronic break-ins, and denial-of-service attacks on us, third-party
vendors or communications infrastructure, could affect the availability of our services on our platform and prevent or inhibit the ability
of selling our products. Volume of traffic and activity on eCommerce marketplaces spikes on certain days, such as during a Black Friday
promotion, and any such interruption would be particularly problematic if it were to occur at such a high-volume time. Problems with the
reliability of our systems or third-party marketplaces could prevent us from earning revenue and could harm our reputation. Damage to
our reputation, any resulting loss of customers, eCommerce confidence and the cost of remedying these problems could negatively affect
our business, results of operations, financial condition and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our ability to maintain communications, network
and computer hardware in the countries in which they are used may in the future be subject to regulatory review and licensing, and the
failure to obtain any required licenses could negatively affect our business. Our systems and infrastructure are predominately reliant
on third parties. Problems faced by our third-party service providers with the telecommunications network providers with whom they contract
or with the systems by which they allocate capacity among their users, including us, could adversely affect the experience of our customers.
Our third-party service providers could decide to close their facilities without adequate notice. Any financial difficulties, such as
bankruptcy or reorganization, faced by our third-party service providers or any of the service providers with whom they contract may have
negative effects on our business, the nature and extent of which are difficult to predict. If our third-party service providers are unable
to keep up with our needs for capacity, this could have an adverse effect on our business. Any errors, defects, disruptions or other performance
problems with our services could harm our reputation and may have a material adverse effect on our business, results of operations, financial
condition and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Risks Related to the Ownership of Our Securities</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We will need additional capital in the future.
Raising additional capital by issuing securities may cause dilution to existing shareholders.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have incurred losses every
year since our inception. If we continue to use cash at our historical rates of use we will need significant additional financing, which
we may seek through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing
arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, an existing shareholder&#8217;s
ownership interest will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely
affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may
involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making
capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third parties,
we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms
that are not favorable to us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We do not know whether a market for the
Ordinary Shares will be sustained or what the trading price of the Ordinary Shares will be and as a result it may be difficult for you
to sell your Ordinary Shares</i></b>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although our Ordinary Shares
are listed on Nasdaq, an active trading market for the Ordinary Shares may not be sustained. It may be difficult for you to sell your
Ordinary Shares without depressing the market price for the Ordinary Shares or at all. Further, an inactive market may also impair our
ability to raise capital by selling Ordinary Shares and may impair our ability to enter into strategic partnerships or acquire companies,
products, or services by using our equity securities as consideration.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Sales of a substantial number of our Ordinary
Shares in the public market by our existing shareholders could cause our share price to fall.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales of a substantial number
of our 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The exercise of outstanding warrants will
cause significant dilution to holders of our equity securities and could adversely affect the price of our Ordinary Shares. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of April 24, 2023, holders
of warrants may exercise their warrants into up to 9,500,188 Ordinary Shares. In the event that such warrants are exercised in full, the
ownership interest of existing holders of our equity securities will be diluted and may have a negative effect on the trading price of
our Ordinary Shares.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The market price of our securities may be
highly volatile, and you may not be able to resell your Ordinary Shares at or above the price you paid. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The market price of our Ordinary
Shares is volatile. Our Ordinary Share price is and will continue to be subject to wide fluctuations in response to a variety of factors,
including the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">adverse results or delays in preclinical studies or clinical trials;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reports of adverse events in our product candidates or clinical trial failures of our product candidates;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">any delay in filing a regulatory submission for any of our product or product candidates and any adverse development or perceived adverse development with respect to the review of that regulatory submission by the FDA or European or Asian authorities;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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                                    <p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">&#160;</span></p></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">failure to enter into strategic collaborations or failure to successfully integrate acquisitions we have made;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">failure by us or strategic collaboration partners to prosecute, maintain or enforce our intellectual property rights;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">changes in laws or regulations applicable to future products;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">inability to scale up our manufacturing capabilities through third-party manufacturers, inability to obtain adequate product supply for our products or the inability to do so at acceptable prices;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">introduction of new products or technologies by our competitors;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">failure to meet or exceed financial projections we may provide to the public;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">failures or delays in our intended Restructuring Plan;</span></td></tr>
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">sales of our securities by us or our shareholders in the future; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">trading volumes of our securities.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, companies trading
in the stock market have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of these companies. Broad market and industry factors may negatively affect the market price of our Ordinary Shares, regardless
of our actual operating performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Outstanding warrants and pre-funded warrants
to acquire our Ordinary Shares are speculative in nature. Furthermore, holders of our warrants and pre-funded warrants will have no rights
as shareholders until such holders exercise their warrants and acquire our Ordinary Shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Until holders of the warrants
and pre-funded warrants acquire our Ordinary Shares upon exercise of the warrants and pre-funded warrants, holders of the warrants and
pre-funded warrants will have no rights with respect to our Ordinary Shares underlying such warrants and pre-funded warrants. Upon exercise
of the warrants and pre-funded warrants, the holders thereof will be entitled to exercise the rights of a holder of Ordinary Shares only
as to matters for which the record date occurs after the exercise date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our warrants and pre-funded
warrants only represent the right to acquire Ordinary Shares at a fixed price, and in the case of the warrants, for a limited period of
time. Specifically, holders of the warrants and pre-funded warrants that we issued in private placements in March 2019, March 2020, March
2021 and June 2022 and in our November 2020 public offering may exercise their right to acquire Ordinary Shares and pay an exercise price
per Ordinary Shares (in the case of the pre-funded warrants, $0.001 per Ordinary Share and in the case of other warrants, ranging from
$2.57 to $245.00 per Ordinary Share), subject to adjustment upon certain events, and in the case of warrants only prior to five years
from their respective issuance dates, after which date any unexercised warrants will expire and have no further value.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We cannot assure you that our Ordinary Shares
will remain listed on Nasdaq or any other securities exchange.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our 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 &#8220;SPRCF&#8221;. In December
2021, our Ordinary Shares were re-listed on Nasdaq and began trading under the symbol &#8220;SPRC&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">In
addition, on March 10, 2023, 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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&#8217;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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to achieve and maintain effective
internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, results
of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,
which could have a material adverse effect on the price of our Ordinary Shares.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective internal controls
are necessary for us to provide reliable financial reports and effectively prevent fraud. We are required to document and test our internal
control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments
of the effectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal
control, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude
on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Disclosing deficiencies
or weaknesses in our internal control, failing to remediate these deficiencies or weaknesses in a timely fashion or failing to achieve
and maintain an effective internal control environment may cause investors to lose confidence in our reported financial information, which
could have a material adverse effect on the price of our Ordinary Shares. If we cannot provide reliable financial reports or prevent fraud,
our operating results could be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We have not paid, and do not intend to pay,
dividends on our Ordinary Shares and, therefore, unless our traded securities appreciate in value, our investors may not benefit from
holding our securities.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not paid any cash
dividends on our Ordinary Shares since inception. We do not anticipate paying any cash dividends our Ordinary Shares in the foreseeable
future. Moreover, the Israeli Companies Law-1999, or the Companies Law, imposes certain restrictions on our ability to declare and pay
dividends. As a result, investors in our Ordinary Shares will not be able to benefit from owning these securities unless their market
price becomes greater than the price paid by such investors and they are able to sell such securities. We cannot assure you that you will
ever be able to resell our securities at a price in excess of the price paid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be a &#8220;passive foreign investment
company,&#8221; or PFIC, for U.S. federal income tax purposes in the current taxable year or may become one in any subsequent taxable
year. There generally would be negative tax consequences for U.S. taxpayers that are holders of our Ordinary Shares if we are or were
to become a PFIC.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In general, we will be treated
as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is &#8220;passive
income&#8221; or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income.
Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities
and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes
amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a
non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest (by value) is taken into account. We do not believe that we would be deemed a PFIC for 2022. If we are a PFIC
in any taxable year during which a U.S. taxpayer holds the Ordinary Shares, such U.S. taxpayer would be subject to certain adverse U.S.
federal income tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a &#8220;qualified electing fund,&#8221;
or QEF, or make a &#8220;mark-to-market&#8221; election, then &#8220;excess distributions&#8221; to the U.S. taxpayer, and any gain realized
on the sale or other disposition of the Ordinary Shares by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer&#8217;s
holding period for the Ordinary Shares; (2) the amount allocated to the current taxable year and any period prior to the first day of
the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable
years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest
charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have
determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers
that have held the Ordinary Shares during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be
a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer
can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. U.S.
taxpayers that hold the Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing
requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to the Ordinary
Shares in the event that we are a PFIC. See Item 10.E. &#8220;Taxation-U.S. Federal Income Tax Considerations-Passive Foreign Investment
Companies&#8221; for additional information.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Risks Related to Israeli Law and Our Operations
in Israel</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Provisions of Israeli law may make it easy
for our shareholders to demand that we convene a shareholders meeting, and/or allow shareholders to convene a shareholder meeting without
the consent of our management, which may disrupt our management&#8217;s ability to run our company.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Section 63(b) of the Companies
Law may allow any one or more of our shareholders holding at least 5% of our voting rights to demand that we convene a special shareholders
meeting. Also, in the event that we choose 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&#8217;s ruling) and require us to cover the costs, within reason, and as a result thereof, our directors might
be required to repay us such costs. If our shareholders decide to exercise these rights in a way inconsistent with our management&#8217;s
strategic plans, our management&#8217;s ability to run our company may be disrupted, and this process may entail significant costs to
us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our operations are subject to currency and
interest rate fluctuations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We incur expenses in U.S. dollars
and NIS, but our financial statements are denominated in U.S. dollars. U.S. dollars is our functional currency and is the currency that
represents the principal economic environment in which we operate. As a result, we are affected by foreign currency exchange fluctuations
through both translation risk and transaction risk. As a result, we are exposed to the risk that the NIS may appreciate relative to the
dollar, or, if the NIS instead devalues relative to the dollar, that the inflation rate in Israel may exceed such rate of devaluation
of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations
in Israel would increase and our dollar-denominated results of operations would be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Provisions of Israeli law and our amended
and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could
prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Provisions of Israeli law and
our amended and restated articles of association could have the effect of delaying or preventing a change in control and may make it more
difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing
so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the
future for our Ordinary Shares. Among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 17.85pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">Israeli corporate law does not provide for shareholder action by written consent, thereby requiring all shareholder actions to be taken at a general meeting of shareholders; </span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">our amended and restated articles of association divide our directors into three classes, each of which is elected once every three years;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">our amended and restated articles of association require a vote of the holders of a majority of our outstanding Ordinary Shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision stating that each year the term of office of only one class of directors will and dividing our directors into three classes, requires a vote of the holders of 65% of the voting power represented at a general meeting of our shareholders and voting thereon has been obtained, provided the majority constitutes more than 33.33% of the total issued and outstanding share capital as of the record date of such meeting. The affirmative vote of at least three-quarters (3/4) of the directors, in addition to the approval of our shareholders, is also required in order to amend our amended and restated articles of association;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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    <td style="text-align: justify"><span style="font-size: 10pt">subject to certain exceptions, our amended and restated articles of association restrict certain transactions which may have a significant effect on the Company&#8217;s structure, assets or business, including significant mergers and acquisitions, a disposition of all or substantially all of the assets of the Company, a voluntary dissolution and material changes to the principal business of the Company.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, Israeli tax considerations
may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty
with Israel granting tax relief to such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral
in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two
years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted.
See &#8220;Item 10.E. Taxation-Israeli Tax Considerations and Government Programs&#8221; for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>It may be difficult to enforce a judgment
of a United States court against us and our officers and directors and the Israeli experts named in this Annual Report in Israel or the
United States, to assert United States securities laws claims in Israel or to serve process on our officers and directors and these experts.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were incorporated in Israel
and our corporate headquarters are located in Israel. All of our executive officers and directors and the Israeli experts named in this
Annual Report are located in Israel. All of our assets and most of the assets of these persons are located in Israel. Service of process
upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S.
directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel
that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel, or obtain a judgment based
on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S.
securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a
claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable
to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming
and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing
the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect
on judgments rendered against us or our non-U.S. officers and directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Moreover, an Israeli court
will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli
courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if
it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same
matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel
at the time the foreign action was brought.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Our principal executive offices, most of
our research and development activities and other significant operations are located in Israel, and, therefore, our results may be adversely
affected by political, economic and military instability in Israel.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our executive offices, corporate
headquarters and principal research and development facilities are located in Israel. In addition, all of our officers and directors are
residents of Israel. Accordingly, political, economic and security conditions in Israel and the surrounding region may directly affect
our business. Any conflicts, political instability, terrorism, cyberattacks or any other hostilities involving Israel or the interruption
or curtailment of trade between Israel and its present trading partners could adversely affect our operations. Ongoing and revived hostilities
in the Middle East or other Israeli political or economic factors, could harm our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our 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 direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government
coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have
a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business
conditions and could harm our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Israeli government is currently
pursuing extensive changes to Israel&#8217;s judicial system. In response to the foregoing developments, individuals, organizations and
institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment
in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations,
downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic
conditions. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our results
of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, in the past, the State
of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of
Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial
condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which
could also adversely impact our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Finally, many Israeli citizens
are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40
(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be
called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists.
It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which
may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial
condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Competition for skilled technical and other
personnel in Israel is intense, and as a result we may fail to attract, recruit, retain and develop qualified employees, which could materially
and adversely impact our business, financial condition and results of operations.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We compete in a market marked
by rapidly changing technologies and an evolving competitive landscape. In order for us to successfully compete and grow, we must attract,
recruit, retain and develop personnel with requisite qualifications to provide expertise across the entire spectrum of our intellectual
capital and business needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our principal research and
development as well as significant elements of our general and administrative activities are conducted at our headquarters in Israel,
and we face significant competition for suitably skilled employees in Israel. While there has been intense competition for qualified human
resources in the Israeli high-tech industry historically, the industry experienced record growth and activity in 2021, both at the earlier
stages of venture capital and growth equity financings, and at the exit stage of initial public offerings and mergers and acquisitions.
This flurry of growth and activity has caused a sharp increase in job openings in both Israeli high-tech companies and Israeli research
and development centers of foreign companies, and intensification of competition between these employers to attract qualified employees
in Israel. As a result, the high-tech and bio-tech industry in Israel has experienced significant levels of employee attrition and is
currently facing a severe shortage of skilled human capital, including engineering, research and development, sales and customer support
personnel. Many of the companies with which we compete for qualified personnel have greater resources than we do, and we may not succeed
in recruiting additional experienced or professional personnel, retaining personnel or effectively replacing current personnel who may
depart with qualified or effective successors. Failure to retain or attract qualified personnel could have a material adverse effect on
our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Your rights and responsibilities as a holder
of our securities will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders
of U.S. companies. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are incorporated under Israeli
law. The rights and responsibilities of holders of our Ordinary Shares are governed by our amended and restated articles of association
and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders
in typical U.S. corporations. In particular, pursuant to the Companies Law, each shareholder of an Israeli company has to act in good
faith and in a customary manner in exercising his or her rights and fulfilling his or her obligations toward the Company and other shareholders
and to refrain from abusing his or her power in the Company, including, among other things, in voting at the general meeting of shareholders,
on amendments to a company&#8217;s articles of association, increases in a company&#8217;s authorized share capital, mergers and certain
transactions requiring shareholders&#8217; approval under the Companies Law. In addition, a controlling shareholder of an Israeli company
or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint
or prevent the appointment of a director or officer in the Company, or has other powers toward the Company has a duty of fairness toward
the Company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist
in understanding the implications of these provisions that govern shareholder behavior.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We received Israeli government grants for
certain of our past research and development activities and programs, some of which we sold or are in the process of selling. The terms
of such grants may require us, in the future, to pay royalties and to satisfy specific conditions if and to the extent we receive future
royalties or in order to complete the sale of such grant based technologies and programs. We may be required to pay penalties in addition
to payment of the royalties.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our research and development
efforts with respect to some of our past activities, which was focused on developing an immunotherapeutic monoclonal antibody for the
treatment of Alzheimer&#8217;s disease, which we sold in March 2015, and our Anti-CD3 technology directed toward the treatment of inflammatory
and autoimmune diseases, which in part was returned and re-assigned to Hadasit Medical Research Services &amp; Development Ltd., or Hadasit,
and in part is still in the process of being sold, were financed in part through royalty-bearing grants from the Israeli Innovation Authority,
or the IIA. As of December 31, 2022, we had received the aggregate amount of approximately $1.1 million from the IIA for the development
of our abovementioned technologies. As of December 31, 2021, our contingent liabilities regarding IIA grants received by us were in an
aggregate amount of $1.2 million including interest. With respect to such grants, we are committed to pay certain royalties up to $1.2
million relating only to technologies in our possession and excluding any royalties for technologies that we sold to third parties. We
are required to comply with the requirements of the Israeli Encouragement of Industrial Research, Development and Technological Innovation
Law, 5744-1984, as amended, or the Innovation Law, and related regulations, or the Research Law, with respect to those past grants. When
a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer
or license of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside
of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any
transfer or license to third parties inside or outside of Israel of know how or for the transfer outside of Israel of manufacturing or
manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose
certain conditions on any arrangement under which it permits us to transfer technology or development.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Innovation Law and
the regulations thereunder, a recipient of IIA grants is required to return the grants by the payment of royalties of 3% to 6% on the
revenues generated from the sale of products (and related services) developed (in whole or in part) under an IIA program up to the total
amount of the grants received from IIA, linked to the U.S. dollar and bearing interest at an annual rate of the London Interbank Offered
Rate, or LIBOR, applicable to U.S. dollar deposits, as published on the first business day of each calendar year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The United Kingdom&#8217;s
Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit
rates for LIBOR after 2021. The grants received from the IIA bear an annual interest rate based on the 12-month LIBOR. Accordingly, there
is considerable uncertainty regarding the publication of LIBOR beyond 2021. In September 2021, the Bank of Israel, which determines annual
interest rates, published a directive which stated that annual interest at a variable rate linked to the LIBOR rate for loans in U.S.
dollars will be replaced by the Secured Overnight Financing Rate, or the SOFR, in June 2023. While it is not currently possible to determine
precisely whether, or to what extent, the replacement of LIBOR with SOFR would affect us, the implementation of SOFR may increase our
financial liabilities to the IIA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The transfer or license of
IIA-supported technology or know-how outside of Israel and the transfer of manufacturing of IIA-supported products, technology or know-how
outside of Israel may involve the payment of significant amounts, depending upon the value of the transferred or licensed technology or
know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported research project
and other factors. These restrictions and requirements for payment may impair our ability to sell, license or otherwise transfer our technology
assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology
outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel
of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are
required to pay to the IIA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>General Risk Factors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>As a &#8220;foreign private issuer&#8221;
we are permitted to and follow certain home country corporate governance practices instead of otherwise applicable SEC requirements, which
may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers. </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our status as a foreign private
issuer also exempts us from compliance with certain SEC laws and regulations, including the proxy rules and the short-swing profits recapture
rules. In addition, we will not be required under the Exchange Act to file current reports and financial statements with the SEC as frequently
or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be exempt from
filing quarterly reports with the SEC. Also, although the Companies Law requires us to disclose the annual compensation of our five most
highly compensated senior officers on an individual basis, this disclosure is not as extensive as that required of a U.S. domestic issuer.
Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under
the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are
entitled as an investor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>International expansion of our business
exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the
United States or Israel.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other than our headquarters
and other operations which are located in Israel (as further described below), we currently have limited international operations, but
our business strategy incorporates potentially significant international expansion, particularly in anticipation of approval of our product
candidates. We plan to maintain sales representatives and conduct physician and patient association outreach activities, as well as clinical
trials, outside of the United States and Israel. Doing business internationally involves a number of risks, including but not limited
to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, or FCPA, its books and records provisions or its anti-bribery provisions.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any of these factors could
significantly harm our future international expansion and operations and, consequently, our results of operations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Failure to comply with the FCPA could subject
us to penalties and other adverse consequences.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to the FCPA,
which generally prohibits companies, such as us, whose securities are listed in the United States, from paying, offering or authorizing
payment or offering of anything of value, directly or indirectly, to any foreign government official, political party or candidate for
public office for the purpose of influencing any act or decision of such foreign person in order to assist companies like us in obtaining
or retaining business. The FCPA also obligates companies like us, whose securities are listed in the United States, to comply with accounting
provisions requiring the companies to maintain books and records that accurately and fairly reflect all transactions of the companies,
including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations. The U.S. Department of Justice and the SEC, which have responsibility for enforcement of the FCPA, both consider employees
of government-operated health care systems to be &#8220;foreign officials&#8221; for FCPA purposes. In addition, the U.S. Department of
Justice and the SEC are both engaged in a long-running FCPA compliance review of pharmaceutical companies. If our employees or agents
are found to have engaged in conduct that violates the FCPA, we would be held responsible and could suffer severe penalties and other
consequences, including adverse publicity and damage to our reputation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cybersecurity issues, security breaches
and other disruptions could compromise our information, expose us to liability and harm our reputation and business.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business relies upon information
technology systems operated by us and by our third-party service providers. These systems may fail or experience operational disruption,
experience cybersecurity attacks, or be damaged by computer viruses and unauthorized access. In the ordinary course of our business we
collect and store sensitive data, including intellectual property, personal information and our proprietary business information. The
secure maintenance and transmission of this information is critical to our operations and business strategy. We rely on commercially available
systems, software, tools and domestically available monitoring to provide security for processing, transmitting and storing this sensitive
data.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Hackers may attempt to penetrate
our computer systems, and, if successful, misappropriate personal or confidential business information. In addition, an associate, contractor
or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain such information, and
may purposefully or inadvertently cause a breach involving such information. While we continue to implement additional protective measures
to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used
in such attacks change rapidly. If our third-party vendors fail to protect their information technology systems and our confidential and
proprietary information, we may be vulnerable to disruptions in service and unauthorized access to our confidential or proprietary information
and we could incur liability and reputational damage and the further development and commercialization of our product candidates could
be delayed. While we have not, to our knowledge, experienced any material IT system failures or cybersecurity attacks to date, we cannot
assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages,
breaches in our systems or those of our third-party vendors and other contractors and consultants, or other cyber incidents that could
have a material adverse effect upon our reputation, business, operations or financial condition. If such an event were to occur and cause
interruptions in our operations, it could result in a material disruption of our development programs, business operations, a breach of
sensitive personal information or a loss or corruption of critical data assets including trade secrets or other proprietary information.
For example, the loss of clinical trial data from future clinical trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. Such IT system failures, cybersecurity attacks or vulnerabilities to
our or our third-party vendors&#8217; information security programs or defenses could result in legal liability, reputational damage,
business interruption, and our competitive position could be harmed and the further development and commercialization of our products
or any future products could be delayed or disrupted. Moreover, containing and remediating any IT system failure, cybersecurity attack
or vulnerability may require significant investment of resources.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our information technology
networks and infrastructure may still be vulnerable to damage, disruptions or shutdowns due to attack by hackers or breaches, employee
error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters or other
catastrophic events. Furthermore, significant security breaches or disruptions of our internal information technology systems or those
of our third-party vendors and other contractors and consultants could result in the loss, misappropriation and/or unauthorized access,
use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property,
proprietary business information and personal information), which could result in financial, legal, business and reputational harm to
us., Any such compromise could disrupt our operations, damage our reputation and subject us to additional costs and liabilities, any of
which could adversely affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>We may be subject to securities litigation,
which is expensive and could divert management attention.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the past, companies that
have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the
target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management&#8217;s
attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant
liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>If securities or industry analysts do not
publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations
or publish negative reports regarding our business or our shares, the share price and trading volume of our securities could decline.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The trading market for our
Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business,
our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover
us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our securities,
or provide more favorable relative recommendations about our competitors, the price of our securities would likely decline. If any analyst
who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could cause the price or trading volume of our securities to decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 4. INFORMATION ON THE COMPANY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A. History and Development of the Company</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 Companies Law. Our registered
office and principal place of business is located at 20 Raul Wallenberg St., Tower A, 2<sup>nd</sup> Floor, Tel Aviv 6971916, Israel.
Our telephone number in Israel is: +972-73-3447180.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 Annual Report, and the reference to our website in this Annual Report is an inactive textual reference only. The SEC also
maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC&#8217;s website at www.sec.gov.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a foreign private issuer
as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us from compliance
with certain laws and regulations of the SEC, including the proxy rules and the short-swing profits recapture rules. In addition, we will
not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S.
domestic companies registered under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our capital expenditures for
2022, 2021 and 2020 amounted to $9,200, $35,000 and $0, respectively. These expenditures were primarily for purchases of fixed assets.
Our purchases of fixed assets primarily include, computers, and equipment used for the development of our products, and we financed these
expenditures primarily from cash on hand.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_014"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B. Business Overview </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Overview </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a specialty clinical-stage
pharmaceutical company. Our focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. With
this focus, we are currently engaged in the following development programs based on &#916;9-tetrahydrocannabinol, or THC, and/or CBD
and/or other CBR agonists: SCI-110 for the treatment of TS, for the treatment of OSA, and for the treatment of Alzheimer&#8217;s disease
and agitation; SCI-160 for the treatment of pain; and SCI-210 for the treatment of ASD, and SE. We also have a majority-owned subsidiary
whose business focuses on the sale of hemp seeds oil-based products and others on the Amazon.com marketplace.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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&#8482;, 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 &#8220;sparing
effect,&#8221; which has strong potential to treat various diseases of the central nervous system such as TS, OSA and Alzheimer&#8217;s
disease and agitation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">SCI-210 is a proprietary drug
candidate based on two components: (1) CBD, and (2) CannAmide&#8482;. 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.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">SCI-160 is a novel pharmaceutical
preparation containing a CB2 receptor, agonist for the treatment of pain. This innovative CB2 receptor agonist was synthesized by Raphael
Mechoulam, Ph.D., Professor of Medicinal Chemistry at the Hebrew University, a member of the SciSparc Scientific Advisory Board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that modulating
CB2 receptor activity by selective CB2 receptor agonists holds unique therapeutic potential for addressing pain conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the positive results
obtained in a phase IIa TS study conducted at Yale School of Medicine, we are developing a regulatory dossier to be submitted to the FDA,
BfArM and the MoH, for our SCI-110 program for TS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In February 2021, we announced
an agreement with The Israeli Medical Center for Alzheimer&#8217;s, to conduct a phase IIa clinical trial to evaluate the safety, tolerability
and efficacy of SCI-110 in patients with Alzheimer&#8217;s disease and agitation using our proprietary cannabinoid-based technology. Sporadic
observation in healthy or sick individuals indicated that cannabis products and in particular THC have calming and anti-anxiety effects.
Based on our pre-clinical and clinical experience using SCI-110 we believe that this treatment may potentially be found to be more safe
and efficacious than THC alone. In November 2022, we announced positive interim results from our Phase IIa trial of SCI-110 in patients
with Alzheimer&#8217;s disease and agitation. Agitation manifests in the course of Alzheimer&#8217;s disease progression in almost all
affected patients, increasing patients&#8217; suffering and burden of care. This Phase IIa clinical trial is an open label study, which
includes 20 patients diagnosed with Alzheimer&#8217;s disease and agitation, to evaluate the safety, tolerability and efficacy trends
of twice daily oral administration of SCI-110. In December 2021, The Israeli Medical Center for Alzheimer&#8217;s recruited the first
patient to participate in the phase IIa clinical trial. Additionally, following positive results in a pre-clinical study that consisted
of in vitro tests which showed synergy between CBD and PEA, we announced in December 2019 progression of SCI-210 into a clinical stage,
and our plans to initiate a randomized, double blind placebo controlled study to evaluate the potential efficacy, safety and tolerability
of SCI-210 in treating patients with ASD. In 2022, we received approval from the Ethics Committee of The Soroka University Medical Center
and the MoH to conduct the Company&#8217;s clinical trial for SCI-210 in patients suffering from ASD. We also have a pending regulatory
request submitted to the Israeli Medical Cannabis Agency, or IMCA, for this clinical study.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, in March 2021,
we announced an agreement with The Sheba Fund for Health Services and Research at Chaim Sheba Medical Center to examine the potential
role of SCI-210 on SE. The study commenced in the second half of 2021. In December 2022, we announced positive results from the study
which reaffirm the potential of its proprietary combination products to have a positive effect while minimizing adverse side effects for
SE treatment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For our proprietary SCI-160,
in August 2021, we announced positive top-line results for a controlled pre-clinical trial on neuropathic and post-operative pain. The
study &#8220;An evaluation of SCI-160 on neuropathic pain in the rat spared nerve injury (SNI) model and post-surgical pain in the rat
hind paw incision model,&#8221; was designed to help assess the potential of SCI-160. Key findings from the pre-clinical trial are that
SCI-160 significantly alleviates pain up to six hours after injection as compared with vehicle-treated animals. Daily SCI-160 injections
significantly alleviate subject pain from mechanical stimuli as compared with vehicle-treated animals, for up to seven days after surgery.
Daily injections of SCI-160 significantly alleviate pain in a hind paw incision model of post-surgical pain up to four days post surgery
as compared with vehicle treated animals, and SCI-160 analgesic effects are prolonged in the presence of PEA. Collectively, the results
indicated that treatment with SCI-160 significantly alleviates both chronic and acute pain. Based on the positive results, we are continuing
the development of SCI-160 towards a first in-human clinical study.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Our Pharmaceutical Drug Development Programs</b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">SCI-110 - TS, Alzheimer&#8217;s
disease and agitation and OSA</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our pharmaceutical
product candidate, SCI-110, offers a safe and potentially effective solution for a variety of medical concerns. Despite being in its early
phases of clinical testing, the application of SCI-110 has extended into several treatments, including TS, OSA and Alzheimer&#8217;s disease
and agitation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>TS</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">TS is a neuropsychiatric disorder,
characterized by physical (motor) tics and vocal (phonic) tics. Motor tics generally precede the development of phonic tics in TS, and
the onset of simple tics usually predates that of complex tics. TS ranges from mild symptoms to loud noises and forceful movements that
can result in self-injury (e.g. punching oneself in the face, repeating other people&#8217;s words or involuntary swearing). Many with
TS experience additional neurobehavioral problems and comorbidities including inattention, hyperactivity and impulsivity, anger control
problems, sleep difficulties, and obsessive-compulsive symptoms. Pharmacotherapy is used when symptoms are more severe and interfere with
the ability to function. Furthermore, according to the CDC, in most cases, the prevalence of tics decreases during adolescence and early
adulthood, and sometimes disappears entirely; therefore, there are a limited number of adults with TS and it is usually manifested mainly
through moderate to severe symptoms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Market Size</span>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The exact number of people
with TS is unknown. The prevalence of TS and TS symptoms is greater in children than in adults. The global TS drugs market size (revenues
of total drugs sold) was approximately $80 million in 2019 and is expected to reach $98.7 million by 2023. North America dominated the
TS market in 2018 and is estimated to hold the largest market size today and in the future owing to high incidences of TS, highly aware
population, advanced healthcare infrastructure, and favorable government initiatives. One out of 162 children in the U.S. have TS, and
it affects three out of every 1,000 children between the ages of 6 and 17.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Current Treatment</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pharmacological intervention
is considered the first line of therapy for TS, but is reserved for more severe symptoms that interfere with the individual&#8217;s ability
to function. Today, a full class of drugs that interact with dopamine and non-dopamine systems in the brain are used in the treatment
of TS symptoms. Many of the drugs used to treat TS are limited to the treatment of a narrow range of TS symptoms (mainly tics), and are
associated with severe side effects, both of which limit their utility. Furthermore, several of these drugs have a black box warning on
their label due to their potentially lethal effect. A black box warning is the strictest warning put in the labeling of prescription drugs
or drug products by the FDA when there is reasonable evidence of an association of a serious hazard with the drug.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The medications commonly used
to treat symptoms of TS can be divided into the following groups:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Antipsychotic medications: belong to a class of drugs primarily used to manage psychosis (including haloperidol, pimozide and fluphenazine), all of which are associated with severe side effects (including weight gain, sedation, akathisia (a state of agitation, distress, and restlessness), nausea and tardive dyskinesia (involuntary movements of the face and jaw), among others).</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Alpha2 Adrenergic Agonists: belong to a class of drugs primarily used to manage hypertension and migraine headaches prevention (including clonidine and guanfacine), which have limited utility despite common application to children with Attention Deficit Hyperactivity Disorder, or ADHD. Similar to antipsychotic medications, these also are associated with several side effects, and some of them, such as clonidine, might even be lethal.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Benzodiazepines, an anticonvulsant or antiepileptic drug: belong to a class of drugs primarily used to manage seizures, panic disorder and movement disorders. Of these, Clonazepam is used off-label for the reduction of tics in TS patients, which also has associated negative side effects.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As the currently used medications
are managing only a small number of disease symptoms with limited efficacy and questionable safety, there is a clear unmet medical need
for the management of TS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Our SCI-110 Solution for
TS</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our SCI-110 platform is a drug
candidate for the treatment of TS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On April 4, 2018, we announced
topline results of our Phase IIa investigator-initiated study at Yale University of SCI-110 for the treatment of TS. The study was a single-arm,
open-label trial, in which each subject both received one daily treatment of SCI-110 via oral administration and was followed-up for a
period of 12 weeks. 16 subjects participated in the study and received SCI-110 at the Yale University Child Study Center at Yale University.
The primary endpoint of the study was to assess the performance of SCI-110 in the treatment of adult patients suffering from symptoms
of TS, as measured by the Yale Global Tic Severity Scale Total Tic Score, or YGTSS-TTS, the customary index for assessing symptom severity.
Treatment was given in a dose titration regimen with a maximum dose of SCI-110 consisting of 10mg dronabinol and 800mg CannAmide&#8482;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The topline results of the
study showed that each of these 16 subjects with medication-refractory TS sustained a significant reduction of tic symptoms (paired t-test:
YGTSS-TTS mean difference (mean +/- SD) =7.9+/-8.4, t= 3.7, df=15, p=0.002) from baseline (YGTSS-TTS: 38.4 +/- 8.3) to endpoint YGTSS-TTS:
30.5 +/- 10.9). This resulted in an average tic reduction of 21% across the entire sample of 16 TS subjects. Six of the 16 medication-refractory
TS subjects experienced a response to treatment as defined by a reduction in YGTSS-TTS of greater than 25%. Improvement over time with
treatment was also observed when generalized linear models were used to analyze repeated measures data on the YGTSS-TTS. In the study,
SCI-110 demonstrated no significant effects on comorbid ADHD, anxiety, depression or obsessive-compulsive disorder, or OCD, symptoms.
The medication was generally well-tolerated by the subjects with only two subjects stopping treatment early (one due to sedation and another
due to lack of improvement in tic symptoms). 12 of the 16 subjects elected to proceed with a 24-week extension phase of the trial, which
was also completed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the Phase IIa study,
we plan to initiate a multinational, multicenter, Phase IIb randomized, double-blind, placebo controlled study to evaluate safety, tolerability
and efficacy of daily oral SCI-110 in treating adults with TS, with Yale Child Study Center at Yale University, USA, Hannover Medical
School, Germany and Tel-Aviv Sourasky Medical Center, Israel. The study is expected to include approximately 84 patients. Study patients
are randomized to either oral SCI-110 or placebo at a 1:1 ratio. The overall estimated study duration is 18-24 months. We may also be
required to conduct further preclinical studies in parallel to our clinical plans as part of registration process with the FDA and EMA.
Following these studies, if successful, we intend to conduct a Phase III, multinational, multicenter, randomized, double-blind, parallel-group,
placebo controlled study to evaluate the safety, tolerability and efficacy of up to twice daily oral SCI-110 in treating TS. During 2022,
we received Ethics Committee approvals from Hannover Medical School in Hannover, Germany, and the Tel Aviv Sourasky Medical Center and
we are planning to submit an application to the IRB of the Child Study Center at Yale School of Medicine. In addition, we received the
MoH approval to conduct the study in Israel, and we are developing a regulatory dossier to be submitted to the FDA and BfArM, for our
SCI-110 program for TS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2016, we submitted
a request for orphan drug designation to the FDA for SCI-110 for the treatment of TS. The request is still pending and we are in communication
with FDA. Our last communication was in December 2020 when we received a letter from FDA raising a concern that it will be hard to limit
the use of the pharmaceutical product to the subset of patients we are pursuing. There is no assurance that we will successfully obtain
orphan drug designation for TS. However, in light of the fact that we disagree with this concern expressed by the FDA, we requested a
clarification call. In the clarification call conducted on February 2, 2021, we agreed with the FDA concern about our ability to limit
the use of the pharmaceutical product to the subset of patients in addition to a safety concern associated with THC treatment in pediatrics
population so we suggested to amend our preliminary request and asked to include only adults in the treated population. An amendment letter
was discussed and the FDA described what it would want to see in such an amendment. In March we sent our response to the FDA. In June
2021, we received a response from the FDA, explaining that they are unable to grant our request until new information becomes available
to support our request for orphan drug designation. We will re-visit the application after we obtain clinical results from our upcoming
phase IIb study in TS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the FDA does not allow us
to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional
data and information and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required
to obtain FDA approval, and complications and risks associated with FDA approval, would substantially increase. In a pre-IND meeting we
had with FDA in February 2018, the FDA did not oppose our plans to submit an NDA via the 505(b)(2) pathway relying, in part, on clinical
and nonclinical information from literature related to dronabinol and the FDA&#8217;s previous finding of safety and efficacy for the
reference listed drug (Marinol).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Alzheimer&#8217;s disease and Agitation</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Alzheimer&#8217;s disease is
the most common type of dementia, accounting for over two-thirds of cases of dementia. Alzheimer&#8217;s disease is a neurodegenerative
disease that causes progressive and disabling impairment of cognitive functions including memory, comprehension, language, attention,
reasoning and judgment. Symptoms of Alzheimer&#8217;s disease depend on the stage of the disease. Neuropsychiatric symptoms like apathy,
social withdrawal, disinhibition, agitation, psychosis, insomnia, poor appetite and wandering are also common in the mid to late stages.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="text-decoration:underline">Market Size </span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is estimated that the global
Alzheimer&#8217;s therapeutics market is projected to reach $13.57 billion by 2027 from $7.42 billion in 2019 with a compounded annual
growth rate of 9.2% through 2027, which is primarily attributed to the increasing pipeline drug development and increasing investments
for drug development biomarkers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="text-decoration:underline">Current Treatment</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The current pharmacological
treatment of agitation in Alzheimer&#8217;s disease has an unsatisfactory benefit/risk ratio and often involves using off-label drugs.
Antipsychotic drugs, which are the most frequently used drugs for this purpose, are only marginally better than placebo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Our SCI-110 Solution for
Alzheimer&#8217;s disease and Agitation</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The drug product, SCI-110,
is a unique proprietary combination of dronabinol (synthetic delta-9-tetrahydrocannabinol (&#916;<span style="font-family: Times New Roman, Times, Serif">&#8313;</span>-THC),
and PEA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In February 2021, we signed
an agreement with The Israeli Medical Center for Alzheimer&#8217;s, to conduct a phase IIa clinical trial to evaluate the safety, tolerability
and efficacy of SCI-110 in patients with Alzheimer&#8217;s disease and agitation using our proprietary cannabinoid-based technology. The
study&#8217;s primary objective is the safety of SCI-110 and the secondary objective is the ability of the compound to ameliorate agitation
and other behavioral disturbances in patients with Alzheimer&#8217;s disease. The study will be initiated immediately after receipt of
all the required approvals from the IRB and the MoH. The study, titled &#8220;Clinical Study Protocol Phase II-a open label trial to evaluate
the safety, tolerability and efficacy trend of SCI-110 in patients with Alzheimer&#8217;s Disease and agitation,&#8221; is expected to
be conducted under the leadership of Dr. Alex Kaplan, MD, Principal Investigator and board-certified geriatrician. In December 2021, The
Israeli Medical Center for Alzheimer&#8217;s recruited the first patient to participate in the phase IIa clinical trial. In November 2022,
we announced positive interim results from our Phase IIa trial of SCI-110 in patients with Alzheimer&#8217;s disease and agitation. At
the interim analysis, the study met its primary endpoints of safety, including non-treatment related adverse events and drop out patients
from the study; specifically, SCI-110 did not cause delirium, oversedation, hypotension or falls even in the highest dose tested (12.5MG
Dronabinol+400mg PEA).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, the interim analysis
showed that the study also met its secondary endpoint of Change from Baseline to end of treatment in agitation measured by the Cohen Mansfield
Agitation Inventory, or CMAI; out of the eight patients enrolled, six showed amelioration in agitation with no need to use rescue medication
to control agitation. CMAI is a standard measure for measuring agitation in people with dementia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, the interim analysis
showed in the exploratory endpoints that appetite was increased in six out of the eight patients, as measured by the Edinburgh Feeding
Evaluation in Dementia Scale. No effect was observed on cognitive measurements and sleep quality, as measured by the Mini Mental State
Exam, and by the Alzheimer&#8217;s Disease Assessment Scale-cognitive subscale (for cognitive impairment assessments) and the Pittsburgh
Sleep Quality Index (for quality of sleep assessment).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This Phase IIa clinical trial
is an open label study, which includes 20 patients diagnosed with Alzheimer&#8217;s disease and agitation, to evaluate the safety, tolerability
and efficacy trends of twice daily oral administration of SCI-110. At the interim analysis, the study met its primary endpoints of safety,
including non-treatment related adverse events and drop out patients from the study; specifically, SCI-110 did not cause delirium, oversedation,
hypotension or falls even in the highest dose tested (12.5MG Dronabinol+400mg PEA). In addition, the interim analysis showed that the
study also met its secondary endpoint of Change from Baseline to end of treatment in agitation measured by the CMAI; out of the eight
patients, six showed amelioration in agitation with no need to use rescue medication to control agitation. Additionally, the interim analysis
showed in the exploratory endpoints that appetite was increased in six out of the eight patients, as measured by the Edinburgh Feeding
Evaluation in Dementia Scale. No effect was observed on cognitive measurements and sleep quality, as measured by the Mini Mental State
Exam, and by the Alzheimer&#8217;s Disease Assessment Scale-cognitive subscale (for cognitive impairment assessments) and the Pittsburgh
Sleep Quality Index (for quality of sleep assessment). In general, the study medication was well tolerated with no negative response to
the treatment observed during the duration of the study (32 days of treatments and seven days for follow-up after the study drug was stopped).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">SCI-210 - ASD and SE</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our pharmaceutical
product candidate, SCI-210, offers a safe and potentially effective solution for a variety of medical concerns. Despite being in its early
phases of pre-clinical and clinical testing, the application of SCI-210 has extended into several treatments, including ASD and SE.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>ASD</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">ASD is a neurodevelopmental
disorder. The specific etiologies and neural bases of autism remain largely unknown; it has been proposed that alterations in multiple
genes in combination with environmental factors constitute the cause for the development of the autism phenotype. ASD is characterized
by early dysfunction in communication and social interactions, presenting with repetitive, restrictive, stereotyped patterns of behavior
and loss of interest in diverse activities. Additionally, ASD is frequently accompanied by impairments in adaptive functioning, sensory
processing disorder, aggression, or self-injury.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Market Size</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">It is estimated that the global
ASD therapeutics market was approximately $3.3 billion in 2018 and is expected to reach approximately $4.6 billion by 2026 with a compounded
annual growth rate of 4.3% during such time period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="text-decoration:underline">Current Treatment</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No cure exists for ASD. The
goal of treatment is to maximize patients&#8217; ability to function by reducing ASD symptoms and supporting development and learning.
Treatment options may include: (i) behavior and communication therapies - successful programs typically include a team of specialists
and a variety of activities to improve social skills, communication and behavior; and (ii) medications - to date, no medication can improve
the core signs of ASD, specific medications can help control comorbidity symptoms. The main symptoms to be treated in patients with ASD
are: epilepsy, aggression, hyperactivity, irritability, attention deficit, sleep problems, obsessions and anxiety. Antipsychotic drugs
are sometimes used to treat severe behavioral problems and antidepressants may be prescribed for anxiety. Among the main drugs used in
the treatment of ASD are typical antipsychotics such as Haloperidol, Thioridazine, Chlorpromazine and the atypical risperidone, Olanzapine
and Clozapine, whose use is more common. These are used with the objective to treat the child&#8217;s behavioral problems by blocking
the D2 dopaminergic channels, causing a diminished reaction to stimuli known as &#8220;neuroleptic syndrome,&#8221; observed as calm and
quiet behavior in the child. In turn, some atypical antipsychotics also exhibit an antagonism of type 2A receptors for serotonin, aside
from their effect on the D2 channels. It is important to individualize the patient when these drugs are administered, since there are
no pre-established criteria for dosing and such drugs could present extrapyramidal adverse effects such as tremors, sialorrhea, sedation,
impaired liver function, etc. Serotonin reuptake inhibitors such as Fluoxetine, Paroxetine and Sertraline are given to children with autism
because they have been found to increase 25% of serotonin levels in platelets and serum. This treatment is based on suppressing symptoms
such as anxiety, depression, OCDs, and self-injurious behavior.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unfortunately, about 40% of
children with ASD and disruptive behavior do not respond well to standard behavioral and medical treatment. Consequently, an exceptionally
high percentage of parents are seeking help through unproven methods, including the use of compounds made of the cannabis plant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Our SCI-210 Solution for
ASD</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The drug product SCI-210 is
a proprietary drug candidate based on two components: (1) CBD, and (2) CannAmide&#8482;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In December 2019, we announced
the progression of SCI-210 into clinical stage. In light of this, we plan to initiate a randomized, double blind placebo controlled study
to evaluate the efficacy, safety and tolerability of SCI-210 in treating patients with ASD. We have received a regulatory approval to
conduct the study from the MoH and the Helsinki Committee at the Soroka University Medical Center. We also have a pending regulatory request
submitted to the IMCA for this clinical study. On August 8, 2022, we announced that we have received approval from the MoH to conduct
the Company&#8217;s clinical trial for SCI-210 in patients suffering ASD and on January 9, 2023, we signed an agreement with the Soroka
University Medical Center in Be&#8217;er-Sheva, Israel to conduct the Company&#8217;s clinical study for SCI-210 in patients suffering
from ASD.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>SE</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">SE is a common life threatening
medical emergency characterized by an acute, prolonged epileptic seizure. SE can represent either the exacerbation of a pre-existing seizure
or the initial manifestation of epilepsy. In order to avoid neurological sequelae, a timely treatment should be started. When the continuous
seizure does not respond to conventional drug treatment, SE can pose serious life threatening risks.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2018, GW&#8217;s Epidiolex,
a plant-based, pharmaceutical grade CBD extract was approved by the FDA for the treatment of seizures associated with two rare and severe
forms of epilepsy. Our study for SCI-210 previously met its endpoint (efficacy) when comparing its effect to the effect of CBD alone in
an in-vitro hepatocytes model of fat accumulation; the effect of CBD was enhanced by the addition of PEA, lowering the required effective
concentration of CBD. In this study, we hope to meet the study endpoint (efficacy) when comparing treatment using our pharmaceutical product
candidate compared to the effect of CBD alone on SE and its neurological cognitive sequelae.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Market Size</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">According to the World Health
Organization, or WHO, report on epilepsy in 2019, around 50 million people have epilepsy. In addition, it has been estimated that the
global epilepsy market size would grow from $10.6 billion in 2021 to $14.9 billion towards the end of 2031. <span style="font-family: Times New Roman, Times, Serif">North
America accounted for approximately 50% of the global epilepsy therapeutics market in 2021. The U.S. is the largest epilepsy drug market
in North America.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2017, the Americas held
a 41% market share ($1.49 billion) and are projected to hold such position, estimated to be $1.6 billion in 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify"><span style="text-decoration:underline">Current Treatment</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The first-line treatment for
early SE mainly comprises the administration of benzodiazepines, the most frequently used of which include Diazepam, Lorazepam, and Midazolam.
Seizures continue and progress to established SE in about 40% of patients with Convulsive Status Epilepticus (CSE) despite benzodiazepine
administration as the first-line treatment. The second-line treatment for established SE consists of a loading dose of antiepileptic drugs.
Frequently used antiepileptic drugs include Phenytoin or Fosphenytoin, Valproate, Levetiracetam, Phenobarbital, and Lacosamide. There
is no clear evidence for the relative superiority of any of these drugs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Our SCI-210 Solution for
SE</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The drug product SCI-210 is
a proprietary drug candidate based on two components: (1) CBD, and (2) CannAmide&#8482;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2021, we entered an
agreement with The Sheba Fund for Health Services and Research, to perform a pre-clinical study for the evaluation of our SCI-210 drug
development program for the treatment of SE. The pre-clinical study is expected to investigate the potential advantage of our proprietary
combination of SCI-210 by harnessing the &#8220;sparing effect&#8221; phenomenon. In the study, the effect of SCI-210 is compared to CBD
single treatment in animal model (mice) of SE. The study commenced in the second half of 2021. On December 7, 2022, we announced positive
results from our study of SCI-210 on SE, conducted at The Sheba Fund for Health Services and Research at Chaim Sheba Medical Center, which
reaffirm the potential of its proprietary combination products to have a positive effect while minimizing adverse side effects. Our SCI-210
platform combines PEA with CBD. The non-clinical trial objective was to study the potential therapeutic effects of SCI-210 on SE and on
neuro-biochemical markers for neurological cognitive sequelae. A pilocarpine SE-induced mice (C57BL/6 male) model to study SCI-210&#8217;s
effects on seizure severity and mortality was used. After calibration, four groups of animals were studied: an effective-high dose CBD
group, a sub-effective dose CBD group, a SCI-210 group (a combination of sub-effective CBD dose and PEA) and a non-treated control group.
The results indicated differences in mortality rate as well as seizure rates over time. In the low-CBD group, a higher mortality rate
(although not significant) was found and therefore it is reasonable to believe that no significant impact on neuronal protection was achieved.
In the high-CBD group, higher, although not significant, levels of neuronal protection were found together with a decreased mortality
rate when compared to control. The level of neuronal protection in the SCI-210 treatment was significantly higher compared to the control
group and no mortality was found in this group. It was concluded that SCI-210 treatment may potentially be more effective than a CBD monotherapy.
Moreover, since the concentrations used in the combo treatment are significantly lower than those recommended for CBD monotherapy, this
treatment also has the potential to be safer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Our SCI-160 Pain Solution</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pain is the most common reason
for physician consultation in most developed countries. It is a major symptom in many medical conditions and can interfere with a person&#8217;s
quality of life and general functioning. Opioid medications can provide short, intermediate or long acting analgesia depending upon the
specific properties of the medication and whether it is formulated as an extended release drug. Opioids are efficacious analgesics in
chronic malignant pain and modestly effective in nonmalignant pain management. However, there are associated adverse effects, especially
during the commencement or change in dose. Prolonged opioid use may cause drug tolerance, chemical dependency, diversion and addiction.
The potency and availability of these substances, despite their high risk of addiction and overdose, have made them popular both as formal
medical treatments and as recreational drugs. Due to their sedative effects on the medulla oblongata, opioids in high doses present the
potential for respiratory depression, and may cause respiratory failure and death. In a 2013 review study published in Fundamental &amp;
Clinical Pharmacology, various studies were cited demonstrating that cannabinoids exhibit comparable effectiveness to opioids in models
of acute pain and even greater effectiveness in models of chronic pain. Cannabis produces several compounds with various known activities
known together as cannabinoids, such as THC and cannabidiol (CBD). In general, cannabinoids bind and act through the two characterized
CRP: CB1 and CB2. However, activation of the CB1 receptor (as for example in the case of THC) leads to unwanted psychoactive &#8220;high&#8221;
and other adverse events, whereas activation of CB2 does not lead to any psychoactivity. In addition and unrelated to the above sentence,
the affinity of the cannabis derived cannabinoids to these receptors is limited and partial. Newly synthetic cannabinoid HU-433, a specific
CB2 agonist with high CB2 receptor affinity, was specifically synthesized by Prof. Raphael Mechoulam from Hebrew University of Jerusalem
and is our proprietary new chemical entity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2018, we executed a
license agreement with Yissum, the technology transfer company of the Hebrew University of Jerusalem, for SCI-160, a synthetic cannabinoid
synthesized by Prof. Mechoulam. We completed two preliminary preclinical studies evaluating analgesic and opioid-sparing effects of this
compound in a rat model of acute and chronic pain. In the preclinical studies, SCI-160 was well tolerated and did not cause any significant
adverse clinical effects. In addition, efficacy studies demonstrated the analgesic superiority of SCI-160 over control and were comparable
to high-dose morphine analgesic effects and in some instances exerted greater potency. These preclinical studies in SCI-160 were able
to meet their endpoints - efficacy and safety - for both acute and chronic pain.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Market Size</span>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span>The
global&#160;pain management drugs market size&#160;was estimated at&#160;$78.14 billion in 2022&#160;and is projected to hit around&#160;$115
billion by 2032, growing at a&#160;CAGR of 3.94% during the forecast period 2023 to 2032. On the basis of geography, North America dominated
the market and captured more than 45% revenue share in 2022.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span>According
to the U.S. National Center for Health Statistics, over 310 million major procedures are performed annually, of which approximately 40
to 50 million are in the U.S. and 20 million in Europe. Moreover, there is a rise in the rate of surgeries worldwide which is the primary
reason for the growing consumption of pain management drugs. Subsequently, the increased cancer therapies associated with pain incidence
and a rising geriatric population having various therapies drive the market. Consumer preference for pain management therapies is influenced
by their high availability, ease of access, heightened awareness, cost-effectiveness, and rapid relief.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><span>Furthermore,
rising road accidents due to the increasing number of vehicles and traffic violations lead to related trauma injuries, which create demand
for pain management post surgeries. According to the WHO, 1.3 million people die yearly from road traffic crashes. Between 20 and 50 million
people suffer from non-fatal injuries, with many incurring a disability due to their injury.&#160;</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Current Treatment</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Currently available treatments
are antidepressant and anticonvulsant analgesics, opioids and nonsteroidal anti-inflammatory drugs. These are inadequate to control all
pain or are associated with limiting side effects (e.g., most problematic being sedation with the antidepressant and anticonvulsant group,
constipation with the opioids and gastrointestinal and cardiovascular effects with the Non-steroidal anti-inflammatory drugs, or NSAIDs).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span style="text-decoration:underline">Our SCI-160 Solution for
pain</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">SCI-160 is a newly synthetic
cannabinoid, a specific CB2 agonist with high CB2 receptor affinity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For our proprietary SCI-160,
in August 2021, we announced positive top-line results for a controlled pre-clinical trial on neuropathic and post-operative pain. The
study &#8220;An evaluation of SCI-160 on neuropathic pain in the rat spared nerve injury (SNI) model and post-surgical pain in the rat
hind paw incision model,&#8221; was designed to help assess the potential of SCI-160. Key findings from the pre-clinical trial are that
SCI-160 significantly alleviates pain up to six hours after injection as compared with vehicle-treated animals. Daily SCI-160 injections
significantly alleviate subject pain from mechanical stimuli as compared with vehicle-treated animals, for up to seven days after surgery.
Daily injections of SCI-160 significantly alleviate pain in a hind paw incision model of post-surgical pain up to four days post surgery
as compared with vehicle treated animals and SCI-160 analgesic effects are prolonged in the presence of PEA. Collectively, the results
indicated that treatment with SCI-160 significantly alleviates both chronic and acute pain. Based on the positive results, we are continuing
the development of SCI-160 towards a first in-human clinical study.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Programs</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Our CannAmide&#8482; Anti-Inflammatory
and Chronic Pain Solution</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">CannAmide&#8482; is a cannabimimetic
compound that regulates endocannabinoid levels by enhancing receptor sensitivity and inhibiting their metabolism, and is particularly
attractive therapeutically as it appears to have a very high safety profile with low or no abuse liability. Although numerous clinical
trials have shown the favorable effect of PEA as an analgesic agent it has low solubility.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2019, we announced
the issuance of a product license for our proprietary PEA oral tablet CannAmide&#8482; by Health Canada&#8217;s Natural and NNHPD, for
the recommended use as an anti-inflammatory and to help relieve chronic pain. This license was issued by the NNHPD under the authority
of the NHPR. Dosage form of the described natural health product is tablets composed of 400mg PEA with a recommended dose of one tablet
three times a day. Chronic pain is estimated to affect 38% of people worldwide, and according to an analysis by the World Health Organization,
half of the most prevalent conditions responsible for living with disability is characterized by the presence of different kinds of pain.
With the NNHPD license, we are able to offer safe and beneficial non-opiate pain management products. CannAmide&#8482;&#8217;s active
compound PEA is a cannabimimetic compound that regulates endocannabinoid levels by enhancing receptor sensitivity and inhibiting their
metabolism, and is particularly attractive therapeutically as it appears to have a very high safety profile with low or to no possibility
for abuse. Additionally, on February 9, 2021, we announced that we have begun commercial production of our proprietary PEA oral tablets
CannAmide&#8482;, which will be marketed to pharmacies and other retail outlets across Canada following our entering into a distribution
agreement. Furthermore, on February 10, 2021, we announced that we had entered into an agreement with Procaps, a leader in contract development
and manufacturing services in softgel advanced technologies for the global pharmaceutical and nutraceutical industries, to develop and
commercially manufacture both of our drug candidates, SCI-110 and our proprietary PEA oral tablets CannAmide&#8482;, in softgel capsule
form.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cannabinoids have great therapeutic
potential and have been used for years for medicinal purposes. For example, cannabis and cannabinoids are being used to improve the quality
of life of patients with numerous and diverse indications (oncological patients, chronic pain conditions, etc.). We believe that the novel
approaches and unique mechanism of action of our proprietary technology platforms, including our drug delivery systems and unique combination
and specific dosages, may be expanded to treat additional diseases and unmet medical needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the future, we may consider
expanding our pipeline to include these additional indications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Collaboration with Clearmind</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 7, 2022, we entered
into a cooperation agreement, or the Cooperation Agreement, with Clearmind. The Cooperation Agreement includes, among others, examination
of the benefit of integrating the core technologies of each company to explore the development of psychedelic-centric drug candidates
and targeting mental health-related diseases. Pursuant to the terms of the Cooperation Agreement, we conducted a joint pre-clinical study
with Clearmind. Under the Cooperation Agreement, we aim to pursue, develop and commercialize psychedelic-centric drug candidates. Our
collaboration with Clearmind has resulted as of the date of this Annual Report, in the filing of nine patent applications. All patent
applications refer to the combination of SciSparc&#8217;s CannAmide&#8482; with Clearmind&#8217;s 5-Methoxy-2-aminoindane, or MEAI, an
innovative proprietary psychedelic treatment for addictions and others.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2022, we announced that
our collaboration with Clearmind resulted in the filing of a provisional patent application related to a psychedelic combination therapy
treating numerous binge behaviors. The patent application referred to the combination of our CannAmide&#8482; with Clearmind&#8217;s MEAI.
The patent application followed successful pre-clinical studies that showed a significant dose dependent effect for MEAI treatment in
reducing alcohol consumption of treated animals, with additional significant effect for the CannAmide&#8482; treatment at the lower sub-effective
MEAI dose. Additionally, in May 2022, we announced positive safety profile results from our joint pre-clinical trial with Clearmind. The
trial tested the proprietary combination of our CannAmide&#8482; with Clearmind&#8217;s psychedelic molecule, MEAI, for alcohol consumption.
A histopathology assessment was conducted on several organs (heart, lungs, liver, kidneys, brain, pancreas, spleen, and thyroid gland)
from all experiment groups (n=3-5 per group) to determine the safety of the proprietary combination of MEAI and CannAmide&#8482; versus
control (mice) that were not exposed to alcohol). The severity of changes was scored by a 5-point scale by a qualified blinded toxicologist
(Schafer et al., Toxicol Pathol 2018, 46:256-265). The results indicated a high safety profile of the combination treatment with no treatment-related
changes observed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2022, we announced
that our collaboration with Clearmind resulted in the filing of a provisional patent application related to treating cocaine addiction.
The patent application refers to the proprietary combination of our CannAmide&#8482; with Clearmind&#8217;s MEAI, for treating cocaine
addiction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2022, we announced
additional positive pre-clinical results of our psychedelic-based pharma collaboration for treatment for cocaine addiction using MEAI.
These pre-clinical study results added to our announcements regarding our collaboration with Clearmind for their combination treatment
based on our CannAmide&#8482; compound and Clearmind&#8217;s MEAI for various addictions, including pre-clinical studies results, the
filing of two provisional patent applications related to compositions comprising MEAI and n-acylethanolamines and uses thereof and treating
cocaine addiction. The pre-clinical trial was led by Professor Gal Yadid and his team from the Gonda Multidisciplinary Brain Research
Center located at Bar Ilan University (Ramat Gan, Israel) and was designed to evaluate the possible reward-like effects of MEAI with connection
to cocaine and its ability to abolish cocaine-induced conditioned place preference. In the pre- clinical trial, the self-administration
paradigm was utilized, which is the gold-standard model for examining drug addiction and is based on operant conditioning. Rats were catheterized
and trained to self-administer cocaine. The results identified a statistically significant sub-group within the study, in a non-biased
manner and high integrity, which dramatically responded to the treatment, significantly decreasing the craving for cocaine as compared
to non-treated control group. This sub-group, representing 60% of animals, showed a very high response within the group.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September 2022, we announced
that Clearmind filed a provisional patent application related to metabolic syndromes including obesity, regarding our collaboration with
Clearmind. The patent application is the third of the collaboration, each referring to the proprietary combination of our PEA and Clearmind&#8217;s
MEAI.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In February 2023, we announced
that announced that Clearmind filed three provisional patent applications were filed by Clearmind with the USPTO as a part of our ongoing
collaboration. The patent applications refer to novel proprietary combinations of lysergic acid diethylamide, psilocybin, and N,N-dimethyltryptamine
and our PEA. Additionally, in February 2023, we announced that as part of our ongoing collaboration with Clearmind, Clearmind filed three
provisional patent applications with the USPTO, for unique combinations of future psychedelic-based compounds. The patent applications
refer to novel proprietary combinations of 3,4 Methylenedioxymethamphetamine, Ibogaine and Ketamine each with our PEA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Collaboration with Polyrizon&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 31, 2022, we entered
into a collaboration agreement with Polyrizon Ltd., or Polyrizon, a biotech company focused on the development of innovative medical device
hydrogels delivered in the form of nasal sprays, or the Polyrizon Collaboration Agreement. As part of this collaboration, we will work
together to develop a unique technology for the treatment of pain, based on our SCI-160 platform and Polyrizon&#8217;s Trap and Target<sup>TM</sup>&#160;intranasal
drug delivery technology to target the central nervous system. We have agreed to pay development fees to Polyrizon up to a total of $2,550,000
upon the completion of certain milestones, as well as royalties in the low single digits upon sales of products under the agreement and
additional royalties for sales under any sublicense by us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Acquisition of Wellution&#8482;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 14, 2022, we entered
into the Wellution Acquisition Agreement with Merhavit M.R.M Holding and&#160;Management Ltd., or M.R.M, and the other parties named therein,
to acquire from M.R.M its rights to purchase, the Wellution&#8482; brand. In connection therewith, we incorporated a new wholly owned
subsidiary,&#160;SciSparc Nutraceuticals, to hold the new assets of the Brand. The Brand sells hemp-based products, including hemp gummies,
hemp oil capsules, hemp gel, hemp cream, detox pills, height pills, antibacterial creams, and anti-aging creams, among other beauty and
hair treatment products that are all manufactured in the United States. In total, the Brand has over 40,000 product reviews, many of which
are 4 and 5-star reviews.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The closing of the acquisition
of the Brand occurred on September 30, 2022 and in accordance with the Wellution Acquisition Agreement, at the closing, we paid a base
cash payment of $4.59 million. Upon the lapse of 12 months from the closing, September 30, 2023, we will pay, pursuant to the Wellution
Acquisition Agreement, an additional deferred cash payment of a multiple of three times the amount by which the acquired Brand EBITDA
exceeds $1.12 million (defined as SDE, which is defined in the Wellution Acquisition Agreement and includes certain price adjustments
such as research and development expense).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with the Wellution
Acquisition Agreement, at the closing, we issued to M.R.M $15 million worth of warrants to purchase up to an aggregate amount of 2,142,857
of our Ordinary Shares, or the M.R.M Warrants. The M.R.M Warrants have an exercise price of $7.00 per share and an exercise period of
five years from the closing, until September 30, 2027. The M.R.M Warrants will become exercisable during the exercise period upon the
earlier of (i) an achievement of $100 million of gross sales by the Brand in the aggregate or (ii) if the price of our Ordinary Shares
closes at $10.00 or above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">On
February 23, 2023, we entered into the Wellution Sale Agreement with Jeffs&#8217; Holdings and Jeffs&#8217; Brands, pursuant to which,
at the closing on March 28, 2023, Jeffs&#8217; Holdings acquired from us a number of shares of common stock of SciSparc Nutraceuticals,
equal to approximately a 49% interest in our wholly owned subsidiary, SciSparc Nutraceuticals, which owns the Wellution<sup>TM</sup> Brand,
for a cash consideration of $2.5 million. In addition to the cash consideration upon closing, we received from Jeffs&#8217; Brands an
additional amount accounting for certain purchase price adjustments related to inventory and working capital, which adjustments increased
the purchase price by approximately $489,330.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">Following
the closing of the Wellution Sale Agreement on March 28, 2023, including an equity conversion of the financing amounts we previously provided
to SciSparc Nutraceuticals for working capital, we hold approximately 51% of the outstanding capital stock of SciSparc Nutraceuticals.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">In
connection with the Wellution Sale Agreement, at the closing, Jeffs&#8217; Brands and SciSparc Nutraceuticals entered into a consulting
agreement, or the Wellution Management Agreement for the provision of services by Jeffs&#8217; Brands for the management of the Brand
for a monthly fee of $20,000. Jeffs&#8217; Brands also received a one-time signing bonus at the closing in the amount of $51,000. The
Wellution Management Agreement is in effect for an undefined period of time and may be terminated by either party with 30 days&#8217;
advance notice.&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; "><span>In
addition, pursuant to the Wellution Sale Agreement, at the closing, we undertook a share exchange with Jeffs&#8217; Brands, in which we
acquired 247,415 ordinary shares of Jeffs&#8217; Brands and Jeffs&#8217; Brands acquired 360,297 of our Ordinary Shares, in each case
having an aggregate value of $288,238, or the Share Exchange. The number of shares exchanged was calculated based on the average closing
price of the shares on the Nasdaq for the 30 consecutive trading days ending on the third trading day immediately prior to the closing</span>
date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; "><i>Joint
Venture with Jeffs&#8217; Brands</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 15, 2022, we entered
into a letter of intent with Jeffs&#8217; Brands, to establish a joint venture for the development of a new food supplements product line
and its online marketing, or the Jeffs&#8217; Joint Venture.&#160;Pursuant to the letter of intent, we will form a joint venture together
with Jeffs&#8217; Brands in which we will each own 50%. Upon entry into definitive agreements, we will be responsible for the development
of the new food supplement product line that will be marketed on the Internet by Jeffs&#8217; Brands. Decision regarding the products
for development will be made mutually by the parties and will be based on Jeffs&#8217; Brands&#8217; advanced technology analysis of in-demand
products with potential high profitability. As further detailed above, on March 28, 2023, we consummated the Wellution Sale Agreement
to sell a 49% interest in SciSparc .Nutraceuticals. We intend to work together with Jeffs&#8217; Brands to incorporate the activity of
the intended Jeffs&#8217; Joint Venture through SciSparc Nutraceuticals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>Restructuring Plan</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 25, 2023, we announced
that our board of directors resolved to pursue a Restructuring Plan which involves transferring our pharmaceutical activities to NewCo.
As part of the Restructuring Plan, we intend to examine the possibility of listing NewCo on a leading stock exchange, while maintaining
our controlling interest in NewCo such that we will continue to control our current business activities. We also intend to explore other
potential new opportunities, activities and investments in a variety of sectors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any restructuring and possible
listing of NewCo on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory
approvals, receipt of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions to
effectuate such corporate restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended
restructuring and listing of NewCo or that they will be completed at all. As of the date of this Annual Report, we have not initiated
the Restructuring Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Intellectual Property</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our intellectual property portfolio
comprises seven granted U.S. patents, pending patent applications in nine families, all of which are currently international PCT applications
or PCT applications that have entered the national phase. Of this portfolio, we have exclusively licensed one granted U.S. patent from
Dekel and one patent family from Yissum. Our intellectual property portfolio also includes two trademarks.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Internally Developed Patent Applications</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2013, we filed a provisional
application with the USPTO for the technology of proprietary sequences of anti-CD3 antibody and the utilization of the latter in various
autoimmune diseases, as well as in hepato-pathologies. The provisional application has been converted to a PCT and then entered a National
Status in December 2014 in the U.S., with the European Patent Office, or EPO, and in China, Canada and Japan. In the U.S. it received
a grant status in June 2018.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In April 2015, we filed a provisional application
with the USPTO for combinations of cannabinoids, n-acylethanolamines, and inhibitors of n-acylethanolamine degradation, which, in April
2016 was converted into an international PCT application that subsequently entered national phase in the following state entities: U.S.,
EPO, Israel, Australia, Canada, China and Japan. The technology is directed to utilizing the potentiating effect of n-acylethanolamines
on cannabinoids for any cannabinoid amenable indication, including but not limited to analgesia and TS. The 20-year term of any patent
issuing from this application would expire in April 2036. In August and September 2021, the patent was granted in Australia and Japan,
respectively, and three patents have been issued in the U.S., two in December 2021 and one in February 2022. In December 2022, we were
granted a patent from the EPO.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2015, we filed a provisional
application with the USPTO for combinations of opioids, n-acylethanolamines, and inhibitors of n-acylethanolamines degradation, which,
in May 2016 was converted into an international PCT application that subsequently entered national phase in the following state entities:
U.S., EPO, Israel, Australia, Canada, China and Japan. The technology is directed to potentiating effect of N-acylethanolamines on opioids
for opioid amenable indications. The 20-year term of any patent issuing from this application would expire in May 2036. In July 2021,
the patent was granted in Australia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2016, we filed a provisional
application with the USPTO for the use of cannabinoids for potentiating the efficacy of antibiotics, which in July 2017 was converted
into an international PCT application that subsequently entered national phase in the following state entities: U.S., EPO, Canada and
China. The 20-year term of any patent issuing from this application would expire in July 2037. In November 2022, the USPTO issued this
patent called &#8220;Compositions and Methods of Potentiating Antimicrobials&#8221; .</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In January 2018, we filed a
provisional application with the USPTO directed to methods of treating OSA, which in January 2019 was converted into an international
PCT application that subsequently entered national phase in the following state entities: U.S., EPO, Canada and Australia. The 20-year
term of any patent issuing from this application would expire in January 2039.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In April 2019, we filed a provisional
application with the USPTO directed to compositions and methods for potentiating derivatives of 4-aminophenols, which in April 2020 was
converted into an international PCT application. The PCT application subsequently entered the national phase in Australia, Canada, China,
EPO, Israel, India, Japan, Mexico, Russia, and the U.S. The 20-year term of any patent issuing from this application would expire in April
2040.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2020, we filed a
provisional application with the USPTO directed to methods for maintaining microvascular integrity, which in August 2021 was converted
into an international PCT application. The PCT application subsequently entered the national phase in Australia, Canada, China, EPO, Israel,
India, Japan, and the U.S. The 20-year term of any patent issuing from this application would expire in August 2041.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In August 2022, we received
an Israeli patent for our core technology that treats central nervous systems disorders. The invention relates to &#8220;Pharmaceutical
compositions comprising cannabinoids and N-acylethanolamines, and methods for their use in preventing and treating a variety of cannabinoid-treatable
conditions.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In November 2022, the USPTO
granted us a new patent - U.S. Patent No. 11,491,172, title: COMPOSITIONS AND METHODS OF POTENTIATING ANTIMICROBIALS. This patent further
strengthens our intellectual property portfolio and protection of our core technologies, and in one of the most important markets in the
world. This is SciSparc&#8217;s seventh granted patent in the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>In-Licensed Patents and Patent Applications</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In May 2015, we entered into
an exclusive, irrevocable, worldwide license agreement with Dekel for certain technology and one granted U.S. patent related to compositions
and methods for treating inflammatory disorders. The agreement became effective in August 2015 immediately after we and Dekel entered
into an amendment to the license agreement. Pursuant to the license agreement, in May 2016 we issued Dekel 200,000 of our Ordinary Shares
at a price per share of NIS 0.5 on account of future royalty payments. Also, pursuant to the license agreement, we are obligated to pay
Dekel fees based on specific milestones and royalties upon commercialization. The milestone payments include: (i) $25,000 upon the successful
completion of preclinical trials (which milestone was met in November 2016, resulting in this payment becoming due, and which was paid
in March 2017); (ii) $75,000 upon the successful completion of a Phase I/IIa trial (which was paid in April 2018); and (iii) $75,000 upon
the earlier of generating net revenues of at least $200,000 from the commercialization of the technology or the approval of the FDA /
the EMA of a drug based on the licensed assets. In each case, and subject to our discretion, the respective milestone payments are payable
in cash or equity based on a price per Ordinary Share of NIS 0.5. The royalty payments are 8% for commercialization and 35% pursuant to
a sub-license of the licensed assets. The patent expiration dates of any patents maturing from this application would likely be 2029.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 14, 2019, we entered
into an amendment to the license agreement, to encompass our and Dekel&#8217;s original intention to exclude certain consumer packaged
goods (including, inter alia, food, beverage, cosmetics, pet products and hemp based products, which are sources of nutrients or other
substances which may have a nutritional effect) from the scope of the licensed products and the field of our activity, as described in
the license agreement, which intention was not reflected in the license agreement, and therefore, desired and agreed to amend the license
agreement to reflect the foregoing clarification, as well as certain additional less material matters as discussed in the amendment. The
amendment also prescribes a specific development plan under the license agreement requiring us to invest in the licensed technology (as
defined under the license agreement) formulation development and maintenance of a total annual investment cap of $350,000 and for a non-compete
and non-solicitation obligation by Dekel and Dr. Shmulewitz, our former chairman and chief executive officer, towards our field of activity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 29, 2018, we
entered into an exclusive, worldwide, sublicensable, royalty-bearing license agreement with Yissum for a license to make commercial use
of the licensed technology, in order to develop, obtain regulatory approvals, manufacture, market, distribute or sell products, or the
Yissum License Agreement. According to the Yissum License Agreement, we were required to pay Yissum an initial payment of $133,000, and
shall pay Yissum royalties at the rates of 3% of net sales, subject to the royalty reductions as described in the Yissum License Agreement.
All right, title and interest in and to the Yissum License Agreement shall vest solely in Yissum, and we shall hold and make use of the
rights granted. All rights in the development results shall be solely owned by us, except to the extent that an employee of the Yissum,
including the researcher, is considered an inventor of a patentable invention arising from the development results, in which case such
invention and all patent applications and/or patents claiming such invention shall be owned jointly by us and Yissum, as appropriate,
and Yissum&#8217;s share in such joint patents shall be automatically included in the Yissum License Agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Intellectual Property Protection </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to patent and trademark
protection, we intend to use other means to protect our proprietary rights, including pursuing marketing or data exclusivity periods,
orphan drug status, and similar rights that are available under regulatory provisions in certain countries, including but not limited
to the United States, Europe, Canada, Japan, and China.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We also rely on trade secrets,
know-how, and continuing innovation to develop and maintain our competitive position. We cannot be certain that patents will be granted
with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we
be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We also seek regulatory approval
for our products for indications with high unmet medical need, great market potential, and where we have a proprietary position through
patents covering various aspects of our products, including but not limited to: composition, dosage, formulation, use, and manufacturing
process. Our success depends, in part, on an intellectual property portfolio that supports future revenue streams and erects barriers
to our competitors. We are maintaining and building our patent portfolio through filing new patent applications, prosecuting existing
applications, and licensing and acquiring new patents and patent applications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Despite these measures, any
of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated. Intellectual
property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide
competitive one. For more information, see Item 3D. &#8220;Risk Factors-Risks Related to our Intellectual Property.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table summarizes
our portfolio of patents:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; padding-right: 5pt; width: 11%; text-align: center; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Estimated<br/>
Expiration&#160;Date</b></span></td>
    <td style="width: 1%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; padding-right: 5pt; width: 10%; text-align: center; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Product Covered</b></span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">19-Apr-2016</span></td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Granted</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">19-Apr-2016</span></td>
    <td>&#160;</td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">May 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">United States of America</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">01-Oct-2019</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
  <tr style="vertical-align: top; ">
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">United States of America</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Granted</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">10-Oct-2019</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">October 2037</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">United States of America</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Granted</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">30-Aug-2019</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">October 2037</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
  <tr style="vertical-align: top; ">
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    <td>&#160;</td>
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
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  <tr style="vertical-align: top; ">
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
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  <tr style="vertical-align: top; ">
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
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    <td>&#160;</td>
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  <tr style="vertical-align: top; ">
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">19-Apr-2016</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>

<tr style="vertical-align: top; ">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt; width: 10%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">April 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">THX-110 THX-210</span></td></tr>

<tr style="vertical-align: top; ">
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</table><div>
</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

</div><!-- Field: Page; Sequence: 70; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

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  <tr style="vertical-align: top">
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    <td style="width: 1%">&#160;</td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">17-May-2016</span></td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">May 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">17-May-2016</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">May 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; ">
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">17-May-2016</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">May 2036</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: top; ">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">17-May-2016</span></td>
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: top; ">
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">24-Aug-2020</span></td>
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: top; ">
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: top; ">
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: top; ">
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: top; ">
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</table><div>
</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>

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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12-Mar-2013</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)</span></td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12-Mar-2013</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12-Mar-2013</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">March 2033</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">12-Mar-2013</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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    <td>&#160;</td>
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  <tr style="vertical-align: top; ">
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  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: top; ">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2-Aug-21</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2-Aug-21</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 2041</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; ">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2-Aug-21</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 2041</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2-Aug-21</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 2041</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; ">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2-Aug-21</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 2041</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2-Aug-21</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 2041</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
  <tr style="vertical-align: top; ">
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pending</span></td>
    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2-Aug-21</span></td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">August 2041</span></td>
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    <td style="padding-right: 5pt; text-align: center; padding-bottom: 2pt; padding-left: 5pt">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have also been granted a
trademark for CannAmide&#8482; in the United States with registration pending.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Sales and Transfer of Intellectual Property
Assets</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Transaction with Former Subsidiary</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In June 2016, we entered
into a share transfer agreement with our former subsidiary, Orimmune Bio Ltd., or Orimmune, and Karma Link Ltd., or Karma Link. According
to the agreement, we agreed to sell our interests in Orimmune to Karma Link, and also use our best efforts to transfer to and assign
Orimmune our rights in the Anti-CD3 technology </p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 13, 2018, an additional
amendment to the transfer agreement was signed, or the Additional Amendment, between us, Karma Link and Orimmune, under which it was agreed
that Orimmune (and Karma Link) will be assigned certain rights in IP related to the licensed technology owned by us, subject to certain
conditions precedent. In 2021, we received the approval of the IIA to complete the assignment and we are now seeking to complete the transaction.
As of the date of this Annual Report on Form 20-F, the conditions precedent have not yet been completed and the assignment of the intellectual
property rights related to the licensed technology owned by us has not yet been transferred.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>MitoCare X Bio</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 10, 2022, we entered
into a Founders and Investment Agreement with Dr. Alon Silberman, or the MitoCareX Agreement. Pursuant to the MitoCareX Agreement, we
invested an initial amount of $700,000 in MitoCareX and agreed to invest over the next two years an additional $1,000,000, subject to
the achievement of certain pre-determined milestones as agreed upon in the MitoCareX Agreement, for up to a 50.01% ownership in MitoCareX.
MitoCareX is focused on the discovery and development of potential drugs for cancers and other life-threatening conditions. The MitoCareX
Agreement also contains customary representations, warranties, covenants and indemnification provisions and on March 31, 2022, the closing
conditions were met.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 17, 2023, we announced
that MitoCareX has achieved its first milestone pursuant to the MitoCareX Agreement. The first milestone refers to the establishment of
MitoCareX&#8217;s cloud-based computing infrastructure that is expected to allow its future expansion into machine learning system. The
system is harnessed to investigating mitochondrial carriers that are crucial for cell viability. As a result of MitoCareX meeting this
milestone, we invested an additional $400,000 in MitoCareX and increase our share ownership holdings in MitoCareX Bio from 31.48% to 41.92%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Commercialization</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although we started early commercialization
of our proprietary PEA oral tablets CannAmide&#8482;, we intend to build a global commercial infrastructure to effectively support the
commercialization of our main pharmaceutical product candidates, if and when we believe regulatory approval of a pharmaceutical product
candidate in a particular geographic market appears imminent.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To develop the appropriate
commercial infrastructure, we will likely have to invest significant amounts of financial and management resources, some of which we expect
to commit prior to completing the regulatory process for our pharmaceutical product candidates. Where appropriate, we may elect in the
future to utilize strategic partners, distributors, or contract sales forces to assist in the commercialization of our pharmaceutical
products. In certain instances we may consider building our own commercial infrastructure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Competition</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The biotechnology and pharmaceutical
industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While
we believe that our scientific knowledge, technology and development experience provide us with competitive advantages, we face potential
competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic
institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop
and commercialize will compete with existing therapies and new therapies that may become available in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The first THC-based pharmaceutical,
a pill sold under the commercial name of Marinol (scientific name: dronabinol), was developed by a company called Unimed Pharmaceuticals,
with funding provided by the National Cancer Institute. In 1985, Marinol received FDA approval as a treatment for chemotherapy-related
nausea and vomiting. Today, Marinol is marketed by AbbVie, Inc. Since the introduction of Marinol into the market, other pharmaceuticals
containing THC have also been developed. These include generic oral capsules of dronabinol, such as those marketed by SVC Pharma LP and
Akorn Inc., Meda AB&#8217;s Cesamet (nabilone), a synthetic derivative of THC, and Sativex (nabiximols), a whole cannabis extract administered
as an oral spray. Furthermore, to the best of our knowledge, there are multiple companies that are working in the cannabis therapeutic
area and are pursuing regulatory approval for their product candidates. For example, GW, which markets Sativex, a botanical cannabinoid
oral mucosal for the treatment of spasticity due to multiple sclerosis, received FDA approval in the United States in June 2018 for Epidiolex,
a liquid formulation of highly purified cannabidiol extract, as a treatment for Dravet&#8217;s Syndrome, Lennox Gastaut Syndrome, and
various childhood epilepsy syndromes. In addition, GW is developing, among others, CBDV based therapy for ASD and therapy for neonatal
hypoxic-ischemic encephalopathy and schizophrenia. Zynerba is developing a transdermal formulation of cannabidiol for Fragile X and certain
refractory epilepsies and ASD. Skye is focused on developing proprietary, synthetic cannabinoid-derived molecules to treat glaucoma and
other diseases with significant unmet need. Corbus Pharmaceuticals Holdings is seeking FDA approval for their synthetic cannabinoid for
systemic sclerosis, cystic fibrosis, dermatomyositis and systemic lupus erythematosus and metabolism and solid tumors. RespireRx is developing
dronabinol for OSA treatment. Synendos is a developer of endocannabinoid modulators for the treatment of CNS disorders. It has developed
pharmaceutical products to restore the natural function of the brain and treat neuropsychiatric disorders. Synendos is developing small
molecules as selective endocannabinoid reuptake inhibitors that increase the levels of endogenous cannabinoids to treat CNS disorders
caused by cannabinoid deficiency. Inversago Pharma (formerly GIcare Pharma) is focused on developing peripheral cannabinoid (CB1) receptor
antagonist/inverse agonist for the treatment of metabolic diseases such as obesity, insulin resistance, and liver fibrosis. Its drug INV-101
(Inverse agonist of peripheral CB1) under phase-1.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our competitors, either alone
or through their strategic partners, might have substantially greater name recognition and financial, technical, manufacturing, marketing
and human resources than we do and significantly greater experience and infrastructure in researching and developing pharmaceutical products,
obtaining FDA and other regulatory approvals of those products and commercializing those products around the world. They may also have
intellectual property portfolios that provide them with significant competitive advantages or create substantial barriers in our target
markets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Manufacturing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently contract with
third parties for the manufacturing and testing of our product candidates for preclinical trials and clinical trials and also intend to
do so in the future. We do not own or operate manufacturing facilities for the production of clinical quantities of our product candidates.
The use of contracted manufacturing and reliance on collaboration partners is relatively cost-efficient and may eliminate the need to
directly invest in manufacturing facilities and additional staff.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To date, our third-party manufacturers
have met our manufacturing requirements. We expect third-party manufacturers to be capable of providing sufficient quantities of our product
candidates to meet anticipated full scale commercial demands. To meet our projected needs for commercial manufacturing, third parties
with whom we currently work might need to increase their scale of production, or we will need to secure alternate suppliers. We believe
that there are alternate sources of supply that can satisfy our clinical and commercial requirements, although we cannot be certain that
identifying and establishing relationships with such sources, if necessary, would not result in significant delay or material additional
costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Government Regulation </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>FDA Approval Process</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States, pharmaceutical
product candidates are subject to extensive regulation by the FDA. The FDC Act, and other federal and state statutes and regulations,
govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion, marketing,
distribution, post-approval monitoring, reporting, sampling, and import and export of pharmaceutical drug product candidates. Failure
to comply with applicable U.S. rules and regulations may subject a company to a variety of administrative or judicial sanctions, such
as FDA refusal to approve pending NDAs, warning letters, product candidate recalls, product candidate seizures, total or partial suspension
of production or distribution, injunctions, fines, civil penalties and criminal prosecution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pharmaceutical drug product
candidate development in the United States typically involves pre-clinical laboratory and animal testing, the submission to the FDA of
an IND Application, which must become effective before clinical testing may commence, and adequate, well-controlled clinical trials to
establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market
approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and
novelty of the product candidate or disease.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Nonclinical tests include laboratory
evaluation of an API or drug substance and drug product&#8217;s candidate chemistry, formulation and toxicity, as well as animal trials
to assess the characteristics and potential safety and efficacy of the product candidate. The conduct of the nonclinical toxicology studies
must comply with federal regulations and requirements, including GLP. The results of nonclinical testing are submitted to the FDA as part
of an IND along with other information, including information about product candidate chemistry, manufacturing and controls, and a proposed
clinical trial protocol. Long term nonclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue
after the IND is submitted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A 30-day waiting period after
the submission of an original IND is required prior to the commencement of clinical testing in humans. If the FDA has not imposed a clinical
hold on the IND or otherwise commented or questioned the IND within this 30-day period, the proposed clinical trial proposed in the IND
may begin. In practice, a submitting party should contact the division after this 30 day period to ensure that the FDA has reviewed the
IND to the extent that they can assure there will be no hold placed on the IND.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Clinical trials involve the
administration of the investigational product to healthy volunteers or patients under the supervision of a qualified investigator. Clinical
trials must be conducted: (i) in compliance with federal regulations, (ii) in compliance with GCP, an international standard meant to
protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors. Clinical protocols
and details of the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated.
Each protocol and any amendment involving testing of U.S. patient study subjects within the United States and subsequent protocol amendments
must be submitted to the FDA as part of the IND.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA may order the temporary
hold of a clinical trial at any time or impose other sanctions if the FDA believes that the clinical trial either is not being conducted
in accordance with FDA requirements, regulations or presents a potentially unacceptable risk to the clinical trial subjects. The trial
protocol and informed consent information for subjects in clinical trials must also be submitted to an IRB for approval. An IRB may impose
other conditions for the protocol and may also require the clinical trial at the site to be halted, either temporarily or permanently,
for failure to comply with the IRB&#8217;s requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>505(b)(2) Regulatory Approval Process</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Section 505(b)(2) of the FDC
Act, or 505(b)(2), provides an alternate regulatory pathway to FDA approval for new or improved formulations or new uses of previously
approved drug products. Specifically, 505(b)(2) permits the filing of an NDA where at least some of the information required for approval
comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference, or use from
the person by or for whom the investigations were conducted. The applicant may rely upon the FDA&#8217;s prior findings of safety and
efficacy for an approved product that acts as the reference listed drug for purposes of a 505(b)(2) NDA. The FDA may also require 505(b)(2)
applicants to perform additional studies or measurements to support any changes from the reference listed drug. The FDA may then approve
the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for
any new indication sought by the 505(b)(2) applicant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Orange Book Listing</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Section 505 of the FDC Act
describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A
Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A Section 505(b)(2) NDA is
an application that contains full reports of investigations of safety and efficacy, but where at least some of the information required
for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a
right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant
to rely, in part, on the FDA&#8217;s prior findings of safety and efficacy for an existing product, or published literature, in support
of its application.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In seeking approval for a drug
through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA patents whose claims cover the applicant&#8217;s
product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products
with Therapeutic Equivalence Evaluations, also known as the Orange Book. These products may be cited by potential competitors in support
of approval of a 505(b)(2) NDA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any applicant who submits a
505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product
that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires;
or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application
is submitted. This last certification is known as a Paragraph IV certification. Generally, 505(b)(2) NDA cannot be approved until all
listed patents have expired, except where 505(b)(2) NDA applicant challenges a listed patent through a Paragraph IV certification. If
the applicant does not challenge the listed patents or does not indicate that it is not seeking approval of a patented method of use,
the 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Although some of our product
candidates are based on repurposed drugs, there are at present no patents or other exclusivities listed in the Orange Book pertaining
to a product containing the active ingredient dronabinol.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Exclusivity</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Three-year exclusivity is available
to the holder of an NDA, including a 505(b)(2) NDA, for a particular condition of approval, or change to a marketed product, such as a
new formulation for a previously approved product, if one or more new clinical trials, other than bioavailability or bioequivalence trials,
was essential to the approval of the application and was conducted or sponsored by the applicant. This three-year exclusivity period protects
against FDA approval of 505(b)(2) NDAs for the condition of the new drug&#8217;s approval. As a general matter, three-year exclusivity
does not prohibit the FDA from approving 505(b)(2) NDAs for generic versions of the original, unmodified drug product. Five-year and three-year
exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to
conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to
demonstrate safety and efficacy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>NDA Submission and Review by the FDA</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Assuming successful completion
of the required clinical and nonclinical testing, among other items, the results of product development, including chemistry, manufacture
and controls, nonclinical studies and clinical trials are submitted to the FDA, along with proposed labeling, as part of an NDA. The submission
of an NDA requires payment of a substantial user fee to the FDA. These user fees must be paid at the time of the first submission of the
application, even if the application is being submitted on a rolling basis. Fee waivers or reductions are available in some circumstances.
One basis for a waiver of the application user fee is if the applicant employs fewer than 500 employees, including employees of affiliates,
the applicant does not have an approved marketing application for a product that has been introduced or delivered for introduction into
interstate commerce, and the applicant, including its affiliates, is submitting its first marketing application.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The cost of preparing and submitting
an NDA is substantial, mainly due to the non-clinical and clinical trial costs. Under federal law, the submission of most NDAs is additionally
subject to a substantial application user fee; the fee in the fiscal year 2020 is $2,942,965.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA has 60 or 74 days from
its receipt of an NDA to determine whether the application will be accepted for filing based on the agency&#8217;s threshold determination
that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth
review. The FDA has agreed to certain performance goals in the review of NDAs. Most such applications for standard review drug product
candidates are reviewed within 10 to 12 months, while most applications for priority review drugs are reviewed in six months. Priority
review can be applied to drugs that the FDA determines offer major advances in treatment or provide a treatment where no adequate therapy
exists. The review process for both standard and priority review may be extended by FDA for three additional months to consider certain
late-submitted information, or information intended to clarify information already provided in the submission.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA may also refer applications
for novel drug product candidates, or drug product candidates that present difficult questions of safety or efficacy, to an advisory committee,
which is typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application
should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.
Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA
will inspect the facility or the facilities at which the drug substance and drug product are manufactured. The FDA will not approve the
drug product candidate unless compliance with or current cGMP is satisfactory and the NDA contains data that provide substantial evidence
that the drug is safe and effective in the indication studied.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">After the FDA evaluates the
NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally
outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider
the application. If, or when, those deficiencies have been addressed to the FDA&#8217;s satisfaction in a resubmission of the NDA, the
FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of
requested information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An approval letter authorizes
commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA
may require a REMS plan to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides,
communication plans for health care professionals, and ETASU. An ETASU can include, but are not limited to, special training or certification
for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The
requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product candidate approval
may require substantial post-approval testing and surveillance to monitor the drug&#8217;s safety or efficacy. Once granted, product candidate
approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Disclosure of Clinical Trial Information</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sponsors of clinical trials
of certain FDA-regulated product candidates, including prescription drugs, are required to register and disclose certain clinical trial
information on a public website (clinicaltrials.gov) which is maintained by the U.S. National Institutes of Health. Information related
to the product candidate, patient population, phase of investigation, study sites and investigator, and other aspects of the clinical
trial is made public as part of the registration. Sponsors are also obligated to disclose the results of these trials after completion.
Disclosure of the results of these trials can be delayed until the product candidate drug product or new indication being studied has
been approved. Competitors may use this publicly available information to gain knowledge regarding the design and progress of our development
programs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fast Track Designation and Accelerated Approval</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FDA has programs to facilitate
the development, and thus expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or
condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition.
These therapies for serious conditions are approved and available to patients as soon as it can be concluded that the therapies&#8217;
benefits outweigh their risk. Under the Fast Track Program, the sponsor of a new drug candidate may request that FDA designate the drug
candidate for a specific indication as a Fast Track drug concurrent with, or after, the filing of the IND for the drug candidate. FDA
must determine if the drug candidate qualifies for Fast Track designation within 60 days of receipt of the sponsor&#8217;s request.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the FDA&#8217;s accelerated
approval regulations, FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to
patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. Accelerated approval
may also be based on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely
to predict an effect on irreversible morbidity or mortality or other clinical benefit, considering the severity, rarity or prevalence
of the condition and the availability or lack of alternative treatments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In clinical trials, a surrogate
endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a
patient feels, functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A
drug product that is approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of
confirmatory or post-approval clinical trial(s) to confirm the effect on the clinical endpoint. Failure to conduct required post-approval
studies, or confirm a clinical benefit during post-marketing studies, will allow FDA to withdraw the drug from the market on an expedited
basis. All promotional materials for drug candidates approved under accelerated approval regulations are subject to prior review by FDA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to other benefits
such as the ability to use surrogate endpoints and engage in more frequent interactions with FDA, FDA may initiate review of sections
of a Fast Track drug&#8217;s NDA before the application is complete. This rolling review is available if the applicant provides, and FDA
approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, FDA&#8217;s
time period goal for reviewing an application does not begin until the last section of the NDA is submitted. Additionally, the Fast Track
designation may be withdrawn by FDA if FDA believes that the designation is no longer supported by data emerging in the clinical trial
process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Patent Term Extension</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">After NDA approval, owners
of relevant drug patents may apply for up to a five-year patent extension. The allowable patent term extension is calculated as half of
the drug&#8217;s testing phase, the time between IND submission and NDA submission, and all of the review phase-the time between NDA submission
and approval up to a maximum of five years. The time can be shortened if FDA determines that the applicant did not pursue approval with
due diligence. The total patent term after the extension may not exceed 14 years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For patents that might expire
during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent
term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is
reduced by one year. The director of the USPTO must determine that approval of the drug covered by the patent for which a patent extension
is being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Advertising and Promotion</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Once an NDA is approved, a
drug product will be subject to certain post-approval requirements. Products manufactured or distributed by us pursuant to FDA approvals
are subject to continuing regulation by the FDA, including manufacturing, periodic reporting, product sampling and distribution, advertising,
promotion, drug shortage reporting, compliance with any post-approval requirements imposed as a conditional of approval such as Phase
4 clinical trials, REMS and surveillance, recordkeeping and reporting requirements, including adverse experiences. For instance, FDA closely
regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising,
off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Drugs may be marketed only
for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established
in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and
FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires
clinical data similar to that in the original application. The FDA uses the same procedures and actions in reviewing NDA supplements as
it does in reviewing NDAs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.2pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Adverse Event Reporting and GMP Compliance</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Adverse event reporting and
submission of periodic reports are required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as
Phase 4 testing, REMS and surveillance to monitor the effects of an approved product candidate, or the FDA may place conditions on an
approval that could restrict the distribution or use of the drug product. In addition, quality-control, drug manufacture, packaging, and
labeling procedures must continue to conform with cGMPs after approval. Drug manufacturers and certain of their subcontractors are required
to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced
inspections by the FDA, during which the FDA inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers
must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory
authorities may withdraw product candidate approvals or request product candidate recalls if a company fails to comply with regulatory
standards, if it encounters problems following initial marketing or if previously unrecognized problems are subsequently discovered.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Pediatric Exclusivity and Pediatric Use</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Best Pharmaceuticals for
Children Act, or BPCA, provides NDA holders a six-month extension of any exclusivity-patent or non-patent-for a drug if certain conditions
are met. Conditions for exclusivity include a determination by the FDA that information relating to the use of a new drug in the pediatric
population may produce health benefits in that population; a written request by the FDA for pediatric studies; and agreement by the applicant
to perform the requested studies and the submission to the FDA; and the acceptance by the FDA, of the reports of the requested studies
within the statutory timeframe. Applications under the BPCA are treated as priority applications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, under the Pediatric
Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the
claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation
for which the drug is safe and effective, unless the sponsor has received a deferral or waiver from the FDA. Unless otherwise required
by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. The required pediatric
assessment must assess the safety and effectiveness of the product candidate for the claimed indications in all relevant pediatric subpopulations
and support dosing and administration for each pediatric subpopulation for which the product candidate is safe and effective. The sponsor
or FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several
reasons, including a finding that the drug is ready for approval for use in adults before pediatric studies are complete or that additional
safety or effectiveness data need to be collected before the pediatric studies begin. Under PREA, the FDA must send a non-compliance letter
requesting a response with 45 days to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit
a request for approval of a pediatric formulation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Orphan Drugs</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Orphan Drug Act,
the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition-generally a disease or condition with
a prevalence of fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA.
After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by
the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with an FDA orphan drug
designation is entitled to a seven-year exclusive marketing period in the United States for that drug product candidate for that indication.
During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease,
except in limited circumstances, such as a showing of clinical superiority to the product candidate with orphan drug exclusivity. Orphan
drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different
disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA
application user fee. In addition to the potential seven years of market exclusivity after approval, orphan drug designation status qualifies
sponsors for tax credits for qualified clinical trials and exemption from user fees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Special Protocol Assessment</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A company may reach an agreement
with the FDA under the Special Protocol Assessment, or SPA, process as to the required design and size of clinical trials intended to
form the primary basis of an efficacy claim. According to its performance goals, the FDA is supposed to evaluate the protocol within 45
days of the request to assess whether the proposed trial is adequate, and that evaluation may result in discussions and a request for
additional information. An SPA request must be made, and all open issues must be resolved before the clinical trial begins. If a written
agreement is reached, it will be documented and made part of the administrative record. Under the FDC Act and FDA guidance implementing
the statutory requirement, an SPA is generally binding upon the FDA except in limited circumstances, such as if the FDA identifies a substantial
scientific issue essential to determining safety or efficacy after the study begins, public health concerns emerge that were unrecognized
at the time of the protocol assessment, the sponsor and FDA agree to the change in writing, or if the study sponsor fails to follow the
protocol that was agreed upon with the FDA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Controlled Substances</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The CSA and its implementing
regulations establish a &#8220;closed system&#8221; of regulations for controlled substances. The CSA imposes registration, security,
recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements under the oversight of the DEA.
The DEA is the federal agency responsible for regulating controlled substances, and requires those individuals or entities that manufacture,
import, export, distribute, research, or dispense controlled substances to comply with the regulatory requirements in order to prevent
the diversion of controlled substances to illicit channels of commerce.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The DEA categorizes controlled
substances into one of five schedules-Schedule I, II, III, IV or V-with varying qualifications for listing in each schedule. Schedule
I substances by definition have a high potential for abuse, have no currently accepted medical use in treatment in the United States and
lack accepted safety for use under medical supervision. Schedule I substances may be used only in federally approved research programs
and may not be marketed or sold for dispensing to patients in the United States. Pharmaceutical product candidates having a currently
accepted medical use that are otherwise approved for marketing may be listed as Schedule II, III, IV or V substances, with Schedule II
substances presenting the highest potential for abuse and physical or psychological dependence, and Schedule V substances presenting the
lowest relative potential for abuse and dependence. The regulatory requirements are more restrictive for Schedule II substances than Schedule
III substances. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist in
most situations and cannot be refilled.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following NDA approval of a
drug containing a Schedule I controlled substance, that substance must be rescheduled as a Schedule II, III, IV or V substance before
it can be marketed. In 2015, the Improving Regulatory Transparency for New Medical Therapies Act, removed uncertainty associated with
timing of the DEA rescheduling process after NDA approval. Specifically, it requires DEA to issue an &#8220;interim final rule,&#8221;
pursuant to which a manufacturer may market its product candidate within 90 days of FDA approval. The new law also preserves the period
of orphan marketing exclusivity for the full seven years such that this period only begins after DEA scheduling. This contrasts with the
previous situation whereby the orphan &#8220;clock&#8221; began to tick upon FDA approval, even though the product candidate could not
be marketed until DEA scheduling was complete.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Facilities that manufacture,
distribute, import or export any controlled substance must register annually with the DEA. The DEA registration is specific to the particular
location, activity(ies) and controlled substance schedule(s). For example, separate registrations are required for importation and manufacturing
activities, and each registration authorizes which schedules of controlled substances the registrant may handle. However, certain coincident
activities are permitted without obtaining a separate DEA registration, such as distribution of controlled substances by the manufacturer
that produces them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The DEA inspects all manufacturing
facilities to review security, recordkeeping, reporting and handling prior to issuing a controlled substance registration. The specific
security requirements vary by the type of business activity and the schedule and quantity of controlled substances handled. The most stringent
requirements apply to manufacturers of Schedule I and Schedule II substances. Required security measures commonly include background checks
on all employees and physical control of controlled substances through storage in approved vaults, safes and cages, and through use of
alarm systems and surveillance cameras. An application for a manufacturing registration as a bulk manufacturer (not a dosage form manufacturer
or a repacker/relabeler) for a Schedule I or II substance must be published in the Federal Register, and the application is open for 30
days to permit interested persons to submit comments, objections or requests for a hearing. A copy of the notice of the Federal Register
publication is forwarded by DEA to all those registered, or applicants for registration, as bulk manufacturers of that substance. Once
registered, manufacturing facilities must maintain records documenting the manufacture, receipt and distribution of all controlled substances.
Manufacturers must submit periodic reports to the DEA of the distribution of Schedule I and II controlled substances, Schedule III narcotic
substances, and other designated substances. Registrants must also report any controlled substance thefts or significant losses, and must
obtain authorization to destroy or dispose of controlled substances. As with applications for registration as a bulk manufacturer, an
application for an importer registration for a Schedule I or II substance must also be published in the Federal Register, which remains
open for 30 days for comments. Imports of Schedule I and II controlled substances for commercial purposes are generally restricted to
substances not already available from domestic supplier or where there is not adequate competition among domestic suppliers. In addition
to an importer or exporter registration, importers and exporters must obtain a permit for every import or export of a Schedule I and II
substance or Schedule III, IV and V narcotic, and submit import or export declarations for Schedule III, IV and V non-narcotics. In some
cases, Schedule III non-narcotic substances may be subject to the import/export permit requirement, if it is necessary to ensure that
the United States complies with its obligations under international drug control treaties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For drugs manufactured in the
United States, the DEA establishes annually an aggregate quota for the amount of substances within Schedules I and II that may be manufactured
or produced in the United States based on the DEA&#8217;s estimate of the quantity needed to meet legitimate medical, scientific, research
and industrial needs. This limited aggregate amount of cannabis that the DEA allows to be produced in the United States each year is allocated
among individual companies, which, in turn, must annually apply to the DEA for individual manufacturing and procurement quotas. The quotas
apply equally to the manufacturing of the API/drug substance and production of dosage forms. The DEA may adjust aggregate production quotas
a few times per year, and individual manufacturing or procurement quotas from time to time during the year, although the DEA has substantial
discretion in whether or not to make such adjustments for individual companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Individual states may also
maintain separate controlled substance laws and regulations, including licensing, recordkeeping, security, distribution, and dispensing
requirements. State Authorities, including Boards of Pharmacy, regulate use of controlled substances in each state. Failure to maintain
compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can result in enforcement
action that could have a material adverse effect on our business, operations and financial condition. The DEA may seek civil penalties,
refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could
lead to criminal prosecution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 81; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Europe/Rest of World Government Regulation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to regulations
in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution
of our products to the extent we choose to develop or sell any products outside of the United States. The approval process varies from
country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.2pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Whether or not we obtain FDA
approval for a product candidate, we must obtain the requisite approvals from regulatory authorities in non-U.S. countries prior to the
commencement of clinical trials or marketing of the product candidate in those countries. Certain countries outside of the United States
have a process that requires the submission of a Clinical Trial Application, or CTA, much like an IND prior to the commencement of human
clinical trials. In Europe, for example, a CTA must be submitted to the competent national health authority and to independent ethics
committees in each country in which a company intends to conduct clinical trials. Once the CTA is approved in accordance with a country&#8217;s
requirements, clinical trial development may proceed in that country.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The requirements and process
governing the conduct of clinical trials, product candidate licensing, pricing and reimbursement vary from country to country, even though
there is already some degree of legal harmonization in the European Union member states resulting from the national implementation of
underlying European Union legislation. In all cases, the clinical trials are conducted in accordance with GCP and other applicable regulatory
requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To obtain regulatory approval
of an investigational drug under the European Union. regulatory systems, we must submit a MAA. This application is similar to the NDA
in the United States, with the exception of, among other things, country-specific document requirements. Drugs can be authorized in the
European Union by using (i) the centralized authorization procedure, (ii) the Mutual Recognition Procedure, or MRP, (iii) the decentralized
procedure or (iv) national authorization procedures. The initial Sativex approvals were a consequence of an application under the De-Centralized
Procedure, or DCP, to the European Union member state of Spain.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The European Commission implemented
the centralized procedure for the approval of human drugs to facilitate marketing authorizations that are valid throughout the European
Economic Area, or EEA. This procedure results in a single marketing authorization granted by the European Commission that is valid across
the European Union, as well as in Iceland, Liechtenstein and Norway (forming together the EEA). The centralized procedure is compulsory
for human drugs that are: (i) derived from biotechnology processes, such as genetic engineering, (ii) contain a new active substance indicated
for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune dysfunctions
and viral diseases, (iii) officially designated &#8220;orphan drugs&#8221; (drugs used for rare human diseases) and (iv) advanced-therapy
medicines, such as gene- therapy, somatic cell-therapy or tissue-engineered medicines. The centralized procedure may at the request of
the applicant also be used for human drugs which do not fall within the above mentioned categories if the human drug (a) contains a new
active substance which, on the date of entry into force of this Regulation, was not authorized in the Community; or (b) the applicant
shows that the medicinal product candidate constitutes a significant therapeutic, scientific or technical innovation or that the granting
of authorization in the centralized procedure is in the interests of patients or animal health at the European Community level.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the centralized procedure
in the European Union, the maximum timeframe for the evaluation of a MAA by the EMA is 210 days (excluding clock stops, when additional
written or oral information is to be provided by the applicant in response to questions asked by the Committee for Medicinal Products
for Human Use, or CHMP, with adoption of the actual marketing authorization by the European Commission thereafter. Accelerated evaluation
might be granted by the CHMP in exceptional cases, when a medicinal product candidate is expected to be of a major public health interest
from the point of view of therapeutic innovation, defined by three cumulative criteria: (1) the seriousness of the disease to be treated;
(2) the absence of an appropriate alternative therapeutic approach, and (3) anticipation of exceptional high therapeutic benefit. In this
circumstance, EMA ensures that the evaluation for the opinion of the CHMP is completed within 150 days and the opinion issued thereafter.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Should any Member State refuse
to recognize the marketing authorization by the reference member state, on the grounds of potential serious risk to public health, the
issue will be referred to the Committee for the Mutual Recognition and Decentralized Procedures human. Within a timeframe of 60 days,
member states shall, within the coordination group, make all efforts to reach a consensus. If this fails, the procedure is submitted to
the CHMP for arbitration. The opinion of the CHMP is then forwarded to the Commission, for the start of the decision making process. As
in the centralized procedure, this process entails consulting various European Commission Directorates General and the Standing Committee
on Human Medicinal Product candidates or Veterinary Medicinal Product candidates, as appropriate. Since the initial approvals of Sativex
in the United Kingdom and Spain, there have been three &#8220;waves&#8221; of additional approvals under three separate MRPs. Each of
these procedures have been completed without any referral, and therefore without any delay.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For other countries outside
of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical
trials, product candidate licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials
are conducted in accordance with GCP and the other applicable regulatory requirements.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we fail to comply with applicable
foreign regulatory requirements, we may be subject to, among other things, fines, suspension of clinical trials, suspension or withdrawal
of regulatory approvals, product candidate recalls, seizure of product candidates, operating restrictions and criminal prosecution.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, most countries
are parties to the Single Convention on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances,
including cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to
our obtaining marketing approval for Sativex and our other product candidates in those countries. These countries may not be willing or
able to amend or otherwise modify their laws and regulations to permit Sativex or our other product candidates to be marketed, or achieving
such amendments to the laws and regulations may take a prolonged period of time. In that case, we would be unable to market our product
candidates in those countries in the near future or perhaps at all.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Expanded Access to Investigational Drugs
in the U.S.</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An investigational drug may
be eligible for clinical use outside the context of a manufacturer&#8217;s clinical trial of the drug. &#8220;Expanded access&#8221; refers
to the use of an investigational drug where the primary purpose is to diagnose, monitor, or treat a patient&#8217;s disease or condition
rather than to collect information about the safety or effectiveness of a drug. Expanded access INDs are typically sponsored by individual
physicians to treat patients who fall into one of three FDA-recognized categories of expanded access: expanded access for individual patients,
including for emergency use; expanded access for intermediate-size patient populations; and expanded access for large patient populations
under a treatment IND or treatment protocol. For all types of expanded access, the FDA must determine prior to authorizing expanded access
that: (1) the patient or patients to be treated have a serious or life threatening disease or condition and there is no comparable or
satisfactory alternative therapy; (2) the potential patient benefit justifies the potential risks of use and that the potential risks
are not unreasonable in the context of the disease or condition to be treated; and (3) granting the expanded access will not interfere
with the initiation, conduct, or completion of clinical studies in support of the drug&#8217;s approval. In addition, the sponsor of an
expanded access IND must submit IND safety reports and, in the cases of protocols continuing for one year or longer, annual reports to
the FDA. Expanded access programs are not intended to yield information relevant to evaluating a drug&#8217;s effectiveness for regulatory
purposes. If a patient enrolled in one of our clinical trials is not eligible or able to continue enrollment, we may be required to continue
to provide our product candidate to such patient through expanded access.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Pricing and Reimbursement in the U.S.</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sales of pharmaceutical product
candidates in the United States will depend, in part, on the extent to which the costs of the product candidates will be covered by third-party
payers, such as government health programs, commercial insurance and managed health care organizations. These third-party payers are increasingly
challenging the prices charged for medical product candidates and services. Additionally, the containment of health care costs has become
a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The United States government, state
legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls,
restrictions on reimbursement and requirements for substitution of generic product candidates. Adoption of price controls and cost-containment
measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net
revenue and results. If these third-party payers do not consider our product candidates to be cost-effective compared to other available
therapies, they may not cover our product candidates after approval as a benefit under their plans or, if they do, the level of payment
may not be sufficient to allow us to sell our product candidates on a profitable basis.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, or the MMA, imposed new requirements for the distribution and pricing of prescription drugs
for Medicare beneficiaries and included a major expansion of the prescription drug benefit under Medicare Part D. Under Part D, Medicare
beneficiaries may enroll in prescription drug plans offered by private entities which will provide coverage of outpatient prescription
drugs. Part D plans include both stand-alone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare
Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required
to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and
at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of
covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug
plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription
drugs may increase demand for product candidates for which we receive marketing approval. However, any negotiated prices for our product
candidates covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while
the MMA applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations
in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from
non-governmental payers.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The ACA was enacted in March
2010. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the law. The ACA may be modified,
amended or reaped at any time and may or may not be replaced with a different law or health care payment system. The ACA is expected to
continue to have a significant impact on the health care industry. With regard to pharmaceutical product candidates, among other things,
the ACA may expand and increase industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements
under the Medicare D program. Since the enactment of the ACA, numerous regulations have been issued providing further guidance on its
requirements. The ACA continues to be implemented through regulation and government activity but is subject to possible amendment, additional
implementing regulations and interpretive guidelines. Several states have decided not to expand their Medicaid programs and are seeking
alternative reimbursement models to provide care to the uninsured. The manner in which these issues are resolved could materially affect
the extent to which and the amount at which pharmaceuticals are reimbursed by government programs such as Medicare, Medicaid and Tricare.
We are unable to predict the full impact of any potential modification, amendment, or repeal of the ACA.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our ability to commercialize
any products successfully also will depend in part on the extent to which coverage and adequate reimbursement for our products, once approved,
and related treatments will be available from third-party payors, such as government health administration authorities, private health
insurers and managed care organizations. Third-party payors determine which medications they will cover and separately establish reimbursement
levels. Even if we obtain coverage for a given product by a third-party payor, the third-party payor&#8217;s reimbursement rates may not
be adequate to make the product affordable to patients or profitable to us, or the third-party payors may require co-payments that patients
find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians,
generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely
to use our products unless coverage is provided, and reimbursement is adequate to cover all or a significant portion of the cost of our
products. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical
and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available
or subsequently become available.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Government authorities and
other third-party payors are developing increasingly sophisticated methods of controlling healthcare costs, such as by limiting coverage
and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide
them with predetermined discounts from list prices as a condition of coverage, are using restrictive formularies and preferred drug lists
to leverage greater discounts in competitive classes and are challenging the prices charged for medical products. Further, no uniform
policy for determining coverage and reimbursement for drug products exists among third-party payors in the United States. Therefore, coverage
and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often
a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each
payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot be sure that coverage
and reimbursement will be available for any product that we commercialize and, if reimbursement is available, that the level of reimbursement
will be adequate. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing
approval. If coverage and reimbursement are not available, or if reimbursement is available only to limited levels, we may not successfully
commercialize any product candidate for which we obtain marketing approval.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a condition of receiving
Medicaid coverage for prescription drugs, the Medicaid Drug Rebate Program requires manufacturers to calculate and report to CMS their
AMP, which is used to determine rebate payments shared between the states and the federal government and, for some multiple source drugs,
Medicaid payment rates for the drug, and for drugs paid under Medicare Part B, to also calculate and report their average sales price,
which is used to determine the Medicare Part B payment rate for the drug. In January 2016, CMS issued a final rule regarding the Medicaid
Drug Rebate Program, effective April 1, 2016, that, among other things, revised the manner in which the AMP is calculated by manufacturers
participating in the program and implemented certain amendments to the Medicaid rebate statute created under the ACA. Drugs that are approved
under an NDA, including a 505(b)(2) NDA, are subject to an additional requirement to calculate and report the manufacturer&#8217;s best
price for the drug and inflation penalties which can substantially increase rebate payments. On December 21, 2020, CMS issued a final
rule that made changes to the Medicaid Drug Rebate Program regulations in several areas, including some changes to the treatment of value-based
purchasing arrangements and price reporting for patient benefit programs sponsored by pharmaceutical manufacturers.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For NDA drugs, the Veterans
Health Care Act of 1992 requires manufacturers to calculate and report to the Department of Veterans Affairs a different price called
the Non-Federal AMP, offer the drugs for sale on the Federal Supply Schedule, and charge the government no more than a statutory price
referred to as the Federal Ceiling Price, which includes an inflation penalty. A separate law requires manufacturers to pay rebates on
these drugs when paid by the Department of Defense under its TRICARE Retail Pharmacy Program. Knowingly submitting false pricing information
to the government creates potential federal False Claims Act liability.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, there has been increasing
legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been
several recent U.S. Congressional inquiries and proposed and enacted legislation at the federal and state levels designed to, among other
things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the
cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. We expect that the pharmaceutical industry
will continue to experience pricing pressures due to the trend toward managed healthcare, particularly towards specialty pharmacy, the
increasing influence of managed care organizations, and additional legislative proposals. For example, CMS issued an interim final rule
on November 27, 2020 designed to test whether a Most-Favored-Nation model will help control growth in spending for Medicare Part B drugs
without adversely affecting quality of care. This followed an Executive Order issued in September 2020 that directed the Secretary of
DHHS to implement new payment models under the Medicare Part B and Part D programs to curb &#8220;unfair&#8221; and high drug prices in
the United States. Implementation of this interim final rule has been blocked by a temporary restraining order and preliminary injunctions
through various court actions. The Most-Favored-Nation model will not be implemented without further rulemaking, and the new Biden administration
may choose to modify the model, move forward with the model as is, or withdraw it. Nonetheless, we expect that there will continue to
be a number of U.S. federal and state proposals to implement governmental pricing controls and limit the growth of healthcare costs, including
the cost of prescription drugs. It is unknown what form any such changes or any law would take, and how or whether it may affect the biopharmaceutical
industry as a whole or our business in the future. We expect that changes or additions to the ACA, the Medicare and Medicaid programs,
such as changes allowing the federal government to directly negotiate drug prices, and changes stemming from other healthcare reform measures,
especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect
on the health care industry in the United States.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At the state level, legislatures
have been increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, drug price increases, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
On the federal level, the Trump Administration issued a final rule in 2020 for the safe importation of drugs from Canada and other countries.
During the 2020 presidential campaign, President Biden also supported a proposal to limit drug price increases to no more than the inflation
rate. Additional health reform measures may continue and affect our business in unknown ways. In July 2021, the Biden administration released
an executive order, &#8220;Promoting Competition in the American Economy,&#8221; with multiple provisions aimed at increasing competition
for prescription drugs. The DHHS has released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing
reform and potential legislative policies that Congress could pursue to advance these principles. While no legislation or administrative
actions have been finalized to implement these principles, Congress is considering legislation that, if passed, could have significant
impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases and allowing Medicare to negotiate
pricing for certain covered drug products. The impact of these legislative, executive, and administrative actions and any future healthcare
measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is unclear. The implementation
of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or
commercialize any of the product candidates for which we receive approval.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As noted above, the marketability
of any products for which we receive regulatory approval for commercial sale may suffer if the government and other third-party payors
fail to provide adequate coverage and reimbursement. We expect that an increasing emphasis on cost containment measures in the U.S. will
continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time.
Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less
favorable coverage policies and reimbursement rates may be implemented in the future.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Pricing and Reimbursement in Foreign Countries</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, in some foreign
countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing
vary widely from country to country. For example, a member state of the European Union may approve a specific price for the medicinal
product candidate. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical
product candidates will allow favorable reimbursement and pricing arrangements for any of our product candidates. Historically, product
candidates launched in the European Union do not follow price structures of the United States and generally tend to be significantly lower.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As another example, in Canada,
for patented drugs, the Patented Medicines Prices Review Board (PMPRB) uses the median international publicly available ex-factory list
price (using prices in 11 pre-determined countries) as the maximum price the company is allowed to charge. The PMPRB is a quasi-judicial
body with a regulatory mandate to prevent pharmaceutical patentees from charging consumers excessive prices during the market exclusivity
period. This agency then monitors the prices charged by patentees for patented drugs on an ongoing basis. Under the Canadian Patent Act,
patentees are required to file price and sales information about their patented drug products at introduction and twice a year thereafter
for each strength of each dosage form of each patented drug product sold in Canada.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Other Health Care Laws and Compliance Requirements</i></b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the United States, our activities
are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the CMS, other
divisions of the DHHS (e.g., the Office of Inspector General), the U.S. Department of Justice and individual U.S. Attorney offices within
the Department of Justice, and state and local governments.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The federal AKS prohibits,
among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly
or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for, or purchasing,
leasing, ordering, or arranging for the purchase, lease or order of, any good, facility, item or service reimbursable, in whole or in
part, by Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything
of value, including unlawful financial inducements paid to prescribers and beneficiaries, as well as impermissible promotional practices.
There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions
and safe harbors are drawn narrowly. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory
safe harbor does not make the conduct per se illegal under the federal AKS. Instead, the legality of the arrangement will be evaluated
on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Additionally, the ACA amended the intent requirement
of the federal AKS so that a person or entity no longer needs to have actual knowledge of the federal AKS, or specific intent to violate
it, to have violated the statute. The ACA also provided that a violation of the federal AKS is grounds for the government or whistleblower
to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent claim for purposes
of the civil False Claims Act.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, in November 2020,
DHHS finalized a regulation aimed at lowering prescription drug prices and out-of-pocket spending for prescription drugs by excluding
rebates on prescription drugs paid by manufacturers to or purchased by Medicare Part D plan sponsors or PBMs acting under contract with
Medicare Part D plan sponsors from the existing discount safe harbor under the federal AKS. The regulation reflects the first change to
the AKS discount safe harbor since the Medicare Part D program was established. In addition to the rebate exclusions, two new safe harbors
were added. One of these new safe harbors protects point-of-sale reductions in price from a manufacturer to a plan sponsor under Medicare
Part D or a MCO for a prescription drug payable, in whole or in part, by a plan sponsor under Medicare Part D or a MCO, provided certain
conditions are met. The other protects certain fixed-fee services arrangements between manufacturers and PBMs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The federal civil and criminal
false claims laws, including the federal False Claims Act, prohibit, among other things, any person or entity from knowingly presenting,
or causing to be presented, a false claim for payment to, or for approval by, the federal government, including the Medicare and Medicaid
programs, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim
to avoid, decrease or conceal an obligation to pay money to the federal government.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The civil monetary penalties
statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented
a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or
is false or fraudulent.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">HIPAA created additional federal
criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit
program, including public and private payors, or obtain, by means of false or fraudulent pretenses, representations or promises, any of
the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is
public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal
investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material
fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services
relating to healthcare matters. The ACA amended the federal health care fraud criminal statute implemented under HIPAA so that a person
or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have violated the statute.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, the federal Open
Payments program pursuant to the Physician Payments Sunshine Act, created under Section 6002 of the ACA and its implementing regulations,
require some manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid
or the Children&#8217;s Health Insurance Program (with specified exceptions) to report annually information related to specified payments
or other transfers of value provided to physicians and teaching hospitals, or to entities or individuals at the request of, or designated
on behalf of, the physicians and teaching hospitals and to report annually specified ownership and investment interests held by physicians
and their immediate family members. The SUPPORT Act, signed into law on October 24, 2018, expanded Sunshine Act reporting to include data
for physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse
midwifes. The amendment applies to reports submitted to CMS on or after January 1, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, we may be subject
to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended
by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, impose requirements
relating to the privacy, security and transmission of individually identifiable health information on HIPAA covered entities and their
business associates, including mandatory contractual terms and the implementation of certain safeguards of such information. Among other
things, HITECH makes HIPAA&#8217;s security standards directly applicable to business associates, independent contractors or agents of
covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.
HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable
to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts
to enforce the federal HIPAA laws and seek attorneys&#8217; fees and costs associated with pursuing federal civil actions. In addition,
state laws govern the privacy and security of health information in some circumstances, many of which differ from each other in significant
ways, may not have the same effect and may not be preempted by HIPAA, thus complicating compliance efforts.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Many states have also adopted
laws similar to each of the above federal laws, which may be broader in scope and apply to items or services reimbursed by any payor,
including commercial insurers. We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical
industry&#8217;s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and/or state
laws that require drug manufacturers to report information related to marketing expenditures or payments and other transfers of value
to physicians and other healthcare providers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Enforcement actions can be
brought by federal or state governments or, in some cases, as &#8220;qui tam&#8221; actions brought by individual whistleblowers in the
name of the government. Depending on the circumstances, failure to comply with these laws can result in penalties, including criminal,
civil and/or administrative criminal penalties, damages, fines, disgorgement, debarment from government contracts, individual imprisonment,
additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve
allegations of non-compliance with these laws, exclusion from government programs, refusal to allow us to enter into supply contracts,
including government contracts, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our
operations, any of which could adversely affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In order to distribute product
candidates commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of pharmaceutical
product candidates in a state, including, in certain states, manufacturers and distributors who ship product candidates into the state,
even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers
and distributors to establish the pedigree of product candidate in the chain of distribution, including some states that require manufacturers
and others to adopt new technology capable of tracking and tracing product candidate as it moves through the distribution chain. Several
states have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, file periodic reports with
the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities or register their sales
representatives. Other legislation has been enacted in certain states prohibiting pharmacies and other health care entities from providing
certain physician prescribing data to pharmaceutical companies for use in sales and marketing, and prohibiting certain other sales and
marketing practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Foreign Corrupt Practices Act</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The FCPA prohibits any U.S.
individual or business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign
official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the
individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United
States to comply with accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all
transactions of the companies, including international subsidiaries, and to devise and maintain an adequate system of internal accounting
controls for international operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Grants from the IIA</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our research and development
efforts mainly with respect to our past activities (with respect to immunotherapy programs such as the Anti-CD3) were financed in part
through royalty-bearing grants from the IIA. As of December 31, 2022, we had received the aggregate amount of approximately $1.1 million
from the IIA for the development of our abovementioned technologies. With respect to such grants, we are committed to pay royalties of
up to an aggregate amount of approximately $1.2 million relating only to technologies in our possession and excluding any royalties for
technologies that we sold to third parties. We are further required to comply with the requirements of the Research Law, with respect
to those past grants. In addition, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israel
citizen or resident an &#8220;interested party&#8221; as defined in the Research Law requires prior written notice from the IIA. When
a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer
of such know-how inside or outside of Israel, and the transfer outside of Israel of manufacturing or manufacturing rights of such products,
technologies or know-how, without the prior approval of the IIA. None of our current projects in the field of cannabinoid therapeutics
are supported by the IIA, yet if eligible, we might apply for such support in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Current Regulatory Status of SciSparc&#8217;s
Pharmaceutical Products</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>United States</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The active ingredient in our
pharmaceutical product candidate SCI-110 is a Schedule I controlled substance. Other drug candidates in our portfolio are either not controlled
or as yet to be scheduled.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our drug candidate SCI-110
is being developed, among others, for the treatment of TS. TS may be considered a serious condition with a potentially disabling nature.
Thus, it may be eligible for a fast-tracked submission. However, a request for eligibility may be filed by us later in the development
of this molecule. In June 2016, we submitted a request for orphan drug designation to the FDA for SCI-110 for the treatment of TS. In
a letter dated September 29, 2016, the FDA informed us that our request could not be granted at such time and is being held in abeyance
until and subject to us providing additional information pertaining to the overall prevalence of TS in both children and adults, and further
clinical data to support our scientific rationale for our request for orphan drug designation within 12 months. In September 2017, we
responded to such FDA letter within the designated time frame and provided the FDA with our articulated and reasoned responses including
documentation and clinical data that supports it. On December 26, 2017, we received the FDA&#8217;s response to our response. The FDA
accepted that there is adequate scientific rationale for the treatment of TS with SCI-110 mainly through the preliminary results of ongoing
clinical trials, suggesting that SCI-110 may provide benefit in treating TS. However, the FDA stated that it was unable to grant our request
and indicated that we did not provide adequate prevalence estimates, and any evidence to support our statement that only moderate to severe
TS patients would require pharmacological treatment. We further responded in January 2018 by providing the requested information. On January
23, 2020, following additional correspondence with the FDA, the FDA still did not grant us our request due to fact that we have not yet
provided adequate prevalence estimates. However, the FDA did agree with our position that we could potentially qualify for orphan drug
designation with respect to the moderate-to-severe TS sub-group population only rather than the entire population. After we had provided
additional prevalence estimates, the FDA raised a concern in its letter, dated December 7, 2020, about our ability to limit the use of
the pharmaceutical product to the subset of patients we are pursuing. Due to the fact that we disagree with this concern, we requested
a clarification call. In the clarification call conducted on February 2, 2021, we agreed with the FDA concern about our ability to limit
the use of the pharmaceutical product to the subset of patients in addition to a safety concern associated with THC treatment in pediatrics
population so we suggested to amend our preliminary request and asked to include only adults in the treated population. An amendment letter
was discussed and the FDA described what it would want to see in such an amendment. In March 2021, we sent our response to the FDA. In
June 2021, we received a response from the FDA explaining that they are unable to grant our request until new information becomes available
to support our request for orphan drug designation. We will re-visit the application after we obtain clinical results from our upcoming
phase IIb study in TS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Canada</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>NNHPD Approval</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to a non-traditional
class III Product License Application, CannAmide&#8482; (TheraPEA) received Health Canada approval (NPN 80093504) from the NNHPD on July
23, 2019. In the approval letter, the NNHPD confirmed that the application was in compliance with section 7 of the NHPR. The dosage of
1 x 400 mg tablet 3 times daily was approved for the following use: &#8220;Studies show that PEA may be used as an anti-inflammatory to
help relieve chronic pain&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any labels used in the marketing
of TheraPEA must reflect the information outlined on the product license and must comply with the labelling requirements as per Part 5
of the NHPR. In addition, natural health products, such as TheraPEA, must be manufactured, packaged, labelled, imported, distributed or
stored in accordance with GMP as required by NHPR or in accordance with equivalent requirements if the natural health product is imported.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the NHPR, companies
are required to provide the NNHPD with the Canadian site information prior to commencing the importation and/or sale of the natural health
products in Canada.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Changes made in respect of
a licensed product require the submission of an amendment, notification or a new product license application as per sections 11, 12 and
13 of the NHPR.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.2pt">&#160;</p><div>

</div><div><a id="a_015"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>C. Organizational Structure</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">SciSparc Nutraceuticals Inc.
is our majority-owned subsidiary (approximately 51%), a company focused on e-commerce operations of Wellution&#8482;, a top- seller account
of Amazon, which sells hemp-based products. Brain Bright Ltd. is an inactive wholly-owned subsidiary. In addition, we also own 85% of
the issued and outstanding share capital of Evero Health Ltd., a company focused on the development and commercialization of SCI-110 sleep
technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 17, 2022, we invested
$1.5 million in Clearmind in connection with its initial public offering on the Nasdaq Capital Market, in exchange for 230,769 common
shares of Clearmind, representing 9.33% of the outstanding share capital of Clearmind.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We also hold approximately
31.48% of MitoCareX Bio Ltd., an Israeli private company<i>.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_016"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>D. Property, Plants and Equipment </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our offices are located at
20 Raul Wallenberg Street,&#8239;Tower A, 2nd Floor, Tel Aviv 6971916, Israel, where we currently occupy approximately 120 square meters,
under a joint lease with a third-party for a total of 240 square meters. The lease ends on June 30, 2023, with an option of renewal for
an additional thirty-six (36) months. Our current monthly rent payment is NIS 10,200 (approximately $3,300).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We consider that our current
office space is sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business. However,
we are currently assessing our future needs and have not renewed our lease as of the date hereof.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 4A. UNRESOLVED STAFF COMMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following discussion and
analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report. This
discussion and other parts of this Annual Report contain forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking
statements as a result of several factors, including those set forth under Item 3.D. &#8220;Risk Factors&#8221; and elsewhere in this
Annual Report. We report financial information under 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. Our discussion and analysis
for the year ended December 31, 2020 can be found in our Annual Report for the fiscal year ended December 31, 2021, filed with the SEC
on April 28, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following financial data
in this narrative are expressed in thousands, except for share and per share data or as otherwise noted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A. Operating Results</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">During the year ended December 31, 2022, we have
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in the year ended December 31, 2022, amounted to $1,347 thousand.</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Operating Results</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To date, we have not generated
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revenue in this business within the next year at least. As of December 31, 2022, we had an accumulated deficit of approximately $64 million.
Our operating activities are described below under &#8220;Operating Expenses.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Revenues</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since the acquisition of the
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</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Cost of goods sold </b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The cost of goods sold comprises
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Operating Expenses (in thousands of dollars)</b></p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our current operating expenses
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</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Research and Development Expenses, net</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our research and development
expenses consist primarily of salaries and related personnel expenses, research and preclinical studies, chemistry and formulations, regulatory,
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table discloses
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect that our research
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table discloses
the breakdown of general and administrative expenses:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,592</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Research and Development Expenses </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our research and development
expenses for the year ended December 31, 2022, amounted to $2,803, representing an increase of $813, or 41%, compared to $1,990 for the
year ended December 31, 2021. The increase was primarily attributable to an increase of $972 in share-based compensation, clinical studies,
research and pre-clinical studies, reflecting the acceleration of clinical studies that were initiated in the previous year.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>General and Administrative Expenses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our general and administrative
expenses totaled $6,509 for the year ended December 31, 2022, representing an increase of $2,731, or 72%, compared to $3,778 for the year
ended December 31, 2021. The increase resulted primarily from the inclusion of results of our new subsidiary Scisparc Nutraceuticals,
which amounted to $907, and comprised mainly by Amazon transaction fees, advertising, and promotion on Amazon. Another main reason for
the increase is the increase of $703 in investor relations and business expenses, an increase of $617 in share-based compensation, and
an increase of $181 in wages and related expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 92; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Operating Loss</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our operating loss for the
year ended December 31, 2022, was $8,287, representing an increase of $2,519, or 44%, as compared to an operating loss of $5,768 for the
year ended December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Financial Expense and Income</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Financial expense and income
consist of revaluations of instruments measured at fair value, exchange rate differences, bank fees, loans interest and other transactional
costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recognized financial income
in the amount of $7,832 for the year ended December 31, 2022, as compared to no financial income for the year ended December 31, 2021.
The financial income recognized in 2022 was primarily due to changes in the fair value of warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We recognized financial expenses
for the year ended December 31, 2022, of $2,014, representing an increase of $41,993, as compared to financial expense of $21 for the
year ended December 31, 2021. The financial expenses recognized in 2022 are primarily due to issuance expenses of shares and warrants
in the amount of $1,204, and losses from the change in the fair value of our investment in securities in the amount of $770.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Total Comprehensive Loss</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our total comprehensive loss
for the year ended December 31, 2022, was $2,592, representing a decrease of $3,197, or 55%, as compared to $5,789 for the year ended
December 31, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B. Liquidity and Capital Resources (in thousands of dollars)</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Overview</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since our inception in 2004,
and through December 31, 2022, we have funded our operations principally with $75,225 from the issuance of Ordinary Shares and ADSs, warrants
and pre-funded warrants. As of December 31, 2022, we had $3,574 in cash, $77 in trade receivables, $131 in other accounts receivable,
$668 in inventory, and an additional amount of $60 in short-term bank deposits. <span>In the event that
additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.
If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely
affected, and there is substantial doubt about our ability to continue as a going concern.</span></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The table below presents our
cash flows for the periods indicated:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(7,084</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(3,301</td><td style="text-align: left">)</td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">During the year ended December
31, 2022 and 2021, we did not have any cash equivalents.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Operating Activities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash used in operating
activities was $7,917 during 2022 in comparison to $5,061 during 2021. The increase of $2,856 was primarily attributable to an increase
in research and development and general and administrative expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Investing Activities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash used in investing
activities was $7,084 during 2022 in comparison to $70 during 2021. The increase of $7,014 was primarily attributable to a purchase of
the Wellution brand in the amount of $4,861, and investment in MitoCareX in the amount of $700, and an investment in securities of Clearmind
in the amount to $1,500.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash used in investing
activities of $70 during the year ended December 31, 2021, primarily reflected the investment in restricted bank deposits and purchase
of fixed assets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Financing Activities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash provided by financing
activities of $11,700 in the year ended December 31, 2022, primarily consisted $9,005 of net proceeds from the issuance of share capital,
pre-funded warrants and warrants and $2,770 from warrant exercises.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net cash provided by financing
activities of $10,060 in the year ended December 31, 2021, primarily consisted $7,699 of net proceeds from the issuance of share capital,
pre-funded warrants and warrants and $2,568 from warrant exercises.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 27, 2022, we announced
the entrance into&#160;a securities purchase agreement, which closed on June 1, 2022, with a single healthcare-focused institutional investor
for aggregate gross proceeds of approximately $10,000, before deducting fees to the placement agent and other offering expenses payable
by us, or the 2022 Private Placement. In connection with the 2022 Private Placement, we issued 3,546,100 units and pre-funded units at
a purchase price of $2.82 per unit (or $0.001 less per pre-funded unit), priced at-the-market under Nasdaq rules. Each unit and pre-funded
unit consisted of one Ordinary Share (or Ordinary Share equivalent) and two non-tradable warrants each exercisable for one Ordinary Share
for $2.57 (for a total of 7,092,200 shares underlying the warrants). The warrants have a term of five years from the issuance date. No
actual units were issued in the 2022 Private Placement. Aegis Capital Corp. was the exclusive placement agent in connection with the 2022
Private Placement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 30, 2022, the Company
and the institutional investor entered into a letter agreement and agreed, among other things, to amend: (i) the warrants to: (a) extend
the termination date for exercising the warrants from June 1, 2027 to June 1, 2029; and (b) amend the exercise price from $2.57 per share
to $2.63 per share; and (ii) the securities purchase agreement to reflect a new purchase price of $2.88 per unit (or $0.001 less per pre-funded
unit), resulting in additional gross proceeds to the Company of $212,766. On August 19, 2022, <span>3,211,100
of the pre-funded warrants were fully exercised at a nominal exercise price of $0.001 per share, which resulted in an issuance of 3,211,100
Ordinary Shares.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 14, 2022, we
entered into Wellution Acquisition Agreement, pursuant to which we acquired the Wellution&#8482; brand. We established SciSparc Nutraceuticals,
a wholly owned subsidiary, to hold the new assets, which is also a party to the Wellution Acquisition Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 30, 2022, we
closed the acquisition of the Brand and paid a base cash payment of $4,590. In 12 months following the closing date, we will pay an additional
deferred cash payment of a multiple three times the amount by which the acquired Brand&#8217;s SDE (as defined in the Wellution AcquisitionAgreement)
exceeds $1,120. In addition, at the closing we issued the M.R.M Warrant to M.R.M, consisting of $15 million worth of warrants to purchase
up to 2,142,857 of our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">On
February 23, 2023, we entered into the Wellution Sale Agreement with Jeffs&#8217; Holdings and Jeffs&#8217; Brands, pursuant to which,
at the closing, which occurred on March 28, 2023, which occurred on March 28, 2023,Jeffs&#8217; Holdings acquired from us a number of
shares of common stock of SciSparc Nutraceuticals equal to approximately a 49% interest in our wholly owned subsidiary, SciSparc Nutraceuticals,
which owns the Wellution<sup>TM</sup>&#160;brand, for a consideration of $2,500 in cash, and an additional deferred cash payment of approximately
$489.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">In
connection with the closing, we and Jeffs&#8217; Brands will undertake a mutual share exchange in the amount of approximately $288 of
ordinary shares from each of us and Jeffs&#8217; Brands. The number of shares in the share exchange was calculated based on the average
closing price of the relevant company&#8217;s shares for 30 consecutive trading days ending on the third trading day immediately prior
to the closing. Accordingly, we will acquire 247,415 ordinary shares of Jeffs&#8217; Brands and Jeffs&#8217; Brands will acquire 360,297
ordinary shares from us having an aggregate value of $288,238.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; "></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">Following
the closing of the transaction, which included an equity conversion of the financing amounts of approximately $700 previously provided
by the Company to SciSparc Nutraceuticals for working capital, into shares of common stock at the price per share of the Wellution Sale
Agreement, we hold approximately 51% of SciSparc Nutraceuticals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">In
connection with the Wellution Sale Agreement, at the closing, Jeffs&#8217; Brands and SciSparc Nutraceuticals entered into the Wellution
Management Agreement for management services of the Wellution<sup>TM</sup> brand by Jeffs&#8217; Brands, for a monthly fee of $20, Jeffs&#8217;
Brands also received a one-time signing bonus in the amount of $51.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 1, 2021, we entered
into a definitive agreement with several accredited and institutional investors providing for the issuance of an aggregate of 1,152,628
units, as follows: (a) 916,316 units, at a price of $7.07 per unit, consisting of (i) one ADS and (ii) a Series A Warrant to purchase
an equal number of units purchased and a Series B Warrant to purchase half the number of units, and (b) 236,312 pre-funded units, at a
price of $7.069 per unit, consisting of (i) one pre-funded warrant to purchase one ADS and (ii) a Series A Warrant to purchase an equal
number of units purchased and a Series B Warrant to purchase half the number of units. The pre-funded warrants have an exercise price
of $0.001 per full ADS and will be exercisable at any time after the date of issuance upon payment of the exercise price. The Series A
Warrants have an exercise price of $7.07, subject to adjustments therein. The Series B Warrants have an exercise price equal to $10.60,
subject to adjustments therein. The Series A Warrants and the Series B Warrants are exercisable six months from the date of issuance and
have a term of exercise equal to five years from the initial exercise date. As of April 23, 2022, there were 1,142,628 Series A Warrants,
576,314 Series B Warrants and 18,156 pre-funded warrants outstanding. Aegis Capital Corp. acted as exclusive placement agent in connection
with this offering and received a transaction fee equal to $0.4949 per unit and $0.4949 per pre-funded unit sold at the closing. The offering
closed on March 4, 2021, and resulted in gross proceeds to us of approximately $8.15 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Share Buyback Program </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 6, 2022, we announced
that our board of directors authorized a $1 million buyback program for our Ordinary Shares. However, as of the date of this Annual Report
we have not proceeded with the buyback program and do not currently intend to do so. If we wish to effect the buyback program in the future,
we would be required to file a motion seeking a court approval in Israel for the buyback program and the effectiveness of the buyback
plan, if formally approved, will be contingent upon such approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Current Outlook</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have financed our operations
to date primarily through proceeds from sales of our Ordinary Shares and ADSs as well as exercises of warrants and options to purchase
Ordinary Shares or ADSs, as the case may be. We have incurred losses and generated negative cash flows from operations since August 2004.
Since August 2004, we have not generated any revenue from the sale of pharmaceutical product candidates and we do not expect to generate
revenues from sale of our pharmaceutical product candidates in the next few years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of December 31, 2022, our
cash, including short-term bank deposits, was $3,634.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our existing
cash resources will not be sufficient to finance our operating activities in the foreseeable future; however, we expect that we will require
substantial additional capital to complete the development of, and to commercialize, our product candidates. If we do seek to raise additional
capital, there can be no guarantee or assurance that we will be successful in raising such additional capital or that the term of such
capital raise will be on terms favorable to us.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September 2022, we&#160;purchased
Wellution&#8482;, a business and brand which sells hemp-based products on the Amazon.com marketplace.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->87<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 25, 2023, we announced
that our board of directors resolved to pursue a Restructuring Plan which involves transferring our pharmaceutical activities to NewCo.
As part of the Restructuring Plan, we intend to examine the possibility of listing NewCo on a leading stock exchange, while maintaining
our controlling interest in NewCo such that we will continue to control our current business activities. We also intend to explore other
potential new opportunities, activities and investments in a variety of sectors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any restructuring and possible
listing of NewCo on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory
approvals, receipt of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions to
effectuate such corporate restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended
restructuring and listing of NewCo or that they will be completed at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, our operating
plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional financing sooner
than planned. Our efforts to commercialize our proprietary PEA oral tablets CannAmide&#8482; may not lead to any revenue or revenue at
the level at which we are expecting. Our future capital requirements will depend on many factors, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the magnitude of our general and administrative expenses.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Until we can generate significant
recurring revenues, we expect to satisfy our future cash needs through debt and/or equity financings. We cannot be certain that additional
funding will be available to us on acceptable terms, if at all. This raises substantial doubts about our ability to continue as a going
concern.&#160;If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans
for, or commercialization efforts with respect to our product candidates.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_021"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>C.  Research and development, patents and licenses, etc.</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For a description of our research
and development programs and the amounts that we have incurred over the last two years pursuant to those programs, please see &#8220;Item
5. Operating and Financial Review and Prospects-A. Operating Results-Operating Expenses-Research and Development Expenses, net&#8221;
and &#8220;Item 5. Operating and Financial Review and Prospects-A. Operating Results-Comparison of the year ended December 31, 2022 to
the year ended December 31, 2021-Research and Development Expenses.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_022"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>D.  Trend information</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The COVID-19 pandemic has
impacted companies in Israel and around the world, and as its trajectory remains highly uncertain, and although the impact of COVID-19
has lessened in Israel recently, we cannot predict the duration and severity of the outbreak and its containment measures for our Company.
Further, we cannot predict impacts, trends and uncertainties involving the pandemic&#8217;s effects on economic activity, the size of
our labor force, and the extent to which our income, profitability, liquidity, or capital resources may be materially and adversely affected.
See also &#8220;Item 3.D. - Risk Factors-Risks Related to Our Business Operations-Widespread public health pandemics, including COVID-19,
could have a material and adverse effect on our business, financial condition and results of operations.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_023"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>E.  Critical Accounting Estimates</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We describe our significant
accounting policies more fully in Note 2 and the significant accounting judgments, estimates and assumptions used in the preparation of
the financial statements in Note 3 to our financial statements for the year ended December 31, 2022. We believe that the accounting policies
below are critical in order to fully understand and evaluate our financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We prepare our financial statements
in accordance with IFRS. At the time of the preparation of the financial statements, our management is required to use estimates, evaluations,
and assumptions which affect the application of the accounting policy and the amounts reported for assets, obligations, income, and expenses.
Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during the period in which
the change to the estimate is made.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; "><b><i>Going Concern</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">We
have a shareholders&#8217; equity of $6,449 thousand as of December 31, 2022, and negative operating cash flows in recent years. We expect
to continue incurring losses and negative cash flows from operations until our pharmaceutical products reach commercial profitability.
Our plans to reduce the going concern risk include the continued commercialization of our products, maintaining cost efficiency and raising
capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Intangible Assets</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Separately acquired intangible
assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination
are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized
development costs, are recognized in profit or loss when incurred.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Intangible assets with a finite
useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired.
The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Contingent Liabilities</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The evaluations of provisions
and contingent liabilities are based on best professional judgment, taking into consideration the stage of the proceedings, as well as
cumulative legal experience in the various topics. Whereas the results of the lawsuits shall be determined by the courts, these results
may differ from these evaluations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Share-Based Compensation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our employees and other service
providers are entitled to benefits by way of share-based compensation settled with company options to shares. The cost of transactions
with employees settled with capital instruments is measured based on the fair value of the capital instruments on the granting date. The
fair value is determined using an accepted options pricing model. The model is based on share price, grant date and on assumptions regarding
expected volatility, expected lifespan, expected dividend, and a no risk interest rate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The cost of the transactions
settled with capital instruments is recognized in profit or loss together with a corresponding increase in the equity over the period
in which the performance and/or service takes place, and ending on the date on which the relevant employees are entitled to the benefits,
or the Vesting Period. The aggregate expense recognized for transactions settled with capital instruments at the end of each reporting
date and until the Vesting Period reflects the degree to which the Vesting Period has expired and our best estimate regarding the number
of options that have ultimately vested. The expense or income in profit or loss reflects the change of the aggregate expense recognized
as of the end of the reported period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We selected the Black-Scholes
option-pricing model as a fair value method for our options awards. The option-pricing model requires a number of assumptions:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Expected dividend yield</i>
- The expected dividend yield assumption is based on our historical experience and expectation of no future dividend payouts. We have
historically not paid cash dividends and have no foreseeable plans to pay cash dividends in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Volatility </i>- The expected
volatility is based on fluctuations in the price of our Ordinary Share prices on the Nasdaq.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Risk free interest rate
</i>- The risk free interest rate is based on the U.S. Treasury yield curve, in accordance with the option&#8217;s contractual term.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Contractual term </i>-
An option&#8217;s contractual term must at least include the Vesting Period and the employees&#8217; historical exercise and post-vesting
employment termination behavior for similar grants. If the amount of past exercise data is limited, that data may not represent a sufficiently
large sample on which to base a robust conclusion on expected exercise behavior.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Share price </i>- The share
price is determined according to the last known or above closing price of our Ordinary Shares at the grant date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_025"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A. Directors and Senior Management </b>&#160;</span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth
information regarding our executive officers, key employees and directors as of April 24, 2023:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: black 1.5pt solid; text-align: justify; width: 30%"><span style="font-size: 10pt"><b>Name</b></span></td>
    <td style="text-align: justify; width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: center; width: 10%"><span style="font-size: 10pt"><b>Age</b></span></td>
    <td style="text-align: justify; width: 1%">&#160;</td>
    <td style="text-align: justify; width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: justify; width: 57%"><span style="font-size: 10pt"><b>Position</b></span></td></tr>
  <tr style="background-color: #CCEEFF">
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    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">75</span></td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify">&#160;</td>
    <td style="vertical-align: bottom; text-align: justify"><span style="font-size: 10pt">President and Director </span></td></tr>
  <tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mr. Itschak Shrem </i>was
appointed to serve as our President in January 2022, prior to which he served as our Chairman from August 2020 to January 2022. Mr. Shrem
has more than 40 years of experience in financial markets and venture capital. In 1991, Mr. Shrem founded Dovrat Shrem Ltd., an investment
banking, management and technology company. Prior to that, he spent 15 years at Clal Israel Ltd., where he served in various capacities,
including chief operating officer, and was responsible for capital markets and insurance businesses. In 1993, Mr. Shrem founded Pitango
Venture Capital Fund (formerly, Polaris) and served as a partner of Pitango Funds I, II and III. He has been the Managing Director of
Yaad Consulting 1995 Ltd. since 1995. Previously, Mr. Shrem served on the board of Tel-Aviv Sourasky Medical Center, the Weizman Institute
Eden Spring Ltd., Rail Vision Ltd., Nano Dimension Ltd., Ormat Industries Ltd., Retalix Ltd. and as chairman of Sphera Funds Management
Ltd. Mr. Shrem holds a B.A. in Economics and Accounting from Bar-Ilan University and an M.B.A. from Tel-Aviv University.&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mr. Amitay Weiss </i>has
served on our Board of Directors since August 2020 and as our Chairman since January 2022. Mr. Weiss served as our Chief Executive Officer
from August 2020 to January 2022. Mr. Weiss currently serves as chairman of the board of directors of Automax Motors Ltd. (TASE: AMX.TA),
as a director of Jeffs&#8217; Brands Ltd. (Nasdaq: JFBR) and as an external director of Cofix Group Ltd. (TASE: CFCS). Mr. Weiss also
chairs and serves as director on the board of director of several public and private companies, including, Clearmind, Maris Tech Ltd.
(Nasdaq: MTEK) and Save Foods Inc. (Nasdaq: SVFD). In 2016, Mr. Weiss founded Amitay Weiss Management Ltd. and now serves as its chief
executive officer. From 2001 until 2015, Mr. Weiss served as vice president of business marketing &amp; development and in various other
positions at Bank Poalei Agudat Israel Ltd. from the First International Bank of Israel group. Mr. Weiss holds a B.A. in economics from
New England College, an M.B.A. in business administration from Ono Academic College in Israel, an Israeli branch of University of Manchester
and an LL.B. from the Ono Academic College.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mr. Oz Adler, CPA, </i>was
appointed to serve as our Chief Executive Officer in January 2022 and has served as our Chief Financial Officer since April 2018 and previously
held served as our VP Finance from March 2018 until April 2018 and as our Controller from September 2017 to March 2018. Mr. Adler has
experience in a wide variety of managerial, financial, tax and accounting roles. Mr. Adler currently serves on the board of directors
of numerous private, such as Polyrizon Ltd., and public companies, including Jeffs&#8217; Brands Ltd. (Nasdaq: JFBR), Rail Vision Ltd.
(Nasdaq: RVSN) and Clearmind (CSE: CMND), (OTC: CMNDF), (FSE: CWY), and previously served as the chief financial officer of Medigus Ltd.
(Nasdaq: MDGS) from December 2020 to April 2021. From 2012 until 2017, Mr. Adler was employed as a certified public accountant at Kost
Forer Gabbay &amp; Kasierer, a member of Ernst &amp; Young Global. Mr. Adler holds a B.A. in Accounting and Business management from The
College of Management, Israel.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Dr. Adi Zuloff-Shani </i>has
served as our Chief Technologies Officer since February 2016. Dr. Zuloff-Shani has more than 20 years of experience as a research and
development executive. Prior to joining us, and from 2012 to 2016, Dr. Zuloff-Shani served as a vice president development at Macrocure
Ltd. (Nasdaq: MCUR) where besides leading all research and development activities, she interacted and was involved with the activities
of all departments including clinical, operations, quality assurance, quality control, finance, and regulatory affairs. Dr. Zuloff-Shani
currently serves as the Chief Executive Officer of Clearmind. She has also served as the Chairman of Orsus Therapeutics, Inc. since November
2022. Dr. Zuloff-Shani holds a Ph.D. in human biology and immunology from Bar-Ilan University, Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mr. Amnon Ben Shay</i>
has served as a member of our Board of Directors since January 2021 and served as our external director under the Companies Law between
January 2021 and January 2022. Mr. Ben Shay has been serving as the chief financial officer of Hadar Hasharon Marketing and Distributions
Ltd. since 2019. Mr. Ben Shay previously served on the board of directors of Azorim Investments and Building Development Company Ltd.
(TASE: AZRM), Value Capital One Ltd. (TASE: VALU) and B.G.I. Investments (1961) Ltd. (TASE: BGI). From 2017 to 2019, Mr. Ben Shay served
as the chief financial officer of Fridenson Air &amp; Ocean Ltd. From 2014 to 2017, he served as the chief financial officer of Abetrans
Logistics Ltd. Prior to that, Mr. Ben Shay served as the chief financial officer of Isline Export and Import Services Ltd. from 2010 to
2013. Prior to the year 2009, Mr. Ben Shay served as the chief financial officer of several Israeli real estate investment groups. Mr.
Ben Shay holds a B.A. in economics and business and an M.B.A in business, both from The Hebrew University of Jerusalem, Israel, and an
accounting certificate from The College of Management Academic Studies, Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mr. Alon Dayan</i> has
served as a member of our Board of Directors since January 2021 and served as our external director under the Companies Law between January
2021 and January 2022. Mr. Dayan is the founder of L1-Systems Ltd. and has been serving as its chief executive officer since 2015. Since
2018, Mr. Dayan has served as the chief executive officer of Virtual Crypto Technologies Inc. (OTC: VBIX) from 2018 to 2019, which he
founded as well. Prior to that, he served as a business development manager at Elbit Systems Ltd. from 2006 to 2013. Mr. Dayan holds a
B.A. in electronical engineering from Ariel University, Israel.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mr.&#160;Moshe Revach</i>&#160;has
served as a member of our board of directors since September 2022. Mr. Revach also previously served as our director since August&#160;2020
until his resignation on March&#160;13, 2022. Mr.&#160;Revach serves as deputy mayor of the city of Ramat Gan, Israel, has headed both
the sports and government relations departments in the Ramat Gan municipality since 2013, and has served in various other Ramat Gan municipality
positions since 2008. Mr.&#160;Revach serves as a director of L.L.N IT solutions, a wholly-owned&#160;subsidiary of the Jewish Agency
for Israel, of Jeffs&#8217; Brands Ltd. (Nasdaq: JFBR) and of Biomedico Hadarim Ltd. Mr.&#160;Revach previously served as a director of
the RPG Economic Society and Jewish Experience Company on behalf of the Jewish Agency. Mr.&#160;Revach holds an LL.B from the Ono Academic
College, Israel, and a B.A. in management and economics from the University of Derby.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Ms. Liat Sidi</i> has served
as our Director since August 2020. Ms. Sidi serves as the manager of the accounting department for Foresight Autonomous Holdings Ltd.
(Nasdaq and TASE: FRSX). Ms. Sidi previously served as an accountant for Panaxia Labs Israel Ltd. (TASE: PNAK) from 2015 to 2020 and as
an accountant for Soho Real Estate Ltd. from 2015 to 2016. Ms. Sidi also served as an accountant for Feldman-Felco Ltd. from 2006 to 2010
and as an accountant for Eli Abraham accounting firm from 2000 to 2006. Ms. Sidi completed tax, finance and accounting studies in Ramat
Gan College of Accounting.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Mr. Lior Vider</i> has
served as our Director since August 2020. Mr. Vider has served as a senior investment portfolio manager at Forte Investment House Ltd.
since 2021. Mr. Vider previously served as chief investment manager for Impact Investment Management Ltd., from the Union Bank group,
from 2007 to 2010 and as chairman of the board of directors and a member of the group&#8217;s investment committee of Rahkia Capital Markets
Ltd. from 2006 to 2007. Mr. Vider also served as a director at Endymed Medical Ltd. and Apollo Power Ltd. Mr. Vider founded and managed
sponser.co.il, a financial portal specializing in services for investors from 2005 to 2017. Mr. Vider holds a B.A. in industry and management
engineering from Shenkar College in Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Scientific Advisory Board</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have a Scientific Advisory
Board of eleven award winning and active physicians and scientists in the field(s) of: psychiatry and child psychiatry, TS, neurology,
Alzheimer&#8217;s disease, hospice and palliative medicine neurobiology, pharmacology and neuropsychopharmacology, organic and medicinal
chemistry, cannabinoids and drug discovery. We consult with the members of our Scientific Advisory Board on a regular basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Prof. Yossi Tam</i> received
his B.Med.Sc., M.Sc., Ph.D. and D.M.D. from the Hebrew University of Jerusalem. He did his postdoctoral training at the National Institutes
of Health (NIH), and in 2014 he moved to the Hebrew University to head the Obesity and Metabolism Laboratory at the Institute for Drug
Research, where he focuses on targeting the endocannabinoid system for Obesity, Diabetes and the metabolic syndrome. Prof. Tam won major
national and international grants. He authored over 80 peer-reviewed papers in leading journals (such as Science, Nature Medicine, Cell
Metabolism, JCI, PNAS, Hepatology, Gastroenterology, Molecular Metabolism, to name a few), and three book chapters, with 5,412 citations
yielding an H-index of 36. In addition, Prof. Tam co-invented 14 patents that were commercialized to different pharmaceutical companies
for further clinical development and testing. Prof. Tam also serves as the Director of the Hebrew University&#8217;s Multidisciplinary
Center for Cannabinoid Research and a Scientific Advisory Board Member of several biotech companies, which develop a portfolio of non-psychoactive
cannabinoid-modulating medicines for unmet market needs. Prof. Tam&#8217;s research projects over the past twenty years have crossed subjects,
disciplines and methodologies, yet the main research interests remain focused on the different pathophysiological aspects of the endocannabinoid
system. Having a clinical background with basic science training, he has always been interested in how science can directly improve people&#8217;s
everyday lives. Thus, he has strived unceasingly to integrate his clinical curiosity and experimental knowledge, in order to deepen the
understanding of clinically relevant research questions.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Prof. Elon Eisenberg,</i>
is the Dean of the Faculty of Medicine at the Technion - Israel Institute of Technology. Prof. Eisenberg is a Professor of Neurology and
Pain Medicine at the Faculty of Medicine and holds the Otto Barth Family Academic Chair in Biomedical Science. Prof. Eisenberg graduated
from Sackler School of Medicine, Tel-Aviv University in Israel. Prof. Eisenberg completed a residency in Neurology, at Rambam Medical
Center, Haifa, Israel, and Neurology - Pain Fellowship at Massachusetts General Hospital, Harvard Medical School in Boston, USA. Prof.
Eisenberg has been the director of the Institute of Pain Medicine at Rambam Health Care Campus, Haifa, Israel, and the President of the
Israeli Pain Association. Prof. Eisenberg is currently the director of the Pain Research Unit at the Institute of Pain Medicine, Rambam
Health Care Campus. H Prof. Eisenberg&#8217;s main areas of research include mechanisms and treatment of pain with special emphasis on
neuropathic pain, CRPS, cancer pain, opioids and cannabinoids. Prof. Eisenberg has published about two-hundred articles, book chapters
and other manuscripts in various&#160;areas&#160;of&#160;pain&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Prof. James Leckman, M.D.</i>
is the Neison Harris Professor of Child Psychiatry, Psychiatry, Psychology and Pediatrics at Yale University. Prof. Leckman is a well-known
child psychiatrist and patient-oriented clinical investigator. For more than 20, years he served as the Director of Research for the Yale
Child Study Center. His peers have regularly selected him as one of the Best Doctors in America. Dr. Leckman is the author or co-author
of over 430 original articles published in peer-reviewed journals, twelve books, and 140 book chapters. Dr. Leckman has a longstanding
interest in Tourette syndrome and Obsessive-Compulsive Disorder (OCD). His research on these disorders is multifaceted from phenomenology
and natural history, to neurobiology to genetics, to risk factor research and treatment studies. One area of active research interest
concerns the role of the immune system in the pathobiology of Tourette syndrome and other neuropsychiatric disorders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Prof. Michael Davidson
</i>currently serves, among other things, as Chairman of the Israeli Medical Centre for Alzheimer&#8217;s Disease Care and Research in
Ramat Gan and Chairman of the department of psychiatry at the Nicosia University Medical School. Prof. Davidson served as Chief Psychiatrist
at the Department of Psychiatry of the Sheba Medical Centre in Tel-Hashomer for six years. Prof. Davidson holds a secondary professorship
at the Sackler School of Medicine of Tel Aviv University and at the Mount Sinai School of Medicine in New York. Prof. Davidson is considered
an international expert on Alzheimer&#8217;s disease and schizophrenia is the author of approximately 350 publications in scientific literature.<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Prof. Daniele Piomelli</i>
serves as the Louise Turner Arnold Chair in Neurosciences and Professor of Anatomy and Neurobiology, Pharmacology, and Biological Chemistry
at University of California, Irvine. Prof. Piomelli is also the founding director of the drug discovery and development unit (D3) at the
Italian Institute of Technology in Genoa, Italy, as well as the Editor in Chief of Cannabis and Cannabinoid Research of Cannabis and Cannabinoid
Research. Prof. Piomelli&#8217;s research has resulted in several contributions to the pharmacology of lipid based signaling molecules
including endocannabinoid substances and lipid amides. Prof. Piomelli is the author of more than 400 peer reviewed articles and books
and has received several awards and honors. Prof. Piomelli studied Pharmacology and Neuroscience at Columbia University, and the Rockefeller
University, and earned his degree of Doctor of Pharmacy from University of Naples.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><i>Prof. Kirsten M&#252;ller-Vahl </i>is a Professor
of Psychiatry at the Department of Psychiatry, Socialpsychiatry and Psychotherapy at the Hannover Medical School, Germany. Prof. M&#252;ller-Vahl
is a specialist in both neurology and adult psychiatry. She serves as the head of the TS outpatient department and over the past twenty-five
years, Prof. M&#252;ller-Vahl has investigated more than 4000 patients with TS, both children and adults. She serves on the scientific
advisory board of the German Tourette Syndrome Association and is the current president of the European Society of the study of Tourette
syndrome (ESSTS), the national German Association for Cannabinoid Medicines (ACM) as well as the International Alliance for Cannabinoid
Medicines (IACM). Her scientific work related to TS includes a large number of clinical trials funded by the EU (TS-EUROTRAIN: FP7-PEOPLE-2012-ITN,
No. 316978; EMTICS: EU FP7-HEALTH-2011, 278367), by the NIMH (TIC-GENETICS (1R01MH115958-01), by the German ministry of education and
research (BMBF) (ONLINE-TICS: 01KG1421) and the German Research Foundation (DFG) (CANNA-TICS: NCT03087201). At the 9th IACM Conference
on Cannabinoids in Medicine in 2017 she received the &#8220;IACM Award 2017 for Clinical Research&#8221; for her special achievements
regarding the re-introduction of cannabis and cannabinoids as medicine.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prof. M&#252;ller-Vahl has
published more than 180 scientific articles, is the author of several book chapters and the leading German textbook on TS, and co-editor
of the leading German textbook on cannabis-based medicine. She is author of several guidelines on TS including ESSTS guidelines and treatment
guidelines published by the American Academy of Neurology (AAN).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Prof. Avi Weizman</i> is
a Professor of Child and Adult Psychiatry at the Sackler Faculty of Medicine of Tel Aviv University, a former Director of the Felsentein
Medical Research Center and the head of the Laboratory for Biological and Molecular Psychiatry and the head of the Research Unit at the
Geha Mental Health Center. Prof. Weizman&#8217;s research involves the investigation of brain mechanisms of mental disorders. Currently,
it focuses on neurodevelopmental disorders, the development of new strategies for treating psychotic disorders, and the psychopharmacology
of mental disorders. Prof. Weizman is the author of more than 760 original papers, five full books, 28 book chapters, and 60 review articles.
After completing his residency in Psychiatry, Prof. Weizman spent two years as a visiting scientist at the National Institute of Mental
Health in&#160;Bethesda,&#160;MD.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Dr. Michael H. Bloch, M.D.,
M.S.</i> graduated from Yale School of Medicine and completed his child and adult psychiatry training at Yale. His research interests
focus on studying TS, obsessive-compulsive disorder (OCD) and trichotillomania (TTM) across the lifespan and developing better pharmacological
treatments for children with depression, anxiety and ADHD. His research focuses on developing better treatments for children and adults
with these conditions particularly through clinical trials and meta-analysis. He has over 200 peer-reviewed publications and is currently
the Research Review Editor for the Journal of Child Psychology and Psychiatry. He also serves on the scientific advisory boards of the
Tourette Association of America and the TLC Foundation for Body-Focused Repetitive Behaviors. <i>Prof. Saoirse O&#8217;Sullivan, PhD</i>
received her doctorate from Trinity College Dublin in 2001 and moved to the University of Nottingham in 2002 as a Research fellow where
she began researching cannabinoid pharmacology through basic and clinical research. She was made Lecturer in 2007 and Associate Professor
in 2011 and Full Professor in 2019. Prof. O&#8217;Sullivan has over 40 peer reviewed articles, six reviews and three books chapters on
the topic of cannabinoid pharmacology, with specific interests on the cardiovascular and gastrointestinal effects of cannabinoids and
therapeutic potential of cannabis-based medicines. Prof. O&#8217;Sullivan&#8217;s research methodologies span from cellular and animal
models to human healthy volunteer studies and early phase clinical trials. In 2016, Prof. O&#8217;Sullivan was named the International
Cannabinoid Research Society Young Investigator of the year. Prof. O&#8217;Sullivan now runs an independent consulting company called
CanPharmaConsulting Ltd, and through this, acts as scientific advisor to Artelo Biosciences, Inc., CBD Science Group PLC, Scisparc, FSD
Pharma Inc., and Dragonfly Biosciences Ltd. She is the science lead for the Centre for Medicine Cannabis, working to shape the UK&#8217;s
new medicinal cannabis regime for patients. She is also secretary to the International Cannabinoid Research Society.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Dr. Mellar P. Davis, MD,
FCCP FAAHPM </i>is a Professor of Palliative Medicine, the Geisinger Commonwealth School of Medicine and a member of the Palliative Care
Department, and Section Head, Geisinger Medical System Danville, PA. He has been a member of the Geisinger Medical Staff since August
2016. In his role as Section Head, Dr. Davis is responsible for developing palliative care services throughout the Geisinger Medical System
including outpatient and inpatient services. In addition, Dr. Davis works with the Geisinger Hospice Services to develop and coordinate
care within the central region. Dr. Davis was a member of the Cleveland Clinic Palliative Care section, Taussig Cancer Institute and fellowship
director until joining the Geisinger Medical System. Dr. Davis was the co-chair of the Palliative Care Study Group of the Multinational
Association of Supportive Care (MASCC) and a past board member since 2010. Dr. Davis has been a Professor of Medicine in The Cleveland
Clinic Lerner College of Medicine, Case Western Reserve University, since 2009 and was elected as a Fellow to the American Academy of
Hospice and Palliative Medicine in 2010. Dr. Davis is Editor in Chief of Progress on Palliative Care. Dr. Davis&#8217; present duties
are as the Associate Editor in Chief of PC Fast Article Critical Summary for Clinicians in Palliative Care.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Prof. Avi Schroeder</i>
is the head of the Targeted Drug Delivery and Personalized Medicine Group, at the Technion, Israel Institute of Technology, and has translational
research experience with the development of liposome-based clinical systems. He is the author of 60 scientific papers in the field of
nanotechnology and medicine and is the inventor on 17 patents, and a recipient of 30 national and international innovation awards. Prof.
Schroeder is a scientific entrepreneur, starting multiple successful Technion spin-outs. Prof. Schroeder received three degrees in Chemical
Engineering from the Ben-Gurion University of the Negev and his postdoctoral training took&#160;place&#160;at&#160;MIT.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Family Relationships</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are no family relationships
between any members of our executive management and our directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Arrangements for Election of Directors and
Members of Management</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are not a party to, and
there are no arrangements or voting agreements that we are aware of for the election of our directors and members of management.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_026"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B. Compensation</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Compensation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table presents
in the aggregate all compensation we paid to all of our directors and senior management, as a group for the year ended December 31, 2022.
The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during
this period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All amounts reported in the
tables below reflect the cost to the Company, in thousands of U.S. Dollars, for the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td style="width: 64%; text-align: left">All directors and senior management as a group, consisting of 9 persons</td><td style="width: 1%">&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(1)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Represents the directors and senior
management&#8217;s payment of mandatory social benefits made by the Company on behalf of such officer. Such benefits may include, to
the extent applicable to the executive, payments, contributions and/or allocations for savings funds, education funds (referred to in
Hebrew as &#8220;<i>Keren Hishtalmut</i>&#8221;), pension, severance, risk insurances (e.g., life or work disability insurance) and payments
for social security.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">(2)</span></td><td style="text-align: justify"><span style="font-size: 10pt">Computed based on fair value for
Ordinary Shares options granted and estimated using the Black-Scholes option pricing model.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with the Companies
Law, the table below reflects the compensation granted to our five most highly compensated officers or directors during or with respect
to the year ended December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Annual Compensation </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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<br/> Based<br/> Compensation&#160;<sup>(1)</sup></b></span></td><td style="text-align: center; padding-bottom: 1.5pt; font-weight: bold; vertical-align: bottom">&#160;</td><td style="text-align: center; font-weight: bold; padding-bottom: 1.5pt; vertical-align: bottom">&#160;</td>
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  <tr style="vertical-align: bottom">
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Weiss<br/>
<i>Chairman and Former Chief Executive Officer</i><sup>(2)</sup></p></td><td style="width: 1%">&#160;</td>
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<i>Chief Technologies Officer</i></span></td><td>&#160;</td>
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Adler <br/>
<i>Chief Executive Officer and Chief Financial Officer</i><sup>(3)</sup></p></td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">$</td><td style="vertical-align: top; text-align: right">358</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">$</td><td style="vertical-align: top; text-align: right">64</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: 0pt">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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Shrem<br/>
<i>President and Former Chairman</i><sup>(4)</sup></p></td><td>&#160;</td>
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    <td style="vertical-align: top; text-align: left">$</td><td style="vertical-align: top; text-align: right">120</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">$</td><td style="vertical-align: top; text-align: right">619</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="vertical-align: top; text-align: left">&#160;</td><td style="vertical-align: top; text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-variant: normal; padding-left: 0.125in; text-indent: -0.125in; font-style: normal; text-align: left; font-weight: normal">Lior
    Vider<br/>
    <i>Director</i></td><td>&#160;</td>
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Share-based compensation includes the cost of our non-cash share-based compensation in 2022.&#160;</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(2)</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(3)</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Mr. Shrem resigned from his position as Chairman of the Board of Directors, effective January 10, 2022, and was subsequently appointed to serve as the President of the Company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 103; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->95<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Employment and Services Agreements with
Executive Officers</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have entered into written
employment agreements and/or consulting agreements with each of our executive officers. All of these agreements contain customary provisions
regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition
provisions may be limited under applicable law. Most of these agreements are terminable by either party upon 30 days&#8217; prior written
notice. However, a longer 90 day notice period is required with respect to each of our executive officers. In addition, we have entered
into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount
and to the extent that these liabilities are not covered by directors and officers insurance. Members of our senior management are eligible
for bonuses each year, subject to a pre-determined target-based bonus plan, which is usually set during the first quarter of each calendar
year following the recommendation of our compensation committee and the approval of our Board of Directors. The annual bonuses are payable
upon meeting objectives and targets that are set by our Chief Executive Officer and compensation committee and approved annually by our
Board of Directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For a description of the terms
of our options and option plans, see Item 6.E. &#8220;Share Ownership<span style="font-variant: small-caps">&#8221; </span>below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As required by the Companies
Law, our compensation committee and Board of Directors approved, and recommended to the shareholders of the Company to approve, amended
terms of compensation of our Chief Executive Officer, Mr. Oz Adler, our President, Mr. Itschak Shrem, and our and Chairperson of the Board
of Directors, Mr. Amitay Weiss, as set forth below. Such terms are in line with our Compensation Policy and were approved by the Company&#8217;s
shareholders on February 10, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="text-decoration:underline">President and Chairperson of the Board of Directors</span>
- a monthly fee in the amount of NIS 52,500 (approximately $14,919) and an annual target bonus of up to six monthly salaries, or eight
in the case of overachievement.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-left: 0.75in; margin-top: 0pt; margin-bottom: 0pt">In addition, on September 15, 2022, our shareholders approved a special one-time bonus of $90,000 to each of <span style="font-family: Times New Roman, Times, Serif">Mr.&#160;Amitay Weiss, in his previous capacity as the Company&#8217;s Chief Executive Officer</span> and <span style="font-family: Times New Roman, Times, Serif">Mr.&#160;Itschak Shrem, in his previous capacity as the Company&#8217;s Chairman of the Board of Directors.</span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt"><span style="text-decoration:underline">Chief Executive Officer </span>-
a monthly fee in the amount of NIS 66,000 (approximately $18,755) and an annual target bonus of up to six monthly salaries, or eight
in the case of overachievement, plus applicable pension, retirement and other similar benefits.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Directors&#8217; Service Contracts</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not have written agreements
with any director providing for benefits upon the termination of his/her employment with us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 22.5pt">&#160;&#160;</p><div>

</div><div><a id="a_027"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>C. Board Practices </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Corporate Governance Practices</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As an Israeli company, we
are subject to various corporate governance requirements under the Companies Law. However, pursuant to regulations promulgated under the
Companies Law, companies with shares traded on certain U.S. stock exchanges, including the Nasdaq, may, subject to certain conditions,
&#8220;opt out&#8221; from the requirements to appoint external directors and related rules concerning the composition of the audit committee
and compensation committee of the board of directors, other than the gender diversification rule, which requires the appointment of a
director from the other gender if, at the time a director is appointed, all members of the board of directors are of the same gender.
In accordance with these regulations, following our listing on the Nasdaq, in January 2022, we elected to &#8220;opt out&#8221; from these
requirements of the Companies Law. Under these regulations, the exemptions from such Companies Law requirements will continue to be available
to us so long as: (i) we do not have a &#8220;controlling shareholder&#8221;, as such term is defined under the Companies Law, (ii) our
shares are traded on certain U.S. stock exchanges, including the Nasdaq, and (iii) we comply with the director independence requirements
and the audit committee and compensation committee composition requirements under U.S. laws, including the rules of the applicable exchange,
that are applicable to U.S. domestic issuers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a &#8220;foreign private
issuer&#8221;, as such term is defined in Rule 405 under the Securities Act. As a foreign private issuer we are permitted to comply with
Israeli corporate governance practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements
we are not following and the equivalent Israeli requirement. As a foreign private issuer, we are exempt under the Exchange Act from, among
other things, the rules prescribing 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 periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For more information regarding
our corporate governance practices and foreign private issuer status, see &#8220;Item 16.G Corporate Governance&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Board of Directors presently
consists of seven members. Nasdaq listing standards require that a majority of our Board of Directors be independent. These standards
provide, among other things, that a person will be considered an independent director if he or she is not an officer of the company and
is, in the view of the company&#8217;s board of directors, free of any relationship that would interfere with the exercise of independent
judgment. We believe that Mr. Vider, Ms. Sidi, Mr. Ben Shay, Mr. Revach and Mr. Dayan are all currently considered &#8220;independent&#8221;
for purposes of the Nasdaq rules. As such, our Board of Directors is comprised of a majority of independent directors as such term is
defined in the Nasdaq rules. Our amended and restated articles of association provide that the number of directors shall be set by the
general meeting of the shareholders provided that it will consist of not less than three and not more than 12 directors. Pursuant to the
Companies Law, the overall planning and management of our business is vested in our Board of Directors. Our Board of Directors may exercise
all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are
responsible for our day-to-day management and have individual responsibilities established by our Board of Directors. Our Chief Executive
Officer is appointed by, and serves at the discretion of, our Board of Directors. All other executive officers are appointed by the Board
of Directors or by our Chief Executive Officer, provided that he was authorized by the Board of Directors to do so. Their terms of employment
are subject to the approval of our Board of Directors&#8217; Compensation Committee (see &#8220;-Compensation Committee<span style="font-variant: small-caps">&#8221;</span>)
and of the Board of Directors (and in case the terms are not compatible with the provisions of the compensation policy, to our shareholders&#8217;
approval as well), and are subject to the terms of any applicable employment agreements that we may enter into with them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 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 of association.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our directors are divided
among the three classes as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the Class I directors consist
of Ms. Liat Sidi and Mr. Amnon Ben Shay, and their terms will expire at our annual general meeting of shareholders to be held in 2024;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the Class II directors consist
of Mr. Alon Dayan, Mr. Moshe Revach and Mr. Lior Vider and their terms will expire at our annual general meeting of shareholders to be
held in 2025; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">the Class III directors consist
of Mr. Amitay Weiss and Mr. Itschak Shrem and their terms will expire at our annual general meeting of shareholders to be held in 2023.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->97<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, our amended and
restated articles of association allow our Board of Directors to appoint directors to fill vacancies on our Board of Directors or in addition
to the acting directors (subject to the limitation on the number of directors and their qualifications), until the next general meeting
in which directors may be appointed or such appointment terminated.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, nominations
for directors may be made by any shareholder holding at least 1% of our outstanding voting power. However, any such shareholder may make
such a nomination only if a written notice of such shareholder&#8217;s intent to make such nomination has been given to our Board of Directors.
Any such notice must include certain information, a description of all arrangements between the nominating shareholder and the proposed
director nominee(s) and any other person pursuant to which the nomination(s) are to be made by the nominating shareholder, the consent
of the proposed director nominee(s) to serve as our director(s) if elected and a declaration signed by the nominee(s) declaring that there
is no limitation under the Companies Law preventing their election and that all of the information that is required to be provided to
us in connection with such election under the Companies Law has been provided.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, our
Board of Directors must determine the minimum number of directors who are required to have accounting and financial expertise. Our Board
of Directors has determined that the minimum number of directors of our company who are required to have accounting and financial expertise
is one.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Board of Directors is
required to elect one director to serve as the Chairman of the Board of Directors to preside at the meetings of the Board of Directors
and may also remove that director as Chairman. Pursuant to the Companies Law, neither the chief executive officer nor any of his or her
relatives is permitted to serve as the Chairman of the Board of Directors, and a company may not (subject to a certain time-limited exemption,
as described below) vest the Chairman or any of his or her relatives with the chief executive officer&#8217;s authorities. In addition,
a person who reports, directly or indirectly, to the chief executive officer may not serve as the Chairman of the Board of Directors;
the Chairman may not be vested with authorities of a person who reports, directly or indirectly, to the chief executive officer; and the
Chairman may not serve in any other position in the company or a controlled company, but he or she may serve as a director or chairman
of a controlled company. However, and notwithstanding the foregoing, the Companies Law permits the shareholders of a company to determine,
for periods not exceeding three years from each such determination, that the Chairman or his or her relative may serve as chief executive
officer or be vested with the chief executive officer&#8217;s authorities, and that the chief executive officer or his or her relative
may serve as Chairman or be vested with the Chairman&#8217;s authorities. Such determination of a company&#8217;s shareholders requires
either: (1) the approval of at least the majority of the shares of those shareholders present and voting on the matter (other than controlling
shareholders and those having a personal interest in the determination); or (2) that the total number of shares opposing such determination
does not exceed 2% of the total voting power in the company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Board of Directors may,
subject to the provisions of the Companies Law, delegate any or all of its powers to committees of the Board of Directors, and it may,
from time to time, revoke such delegation or alter the composition of any such committees, subject to certain limitations. Unless otherwise
expressly provided by the Board of Directors, the committees shall not be empowered to further delegate such powers. The composition and
duties of our audit committee and compensation committee, are described below. See &#8220;-Committees of the Board of Directors&#8221;
below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Role of Board of Directors in Risk Oversight
Process</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Board of Directors oversees
how management monitors compliance with our risk management policies and procedures, and reviews the adequacy of the risk management framework
in relation to the risks faced by us. Our Board of Directors encourages management to promote a culture that incorporates risk management
into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management
meetings, and conducts specific strategic planning and review sessions that include a focused discussion and analysis of the risks we
face. Senior management reviews these risks with the Board of Directors focusing on particular business functions, operations or strategies,
and presents the steps taken by management to mitigate or eliminate such risks. The Board of Directors is assisted in its oversight role
by an internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the
results of which are reported to our audit committee. See &#8220;-Committees of the Board of Directors-Internal Auditor&#8221; below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->98<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Leadership Structure of the Board of Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with the Companies
Law and our amended and restated articles of association, our Board of Directors is required to appoint one of its members to serve as
Chairman of the Board of Directors. Our Board of Directors has appointed Mr. Amitay Weiss to serve as Chairman of the Board of Directors,
effective January 10, 2022, and subsequently further named as the President of the Company, Mr. Itschak Shrem, the authorities of the
Chairman of the Board of Directors as well.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Alternate Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our amended and restated articles
of association provide, consistent with the Companies Law, that any director, and with respect to external directors (to the extent required
under applicable law - see the description of the External Directors Relief Resolution under &#8220;-External Directors&#8221; below)
&#8211; only subject to certain preconditions, may appoint another person to serve as his alternate director, provided such person has
the qualifications prescribed under the Companies Law to be appointed and to serve as a director and is not already serving as a director
or an alternate director of the company. The term of an alternate director may be terminated at any time by the appointing director and
automatically terminates upon the termination of the term of the appointing director. An alternate director has the same rights and responsibilities
as a director. To date there are no alternate director appointments in effect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>External Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, companies
incorporated under the laws of the State of Israel that are &#8220;public companies&#8221; are required to appoint at least two external
directors who meet the qualification requirements under the Companies Law. Pursuant to regulations promulgated under the Companies Law,
companies with shares traded on certain U.S. stock exchanges, including Nasdaq, which do not have a &#8220;controlling shareholder,&#8221;
may, subject to certain conditions, &#8220;opt out&#8221; from the Companies Law requirements to appoint external directors and related
Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors (other than
the gender diversification rule under the Companies Law, which requires the appointment of a director from the other gender if at the
time a director is appointed all members of the board of directors are of the same gender). In accordance with these regulations, in January
2022, following our listing on Nasdaq, our Board of Directors elected to &#8220;opt out&#8221; from the Companies Law requirement to appoint
external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of our
board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fiduciary Duties of Office Holders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Companies Law imposes
a duty of care and a duty of loyalty on all office holders of a company. &#8220;Office holders&#8221; includes the chief executive officer,
general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities
of any of the above positions regardless of that person&#8217;s title, and a director, or a manager directly subordinate to the chief
executive officer or general manager.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The duty of care requires
an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same
circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">information on the advisability of a given action brought for his approval or performed by him by virtue of his position; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">all other important information pertaining to these actions.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The duty of loyalty of an
office holder requires an office holder to act in good faith and for the benefit of the company, and includes a duty to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">refrain from any conflict of interest between the performance of his duties in the company and his performance of his other duties or personal affairs;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">refrain from any action that constitutes competition with the company&#8217;s business;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">disclose to the company any information or documents relating to the company&#8217;s affairs which the office holder has received due to his position as an office holder.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 15, 2022, we filed
a lawsuit in the Economic Division of the Tel Aviv Court against six of our former directors, including our former interim chief executive
officer and executive chairman, which included allegations of breaches of their fiduciary duties (duty of care and duty of loyalty) under
the Companies Law. See &#8220;Legal Proceedings&#8221; in Item 8.A below for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Approval of Related Party Transactions under
Israeli Law</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>General</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, we
may approve an action by an office holder from which the office holder would otherwise have to refrain, as described above, if:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the office holder acts in good faith and the act or its approval does not cause harm to the company; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the office holder disclosed the nature of his or her interest in the transaction (including any significant fact or document) to the company at a reasonable time before the company&#8217;s approval of such matter.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Disclosure of Personal Interests of an Office
Holder</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Companies Law requires
that an office holder disclose to the company, promptly, and, in any event, not later than the board meeting at which the transaction
is first discussed, any direct or indirect personal interest that he or she may have and all related material information known to him
or her relating to any existing or proposed transaction by the company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A &#8220;personal interest&#8221;
includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder
with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest
in the matter.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the transaction is an extraordinary
transaction, the office holder must also disclose any personal interest held by:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the office holder&#8217;s relatives; or</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any corporation in which the office holder or his or her relatives holds 5% or more of the shares or voting rights, serves as a director or general manager or has the right to appoint at least one director or the general manager.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">An office holder is not, however,
obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is
not considered an extraordinary transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->100<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, an
extraordinary transaction is a transaction:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">not in the ordinary course of business;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">not on market terms; or</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">that is likely to have a material effect on the company&#8217;s profitability, assets or liabilities.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Companies Law does not
specify neither to who within us nor the manner in which required disclosures are to be made. We require our office holders to make such
disclosures to our Board of Directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, once
an office holder complies with the above disclosure requirement, the board of directors may approve a transaction between the company
and an office holder, or a third party in which an office holder has a personal interest, unless the articles of association provide otherwise
and provided that the transaction is in the company&#8217;s interest and is performed by the office holder in good faith. If the transaction
is an extraordinary transaction, first the audit committee and then the board of directors, in that order, must approve the transaction.
Under specific circumstances, shareholder approval may also be required. Any director (and any person, in general) who has a personal
interest in an extraordinary transaction, which is considered at a meeting of the board of directors or the audit committee, may not be
present at this meeting or vote on this matter, unless the chairman of the relevant committee or board of directors determines that he
or she should be present in order to present the transaction that is subject to approval. If a majority of the board of directors or the
audit committee, as the case may be, has a personal interest in the approval of a transaction, then all directors may participate in discussions
of the audit committee or the board of directors (as applicable) on such transaction and the voting on approval thereof, but shareholder
approval is also required for such transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, all
arrangements as to compensation and indemnification or insurance of office holders require approval of the compensation committee and
board of directors, and compensation of office holders who are directors must be also approved, subject to certain exceptions, by the
shareholders, in that order. If shareholders of a company do not approve the compensation terms of office holders, other than directors,
the compensation committee and board of directors may override the shareholders&#8217; decision, subject to certain conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Disclosure of Personal Interests of a Controlling
Shareholder</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, the
disclosure requirements that apply to an office holder also apply to a &#8220;controlling shareholder&#8221; of a public company. Extraordinary
transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement
in which a controlling shareholder has a personal interest, as well as transactions for the provision of services whether directly or
indirectly by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions concerning
the terms of engagement of a controlling shareholder or a controlling shareholder&#8217;s relative, whether as an office holder or an
employee, require the approval of the audit committee or the compensation committee, as the case may be, the board of directors and a
majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders&#8217; meeting.
In addition, the shareholder approval must fulfill one of the following requirements:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">at least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="text-align: justify"><span style="font-size: 10pt">the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, any extraordinary
transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three
years requires the abovementioned approval every three years; however, such transactions not involving the receipt of services or compensation
can be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to regulations promulgated
under the Companies Law, certain transactions with a controlling shareholder or his or her relative, or with directors, that would otherwise
require approval of a company&#8217;s shareholders may be exempt from shareholder approval upon certain determinations of the audit or
compensation committee and board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Companies Law requires
that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a controlling
shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question.
Failure to so indicate will result in the invalidation of that shareholder&#8217;s vote.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The term &#8220;controlling
shareholder&#8221; is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, other than
by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of
the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. The definition
a &#8220;controlling shareholder&#8221; is deemed to include any shareholder that holds 25% or more of the voting rights in a company
if no other shareholder holds more than 50% of the voting rights in the company. For the purpose of determining the holding percentage
stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company&#8217;s approval
are deemed as joint holders. According to the foregoing, the Companies Law recognizes a situation where there exists a &#8220;controlling
shareholder&#8221; regarding a particular matter or in relation to a particular transaction, although such shareholder would not be considered
to have a controlling interest on an ongoing basis or in any other case.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Duties of Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, a
shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising
its rights and performing its obligations to the company and other shareholders, including, among other things, voting at general meetings
of shareholders on the following matters:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A shareholder also has a general
duty to refrain from oppressing and discriminating against other shareholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The remedies generally available
upon a breach of contract will also apply to a breach of the above mentioned duties, and in the event of oppression of other shareholders,
additional remedies are available to the injured shareholder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, any controlling
shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under
a company&#8217;s articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power
with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance
of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach
of the duty to act with fairness, taking the shareholder&#8217;s position in the company into account.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;<b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Committees of the Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Board of Directors has
established two standing committees, both of which (the audit committee and the compensation committee) are mandatory (and to date comprised
of the same members and combined into one functional committee which resides as a unified committee). In addition, occasionally our Board
of Directors may form sub-committees for certain matters on an ad hoc basis, such as a pricing committee or a nomination and corporate
governance committee, with advisory powers only, operating under a framework and guidelines as outlined and defined in advance by our
Board of Directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Audit Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><i>Companies Law Requirements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, we
are required to appoint an audit committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><i>Listing Requirements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 20pt"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the corporate governance
rules of Nasdaq, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially
literate and one of whom has accounting or related financial management expertise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit committee, acting
pursuant to a written charter, consists of Mr. Vider, Mr. Ben Shay and Mr. Dayan. Mr. Ben Shay serves as chairperson of our audit committee.
All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC
and the corporate governance rules of Nasdaq. Our Board of Directors has determined that Amnon Ben Shay is an audit committee financial
expert as defined by the SEC rules and has the requisite financial experience as defined by the corporate governance rules of Nasdaq.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><i>Audit Committee Role</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, our
audit committee is responsible for:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">determining whether there are deficiencies in the business management practices of our company, and making recommendations to the Board of Directors to improve such practices;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is extraordinary or material under Companies Law) (see &#8220;-Approval of Related Party Transactions under Israeli Law&#8221;);</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">examining our internal controls and internal auditor&#8217;s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">examining the scope of our auditor&#8217;s work and compensation and submitting a recommendation with respect thereto to our Board of Directors or shareholders, depending on which of them is considering the appointment of our auditor;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">establishing procedures for the handling of employees&#8217; complaints as to the management of our business and the protection to be provided to such employees;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">determining whether certain acts of an office holder not in accordance with his or her fiduciary duty owed to the company are extraordinary or material and to approve such acts and certain related party transactions (including transactions in which an office holder has a personal interest) and whether such transaction is extraordinary or material under the Companies Law (see &#8220;-Approval of Related Party Transactions Under Israeli Law&#8221;);</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">deciding whether to approve and to establish the approval process (including by tender or other competitive proceedings) for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal interest; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">determining the process of approving of transactions that are not negligible, including determining the types of transactions that will be subject to the approval of the audit committee.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have adopted an audit committee
charter setting forth among others, the responsibilities of the audit committee consistent with the rules of the SEC and Nasdaq listing
rules, including, among others, the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">considering and making recommendations to the Board of Directors on our financial statements, reviewing and discussing the financial statements and presenting its recommendations with respect to the financial statements to the Board of Directors prior to the approval of the financial statements by our Board of Directors;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the Board of Directors in accordance with Israeli law;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">recommending the engagement or termination of the person filling the office of our internal auditor, reviewing the services provided by our internal auditor and reviewing effectiveness of our system of internal control over financial reporting;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our Board of Directors; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reviewing and monitoring, if applicable, legal matters with significant impact, reviewing regulatory authorities&#8217; findings, receiving reports regarding irregularities and legal compliance, acting according to &#8220;whistleblower policy&#8221; and recommending to our Board of Directors if so required, and overseeing our policies and procedures regarding compliance with applicable financial and accounting related standards, rules and regulations.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Compensation Committee</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><i>Companies Law Requirements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, the
board of directors of any public company must establish a compensation committee. The compensation committee must be comprised of at least
three directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: left; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"><i>Listing Requirements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our compensation committee
is acting pursuant to a written charter, and consists of Mr. Vider, Mr. Ben Shay and Mr. Dayan. Mr. Ben Shay is the Chairperson of the
compensation committee. Our Board of Directors has determined that each member of our compensation committee is independent under the
corporate governance rules of Nasdaq, including the additional independence requirements applicable to the members of a compensation committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt; text-align: left"><i>Compensation Committee Role</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our compensation committee
reviews and recommends to our Board of Directors: (1) the annual base compensation of our executive officers and directors; (2) annual
incentive bonus, including the specific goals and amount; (3) equity compensation; (4) employment agreements, severance arrangements,
and change in control agreements/provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits, compensation,
compensation policies or arrangements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The duties of the compensation
committee include the recommendation to the company&#8217;s board of directors of a policy regarding the terms of engagement of office
holders, to which we refer as a Compensation Policy. The Compensation Policy must be adopted by the company&#8217;s Board of Directors,
after considering the recommendations of the Compensation Committee. The Compensation Policy is then brought for approval by our shareholders
and is subject to special majority requirements. On February 10, 2022, our shareholders approved our new Compensation Policy, which unless
amended shall remain in effect until February 9, 2025.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Compensation Policy</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Compensation Policy must
serve as the basis for decisions concerning the financial terms of employment or engagement of executive officers and directors, including
exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The Compensation
Policy must be approved (or reapproved) not longer than every three years, and relate to certain factors, including advancement of the
company&#8217;s objectives, the company&#8217;s business and its long-term strategy, and creation of appropriate incentives for executives.
It must also consider, among other things, the company&#8217;s risk management, size and the nature of its operations. The Compensation
Policy must furthermore consider the following additional factors:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">the director&#8217;s or executive&#8217;s roles and responsibilities and prior compensation agreements with him or her;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">the relationship between the terms offered and the average and median compensation of the other employees of the company, including those employed through manpower companies;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">the impact of disparities in salary upon work relationships in the company;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">the possibility of reducing variable compensation at the discretion of the board of directors; and the possibility of setting a limit on the exercise value of non-cash variable compensation; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Compensation Policy must
also include the following principles:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Compensation Policy must
also consider appropriate incentives from a long-term perspective and maximum limits for severance compensation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Compensation Committee
is responsible for (1) recommending the Compensation Policy to a company&#8217;s Board of Directors for its approval (and subsequent approval
by our shareholders) and (2) duties related to the compensation policy and to the compensation of a company&#8217;s office holders as
well as functions previously fulfilled by a Company&#8217;s Audit Committee with respect to matters related to approval of the terms of
engagement of office holders, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">recommending to the board of directors periodic updates to the compensation policy;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Internal Auditor</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, the
Board of Directors of an Israeli public company must also appoint an internal auditor nominated and supervised by the audit committee.
Our internal auditor is Mr. Daniel Shapira, who has been serving as our internal auditor since March 2006. Mr. Shapira is a Certified
Public Accountant and holds a B.A. degree in Economics and Accounting from Bar-Ilan University, Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The role of the internal auditor
is to examine whether a company&#8217;s actions comply with the law and proper business procedure. Our Chairman acts as the internal auditor&#8217;s
organizational supervisor. The internal auditor will submit his internal auditor&#8217;s work plan for the approval of our audit committee.
The internal auditor may not be an &#8220;interested party&#8221; or office holder, or a relative of any interested party or office holder,
and may not be a member of the company&#8217;s independent accounting firm or its representative. The Companies Law defines an interested
party as a holder of 5% or more of the shares or voting rights of a company, any person or entity that has the right to nominate or appoint
at least one director or the general manager of the company or any person who serves as a director or as the general manager of a company.
Our internal auditor is not our employee, but the managing partner of a firm which specializes in internal auditing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Remuneration of Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, remuneration
of directors is subject to the approval of the compensation committee, thereafter by the board of directors and thereafter by the general
meeting of the shareholders. In case the remuneration of the directors is in accordance with regulation applicable to remuneration of
the external directors then such remuneration shall be exempt from the approval of the general meeting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Insurance</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law and
our amended and restated articles of association, a company may obtain insurance for any of its office holders for:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a breach of his or her duty of care to the company or to another person, including a breach arising out of the negligent conduct of the office holder;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a breach of his or her duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice the company&#8217;s interests;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">a financial liability imposed upon him or her in favor of another person concerning an act performed by such office holder in his or her capacity as an officer holder;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">any other insurable action in accordance with the Companies Law;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">expenses incurred by an office holder relating to an administrative enforcement proceeding conducted with respect to such office holder including reasonable litigation expenses and attorneys&#8217; fees; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">payments to the party injured by the violation, in accordance with the Securities Law.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently have liability
insurance providing total coverage of $5 million per claim and in the aggregate for the benefit of all of our directors and officers and
company coverage for securities claims. We also have an excess Side A difference in conditions policy providing a total coverage of $2.5
million per claim and in the aggregate for the benefit of all of our directors and officers for claims against them, which may operate
as a primary coverage in certain cases, subject to policy terms and conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Indemnification</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Companies Law and our
amended and restated articles of association provide that we may indemnify an office holder against:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">a financial liability imposed on him or her in favor of another person by any judgment concerning an act performed in his or her capacity as an office holder, including a settlement or arbitrator&#8217;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 a company&#8217;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 must detail the abovementioned foreseen events and amount or criteria;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reasonable litigation expenses, including attorneys&#8217; fees, incurred by the office holder: (i) 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 (a) no indictment (as defined in the Companies Law) was filed against such office holder as a result of such investigation or proceeding; and (b) no financial liability as a substitute for the criminal proceeding (as defined in the Companies Law) was imposed upon him or her 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 (ii) in connection with a monetary sanction;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">reasonable litigation expenses, including attorneys&#8217; fees, expended by the office holder or charged to him or her by a court relating to an act performed in his or her capacity as an office holder, in connection with: (1) proceedings that the company institutes, or that another person institutes on the company&#8217;s behalf, against him or her; (2) a criminal charge of which he or she was acquitted; or (3) a criminal charge for which he or she was convicted for a criminal offense that does not require proof of criminal thought;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">expenses incurred by an office holder relating to an administrative enforcement proceeding conducted with regard to such office holder, including reasonable litigation expenses and including attorneys&#8217; fees;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">payment to the party injured by the violation; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">liability or expense otherwise permitted as an indemnification by the Companies Law.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our amended and restated articles
of association allow us to indemnify our office holders up to a certain amount. The Companies Law also permits a company to undertake
in advance to indemnify an office holder, provided that if such indemnification relates to financial liability imposed on him or her,
as described above, then the undertaking should be limited:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">to categories of events that the board of directors determines are likely to occur in light of the operations of the company at the time that the undertaking to indemnify is made; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">in amount or criterion determined by the board of directors, at the time of the giving of such undertaking to indemnify, to be reasonable under the circumstances.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have entered into indemnification
agreements, with each of our directors and with certain members of our senior management. Each such indemnification agreement provides
the office holder with indemnification to the fullest extent permitted under applicable law and up to a certain amount, and including
with respect to liabilities resulting from our initial public offering in the United States and any other subsequent public offerings,
and to the extent that the directors and officers insurance do not cover these liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Exculpation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Companies Law, an
Israeli company may not exculpate an office holder from liability for a breach of his or her duty of loyalty, but may exculpate in advance
an office holder from his or her liability to the company, in whole or in part, and for damages caused to the company as a result of a
breach of his or her duty of care (other than in relation to distributions), but only if a provision authorizing such exculpation is included
in its articles of association. A company may not exculpate a director from liability arising out of a prohibited dividend or distribution
to shareholders. Our amended and restated articles of association provide that we may exculpate any office holder from liability to us
to the fullest extent permitted by law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have entered into exculpation
agreements with each of our current directors and executive officers undertaking to exculpate and release our office holders from any
and all liability to us related to any breach by them of their duty of care to us to the fullest extent permitted by law and including
with respect to liabilities resulting from our initial public offering in the United States and any other subsequent public offerings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->107<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Limitations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Companies Law provides
that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability
incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity
or insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis to believe that the act would
not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly
(as opposed to merely negligently); (3) any action taken or omission committed with the intent to derive an illegal personal benefit;
or (4) any fine or forfeit levied against the office holder.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Equity Incentive Plans</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Israeli Share Option Plan (2015); Israeli
Share Option Plan (2005) </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In July 2005, we adopted the
Israeli Share Option Plan (2005), or the 2005 Plan, which was in force for a period of 10 years. Upon the expiration of the 2005 Plan,
we adopted the Israeli Share Option Plan (2015), or the 2015 Plan. There are no options outstanding under our 2005 Plan and all new options
are granted under the 2015 Plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the 2015 Plan, we grant
options to purchase our Ordinary Shares to our officers, employees, consultants and other service providers. As of April 24, 2023, 357,153
&#160;Ordinary Shares were reserved for issuance under the 2015 Plan, of which options to purchase 183,284 Ordinary Shares were issued
and outstanding thereunder. Of such outstanding options, options to purchase 123,911 &#160;Ordinary Shares were vested as of April 24,
2023, with a weighted average exercise price of $6.25 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The 2015 Plan was designed
to reflect the provisions of the Israeli Income Tax Ordinance (New Version) 5721-1961, or the Ordinance, mainly Sections 102 and 3(i),
which afford certain tax advantages to Israeli employees, officers, and directors who are granted share options in accordance with its
terms. Section 102 of the Ordinance allows employees, directors, and officers, who are not controlling shareholders and who are Israeli
residents, to receive favorable tax treatment for compensation in the form of shares or share options. Section 102 of the Ordinance includes
two alternatives for tax treatment involving the issuance of share options or shares to a trustee for the benefit of the grantees and
also includes an additional alternative for the issuance of share options or shares directly to the grantee. Sections 102(b)(2) and 102(b)(3)
of the Ordinance, which provide the most favorable tax treatment for grantees, permit the issuance to a trustee under the &#8220;capital
gain&#8221; tax regime. In order to comply with the terms of the &#8220;capital gain&#8221; tax regime, all share options granted under
a specific plan and subject to the provisions of Section 102 of the Ordinance, as well as the shares issued upon exercise of such share
options and other shares received following any realization of rights with respect to such share options, such as share dividends and
share splits, must be registered in the name of a trustee selected by the board of directors and held in trust for the benefit of the
relevant employee, director, officer or service provider. The trustee may not release these share options or shares to the relevant grantee
before the second anniversary of the registration of the share options in the name of the trustee. However, under this regime, our ability
to deduct an expense with respect to the issuance of the share options or shares might be limited. Section 3(i), which permits the issuance
of share options under the &#8220;income from labor&#8221; tax regime, does not provide for similar tax benefits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The 2015 Plan may be administered
by our Board of Directors either directly or upon the recommendation of a committee appointed by our Board of Directors. Our compensation
committee recommends to the Board of Directors, and the Board of Directors determines or approves the eligible individuals who receive
share options under the 2015 Plan, the number of Ordinary Shares covered by those share options, the terms under which such share options
may be exercised, and other terms and conditions of the share options, all in accordance with the provisions of the 2015 Plan. Share option
holders may not transfer their share options except in the event of death or transfer in accordance with law and the provisions of the
2015 Plan. Our compensation committee or Board of Directors may at any time amend or terminate the 2015 Plan; however, any amendment or
termination may not adversely affect any share options or shares granted under such 2105 Plan prior to such action. The share option exercise
price is determined by the Board of Directors, following the recommendation of the compensation committee, and specified in each option
award agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 116; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->108<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Awards under the 2015 Plan
may be granted until December 2025, 10 years from December 2015. Share options granted under the 2015 Plan generally vest over three years
commencing on the date of grant such that the options shall vest on a quarterly basis in equal portions, unless otherwise provided in
a specific share option grant agreement and such option agreements may contain acceleration provisions upon certain merger, acquisition,
or change of control transactions. Share options, other than certain incentive share options, that are not exercised within the term set
forth under each award agreement shall expire, unless otherwise determined by our Board of Directors. Except as otherwise determined by
the Board of Directors or as set forth in an individual&#8217;s award agreement, in the event of termination of employment or services
for reasons of disability or death, the grantee, or in the case of death - his or her legal successor, may exercise share options that
have vested prior to termination within a period of twenty four months from the date of disability or death. If we terminate a grantee&#8217;s
employment or service for cause (as this term is defined under the Plan), all of the grantee&#8217;s unvested share options will expire
on the date of termination, yet share options which by that date the offeree&#8217;s eligibility to exercise has already been formed shall
remain exercisable. If a grantee&#8217;s employment or service is terminated for any other reason other than for cause, the grantee may
exercise his or her vested share options within 90 days of the date of termination, unless otherwise provided in a specific share option
grant agreement. In the event of (i) a sale of all or substantially all of our assets or (ii) our consolidation or merger in which we
are not the ongoing or surviving corporation, then, and unless otherwise determined in the agreement or by the Board of Directors, we
shall be entitled to determine that all of the outstanding unexercised share options held by or for the benefit of any grantee shall be
assumed or substituted for an appropriate number of share options of the successor company, provided that the aggregate amount of the
exercise price for such share options shall be equal to the aggregate amount of the exercise price of our unexercised share options held
by each grantee at such time. In addition, and unless otherwise determined by our Board of Directors, upon the occurrence of certain events,
as further described in the 2015 Plan (among others, a merger transaction (or the like), liquidation and/or dissolution, recapitalization,
rights offering, distribution of bonus shares, dividends and capital reorganization), a grantee&#8217;s rights to purchase shares under
the 2015 Plan shall be adjusted as provided therein.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_028"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>D. Employees.</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On December 31, 2020, we had
3 full-time employees. On December 31, 2021, we had 4 full-time employees. On December 31, 2022, we had 3 full-time employees, 2 of whom
were members of senior management: our Chief Executive Officer who is also our Chief Financial Officer and Chief Technologies Officer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None of our current employees
and officeholders is represented by labor unions or covered by collective bargaining agreements. We believe that we maintain good relations
with all of our employees. However, in Israel, we are subject to certain Israeli labor laws, regulations and national labor court precedent
rulings, as well as certain provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance
with relevant labor laws by the Israeli and Industry of Economy and which apply such agreement provisions to our employees even though
they are not part of a union that has signed a collective bargaining agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><div><a id="a_029"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>E. Share Ownership.</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See &#8220;Item 7.A. Major Shareholders&#8221;
below. &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_031"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A. Major Shareholders </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None of the Company&#8217;s
shareholders own more than 5% of the Company&#8217;s issued and outstanding ordinary shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 117; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->109<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unless indicated otherwise,
the following table lists the number of our shares beneficially owned by each of our directors, our executive officers and our directors
and executive officers as a group as of April 24, 2023:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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Ordinary<br/>
Shares<br/>
Beneficially<br/>
Owned (1)</b></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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Class (2)</b></span></td>
    <td>&#160;</td></tr>
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    <td style="width: 1%">&#160;</td>
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    <td style="width: 1%">&#160;</td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amitay Weiss</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">29</span><span style="font-size: 10pt">,<span style="font-family: Times New Roman, Times, Serif">590</span></span></td>
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    <td>&#160;</td>
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    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
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    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
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    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>(7)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>(7)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>(7)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>(7)</sup></span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right">&#160;</td>
    <td style="text-align: right">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">*</span></td><td style="text-align: justify"><span style="font-size: 10pt">Less than 1%.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary Shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">The percentages shown are based on 6,860,090 Ordinary Shares issued and outstanding as of April 24, 2023, plus Ordinary Shares relating to options and warrants currently exercisable or exercisable within 60 days of the date of this table, which are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person.</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="text-align: justify">Includes 3,857 Ordinary Shares and options to purchase 20,733 Ordinary
Shares at an exercise price of $6.50 per share. In addition, Mr. Shrem holds options to purchase 10,367 Ordinary Shares that are not exercisable
within 60 days. Mr. Shrem&#8217;s options have an expiration date of January 3, 2028, and a weighted average exercise price of $6.50..</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">(4)</span></td>
    <td style="text-align: justify">Includes 8,857 Ordinary Shares and options to purchase 20,733 Ordinary
Shares at an exercise price of $6.50 per share. In addition, Mr. Weiss holds options to purchase 10,367 Ordinary Shares that are not exercisable
within 60 days. Mr. Weiss&#8217;s options have an expiration date of January 3, 2028, and a weighted average exercise price of $6.50.</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">(5)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Includes options to purchase 20,733 Ordinary Shares at an exercise price of $6.50 per share, options to purchase 1,606 Ordinary Shares at an exercise price $210 per share and options to purchase 142 Ordinary Shares at an exercise price $392 per share. In addition, Mr. Adler holds options to purchase 10,367 Ordinary Shares that are not exercisable within 60 days. Mr. Adler&#8217;s options have an expiration date of August 31, 2023 to October 10, 2029, and a weighted average exercise price of $18.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-size: 10pt">(6)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Includes options to purchase 178 Ordinary Shares at an exercise price of NIS 2,971 (approximately $900) per share, options to purchase 321 Ordinary Shares at an exercise price of $392 per share, options to purchase 1,428 Ordinary Shares at an exercise price of $210 per share and options to purchase 20,733 Ordinary Shares at an exercise price of $6.50 per share. In addition, Dr. Zuloff-Shani holds options to purchase 10,367 Ordinary Shares that are not exercisable within 60 days. Dr. Zuloff-Shani&#8217;s options have an expiration date of August 28, 2023 to October 10, 2029, and a weighted average exercise price of $23.86.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">Includes options to purchase 3,666 Ordinary Shares at an exercise price of $6.50 per share. Each of Amnon Ben Shay, Alon Dayan, Liat Sidi, Lior Vider and Moshe Revach holds options to purchase 1,834 Ordinary Shares that are not exercisable within 60 days. The options have an expiration date of January 3, 2028, and a weighted average exercise price of $6.50.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Changes in Percentage Ownership by Major
Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To our knowledge, other than
as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant change in the percentage
ownership held by any major shareholder during the past three years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Voting Rights</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 30.6pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No major shareholders listed
above had or have voting rights with respect to their Ordinary Shares that are different from the voting rights of other holders of our
Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Record Holders </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of April 24, 2023, there
were 21 holders of record of our Ordinary Shares, 6 of which have a registered address in the United States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These numbers are not representative
of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since many of these
shares were held of record by brokers or other nominees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Change in Control Arrangements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are not controlled by another
corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known
to us which would result in a change in control at a subsequent date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->111<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_032"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B. Related Party Transactions </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Employment Agreements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have entered into written
employment agreements with Mr. Oz Adler, our Chief Executive Officer and Chief Financial Officer, and Dr. Adi Zuloff-Shani, our Chief
Technologies Officer. Each of these agreements contains customary provisions regarding noncompetition, confidentiality of information
and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. These
agreements are terminable by either party upon 30 days&#8217; prior written notice. In addition, we have entered into agreements with
each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent
that these liabilities are not covered by directors and officers insurance. Members of our senior management are eligible for bonuses
each year. The bonuses are payable upon meeting objectives and targets that are set by our Chief Executive Officer and approved annually
by our Board of Directors that also set the bonus targets for our Chief Executive Officer. See Item 6.B. &#8220;Compensation-Employment
and Service Agreements with Executive Officers&#8221; and see the descriptions of exculpation and indemnification agreements and directors
and officers insurance arrangements in Item 6.A. &#8220;Directors and Senior Management&#8221; and Item 6.C. &#8220;Board Practices-Insurance,&#8221;
- &#8220;Indemnification&#8221; and &#8220;-Exculpation.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Options </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since our inception, we have
granted options to purchase our Ordinary Shares to our employees, officers, service providers and certain of our directors. Such option
agreements may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. We describe our option
plans under Item 6.E. &#8220;Share Ownership-Equity Incentive Plans.&#8221; If the relationship between us and an executive officer or
a director is terminated, except for cause (as defined in the various option plan agreements), options that are vested will generally
remain exercisable for 90 days after such termination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Commercial Agreements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Clearmind</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 7, 2022, we entered
into the Cooperation Agreement with Clearmind, a company in which Dr. Adi Zuloff-Shani, our Chief Technologies Officer, Mr. Weiss, our
President, and Mr. Adler, our Chief Executive Officer and Chief Financial Officer serve as officers and directors. See Item 4.B. &#8220;Business
Overview- <i>Collaboration with Clearmind</i>&#8221; for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 17, 2022, we invested
$1.5 million in Clearmind in connection with its initial public offering on the Nasdaq Capital Market, in exchange for 230,769 common
shares of Clearmind, representing 9.33% of the outstanding share capital of Clearmind.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Polyrizon</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 31, 2022, we entered
into the Polyrizon Collaboration Agreement with Polyrizon. Mr. Adler, our Chief Executive Officer and Chief Financial Officer, serves
as a director in Polyrizon. See Item 4.B. &#8220;Business Overview - <i>Collaboration with Polyrizon</i>&#8221; for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Jeffs&#8217; Brands</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 15, 2022, we entered
into a letter of intent with Jeffs&#8217; Brands, to establish the Jeffs&#8217; Joint Venture. See Item 4.B. &#8220;Business Overview
&#8211; <i>Joint Venture with Jeffs&#8217; Brands</i>&#8221; for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; ">On
February 23, 2023, we entered into the Secondary Purchase Agreement with Jeffs&#8217; Brands and Jeffs&#8217; Holdings. <span>See
Item 4.B. &#8220;Business Overview&#8212;&#160;<i>Wellution</i>&#8221; for additional information.</span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Oz Adler, our Chief Executive
Officer and Chief Financial Officer, is the chairman of the board of directors of&#160;Jeffs&#8217;&#160;Brands, Mr. Amitay Weiss, our
chairman of the board of directors and Mr. Moshe Revach, a member of our board of directors, are both directors in&#160;Jeffs&#8217;&#160;Brands.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_033"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>C. Interests of Experts and Counsel</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_034"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 8. FINANCIAL INFORMATION.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_035"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A. Consolidated Statements and Other Financial Information.</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">See Item 18. &#8220;Financial
Statements.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Legal Proceedings </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Claims Against our Former Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On February 15, 2022, we filed
a lawsuit against our former directors in the Economic Division of the Tel Aviv Court, case number 34426-02-22, or the Lawsuit. The Lawsuit
names six former directors, including our former interim chief executive officer and executive chairman, Dr. Ascher Shmulewitz, as defendants,
or the Defendants, and includes allegations of breaches of fiduciary duties (duty of care and duty of loyalty) of the Defendants under
the Companies Law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 28.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Lawsuit challenges a transaction
approved by the Defendants in August 2018, to acquire, via one of our subsidiaries, Therapix Healthcare Resources, Inc., eight pain clinics
and a fully equipped laboratory from Anesthesia Services Associates PLLC. (d/b/a Comprehensive Pain Specialist), or the Transaction. The
Lawsuit claims that the Defendants breached their fiduciary duties when approving the Transaction, causing us significant harm. The Lawsuit
claims damages in the amount of NIS 13,114,200 (approximately $4.12 million), which accounts for, as of the date of the filing of the
Lawsuit, the amounts invested by the Company in the Transaction and indirect expenses arising from the Transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 28.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>2020 Insolvency Petition</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 28.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 23, 2020, we submitted
to the Tel Aviv Court, or the Court, a petition pursuant to the Israeli Insolvency and Economic Rehabilitation Law, 2018, to commence
proceedings for the economic rehabilitation of the Company, or the Petition. In the Petition submitted to the Court, we stated that it
is insolvent (as determined by the cash flow test) and unable to pay its debts to our creditors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 6, 2020, L.I.A.
Pure Capital Ltd., or Pure Capital, filed with the Court, requesting an order to have the results of the Company&#8217;s annual general
meeting held on August 4, 2020 declared invalid, mainly due to our reliance on discretionary voting of the depositary bank for our ADSs.
The Court asked for the Company and former directors&#8217; response by no later than August 13, 2020, which was subsequently extended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 11, 2020, Pure Capital
proposed to deposit $1.5 million with the Company&#8217;s temporary trustee nominated by the Court to cover and pay all of our debts,
without derogating from any other creditor&#8217;s rights towards us, or the Pure Capital Proposal. The Pure Capital Proposal was made
subject to the replacement of our board of the directors as of the date of the Pure Capital Proposal, or the Prior Board, with Pure Capital&#8217;s
designated nominees that were voted upon at the adjourned annual general meeting of the Company&#8217;s shareholders on August 4, 2020
(as discussed below). The Court&#160;issued an order on August 14, 2020, or the Order, approving the Pure Capital Proposal and settlement
agreement submitted to the Court by the parties thereto.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In accordance with the terms
of the Order and following the deposit by Pure Capital, the Prior Board was replaced with: Itschak Shrem (chairman), Amity Weiss (also
was appointed to act as the Company&#8217;s Chief Executive Officer), Moshe Revach, Lior Amit, Lior Vider and Liat Sidi. Following the
issuance of the Order, a related case that was filed by Pure Capital with the Court was withdrawn as well.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 28.35pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Dividends </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have never declared or
paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash
dividends, if any, in the future will be at the discretion of our Board of Directors and will depend on then-existing conditions, including
our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board
of Directors may deem relevant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The distribution of dividends
may also be limited by the Companies Law, which permits the distribution of dividends only out of retained earnings or earnings derived
over the two most recent fiscal years, whichever is higher, provided that there is no reasonable concern that payment of a dividend will
prevent a company from satisfying its existing and foreseeable obligations as they become due.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Payment of dividends may be
subject to Israeli withholding taxes. See Item 10.E. &#8220;Taxation&#8221; for additional information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_036"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B. Significant Changes</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">No significant change, other
than as otherwise described in this Annual Report, has occurred in our operations since the date of our consolidated financial statements
included in this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_037"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 9. THE OFFER AND LISTING</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_038"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A. Offer and Listing Details</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Ordinary Shares are listed
on the Nasdaq Capital Market, trading under the symbol &#8220;SPRC&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_039"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B.  Plan of Distribution</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_040"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>C.  Markets</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Ordinary Shares are traded
on the Nasdaq under the symbol &#8220;SPRC&#8221;.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_041"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>D. Selling Shareholders</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_042"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>E. Dilution</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_043"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>F. Expenses of the Issue</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_044"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 10. ADDITIONAL INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_045"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>A. Share Capital </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_046"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>B. Memorandum and Articles of Association </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A copy of our amended and
restated articles of association is attached as Exhibit 1.1 to this Annual Report. The information called for by this Item is set forth
in Exhibit 2(d) to this Annual Report on Form 20-F and is incorporated by reference into this Annual Report.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_047"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>C. Material Contracts </b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not entered into any
material contract within the two years prior to the date of this Annual Report, other than contracts entered into in the ordinary course
of business, as otherwise described herein in &#8220;Item 4.A. History and Development of the Company&#8221; above, &#8220;Item 4.B. Business
Overview&#8221; above, &#8220;Item 5.A. Operating Results&#8221; above, or &#8220;Item 7.B. Related Party Transactions&#8221; above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_048"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>D. Exchange Controls</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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 countries that are, or have been, in a state of
war with Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_049"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>E. Taxation. </b>&#160;</span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ISRAELI TAX CONSIDERATIONS AND GOVERNMENT PROGRAMS
</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a description
of the material Israeli income tax consequences of the ownership of our Ordinary Shares. The following also contains a description of
material relevant provisions of the current Israeli income tax structure applicable to companies in Israel, with reference to its effect
on us. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation,
there can be no assurance that the tax authorities will accept the views expressed in the discussion in question. The discussion is not
intended, and should not be taken, as legal or professional tax advice and is not exhaustive of all possible tax considerations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following description
is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our Ordinary Shares.
Shareholders should consult their own tax advisors concerning the tax consequences of their particular situation, as well as any tax consequences
that may arise under the laws of any state, local, foreign or other taxing jurisdiction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>General Corporate Tax Structure in Israel</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Israeli resident companies
are generally subject to corporate tax, currently at the rate of 23% of a company&#8217;s taxable income. Capital gains derived by an
Israeli resident company are subject to tax at the prevailing corporate tax rate. Under Israeli tax legislation, a corporation will be
considered as an &#8220;Israeli resident company&#8221; if it meets one of the following: (i) it was incorporated in Israel; or (ii) the
control and management of its business are exercised in Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>The Encouragement of Research, Development
and Technological Innovations in the Industry Law, 5744-1984</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Innovation Law,
research and development programs which meet specified criteria and are approved by a committee of the IIA are eligible for grants of
up to 50% of the project&#8217;s expenditure, as determined by the research committee, and subject to the benefit track under which the
grant was awarded. A company that receives a grant from the IIA, or a grant recipient, is typically required to pay royalties from the
revenues generated from the sale of products and related services developed, in whole or in part pursuant to, or as a result of, a research
and development program funded by the IIA. Under the regular benefits tracks, the royalties are generally at a range of 3.0% to 5.0% of
revenues until the entire IIA grant is repaid, together with an annual interest generally equal to the 12 month LIBOR applicable to dollar
deposits that is published on the first business day of each calendar year. The obligation to pay royalties is contingent on actual income
generated from such products and services. In the absence of such income, no payment of such royalties is required.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The United Kingdom&#8217;s
Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit
rates for LIBOR after 2021. The grants received from the IIA bear an annual interest rate based on the 12-month LIBOR. Accordingly, there
is considerable uncertainty regarding the publication of LIBOR beyond 2021. While it is not currently possible to determine precisely
whether, or to what extent, the withdrawal and replacement of LIBOR would affect us, the implementation of alternative benchmark rates
to LIBOR may increase our financial liabilities to the IIA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The terms of the Innovation
Law also require that the manufacture of products developed with government grants be performed in Israel. The transfer of manufacturing
activity outside Israel is subject to the prior approval of the IIA (such approval is not required for the transfer of a portion of the
manufacturing capacity which does not exceed, in the aggregate, 10% of the portion declared to be manufactured outside of Israel in the
applications for funding, in which case only notification is required). It should be noted that the terms of the Innovation Law do not
restrict the export of products that incorporate the funded technology. Under the regulations of the Innovation Law, assuming we receive
approval from the IIA to manufacture our IIA-funded products outside Israel, our liability to the IIA may be increased depending upon
the manufacturing volume that is performed outside of Israel as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="white-space: nowrap; text-align: justify; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Manufacturing Volume Outside of Israel</b></p></td><td style="white-space: nowrap; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="white-space: nowrap; font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Royalties<br/> to the IIA as <br/> a Percentage<br/> of Grant</td><td style="white-space: nowrap; padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: justify">Up to 50%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">120</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: justify">between 50% and 90%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">150</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">90% and more</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">300</td><td style="text-align: left">%</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the manufacturing is performed
outside of Israel by us, the rate of royalties payable by us on revenues from the sale of products manufactured outside of Israel will
increase by 1% over the regular rates. A company requesting funds from the IIA also has the option of declaring in its IIA grant application
its intention to perform part of its manufacturing outside Israel, thus avoiding the need to obtain additional approval under the same
manufacturing scope indicated at the application. On January 6, 2011, the Innovation Law was amended to clarify that the potential increased
royalties specified in the table above will apply even in those cases where the IIA approval for transfer of manufacturing outside of
Israel is not required, namely when the volume of the transferred manufacturing capacity is less than 10% of total capacity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The know-how developed within
the framework of the IIA plan may not be transferred to third parties outside Israel without the prior approval of the IIA. The approval,
however, is not required for the export of any products developed using grants received from the IIA. The IIA approval to transfer know-how
created, in whole or in part, in connection with an IIA-funded project to a third party outside Israel is subject to payment of a redemption
fee to the IIA calculated according to a formula provided under the Innovation Law that is based, in general, on the ratio between the
aggregate IIA grants and our aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction consideration
taking into account a depreciation mechanism, and less royalties already paid to the IIA. According to regulations promulgated under the
Innovation Law, the maximum amount payable to the IIA in case of transfer of know how outside Israel shall not exceed six times the amount
of the grants received plus interest, with a possibility to reduce such payment to up to three times the amount of the grants received
plus interest if the grant recipient undertakes to continue the research and development activity in Israel for a period of three years
after the transfer of knowhow, and maintain at least 75% of the research and development employees the company had for the six months
before the know-how was transferred, subject to additional conditions specified in the regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Transfer of know-how to an
Israeli entity is subject to the IIA approval and to an undertaking of the recipient Israeli entity to undertake all the transferor&#8217;s
obligations to the IIA and to comply with the provisions of the Innovation Law and related regulations, including the restrictions on
the transfer of know-how and the obligation to pay royalties, as further described in the Innovation Law and related regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The restrictions under the
Innovation Law will continue to apply even after we will repay the full amount of royalties payable pursuant to the grants. In addition,
the government of the State of Israel may from time to time audit sales of product candidates which it claims incorporate technology funded
via IIA programs and this may lead to additional royalties being payable on additional product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These restrictions may impair
our ability to outsource manufacturing or otherwise transfer our know-how outside Israel and may require us to obtain the approval of
the IIA for certain actions and transactions and pay additional royalties or other payments to the IIA. If we fail to comply with certain
restrictions under the Innovation Law, we may be subject to mandatory repayment of grants received by us (together with interest and penalties),
as well as be exposed to criminal charges.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 124; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our research and development
efforts have been financed, partially, through grants that we have received from the IIA. We therefore must comply with the requirements
of the Innovation Law and related regulations. Our total outstanding obligation to the IIA, respectively, including the interest accrued
through December 31, 2021, amounts to approximately $1.2 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Tax Benefits for Research and Development
under the Innovation Law</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Israeli tax law allows, under
certain conditions, a tax deduction for expenditures, including capital expenditures, in scientific research in the fields of industry,
agriculture, transportation or energy, for the year in which they are incurred. Expenditures are deemed related to scientific research
and development projects, if:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The expenditures are approved by the relevant Israeli government ministry, determined by the field of research;</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The research and development must be for the promotion of the company; and</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The research and development is carried out by or on behalf of the company seeking such tax deduction.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amount of such deductible
expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development
projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested
in an asset depreciable under the general depreciation rules of the Israeli Income Tax Ordinance (New Version) 1961, or the Ordinance.
Expenditures not so approved are deductible in equal amounts over three years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time we may apply
the IIA for approval to allow a tax deduction for all research and development expenses during the year incurred. There can be no assurance
that such application will be accepted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i><span style="text-decoration:underline">Law for the Encouragement of Capital Investments, 5719-1959</span></i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Law for the Encouragement
of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in
production facilities (or other eligible assets) by &#8220;Industrial Enterprises&#8221; (as defined under the Investment Law).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Investment Law was significantly
amended effective April&#160;1, 2005 (which we refer to as the 2005 Amendment), further amended as of January&#160;1, 2011 (which we refer
to as the 2011 Amendment) and further amended as of January 1, 2017 (which we refer to as the 2017 Amendment). Pursuant to the 2005 Amendment,
tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force
but any benefits granted subsequently are subject to the provisions of the 2005 Amendment. Similarly, the 2011 Amendment introduced new
benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However,
companies entitled to benefits under the Investment Law as in effect prior to January&#160;1, 2011 were entitled to choose to continue
to enjoy such benefits, provided that certain conditions are met, or elect instead irrevocably to forego such benefits and have the benefits
of the 2011 Amendment apply. The 2017 Amendment introduced new benefits for Technological Enterprises, alongside the existing tax benefits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of our Shareholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Capital Gains</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Capital gain tax is imposed
on the disposal of capital assets by an Israeli resident, and on the disposal of such assets by a non-Israeli resident if those assets
are either (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation, or (iii) represent, directly
or indirectly, rights to assets located in Israel, unless a tax treaty between Israel and the seller&#8217;s country of residence provides
otherwise. The Ordinance, distinguishes between &#8220;Real Gain&#8221; and the &#8220;Inflationary Surplus.&#8221; Real Gain is the excess
of the total capital gain over Inflationary Surplus. Inflationary Surplus is computed generally on the basis of the increase in the Israeli
Consumer Price Index or, in certain circumstances, according to the change in the foreign currency exchange rate, between the date of
purchase and the date of disposal. Inflationary Surplus is not subject to tax in Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Real Gain accrued by individuals
on the sale of our Ordinary Shares will be taxed at the rate of 25%. However, if the shareholder claims deduction of interest and linkage
differences expenses in connection with the purchase and holding of such shares or the individual shareholder is a &#8220;Controlling
Shareholder&#8221; (i.e., a person who holds, directly or indirectly, alone or together with such person&#8217;s relative or another person
who collaborates with such person on a permanent basis, 10% or more of one of the Israeli resident company&#8217;s &#8220;means of control&#8221;
including, among other things, the right to company profits, voting rights, the right to the company&#8217;s liquidation proceeds and
the right to appoint a company director) at the time of sale or at any time during the preceding 12 months period, such gain will be taxed
at the rate of 30%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Real Gain derived by corporations
will be generally subject to the regular corporate tax rate (23% in 2022).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Individual and corporate shareholder
dealing in securities in Israel for whom the income from the sale of securities is considered &#8220;business income&#8221; as defined
in Section 2(1) of the Ordinance are taxed at the tax rates applicable to business income- 23% for corporations in 2021 and a marginal
tax rate of up to 47% in 2021 for individuals, unless the benefiting provisions of an applicable tax treaty applies. Certain Israeli institutions
who are exempt from tax under Section 9(2) or Section 129(C)(a)(1) of the Ordinance (such as exempt trust fund, pension fund) may be exempt
from capital gains tax from the sale of shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><i>Capital Gains Taxes is
Applicable also to Non-Israeli Resident Shareholders</i>. A non-Israeli resident (whether an individual or a corporation) who derives
capital gains from the sale of shares in an Israeli resident company may be exempt from Israeli capital gain tax so long as the following
cumulative conditions are met: (i) the shares were purchased upon or after the registration of the securities on a recognized stock exchange,
outside of Israel (such as Nasdaq) (ii) the seller does not have a permanent establishment in Israel to which the derived capital gain
is attributed, and (iii) with respect to securities listed on a recognized stock exchange outside of Israel, such shareholders are not
subject to the Israeli Income Tax Law (Inflationary Adjustments) 5745-1985. However, non-Israeli corporation will not be entitled to the
foregoing exemptions if Israeli residents (a) have a controlling interest of more than 25% in such non-Israeli corporation, or (b) are
the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly and indirectly.
In addition, such exemption would not be available to a person whose gains from selling or otherwise disposing of the securities are deemed
to be business income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If not exempt, a&#160;non-Israeli&#160;resident
would generally be subject to tax on capital gain at the ordinary corporate tax rate (23% in 2022) if generated by a company, or at the
rate of 25%, if generated by an individual, or 30%, if generated by an individual who is a &#8220;Controlling Shareholder&#8221;, at the
time of sale or at any time during the preceding&#160;12-month&#160;period (or if the shareholder claims a deduction for interest and
linkage differences expenses in connection with the purchase and holding of such shares).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, a sale of shares
by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example,
under the Convention Between the Government of the United States of America and the Government of the State of Israel with respect to
Taxes on Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder
who is a United States resident (for purposes of the United States-Israel Tax Treaty) holding the shares as a capital asset and is entitled
to claim the benefits afforded to such a resident by the United States.-Israel Tax Treaty, or a Treaty U.S. Resident, is generally exempt
from Israeli capital gains tax unless either: (i) the capital gain arising from such sale, exchange or disposition is attributed to real
estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the
capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment of the shareholder which is
maintained in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more
of the voting capital during any part of the 12-month period preceding the disposition, subject to certain conditions; or (v) such Treaty
U.S. Resident, if an individual, was present in Israel for a period or periods of 183 days or more in the aggregate during the relevant
taxable year. In any such case, the sale, exchange or disposition of such shares would be subject to Israeli tax, to the extent applicable;
however, under the United States-Israel Treaty, a U.S. resident would be permitted to claim a credit for the Israeli tax against the U.S.
federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign
tax credits. The United States-Israel Treaty does not provide such credit against any U.S. state or local taxes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In some instances where our
shareholders may be liable for Israeli tax on the sale of their Ordinary Shares, the payment of the consideration may be subject to the
withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains
in order to avoid withholding at source at the time of sale. Specifically, in transactions involving a sale of all of the shares of an
Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may require from shareholders who are not liable
for Israeli tax to sign declarations in forms specified by this authority or obtain a specific exemption from the Israel Tax Authority
to confirm their status as non-Israeli residents, and, in the absence of such declarations or exemptions, may require the purchaser of
the shares to withhold taxes at source.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Either the purchaser, the
Israeli stockbrokers or financial institution through which the shares are held is obliged, subject to the above mentioned exemptions,
to withhold tax upon the sale of securities from the Real Gain at the rate of 25%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At the sale of securities
traded on a stock exchange, a detailed return, including a computation of the tax due, must be filed and an advance payment must be made
on January 31 and July 31 of every tax year in respect of sales of securities made within the previous six months. However, if all tax
due was withheld at source according to applicable provisions of the Ordinance and regulations promulgated thereunder, the aforementioned
return need not be filed and no advance payment must be paid, provided that (i) such income was not generated from business conducted
in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required
to be filed, and (iii) the taxpayer is not obligated to pay Excess Tax (as further explained below). Capital gain is also reportable on
the annual income tax return.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Dividends</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A distribution of dividends
from income, to an Israeli resident individual, will generally be subject to income tax at a rate of 25%. However, a 30% tax rate will
apply if the dividend recipient is a Controlling Shareholder (as defined above in this section) at the time of distribution or at any
time during the preceding 12 months period. If the recipient of the dividend is an Israeli resident corporation, generally, such dividend
will be exempt from income tax provided the income from which such dividend is distributed was derived or accrued within Israel (although,
if such dividends are subsequently distributed to individuals, the aforesaid will apply).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Non-Israeli residents (whether
individuals or a corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares at
the rate of 25% or 30% with respect to a Controlling Shareholder (as defined above) at the time of receiving the dividend or on any time
during the preceding twelve months, the applicable tax rate, which tax will be withheld at source, unless relief is provided in a treaty
between Israel and the shareholder&#8217;s country of residence subject to the receipt in advance of a valid certificate from the Israel
Tax Authority allowing for a reduced tax rate). Such dividends are generally subject to Israeli withholding tax at a rate of 25% so long
as the shares are registered with a Nominee Company (whether the recipient is a Controlling Shareholder or not). For example, under the
United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our Ordinary Shares
who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by a Preferred
Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year
in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income
for such preceding year consists of certain types of dividends and interest. The aforementioned rates will not apply if the dividend income
was generated through a permanent establishment of the U.S. resident which is maintained in Israel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A non-Israeli resident who
receives dividends from which tax was withheld is generally exempt from the obligation to file tax returns in Israel with respect to such
income, provided that (i) such income was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other
taxable sources of income in Israel with respect to which a tax return is required to be filed, and (iii) the taxpayer is not obligated
to pay excess tax (as further explained below).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Excess Tax</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Individuals who are subject
to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at
a rate of 3% on annual income exceeding a certain threshold (NIS 663,240 for 2022, which amount is linked to the annual changes to the
Israeli Consumer Price Index), including, but not limited to income derived from dividends, interest and capital gains.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Foreign Exchange Regulations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Non-residents of Israel who
hold our Ordinary Shares are able to receive any dividends, and any amounts payable upon the dissolution, liquidation and winding up of
our affairs, repayable in non-Israeli currency at the rate of exchange prevailing at the time of conversion. However, Israeli income tax
is generally required to have been paid or withheld on these amounts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Estate and Gift Tax</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Israeli law presently does
not impose estate or gift taxes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>U.S. FEDERAL INCOME TAX CONSIDERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL
INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS
OR HER OWN TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES
AND AMERICAN DEPOSITARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE
TAX LAWS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to the limitations
described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a &#8220;U.S.
Holder&#8221; arising from the purchase, ownership and sale of the Ordinary Shares. For this purpose, a &#8220;U.S. Holder&#8221; is a
holder of Ordinary Shares that is: (1) an individual citizen or resident of the United States, including an alien individual who is a
lawful permanent resident of the United States or meets the substantial presence residency test under U.S. federal income tax laws; (2)
a corporation (or entity treated as a corporation for U.S. federal income tax purposes) or a partnership (other than a partnership that
is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized under the laws of the United States
or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is includable in gross income for
U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or
(5) a trust that has a valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This summary is for general
information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations
that may be relevant to a decision to purchase our Ordinary Shares. This summary generally considers only U.S. Holders that will own our
Ordinary Shares as capital assets. Except to the limited extent discussed below, this summary does not consider the U.S. federal tax consequences
to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer&#8217;s status as a U.S. Holder.
This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, final, temporary and proposed U.S.
Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, (including with respect to the TCJA
of 2017), and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change, possibly
on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to
the U.S. federal income tax treatment of an investment in our Ordinary Shares by U.S. Holders and, therefore, can provide no assurances
that the IRS will agree with the conclusions set forth below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This discussion does not address
all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder based on such holder&#8217;s particular
circumstances and in particular does not discuss any estate, gift, generation-skipping, transfer, state, local, excise or foreign tax
considerations. In addition, this discussion does not address the U.S. federal income tax treatment of a U.S. Holder who is: (1) a bank,
life insurance company, regulated investment company, or other financial institution or &#8220;financial services entity;&#8221; (2) a
broker or dealer in securities or foreign currency; (3) a person who acquired our Ordinary Shares in connection with employment or other
performance of services; (4) a U.S. Holder that is subject to the U.S. alternative minimum tax; (5) a U.S. Holder that holds our Ordinary
Shares as a hedge or as part of a hedging, straddle, conversion or constructive sale transaction or other risk-reduction transaction for
U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment trusts or grantor trusts; (8) a U.S. Holder that
expatriates out of the United States or a former long-term resident of the United States; or (9) a person having a functional currency
other than the U.S. dollar. This discussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly
or constructively, at any time, Ordinary Shares representing 10% or more of our voting power. Additionally, the U.S. federal income tax
treatment of partnerships (or other pass-through entities) or persons who hold Ordinary Shares through a partnership or other pass-through
entity are not addressed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each prospective investor
is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding or disposing
of our Ordinary Shares, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of Dividends Paid on our Ordinary
Shares </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not intend to pay dividends
in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading &#8220;Passive Foreign
Investment Companies&#8221; below and the discussion of &#8220;qualified dividend income&#8221; below, a U.S. Holder will be required
to include in gross income as ordinary income the amount of any distribution paid on our Ordinary Shares (including the amount of any
Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed our current and accumulated
earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our earnings and
profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder&#8217;s tax basis for the Ordinary Shares to
the extent thereof, and then capital gain. We do not expect to maintain calculations of our earnings and profits under U.S. federal income
tax principles and, therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as dividend
income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In general, preferential tax
rates for &#8220;qualified dividend income&#8221; and long-term capital gains are applicable for U.S. Holders that are individuals, estates
or trusts. For this purpose, &#8220;qualified dividend income&#8221; means, inter alia, dividends received from a &#8220;qualified foreign
corporation.&#8221; A &#8220;qualified foreign corporation&#8221; is a corporation that is entitled to the benefits of a comprehensive
tax treaty with the United States which includes an exchange of information program. The IRS has stated that the Israel/U.S. Tax Treaty
satisfies this requirement, and we believe we are eligible for the benefits of that treaty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Dividends will not qualify
for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as a PFIC, as described below under
&#8220;Passive Foreign Investment Companies.&#8221; A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder
has not held our Ordinary Shares for at least 61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend
date, or (2) to the extent the U.S. Holder is under an obligation to make related payments on substantially similar property. Any days
during which the U.S. Holder has diminished its risk of loss on our Ordinary Shares are not counted towards meeting the 61-day holding
period. Finally, U.S. Holders who elect to treat the dividend income as &#8220;investment income&#8221; pursuant to Code section 163(d)(4)
will not be eligible for the preferential rate of taxation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amount of a distribution
with respect to our Ordinary Shares will be measured by the amount of the fair market value of any property distributed, and for U.S.
federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included
in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible
in the income of the U.S. Holder, and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such
U.S. dollar value. If the U.S. Holder subsequently converts the NIS into U.S. dollars or otherwise disposes of it, any subsequent gain
or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. source ordinary exchange gain or loss.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Taxation of the Disposition of our Ordinary
Shares </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as provided under the
PFIC rules described below under &#8220;Passive Foreign Investment Companies,&#8221; upon the sale, exchange or other disposition of our
Ordinary Shares, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder&#8217;s
tax basis for the Ordinary Shares in U.S. dollars and the amount realized on the disposition in U.S. dollar (or its U.S. dollar equivalent
determined by reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency).
The gain or loss realized on the sale, exchange or other disposition of Ordinary Shares will be long-term capital gain or loss if the
U.S. Holder has a holding period of more than one year at the time of the disposition. Individuals who recognize long-term capital gains
may be taxed on such gains at reduced rates of tax. The deduction of capital losses is subject to various limitations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gain realized by a U.S. Holder
on a sale, exchange or other disposition of our Ordinary Shares will generally be treated as U.S. source income for U.S. foreign tax credit
purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of our Ordinary Shares is generally allocated to
U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of our Ordinary Shares is subject
to limitations. An additional 3.8% net investment income tax (described below) may apply to gains recognized upon the sale, exchange or
other taxable disposition of our Ordinary Shares by certain U.S. Holders who meet certain income thresholds.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Passive Foreign Investment Companies</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Special U.S. federal income
tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federal income
tax purposes for any taxable year that either:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">75% or more of our gross income
(including our pro rata share of gross income for any company, in which we are considered to own 25% or more of the shares by value),
in a taxable year is passive; or</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">At least 50% of our assets,
averaged over the year and generally determined based upon fair market value (including our pro rata share of the assets of any company
in which we are considered to own 25% or more of the shares by value) are held for the production of, or produce, passive income.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For this purpose, passive
income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions and from
notional principal contracts. Cash is treated as generating passive income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not believe that we
would be deemed a PFIC for 2022&#160;&#160;&#160;. The tests for determining PFIC status are applied annually, and it is difficult to
make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend
in part on the market value of our Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become
a PFIC.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we currently are or become
a PFIC, each U.S. Holder who has not elected to mark the shares to market (as discussed below), would, upon receipt of certain distributions
by us and upon disposition of our Ordinary Shares at a gain: (1) have such distribution or gain allocated ratably over the U.S. Holder&#8217;s
holding period for the Ordinary Shares, as the case may be; (2) the amount allocated to the current taxable year and any period prior
to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to
each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for
that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each
such other taxable year. In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the
tax basis of such shares would not receive a step-up to fair market value as of the date of the decedent&#8217;s death, but instead would
be equal to the decedent&#8217;s basis if lower, unless all gain were recognized by the decedent. Indirect investments in a PFIC may also
be subject to these special U.S. federal income tax rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The PFIC rules described above
would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held our Ordinary Shares while
we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made such a QEF election
is required for each taxable year that we are a PFIC to include in income such U.S. Holder&#8217;s pro rata share of our ordinary earnings
as ordinary income and such U.S. Holder&#8217;s pro rata share of our net capital gains as long-term capital gain, regardless of whether
we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required
information. The QEF election is made on a shareholder-by-shareholder basis and generally may be revoked only with the consent of the
IRS. We do not intend to furnish U.S. Holders annually with information needed in order to complete IRS Form 8621 and to make and maintain
a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. Therefore, the QEF election will not be available
with respect to our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">U.S. Holders who hold our
Ordinary Shares during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders
are strongly urged to consult their tax advisors about the PFIC rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->122<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Tax on Net Investment Income</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to certain adjustments
under the PFIC rules, U.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their
net investment income (including dividends on and gains from the sale or other disposition of our Ordinary Shares), or in the case of
estates and trusts on their net investment income that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent
the U.S. Holder&#8217;s total adjusted income exceeds applicable thresholds.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Tax Consequences for Non-U.S. Holders of Ordinary
Shares </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as provided below,
an individual, corporation, estate or trust that is not a U.S. Holder referred to below as a non-U.S. Holder, generally will not be subject
to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our Ordinary Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A non-U.S. Holder may be subject
to U.S. federal income tax on a dividend paid on our Ordinary Shares or gain from the disposition of our Ordinary Shares if: (1) such
item is effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States and, if required by
an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in
the case of a disposition of our Ordinary Shares, the individual non-U.S. Holder is present in the United States for 183 days or more
in the taxable year of the disposition and other specified conditions are met. Any dividend income or gain described in clause (1) above
will be subject to U.S. federal income tax on a net income tax basis in the same manner as a U.S. Holder and, with respect to corporate
holders, a branch profits tax imposed at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) may
also apply to its effectively connected earnings and profits (subject to adjustments). Any dividend income or gain described in clause
(2) above that is not effectively connected with the conduct by a Non-U.S. Holder of a trade or business within the U.S. generally will
be subject to 30% withholding tax (or such lower rate as may be specified by an applicable income tax treaty) net of certain U.S. source
capital losses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In general, non-U.S. Holders
will not be subject to backup withholding with respect to the payment of dividends on our Ordinary Shares if payment is made through a
paying agent, or office of a foreign broker outside the United States. However, if payment is made in the United States or by a U.S. related
person, non-U.S. Holders may be subject to backup withholding, unless the non-U.S. Holder provides an applicable IRS Form W-8 (or a substantially
similar form) certifying its foreign status, or otherwise establishes an exemption.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amount of any backup withholding
from a payment to a non-U.S. Holder will be allowed as a credit against such holder&#8217;s U.S. federal income tax liability and may
entitle such holder to a refund, provided that the required information is timely furnished to the IRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Information Reporting and Withholding</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A U.S. Holder may be subject
to backup withholding at a rate of 24% with respect to cash dividends and proceeds from a disposition of Ordinary Shares. In general,
backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will
not apply with respect to payments made to designated exempt recipients, such as corporations and tax-exempt organizations. Backup withholding
is not an additional tax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that
the required information is timely furnished to the IRS.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 131; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->123<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_050"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>F. Dividends and Paying Agents</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_051"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>G. Statement by Experts</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_052"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>H. Documents on Display</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to certain
information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will file reports
with the SEC. 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 will also available to the public through the SEC&#8217;s website at www.sec.gov.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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. domestic companies whose securities are registered under the Exchange Act. However, we 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 may submit to the SEC, on a Form
6-K, unaudited quarterly financial information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We maintain a corporate website
at http://www.scisparc.com. Information contained on, or that can be accessed through, our website and the other websites referenced above
do not constitute a part of this Annual Report. We have included these website addresses in this Annual Report solely as inactive textual
references.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_053"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>I. Subsidiary Information.</b></span></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_054"></a></div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><span style="font-size: 10pt"><b>J.</b></span> <b>Annual Report to Security Holders.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.5in; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">Not applicable.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_055"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In the ordinary course of
our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Quantitative and Qualitative Disclosure About
Market Risk</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are exposed to market risks
in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse
changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits with banks that
have a credit rating of at least A-minus. However, a substantial majority of our cash is held in current bank accounts that do not bear
interest. In the future, we intend to hold most of our cash in deposits that bear interest. Given the current low rates of interest we
receive, once we begin to hold most of our cash in deposits that bear interest, we do not expect to be adversely affected if such rates
are reduced. Our market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in detail in the following
paragraph.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Foreign Currency Exchange Risk </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our results of operations
and cash flow are subject to fluctuations due to changes mainly in NIS/U.S. dollar currency exchange rates. As of December 31, 2022, the
vast majority of our liquid assets are held in U.S. dollars, and the majority of our expenses is denominated in U.S. dollars. Changes
of both 5% and 10% in the U.S. Dollar/NIS exchange rate would decrease/increase our loss for 2022 by less than 1%, respectively. However,
these historical figures may not be indicative of future exposure, as we expect that the percentage of our NIS denominated expenses will
materially decrease in the near future, therefore reducing our exposure to exchange rate fluctuations. Beginning October 1, 2018, our
functional currency is the U.S. dollar.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We do not hedge our foreign
currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure
from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us
from the material adverse effects of such fluctuations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_056"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 132; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->124<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_057"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>PART II</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_058"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_059"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 15, 2022, our
shareholders approved our amended and restated articles of association which became effective immediately thereof. Our amended and restated
articles of association contain certain modifications to the required approvals for certain shareholder votes, including the required
approval for any amendment to our amended and restated articles of association, which now requires, in addition to the approval of shareholders,
also the approval of the Board of Directors with the affirmative vote of at least three-quarters&#160;(3/4) of the directors then in office
and entitled to vote thereon. See &#8220;Item 10. Additional Information&#8212;B. Memorandum and Articles of Association&#8221; for further
description of the rights of securities holders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_060"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 15. CONTROLS AND PROCEDURES</b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(a) Disclosure Controls and Procedures</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022, or the Evaluation Date. Based
on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective
in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under
the Exchange Act and that such information is accumulated and communicated to management, including our principal executive and financial
officers, as appropriate to allow timely decisions regarding required disclosure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(b) Management&#8217;s Annual Report on Internal
Control over Financial Reporting</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.
Our internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS. We have a program for the review of our internal
control over financial reporting to ensure compliance with the requirements of the Exchange Act and Section 404 of the Sarbanes-Oxley
Act. Our internal control over financial reporting includes those policies and procedures that:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">provide reasonable assurance
that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.5in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-size: 10pt">provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on the financial statements.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because of its inherent limitations,
internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management, with the participation
of our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting
as of December 31, 2022. In conducting its assessment of internal control over financial reporting, management based its evaluation on
the Internal Control&#8201;Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
as of December 31, 2022. Based on its evaluation, our management has concluded that our internal control over financial reporting was
effective as of December 31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 133; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->125<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(c) Attestation Report of the Registered Public
Accounting Firm</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><span>Not
applicable (we are exempt from this requirement due to our status under the Exchange Act as a non-accelerated filer as of the current
time).</span>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>(d) Changes in Internal Control over Financial
Reporting</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the year ended December
31, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_061"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16. [Reserved]</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><div><a id="a_062"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">All of the members of our
audit committee are &#8220;independent,&#8221; as such term is defined under Nasdaq rules. In addition, our Board of Directors has determined
that Amnon Ben Shay is an audit committee financial expert, as defined under the rules under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_063"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16B. CODE OF ETHICS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have adopted a written
code of ethics that applies to our officers and employees, including our principal executive officer, principal financial officer, principal
controller and persons performing similar functions as well as our directors. Our Code of Ethics and Conduct is posted on our website
at http://www.scisparc.com. Information contained on, or that can be accessed through, our website does not constitute a part of this
Annual Report and is not incorporated by reference herein. If we make any amendment to the Code of Ethics and Conductor grant any waivers,
including any implicit waiver, from a provision of the code, we will disclose the nature of such amendment or waiver on our website to
the extent required by the rules and regulations of the SEC including the instructions to Item 16B of Form 20-F. We have not granted any
waivers under our Code of Business Conduct and Ethics.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_064"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES</b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Kost Forer Gabbay &amp; Kasierer
(a member of EY Global), served as our principal independent registered public accounting firm for each of the two years ended December
31, 2021 and 2022. Kost Forer Gabbay &amp; Kasierer (a member of EY Global) has served as our principal independent registered public
accounting firm since 2009.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table provides
information regarding fees paid by us to Kost Forer Gabbay &amp; Kasierer and/or other member firms of EY Global for all services, including
audit services, for the years ended December 31, 2021 and 2022:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Year Ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%"><span style="font-size: 10pt">Audit fees<sup>(1)</sup></span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">120,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">120,000</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td><span style="font-size: 10pt">Audit-related fees<sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">22,500</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">22,500</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Tax fees</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-align: left; padding-bottom: 1.5pt">All other fees</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">142,500</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">142,500</td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Includes professional services rendered in connection with the audit of our annual financial statements, review of our interim financial statements. </span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Includes professional services rendered in connection with the fees relating to our public equity offerings and related filings.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">All of the services provided above were
approved by our audit committee and by our board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Pre-Approval of Auditors&#8217; Compensation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audit committee charter
provides, among others, that our audit committee is responsible for: (1) pre-approving audit and non-audit services provided to us by
the independent registered public accounting firm; (2) reviewing and approving disclosures relating to fees and non-audit services required
to be included in the SEC reports; and (3) establishing pre-approval policies and procedures for the engagement of independent accountants
to render us services. Subject to the Board of Directors&#8217; and shareholders&#8217; approval, if and to the extent required by applicable
law, the audit committee shall have the authority to approve all audit engagement fees and terms and all non-audit engagements, as may
be permissible, with the independent registered public accounting firm.</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 22.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 22.5pt"></p><div>

</div><!-- Field: Page; Sequence: 134; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->126<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 22.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><div><a id="a_065"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_066"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16E. PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_067"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16F. CHANGE IN REGISTRANT&#8217;S CERTIFYING
ACCOUNTANT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_068"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16G. CORPORATE GOVERNANCE </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a &#8220;foreign private
issuer&#8221;, as such term is defined in Rule 405 under the Securities Act. As a foreign private issuer we are permitted to comply with
Israeli corporate governance practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements
we are not following and the equivalent Israeli requirement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We rely on this &#8220;foreign
private issuer exemption&#8221; with respect to the following items:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.5in">&#160;</td>
    <td style="text-align: justify; width: 0.25in"><span style="font-size: 10pt">&#9679;</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-size: 10pt">&#9679;</span></td>
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We otherwise intend to comply
with the rules generally applicable to U.S. domestic companies listed on Nasdaq. We may, however, in the future decide to rely upon the
&#8220;foreign private issuer exemption&#8221; for purposes of opting out of some or all of the other corporate governance rules.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20pt">&#160;</p><div>

</div><div><a id="a_069"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16H. MINE SAFETY DISCLOSURE</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><div><a id="a_070"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Not applicable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 135; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->127<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;&#160;</p><div>

</div><div><a id="a_071"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>PART III</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_072"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 17. FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have elected to provide
financial statements and related information pursuant to Item 18.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_073"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 18. FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The consolidated financial
statements and the related notes required by this Item are included in this Annual Report beginning on page F-1.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><div><a id="a_074"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>ITEM 19.
EXHIBITS</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td>
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    <td style="vertical-align: bottom; text-align: center; width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: center; width: 18%"><span style="font-size: 10pt"><b>Filing Date</b></span></td>
    <td style="vertical-align: bottom; text-align: center; width: 1%">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: center; width: 6%"><span style="font-size: 10pt"><b>Filed/<br/>
Furnished</b></span></td></tr>
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    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390023012516/ea172999ex3-1_scisparc.htm"><span style="font-size: 10pt">Amended and Restated Articles of Association of SciSparc Ltd.</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">F-3</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">333-269839&#160;</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">&#160;3.1</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">February 16, 2023&#160;</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="text-align: center; vertical-align: top">&#160;</td></tr>
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    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><span style="font-size: 10pt"><a href="f20f2022ex2-1_scisparc.htm">Description of Securities</a></span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">*</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left"><span style="font-size: 10pt">2.2</span></td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390020007166/ea119823ex99-4_therapix.htm"><span style="font-size: 10pt">Form of Warrant, pursuant to Securities Purchase Agreement, dated March 19, 2020&#160;</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">99.4</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">March 23, 2020</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
    <td style="vertical-align: top; text-align: left"><span style="font-size: 10pt">2.3</span></td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390020012970/ea122045ex99-3_therapix.htm"><span style="font-size: 10pt">Warrant, pursuant to Share Transfer Agreement, dated May 15, 2020&#160;</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">99.3</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">May 19, 2020</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left"><span style="font-size: 10pt">2.4</span></td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390020038984/ea130376ex4-2_therapixbio.htm"><span style="font-size: 10pt">Form of Warrant&#160;</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">4.2</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">November 24, 2020</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
    <td style="vertical-align: top; text-align: left"><span style="font-size: 10pt">2.5</span></td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390021012886/ea136813ex99-4_scisparcltd.htm"><span style="font-size: 10pt">Form of Pre-Funded Warrant&#160;</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">99.4</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">March 2, 2021</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left"><span style="font-size: 10pt">2.6</span></td>
    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390021012886/ea136813ex99-5_scisparcltd.htm"><span style="font-size: 10pt">Form of Series A Warrant&#160;</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">99.5</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">March 2, 2021</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr>
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    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390021012886/ea136813ex99-6_scisparcltd.htm"><span style="font-size: 10pt">Form of Series B Warrant&#160;</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">99.6</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">March 2, 2021</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
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    <td style="vertical-align: top">&#160;</td>
    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390022030109/ea160740ex99-5_scisparcltd.htm"><span style="font-size: 10pt">Form of Ordinary Share Purchase Warrant, pursuant to Securities Purchase Agreement, dated May 27, 2022</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">99.5</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">May 27, 2022</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
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    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390022030109/ea160740ex99-6_scisparcltd.htm"><span style="font-size: 10pt">Form of Pre-Funded Ordinary Share Purchase Warrant, pursuant to Securities Purchase Agreement, dated May 27, 2022</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">99.6</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">May 27, 2022</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="background-color: rgb(204,238,255)">
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    <td style="vertical-align: top"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390022060388/ea166507ex99-4_scisparc.htm"><span style="font-size: 10pt">Share Purchase Warrant, pursuant to Assignment and Assumption Agreement dated September 12, 2022</span></a></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">6-K</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt">001-38041</span></td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top"><span style="font-size: 10pt"><span style="text-decoration:underline;text-decoration: none"><a href="http://www.sec.gov/Archives/edgar/data/1611746/000121390022060388/ea166507ex99-3_scisparc.htm">Asset Purchase Agreement between the Company, SciSparc Nutraceuticals Inc. and the parties named therein, dated September 12, 2022</a></span></span></td>
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    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td>
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    <td style="width: 0.25in"><span style="font-size: 10pt">*</span></td>
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        <p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">&#160;</span></p></td></tr>
  <tr style="vertical-align: top">
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<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#8224;</span></td><td style="text-align: justify"><span style="font-size: 10pt">Confidential treatment was granted
with respect to certain portions of this exhibit pursuant to 17.C.F.R. &#167;240.24b-2. Omitted portions were filed separately with the
SEC.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"></td><td style="width: 0.25in; text-align: left"><span style="font-size: 10pt">&#8224;</span>&#8224; </td><td style="text-align: justify">Certain
identified information in the exhibit has been excluded from the exhibit because it is both (i) not material and (ii) is the type that
SciSparc Ltd. treats as private or confidential.</td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 137; Value: 1 --><div>
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</div><div><a id="a_075"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SIGNATURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The registrant hereby certifies
that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
Annual Report on Form 20-F filed on its behalf.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td colspan="2"><span style="font-size: 10pt"><b>SCISPARC LTD.</b></span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="width: 3%">&#160;</td>
    <td style="width: 37%">&#160;</td>
    <td style="width: 60%">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td><span style="font-size: 10pt">By: </span></td>
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    <td>&#160;</td></tr>
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    <td>&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Date May 1, 2023</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 138; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->130<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>AS OF DECEMBER 31, 2022</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>U.S. DOLLARS IN THOUSANDS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>INDEX</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr> <td style="vertical-align: top; width: 92%; padding-bottom: 1.5pt; text-align: justify">&#160;</td> <td style="vertical-align: top; width: 1%; padding-bottom: 1.5pt">&#160;</td> <td style="vertical-align: bottom; width: 7%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-size: 10pt"><b>Page</b></span></td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="text-align: justify"><span style="font-size: 10pt"><b><a href="#F_001">Report of Independent Registered Public Accounting Firm (PCAOB ID&#160;<ix:nonNumeric contextRef="c0" name="dei:AuditorFirmId">1281</ix:nonNumeric>)</a></b></span></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt"><b>F-2 - F-3</b></span></td></tr> <tr style="vertical-align: top"> <td style="text-align: justify">&#160;</td> <td>&#160;</td> <td style="text-align: center">&#160;</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="text-align: justify"><span style="font-size: 10pt"><b><a href="#F_002">Consolidated Statements of Financial Position</a></b></span></td> <td>&#160;</td> <td style="text-align: center"><span style="font-size: 10pt"><b>F-4 - F-5</b></span></td></tr> <tr style="vertical-align: top"> <td style="text-align: justify">&#160;</td> <td>&#160;</td> <td style="text-align: center">&#160;</td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt"><b><a href="#F_003">Consolidated Statements of Comprehensive Loss</a></b></span></td> <td>&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt"><b>F-6</b></span></td></tr> <tr> <td style="vertical-align: top; text-align: justify">&#160;</td> <td>&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt"><b><a href="#F_004">Consolidated Statements of Changes in Equity</a></b></span></td> <td>&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt"><b>F-7 </b></span></td></tr> <tr> <td style="vertical-align: top; text-align: justify">&#160;</td> <td>&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt"><b><a href="#F_005">Consolidated Statements of Cash Flows</a></b></span></td> <td>&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-size: 10pt"><b>F-8- F-10</b></span></td></tr> <tr> <td style="vertical-align: top; text-align: justify">&#160;</td> <td>&#160;</td> <td style="vertical-align: top; text-align: center">&#160;</td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: top; text-align: justify"><span style="font-size: 10pt"><b><a href="#F_006">Notes to Consolidated Financial Statements</a></b></span></td> <td>&#160;</td> <td style="white-space: nowrap; vertical-align: top; text-align: center"><span style="font-size: 10pt"><b>F-11 - F-49</b></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="vertical-align: top; width: 34%"><img alt="" src="image_001.jpg"/></td>
    <td style="vertical-align: bottom; width: 33%"><p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt"><b>Kost Forer Gabbay &amp; Kasierer</b></span></p>
                                                   <p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">144 Menachem
Begin Road,</span></p>
                                                   <p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">Tel-Aviv 6492102, Israel</span></p></td>
    <td style="vertical-align: bottom; width: 33%"><p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">Tel: +972-3-6232525</span></p>
                                                   <p style="margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">Fax: +972-3-5622555</span></p>
                                                   <p style="text-align: left; margin-top: 0; margin-bottom: 0"><span style="font-size: 10pt">ey.com</span></p></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="F_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>To the Shareholders and
the Board of Directors of</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>SCISPARC LTD. (formerly
known as THERAPIX BIOSCIENCES LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Opinion on the Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have audited the accompanying
consolidated statements of financial position of SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) and its subsidiaries (the
&#8220;Company&#8221;) as of December 31, 2022, and 2021, and the related consolidated statements of comprehensive loss, changes in equity
and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the
&#8220;consolidated financial statements&#8221;). In our opinion, the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company at December 31, 2022, and 2021, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with International Financial Reporting
Standards (&#8220;IFRS&#8221;) as issued by the International Accounting Standards Board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>The Company&#8217;s Ability to Continue as
a Going Concern</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, negative cash flows from operating activities and has stated that
substantial doubt exists about the Company&#8217;s ability to continue as a going concern. Management&#8217;s evaluation of the events
and conditions and management&#8217;s plans regarding these matters are also described in Note 1. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Basis for Opinion</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These financial statements
are the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on the Company&#8217;s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (&#8220;PCAOB&#8221;) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company&#8217;s internal control over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 140 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Critical Audit Matters</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The critical audit matter communicated below is
a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the
audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the account or disclosure to which it relates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Liquidity and Capital Resources</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 118.1pt; text-indent: -118.05pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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statements, the Company has incurred losses since inception, and expects to continue to incur losses for the foreseeable future. At December
31, 2022, the Company&#8217;s cash and cash equivalents position is not sufficient to fund the Company&#8217;s planned operations for
at least a year beyond the date of the issuance of the consolidated financial statements. Those factors raise substantial doubt about
the Company&#8217;s ability to continue as a going concern.</p></td></tr>
  <tr style="vertical-align: top">
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is a critical audit matter due to the estimation and execution uncertainty regarding the Company&#8217;s future cash flows and the risk
of bias in management&#8217;s judgments and assumptions in estimating these cash flows to conclude the Company would have sufficient liquidity
to sustain itself for at least a year beyond the date of the issuance of the consolidated financial statements. This in turn led to a
high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions.</span></td></tr>
  <tr style="vertical-align: top">
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audit evidence in connection with our overall opinion on the consolidated financial statements.&#160;Our audit procedures included, among
others, testing the reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash used in management&#8217;s
assessment of whether the Company has sufficient liquidity to fund operations for at least one year from the consolidated financial statement
issuance date. This testing included inquiries with management, consideration of positive and negative evidence impacting management&#8217;s
forecasts, the Company&#8217;s financing arrangements in place as of the report date, market and industry factors, we evaluated management&#8217;s
analysis of their impact on the forecasted cash flows.</span>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
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going concern disclosures included in Note 1 to the consolidated financial statements.</p>
</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 0.25in; margin-top: 0; margin-bottom: 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 118.1pt; text-indent: -118.05pt">A Member of Ernst &amp; Young Global</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have served as the Company&#8217;s auditor since 2009.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="F_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>CONSOLIDATED STATEMENTS OF FINANCIAL POSITION</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying notes are an integral part of
the consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 142 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>CONSOLIDATED STATEMENTS OF FINANCIAL POSITION</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying notes are an integral part of
the consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 143 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="F_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Attributable to:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Equity holders of the Company</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: center">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.125in; padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left; padding-bottom: 4pt">Basic loss per ordinary share attributable to equity holders of the Company:</td><td style="padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left; padding-bottom: 4pt">Diluted loss per ordinary share attributable to equity holders of the Company:</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying notes are an integral part of
the consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="F_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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    <td style="font-size: 8pt">&#160;</td><td style="font-size: 8pt; font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="font-size: 8pt; vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="font-size: 8pt; vertical-align: bottom; ">
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  <tr style="font-size: 8pt; vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right"><div style="-sec-ix-hidden: hidden-fact-62">-</div></td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
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  <tr style="font-size: 8pt; vertical-align: bottom; ">
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    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right"><div style="-sec-ix-hidden: hidden-fact-71">-</div></td><td style="font-size: 8pt; text-align: left">&#160;</td></tr>
  <tr style="font-size: 8pt; vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="font-size: 8pt; vertical-align: bottom; ">
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    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right">&#160;</td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right">&#160;</td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right">&#160;</td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right">&#160;</td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right">&#160;</td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right">&#160;</td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
    <td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt; text-align: right">&#160;</td><td style="font-size: 8pt; text-align: left">&#160;</td><td style="font-size: 8pt">&#160;</td>
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  <tr style="font-size: 8pt; vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying notes are an integral part of
the consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 145 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="F_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-97">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-align: left">Working capital adjustments:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left">Decrease (increase) in other accounts receivable</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td style="padding-left: 0.25in; text-align: left">Increase (decrease) in trade payables</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left">Increase (decrease) in other accounts payable</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-99">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-100">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-align: left; padding-bottom: 1.5pt">Increase in inventory</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-101">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-102">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying notes are an integral part of
the consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 146 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-107">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-decoration: underline; text-align: left; text-indent: -9pt; padding-left: 9pt">Cash flows from financing activities:</td><td>&#160;</td>
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying notes are an integral part of
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying notes are an integral part of
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="F_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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on August 23, 2004. Until March 2014, SciSparc and its subsidiaries at the time (the &#8220;Group&#8221;) were mainly engaged in developing
several innovative immunotherapy products and SciSparc&#8217;s own patents in the immunotherapy field. In August 2015, the Company decided
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With this focus, the Company is currently engaged in the following development programs based on &#916;9-tetrahydrocannabinol (&#8220;THC&#8221;)
and/or non-psychoactive cannabidiol for the treatment of Tourette syndrome, Alzheimer&#8217;s disease&#160;and agitation, pain, autism
spectrum disorder and Status Epilepticus. The headquarters of the Company are located in Tel Aviv, Israel.</span></td></tr>
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(&#8220;TASE&#8221;) from December 26, 2005 until its delisting on August 7, 2018, and (b) its American Depository Shares (&#8220;ADSs&#8221;)
on the Nasdaq Capital Market (&#8220;Nasdaq&#8221;) following its initial public offering (&#8220;IPO&#8221;) on March 27, 2017, at which
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respectively. Following the delisting of the ADSs from Nasdaq, the Company&#8217;s ADSs were listed on the Pink Sheets and then subsequently
upgraded to the OTCQB on December 8, 2020. On August 26, 2021, the Company&#8217;s ADSs were mandatorily cancelled and were exchanged
for ordinary shares at a one-for-one ratio.&#160;On December 22, 2021, the Company&#8217;s ordinary shares were re-listed on Nasdaq and
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</div><div>

</div><ix:continuation continuedAt="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_4" id="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">As of December 31, 2022, the Company
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inactive company incorporated under the laws of Israel: Brain Bright Ltd (&#8220;Brain Bright&#8221;); and a company incorporated under
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</div><div>

</div><ix:continuation continuedAt="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_5" id="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The consolidated financial statements
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 149 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><ix:continuation continuedAt="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_7" id="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">A<span>s
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its ability to raise additional funds from existing and/or new investors. This dependency will continue until the Group will be able to
completely finance its operations by generating revenue from its products. These abovementioned factors raise substantial doubt about
the Group&#8217;s ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts
and classifications of assets and liabilities that might result should the Group be unable to continue as a going concern.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_8" id="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation id="sprcy_DisclosureOfGeneralExplanatoryTextBlock-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 150 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_3" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_1" escape="true" name="sprcy:BasisOfPresentationOfFinancialStatements"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">a.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Basis of presentation of the financial statements:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
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</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_4" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_3"><ix:continuation continuedAt="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_2" id="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">These financial statements have been
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_5" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_4"><ix:continuation continuedAt="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_3" id="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The Company&#8217;s financial statements
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_6" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_5"><ix:continuation continuedAt="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_4" id="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The Company has elected to present
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_7" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_6"><ix:continuation id="sprcy_BasisOfPresentationOfFinancialStatements-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The financial statements are presented
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_10" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_9"><ix:nonNumeric contextRef="c0" continuedAt="sprcy_DescriptionOfAccountingPolicyForConsolidatedfinancialstatements-c0_cont_1" escape="true" name="sprcy:DescriptionOfAccountingPolicyForConsolidatedfinancialstatements"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">c.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Consolidated financial statements:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
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</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_11" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_10"><ix:continuation continuedAt="sprcy_DescriptionOfAccountingPolicyForConsolidatedfinancialstatements-c0_cont_2" id="sprcy_DescriptionOfAccountingPolicyForConsolidatedfinancialstatements-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The consolidated financial statements
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the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Potential voting rights are considered when assessing whether an entity has control over
the other entity. The consolidation of the financial statements commences on the date on which control is obtained and ends when such
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_12" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_11"><ix:continuation continuedAt="sprcy_DescriptionOfAccountingPolicyForConsolidatedfinancialstatements-c0_cont_3" id="sprcy_DescriptionOfAccountingPolicyForConsolidatedfinancialstatements-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The financial statements of the Company
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accounting policies by all companies in the Group. Significant intra-Group balances and transactions and gains or losses resulting from
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</div><div>

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equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive
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</div><div>

</div><!-- Field: Page; Sequence: 151 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_14" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_13"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 72px"></td><td style="width: 48px; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">d.</span></td><td style="text-align: justify">Functional currency and foreign currency:</td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_15" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_14"><ix:continuation id="_DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">The functional currency of the Company, which is the currency that best reflects the economic environment in which the Company operates and conducts its transactions is the U.S. Dollar (&#8220;USD&#8221; or &#8220;$&#8221;), since it&#8217;s the primary currency of the economic environment in which the Company operates. The consolidated financial statements are also presented in USD since the Company believes that preparing the consolidated financial statements in USD provides more relevant information to the users of the consolidated financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_16" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_15"><ix:nonNumeric contextRef="c0" continuedAt="sprcy_DescriptionOfAcquisitionOfASingleAssetCompany-c0_cont_1" escape="true" name="sprcy:DescriptionOfAcquisitionOfASingleAssetCompany"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">e.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Acquisition of a single asset company:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_17" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_16"><ix:continuation id="sprcy_DescriptionOfAcquisitionOfASingleAssetCompany-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">Upon the acquisition
of a single asset company, the Group evaluates whether it is the acquisition of a business or of an asset. To be considered a business,
the acquisition must include, at a minimum, an input and a substantive process that together can significantly contribute to the creation
of outputs. The acquisition is accounted for as a business combination if the single asset company is a business. If it is not a business,
the acquisition is accounted for as the acquisition of assets and liabilities. In such an acquisition, the cost of the acquisition includes
transaction costs which are allocated to the identifiable acquired assets and liabilities proportionally based on their fair value on
the acquisition date. In such case, goodwill and deferred taxes in respect of the temporary differences existing as of the acquisition
date are not recognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_18" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_17"><ix:nonNumeric contextRef="c0" continuedAt="sprcy_DescriptionOfAccountingPolicyForRestrictedDeposit-c0_cont_1" escape="true" name="sprcy:DescriptionOfAccountingPolicyForRestrictedDeposit"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify; font-size: 10pt">&#160;</td> <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">f.</span></td> <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Restricted deposits:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_19" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_18"><ix:continuation id="sprcy_DescriptionOfAccountingPolicyForRestrictedDeposit-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">A restricted deposit is cash invested
in a short-term deposit (between three months and one year) or in a long-term deposit (with a maturity of more than one year from the
date of investment). Restricted deposits are designated to secure the Company&#8217;s office facilities lease agreements and its credit
cards.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_20" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_19"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top">
<td style="width: 72px"></td><td style="width: 48px">g.</td><td style="text-align: justify">Investment in joint arrangements:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: 0in">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_21" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_20"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">Joint arrangements
are arrangements in which the Company has joint control. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: 0in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_22" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_21"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top">
<td style="width: 1.25in"></td><td style="width: 0.5in">1.</td><td style="text-align: justify">Joint ventures:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 113.4pt; text-align: justify; text-indent: -28.35pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_23" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_22"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify; text-indent: 0in">In joint ventures
the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venture is accounted
for at equity</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_24" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_23"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top">
<td style="width: 1.25in"></td><td style="width: 0.5in">2.</td><td style="text-align: justify">Joint operations:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 113.4pt; text-align: justify; text-indent: -28.35pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_25" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_24"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify; text-indent: 0in">In joint operations
the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement.
The Company recognizes in relation to its interest its share of the assets, liabilities, revenues and expenses of the joint operation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify; text-indent: -28.35pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_26" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_25"><ix:continuation id="_DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify; text-indent: 0in">The acquisition
of interests in a joint operation which represents a business, as defined in IFRS 3, is accounted for using the acquisition method, including
the measurement of the identifiable assets and liabilities at fair value, the recognition of deferred taxes arising from this measurement,
the accounting treatment of the related transaction costs and the recognition of goodwill or bargain purchase gains. This applies to the
acquisition of the initial interest and additional interests in a joint operation that represents a business.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 113.4pt; text-align: justify; text-indent: 0in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 113.4pt; text-align: justify; text-indent: 0in"></p><div>

</div><!-- Field: Page; Sequence: 152 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 113.4pt; text-align: justify; text-indent: 0in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 113.4pt; text-align: justify; text-indent: 0in">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_27" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_26"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForInvestmentInAssociates-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top">
<td style="width: 72px"></td><td style="width: 48px">h.</td><td style="text-align: justify">Investments in associates:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: -28.35pt"><span style="text-transform: uppercase">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_28" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_27"><ix:continuation id="_DescriptionOfAccountingPolicyForInvestmentInAssociates-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">Associates are companies in which the Group has significant
influence over the financial and operating policies without having control. The investment in an associate is accounted for using the
equity method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_29" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_28"><ix:nonNumeric contextRef="c0" continuedAt="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_1" escape="true" name="sprcy:DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top">
<td style="width: 72px"></td><td style="width: 48px">i.</td><td style="text-align: justify">Investments accounted for using the equity method:</td></tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: -28.35pt"><span style="text-transform: uppercase">&#160;</span></p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_30" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_29"><ix:continuation continuedAt="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_2" id="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">The Group&#8217;s investments
in associates and joint ventures are accounted for using the equity method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: 0in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_31" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_30"><ix:continuation continuedAt="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_3" id="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">Under the equity
method, the investment in the associate or in the joint venture is presented at cost with the addition of post-acquisition changes in
the Group&#8217;s share of net assets, including other comprehensive income of the associate or the joint venture. Gains and losses resulting
from transactions between the Group and the associate or the joint venture are eliminated to the extent of the interest in the associate
or in the joint venture. The cost of the investment includes transaction costs.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: -28.35pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_32" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_31"><ix:continuation continuedAt="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_4" id="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">Goodwill relating
to the acquisition of an associate or a joint venture is presented as part of the investment in the associate or the joint venture, measured
at cost and not systematically amortized. Goodwill is evaluated for impairment as part of the investment in the associate or in the joint
venture as a whole.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: 0in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_33" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_32"><ix:continuation continuedAt="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_5" id="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">The financial statements
of the Company and of the associate or joint venture are prepared as of the same dates and periods. The accounting policies applied in
the financial statements of the associate or the joint venture are uniform and consistent with the policies applied in the financial statements
of the Group.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: 0in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_34" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_33"><ix:continuation continuedAt="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_6" id="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">Upon the acquisition
of an associate or a joint venture achieved in stages when the former investment in the acquiree was accounted for pursuant to the provisions
of IFRS 9, the Group applies the principles of IFRS 3 regarding business combinations achieved in stages. Consequently, equity interests
in the acquiree that had been held by the Group prior to achieving significant influence or joint control are measured at fair value on
the acquisition date and are included in the acquisition consideration while recognizing a gain or loss resulting from the fair value
measurement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 85.05pt; text-align: justify; text-indent: -28.35pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_35" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_34"><ix:continuation id="sprcy_DescriptionOfAccountingPolicyForInvestmentAccountedForUsingTheEquityMethodtextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: 0in">The equity method
is applied until the loss of significant influence in the associate or loss of joint control in the joint venture or classification as
investment held for sale.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 153 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_37" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_36"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Property and equipment are measured
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_38" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_37"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Depreciation is calculated on a straight-line
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_39" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_38"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosureOfUsefulLifeOfAssetsAtAnnualRatesExplanatory"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_40" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_39"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Leasehold improvements are depreciated
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and the expected life of the improvement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_41" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_40"><ix:continuation id="_DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The useful life, depreciation method
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estimate. Depreciation of an asset ceases at the earlier of: the date that the asset is classified as held for sale and the date that
the asset is derecognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_42" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_41"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">k.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Intangible assets:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_43" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_42"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Separately acquired intangible assets
are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination
are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized
development costs, are recognized in profit or loss when incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_44" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_43"><ix:continuation id="_DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Intangible assets with a finite useful
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_45" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_44"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">l.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Impairment of non-financial assets:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_46" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_45"><ix:continuation id="_DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The Company evaluates the need to record
an impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable.
If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The
recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash
flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that
does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are
recognized in profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 154 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_47" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_46"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">m.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Financial instruments:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_48" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_47"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_49" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_48"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Financial assets are measured upon
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_50" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_49"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">The Company classifies and measures
debt instruments in the financial statements based on the following criteria:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_51" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_50"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_52" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_51"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_53" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_52"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_54" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_53"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">The Company&#8217;s business model
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rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial
recognition, the instruments in this category are measured according to their terms at amortized cost using the effective interest rate
method, less any provision for impairment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_55" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_54"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">On the date of initial recognition,
the Company may irrevocably designate a debt instrument as measured at fair value through profit or loss if doing so eliminates or significantly
reduces a measurement or recognition inconsistency, such as when a related financial liability is also measured at fair value through
profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_56" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_55"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 168px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_57" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_56"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">A financial asset which is a debt instrument
does not meet the criteria for measurement at amortized cost or at fair value through other comprehensive income. After initial recognition,
the financial asset is measured at fair value and gains or losses from fair value adjustments are recognized in profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_58" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_57"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_12" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_59" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_58"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_13" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">Investments in equity instruments do
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_60" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_59"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_14" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">Other financial assets held for trading
such as derivatives, including embedded derivatives separated from the host contract, are measured at fair value through profit or loss
unless they are designated as effective hedging instruments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_61" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_60"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_15" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">Dividends from investments in equity
instruments are recognized in profit or loss when the right to receive the dividends is established.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 155 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">m.</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_62" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_61"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_16" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_15"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">2.</span></td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_63" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_62"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_17" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">A financial asset is derecognized only
when:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_64" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_63"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_18" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 168px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">-</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The contractual rights to the cash flows from the financial asset have expired;</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_65" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_64"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_19" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_18"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 168px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">-</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The Company has transferred substantially all the risks and rewards deriving from the contractual rights to receive cash flows from the financial asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; or</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_66" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_65"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_20" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 168px; text-align: justify">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">-</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The Company has retained its contractual rights to receive cash flows from the financial asset but has assumed a contractual obligation to pay the cash flows in full without material delay to a third party.</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_67" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_66"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_21" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_20"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">3.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Financial liabilities:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_68" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_67"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_22" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_21"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 168px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">a)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Financial liabilities measured at amortized cost:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_69" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_68"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_23" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">Financial liabilities are initially
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_70" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_69"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_24" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_23"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">After initial recognition, the Company
measures all financial liabilities at amortized cost using the effective interest rate method, except for financial liabilities at fair
value through profit or loss such as derivatives.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_71" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_70"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_25" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_24"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 168px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">b)</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Financial liabilities measured at fair value through profit or loss:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_72" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_71"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_26" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">At initial recognition, the Company
measures financial liabilities that are not measured at amortized cost at fair value. Transaction costs are recognized in profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_73" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_72"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_27" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">After initial recognition, changes
in fair value are recognized in profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_74" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_73"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_28" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">4.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Derecognition of financial liabilities:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_75" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_74"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_29" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">A financial liability is derecognized
only when it is extinguished, that is when the obligation specified in the contract is discharged or cancelled or expires. A financial
liability is extinguished when the debtor discharges the liability by paying in cash, other financial assets, goods or services, or is
legally released from the liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_76" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_75"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_30" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_29"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">5.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Offsetting financial instruments:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_77" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_76"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_31" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Financial assets and financial liabilities
are offset and the net amount is presented in the statement of financial position if there is a legally enforceable right to set off the
recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
The right of set-off must be legally enforceable not only during the ordinary course of business of the parties to the contract but also
in the event of bankruptcy or insolvency of one of the parties. In order for the right of set-off to be currently available, it must not
be contingent on a future event, there may not be periods during which the right is not available, or there may not be any events that
will cause the right to expire.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 156 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">m.</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_78" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_77"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_32" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_31"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_79" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_78"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_33" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Convertible debentures which contain
both an equity/derivative component and a liability component are separated into two components. This separation is performed by first
determining the liability component based on the fair value of an equivalent non-convertible liability. The value of the conversion component
is determined to be the residual amount. Directly attributable transaction costs are apportioned between the equity component and the
liability component based on the allocation of proceeds to the equity and liability components.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_80" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_79"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_34" id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_33"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_81" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_80"><ix:continuation id="_DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">The issue of a unit of securities involves
the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on the following order: financial
derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities
that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs
are allocated to each component pro rata to the amounts determined for each component in the unit.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_82" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_81"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">n.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Research and development expenditures:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_83" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_82"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Research expenditures are recognized
in profit or loss when incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_84" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_83"><ix:continuation id="_DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The conditions enabling capitalization
of development costs as an asset have not yet been met and, therefore, all development expenditures are recognized in profit or loss when
incurred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_85" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_84"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">o.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Finance income and expenses:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_86" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_85"><ix:continuation id="_DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Finance income and expenses comprise
interest income on amounts invested and exchange rate gains and losses. Interest income is recognized as it accrues using the effective
interest method. Finance income and expenses derive also from changes in the fair value of financial liabilities measured at fair value
through profit or loss. Borrowing costs are recognized in profit or loss using the effective interest method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_87" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_86"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">p.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Fair value measurement:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_88" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_87"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Fair value measurement is based on the assumption that the transaction will take place in the asset&#8217;s or the liability&#8217;s
principal market, or in the absence of a principal market, in the most advantageous market.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_89" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_88"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The fair value of an asset or a liability
is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_90" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_89"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Fair value measurement of a non-financial
asset takes into account a market participant&#8217;s ability to generate economic benefits by using the asset in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best use.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><!-- Field: Page; Sequence: 157 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">p.</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_91" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_90"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The Company uses valuation techniques
that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_92" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_91"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">All assets and liabilities measured
at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based on the lowest level
input that is significant to the entire fair value measurement:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_93" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_92"><ix:continuation id="_DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 120px">&#160;</td>
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    <td style="width: 2%; text-align: justify"><span style="font-size: 10pt">-</span></td>
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt">-</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Inputs other than quoted prices included within Level 1 that are observable directly or indirectly.</span></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_94" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_93"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">q.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Taxes on income:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_95" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_94"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Current or deferred taxes are recognized
in profit or loss, except to the extent that they relate to items which are recognized in other comprehensive income or equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_96" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_95"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_97" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_96"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">A current tax liability is measured
using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments required
in connection with the tax liability in respect of previous years.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_98" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_97"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_99" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_98"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Deferred taxes are computed in respect
of temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_100" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_99"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Deferred taxes are measured at the
tax rate that is expected to apply when the asset is realized, or the liability is settled, based on tax laws that have been enacted or
substantively enacted by the reporting date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_101" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_100"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Deferred tax assets are reviewed at
each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductible carryforward losses and temporary
differences for which deferred tax assets had not been recognized are reviewed at each reporting date and a respective deferred tax asset
is recognized to the extent that their utilization is probable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_102" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_101"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Taxes that would apply in the event
of the disposal of investments in investees have not been taken into account in computing deferred taxes, as long as the disposal of the
investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event of distribution
of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividends
does not involve an additional tax liability or since it is the Company&#8217;s policy not to initiate distribution of dividends from
a subsidiary that would trigger an additional tax liability.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_103" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_102"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Taxes on income that relate to distributions
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_104" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_103"><ix:continuation id="_DescriptionOfAccountingPolicyForTaxesOtherThanIncomeTaxExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">Deferred taxes are offset if there
is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate to the same
taxpayer and the same taxation authority.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 158 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_105" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_104"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">r.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Share-based payment transactions:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_106" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_105"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The Company&#8217;s employees and other
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_107" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_106"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify"><i>Equity-settled transactions:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_108" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_107"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The cost of equity-settled transactions
with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using an acceptable
option pricing model (&#8220;OPM&#8221;). As for service providers, the cost of the transactions is measured at the fair value of the
goods or services received as consideration for equity instruments granted.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_109" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_108"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The cost of equity-settled transactions
is recognized in profit or loss together with a corresponding increase in equity during the period in which the performance and/or service
conditions are to be satisfied ending on the date on which the relevant employees become entitled to the award (the &#8220;Vesting Period&#8221;).
The cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects
the extent to which the Vesting Period has expired and the Company&#8217;s best estimate of the number of equity instruments that will
ultimately vest.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_110" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_109"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">No expense is recognized for awards
that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective
of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_111" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_110"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">If the Company modifies the conditions
on which equity-instruments were granted, an additional expense is recognized for any modification that increases the total fair value
of the share-based payment arrangement or is otherwise beneficial to the employee/other service provider at the modification date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_112" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_111"><ix:continuation id="_DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">If a grant of an equity instrument
is cancelled, it is accounted for as if it had vested on the cancellation date and any expense not yet recognized for the grant is recognized
immediately. However, if a new grant replaces the cancelled grant and is identified as a replacement grant on the grant date, the cancelled
and new grants are accounted for as a modification of the original grant, as described above.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_113" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_112"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForEarningsPerShareExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">s.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Earnings (loss) per share:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_114" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_113"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEarningsPerShareExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForEarningsPerShareExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Earnings (loss) per share are calculated
by dividing the income (loss) attributable to equity holders of the Company by the weighted number of ordinary shares outstanding during
the period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_115" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_114"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEarningsPerShareExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForEarningsPerShareExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Basic loss per ordinary share includes
only ordinary shares that were outstanding during the period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_116" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_115"><ix:continuation id="_DescriptionOfAccountingPolicyForEarningsPerShareExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">Potential ordinary shares are included
in the computation of diluted loss per ordinary share when their conversion increases loss per ordinary share from continuing operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 159 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; font-size: 10pt"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_117" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_116"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; font-size: 10pt; text-align: justify">&#160;</td> <td style="width: 48px; font-size: 10pt; text-align: justify"><span style="font-size: 10pt">t.</span></td> <td style="font-size: 10pt; text-align: justify"><span style="font-size: 10pt">Employee benefit liabilities:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_118" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_117"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Company has several employee-benefit
plans:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_119" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_118"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_120" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_119"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">Short-term employee benefits are benefits
that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render
the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions
and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized
when the Company has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a
reliable estimate of the amount can be made.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_121" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_120"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_122" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_121"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The plans are normally financed by contributions
to insurance companies and classified as defined contribution plans or as defined benefit plans.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_123" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_122"><ix:continuation id="_DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The Company has defined contribution
plans to its employees according to the specific laws per country.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_124" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_123"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">u.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Provisions:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_125" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_124"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">A provision in accordance with IAS 37,
&#8220;<i>Provisions, Contingent Liabilities and Contingent Assets</i>&#8221;, is recognized when the Company has a present obligation
(legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects part or all of
the expense to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when
the reimbursement is virtually certain. The expense is recognized in the statement of profit or loss net of any reimbursement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_126" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_125"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">Following are the types of provisions
included in the financial statements:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_127" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_126"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify"><i>Legal claims:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_128" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_127"><ix:continuation id="_DescriptionOfAccountingPolicyForProvisionsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">A provision for claims is recognized
when the Company has a present legal or constructive obligation as a result of a past event, it is more likely than not that an outflow
of resources embodying economic benefits will be required by the Company to settle the obligation and a reliable estimate can be made
of the amount of the obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_129" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_128"><ix:nonNumeric contextRef="c0" continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">v.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">Leases:</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_130" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_129"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_2" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Company elected to apply the provisions
of IFRS 16, &#8220;<i>Leases</i>&#8221; (&#8220;IFRS 16&#8221;) using the modified retrospective method (without restatement of comparative
data).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_131" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_130"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_3" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The accounting policy for leases applied
effective from January 1, 2019, is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_132" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_131"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_4" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Company accounts for a contract as
a lease when the contract terms convey the right to control the use of an identified asset for a period of time in exchange for consideration.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 160 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">v.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Leases: (Cont.)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_133" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_132"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_5" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">1.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">The Company as a lessee:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_134" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_133"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_6" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">For leases in which the Company is the
lessee, the Company recognizes on the commencement date of the lease a right-of-use asset and a lease liability, excluding leases whose
term is up to 12 months and leases for which the underlying asset is of low value. For these excluded leases, the Company has elected
to recognize lease payments as an expense in profit or loss on a straight-line basis over the lease term (see Note 9). In measuring the
lease liability, the Company has elected to apply the practical expedient in IFRS 16 and separates the lease components from the non-lease
components (such as management and maintenance services, etc.) included in a single contract.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_135" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_134"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_7" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">On the commencement date, the lease
liability includes all unpaid lease payments discounted at the interest rate implicit in the lease, if that rate can be readily determined,
or otherwise using the Company&#8217;s incremental borrowing rate. After the commencement date, the Company measures the lease liability
using the effective interest rate method.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_136" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_135"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_8" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">On the commencement date, the right-of-use
asset is recognized in an amount equal to the lease liability plus lease payments already made on or before the commencement date and
initial direct costs incurred. The right-of-use asset is measured applying the cost model and depreciated over the shorter of its useful
life and the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_137" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_136"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_9" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The Company tests for impairment of
the right-of-use asset whenever there are indications of impairment pursuant to the provisions of IAS 36, &#8220;<i>Impairment of Assets</i>&#8221;.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_138" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_137"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_10" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">2.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Lease extension and termination options:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_139" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_138"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_11" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">A non-cancelable lease term includes
both the periods covered by an option to extend the lease when it is reasonably certain that the extension option will be exercised, and
the periods covered by a lease termination option when it is reasonably certain that the termination option will not be exercised.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_140" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_139"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_12" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">In the event of any change in the expected
exercise of the lease extension option or in the expected non-exercise of the lease termination option, the Company remeasures the lease
liability based on the revised lease term using a revised discount rate as of the date of the change in expectations. The total change
is recognized in the carrying amount of the right-of-use asset until it is reduced to zero, and any further reductions are recognized
in profit or loss.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_141" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_140"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_13" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">3.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Lease modifications:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_142" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_141"><ix:continuation continuedAt="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_14" id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">If a lease modification does not reduce
the scope of the lease and does not result in a separate lease, the Company remeasures the lease liability based on the modified lease
terms using a revised discount rate as of the modification date and records the change in the lease liability as an adjustment to the
right-of-use asset.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_143" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_142"><ix:continuation id="_DescriptionOfAccountingPolicyForLeasesExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">If a lease modification reduces the
scope of the lease, the Company recognizes a gain or loss arising from the partial or full reduction of the carrying amount of the right-of-use
asset and the lease liability. The Company subsequently remeasures the carrying amount of the lease liability according to the revised
lease terms, at the revised discount rate as of the modification date and records the change in the lease liability as an adjustment to
the right-of-use asset.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 161 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px"><span style="font-size: 10pt"><b>NOTE 2:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING POLICIES (CONT.)</b></span></td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_144" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_143"><ix:nonNumeric contextRef="c0" continuedAt="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_1" escape="true" name="sprcy:DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 72px"></td><td style="width: 48px; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">w.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendment
to IAS 1, &#8220;Presentation of Financial Statements&#8221;:</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_145" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_144"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_2" id="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_1"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">In January 2020, the IASB issued
an amendment to IAS 1, &#8220;Presentation of Financial Statements&#8221; regarding the criteria for determining the classification of liabilities
as current or non-current (&#8220;the Original Amendment&#8221;). In October 2022, the IASB issued a subsequent amendment (&#8220;the Subsequent
Amendment&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-indent: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_146" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_145"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_3" id="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_2"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">According to the Subsequent Amendment:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-indent: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_147" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_146"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_4" id="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_3"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">Only covenants with which an entity
must comply on or before the reporting date will affect a liability&#8217;s classification as current or non-current.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-indent: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_148" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_147"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_5" id="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_4"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">An entity should provide disclosure
when a liability arising from a loan agreement is classified as non-current and the entity&#8217;s right to defer settlement is contingent on
compliance with future covenants within twelve months from the reporting date. This disclosure is required to include information about
the covenants and the related liabilities. The disclosures must include information about the nature of the future covenants and when
compliance is applicable, as well as the carrying amount of the related liabilities. The purpose of this information is to allow users
to understand the nature of the future covenants and to assess the risk that a liability classified as non-current could become repayable
within twelve months. Furthermore, if facts and circumstances indicate that an entity may have difficulty in complying with such covenants,
those facts and circumstances should be disclosed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify; text-indent: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_149" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_148"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_6" id="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_5"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">According to the Original Amendment,
the conversion option of a liability affects the classification of the entire liability as current or non-current unless the conversion
component is an equity instrument.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-indent: 0pt">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_150" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_149"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_7" id="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_6"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">The Original Amendment and Subsequent
Amendment are both effective for annual periods beginning on or after January 1, 2024, and must be applied retrospectively. Early application
is permitted.</p><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_151" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_150"><ix:continuation id="sprcy_DescriptionOfAmendmentToIAS1PresentationOfFinancialStatements-c0_cont_7"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">The Company is evaluating the
effects of the Amendments on its financial statements.</p><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_152" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_151"><ix:nonNumeric contextRef="c0" continuedAt="sprcy_DescriptionOfAmendmentToIAS8AccountingPoliciesChangesToAccountingEstimatesAndErrors-c0_cont_1" escape="true" name="sprcy:DescriptionOfAmendmentToIAS8AccountingPoliciesChangesToAccountingEstimatesAndErrors"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 72px"></td><td style="width: 48px; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">x.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amendment
to IAS 8, &#8220;Accounting Policies, Changes to Accounting Estimates and Errors&#8221;:</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -10.1pt">&#160;</p></ix:nonNumeric></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_153" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_152"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS8AccountingPoliciesChangesToAccountingEstimatesAndErrors-c0_cont_2" id="sprcy_DescriptionOfAmendmentToIAS8AccountingPoliciesChangesToAccountingEstimatesAndErrors-c0_cont_1"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in">In February 2021, the IASB issued an amendment to IAS 8,
&#8220;Accounting Policies, Changes to Accounting Estimates and Errors&#8221; (&#8220;the Amendment&#8221;), in which it introduces a new
definition of &#8220;accounting estimates&#8221;.</p><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_154" id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_153"><ix:continuation continuedAt="sprcy_DescriptionOfAmendmentToIAS8AccountingPoliciesChangesToAccountingEstimatesAndErrors-c0_cont_3" id="sprcy_DescriptionOfAmendmentToIAS8AccountingPoliciesChangesToAccountingEstimatesAndErrors-c0_cont_2"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">Accounting estimates are defined as
&#8220;monetary amounts in financial statements that are subject to measurement uncertainty&#8221;. The Amendment clarifies the distinction
between changes in accounting estimates and changes in accounting policies and the correction of errors.</p><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory-c0_cont_154"><ix:continuation id="sprcy_DescriptionOfAmendmentToIAS8AccountingPoliciesChangesToAccountingEstimatesAndErrors-c0_cont_3"><p style="text-indent: 0pt; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0pt 0pt 1.25in; text-align: justify">The Amendment is to be applied prospectively
for annual reporting periods beginning on or after January 1, 2023 and is applicable to changes in accounting policies and changes in
accounting estimates that occur on or after the start of that period. Early application is permitted.</p></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 162 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_1" escape="true" name="sprcy:SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 3:-</b></span></td>
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</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_2" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">In the process of applying the significant
accounting policies, the Company has made the following judgments which have the most significant effect on the amounts recognized in
the financial statements:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_3" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">a.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Judgments:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_4" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_5" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">When a company in the Group is unable
to readily determine the discount rate implicit in a lease in order to measure the lease liability, such company uses an incremental borrowing
rate. That rate represents the rate of interest that the Company would have to pay to borrow over a similar term and with similar security,
the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment. When there are no
financing transactions that can serve as a basis, said company determines the incremental borrowing rate based on its credit risk, the
lease term and other economic variables deriving from the lease contract&#8217;s conditions and restrictions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_6" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_7" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The Company assesses whether it controls
a company in which it holds less than the majority of the voting rights by, among others, reference to the size of its holding of voting
rights relative to the size and dispersion of holdings of the other vote holders including voting patterns at previous shareholders&#8217;
meetings.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_8" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_9" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The fair value of share-based payment
transactions is determined upon initial recognition by an acceptable OPM. The inputs to the model include share price, exercise price
and assumptions regarding expected volatility, expected life of share option, risk-free interest and expected dividend yield.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_10" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">Estimates and assumptions:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_11" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The preparation of the financial statements
requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported
amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_12" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The key assumptions made in the financial
statements concerning uncertainties at the reporting date and the critical estimates computed by the Company that may result in a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_13" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">Legal claims:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_14" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">In estimating the likelihood of outcome
of legal claims filed or threatened to commence against the Company and/or its Subsidiaries and/or affiliates, the Company relies on its
management&#8217;s best knowledge and estimations and where applicable, on the opinion of their legal counsels. These estimates are based,
among others, on management&#8217;s familiarity of and proximity to the circumstances, and also on the legal counsels&#8217; best professional
judgment, taking into account the stage of proceedings and legal precedents in respect of the different issues. Since the outcome of the
claims might be determined in courts and/or other quasi-judicial tribunals, the results could differ from these estimates.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 163 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 3:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">b.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Estimates and assumptions: (Cont.)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_15" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">-</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Lease extension and/or termination options:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_16" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">In evaluating whether it is reasonably
certain that a company of the Group will exercise an option to extend a lease or not exercise an option to terminate a lease, the Company
considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend or not
exercise the option to terminate such as: significant amounts invested in leasehold improvements, the significance of the underlying asset
to the Company&#8217;s operation and whether it is a specialized asset, the company&#8217;s past experience with similar leases, etc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_17" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">After the commencement date, the Company
reassesses the term of the lease upon the occurrence of a significant event or a significant change in circumstances that affects whether
the company is reasonably certain to exercise an option or not exercise an option previously included in the determination of the lease
term, such as significant leasehold improvements that had not been anticipated on the lease commencement date, sublease of the underlying
asset for a period that exceeds the end of the previously determined lease period, etc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_18" id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation id="sprcy_SignificantAccountingJudgmentsEstimatesAndAssumptionsUsedInPreparationOfFinancialStatementsExplanatoryTextBlock-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">When the fair values of financial assets
and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined
using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, estimation is required in establishing fair values. The models are tested for
validity by calibrating to prices from any observable current market transactions in the same instrument when available.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation id="_DisclosureOfCashAndCashEquivalentsExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosueOfCashAndCashEquivalentsTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom">
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  </table></ix:nonNumeric></ix:continuation><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 164 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfInventoriesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfInventoriesExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; font-size: 10pt; width: 72px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE 5:-</b></span></td>
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</div><div>

</div><ix:continuation id="_DisclosureOfInventoriesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfInvestmentEntitiesExplanatory"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Goods in transit</td><td style="width: 1%">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation id="_DisclosureOfTradeAndOtherReceivablesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclourseOfAccountsReceivablesTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Government authorities</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Prepaid expenses</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfInvestmentPropertyExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_2" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_3" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On June 22, 2016, the Company entered
into a share transfer agreement (the &#8220;Transfer Agreement&#8221;) with its then wholly owned subsidiary, Orimmune Bio Ltd. (&#8220;Orimmune&#8221;)
and Karma Link Ltd. (the &#8220;Buyer&#8221;), whereby the Company would sell its interests in Orimmune to the Buyer, and also use its
best efforts to transfer to and assign Orimmune its rights in the Anti-CD3 technology.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_4" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On December 13, 2018, an additional amendment
to the Transfer Agreement was signed (the &#8220;Second Amendment&#8221;) between the parties, under which it was agreed that Orimmune
will be assigned certain rights in intellectual property (&#8220;IP&#8221;) related to the licensed technology owned by the Company subject
to certain conditions precedent which were still not met as of December 31, 2022. As of the Approval Date, the conditions precedent have
not yet been completed and the assignment of the IP related to the licensed technology owned by us has not yet been transferred.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_5" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.5in; text-align: left"><span style="font-size: 10pt">b.</span></td><td style="text-align: justify"><span style="font-size: 10pt">Coeruleus - Joint Venture Transaction</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_6" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_5"><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; margin-top: 0pt; margin-bottom: 0pt">On May 15, 2020, the Company entered into a series of transactions (together, the &#8220;Joint Venture Transaction&#8221;), including a definitive share transfer agreement with Capital Point Ltd. (&#8220;Capital Point&#8221;), an Israeli holding company traded on the TASE, and Evero, pursuant to which Capital Point sold to Evero <ix:nonFraction contextRef="c81" decimals="0" format="ixt:num-dot-decimal" name="sprcy:ConversionOfOrdinaryShares" scale="0" unitRef="shares">5,952,469</ix:nonFraction> ordinary shares, NIS <ix:nonFraction contextRef="c82" decimals="2" format="ixt:num-dot-decimal" name="sprcy:OrdinarySharesPerValue" scale="0" unitRef="ilsPershares">0.01</ix:nonFraction> par value each, of Coeruleus Ltd. (the &#8220;Purchased Coeruleus Shares&#8221; and &#8220;Coeruleus,&#8221; respectively), an Israeli company and a subsidiary of Capital Point (owns approximately <ix:nonFraction contextRef="c83" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ProportionOfOwnershipInterestInSubsidiary" scale="-2" unitRef="pure">46</ix:nonFraction>%), engaged in, among others, developing innovative medications based on the active generic substance flumazenil, including a sublingual spray to reduce the side effects of hypnotic sleep medication, and a sublingual spray to improve function and quality of life in patients with hepatic encephalopathy. The Purchased Coeruleus Shares represented approximately <ix:nonFraction contextRef="c83" decimals="2" format="ixt:num-dot-decimal" name="sprcy:PercentageOfSharesIssuedAndOutstandingShareCapital" scale="-2" unitRef="pure">35</ix:nonFraction>% of the issued and outstanding share capital of Coeruleus. In consideration thereof, Evero issued and sold to Capital Point <ix:nonFraction contextRef="c84" decimals="0" format="ixt:num-dot-decimal" name="sprcy:ConversionOfOrdinaryShares" scale="0" unitRef="shares">176,470</ix:nonFraction> ordinary shares, NIS <ix:nonFraction contextRef="c85" decimals="2" format="ixt:num-dot-decimal" name="sprcy:OrdinarySharesPerValue" scale="0" unitRef="ilsPershares">1.00</ix:nonFraction> par value each, constituting <ix:nonFraction contextRef="c81" decimals="2" format="ixt:num-dot-decimal" name="sprcy:PercentageOfSharesIssuedAndOutstandingShareCapital" scale="-2" unitRef="pure">15</ix:nonFraction>% of the issued and outstanding share capital of Evero, which was valued at $<ix:nonFraction contextRef="c83" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:FairMarketValue" scale="3" unitRef="usd">351</ix:nonFraction>, based on apportionment of the fair market value of the Company as reflected on Nasdaq as of May 15, 2020. Following the transaction, Capital Point held approximately <ix:nonFraction contextRef="c84" decimals="2" format="ixt:num-dot-decimal" name="sprcy:PercentageOfSharesIssuedAndOutstandingShareCapital" scale="-2" unitRef="pure">11</ix:nonFraction>% of Coeruleus&#8217; issued and outstanding share capital. The transaction costs of $<ix:nonFraction contextRef="c83" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AcquisitionrelatedCostsForTransactionRecognisedSeparatelyFromAcquisitionOfAssetsAndAssumptionOfLiabilitiesInBusinessCombination" scale="3" unitRef="usd">51</ix:nonFraction> were also capitalized as part of the investment in associate.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_7" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">As part of the Joint Venture Transaction,
the Company transferred to Evero its SCI-110 sleep technology, to be fully owned by Evero, under the terms and conditions of an asset
purchase agreement. In addition, the Company issued to Capital Point a warrant (the &#8220;Capital Point Warrant&#8221;) to purchase $<ix:nonFraction contextRef="c86" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:PurchaseOfOrdinaryShares" scale="3" unitRef="usd">340</ix:nonFraction>
of ordinary shares of the Company. Pursuant to the terms of the Capital Point Warrant, the exercise price per ordinary share is equal
to the closing price of the Company&#8217;s ordinary shares on the trading day on which the notice of exercise was actually received by
the Company and shall be paid by transferring to the Company a duly executed share transfer deed for <ix:nonFraction contextRef="c87" decimals="0" format="ixt:num-dot-decimal" name="sprcy:ConversionOfOrdinaryShares" scale="0" unitRef="shares">9,577</ix:nonFraction> ordinary shares of Evero. The
Capital Point Warrant is exercisable for twelve months starting from May 15, 2021, until May 15, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>



</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 165 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 7:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>INVESTMENT IN ASSOCIATES AND INVESTMENTS IN INVESTEES (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.75in"></td><td style="width: 0.5in; text-align: left"><span style="font-size: 10pt">b.</span></td><td style="text-align: justify"><span style="font-size: 10pt">Coeruleus - Joint Venture Transaction</span> (Cont.)</td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_8" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">On November 29, 2020, the shareholders
of Coeruleus approved an investment from its shareholders of approximately $<ix:nonFraction contextRef="c88" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:ShareholdersAmount" scale="3" unitRef="usd">30</ix:nonFraction>. The Company did not participate in this investment in
Coeruleus and therefore, as of the completion of such financing, the Company held less than <ix:nonFraction contextRef="c89" decimals="2" format="ixt:num-dot-decimal" name="sprcy:IssuedAndOutstandingSharesPercentage" scale="-2" unitRef="pure">1</ix:nonFraction>% of the issued and outstanding shares of
Coeruleus. As of December 31, 2022, the fair value of the Company&#8217;s investment in Coeruleus is $nil.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_9" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">c.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">MitocareX - Joint Venture Transaction</span></td></tr>
</table><p style="margin: 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_10" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">On March 10, 2022, the Company entered into a Founders and Investment Agreement with Dr. Alon Silberman, or the MitoCareX Agreement. Pursuant to the MitoCareX Agreement, the Company invested an initial amount of $<ix:nonFraction contextRef="c90" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:AdjustmentsForAmountsTransferredToInitialCarryingAmountOfHedgedItems" scale="3" unitRef="usd">700</ix:nonFraction>, and agreed to invest over the next <ix:nonNumeric contextRef="c90" format="ixt-sec:durwordsen" name="sprcy:InvestedInitialAmounts">two years</ix:nonNumeric>, an additional $<ix:nonFraction contextRef="c90" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:PreDeterminedValue" scale="3" unitRef="usd">1,000</ix:nonFraction>, subject to the achievement of certain pre-determined milestones as agreed upon in the MitoCareX Agreement, for up to a <ix:nonFraction contextRef="c90" decimals="4" format="ixt:num-dot-decimal" name="sprcy:OwnershipPercentage" scale="-2" unitRef="pure">50.01</ix:nonFraction>% ownership in MitoCareX Bio Ltd. (&#8220;MitoCareX&#8221;). MitoCareX is focused on the discovery and development of potential drugs for cancers and other life-threatening conditions. The MitoCareX Agreement also contains customary representations, warranties, covenants, and indemnification provisions. On March 31, 2022, the closing conditions were met, and the Company paid the initial investment amount of $<ix:nonFraction contextRef="c91" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:InitialInvestmentAmount" scale="3" unitRef="usd">700</ix:nonFraction> to MitoCareX. As of December 31, 2022, the Company owns <ix:nonFraction contextRef="c0" decimals="4" format="ixt:num-dot-decimal" name="sprcy:ShareBasedCompensationArrangementByShareBasedPaymentAwardPercentageOfOutstandingStocks" scale="-2" unitRef="pure">31.48</ix:nonFraction>% of the outstanding shares of MitocareX.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_11" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">On February 17, 2023, MitoCareX achieved its first milestone pursuant to the MitoCare X Agreement. The first milestone refers to the establishment of MitoCareX&#8217;s cloud-based computing infrastructure that is expected to allow its future expansion into machine learning system. The system is harnessed to investigating mitochondrial carriers that are crucial for cell viability. As a result of MitoCareX meeting this milestone, the Company will invest an additional $<ix:nonFraction contextRef="c92" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:InitialInvestmentAmount" scale="3" unitRef="usd">400</ix:nonFraction> in MitoCareX and increase its share ownership in MitoCareX Bio from <ix:nonFraction contextRef="c93" decimals="4" format="ixt:num-dot-decimal" name="sprcy:OwnershipPercentage" scale="-2" unitRef="pure">31.48</ix:nonFraction>% to <ix:nonFraction contextRef="c94" decimals="4" format="ixt:num-dot-decimal" name="sprcy:OwnershipPercentage" scale="-2" unitRef="pure">41.92</ix:nonFraction>%.</p><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_12" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin-left: 1.25in; text-align: justify; margin-top: 0pt; margin-bottom: 0pt">During the year ended December 31, 2022, the Company recorded equity losses from the investment in MitoCareX in the amount of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:InitialInvestmentAmount" scale="3" unitRef="usd">109</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_13" id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The table below summarizes the fair value of the
investment in MitoCareX:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfInvestmentPropertyExplanatory-c0_cont_13"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosureOfFairValueMeasurementOfAssetstable"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance at January 1, 2022</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-125">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="width: 88%">Investment date March 31, 2022</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:InvestmentDate" scale="3" unitRef="usd">700</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Equity losses from investment in MitoCareX</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Balance at December 31, 2022</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c2" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:FinancialAssetsMeasuredAtFairValueThroughOtherComprehensiveIncome" scale="3" unitRef="usd">591</ix:nonFraction></td><td style="padding-bottom: 4pt; text-align: left">&#160;</td></tr>
  </table></ix:nonNumeric></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfFairValueOfEachInvestmentInEquityInstrumentsDesignatedAsMeasuredAtFairValueThroughOtherComprehensiveIncomeExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfFairValueOfEachInvestmentInEquityInstrumentsDesignatedAsMeasuredAtFairValueThroughOtherComprehensiveIncomeExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>NOTE 8:-</b></span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>INVESTMENT IN FINANCIAL ASSETS</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>

</div><ix:continuation id="_DisclosureOfFairValueOfEachInvestmentInEquityInstrumentsDesignatedAsMeasuredAtFairValueThroughOtherComprehensiveIncomeExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">On November 17, 2022, the Company invested
$<ix:nonFraction contextRef="c95" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:InvestmentAmount" scale="3" unitRef="usd">1,500</ix:nonFraction> in the initial public offering of Clearmind Medicine Inc. (&#8220;Clearmind&#8221;) and received <ix:nonFraction contextRef="c96" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesIssuedButNotFullyPaid" scale="0" unitRef="shares">230,769</ix:nonFraction> common shares of Clearmind,
resulting in the Company holding <ix:nonFraction contextRef="c95" decimals="4" format="ixt:num-dot-decimal" name="sprcy:ShareCapitalPercentage" scale="-2" unitRef="pure">9.33</ix:nonFraction>% of share capital of Clearmind. Clearmind is a psychedelic pharmaceutical biotech company focused
on the discovery and development of novel psychedelic-derived therapeutics to solve widespread and underserved health problems, including
alcohol use disorder. Its primary objective is to research and develop psychedelic-based compounds and attempt to commercialize them as
regulated medicines, foods or supplements. Shares of Clearmind are listed for trading on Nasdaq and the Canadian Securities Exchange under
the symbol &#8220;CMND&#8221; and the Frankfurt Stock Exchange under the symbol &#8220;CWY.&#8221; &#160; As of December 31, 2022, the
listed share price of Clearmind on Nasdaq was $<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sprcy:SharePricePerShare" scale="0" unitRef="usdPershares">3.16</ix:nonFraction>, and the Company has recorded a loss in its statements of comprehensive loss of $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:ComprehensiveLoss" scale="3" unitRef="usd">771</ix:nonFraction>
on its investment. &#160;</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfLeasesExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 9:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>LEASES</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p></ix:nonNumeric><div>
</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfLeasesExplanatory-c0_cont_2" id="_DisclosureOfLeasesExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">On September 1, 2020, the Company entered
into a one-year lease agreement (&#8220;the 2020 Lease&#8221;) with a third party for an area of approximately <ix:nonFraction contextRef="c97" decimals="0" format="ixt:num-dot-decimal" name="sprcy:SquareMeters" scale="0" unitRef="pure">100</ix:nonFraction> square meters for the
Company&#8217;s offices in the district of Tel Aviv, Israel. The yearly lease fee was set at approximately $<ix:nonFraction contextRef="c97" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:LeaseFee" scale="3" unitRef="usd">44</ix:nonFraction>, linked to the NIS. The
lease expired on <ix:nonNumeric contextRef="c98" format="ixt:date-monthname-day-year-en" name="sprcy:ExpireTerm">August 31, 2021</ix:nonNumeric>. The Company did not exercise its option to extend the lease until August 31, 2026.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfLeasesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">On July 1, 2021, the Company entered
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meters, whereby the Company occupies approximately <ix:nonFraction contextRef="c100" decimals="0" format="ixt:num-dot-decimal" name="sprcy:SquareMeters" scale="0" unitRef="pure">120</ix:nonFraction> square meters for the Company&#8217;s offices, in the district of Tel Aviv, Israel.
The Company and the third party have an option to extend for an additional three-year term. The yearly lease fee was set at approximately
$<ix:nonFraction contextRef="c99" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:LeaseFee" scale="3" unitRef="usd">40</ix:nonFraction>, linked to the NIS.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 10:-</b></span></td>
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Disposals</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-140">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c122" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DisposalsPropertyPlantAndEquipment" scale="3" unitRef="usd">54</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Balance at December 31, 2021</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-141">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c103" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:BeginningBalanceCost" scale="3" unitRef="usd">29</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c105" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:BeginningBalanceCost" scale="3" unitRef="usd">114</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-weight: bold; font-style: italic; text-align: left; text-indent: -9pt; padding-left: 9pt">Accumulated depreciation:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">Balance at January&#160;1, 2021</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c114" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:PropertyPlantAndEquipmentCost" scale="3" unitRef="usd">12</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c115" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:PropertyPlantAndEquipmentCost" scale="3" unitRef="usd">13</ix:nonFraction></td><td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-142">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c117" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:PropertyPlantAndEquipmentCost" scale="3" unitRef="usd">44</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Depreciation of leases</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-143">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-144">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-145">-</div></td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c121" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:AccumulatedTerminationOfLeases" scale="3" unitRef="usd">20</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c122" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:AccumulatedTerminationOfLeases" scale="3" unitRef="usd">20</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">Depreciation</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-146">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c120" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DepreciationPropertyPlantAndEquipment" scale="3" unitRef="usd">11</ix:nonFraction></td><td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-147">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c122" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DepreciationPropertyPlantAndEquipment" scale="3" unitRef="usd">12</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Disposals</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c118" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DisposalsPropertyPlantAndEquipment" scale="3" unitRef="usd">19</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c119" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DisposalsPropertyPlantAndEquipment" scale="3" unitRef="usd">12</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c120" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DisposalsPropertyPlantAndEquipment" scale="3" unitRef="usd">23</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td>
    <td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-148">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c122" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:DisposalsPropertyPlantAndEquipment" scale="3" unitRef="usd">54</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Balance at December 31, 2021</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c101" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:PropertyPlantAndEquipmentCost" scale="3" unitRef="usd">1</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-149">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td>
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</div><div>

</div><ix:continuation id="_DisclosureOfPropertyPlantAndEquipmentExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">Depreciation expenses for the years
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 36pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfIntangibleAssetsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 11:-</b></span></td>
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</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_2" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">On September 30, 2022, the Company announced
the closing of the acquisition of Wellution<sup>TM</sup>, a top seller Amazon.com Marketplace account (the &#8220;Brand&#8221;), American
food supplements and cosmetics brand and trademark (the &#8220;Acquisition&#8221;). In connection with the Acquisition, the Company incorporated
a new wholly owned Delaware subsidiary, SciSparc Nutraceuticals Inc., to hold the new assets. The definitive agreement for the acquisition
of the Brand was entered into with Merhavit M.R.M Holding and Management Ltd (&#8220;M.R.M&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_3" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">At the closing, the Company paid a
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_4" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify">In addition, the Company issued to
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 167 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
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    <td style="text-align: justify"><span style="font-size: 10pt"><b>INTANGIBLE ASSET (CONT.)</b></span></td></tr>
</table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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and deemed it to be the purchase of assets for accounting purposes under generally accepted accounting principles and not as a business
combination. The Company reviewed the guidance under IFRS 3 for the transaction and determined that the fair value of the gross assets
acquired was concentrated in a single identifiable asset, a brand. Accordingly, the Company treated the transaction as an asset acquisition.
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_7" id="_DisclosureOfIntangibleAssetsExplanatory-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:ScheduleOfFairValueOfTheIntangibleAssetTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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</div><div>

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was available as of the acquisition date to estimate the fair value of these amounts. The Group&#8217;s management believes the information
provides a reasonable basis for estimating the fair values of these amounts but is waiting for additional information necessary to finalize
those fair values. Therefore, provisional measurements of fair value that appear are subject to change. The Group expects to finalize
the tangible and intangible assets valuation and complete the acquisition accounting as soon as practicable but no later than the measurement
period.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation id="_DisclosureOfTradeAndOtherPayablesExplanatory-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosureOfTradePayables"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td>&#160;</td>
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    <td>&#160;</td>
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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_3" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The financial assets and financial liabilities
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</div><div>

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</div><div>

</div><!-- Field: Page; Sequence: 169 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_5" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_6" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 14:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>FINANCIAL INSTRUMENTS (CONT.)</b></span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_7" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_6"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px">b<span style="font-size: 10pt">.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Bridge Loan</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_8" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On January 15, 2020, the Company entered
into a bridge loan agreement (the &#8220;Bridge Loan&#8221;) with a third party, in which the third party lent to the Company $<ix:nonFraction contextRef="c123" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:BridgeLoanAmount" scale="3" unitRef="usd">50</ix:nonFraction> (the
&#8220;Bridge Loan Amount&#8221;). On April 17, 2020, the Bridge Loan Amount was fully repaid by the Company, including interest in the
amount of $<ix:nonFraction contextRef="c124" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:InterestPayable" scale="3" unitRef="usd">2</ix:nonFraction>. Accordingly, the Bridge Loan was terminated with no further effect.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_9" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_8"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px">c<span style="font-size: 10pt">.</span></td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_10" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On September 8, 2020, the Company entered
into a certain credit agreement (the &#8220;Credit Facility&#8221;), with M.R.M. Merchavit Holdings and Management Ltd. (the &#8220;Lender&#8221;),
whereby the Lender agreed to extend a line of credit to the Company in the aggregate amount of $<ix:nonFraction contextRef="c125" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:AggregateAmountOrCreditAmount" scale="3" unitRef="usd">200</ix:nonFraction>, or the Credit Amount. According to
the terms of the Credit Facility, $<ix:nonFraction contextRef="c125" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:CreditFacilityAmount" scale="3" unitRef="usd">100</ix:nonFraction> of the Credit Amount (the &#8220;Loan Amount&#8221;), was immediately drawn on the date of the
Credit Facility, and the remaining $<ix:nonFraction contextRef="c125" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:CreditFacilityAndRemainingAvailableDrawnAmount" scale="3" unitRef="usd">100</ix:nonFraction> was available be drawn on an as-needed basis. The Loan Amount was due upon the earlier of <ix:nonNumeric contextRef="c125" format="ixt-sec:durwordsen" name="sprcy:LoanAmountDueTerm">one
year</ix:nonNumeric> from September 8, 2020 or at such time that the Company raised $<ix:nonFraction contextRef="c125" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:LoanAmountRaised" scale="3" unitRef="usd">1,500</ix:nonFraction>. <ix:nonNumeric contextRef="c125" name="ifrs-full:DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory">The Lender was entitled to a transaction and interest fee
of $5 (plus VAT) that was offset from the Credit Facility for the immediately drawn $100 and 5% from any additional withdrawal amount
from the Credit Facility. On November 24, 2020, the Loan Amount was fully repaid by the Company.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_11" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_10"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px">d<span style="font-size: 10pt">.</span></td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_12" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On March 19, 2020, <ix:nonNumeric contextRef="c126" continuedAt="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_1" name="ifrs-full:DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory">the Company entered
into a securities purchase agreement with Dekel Pharmaceutical Ltd. (&#8220;Dekel&#8221;) pursuant to which Dekel agreed to invest in
the Company through a private placement transaction (the &#8220;Private Placement&#8221;). At the time of the Private Placement, Dekel
was considered as a related party to the Company; however, it is no longer a related party to the Company. In connection with the Private
Placement, Dekel received convertible promissory notes (the &#8220;Notes&#8221;), with an aggregate original principal amount of approximately
$<ix:nonFraction contextRef="c127" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CashOutflowForLeases" scale="3" unitRef="usd">350</ix:nonFraction>, at an aggregate purchase price of $<ix:nonFraction contextRef="c128" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:PricesSpecifiedInForwardAgreementsToPurchaseFinancialAssetsForCash" scale="3" unitRef="usd">315</ix:nonFraction> to be paid in several tranches spread across a twelve-month period. In addition, the Company
issued a warrant to purchase up to <ix:nonFraction contextRef="c128" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesIssuedAndFullyPaid" scale="0" unitRef="shares">314,285</ix:nonFraction> ordinary shares of the Company (the &#8220;Private Placement Warrant&#8221;) and <ix:nonFraction contextRef="c129" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesIssuedAndFullyPaid" scale="0" unitRef="shares">40,000</ix:nonFraction> ordinary
shares. The initial tranche of the Private Placement was for a principal amount of $<ix:nonFraction contextRef="c130" decimals="-3" format="ixt:num-dot-decimal" name="ifrs-full:CashOutflowForLeases" scale="3" unitRef="usd">220</ix:nonFraction> at a purchase price of $<ix:nonFraction contextRef="c130" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:PurchasePrice" scale="3" unitRef="usd">198</ix:nonFraction>. The Notes are unsecured,
have a maturity date of <ix:nonNumeric contextRef="c127" format="ixt:date-monthname-day-year-en" name="sprcy:MaturityDate">March 23, 2021</ix:nonNumeric>, bear interest at a rate of <ix:nonFraction contextRef="c128" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:BorrowingsInterestRate" scale="-2" unitRef="pure">12</ix:nonFraction>% per annum, and may be converted, at the election of the holder,
into ordinary shares at an initial conversion price of $<ix:nonFraction contextRef="c128" decimals="2" format="ixt:num-dot-decimal" name="sprcy:InitialConversionPrice" scale="0" unitRef="usdPershares">0.35</ix:nonFraction> per ordinary share (the &#8220;Fixed Conversion Price&#8221;), subject to
adjustments. After the six-month anniversary of the issuance of the Notes, the conversion price shall be equal to the lower of the Fixed
Conversion Price or <ix:nonFraction contextRef="c127" decimals="2" format="ixt:num-dot-decimal" name="sprcy:ConversionPrice" scale="-2" unitRef="pure">70</ix:nonFraction>% of the lowest trading price of the ordinary shares as reported on Nasdaq or any exchange upon which the ordinary
shares of the Company are traded at such time, for the 20 prior trading days including the day upon which a notice of conversion is received
by the Company or its transfer agent. The Private Placement Warrant is exercisable at any time on or after the actual closing date and
on or prior to the close of business on the five-year anniversary of the date of issuance, at an initial exercise price of $<ix:nonFraction contextRef="c127" decimals="2" format="ixt:num-dot-decimal" name="sprcy:OrdinaryShareExercisePrice" scale="0" unitRef="usdPershares">0.35</ix:nonFraction> per ordinary
share, subject to adjustment. On November 8, 2020, the Notes were terminated and the initial tranche was fully repaid by the Company.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_13" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_12"><ix:continuation continuedAt="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_2" id="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify"><i>General Overview of Valuation Approaches
used in the Valuation:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_14" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_13"><ix:continuation continuedAt="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_3" id="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 170 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 14:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>FINANCIAL INSTRUMENTS (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px">d<span style="font-size: 10pt">.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Dekel (Cont.)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_15" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_14"><ix:continuation continuedAt="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_4" id="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify"><i>Economic methodology:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_16" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_15"><ix:continuation id="_DisclosureOfCompoundFinancialInstrumentsWithMultipleEmbeddedDerivativesExplanatory-c126_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The warrants&#8217; fair value was calculated
using the Black&#8211;Scholes OPM, which takes into account the parameters as disclosed below for each period valuated, in which a valuation
was performed at (i) the issuance date, and (ii) each reporting date with the following assumptions:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_17" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_16"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:ScheduleOfWarrantsFairValueUsingBlackscholesTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Exercise price ($)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; ">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>


</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_18" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_19" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Company&#8217;s activities expose
it to various financial risks such as market risks (foreign currency risk and interest risk), credit risk and liquidity risk. The Company&#8217;s
comprehensive risk management plan focuses on activities that reduce to a minimum any possible adverse effects on the Company&#8217;s
financial performance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_20" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_19"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">Risk management is performed by management
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principles for the overall risk management activities as well as specific policies with respect to certain exposures to risks such as
exchange rate risk, credit risk and the investments of surplus funds.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_21" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_20"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_22" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify"><i>Foreign currency risk:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_23" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The Company is exposed to exchange rate
risk resulting from the exposure to different currencies, mainly from transactions in NIS. Exchange rate risk arises from recognized liabilities
that are denominated in a foreign currency other than the functional currency.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_24" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_25" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">All cash and restricted deposits related
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_26" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_25"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_27" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The Company monitors the risk of a shortage
of funds on a regular basis and acts to raise funds to satisfy its liabilities. As of December 31, 2022, the Company expects to settle
all of its financial liabilities in less than one year.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_28" id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_27"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The carrying amounts of cash and restricted
deposits, and all other financial assets and liabilities approximate their fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfDetailedInformationAboutFinancialInstrumentsExplanatory-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">Refer to Note 1c for more information.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 171 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfEmployeeBenefitsExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 15:-</b></span></td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_2" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">Employee benefits consist of short-term
benefits and post-employment benefits.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_3" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify"><i>Post-employment benefits:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_4" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">According to the labor laws and the Israeli
Severance Pay Law, 1963 (the &#8220;Severance Pay Law&#8221;), the Company is required to pay compensation to an employee upon dismissal
or retirement or to make current contributions in defined contribution plans pursuant to Section 14 of the Severance Pay Law, as specified
below. The Company&#8217;s liability is accounted for as a post-employment benefit. The computation of the Company&#8217;s employee benefit
liability is made in accordance with a valid employment contract based on the employee&#8217;s salary and employment term which establish
the entitlement to receive the compensation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_5" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">The post-employment benefits are normally
financed by contributions classified as defined benefit plans or as defined contribution plans as detailed below.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_6" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify"><i>Defined contribution plans:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_7" id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 54pt; text-align: justify">Section 14 of the Severance Pay Law applies
to a substantial part of the compensation payments, pursuant to which the fixed contributions paid by the Company into pension funds and/or
policies of insurance companies release the Company from any additional liability to employees for whom said contributions were made.
These contributions and contributions for compensation represent defined contribution plans.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfEmployeeBenefitsExplanatory-c0_cont_7"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosureOfDetailedInformationAboutDefinedContributionPlansExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_1" escape="true" name="ifrs-full:DisclosureOfIncomeTaxExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_2" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_3" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Israeli statutory corporate tax rate
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_4" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_5" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">The assessments of the Company are
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_6" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_5"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfIncomeTaxExplanatory-c0_cont_7" id="_DisclosureOfIncomeTaxExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Company has accumulated tax losses
since its inception.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation id="_DisclosureOfIncomeTaxExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">As of December 31, 2022, the Company&#8217;s
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 172 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt; text-align: left">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_2" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_3" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">In May 2015, the Company entered into
an exclusive, irrevocable, worldwide license agreement with Dekel for certain technology and one granted U.S. patent related to compositions
and methods for treating inflammatory disorders (the &#8220;Dekel License Agreement&#8221;). The Dekel License Agreement became effective
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_4" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">Pursuant to the Dekel License Agreement,
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in March 2017); (ii) $75 upon the successful completion of a Phase I/IIa trial; and (iii) $75 upon the earlier of generating net revenues
of at least $200 from the commercialization of the technology or the approval of the U.S. Food and Drug Administration or the European
Medicines Agency, of a drug based on the licensed assets. In each case, and subject to the Company&#8217;s discretion, the respective
milestone payments are payable in cash or equity based on a price per ordinary share of NIS 0.5. The royalty payments are 8% for commercialization
and 35% pursuant to a sub-license of the licensed assets. The patent expiration dates of any patents maturing from this application would
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_5" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On July 14, 2019, an amendment to the
Dekel License Agreement was signed (the &#8220;Amendment&#8221;), which encompasses the Company and Dekel&#8217;s original intention to
exclude certain consumer packaged goods (meaning, inter alia, food, beverage, cosmetics, pet products and hemp based products, which are
sources of nutrients or other substances which may have a nutritional effect) from the scope of the licensed products and the field of
activity of the Company described in the Dekel License Agreement. The parties agreed to amend the Dekel License Agreement to reflect the
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_6" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Amendment also prescribes for a specific
development plan under the Dekel License Agreement requiring the Company to invest in the licensed technology (as defined under the License
Agreement) formulation development and maintenance a total annual investment to be capped at $<ix:nonFraction contextRef="c0" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:AnnualInvestment" scale="3" unitRef="usd">350</ix:nonFraction>. The Amendment also included a non-compete
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_7" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On November 13, 2019, an additional milestone
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Company paid the milestone amount on April 13, 2020.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 173 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_8" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_7"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_9" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On July 29, 2018, the Company entered
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technology, in order to develop, obtain regulatory approvals, manufacture, market, distribute or sell products, all within the field and
the territory only, as determined in the agreement (the &#8220;Yissum License Agreement&#8221;). According to the Yissum License Agreement,
the Company shall pay Yissum royalties at the rates of future net sales, subject to the royalty reductions as described in the Yissum
License Agreement. The Company is also obligated to pay sublicense fees out of the sublicense consideration. All right, title and interest
in and to the Yissum License Agreement shall vest solely in Yissum, and the Company shall hold and make use of the rights granted. All
rights in the development results shall be solely owned by the Company, except to the extent that an employee of Yissum, including the
researcher, is considered an inventor of a patentable invention arising from the development results, in which case such invention and
all patent applications and/or patents claiming such invention shall be owned jointly by the Company and Yissum, as appropriate, and Yissum&#8217;s
share in such joint patents shall be automatically included in the Yissum License Agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_10" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_9"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

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into an investigator-initiated study contract with Hannover Medical School (&#8220;MHH&#8221;) to conduct during 2018 a phase IIb clinical
trial titled &#8220;A Randomized, Double-Blind, Placebo controlled study to Evaluate the Safety, Tolerability and Efficacy of Up to Twice
Daily Oral SCI-110 in Treating Adults with Tourette Syndrome&#8221; in treating approximately 20 Tourette syndrome subjects aged 18 to
65. Upon the execution of the agreement the Company paid the first installment in the amount of $<ix:nonFraction contextRef="c134" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:InstallmentAmount" scale="3" unitRef="usd">122</ix:nonFraction> out of a total estimated amount of
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to an industry sponsored trial. During October 2017, a discussion was carried out between the Company and MHH and the latter was informed
about this change and a termination letter stating the above was sent to MHH on November 19, 2017. MHH has acknowledged that part of the
first instalment that was paid by the Company, in accordance with the initial agreement, will be used to set-off amounts owed under a
new agreement or will be paid back to the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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into an agreement with MHH to conduct a clinical investigation and laboratory services for a randomized, double-blind, placebo-controlled
proof of concept study to evaluate the safety, tolerability and efficacy of daily oral SCI-110 in treating adults with Tourette syndrome,
which agreement was subsequently updated on December 2, 2021, in an estimated amount of $<ix:nonFraction contextRef="c135" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:TotalAgreementEstimatingAmount" scale="3" unitRef="usd">1,385</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_13" id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px">&#160;</td> <td style="width: 48px"><span style="font-size: 10pt">d.</span></td> <td> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Agreement with Yale University:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 27, 2022, the Company entered into an agreement with Yale University to conduct a clinical investigation and laboratory services for a randomized, double-blind, placebo-controlled, cross over study to evaluate the safety, tolerability and efficacy of daily oral SCI-110 in treating adults with Tourette syndrome in treating approximately 10 Tourette syndrome subjects aged 18 to 65. The total estimated amount of the agreement is approximately $<ix:nonFraction contextRef="c136" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:TotalAgreementEstimatingAmount" scale="3" unitRef="usd">370</ix:nonFraction>.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 174 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->36<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 17:-</b></span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory-c0_cont_13"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 72px; text-align: justify">&#160;</td> <td style="width: 48px; text-align: justify">e<span style="font-size: 10pt">.</span></td> <td> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 23, 2020, the Company submitted to the Tel Aviv-Jaffa District Court (the &#8220;Court&#8221;) a petition pursuant to the Israeli Insolvency and Economic Rehabilitation Law, 2018, to commence proceedings for the economic rehabilitation of the Company (the &#8220;Petition&#8221;). In the Petition submitted to the Court, the Company stated that it is insolvent (as determined by the cash flow test) and unable to pay its debts to the Company&#8217;s creditors.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 6, 2020, L.I.A. Pure Capital Ltd. (&#8220;Pure Capital&#8221;) filed with the Court a demand, requesting an order to have the results of the Company&#8217;s annual general meeting held on August 4, 2020, declared invalid, mainly due to the Company&#8217;s reliance on discretionary voting of the depositary bank for the Company&#8217;s then outstanding ADSs. The Court asked for the Company and directors&#8217; response by no later than August 13, 2020, which was subsequently extended.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 11, 2020, Pure Capital proposed to deposit $<ix:nonFraction contextRef="c137" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:CapitalProposedToDeposit" scale="3" unitRef="usd">1,500</ix:nonFraction> with the Company&#8217;s temporary trustee nominated by the Court to cover and pay all of the Company&#8217;s debts, without derogating from any other creditor&#8217;s rights towards the Company (the &#8220;Pure Capital Proposal&#8221;). The Pure Capital Proposal was made subject to the replacement of the Company&#8217;s Board as of the date of the Pure Capital Proposal (the &#8220;Prior Board&#8221;) with Pure Capital&#8217;s designated nominees that were voted upon at the adjourned annual general meeting of the Company&#8217;s shareholders on August 4, 2020 (as discussed below). The Court&#160;issued an order on August 14, 2020 (the &#8220;Order&#8221;), approving the Pure Capital Proposal and settlement agreement submitted to the Court by the parties thereto.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the terms of the Order and following the deposit by Pure Capital, the Prior Board was replaced with: Itschak Shrem (chairman), Amity Weiss (also appointed to act as the Company&#8217;s Chief Executive Officer), Moshe Revach, Lior Amit, Lior Vider and Liat Sidi. Following the issuance of the Order, a related case that was filed by Pure Capital with the Court was withdrawn as well.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 15, 2020, Mr. Lior Amit tendered his resignation from the Board and on March 13, 2022, Mr. Moshe Revach tendered his resignation from the Board and then later re-joined the Board in September 2022.</p></td></tr> </table></ix:continuation><div>
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</div><div>

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  <tr style="vertical-align: top">
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    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">a.</span></td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_3" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_2"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfClassesOfShareCapitalExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 175 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 18:-</b></span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
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  </table><div>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_5" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On September 17, 2020, <ix:nonNumeric contextRef="c138" name="sprcy:DescriptionOfReverseShareSplit">the Company convened
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_6" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On October 16, 2020, the Company convened
a special general meeting of its shareholders, whereby the shareholders approved an increase to the Company&#8217;s share capital from
<ix:nonFraction contextRef="c141" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfOrdinarySharesIssued" scale="0" unitRef="shares">750,000,000</ix:nonFraction> ordinary shares to <ix:nonFraction contextRef="c142" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfOrdinarySharesIssued" scale="0" unitRef="shares">1,800,000,000</ix:nonFraction> ordinary shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_7" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On October 1, 2020, the Company&#8217;s
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the Reverse Split, a change to the ratio of its ADSs to its ordinary shares was effective pursuant to which each ADS representing <ix:nonFraction contextRef="c143" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfOrdinarySharesIssued" scale="0" unitRef="shares">40</ix:nonFraction> ordinary
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_8" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_7"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On March 2, 2021, the Company convened
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_9" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_8"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;On July 19, 2021, <ix:nonNumeric contextRef="c147" name="sprcy:DescriptionOfReverseShareSplit">the Company&#8217;s
Board resolved that the final ratio for the Second Reverse Split will be 140:1, which went effective on August 9, 2021.&#160;Concurrently
with the Second Reverse Split, a change to the ratio of its ADSs to its Ordinary Shares was effective pursuant to which each ADS representing
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_10" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_9"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">Consequently, all share numbers, share
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_11" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On September 15, 2022, the Company convened
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ordinary shares with no par value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_12" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_11"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">b.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Changes in share capital:</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_13" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_12"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify"><i>Issued and outstanding share capital:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_14" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_13"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosureOfIssuedAndOutstandingShareCapital"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><p style="margin-top: 0; margin-bottom: 0">Number of<br/> ordinary</p>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesIssued" scale="0" unitRef="shares">3,091,740</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="INF" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfSharesOutstanding" scale="0" unitRef="shares">335,000</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-indent: -9pt; padding-left: 9pt">Exercise of pre-funded warrants (Note 18g)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="INF" format="ixt:num-dot-decimal" name="sprcy:ExerciseOfPrefundedWarrantsOne" scale="0" unitRef="shares">100,000</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Exercise of pre-funded warrants (Note 18h)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="INF" format="ixt:num-dot-decimal" name="sprcy:ExerciseOfPrefundedWarrants" scale="0" unitRef="shares">3,211,100</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; ">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Share issued to a consultant (Note 18f)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="INF" format="ixt:num-dot-decimal" name="sprcy:ShareIssuedToAConsultant" scale="0" unitRef="shares">61,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
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    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Balance at December 31, 2022</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 176 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 18:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>EQUITY (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_15" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_14"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_16" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_15"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">Voting rights at the shareholders meeting,
right to dividends, rights upon liquidation of the Company and right to nominate the directors in the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_17" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_16"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify">&#160;</td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_18" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_17"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Company&#8217;s capital management
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and other interested parties. The Company is not under any minimal equity requirements nor is it required to attain a certain level of
capital return.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>



</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_19" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_18"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_20" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_19"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px; font-size: 10pt">&#160;</td>
    <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</span></td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_21" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">On April 1, 2020, <ix:nonNumeric contextRef="c149" name="sprcy:PurchaseAgreementsDescription">the Company entered
into a definitive securities purchase agreement (the &#8220;April 2020 Purchase Agreement&#8221;) with institutional investors to purchase
of 4,166,168 units, each consisting of (i) one pre-funded warrant to purchase one ordinary share and (ii) one Series B warrant to purchase
one ordinary share, at a purchase price of $0.2999 per unit. The Series B warrants have an exercise price of $0.43 per ordinary share,
are exercisable upon issuance and expire five years from the date of issuance. The offering resulted in gross proceeds to the Company
of approximately $1,250. The closing of the sale of the securities took place on April 3, 2020. After the closing of the April 2020 Purchase
Agreement and until the Approval Date, all pre-funded warrants were exercised. In addition, 4,166,168 of the Series B warrants were exercised
pursuant to a cashless exercise mechanism as described in the April 2020 Purchase Agreement for no further consideration to the Company.
As of the Approval Date, all Series B warrants were exercised.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_22" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_21"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The Series B warrants are classified
as a financial liability that will be measured at fair value, through profit or loss, as of the issuance date and on any following financial
reporting date (accordingly, issue expenses related to the Series B warrants will be recorded through profit or loss). No consideration
will be left to attribute to the pre-funded warrants, which is an equity instrument.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_23" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_22"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The valuation of the conversion component
of the Series B warrants was set at fair value, as required in IFRS 9, and in accordance with IFRS 13, and was categorized as Level 3
by the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 177 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 18:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>EQUITY (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">e.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Financing Rounds: (Cont.)</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_24" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 120px">&#160;</td>
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    <td style="text-align: justify"><span style="font-size: 10pt">November 2020 Financing Round</span></td></tr>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_25" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_24"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">On November 20, 2020, the Company completed
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share and (ii) two warrants to purchase one ordinary share each, at a purchase price of&#160;$5.02&#160;per unit (&#8220;November 2020
Warrants&#8221;). The November 2020 Warrants have an exercise price of&#160;$5.02&#160;per ordinary share, will be exercisable upon issuance
and will expire five years from the date of issuance.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_26" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_25"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The November 2020 Warrants are classified
as issued warrants in the Company&#8217;s equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_27" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_26"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.75in; text-align: justify">During the year ended December 31,
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_28" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_27"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">f.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">Additional issuance of ordinary shares:</span></td></tr>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_29" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_28"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On July 21, 2021, the Company issued
a consultant <ix:nonFraction contextRef="c154" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfOrdinarySharesIssued" scale="0" unitRef="shares">6,000</ix:nonFraction> ordinary shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_30" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_29"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">On August 2, 2022, the Company issued
a consultant <ix:nonFraction contextRef="c155" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfOrdinarySharesIssued" scale="0" unitRef="shares">24,000</ix:nonFraction> ordinary shares in respect of services rendered.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_31" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_30"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify">On November 1, 2022, the Company issued
a consultant <ix:nonFraction contextRef="c156" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:IncreaseDecreaseInNumberOfOrdinarySharesIssued" scale="0" unitRef="shares">37,000</ix:nonFraction> ordinary shares in respect of services rendered.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_32" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_31"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">g.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">March 2021 Financing Round</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_33" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_32"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On March 4, 2021, <ix:nonNumeric contextRef="c157" name="sprcy:DescriptionOfPrivateOffering">the Company completed
a private offering with several accredited and institutional investors for gross proceeds of $8,150, providing for the issuance of an
aggregate of 1,152,628 units, as follows: (a) 916,316 units at a price of $7.07 per unit, consisting of (i) one ordinary share of the
Company, and (ii) a Series A Warrant to purchase an equal number of units purchased (the &#8220;2021 Series A Warrants&#8221;) and a Series
B Warrant (the &#8220;2021 Series B Warrants&#8221; and, collectively with the 2021 Series A Warrants, the March 2021 Warrants) to purchase
half the number of units, and (b) 236,312 pre-funded units at a price of $7.069 per unit, consisting of (i) one pre-funded warrant to
purchase one ordinary share and (ii) one 2021 Series A Warrant and one 2021 Series B Warrant.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_34" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_33"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The Series A Warrants have an exercise
price of&#160;$<ix:nonFraction contextRef="c158" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ExercisePriceShareOptionsGranted2019" scale="0" unitRef="usdPershares">7.07</ix:nonFraction>&#160;per ordinary share and the Series B Warrants have an exercise price of&#160;$<ix:nonFraction contextRef="c159" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ExercisePriceShareOptionsGranted2019" scale="0" unitRef="usdPershares">10.60</ix:nonFraction>&#160;per ordinary share).
Both were exercisable upon issuance and will expire <ix:nonNumeric contextRef="c3" format="ixt-sec:durwordsen" name="sprcy:DateOfIssuance">five years</ix:nonNumeric> from the date of issuance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_35" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_34"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The March 2021 Warrants are classified
as issued warrants in the Company&#8217;s equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_36" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_35"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">During the year ended December 31, 2021,
the Company issued <ix:nonFraction contextRef="c160" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesIssued" scale="0" unitRef="shares">128,156</ix:nonFraction> ordinary shares in respect of the exercise of <ix:nonFraction contextRef="c4" decimals="0" format="ixt:num-dot-decimal" name="sprcy:WarrantsAndExercise" scale="0" unitRef="shares">10,000</ix:nonFraction> 2021 Series A Warrants and the exercise of <ix:nonFraction contextRef="c161" decimals="0" format="ixt:num-dot-decimal" name="sprcy:WarrantsAndExercise" scale="0" unitRef="shares">118,156</ix:nonFraction> of
pre-funded warrants.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_37" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_36"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">During the year ended December 31, 2022,
the Company issued <ix:nonFraction contextRef="c162" decimals="0" format="ixt:num-dot-decimal" name="ifrs-full:NumberOfSharesIssued" scale="0" unitRef="shares">100,000</ix:nonFraction> ordinary shares in respect of the exercise of <ix:nonFraction contextRef="c163" decimals="0" format="ixt:num-dot-decimal" name="sprcy:WarrantsAndExercise" scale="0" unitRef="shares">100,000</ix:nonFraction> pre-funded warrants.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_38" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_37"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">h.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">June 2022 Financing Round</span></td></tr>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_39" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_38"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">On June 1, 2022, <ix:nonNumeric contextRef="c164" name="sprcy:DescriptionOfPrivateOffering">the Company completed
a private offering with an investor for gross proceeds of $<ix:nonFraction contextRef="c164" decimals="-3" format="ixt:num-dot-decimal" name="sprcy:GrossProceeds" scale="3" unitRef="usd">10,210</ix:nonFraction> (the &#8220;June 2022 Private Placement&#8221;), providing for the issuance
of an aggregate of <ix:nonFraction contextRef="c165" decimals="0" format="ixt:num-dot-decimal" name="sprcy:IssuanceOfAggregateShares" scale="0" unitRef="shares">3,546,100</ix:nonFraction> units and pre-funded units, as follows: (a) 335,000 units at a price of $2.88 per unit, each consisting of
(i) one ordinary share of the Company, and (ii) two warrants each to purchase one ordinary share (the &#8220;June 2022 Warrants&#8221;),
and (b) 3,211,100 pre-funded units at a price of $2.819 per unit, each consisting of (i) one pre-funded warrant to purchase one ordinary
share and (ii) two June 2022 Warrants.</ix:nonNumeric></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_40" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_39"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The June 2022 Warrants have an exercise
price of&#160;$<ix:nonFraction contextRef="c166" decimals="2" format="ixt:num-dot-decimal" name="sprcy:WarrantsExercisePrice" scale="0" unitRef="pure">2.63</ix:nonFraction>&#160;per ordinary share. The June 2022 Warrants were exercisable upon issuance and will expire seven years from the
date of issuance.&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 178 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
    <td style="text-align: justify; width: 72px"><span style="font-size: 10pt"><b>NOTE 18:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>EQUITY (CONT.)</b></span></td></tr>
</table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 72px">&#160;</td>
    <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">h.</span></td>
    <td style="text-align: justify"><span style="font-size: 10pt">June 2022 Financing Round</span> (Cont.)</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_42" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_41"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">Fair value is the price that would be
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_43" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_42"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify"><i>Economic methodology:</i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_45" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_44"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfIndirectMeasurementOfFairValueOfGoodsOrServicesReceivedShareOptionsGrantedDuringPeriodExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_46" id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_45"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The June 2022 Warrants are classified
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</div><div>

</div><ix:continuation id="_DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory-c0_cont_46"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">During the year ended December 31, 2022,
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: top">
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE 19:-</b></span></td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_2" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_3" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">The expenses due to share-based compensation
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Company is shown in the following table, detailed by departments:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 90pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_4" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_3"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosureOfExpenseRecognizedExplanatoryTableTextBlock"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_5" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
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    <td style="width: 24px; text-align: justify"><span style="font-size: 10pt">1.</span></td>
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_6" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_5"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 108pt; text-align: justify">During 2005, the Board adopted the 2005
Employees Share Option Plan (the &#8220;2005 ESOP&#8221;). Ten years later the Board adopted a new plan - the 2015 Employees Share Option
Plan (the &#8220;2015 ESOP&#8221;). Under both the 2005 ESOP and 2015 ESOP, the Company may grant its employees and other service providers
options to purchase the Company&#8217;s ordinary shares (&#8220;Share Options&#8221;).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 108pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

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</div><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 179 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->41<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0px"></td>
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE&#160;19:-</b></span></td>
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_12" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_11"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The fair value of the Share Options
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_13" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_12"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 120px">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">3.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">On October 10, 2019 (the &#8220;2019 Grant Date&#8221;), <ix:nonNumeric contextRef="c174" name="sprcy:StockOptionDescription">the Board approved the grant of 72 Share Options under the 2015 ESOP to directors, officers and employees, some of which required the approval of the general meeting of the Company&#8217;s shareholders (the &#8220;2019 General Meeting&#8221;), which occurred on January 15, 2020. Following the resignation of some directors and employees on December 31, 2019, 15 Share Options (were not granted. Out of the 57 Share Options that were granted, 10 Share Options didn&#8217;t require the General Meeting&#8217;s approval. The date of commencement for all Share Options granted, the date on which the vesting started, was the 2019 Grant Date. The exercise price was set at $210.00 per Share Option.</ix:nonNumeric></span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
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</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_14" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_13"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">According to IFRS 2, &#8220;<i>Share-based
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_15" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_14"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify"><i>Based on the above-mentioned, hereinafter
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_16" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_15"><ix:continuation continuedAt="sprcy_DescriptionOfOptionPricingModelShareOptionGranted-c0_cont_2" id="sprcy_DescriptionOfOptionPricingModelShareOptionGranted-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>

</div><ix:nonNumeric contextRef="c175" name="sprcy:FairValueDescription"><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_17" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_16"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">The fair value of the Share Options
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$114.1 and $51.1, per Share Option, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 180 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0px"></td>
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE&#160;19:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SHARE-BASED PAYMENT TRANSACTIONS (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 108pt; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_18" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_17"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 120px">&#160;</td> <td style="width: 48px; text-align: justify"><span style="font-size: 10pt">4.</span></td> <td style="text-align: justify"><span style="font-size: 10pt">On January 3, 2022 (the &#8220;2022 Grant Date&#8221;), the Board approved the grant of <ix:nonFraction contextRef="c176" decimals="0" format="ixt:num-dot-decimal" name="sprcy:ShareOptionsReserved" scale="0" unitRef="shares">178,140</ix:nonFraction> Share Options under the 2015 ESOP to directors, officers, employees and consultants, some of which required the approval of the general meeting of the Company&#8217;s shareholders (the &#8220;2022 General Meeting&#8221;), which occurred on February 10, 2022. The date of commencement for all Share Options granted, the date on which the vesting started, was the 2022 Grant Date. The exercise price was set at $<ix:nonFraction contextRef="c2" decimals="2" format="ixt:num-dot-decimal" name="ifrs-full:ExercisePriceOfOutstandingShareOptions2019" scale="0" unitRef="usdPershares">6.50</ix:nonFraction> per Share Option.</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
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</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_19" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_18"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify"><i>The fair value for Share Options
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_20" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_19"><ix:continuation id="sprcy_DescriptionOfOptionPricingModelShareOptionGranted-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; ">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_21" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_20"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify"><ix:nonNumeric contextRef="c177" name="sprcy:FairValueDescription">The fair value of the Share Options
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_22" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_21"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 120px; font-size: 10pt">&#160;</td> <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</span></td> <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During the year ended December 31, 2022, the Company granted consultants Restricted Share Units (&#8220;RSUs&#8221;) in respect of services rendered. The RSU&#8217;s were granted at a discount rate of <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sprcy:RSUGrantedDiscountRate" scale="-2" unitRef="pure">25</ix:nonFraction>% to share price quoted on the date of each grant. The total fair value of the RSU&#8217;s granted to consultants was $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="sprcy:FairValueOfTheRSUsGranted" scale="0" unitRef="usd">70</ix:nonFraction>. </span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_23" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_22"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 120px; font-size: 10pt">&#160;</td> <td style="width: 48px; text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">6.</span></td> <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">During the year ended December 31, 2022, the Company issued consultants <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="sprcy:OrdinarySharesIssued" scale="0" unitRef="shares">61,000</ix:nonFraction> ordinary shares in respect of services rendered. The ordinary were granted at a discount rate of <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="sprcy:OrdinaryGrantedDiscountRate" scale="-2" unitRef="pure">25</ix:nonFraction>% to share price quoted on the date of each grant. The total fair value of the RSU&#8217;s granted to consultants was $<ix:nonFraction contextRef="c178" decimals="0" format="ixt:num-dot-decimal" name="sprcy:FairValueOfTheRSUsGranted" scale="0" unitRef="usd">48</ix:nonFraction>. </span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 181 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 126pt; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0px"></td>
    <td style="width: 72px; text-align: justify"><span style="font-size: 10pt"><b>NOTE&#160;19:-</b></span></td>
    <td style="text-align: justify"><span style="font-size: 10pt"><b>SHARE-BASED PAYMENT TRANSACTIONS (CONT.)</b></span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_24" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_23"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_25" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_24"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation><div>

</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_26" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_25"><ix:nonNumeric contextRef="c0" escape="true" name="sprcy:DisclosureOfShareOptionsAndWeightedAverageExercisePricesExplanatoryTableTextBlock"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_27" id="_DisclosureOfSharebasedPaymentArrangementsExplanatory-c0_cont_26"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%">
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</div><div>

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</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 182 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 183 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->45<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>USD in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 185 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="border-top: Black 1.5pt solid; font-size: 1pt">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>USD
in thousands (except share data)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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</div><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation id="_DisclosureOfEntitysReportableSegmentsExplanatory-c0_cont_6"><ix:continuation id="_DisclosureOfOperatingSegmentsExplanatory-c0_cont_4"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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Development</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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Sales</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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2021</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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management<br/>
personnel</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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related<br/>
parties</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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management<br/>
personnel</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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related<br/>
parties</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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</div><div>

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</div><div>

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</div><div>

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</div><div>

</div><ix:continuation continuedAt="_DisclosureOfRelatedPartyExplanatory-c0_cont_7" id="_DisclosureOfRelatedPartyExplanatory-c0_cont_6"><ix:nonNumeric contextRef="c0" escape="true" name="ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    <td style="text-align: justify"><span style="font-size: 10pt"><b>EVENTS AFTER THE REPORTING DATE</b></span></td></tr>
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February 23, 2023, the Company signed an agreement with Jeffs&#8217; Brands Holdings (&#8220;NewCo&#8221;) Inc. a recently newly-formed
wholly owned subsidiary of Jeffs&#8217; Brands and Jeffs&#8217; Brands, pursuant to which, at the closing and upon the terms and conditions
set forth in the Agreement, NewCo Inc. will acquire from the Company a number of shares of stock equal to approximately a <ix:nonFraction contextRef="c250" decimals="0" format="ixt:num-dot-decimal" name="sprcy:InvestedInitialAmount" scale="0" unitRef="usd">49</ix:nonFraction>% interest
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to the outstanding due amount of the Price Adjustment (the &#8220;Holdback Shares&#8221;). Following the closing of the transaction on
March 22, 2023, which included an equity conversion of financing amounts previously provided to SciSparc Nutraceuticals Inc. by the Company
for working capital, and the release of the Holdback Shares upon the payment in full of the Price Adjustment the Company will hold approximately
<ix:nonFraction contextRef="c253" decimals="0" format="ixt:num-dot-decimal" name="sprcy:InitialInvestment" scale="0" unitRef="usd">51</ix:nonFraction>% of SciSparc Nutraceuticals Inc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt; ">&#160;</p></ix:continuation><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 36pt; ">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center; ">-
- - - - - - - - - - - - - - - - - - - - - - - -</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">F-49</p><div>

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
20-F
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
December 31
,
2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☐
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
File No.:
001-38041
SCISPARC
LTD.
(Exact
name of registrant as specified in its charter)
Translation
of registrant's name into English:
Not applicable
State
of
Israel
(Jurisdiction
of incorporation or organization)
20
Raul Wallenberg St.
Tower
A, 2
nd
Floor
Tel
Aviv
6971916
,
Israel
(Address
of principal executive offices)
Oz
Adler
Chief
Executive Officer
Tel:
+972
-
3-7175777
Email:
oz@scisparc.com
20
Raul Wallenberg St.
Tower
A, 2
nd
Floor
Tel
Aviv
6971916
,
Israel
(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities
to be registered or to be registered pursuant to Section 12(b) of the Act: None
Securities
registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Ordinary Shares, no par value
SPRC
The
Nasdaq
Capital Market
Securities
for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate
the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered
by the annual report.
6,798,840
Ordinary Shares, no par value, as of December 31, 2022
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐
No
☒
If
this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act of 1934.
Yes
☐
No
☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes
☒  No ☐
Indicate
by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes
☒  No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth
company. See the definitions of "large accelerated filer," "accelerated filer," and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
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 13(a) of the Exchange 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.
Indicate
by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate
by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
U.S.
GAAP ☐
International
Financial Reporting Standards as issued by the International Accounting Standards Board
☒
Other
☐
If
"Other" has been checked in response to the previous question, indicate by check mark which financial statement item the
registrant has elected to follow.
☐
Item 17 ☐ Item 18
If
this is an annual report, indicate by check mark whether the registrant is a shell company.
Yes
☐ No
☒
TABLE OF CONTENTS
Page
INTRODUCTION
iii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
iv
SUMMARY RISK FACTORS
v
PART I
1
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
1
ITEM 3.
KEY INFORMATION
1
A.
[Reserved]
1
B.
Capitalization and Indebtedness
1
C.
Reasons for the Offer and Use of Proceeds
1
D.
Risk Factors
1
ITEM 4.
INFORMATION ON THE COMPANY
48
A.
History and Development of the Company
48
B.
Business Overview
48
C.
Organizational Structure
82
D.
Property, Plants and Equipment
82
ITEM 4A.
UNRESOLVED STAFF COMMENTS
82
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
82
A.
Operating Results
83
B.
Liquidity and Capital Resources
85
C.
Research and development, patents and licenses, etc.
88
D.
Trend information
88
E.
Critical Accounting Estimates
88
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
90
A.
Directors and Senior Management
90
B.
Compensation
94
C.
Board Practices
96
D.
Employees
109
E.
Share Ownership
109
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
109
A.
Major Shareholders
109
B.
Related Party Transactions
112
C.
Interests of Experts and Counsel
112
ITEM 8.
FINANCIAL INFORMATION
113
A.
Consolidated Statements and Other Financial Information
113
B.
Significant Changes
114
i
ITEM 9.
THE OFFER AND LISTING
114
A.
Offer and Listing Details
114
B.
Plan of Distribution
114
C.
Markets
114
D.
Selling Shareholders
114
E.
Dilution
114
F.
Expenses of the Issue
114
ITEM 10.
ADDITIONAL INFORMATION
114
A.
Share Capital
114
B.
Memorandum and Articles of Association
114
C.
Material Contracts
114
D.
Exchange Controls
115
E.
Taxation
115
F.
Dividends and Paying Agents
124
G.
Statement by Experts
124
H.
Documents on Display
124
I.
Subsidiary Information
124
J.
Annual Report to Security Holders
124
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
124
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
124
A.
Debt Securities
B.
Warrants and rights
C.
Other Securities
D.
American Depositary Shares
PART II
125
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
125
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
125
ITEM 15.
CONTROLS AND PROCEDURES
125
ITEM 16.
[Reserved].
126
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
126
ITEM 16B.
CODE OF ETHICS
126
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
126
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
127
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
127
ITEM 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
127
ITEM 16G.
CORPORATE GOVERNANCE
127
ITEM 16H.
MINE SAFETY DISCLOSURE
127
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
127
PART III
128
ITEM 17.
FINANCIAL STATEMENTS
128
ITEM 18.
FINANCIAL STATEMENTS
128
ITEM 19.
EXHIBITS
128
SIGNATURES
130
ii
INTRODUCTION
We are a specialty clinical-stage
pharmaceutical company. Our focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. With
this focus, we are currently engaged in the development of the following pharmaceutical compositions comprising N-acylethanolamines and
cannabinoids, such as Palmitoylethanolamide and/or Δ9-tetrahydrocannabinol, or THC, and/or non-psychoactive cannabidiol, or CBD,
and/or other cannabinoid receptor, or CBR, agonists: SCI-110 for the treatment of Tourette syndrome, or TS, and Alzheimer's disease
and agitation; SCI-160 for the treatment of pain; and SCI-210 for the treatment of Autism Spectrum Disorder, or ASD, and Status Epilepticus,
or SE. We also have a majority-owned subsidiary whose business focuses on the sale of hemp-based products on the Amazon.com marketplace.
On September 14, 2022, we
entered into a definitive agreement, or the Wellution Acquisition Agreement, to acquire Wellution™, or the Brand, a top-seller account
on Amazon.com marketplace, or Amazon, for a base cash consideration of $4.59 million and certain additional deferred payments, based on
the Brand's EBITDA in the 12 month period following the closing, which was on September 30, 2022. In connection with the Wellution
Acquisition Agreement, we established a new wholly owned subsidiary, SciSparc Nutraceuticals Inc., or SciSparc Nutraceuticals, to
hold the new assets. The Brand sells hemp-based products, including hemp gummies, hemp oil capsules, hemp gel, hemp cream, detox pills,
height pills, antibacterial creams, and anti-aging creams, among other beauty and hair treatment products that are all manufactured in
the United States.
On February 23, 2023,
we signed a stock purchase agreement, or the Agreement, with Jeffs' Brands Holdings Inc., a recently newly-formed wholly owned subsidiary,
or Jeffs' Brands Holdings, of Jeffs' Brands Ltd., or Jeffs' Brands, and Jeffs' Brands, which closed on March 22,
2023. Pursuant to the Agreement, Jeffs' Brands Holdings acquired from us a number of shares of stock equal to approximately a 49%
interest in our wholly owned subsidiary, SciSparc Nutraceuticals Inc., which owns Wellution
TM
, for $2.5 million in cash, and
additional deferred cash payments of approximately $489,330 accounting for price adjustments related to inventory and working capital,
which will be paid in five equal monthly installments beginning in May 2023. In addition, in connection with the closing of the transaction,
we and Jeffs' Brands, engaged in a mutual share exchange in the amount of $288,238 of ordinary shares from each of us and Jeffs'
Brands. The number of shares in the share exchange was calculated based on the average closing price of the relevant company's shares
for 30 consecutive trading days ending on the third trading day immediately prior to the closing. Accordingly, we acquired 247,415 ordinary
shares of Jeffs' Brands and Jeffs' Brands acquired 360,297 ordinary shares of us having an aggregate value of $288,238, which
was adjusted from $300,000 according to the 4.99% ownership limit included in the definitive agreements, or the Share Exchange. Following
the Share Exchange, we hold approximately 51% of SciSparc Nutraceuticals Inc. As part of the Agreement, Jeffs Brands and SciSparc Nutraceuticals
Inc. entered into a consulting agreement, pursuant to which Jeffs' Brands will provide management services to SciSparc Nutraceuticals
Inc. for the Wellution
TM
brand for a monthly fee of $20,000 and Jeffs' Brands will receive a one-time signing bonus in
the amount of $51,000. The consulting agreement will be for an undefined period of time and may be terminated by either party with 30
days advance notice.
On January 25, 2023, we announced that our board
of directors resolved to pursue a restructuring plan, or the Restructuring Plan, which involves transferring our pharmaceutical activities
to a new wholly-owned subsidiary, or NewCo. As part of the Restructuring Plan, we intend to examine the possibility of listing NewCo on
a leading stock exchange, while maintaining our controlling interest in NewCo such that we will continue to control our current business
activities. We also intend to explore other potential new opportunities, activities and investments in a variety of sectors. Any restructuring
and possible listing of NewCo on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses,
regulatory approvals, receipt of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions
to effectuate such corporate restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended
Restructuring Plan and listing of NewCo or that they will be completed at all.
We were incorporated under
the laws of the State of Israel on August 23, 2004. Our Ordinary Shares are listed on the Nasdaq under the symbol "SPRC".
Unless otherwise indicated,
all references to the "Company," "we," "us, "our" and "SciSparc" refer to SciSparc
Ltd. (formerly known as Therapix Biosciences Ltd.) and its subsidiaries.
References to "U.S.
dollars" and "$" are to currency of the United States of America, and references to "NIS" are to New Israeli
Shekels. References to "Ordinary Shares" are to our Ordinary Shares, no par value. 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. Unless derived from our financial statements
or otherwise indicated, U.S. dollar translations of NIS amounts presented in this Annual Report on Form 20-F, or the Annual Report, are
translated using a rate of NIS 3.52 to USD 1.00, the last exchange rate published by the Bank of Israel on December 30, 2022.
On July 19, 2021, our shareholders
approved a reverse split of our share capital by a ratio of to 140:1, or the Reverse Split, to be effective at the date to be determined
by our Board of Directors. The Reverse Split became effective after the close of business on August 9, 2021. Concurrently with the Reverse
Split, we changed the ratio of the ADSs to our Ordinary Shares from each ADS representing 140 Ordinary Shares to each ADS representing
1 Ordinary Share. On August 26, 2021, our ADSs were mandatorily cancelled and were exchanged for Ordinary Shares at a one-for-one ratio,
or the ADS Exchange. All descriptions of our share capital, including share amounts and per share amounts in this Annual Report are presented
after giving effect to the Reverse Split and ADS Exchange, and the transition of the trading our Ordinary Shares in lieu of our ADSs.
iii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
C
ertain
information included or incorporated by reference in this Annual Report may be deemed to be "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are
often characterized by the use of forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue," "believe," "should," "intend," "project"
or other similar words, but are not the only way these statements are identified.
Forward-looking
statements include, but are not limited to, statements about:
●
our ability to raise capital through the issuance of additional securities
and ability to continue as a going concern;
●
our
    ability to advance the development our pharmaceutical product candidates, including the anticipated starting and ending dates of
    our anticipated clinical trials;
●
our
    assessment of the potential of our pharmaceutical product candidates to treat certain indications;
●
our
    ability to successfully receive approvals from the U.S. Food and Drug Administration, or 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;
●
the
    regulatory environment and changes in the health policies and regimes in the countries in which we operate, including the impact
    of any changes in regulation and legislation that could affect the pharmaceutical industry;
●
our
    ability to commercialize our existing product candidates and future sales of our existing product candidates or any other future
    potential product candidates;
●
our
    ability to meet our expectations regarding the commercial supply of our product candidates;
●
our
    ability to integrate our new eCommerce operations business, which focuses on the sale of hemp-based products on the Amazon.com marketplace;
●
our
    ability to pursue a Restructuring Plan and list NewCo on a leading stock exchange;
●
the
    overall global economic environment;
●
the
    impact of competition and new technologies;
●
general
    market, political and economic conditions in the countries in which we operate;
●
projected
    capital expenditures and liquidity;
●
changes
    in our strategy;
●
litigation;
    and
●
those
    factors referred to in "Item 3. Key Information - D. Risk Factors," "Item 4. Information on the Company,"
    and "Item 5. Operating and Financial Review and Prospects," as well as in this Annual Report.
These
statements are only current predictions and are subject to known and unknown risks,
uncertainties, and other factors that may
cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from those
anticipated by the forward-looking statements. 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.
Readers are urged to carefully
review and consider the various disclosures made throughout this Annual Report which are designed to advise interested parties of the
risks and factors that may affect our business, financial condition, results of operations and prospects.
You should not put undue reliance
on any forward-looking statements. Any forward-looking statements in this Annual Report are made as of the date hereof, and we undertake
no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise,
except as required by law.
iv
Summary Risk Factors
The risk factors described
below are a summary of the principal risk factors associated with an investment in us. These are not the only risks we face. You should
carefully consider these risk factors, together with the risk factors set forth in Item 3.D
of
this Annual Report and the other reports and documents filed by us with the SEC.
Risks
Related to Our Financial Condition and Capital Requirements
●
We
    are a specialty clinical-stage pharmaceutical company and have a limited operating history on which to assess the prospects for our
    business, have incurred significant losses since the date of our inception, and anticipate that we will continue to incur significant
    losses until we are able to successfully commercialize our product candidates.
●
We
    have not generated any revenue from the sale of our current product candidates and may never be profitable.
●
We
    expect that we will need to raise substantial additional funding before we can expect to become profitable from sales of our product
    candidates. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product candidate
    development efforts or other operations.
●
The report of our independent registered public accounting firm contains
an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining
new financing on reasonable terms or at all.
Risks
Related to the Discovery and Development of Our Pharmaceutical Product Candidates
●
We
    are heavily dependent on the success of our pharmaceutical product candidates, which are in the late stages of pre-clinical development
    or early stages of clinical development. We cannot give any assurance that any of our product candidates will receive regulatory
    approval, which is necessary before they can be commercialized.
●
Clinical
    drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive
    of future study results. We may also find it difficult to enroll patients in our clinical studies. Difficulty in enrolling patients
    could delay or prevent clinical studies of our pharmaceutical product candidates.
●
If
    the FDA does not conclude that our pharmaceutical product candidates satisfy the requirements for the Section 505(b)(2) regulatory
    approval pathway, or if the requirements for our pharmaceutical product candidates under Section 505(b)(2) are not as we expect,
    the approval pathway would likely take significantly longer, cost significantly more and entail significantly greater complications
    and risks than anticipated and in either case may not be successful.
●
In
    respect of our pharmaceutical product candidates targeting rare indications, orphan drug exclusivity may afford limited protection,
    and if another party obtains orphan drug exclusivity for the drugs and indications we are targeting, we may be precluded from commercializing
    our pharmaceutical product candidates in those indications during that period of exclusivity.
Risks
Related to Our Reliance on Third Parties
●
We
    rely on third parties to conduct our preclinical and clinical studies and perform other tasks for us. If these third parties do not
    successfully carry out their contractual duties, meet expected deadlines or comply with regulatory requirements, we may not be able
    to obtain regulatory approval for or commercialize our pharmaceutical product candidates and our business could be substantially
    harmed.
●
We
    will rely on third parties to manufacture our active pharmaceutical ingredient, or API, and formulations. Our business could be harmed
    if those third parties fail to provide us with sufficient quantities of our needed supplies, or fail to do so at acceptable quality
    levels or prices.
Risks
Related to Commercialization of Our Pharmaceutical Product Candidates
●
If
    the market opportunities for our pharmaceutical product candidates are smaller than we believe they are, our revenue may be adversely
    affected, and our business may suffer.
●
We
    face intense competition and rapid technological change and the possibility that our competitors may discover, develop or commercialize
    therapies that are similar, more advanced or more effective than ours, which may adversely affect our financial condition and our
    ability to successfully commercialize our pharmaceutical product candidates.
v
Risks
Related to Our Intellectual Property
●
If
    we are unable to obtain and maintain effective patent rights for our product candidates, we may not be able to compete effectively
    in our markets. Further, if we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information
    may be used by others to compete against us.
●
We
    may not be able to identify infringements of our patents and accordingly the enforcement of our intellectual property rights may
    be difficult.
Risks
Related to Our Pharmaceutical Business Operations
●
From time to time, we may sign letters of intent and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements. There can be no assurance that we will enter into any such definitive agreements. Similarly, we may strategically invest in transactions from time to time, and there can be no assurance that the value of our investment will increase or that it will not fluctuate.
●
We
    may strategically invest in transactions from time to time, and there can be no assurance that the value of our investment will increase
    or that it will not fluctuate or that we will be able to successfully integrate or operate any new business we acquire.
●
We
    will need to expand our organization and we may experience difficulties in recruiting needed additional employees and consultants,
    which could disrupt our operations.
Risks
    Related to our Intended Corporate Restructuring Plan
●
The intended Restructuring Plan which involves transferring
our pharmaceutical activities to NewCo may not be completed in accordance with the expected plans or anticipated timeline, or at all,
and may not achieve the expected results.
Risks
    Related to Our Subsidiary's eCommerce Operations
●
We
may be unable to successfully integrate or execute our new subsidiary's eCommerce operations business.
●
Our
subsidiary's eCommerce operations rely on the Amazon.com marketplace and fulfillment by Amazon.com and changes to the Amazon.com
marketplace, Amazon's services and their terms of use may harm our business.
Risks
Related to the Ownership of Our Securities
●
We
    will need additional capital in the future. Raising additional capital by issuing securities may cause dilution to existing shareholders.
●
We
    do not know whether a market for the Ordinary Shares will be sustained or what the trading price of the Ordinary Shares will be and
    as a result it may be difficult for you to sell your Ordinary Shares
Risks
Related to Israeli Law and Our Operations in Israel
●
Provisions
    of Israeli law may make it easy for our shareholders to demand that we convene a shareholders meeting, and/or allow shareholders
    to convene a shareholder meeting without the consent of our management, which may disrupt our management's ability to run our
    company.
●
Our
    principal executive offices, most of our research and development activities and other significant operations are located in Israel,
    and, therefore, our results may be adversely affected by political, economic and military instability in Israel.
vi
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A.
[Reserved]
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
You should carefully consider
the risks described below, together with all of the other information in this Annual Report. The risks described below are not the only
risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially
and adversely affect our business operations. If any of these risks actually occurs, our business and financial condition could suffer
and the price of our Ordinary Shares could decline.
Risks Related to Our Financial Condition and
Capital Requirements
We are a specialty clinical
-
stage
pharmaceutical company and have incurred significant losses since the date of our inception, and anticipate that we will continue to incur
significant losses until we are able to successfully commercialize our product candidates.
We have historically incurred
substantial net losses; including net losses of approximately $2.6 million for the year ended December 31, 2022, and net losses of approximately
$5.8 million in 2021. As of December 31, 2022, we had an accumulated deficit of approximately $63.6 million.
1
We have devoted substantially
all of our financial resources to develop our product candidates, and more recently, to a lesser degree, we have been searching for strategic
transactions. We have financed our operations primarily through the issuance of equity securities. The amount of our future net losses
will depend, in part, on completing the development of our product candidates, the demand for our product candidates, the rate of our
future expenditures and our ability to obtain funding through the issuance of our securities, strategic collaborations or grants. Pharmaceutical
product development is a highly speculative undertaking and involves a substantial degree of risk. We are in the late stages of preclinical
and at the early stages of clinical development for our product candidates, we have not yet commenced pivotal clinical studies for any
product candidate. Although we have begun early commercialization efforts for our proprietary PEA oral tablets formulation, CannAmide™,
which we expect will be marketed to pharmacies and other retail outlets across Canada following our entering into a distribution agreement(s),
it may be several years, if ever, before we complete pivotal clinical studies and have our lead product candidate approved for commercialization.
Even if we obtain regulatory approval to market a product candidate, our future revenue will depend upon the size of the markets for which
our product candidates may receive approval and our ability to achieve sufficient market acceptance, pricing, reimbursement from third-party
payors and adequate market share for our product candidates in those markets.
We expect to continue to incur
significant losses until we are able to commercialize our main pharmaceutical product candidates, which we may not be successful in achieving.
We anticipate that our expenses will increase substantially if and as we:
●
continue the research and development of our product candidates;
●
expand the scope of our current clinical studies for our product candidates;
●
seek regulatory and marketing approvals for our product candidates that successfully complete clinical studies;
●
establish a sales, marketing and distribution infrastructure to commercialize our product candidates;
●
seek to identify, assess, acquire, license, and/or develop other product candidates and subsequent generations of our current product candidates;
●
seek to maintain, protect, and expand our intellectual property portfolio;
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seek to attract and retain skilled personnel; and
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create additional infrastructure to support our operations as a public company and our product candidate development and planned future commercialization efforts.
We have not generated any revenue from the
sale of our current pharmaceutical product candidates and may never be profitable.
We have not yet commercialized
any of our pharmaceutical product candidates and have not generated any revenue from sales of our pharmaceutical product candidates since
the date of our inception. Although we have begun early commercialization efforts for our proprietary PEA oral tablets formulation. CannAmide™,
we do not currently expect the sale of CannAmide to result in material revenues, nor is CannAmide™ our lead pharmaceutical product
candidate. We do not know whether or when we will become profitable. Our ability to generate revenue and achieve profitability depends
on our ability to successfully complete the development of, and to commercialize, our pharmaceutical product candidates and on the demand
for our pharmaceutical product candidates. Our ability to generate revenue and achieve profitability depends on our ability, alone or
with strategic collaboration partners, to successfully complete the development of, and obtain the regulatory and marketing approvals
necessary to commercialize, one or more of our pharmaceutical product candidates. Our ability to generate future revenue from pharmaceutical
product candidate sales depends heavily on our success in many areas, including but not limited to:
●
completing research and preclinical and clinical development of our pharmaceutical product candidates;
●
obtaining regulatory and marketing approvals for pharmaceutical product candidates for which we complete clinical studies;
●
establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) pharmaceutical products to support market demand for our pharmaceutical product candidates, if approved;
2
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launching and commercializing pharmaceutical product candidates if and when we obtain regulatory and marketing approval, either directly or with a collaborator or distributor;
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obtaining market acceptance of our pharmaceutical product candidates as viable treatment options;
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addressing any competing pharmaceutical or biotechnological and market developments;
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identifying, assessing, acquiring and/or developing new pharmaceutical product candidates;
●
negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter;
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maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and
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attracting, hiring and retaining qualified personnel.
Even if one or more of the
pharmaceutical product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated
with commercializing any approved pharmaceutical product candidate. Our expenses could increase beyond expectations if we are required
by the FDA, the European Medicines Agency, or the EMA, or other regulatory agencies, domestic or foreign, to perform clinical, nonclinical
or other types of studies in addition to those that we currently anticipate. In cases where we are successful in obtaining regulatory
approvals to market one or more of our pharmaceutical product candidates, our revenue will be dependent, in part, upon the size of the
markets in the territories for which we gain regulatory approval, the accepted price for the pharmaceutical product candidate, the ability
to get reimbursement at an acceptable price and whether we own the commercial rights for that territory. If the number of our addressable
patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably
expected population for treatment is narrowed by competition, physician choice or treatment guidelines, we may not generate significant
revenue from sales of such pharmaceutical product candidates, even if approved. Additionally, if we are not able to generate revenue from
the sale of any approved pharmaceutical product candidates, we may be forced to cease operations.
We expect that we will need to raise substantial
additional funding before we can expect to become profitable from sales of our pharmaceutical product candidates. This additional financing
may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit
or terminate our pharmaceutical product candidate development efforts or other operations.
As of December 31, 2022, our
cash was approximately $3.6 million, other accounts receivable was approximately $0.2 million, we had a negative working capital of approximately
$131 thousand and an accumulated deficit of approximately $634.6 million. Based upon our currently expected level of operating expenditures,
we do not expect that our existing cash will be sufficient to fund operations for at least the next 12 months. We expect that we will
require substantial additional capital to commercialize our pharmaceutical product candidates. In addition, our operating plans may change
as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned. Our future
funding requirements will depend on many factors, including but not limited to:
●
the scope, rate of progress, results and cost of pharmaceutical product development, clinical studies, preclinical testing, and other related activities;
●
the cost, timing and outcomes of regulatory approvals;
●
the cost and timing of establishing sales, marketing, and distribution capabilities; and
●
the terms and timing of any collaborative, licensing, and other arrangements that we may establish.
3
Any additional fundraising
efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize
our pharmaceutical product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts
or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of holders
of our securities and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause
the market price of our Ordinary Shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations,
and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations
on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our
ability to conduct our business. We could also be required to seek funds through arrangements with collaborative partners or otherwise
at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or pharmaceutical
product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating
results and prospects. Even if we believe that we have sufficient funds for our current or future operating plans, we may seek additional
capital if market conditions are favorable or if we have specific strategic considerations.
If we are unable to obtain
funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research or development
programs or the commercialization of any pharmaceutical product candidates or be unable to expand our operations or otherwise capitalize
on our business opportunities, as desired, which could materially affect our business, financial condition and results of operations.
The report of our
independent registered public accounting firm contains an explanatory paragraph regarding substantial doubt about our ability to continue
as a going concern, which could prevent us from obtaining new financing on reasonable terms or at all.
The
report of our independent registered public accounting firm on our audited consolidated financial statements for the period ended December
31, 2022 contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our
consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability
to continue as a going concern. This going concern opinion could materially limit our ability to raise additional funds through the issuance
of equity or debt securities or otherwise. Further reports on our consolidated financial statements may include an explanatory paragraph
with respect to our ability to continue as a going concern. Until we can generate significant recurring revenues, we expect to satisfy
our future cash needs through debt or equity financing. We cannot be certain that additional funding will be available to us on acceptable
terms, if at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans
for, or commercialization efforts with respect to our products. This may raise substantial doubts about our ability to continue as a going
concern.
Risks Related to the Discovery and Development
of Our Pharmaceutical Product Candidates
We are heavily dependent on the success
of our pharmaceutical product candidates, which are in the late stages of pre-clinical development or early stages of clinical development.
We cannot give any assurance that any of our pharmaceutical product candidates will receive regulatory approval, which is necessary before
they can be commercialized.
To date, we have invested
substantially all of our efforts and financial resources to design and develop our pharmaceutical product candidates, including conducting
preclinical studies and providing general and administrative support for these operations. Our future success is dependent on our ability
to successfully develop, obtain regulatory approval for, and then successfully commercialize one or more pharmaceutical product candidates.
We currently generate no revenue from sales of any pharmaceutical product candidate, and we may never be able to develop or commercialize
a marketable pharmaceutical product candidate.
Each of our pharmaceutical
product candidates is in the late stages of pre-clinical development or early stages of development and will require additional clinical
development (and in some cases additional preclinical development), management of nonclinical, clinical and manufacturing activities,
regulatory approval, obtaining adequate manufacturing supply, building of a commercial organization and significant marketing efforts
before we generate any revenue from pharmaceutical product candidate sales. It may be years before a pivotal study is initiated, if at
all. Any clinical trials in the United States will require the approval of an Investigational New Drug, or IND, application by the FDA,
and we cannot assure that we will obtain such approval in a timely manner, or at all. We are not permitted to market or promote any of
our pharmaceutical product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities,
and we may never receive such regulatory approval for any of our pharmaceutical product candidates.
We as a company have never
submitted marketing applications to the FDA or comparable foreign regulatory authorities. We cannot be certain that any of our pharmaceutical
product candidates will be successful in clinical studies or receive regulatory approval or what regulatory pathway the regulatory authorities
shall designate for our pharmaceutical product candidates. Further, our pharmaceutical product candidates may not receive regulatory approval
even if they are successful in clinical studies. If we do not receive regulatory approvals for our pharmaceutical product candidates,
we may not be able to continue our operations.
We generally plan to seek
regulatory approval to commercialize our pharmaceutical product candidates in the United States, the European Union and in additional
foreign countries. To obtain regulatory approvals we must comply with the numerous and varying regulatory requirements of such countries
regarding safety, efficacy, chemistry, manufacturing and controls, clinical studies, commercial sales, pricing and distribution of our
product candidates. Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval
in any other jurisdictions. If we are unable to obtain approval for our pharmaceutical product candidates in multiple jurisdictions, our
revenue and results of operations would be negatively affected.
4
The regulatory approval processes of the
FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable. If we are ultimately unable to obtain
regulatory approval for our pharmaceutical product candidates, our business will be substantially harmed.
The time required to obtain
approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement of clinical
studies and depends upon numerous factors. In addition, approval policies, regulations or the type and amount of clinical data necessary
to gain approval may change during the course of a pharmaceutical product candidate's clinical development and may vary among jurisdictions,
which may cause delays in the approval or the decision not to approve an application. We have not obtained regulatory approval for any
pharmaceutical product candidate, and it is possible that none of our existing pharmaceutical product candidates or any pharmaceutical
product candidates we may seek to develop in the future will ever obtain regulatory approval.
Applications for our pharmaceutical
product candidates could fail to receive regulatory approval for many reasons, including but not limited to the following:
●
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical studies;
●
we may be unable to demonstrate to the FDA or comparable foreign regulatory authorities that a pharmaceutical product candidate's safety-benefit ratio for its proposed indication is acceptable;
●
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical studies;
●
the data collected from clinical studies of our pharmaceutical product candidates may not be sufficient to support the submission of a New Drug Application, or NDA, in the United States or elsewhere;
●
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes, test procedures and specifications or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
●
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
This lengthy approval process,
as well as the unpredictability of the results of clinical studies, may result in our failing to obtain regulatory approval to market
any of our pharmaceutical product candidates, which would significantly harm our business, results of operations and prospects.
Clinical drug development involves a lengthy
and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.
Clinical testing is expensive
and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical study
process. The results of preclinical studies and early clinical studies of our product candidates may not be predictive of the results
of later-stage clinical studies. Product candidates that have shown promising results in early-stage clinical studies may still suffer
significant setbacks in subsequent advanced clinical studies. There is a high failure rate for drugs proceeding through clinical studies,
and product candidates in later stages of clinical studies may fail to show the desired safety and efficacy traits despite having progressed
satisfactorily through preclinical studies and initial clinical studies. A number of companies in the pharmaceutical industry have suffered
significant setbacks in advanced clinical studies due to lack of efficacy or adverse safety profiles, notwithstanding promising results
in earlier studies. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses. We do not know
whether any Phase I, Phase II, Phase III or other clinical studies we may conduct will demonstrate consistent or adequate efficacy and
safety sufficient to obtain regulatory approval to market our product candidates.
5
We may find it difficult to enroll patients
in our clinical studies. Difficulty in enrolling patients could delay or prevent clinical studies of our pharmaceutical product candidates.
Identifying and qualifying
patients to participate in clinical studies of our pharmaceutical product candidates is critical to our success. The timing of our clinical
studies depends in part on the speed at which we can recruit patients to participate in testing our pharmaceutical product candidates,
and we may experience delays in our clinical studies if we encounter difficulties in enrollment.
Some of the conditions for
which we plan to evaluate our current pharmaceutical product candidates are for rare diseases. Accordingly, there is a limited patient
pool from which to draw for clinical studies. Further, the eligibility criteria of our clinical studies will further limit the pool of
available study participants as we will require that patients have specific characteristics that we can measure or to assure their disease
is either severe enough or not too advanced to include them in a study.
Additionally, the process
of finding patients may prove costly. We also may not be able to identify, recruit and enroll a sufficient number of patients to complete
our clinical studies because of the perceived risks and benefits of the pharmaceutical product candidate under study, the availability
and efficacy of competing therapies and clinical studies, the proximity and availability of clinical study sites for prospective patients
and the patient referral practices of physicians. If patients are unwilling to participate in our studies for any reason, the timeline
for recruiting patients, conducting studies and obtaining regulatory approval of potential pharmaceutical product candidates will be delayed.
If we experience delays in
the completion or termination of any clinical study of our pharmaceutical product candidates, the commercial prospects of our pharmaceutical
product candidates will be harmed, and our ability to generate pharmaceutical product candidate revenue from any of these pharmaceutical
product candidates could be delayed or prevented. In addition, any delays in completing our clinical studies will increase our costs,
slow down our product candidate development and approval process and jeopardize our ability to commence pharmaceutical product candidate
sales and generate revenue. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition,
many of the factors that cause, or lead to, a delay in the commencement or completion of clinical studies may also ultimately lead to
the denial of regulatory approval of our pharmaceutical product candidates.
If the FDA does not conclude that our pharmaceutical
product candidates satisfy the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for our
pharmaceutical
product candidates under Section 505(b)(2) are not as we expect, the approval pathway would likely take significantly longer, cost
significantly more and entail significantly greater complications and risks than anticipated and in either case may not be successful.
We intend to seek FDA approval
through the Section 505(b)(2) regulatory pathway for our pharmaceutical product candidate- SCI-110 and potentially for our drug candidate
SCI-210. The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Amendments, added Section
505(b)(2) to the Federal Food, Drug, and Cosmetic Act of 1938, as amended, or the FDC Act, or Section 505(b)(2). Section 505(b)(2) permits
the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant
and for which the applicant has not obtained a right of reference.
If the FDA does not allow
us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional
data and information and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required
to obtain FDA approval, and complications and risks associated with FDA approval, would substantially increase. We may need to obtain
additional funding, which could result in significant dilution to the ownership interests of our then existing shareholders to the extent
we issue equity securities or convertible debt. We cannot assure you that we would be able to obtain such additional financing on terms
acceptable to us, if at all. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive pharmaceutical
product candidates reaching the market faster than our pharmaceutical product candidates, which could materially adversely impact our
competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that
our pharmaceutical product candidates will receive the requisite approvals for commercialization.
6
In addition, notwithstanding
the approval of a number of pharmaceutical product candidates by the FDA under Section 505(b)(2) over the last few years, some pharmaceutical
companies and others have objected to the FDA's interpretation of Section 505(b)(2). For example, several companies have previously
petitioned the FDA regarding the constitutionality of allowing others to rely upon FDA findings that are based on their proprietary data.
If the FDA's interpretation of Section 505(b)(2) is successfully challenged, the FDA may be required to change its 505(b)(2) policies
and practices, which could require that we generate full data regarding safety and effectiveness for previously approved active ingredients
and delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry
is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors
of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and
mandatory delays in approval of our potential future NDAs for up to 30 months depending on the outcome of any litigation. It is not uncommon
for a manufacturer of an approved pharmaceutical product to file a citizen petition with the FDA seeking to delay approval of, or impose
additional approval requirements for, pending competing pharmaceutical products. If successful, such petitions can significantly delay,
or even prevent, the approval of the new pharmaceutical product. However, even if the FDA ultimately denies such a petition, the FDA may
substantially delay approval while it considers and responds to the petition. In addition, even if we are able to utilize the Section
505(b)(2) regulatory pathway for our pharmaceutical product candidates, there is no guarantee this would ultimately lead to faster pharmaceutical
product development or earlier approval. Moreover, even if these pharmaceutical product candidates are approved under the Section 505(b)(2)
pathway, as the case may be, the approval may be subject to limitations on the indicated uses for which the pharmaceutical products may
be marketed or to other conditions of approval or may contain requirements for costly post-marketing testing and surveillance to monitor
the safety or efficacy of the pharmaceutical products. Our pharmaceutical product candidates are at early stages of development and are
subject to uncertainty over what we must do on our development program in order to secure approval under Section 505(b)(2).
We may encounter substantial delays in our
clinical studies, or we may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities.
Before obtaining marketing
approval from regulatory authorities for the sale of our pharmaceutical product candidates, we must conduct extensive clinical studies
to demonstrate the safety and efficacy of the pharmaceutical product candidates in humans. Clinical testing is expensive, time consuming
and uncertain as to outcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at
all. A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful.
Events that may prevent successful or timely completion of clinical development include but are not limited to:
●
inability to generate sufficient preclinical, toxicology or other in vivo or in vitro data to support the initiation of human clinical studies;
●
the occurrence of a pandemic or the spread of a virus that diverts the attention of regulatory agencies from reviewing our study design or results or which, as a result of such pandemic or widespread, requires us to materially modify our planned clinical studies;
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delays in reaching a consensus with regulatory agencies on study design;
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delays in reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;
●
delays in obtaining required Institutional Review Board, or IRB, approval at each clinical study site;
●
imposition of a clinical hold by regulatory agencies, after review of an IND, application, or equivalent application, or an inspection of our clinical study operations or study sites;
●
delays in recruiting suitable patients to participate in our clinical studies;
7
●
difficulty collaborating with patient groups and investigators;
●
failure by our CROs, other third parties or us to adhere to clinical study requirements;
●
failure to perform in accordance with the FDA's Good Clinical Practices, or GCP, requirements, or applicable regulatory guidelines in other countries;
●
delays in having patients complete participation in a study or return for post-treatment follow-up;
●
patients dropping out of a study;
●
occurrence of serious adverse events associated with the pharmaceutical product candidate that are viewed to outweigh its potential benefits;
●
changes in regulatory requirements and guidance that require amending or submitting new clinical protocols;
●
the cost of clinical studies of our pharmaceutical product candidates being greater than we anticipate;
●
clinical studies of our pharmaceutical product candidates producing negative or inconclusive results, which may result in us deciding, or regulators requiring us, to conduct additional clinical studies or abandon pharmaceutical product candidate development programs; and
●
delays in manufacturing, testing, releasing, validating or importing/exporting sufficient stable quantities of our pharmaceutical product candidates for use in clinical studies or the inability to do any of the foregoing.
Any inability to successfully
complete preclinical and clinical development could result in additional costs to us or impair our ability to generate revenue. We may
also be required to conduct additional safety, efficacy and comparability studies before we will be allowed to start clinical studies
with our repurposed drugs. Clinical study delays could also shorten any periods during which our pharmaceutical product candidates have
patent protection and may allow our competitors to bring pharmaceutical product candidates to market before we do, which could impair
our ability to obtain orphan exclusivity and successfully commercialize our pharmaceutical product candidates and may harm our business
and results of operations.
In respect of our pharmaceutical product
candidates targeting rare indications, orphan drug exclusivity may afford limited protection, and if another party obtains orphan drug
exclusivity for the drugs and indications we are targeting, we may be precluded from commercializing our pharmaceutical product candidates
in those indications during that period of exclusivity
.
We are seeking to obtain an
orphan designation for some of our pharmaceutical product candidates in the United States. Under the Orphan Drug Act, the FDA may designate
a product as an orphan drug if it is a drug intended to treat a rare disease or condition, defined, in part, as a patient population of
fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable
expectation that the cost of developing the drug will be recovered from sales in the United States. Additionally, designation is granted
for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic
condition and when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the
necessary investment in developing the drug.
In the United States, the
first NDA applicant with an orphan drug designation for a particular active moiety to treat a specific disease or condition that receives
FDA approval is entitled to a seven-year exclusive marketing period in the United States for that product candidate, for that indication.
In the European Union, orphan drug designation also entitles a party to financial incentives such as reduction of fees or fee waivers
and 10 years of market exclusivity is granted following drug approval. This period may be reduced to six years if the orphan drug designation
criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market
exclusivity.
8
In June 2016, we submitted
a request for orphan drug designation to the FDA for SCI-110 for the treatment of TS. In a letter dated September 29, 2016, the FDA informed
us that our request could not be granted at such time, and is being held in abeyance until and subject to us providing additional information
pertaining to the overall prevalence of TS in both children and adults, and further clinical data to support our scientific rationale
for our request for orphan drug designation within 12 months. In September 2017, we responded to such FDA letter within the designated
time frame, and provided the FDA with our articulated and reasoned responses including documentation and clinical data that supports it.
On December 26, 2017, we received the FDA's response to our response. The FDA accepted that there is adequate scientific rationale
for the treatment of TS with SCI-110 mainly through the preliminary results of ongoing clinical trials, suggesting that SCI-110 may provide
benefit in treating TS. However, the FDA stated that it was unable to grant our request and indicated that we did not provide adequate
prevalence estimates, and any evidence to support our statement that only moderate to severe TS patients would require pharmacological
treatment. We further responded in January 2018 by providing additional information. On January 23, 2020, following additional correspondence
with the FDA, the FDA still did not grant us our request due to the fact that we have not yet provided adequate prevalence estimates.
However, the FDA did agree with our position that we could potentially qualify for orphan drug designation with respect to the moderate-to-severe
TS sub-group population only rather than the entire population. After we had provided additional prevalence estimates, the FDA raised
a concern in its letter, dated December 7, 2020, about our ability to limit the use of the pharmaceutical product to the subset of patients
we are pursuing. Due to the fact that we disagree with this concern, we requested a clarification call. In the clarification call conducted
on February 2, 2021, we agreed with the FDA concern about our ability to limit the use of the pharmaceutical product to the subset of
patients in addition to a safety concern associated with THC treatment in pediatrics population so we suggested to amend our preliminary
request and asked to include only adults in the treated population. An amendment letter was discussed and the FDA described what it would
want to see in such an amendment. In March 2021, we sent our response to the FDA. In June 2021, we received a response from the FDA explaining
that they are unable to grant our request until new information becomes available to support our request for orphan drug designation.
We will re-visit the application after we obtain clinical results from our upcoming phase IIb study in TS.
There is no assurance that
we will successfully obtain orphan drug designation for TS, any future rare indications or orphan exclusivity upon approval of any of
our pharmaceutical product candidates that have already obtained designation.
Even if we do obtain orphan
exclusivity for any pharmaceutical product candidate, the exclusive marketing rights may be lost if the FDA later determines that the
request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug. Moreover,
a drug product candidate with an active moiety that is a different cannabinoid from that in our drug candidate or, under limited circumstances,
the same drug product candidate, may be approved by the FDA for the same indication during the period of marketing exclusivity. The limited
circumstances include a showing that the second drug is clinically superior to the drug with marketing exclusivity through a demonstration
of superior safety or efficacy or that it makes a major contribution to patient care. In addition, if a competitor obtains approval and
marketing exclusivity for a drug product candidate with an active moiety that is the same as that in a pharmaceutical product candidate
we are pursuing for the same indication, approval of our pharmaceutical product candidate would be blocked during the period of marketing
exclusivity unless we could demonstrate that our product candidate is clinically superior to the approved pharmaceutical product candidate.
In addition, if a competitor obtains approval and marketing exclusivity for a drug product candidate with an active moiety that is the
same as that in a pharmaceutical product candidate we are pursuing for a different orphan indication, this may negatively impact the market
opportunity for our pharmaceutical product candidate.
There have been legal challenges
to aspects of the FDA's regulations and policies concerning the exclusivity provisions of the Orphan Drug Act, and future challenges
could lead to changes that affect the protections afforded our pharmaceutical product candidates in ways that are difficult to predict.
In a recent successful legal challenge, a court invalidated the FDA's denial of orphan exclusivity to a drug on the grounds that
the drug was not proven to be clinically superior to a previously approved pharmaceutical product candidate containing the same ingredient
for the same orphan use. In response to the decision, the FDA released a policy statement stating that the court's decision is limited
just to the facts of that particular case and that the FDA will continue to require the sponsor of a designated drug that is the "same"
as a previously approved drug to demonstrate that its drug is clinically superior to that drug upon approval in order to be eligible for
orphan drug exclusivity, or in some cases, to even be eligible for marketing approval. In the future, there is the potential for additional
legal challenges to the FDA's orphan drug regulations and policies, and it is uncertain how such challenges might affect our business.
9
While orphan drug product candidates are
typically sold at a high price relative to other medications, the market may not be receptive to high pricing of our product candidates.
We develop our product candidates
to treat rare diseases, a space where medications are usually sold at high prices compared with other medications. However, our product
candidates are repurposed drugs, which means, among other things, that they contain drug substances available in pharmacies for the purpose
of treating indications that are different from the indications for which we plan to use. Accordingly, even if regulatory authorities
approve our product candidates, the market may not be receptive to, and it may be difficult for us to achieve, a per-patient per-year
price high enough to allow us to realize a return on our investment.
Our product candidates may cause undesirable
side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved
label or result in significant negative consequences following marketing approval, if any.
The use of dronabinol has
been associated with seizures, paranoia, rapid heart rate and unusual thoughts and behaviors. Undesirable side effects caused by our product
candidates could cause us or regulatory authorities to interrupt, delay or halt clinical studies and could result in a more restrictive
marketing label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Potential side effects
of our cannabinoid-based treatments may include: asthenia, palpitations, tachycardia, vasodilation/facial flush, abdominal pain, nausea,
vomiting, amnesia, anxiety/nervousness, ataxia, confusion, depersonalization, dizziness, euphoria, hallucinations, paranoid reaction,
somnolence and abnormal thinking. Results of our studies may identify unacceptable severity and prevalence of these or other side effects.
In such an event, our studies could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us
to cease further development of or deny or withdraw approval of our product candidates for any or all targeted indications.
Drug-related side effects
could affect patient recruitment, the ability of enrolled patients to complete the study or result in potential product candidate liability
claims.
Additionally, if one or more
of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such product
candidates, a number of potentially significant negative consequences could result, including but not limited to:
●
regulatory authorities may withdraw approvals of such product candidate;
●
regulatory authorities may require additional warnings on the label;
●
we may be required to create a Risk Evaluation and Mitigation Strategy, or REMS, plan, which could include a medication guide outlining the risks of such side effects for distribution to patients, a communication plan for healthcare providers and/or other Elements To Assure Safe Use, or ETASU;
●
we could be sued and held liable for harm caused to patients; and
●
our reputation may suffer.
Any of these events could
prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm
our business, results of operations and prospects.
Even if we obtain regulatory approval for
a product candidate, our product candidates will remain subject to regulatory scrutiny.
If our product candidates
are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion,
sampling, record-keeping, conduct of post-marketing studies and submission of safety, efficacy and other post-market information, including
both federal and state requirements in the United States. In addition, manufacturers and manufacturers' facilities are required
to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to current Good
Manufacturing Practices, or cGMP, regulations and Quality System Regulation, or QSR. As such, we and our contract manufacturers will be
subject to continual review and inspections to assess compliance with cGMP, QSR and adherence to commitments made in any NDA. Accordingly,
we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing,
production and quality control.
10
Any regulatory approvals that
we receive for our product candidates may also be subject to limitations on the approved indicated uses for which the product candidate
may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase
4 clinical trials and surveillance to monitor the safety and efficacy of the product candidate. We will also be required to report certain
adverse reactions and production problems, if any, to the FDA, and to comply with requirements concerning advertising and promotion for
our product candidates. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory
restrictions and must be consistent with the information in the product candidate's approved label. As such, we may not promote
our product candidates for indications or uses for which they do not have FDA approval. The holder of an approved NDA must also submit
new or supplemental applications and obtain FDA approval for certain changes to the approved product candidate, product candidate labeling
or manufacturing process. We could also be asked to conduct post-marketing clinical studies to verify the safety and efficacy of our product
candidates in general or in specific patient subsets. If original marketing approval were obtained via the accelerated approval pathway,
we could be required to conduct a successful post-marketing clinical study to confirm clinical benefit for our product candidates. An
unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval. Furthermore,
any new legislation addressing drug safety issues could result in delays in product candidate development or commercialization or increased
costs to assure compliance. Foreign regulatory authorities impose similar requirements.
If a regulatory agency discovers
previously unknown problems with a product candidate, such as adverse events of unanticipated severity or frequency, or problems with
the facility where the product candidate is manufactured, or disagrees with the promotion, marketing or labeling of a product candidate,
such regulatory agency may impose restrictions on that product candidate or us, including requiring withdrawal of the product candidate
from the market. If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among
other things:
●
issue warning letters;
●
impose civil or criminal penalties;
●
suspend or withdraw regulatory approval;
●
suspend any of our ongoing clinical studies;
●
refuse to approve pending applications or supplements to approved applications submitted by us;
●
impose restrictions on our operations, including closing our contract manufacturers' facilities; or
●
seize or detain product candidates, or require a product candidate recall.
Any government investigation
of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate
revenue from our product candidates. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company
and our operating results will be adversely affected.
11
We are subject to numerous complex regulations
and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.
The research, testing, development,
manufacturing, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, marketing, distribution,
possession and use of our product candidates, among other things, are subject to regulation by numerous governmental authorities in the
United States and elsewhere. The FDA regulates drugs under the FDC Act, and implementing regulations. Noncompliance with any applicable
regulatory requirements can result in refusal to approve product candidates for marketing, warning letters, product candidate recalls
or seizure of product candidates, total or partial suspension of production, prohibitions or limitations on the commercial sale of product
candidates or refusal to allow the entering into of federal and state supply contracts, fines, civil penalties and/or criminal prosecution.
Additionally, the FDA and comparable governmental authorities have the authority to withdraw product candidate approvals that have been
previously granted. Moreover, the regulatory requirements relating to our product candidates may change from time to time and it is impossible
to predict what the impact of any such changes may be.
We are developing product
candidates that are controlled substances as defined in the Controlled Substances Act of 1970, or CSA, which establishes, among other
things, certain registration, production quotas, security, recordkeeping, reporting, import, export and other requirements administered
by the Drug Enforcement Administration, or the DEA. As a result, any product candidate that is a controlled substance (or includes a controlled
substance) cannot be marketed before such substance is rescheduled by the DEA as a Schedule II, III, IV or V substance. The active ingredient
in our product candidates is dronabinol, which is a Schedule III controlled substance. See Item 4.B. "Business-Government Regulation-Controlled
Substances" for additional information.
The manufacture, shipment,
storage, sale and use, among other things, of controlled substances that are pharmaceutical product candidates are subject to a high degree
of regulation. The DEA also conducts periodic inspections of registered establishments that handle controlled substances. Facilities that
conduct research, manufacture, distribute, import or export controlled substances must be registered to perform these activities and have
the security, control and inventory mechanisms required by the DEA to prevent drug loss and diversion. Failure to maintain compliance,
particularly non-compliance resulting in loss or diversion, can result in regulatory action that could have a material adverse effect
on our business, results of operations, financial condition and prospects. The DEA may seek civil penalties, refuse to renew necessary
registrations, or initiate proceedings to suspend or revoke those registrations. In certain circumstances, violations could lead to criminal
proceedings.
Individual states also have
controlled substances laws. Though state controlled substances laws often mirror federal law, because the states are separate jurisdictions,
they may separately schedule our product candidates as well. While some states automatically schedule a drug when the DEA does so, other
states schedule drugs through rulemaking or a legislative action. State scheduling may delay commercial sale of any product candidate
for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness
of such product candidate. We or our partners must also obtain separate state registrations, permits or licenses in order to be able to
obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory
requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwise arising under federal
law.
Risks Related to Our Reliance on Third Parties
We rely on third parties to conduct our
preclinical and clinical studies and perform other tasks for us. If these third parties do not successfully carry out their contractual
duties, meet expected deadlines or comply with regulatory requirements, we may not be able to obtain regulatory approval for or commercialize
our product candidates and our business could be substantially harmed.
We have relied upon and plan
to continue to rely upon third-party CROs to monitor and manage data for our ongoing preclinical and clinical programs, including Target
Health, Inc., FGK Clinical Research GmbH, or FGK, and others. We rely on these parties for execution of our preclinical and clinical studies,
and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted
in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on the CROs does not relieve us
of our regulatory responsibilities. We and our CROs and other vendors are required to comply with current cGMP, GCP, QSR and Good Laboratory
Practices, or GLP, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European
Economic Area, and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities
enforce these regulations through periodic inspections of study sponsors, principal investigators, study sites and other contractors.
If we or any of our CROs or vendors fail to comply with applicable regulations, the clinical data generated in our clinical studies may
be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical studies
before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory
authority will determine that any of our clinical studies comply with GCP regulations. In addition, our clinical studies must be conducted
with product candidates which are produced under cGMP regulations. Our failure to comply with these regulations may require us to repeat
clinical studies, which would delay the regulatory approval process.
12
If any of our relationships
with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable
terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot
control whether or not they devote sufficient time and resources to our on-going clinical, nonclinical and preclinical programs. These
risks may be heightened as a result of the evolving COVID-19 pandemic. If CROs do not successfully carry out their contractual duties
or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain
is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical studies
may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product
candidates. CROs may also generate higher costs than anticipated. As a result, our results of operations and the commercial prospects
for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.
Switching or adding additional
CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO
commences work. As a result, delays may occur, which could materially impact our ability to meet our desired clinical development timelines.
Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or
delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and
prospects.
We will rely on third parties to manufacture
our API and formulations. Our business could be harmed if those third parties fail to provide us with sufficient quantities of our needed
supplies, or fail to do so at acceptable quality levels or prices.
We do not have the infrastructure
or capability internally to manufacture the API formulations, and we lack the resources and the capability to manufacture any of our product
candidates on a clinical or commercial scale. We plan to rely on third parties for such supplies. There are a limited number of manufacturers
who have the ability to produce our API and there may be a need to identify alternate manufacturers to prevent a possible disruption of
our clinical studies. Any significant delay or discontinuity in the supply of these components could considerably delay completion of
our clinical studies, product candidate testing and potential regulatory approval of our product candidates, which could harm our business
and results of operations.
We and our collaborators and contract manufacturers
are subject to significant regulation with respect to manufacturing our product candidates. The manufacturing facilities on which we rely
may not continue to meet regulatory requirements and have limited capacity.
All entities involved in the
preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for our product candidates,
are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or a product candidate
used in late-stage clinical studies must be manufactured in accordance with cGMP. These regulations govern manufacturing processes and
procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational
product candidates and products approved for sale. Poor control of production processes can lead to the introduction of contaminants or
to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing. We,
our collaborators or our contract manufacturers must supply all necessary documentation in support of an NDA, or Marketing Authorization
Application, or MAA, on a timely basis and must adhere to GLP and cGMP QSR regulations enforced by the FDA and other regulatory agencies
through their facilities inspection program. Some of our contract manufacturers have never produced a commercially approved pharmaceutical
product and therefore have not obtained the requisite regulatory authority approvals to do so. The facilities and quality systems of some
or all of our collaborators and third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations
as a condition of regulatory approval of our product candidates or any of our other potential product candidates. In addition, the regulatory
authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our
other potential product candidates or the associated quality systems for compliance with the regulations applicable to the activities
being conducted. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners
for compliance with the regulatory requirements. If these facilities do not pass a pre-approval plant inspection, regulatory approval
of the product candidates may not be granted or may be substantially delayed until any violations are corrected to the satisfaction of
the regulatory authority, if ever.
13
The regulatory authorities
also may, at any time following approval of a product candidate for sale, if ever, audit the manufacturing facilities of our collaborators
and third-party contractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation
of our product candidate specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant
regulatory authority may require remedial measures that may be costly and/or time consuming for us or a third party to implement, and
that may include the temporary or permanent suspension of a clinical study or commercial sales, or the temporary or permanent closure
of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harm our business.
If we, our collaborators,
or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can impose
regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product, withdrawal of an
approval or suspension of production. As a result, our business, financial condition and results of operations may be materially harmed.
Additionally, if supply from
one approved manufacturer is interrupted, an alternative manufacturer would need to be qualified through an NDA or MAA amendment, or equivalent
foreign regulatory filing, which could result in further delay. The regulatory agencies may also require additional studies if a new manufacturer
is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in
our desired clinical and commercial timelines.
These factors could cause
us to incur higher costs and could cause the delay or termination of clinical studies, regulatory submissions, required approvals or commercialization
of our product candidates. Furthermore, if our suppliers fail to meet contractual requirements and we are unable to secure one or more
replacement suppliers capable of production at a substantially equivalent cost, our clinical studies may be delayed or we could lose potential
revenue.
Our reliance on third parties requires us
to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated
or disclosed.
Because we rely on third parties
to develop and manufacture our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary
technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research
agreements, consulting agreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning
research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our
confidential information, such as trade secrets. Despite the contractual provisions employed when working with third parties, the need
to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors,
are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our
proprietary position is based, in part, on our know-how and trade secrets, a competitor's discovery of our trade secrets or other
unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.
Risks Related to Commercialization of Our Pharmaceutical
Product Candidates
If the market opportunities for our pharmaceutical
product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.
Our projections of both the
number of people who have our target diseases, as well as the subset of people with these diseases who have the potential to benefit from
treatment with our pharmaceutical product candidates, are based on our beliefs and estimates. These estimates have been derived from a
variety of sources, including the scientific literature, surveys of clinics, patient foundations or market research and may prove to be
incorrect. Further, new studies may change the estimated incidence or prevalence of these diseases. The number of patients may turn out
to be lower than expected. The effort to identify patients with diseases we seek to treat is in early stages, and we cannot accurately
predict the number of patients for whom treatment might be possible. Additionally, the potentially addressable patient population for
each of our pharmaceutical product candidates may be limited or may not be amenable to treatment with our pharmaceutical product candidates,
and new patients may become increasingly difficult to identify or gain access to, which would adversely affect our results of operations
and our business.
14
We face intense competition and rapid technological
change and the possibility that our competitors may discover, develop or commercialize therapies that are similar, more advanced or more
effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.
The biotechnology and pharmaceutical
industries are highly competitive. There are many pharmaceutical companies, biotechnology companies, public and private universities and
research organizations actively engaged in the research and development of products that may be similar to our product candidates.
The first THC-based pharmaceutical,
a pill sold under the commercial name of Marinol (scientific name: dronabinol), was developed by a company called Unimed Pharmaceuticals,
with funding provided by the National Cancer Institute. In 1985, Marinol received FDA approval as a treatment for chemotherapy-related
nausea and vomiting. Today, Marinol is marketed by AbbVie, Inc. Since the introduction of Marinol into the market, other pharmaceuticals
containing THC have also been developed. These include generic oral capsules of dronabinol, such as those marketed by SVC Pharma LP and
Akorn Inc., Meda AB's Cesamet (nabilone), a synthetic derivative of THC, and Sativex (nabiximols), a whole cannabis extract administered
as an oral spray. Furthermore, to the best of our knowledge, multiple companies that are working in the cannabis therapeutic area and
are pursuing regulatory approval for their product candidates. For example, GW Pharmaceuticals PLC, or GW, which markets Sativex, a botanical
cannabinoid oral mucosal for the treatment of spasticity due to multiple sclerosis, received FDA approval in the United States in June
2018 for Epidiolex, a liquid formulation of highly purified cannabidiol extract, as a treatment for Dravet's Syndrome, Lennox Gastaut
Syndrome, and various childhood epilepsy syndromes. In addition, GW is developing, among others, cannabidivarin, or CBDV, based therapy
for ASD and therapy for neonatal hypoxic-ischemic encephalopathy and schizophrenia. Zynerba Pharmaceuticals, Inc., or Zynerba, is developing
a transdermal formulation of cannabidiol for Fragile X and certain refractory epilepsies and ASD. Skye Bioscience, Inc., or Skye, is focused
on developing proprietary, synthetic cannabinoid-derived molecules to treat glaucoma and other diseases with significant unmet need. Corbus
Pharmaceuticals Holdings is seeking FDA approval for their synthetic cannabinoid for systemic sclerosis, cystic fibrosis, dermatomyositis
and systemic lupus erythematosus and metabolism and solid tumors. RespireRx Pharmaceutical Inc., or RespireRx, developing dronabinol for
OSA treatment. Synendos Therapeutics AG, or Synendos, is a developer of endocannabinoid modulators for the treatment of central nervous
system, or CNS, disorders. It has developed pharmaceutical products to restore the natural function of the brain and treat neuropsychiatric
disorders. Synendos is developing small molecules as selective endocannabinoid reuptake inhibitors that increase the levels of endogenous
cannabinoids to treat CNS disorders caused by cannabinoid deficiency. Inversago Pharma (formerly GIcare Pharma) is focused on developing
peripheral cannabinoid (CB1) receptor antagonist/inverse agonist for the treatment of metabolic diseases such as obesity, insulin resistance,
and liver fibrosis. Its drug INV-101 (Inverse agonist of peripheral CB1) under phase-1.
More established companies
may have a competitive advantage over us due to their greater size, cash flows and institutional experience. Compared to us, many of our
competitors may have significantly greater financial, technical and human resources. As a result of these factors, our competitors may
have an advantage in marketing their approved products and may obtain regulatory approval of their product candidates before we are able
to, which may limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are safer,
more effective, more widely used and less expensive than ours, and may also be more successful than us in manufacturing and marketing
their products. These advantages could materially impact our ability to develop and commercialize our product candidates successfully.
15
Our product candidates may
also compete with medical and recreational marijuana, in markets where the recreational and/or medical use of marijuana is legal. There
is support in the United States for further legalization of marijuana. In markets where recreational and/or medical marijuana is not legal,
our product candidates may compete with marijuana purchased in the illegal drug market. We cannot assess the extent to which patients
may utilize marijuana obtained illegally for the treatment of the indications for which we are developing our product candidates.
Even if we successfully develop
our product candidates, and obtain marketing approval for them, other treatments or therapeutics may be preferred and we may not be successful
in commercializing our product candidates or in bringing them to market.
Many of our competitors have
substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing
and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in
even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than
we are able to and may be more effective in selling and marketing their products as well. Smaller or early-stage companies may also prove
to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase
further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in
these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis, products that are more effective
or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatory approval, product commercialization
and market penetration than we do. Additionally, technologies developed by our competitors may render our potential product candidates
uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.
We currently have no marketing and sales
organization. If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and
sell our product candidates, we may be unable to generate any revenue.
Although our employees may
have sold other similar products in the past while employed at other companies, we as a company have no experience selling and marketing
our product candidates and we currently have no marketing or sales organization. To successfully commercialize any products that may result
from our development programs, we will need to develop these capabilities, either on our own or with others. If our product candidates
receive regulatory approval, we intend to establish a sales and marketing organization with technical expertise and supporting distribution
capabilities to commercialize our product candidates in major markets, which will be expensive, difficult and time consuming. Any failure
or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization
of our products.
Further, given our lack of
prior experience in marketing and selling pharmaceutical products, our initial estimate of the size of the required sales force may be
materially more or less than the size of the sales force actually required to effectively commercialize our product candidates. As such,
we may be required to hire substantially more sales representatives to adequately support the commercialization of our product candidates
or we may incur excess costs as a result of hiring more sales representatives than necessary. With respect to certain geographical markets,
we may enter into collaborations with other entities to utilize their local marketing and distribution capabilities, but we may be unable
to enter into such agreements on favorable terms, if at all. If our future collaborators do not commit sufficient resources to commercialize
our future products, if any, and we are unable to develop the necessary marketing capabilities on our own, we will be unable to generate
sufficient product revenue to sustain our business. We may be competing with companies that currently have extensive and well-funded marketing
and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions, we may be unable
to compete successfully against these more established companies.
The commercial success of any current or
future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the
medical community.
Even with the requisite approvals
from the FDA and comparable foreign regulatory authorities, the commercial success of our product candidates will depend in part on the
medical community, patients and third-party payors accepting our product candidates as medically useful, cost-effective and safe. Any
product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in the medical
community. The degree of market acceptance of any of our product candidates, if approved for commercial sale, will depend on a number
of factors, including:
●
the safety and efficacy of the product as demonstrated in clinical studies and potential advantages over competing treatments;
16
●
the prevalence and severity of any side effects, including any limitations or warnings contained in a product's approved labeling;
●
the clinical indications for which approval is granted;
●
relative convenience and ease of administration;
●
the cost of treatment, particularly in relation to competing treatments;
●
the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies;
●
the strength of marketing and distribution support and timing of market introduction of competitive products;
●
publicity concerning our products or competing products and treatments; and
●
sufficient third-party insurance coverage and reimbursement.
Even if a potential product
displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product will not be fully
known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates
may require significant resources and may never be successful. If our product candidates are approved but fail to achieve an adequate
level of acceptance by physicians, patients, third-party payors and others in the medical community, we will not be able to generate sufficient
revenue to become or remain profitable.
The insurance coverage and reimbursement
status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new or current products
could limit our ability to market those products and decrease our ability to generate revenue.
The pricing, coverage and
reimbursement of our product candidates, if approved, must be adequate to support our commercial infrastructure. Our per-patient prices
must be sufficient to recover our development and manufacturing costs and potentially achieve profitability. Accordingly, the availability
and adequacy of coverage and reimbursement by governmental and private payors are essential for most patients to be able to afford expensive
treatments such as ours, assuming approval. Sales of our product candidates will depend substantially, both domestically and abroad, on
the extent to which the costs of our product candidates will be paid for by health maintenance, managed care, pharmacy benefit and similar
healthcare management organizations, or reimbursed by government authorities, private health insurers and other third-party payors. If
coverage and reimbursement are not available, or are available only to limited levels, we may not be able to successfully commercialize
our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish
or maintain pricing sufficient to realize a return on our investment.
There is significant uncertainty
related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about coverage
and reimbursement for new drugs are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S.
Department of Health and Human Services, or DHHS, as CMS decides whether and to what extent a new drug will be covered and reimbursed
under Medicare. Private payors tend to follow the coverage reimbursement policies established by CMS to a substantial degree. It is difficult
to predict what CMS will decide with respect to reimbursement for products such as ours.
Outside the United States,
international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the
increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the
pricing and usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms
as part of national health systems. In general, the prices of medicines under such systems are substantially lower than in the United
States. Other countries allow companies to fix their own prices for medicinal products, but monitor and control company profits. Additional
foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates.
Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and
may be insufficient to generate commercially reasonable revenue and profits.
17
Moreover, increasing efforts
by governmental and third-party payors in the United States and abroad to cap or reduce healthcare costs may cause such organizations
to limit both coverage and the level of reimbursement for new products approved and, as a result, they may not cover or provide adequate
payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates
due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes.
The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has
become very intense. As a result, increasingly high barriers are being erected to the entry of new products.
Healthcare legislative reform measures may
have a material adverse effect on our business and results of operations.
In the United States, there
have been and continue to be a number of legislative initiatives to contain healthcare costs. The following are among the provisions established
by the ACA of greatest importance to the pharmaceutical and biotechnology industry:
●
an annual, nondeductible fee on any entity that manufactures or imports certain specified branded prescription drugs and biologic agents apportioned among these entities according to their market share in some government healthcare programs;
●
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the Average Manufacturer Price, or AMP, for most branded and generic drugs, respectively, and capped the total rebate amount for innovator drugs at 100% of the AMP;
●
extension of manufacturers' Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, or MCOs;
●
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers' Medicaid rebate liability;
●
a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (now 70%) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D;
●
expansion of the entities eligible for discounts under federal 340B;
●
a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
●
establishment of a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending. This center is currently focused on the following priorities:
●
testing new payment and service delivery models;
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●
evaluating results and advancing best practices; and
●
engaging a broad range of stakeholders to develop additional models for testing.
●
implementation of the federal physician payment transparency requirements, or the Sunshine Act. The Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act, or the SUPPORT Act, signed into law on October 24, 2018, expanded Sunshine Act reporting to include data for physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse midwifes. The amendment applies to reports submitted to CMS on or after January 1, 2022.
The ACA may be modified, amended
or repealed at any time and may or may not be replaced with a different law or health care payment system. The ACA is expected to continue
to have a significant impact on the health care industry. With regard to pharmaceutical product candidates, among other things, the ACA
may expand and increase industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements under
the Medicare D program. Since the enactment of the ACA, numerous regulations have been issued providing further guidance on its requirements.
The ACA continues to be implemented through regulation and government activity but is subject to possible amendment, additional implementing
regulations and interpretive guidelines. Several states have decided not to expand their Medicaid programs and are seeking alternative
reimbursement models to provide care to the uninsured. The manner in which these issues are resolved could materially affect the extent
to which and the amount at which pharmaceuticals are reimbursed by government programs such as Medicare, Medicaid and Tricare.
In 2016, CMS issued a final
rule regarding the Medicaid Drug Rebate Program that, among other things, revised the manner in which the AMP is calculated by manufacturers
participating in the program and implemented certain amendments to the Medicaid rebate statute created under the ACA. In addition, on
December 21, 2020, CMS issued a final rule that made changes to the Medicaid Drug Rebate Program regulations in several areas, including
some changes to the treatment of value-based purchasing arrangements and price reporting for patient benefit programs sponsored by pharmaceutical
manufacturers.
Two bills affecting the implementation
of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or the TCJA, included a provision that repealed,
effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain
qualifying health coverage for all or part of a year, that is commonly referred to as the "individual mandate.'' Additionally,
on January 22, 2018, then President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation
of certain ACA-mandated fees. Further, the Bipartisan Budget Act of 2018, among other things, amended the ACA, effective January 1, 2019,
to close the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole." In July 2018, CMS published
a final rule permitting further collections and payments to and from certain ACA qualified health plans and health insurance issuers under
the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine
this risk adjustment. On April 27, 2020, the U.S. Supreme Court reversed a Federal Circuit decision that previously upheld Congress'
denial of $12 billion in "risk corridor" funding. Congress may consider additional legislation to repeal, or repeal and replace,
other elements of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed a challenge on procedural grounds that argued that the ACA
is unconstitutional in its entirety because the individual mandate was repealed by Congress. Thus, the ACA will remain in effect in its
current form. Prior to the U.S. Supreme Court ruling, on January 28, 2021, President Biden issued an executive order that initiated a
special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed
certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among
others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary
barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is possible that the ACA will be subject to
judicial or Congressional challenges in the future. It is unclear how such challenges and the healthcare reform measures of the Biden
administration will impact the ACA and our business. We continue to evaluate the ACA and its possible repeal and replacement, as the extent
to which any such changes may impact our business or financial condition remains uncertain.
19
In addition, other legislative
changes have been proposed and adopted in the United States since the ACA was enacted. In 2011, the Budget Control Act of 2011 among other
things, created measures for spending reductions by Congress. This includes aggregate reductions of Medicare payments to providers of
2% per fiscal year. These reductions, known as Medicare sequestration adjustments, went into effect in 2013. However, under the Coronavirus
Aid, Relief, Economic Securities Act of 2020, and related legislation, Medicare sequestration adjustments from May 1, 2020 through March
31, 2021 have been suspended, though sequestration has been extended through 2030. Additionally, there has been heightened governmental
scrutiny recently over the manner in which manufacturers set prices for their marketed products. For example, there have been several
recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency
to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement
methodologies for drug products. At the federal level, including the former Administration's budget for fiscal year 2020, there
were further drug price control measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part D,
to continue to allow some states to negotiate drug prices under Medicaid through supplemental rebate negotiations and other mechanisms,
and legislation was introduced to eliminate cost sharing for generic drugs for Part D low-income patients.
In addition, in November 2020,
the U.S. DHHS, finalized a regulation aimed at lowering prescription drug prices and out-of-pocket spending for prescription drugs by
excluding rebates on prescription drugs paid by manufacturers to or purchased by Medicare Part D plan sponsors or pharmacy benefit managers,
or PBMs, acting under contract with Medicare Part D plan sponsors from the existing discount safe harbor under the federal Anti-Kickback
Statute, or the AKS. The regulation reflects the first change to the AKS Statute discount safe harbor since the Medicare Part D program
was established. In addition to the rebate exclusions, two new safe harbors were added. One of these new safe harbors protects point-of-sale
reductions in price from a manufacturer to a plan sponsor under Medicare Part D or a MCO, for a prescription drug payable, in whole or
in part, by a plan sponsor under Medicare Part D or a MCO, provided certain conditions are met. The other protects certain fixed-fee services
arrangements between manufacturers and PBMs.
Congress and the executive
branch have each indicated that it will continue to seek new legislative or administrative measures to control drug costs. At the state
level, legislatures have been increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing
cost disclosure and transparency measures, drug price increases, and, in some cases, designed to encourage importation from other countries
and bulk purchasing.
In the European Union, similar
political, economic and regulatory developments may affect our ability to profitably commercialize any of our product candidates, if approved.
In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state
level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare
in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is
almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers
have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context.
In general, however, the healthcare budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement
of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those
wishing to develop and market products, this could prevent or delay marketing approval of our product candidates, restrict or regulate
post-approval activities and affect our ability to commercialize any products for which we obtain marketing approval. Political, economic
and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has
been obtained. Reference pricing used by various EU member states, and parallel trade, i.e., arbitrage between low-priced and high-priced
member states, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations
for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries.
In international markets, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted
price ceilings on specific products and therapies.
We expect that these and other
healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and lower reimbursement, and
in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or
other government-funded programs may result in a similar reduction in payments from private payors. The implementation of cost containment
measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs,
once marketing approval is obtained. We cannot predict what healthcare reform initiatives may be adopted in the future. However, it is
possible that there will be further legislation or regulation that could harm the business, financial condition and results of operations.
20
The COVID-19 pandemic has resulted in delays
to our product development and may adversely affect any potential future revenues, results of operations and financial condition.
COVID-19 and the various precautionary
measures taken by many governmental authorities around the world to limit its spread had a severe effect on global markets and the global
economy. The extent to which the coronavirus impacts our business and operations will depend on future developments, which are highly
uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the nature and extent
of governmental actions taken to contain or treat its impact and the availability, costs, effectiveness and public acceptance of any FDA-approved
vaccines, among others. COVID-19 and official actions taken in response to it caused a major slowdown in overall economic activity in
the U.S. and elsewhere, curtailed consumer spending and made it more challenging to adequately staff and manage our business and operations.
The COVID-19 pandemic impacted
our various vendors, including CROs, and caused delays in the development of our product candidates. We also experienced delays in the
preparation toward various clinical trials, including being unable to receive prioritization to conduct clinical trials, availability
of physicians and other staff members involved in our clinical trials. At this time, we do not anticipate that the COVID-19 pandemic and
official responses would cause a material adverse effect on our results of operations and financial condition but there can be no assurance
that this will be the case.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain
effective patent rights for our product candidates, we may not be able to compete effectively in our markets. If we are unable to protect
the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us.
Historically, we have relied
on trade secret protection and confidentiality agreements to protect the intellectual property related to our technologies and product
candidates. Since 2015, we have also sought patent protection for certain of our product candidates. Our success depends in large part
on our ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with
respect to our proprietary technology and new product candidates.
We seek to protect our proprietary
position by filing patent applications in the United States and in other countries, with respect to our novel technologies and product
candidates, which are important to our business. Patent prosecution is expensive and time consuming, and we may not be able to file and
prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will
fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
Not including patents and
applications which we are in the process of being assigned, we have a portfolio of seven granted patents with the U.S. Patent and Trademark
Office, or USPTO, nine patent families and two trademarks, of which four families include Patent Cooperation Treaty, or PCT, applications,
that have entered the national phase in various national entities. We cannot offer any assurances about which, if any, patent applications
will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened
by third parties. Any successful opposition to our patents after issuance could deprive us of rights necessary for the successful commercialization
of any new product candidates that we may develop and would allow other third parties to compete with us.
We have exclusively licensed:
(i) one U.S. patent from Dekel Pharmaceuticals Ltd., or Dekel, and (ii) one U.S. patent family from Yissum Research Development Company
of the Hebrew University of Jerusalem Ltd., or Yissum. We cannot assure you that we will ever enter into definitive license agreements
with any third party licensor. See Item 4.B. "Business Overview-Intellectual Property-In-Licensed Patents and Patent Applications."
To the extent the licensed or future licensed patents are found to be invalid or unenforceable, we may be limited in our ability to compete
and market our product candidates. Moreover, the terms of our licenses affect our ability to control the value of any of our product candidates.
If we or any of the parties that control the enforcement of licensed patents elect not to enforce any or all of the licensed patents it
could significantly undercut the value of any of our product candidates, which would materially adversely affect our future revenue, financial
condition and results of operations. Moreover, fluctuating currency rates may create inconsistencies in the royalty payments we are obligated
to make under our licenses.
21
Also, there is no guarantee
that the patent registration applications that were submitted by us with regard to our technologies will result in patent registration.
In the event of failure to complete patent registration, our developments will not be proprietary, which might allow other entities to
manufacture our product candidates and compete with them.
Further, there is no assurance
that all potentially relevant prior art relating to our patent applications has been found. Such prior art, to the extent it exists, may
invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue, and even
if such patents cover our product candidates, third parties may challenge their validity, enforceability, or scope, which may result in
such patents being narrowed, found unenforceable or invalidated. Furthermore, even if they are unchallenged, our patent applications and
any future patents may not adequately protect our intellectual property, provide exclusivity for our new product candidates, or prevent
others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which
may have an adverse impact on our business.
If we cannot obtain and maintain
effective patent rights for our product candidates, we may not be able to compete effectively, and our business and results of operations
would be harmed.
We may not be able to identify infringements
of our patents and accordingly the enforcement of our intellectual property rights may be difficult.
The drug substance in some
of our product candidates is repurposed, which means that it is available in other pharmaceutical products for the purpose of treating
indications that are different from the indications for our product candidates. It is possible that if we receive regulatory approval
to market and sell our drug candidates, some patients that receive a prescription could be sold the same drug substance but not our product
candidate. It would be difficult, if not impossible, for us to identify such instances that may constitute an infringement of our patents.
In addition, because the drug substance of some of our product candidates is repurposed, such substance may not be eligible for patent
protection or data exclusivity. Even if we identify infringing parties, there is no guarantee that a court will agree with our arguments
and find that a third party is infringing our patents or that the court will issue an order for an adequate remedy for that infringement.
If we are unable to maintain effective proprietary
rights for our product candidates, we may not be able to compete effectively in our markets.
In addition to the protection
afforded by any patents currently owned and that may be granted, historically, we have relied on trade secret protection and confidentiality
agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes that are not easily known,
knowable or easily ascertainable, and for which patent infringement is difficult to monitor and enforce and any other elements of our
product candidate discovery and development processes that involve proprietary know-how, information or technology that is not covered
by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes, in part,
by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors. We also seek to preserve
the integrity and confidentiality of our data, trade secrets and intellectual property by maintaining physical security of our premises
and physical and electronic security of our information technology systems. Agreements or security measures may be breached, and we may
not have adequate remedies for any breach. In addition, our trade secrets and intellectual property may otherwise become known or be independently
discovered by competitors.
We cannot provide any assurances
that our trade secrets and other confidential proprietary information will not be disclosed in violation of our confidentiality agreements
or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information
and techniques. Also, misappropriation or unauthorized and unavoidable disclosure of our trade secrets and intellectual property could
impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our
trade secrets and intellectual property are deemed inadequate, we may have insufficient recourse against third parties for misappropriating
any trade secret.
22
Intellectual property rights of third parties
could adversely affect our ability to commercialize our product candidates, and we might be required to litigate or obtain licenses from
third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available on commercially
reasonable terms.
It is inherently difficult
to conclusively assess our freedom to operate without infringing on third party rights. Our competitive position may be adversely affected
if existing patents or patents resulting from patent applications issued to third parties or other third party intellectual property rights
are held to cover our product candidates or elements thereof, or our manufacturing or uses relevant to our development plans. In such
cases, we may not be in a position to develop or commercialize product candidates or our product candidates unless we successfully pursue
litigation to nullify or invalidate the third party intellectual property right concerned, or enter into a license agreement with the
intellectual property right holder, if available on commercially reasonable terms. There may also be pending patent applications that
if they result in issued patents, could be alleged to be infringed by our new product candidates. If such an infringement claim should
be brought and be successful, we may be required to pay substantial damages, be forced to abandon our new product candidates or seek a
license from any patent holders. No assurances can be given that a license will be available on commercially reasonable terms, if at all.
It is also possible that we
have failed to identify relevant third-party patents or applications. For example, certain U.S. patent applications that will not be filed
outside the United States remain confidential until patents issue. Patent applications in the United States and elsewhere are published
approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred
to as the priority date. Therefore, patent applications covering our new product candidates or platform technology could have been filed
by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations,
be later amended in a manner that could cover our platform technologies, our new product candidates or the use of our new product candidates.
Third party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will
be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on
terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented
from or experience substantial delays in pursuing the development of and/or marketing our new product candidates. If we fail in any such
dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our new product
candidates that are held to be infringing. We might, if possible, also be forced to redesign our new product candidates so that we no
longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require
us to divert substantial financial and management resources that we would otherwise be able to devote to our business.
Third-party claims of intellectual property
infringement may prevent or delay our development and commercialization efforts.
Our commercial success depends
in part on our avoiding infringement of the patents and proprietary rights of third parties. Numerous U.S. and foreign issued patents
and pending patent applications, which are owned by third parties, exist in the fields in which we are developing new product candidates.
As our industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement
of the patent rights of third parties.
Third parties may assert that
we are employing their proprietary technology without authorization. There may be third-party patents or patent applications with claims
to materials, designs or methods of manufacture related to the use or manufacture of our product candidates. There may be currently pending
patent applications that may later result in issued patents that our product candidates may infringe. In addition, third parties may obtain
patents in the future and claim that use of our technologies infringes upon these patents.
If any third-party patents
were held by a court of competent jurisdiction to cover aspects of our formulations, processes for designs, or methods of use, the holders
of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a
license or until such patent expires or is finally determined to be invalid or unenforceable. In either case, such a license may not be
available on commercially reasonable terms or at all.
23
Parties making claims against
us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize one
or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and
would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us
in the U.S. or any other relevant jurisdiction, we may have to pay substantial damages, including treble damages and attorneys'
fees for willful infringement, pay royalties, redesign our infringing product candidates or obtain one or more licenses from third parties,
which may be impossible or require substantial time and monetary expenditure.
Patent policy and rule changes could increase
the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents.
Changes in either the patent
laws or interpretation of the patent laws in the United States and other countries may diminish the value of any patents that may issue
from our patent applications, or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to
the same extent as the laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual
discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing,
or in some cases not at all. We therefore cannot be certain that we were the first to file the invention claimed in our owned and licensed
patent or pending applications, or that we or our licensor were the first to file for patent protection of such inventions. Assuming all
other requirements for patentability are met, in the United States prior to 2013, the first to make the claimed invention without undue
delay in filing, is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the
patent. After 2013, the United States moved to a first to file system. Changes in patent litigation could increase the uncertainties and
costs surrounding the prosecution of our patent applications and the enforcement or defense of any issued patents, all of which could
have a material adverse effect on our business and financial condition.
We may be involved in lawsuits to protect
or enforce our intellectual property, which could be expensive, time consuming, and unsuccessful.
Competitors may infringe our
intellectual property. If we were to initiate legal proceedings against a third party to enforce a patent covering one of our new product
candidates, the defendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent
litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity
challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement.
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant
information from the USPTO, or made a misleading statement, during prosecution. The validity of U.S. patents may also be challenged in
post-grant proceedings before the USPTO. The outcome following legal assertions of invalidity and unenforceability is unpredictable.
Derivation proceedings initiated
by third parties or brought by us may be necessary to determine the priority of inventions and/or their scope with respect to our patent
or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to
attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license
on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may result in
substantial costs and distract our management and other employees. In addition, the uncertainties associated with litigation could have
a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our research programs,
license necessary technology from third parties, or enter into development partnerships that would help us bring our new product candidates
to market.
Furthermore, because of the
substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results
of hearings, motions, or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative,
it could have a material adverse effect on the price of our Ordinary Shares.
24
We may be subject to claims challenging
the inventorship of our intellectual property.
We may be subject to claims
that former employees, collaborators or other third parties have an interest in, or right to compensation, with respect to our current
patent and patent applications, future patents or other intellectual property as an inventor or co-inventor. For example, we may have
inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates.
Litigation may be necessary to defend against these and other claims challenging inventorship or claiming the right to compensation. If
we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such
as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our
business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction
to management and other employees.
We may not be able to protect our intellectual
property rights throughout the world.
Filing, prosecuting, and defending
patents on product candidates, as well as monitoring their infringement in all countries throughout the world would be prohibitively expensive,
and our intellectual property rights in some countries can be less extensive than those in the United States. In addition, the laws of
some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States.
Competitors may use our technologies
in jurisdictions where we have not obtained patent protection to develop their own products and may also export otherwise infringing products
to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete
with our product candidates. Future patents or other intellectual property rights may not be effective or sufficient to prevent them from
competing.
Many companies have encountered
significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries,
particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other intellectual property protection,
which could make it difficult for us to stop the marketing of competing products in violation of our proprietary rights generally. Proceedings
to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts
and attention from other aspects of our business, could put our future patents at risk of being invalidated or interpreted narrowly and
our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any
lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts
to monitor and enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage
from the intellectual property that we develop or license.
Our former chairman and chief executive
officer, Dr. Ascher Shmulewitz, may threaten to terminate an agreement with respect to intellectual property rights that we license from
an entity controlled by Dr. Shmulewitz.
In May 2015, we entered into
a license agreement, which, following an amendment thereto in August 2015, became effective, with Dekel, an Israeli private company controlled
by Dr. Ascher Shmulewitz, our former chairman and chief executive officer, under which we were granted an irrevocable, worldwide, exclusive,
royalty-bearing license to certain of Dekel's technology. See Item 7.B. "Related Party Transactions-Dekel License Agreement."
We do not have any agreement
with Dr. Shmulewitz to notify us with business opportunities he may wish to pursue, subject only to his duties under Israeli law, and
we do not have proprietary rights to Dr. Shmulewitz' inventions that are not included under the consulting and services agreement
we previously had entered into with him (pertaining solely to the field of immunomodulators including cannabinoids to treat chronic pain
and inflammation).
On September 17, 2017, we
entered into an amendment to the license agreement, which, if certain conditions precedent were met by June 30, 2018, would provide for
an amendment to the compensation terms of such license agreement. We did not meet the conditions precedent required under such amendment
to the license agreement with Dekel by June 30, 2018, and as a result thereof, the amendment never went into effect. On July 14, 2019,
we entered into an amendment to the license agreement, which encompasses our and Dekel's original intention to exclude certain consumer
packaged goods (including, inter alia, food, beverage, cosmetics, pet products and hemp based products, which are sources of nutrients
or other substances which may have a nutritional effect) from the scope of the licensed products and the field of our activity, as described
in the license agreement, which intention was not reflected in the license agreement, and therefore, desired and agreed to amend the license
agreement to reflect the foregoing clarification, as well as certain additional less material matters as discussed in the amendment. The
amendment also prescribes a specific development plan under the license agreement requiring us to invest in the licensed technology (as
defined under the license agreement) formulation development and maintain a total annual investment cap of $350,000 and for a non-compete
and non-solicitation obligation by Dekel and Dr. Shmulewitz, towards our field of activity.
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In August 2020, Dr. Shmulewitz
was replaced by Mr. Amitay Weiss, who was later replaced by Mr. Oz Adler in January 2022, each of whom was appointed as our Chief Executive
Officer. In February 2021, we received a request from Dr. Shmulewitz to provide him with information in regards to our compliance with
the Dekel license agreement. While we have no reason to believe that we are not complying with material terms of Dekel license agreement,
we cannot provide assurances that Dr. Shmulewitz will not threaten to terminate the agreement. If a dispute arises between us and Dekel
under the license agreement, we cannot assure you that our business will not impeded or materially harmed by such dispute.
Risks Related to Our Pharmaceutical Business
Operations
From time to time, we may sign letters of
intent and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements. There can
be no assurance that we will enter into any such definitive agreements. Similarly, we may strategically invest in transactions from time
to time, and there can be no assurance that the value of our investment will increase or that it will not fluctuate.
From time to time, we may sign letters of intent
and/or enter into term sheets or other similar arrangements that are subject to negotiation of definitive agreements. We may never enter
into definitive agreements after signing a letter of intent and/or entering into a term sheet or other similar arrangement for a multitude
of reasons, including, but not limited to, regulatory, operational, financial and other considerations. There may also be forces outside
of our control that have an effect on our ability or decision as to whether we enter into such definitive agreements. As a result, there
can be no assurance that upon signing a letter of intent and/or entering into a term sheet or similar arrangement, that we will enter
into definitive documents. This could have a material adverse effect on our reputation and could cause us to incur expenses if any legal
claims arise as a result thereof. For example, in November 2019, we entered into a memorandum of understanding with Heavenly Rx, Ltd.,
or Heavenly Rx, pursuant to which we and Heavenly Rx agreed to pursue a business combination. In accordance with the memorandum of understanding
between the parties, any transaction between the parties remained subject to entry into definitive agreements, and to shareholder and
regulatory approvals. We never entered into definitive agreements and do not expect to do so.
Similarly, we may strategically invest into various
pharmaceutical companies. However, we can offer no assurance that the value of our investment will increase or that it will not fluctuate
because the value of our investments may be adversely affected by a number of factors, such as negative changes in a company's results
of operations, cash flows, financial position and accounting impairment. For example, on March 31, 2022, we entered into an agreement
with and invested in MitoCare X Bio Ltd., or MitoCareX, a company focused on the discovery and development of potential drugs for cancers
and other life-threatening conditions. In addition, on November 17, 2022, we invested in Clearmind Medicine Inc., or Clearmind, a psychedelic
pharmaceutical biotech company focused on the discovery and development of novel psychedelic-derived therapeutics to solve widespread
and underserved health problems. The potential benefits of the agreement with MitoCareX, the investment in Clearmind or other potential
investments may not be realized to the full extent, in a timely fashion, or at all, which may have a material adverse effect on our results
of operations, cash flows and financial position. The potential benefits of agreements with potential ventures may not materialize or
may not be realized to the full extent, in a timely fashion, or at all, which may have a material adverse effect on our results of operations,
cash flows and financial position.
26
We will need to expand our organization
and we may experience difficulties in recruiting needed additional employees and consultants, which could disrupt our operations.
As our development and commercialization
plans and strategies develop and because we are so leanly staffed, we will need additional managerial, operational, sales, marketing,
financial, legal and other resources. The competition for qualified personnel in the pharmaceutical field is intense. Due to this intense
competition, we may be unable to attract and retain qualified personnel necessary for the development of our business or to recruit suitable
replacement personnel.
Our management may need to
divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing
these growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our
infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees.
Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the
development of additional pharmaceutical product candidates. If our management is unable to effectively manage our growth, our expenses
may increase more than expected, our ability to generate and/or grow revenue could be reduced and we may not be able to implement our
business strategy. Our future financial performance and our ability to commercialize pharmaceutical product candidates and compete effectively
will depend, in part, on our ability to effectively manage any future growth.
We may not be successful in our efforts
to identify, license or discover additional pharmaceutical product candidates.
Altho
ugh
a substantial amount of our effort will focus on the continued clinical testing, potential approval and commercialization of our existing
pharmaceutical product candidates, the success of our business also depends in part upon our ability to identify, license or discover
additional pharmaceutical product candidates. Our research programs or licensing efforts may fail to yield additional pharmaceutical
product candidates for clinical development for a number of reasons, including but not limited to the following:
●
our
    research or business development methodology or search criteria and process may be unsuccessful in identifying potential pharmaceutical
    product candidates;
●
we
    may not be able or willing to assemble sufficient resources to acquire or discover additional pharmaceutical product candidates;
●
our
    pharmaceutical product candidates may not succeed in preclinical or clinical testing;
●
our
    potential pharmaceutical product candidates may be shown to have harmful side effects or may have other characteristics that may
    make the pharmaceutical products unmarketable or unlikely to receive marketing approval;
●
competitors
    may develop alternatives that render our pharmaceutical product candidates obsolete or less attractive;
●
pharmaceutical
    product candidates we develop may be covered by third parties' patents or other exclusive rights;
●
the
    market for a pharmaceutical product candidate may change during our program so that such a pharmaceutical product may become unreasonable
    to continue to develop;
●
a
    pharmaceutical product candidate may not be capable of being produced in commercial quantities at an acceptable cost, or at all;
    and
●
a
    pharmaceutical product candidate may not be accepted as safe and effective by patients, the medical community or third-party payors.
If any of these events occur,
we may be forced to abandon our development efforts for a program or programs, or we may not be able to identify, license or discover
additional pharmaceutical product candidates, which would have a material adverse effect on our business and could potentially cause us
to cease operations. Research programs to identify new pharmaceutical product candidates require substantial technical, financial and
human resources. We may focus our efforts and resources on potential programs or pharmaceutical product candidates that ultimately prove
to be unsuccessful.
27
We may be subject, directly or indirectly,
to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security laws. If we are unable
to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain FDA approval
for any of our pharmaceutical product candidates and begin commercializing those pharmaceutical products in the United States, our operations
may be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation,
the federal AKS, the federal False Claims Act and physician sunshine laws and regulations. These laws may impact, among other things,
our proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by both the federal
government and the states in which we conduct our business. The laws that may affect our ability to operate include:
●
the federal AKS, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;
●
federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent;
●
the Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
●
HIPAA, as amended by the Health Information Technology and Clinical Health Act, OR HITECH and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;
●
the federal physician sunshine requirements under the ACA requires manufacturers of drugs, devices and medical supplies to report annually to the U.S. DHHS information related to payments and other transfers of value to physicians, other healthcare providers and teaching hospitals and ownership and investment interests held by physicians and other healthcare providers and their immediate family members and applicable group purchasing organizations; and
●
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers, state laws that require pharmaceutical companies to comply with the pharmaceutical industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
Because of the breadth of
these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities
could be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has strengthened these
laws. For example, the ACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud
statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. Moreover, the
ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal AKS constitutes
a false or fraudulent claim for purposes of the False Claims Act.
28
If our operations are found
to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties,
including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare
and Medicaid, imprisonment and the curtailment or restructuring of our operations, any of which could adversely affect our ability to
operate our business and our results of operations.
Widespread public health pandemics could
have a material and adverse effect on our business, financial condition and results of operations.
Any public health pandemic
or other disease outbreak in countries where we or our CROs operate could have a material and adverse effect on our business, financial
condition and results of operations. For example, we reduced our operating expenses at the onset of the COVID-19 pandemic and our Chief
Technologies Officer was on temporary unpaid leave between May 2020 and September 2020.
Our operating results and
financial condition may also be materially adversely affected by laws, regulations, orders or other governmental or regulatory actions
addressing widespread public health concerns that place restrictions on, or require us to make changes to, our operations. For example,
a significant reduction in our workforce and our compliance with instructions imposed by relevant authorities may harm our ability to
continue operating our business and materially and adversely affect our operations and financial condition. In addition, the impact of
a widespread public health crisis may cause delays to our future research and development operations, including but not limited to our
pharmaceutical products development, manufacturing, pre-clinical and clinical trials, and may make it difficult for us to recruit patients
to all of our clinical trials, and keep all of our research and development projects on time.
With respect to our suppliers,
disruptions resulting from the COVID-19 pandemic resulted and in the event of a future widespread public health crisis may result in cancellations
or delays and increased transport times for delivery of materials to our facilities. If such difficulties arise, we may need to seek alternate
suppliers, which may be more expensive, may not be available or may result in delays in shipments to us.
Disruptions to our business
as a result of a widespread public health crisis, as well as any global recession resulting from the impact of such a crisis, could materially
adversely affect our business, financial condition and results of operations.
The use of any of our pharmaceutical product
candidates and marketed products could result in product liability or similar claims that could be expensive, damage our reputation and
harm our business.
Our business exposes us to
an inherent risk of potential pharmaceutical product liability or similar claims. The pharmaceutical and nutraceuticals industries have
historically been litigious, and we face financial exposure to pharmaceutical product liability or similar claims if the use of any of
our pharmaceutical products were to cause or contribute to injury or death. There is also the possibility that defects in the design or
manufacture of any of our pharmaceutical products might necessitate a pharmaceutical product recall. Although we plan to maintain pharmaceutical
product liability insurance, the coverage limits of these policies may not be adequate to cover future claims. In the future, we may be
unable to maintain pharmaceutical product liability insurance on acceptable terms or at reasonable costs and such insurance may not provide
us with adequate coverage against potential liabilities. A pharmaceutical product liability claim, regardless of merit or ultimate outcome,
or any pharmaceutical product recall could result in substantial costs to us, damage to our reputation, customer dissatisfaction and frustration
and a substantial diversion of management attention. A successful claim brought against us in excess of, or outside of, our insurance
coverage could have a material adverse effect on our business, financial condition and results of operations.
If we fail to comply with environmental,
health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse
effect on the success of our business.
Our research and development
activities and our third-party manufacturers' and suppliers' activities involve the controlled storage, use and disposal of
hazardous materials, including the components of our pharmaceutical product candidates and other hazardous compounds. We and our manufacturers
and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials.
In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers' facilities
pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization
efforts, research and development efforts, business operations and environmental damage resulting in costly clean-up and liabilities under
applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste pharmaceutical
products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these
materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate
the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages
and such liability could exceed our resources and state or federal or other applicable authorities may curtail our use of certain materials
and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended
to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently
carry biological or hazardous waste insurance coverage.
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Risks Related to our Intended Corporate Restructuring
Plan
The intended Restructuring Plan which involves transferring our
pharmaceutical activities to a new wholly-owned subsidiary may not be completed in accordance with the expected plans or anticipated timeline,
or at all, and may not achieve the expected results.
On January 25, 2023, we announced that our board
of directors resolved to pursue a Restructuring Plan which involves transferring our pharmaceutical activities to NewCo. As part of the
Restructuring Plan, we intend to examine the possibility of listing NewCo on a leading stock exchange, while maintaining our controlling
interest in NewCo such that we will continue to control our current business activities. We also intend to explore other potential new
opportunities, activities and investments in a variety of sectors.
Any restructuring and possible listing of NewCo
on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory approvals, receipt
of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions to effectuate such corporate
restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended restructuring and listing
of NewCo or that they will be completed at all.
Unanticipated developments or changes, including
but not limited to, changes in the general or financial market conditions, possible delays in obtaining various regulatory and tax approvals,
changes in the law, and challenges in executing the intended restructuring could delay or prevent the completion of the restructuring
and listing of NewCo, or cause the restructuring and listing of NewCo to occur on terms or conditions that are different or less favorable
than initially expected. These or other developments could cause us not to realize some or all of the expected benefits of the restructuring
and listing of NewCo or to realize them on a different timeline than expected. If the restructuring and listing of NewCo do not occur,
we could pursue other transactions involving our pharmaceutical activities.
The restructuring and listing of NewCo may not achieve the anticipated
benefits and may expose us to additional risks.
We may not realize the anticipated strategic, financial,
operational or other benefits of the restructuring and listing of NewCo. We cannot predict with certainty when the benefits expected from
these transactions will occur or the extent to which they will be achieved. There is no assurance that following the restructuring and
listing of NewCo that each separate company will be successful. Whether or not the restructuring and listing of NewCo is completed, we
may face material challenges in connection with the intended transactions, including but not limited to, the diversion of management time
on matters relating to the restructuring and listing of NewCo, the impact of having to operate under the terms of any transition service
agreements, the impact on our ability to retain talent and potential impacts on our relationships with customers, suppliers, employees
and other counterparties. In addition, we will incur one-time costs and ongoing costs in connection with, or as a result of, the restructuring
and listing of NewCo, including costs of operating as independent, publicly-traded companies that the separate businesses will no longer
be able to share. Those costs may exceed our estimates or could negate some of the benefits we expect to realize. Further, we have not
yet analyzed whether the restructuring and listing of NewCo will be tax-free to our shareholders for U.S. federal income tax or Israeli
tax purposes and there is no assurance that the restructuring and listing of NewCo will qualify for this treatment. If the restructuring
and listing of NewCo is ultimately determined to be taxable, any of NewCo, our shareholders or us could incur income tax liabilities that
could be significant. If we do not realize the anticipated benefits of the restructuring and listing of NewCo it could adversely affect
our business, results of operations, cash flows and financial condition.
30
Following any restructuring and listing of NewCo, the trading
price of our Ordinary Shares may fluctuate significantly.
We cannot predict whether the market value of our
Ordinary Shares after any restructuring and listing of NewCo will be, in the aggregate, less than, equal to or greater than the market
value of our ordinary shares prior to such transactions. The trading price of our Ordinary Shares may be more volatile around the time
of the intended separation.
Risks Related to
the
eCommerce Operations of SciSparc Nutraceuticals
We may be unable to successfully pursue, integrate, or execute
upon the eCommerce operations business of SciSparc Nutraceuticals.
In September 2022, we purchased Wellution™,
a business and brand which sells hemp-based products on the Amazon.com marketplace.
Our management has limited prior experience in
eCommerce business operations. There can be no assurance that we will be able to successfully implement our new business ventures or successfully
operate within this industry.
The successful integration of a new business also depends on
our ability to manage the new business, realize forecasted synergies and full value from the combined business. Our business, results
of operations, financial condition and cash flows could be materially adversely affected if we are unable to successfully integrate
Wellution
into our existing operations and
a
ny inability to do so may also hinder our ability to grow,
divert the attention of management and our key personnel, disrupt our business and impair our financial results.
The eCommerce operations of SciSparc Nutraceuticals rely on the
Amazon.com marketplace and fulfillment by Amazon.com and changes to the Amazon.com marketplace, Amazon's services and their terms
of use may harm our business.
Wellution's products are sold predominantly
on the Amazon.com marketplace and orders are fulfilled entirely by Amazon.com utilizing the fulfilled by Amazon, or FBA, model. In order
to continue to utilize the Amazon.com marketplace and FBA, we must comply with the applicable policies and terms of use relating to these
services. Such policies and terms of use may be altered or amended at Amazon's sole discretion, including changes regarding the
cost of securing these services, and changes that increase the burden of compliance with its requirements, may cause us to significantly
alter our business model or incur additional costs in order to comply, which could negatively impact our results of operations. Non-compliance
with applicable terms of use and policies can result in the removal of one or more products from the marketplace and suspension of fulfillment
services either of which could have a material adverse effect on our business and results of our operations. Although we exert efforts
in order to ensure ongoing compliance and no notices of non-compliance have been received to date, we cannot assure you that events of
this kind will not occur in the future.
The eCommerce operations of SciSparc Nutraceuticals rely on other
information technologies and systems to operate its business and to maintain its competitiveness, and any failure to invest in and adapt
to technological developments and industry trends could harm our business.
We depend on sophisticated information technologies
and systems, technology and systems used for Wellution's websites and apps, customer service, logistics and fulfillment, supplier
connectivity, communications and administration. As our operations grow in size, scope and complexity, we will need to continuously improve
and upgrade our systems and infrastructure to offer an increasing number of consumer-enhanced services, features and functionalities,
while maintaining and improving the reliability and integrity of our systems and infrastructure.
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Our future success also depends on our ability
to use A.I. tools and infrastructure, including logistics and fulfillment platform which leverages, to meet rapidly evolving eCommerce
trends and demands. The emergence of alternative platforms may require us to continue to invest in new and costly technology. We may not
be successful, or we may be less successful than our competitors, in adopting technologies that operate effectively across multiple eCommerce
platforms, which would negatively impact our business and financial performance. New developments in other areas, such as cloud computing
providers, could also make it easier for competitors to enter our markets due to lower up-front technology costs. In addition, we may
not be able to maintain our existing systems or replace our current systems or introduce new technologies and systems as quickly or cost
effectively as we would like. Failure to invest in and adapt to technological developments and industry trends may have a material adverse
effect on our business, results of operations, financial condition and prospects.
The eCommerce operations of SciSparc Nutraceuticals rely on data
provided by third parties, the loss of which could limit the functionality of our platforms, cause us to invest in the wrong product or
disrupt our business.
We use third party software to determine market
trends and what markets to enter into. Our ability to successfully use this software depends on our ability to analyze and utilize data,
including search engine results, provided by unaffiliated third parties, primarily, Google and Amazon. Some of this data is provided to
us pursuant to third-party data sharing policies and terms of use, under data sharing agreements by third-party providers or by customer
consent. The majority of this data is sourced for free or for de minimis amounts. These sources of data allow us, along with A.I. tools,
to determine trends, performance and consumer sentiment on products and searches within eCommerce platforms. This functionality allows
us to help determine which products to market, in some cases manufacture through contract manufacturers, import and sell on eCommerce
marketplaces. The connection to multiple eCommerce platforms through application programming interfaces allow us to develop the automation
of the purchase of marketing and automate the change of pricing of product listings on those eCommerce platforms.
In the future, any of these third parties could
change its data sharing policies, including making them more restrictive, charging fees or altering its algorithms that determine the
placement, display and accessibility of search results and social media updates, any of which could result in the loss of, or significant
impairment to, our ability to collect useful data. These third parties could also interpret our, or our service providers', data
collection policies or practices as being inconsistent with their policies, which could result in the loss of our ability to collect this
data. Privacy concerns may cause end users to resist providing the personal data necessary to allow us to determine market trends as well
as our ability to effectively retain existing customers. Privacy advocacy groups and the technology and other industries are considering
various new, additional or different self-regulatory standards that may place additional burdens on us. Any such changes could impair
our ability to use data and could adversely impact select functionality of our proprietary software, impairing our ability to use this
data to anticipate customer demand and market trends, as well as adversely affecting our business and our ability to generate revenue.
The eCommerce operations of SciSparc Nutraceuticals depend on
our ability to build and maintain strong product listings on eCommerce platforms. We may not be able to maintain and enhance our product
listings if we receive a substantial number of customer complaints, negative publicity or otherwise fail to live up to customers'
expectations, any of which could materially adversely affect our business, results of operations and growth prospects.
Maintaining and enhancing our product listings
is critical in expanding and growing our business. However, a significant portion of our perceived performance to the customer depends
on third parties outside of our control, including suppliers and logistics providers such as FedEx, UPS, postal services and other third-party
delivery agents and online retailers, mainly Amazon. Because our agreements with our online retail partners are generally terminable at
will, we may be unable to maintain these relationships, and our results of operations could fluctuate significantly from period to period.
Because we rely on third party logistics companies to deliver our products, we are subject to shipping delays or disruptions caused by
inclement weather, natural disasters, labor activism, health epidemics or bioterrorism. In addition, because we rely on national, regional
and local transportation companies for the delivery of some of our other products, we are also subject to risks of breakage or other damage
during delivery by any of these third parties. If these third parties do not meet our or our customers' expectations, our brands
may suffer irreparable damage. In addition, maintaining and enhancing our current and future brands may require us to make substantial
investments, and these investments may not be yield sufficient returns. If we fail to promote and maintain our brands, or if we incur
excessive expenses in this effort, our business, operating results and financial condition may be materially adversely affected. We anticipate
that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become increasingly difficult and expensive.
Maintaining and enhancing our brands will depend largely on our ability to anticipate market trends and customer demand and to provide
high quality products to our customers and a reliable, trustworthy and profitable sales channel to our suppliers, which we may not be
able to do successfully.
32
A substantial number of customer complaints or
negative publicity about our sites, products, delivery times, customer data handling and security practices or customer support, especially
on blogs, social media websites or our sites, could rapidly and severely diminish consumer views of our products and result in harm to
our brands. Customers may also make safety-related claims regarding products sold through our online retail partners, such as Amazon,
which may result in an online retail partner removing the product from its marketplace. Such removal may materially impact our financial
results depending on the product that is removed and length of time that it is removed. We also use and rely on other services from third
parties, such as our telecommunications services, and those services may be subject to outages and interruptions that are not within our
control.
The eCommerce operations' efforts of SciSparc Nutraceuticals
to acquire or retain customers, and our efforts to sell new products or increase sales of our existing products, may not be successful,
which could prevent us from maintaining or increasing our sales and achieving profitability.
If we do not successfully promote and sustain
our new and/or existing product listings and brands through marketing and other tools, we may fail to maintain or increase our sales and
achieve profitability. Promoting and positioning our brands and product listings will depend largely on the success of our marketing efforts,
our ability to attract customers cost effectively and our ability to consistently provide a high-quality product and maintain consumer
satisfaction. We also use promotions to drive sales, which may not be effective and may adversely affect our gross margins. Our investments
in marketing may not effectively reach potential customers, potential customers may decide not to buy our products or the spending of
customers that purchase from us may not yield the intended return on investment, any of which could negatively affect our financial results.
The failure of our marketing activities could also adversely affect our ability to promote our product listings and sell our products,
and to develop and maintain relationships with our customers, retailers and brands, which may have a material adverse effect on our business,
results of operations, financial condition and prospects.
If the eCommerce operations of SciSparc Nutraceuticals fail to
offer high-quality customer support, our business and reputation may suffer.
High-quality education and training of customer
support personnel to deliver high-quality customer support are important for the successful retention of existing customers. Providing
this education, training and support requires that our support personnel have specific knowledge and expertise of our products and markets,
making it more difficult for us to hire experienced personnel and to scale up our support operations. The importance of high-quality customer
support will increase as we expand our business and pursue new customers. If we do not provide effective and timely ongoing support, our
ability to retain existing customers may suffer, and our reputation with existing or potential customers may be harmed, which would have
a material adverse effect on our business, results of operations, financial condition and prospects.
The eCommerce operations' efforts of SciSparc Nutraceuticals
to expand our business into new brands, products, services, technologies and geographic regions will subject us to additional business,
legal, financial and competitive risks and may not be successful.
Wellution's business success depends to
some extent on our ability to expand our consumer offerings by launching new brands, products and services and by expanding our existing
offerings into new geographic regions. Our strategy is to use our skills to determine which markets to enter and optimize the mix of products
and services that we offer.
Launching new brands, products and services requires
significant upfront investments, including investments in marketing (namely digital marketing and Pay Per Click (PPC), information technology
and additional personnel. We operate in highly competitive industries with relatively low barriers to entry and must compete successfully
in order to grow our business. We may not be able to generate satisfactory revenue from these efforts to offset these costs. Any lack
of market acceptance of our efforts to launch new brands, products or services or to expand our existing offerings could have a material
adverse effect on our business, prospects, financial condition and results of operations. Further, as we continue to expand our fulfillment
capability or add new businesses with different requirements, our logistics networks will become increasingly complex and operating them
will become more challenging. There can be no assurance that we will be able to operate our networks effectively.
33
We have also entered and may continue to enter
new markets and provide product offerings in which we have limited or no experience, which may not be successful or appealing to our customers.
The eCommerce consumer products goods industry
is subject to evolving standards and practices, as well as changing consumer needs, requirements and preferences. Our ability to attract
new customers and increase revenue from existing customers depends, in part, on our ability to enhance and improve our existing tools
that enable us to pinpoint new markets and introduce new products. The success of any enhancements or new instruments depends on, in part,
market-accepted pricing levels and overall market acceptance. We may not be successful in these efforts, which could result in significant
expenditures that could impact our revenue or distract management's attention from current offerings.
Increased emphasis on the sale of new products
could distract us from sales of our existing products in existing markets, negatively affecting our overall sales. We have invested and
expect to continue to invest in new businesses, products, features, services and technologies. Such endeavors may involve significant
risks and uncertainties, including insufficient revenue from such investments to offset any new liabilities assumed and expenses associated
with these new investments, inadequate return of capital on our investments, distraction of management from current operations and unidentified
issues not discovered in our due diligence of such investments that could cause us to fail to realize the anticipated benefits of such
investments and incur unanticipated liabilities. Because these new strategies and offerings are inherently risky, no assurance can be
given that they will be successful. Our new features or enhancements could fail to attain sufficient market acceptance for many reasons,
including:
●
delays in introducing products in new markets;
●
failure to accurately predict market demand or end consumer preferences;
●
introduction of competing products;
●
poor financial conditions for our customers or poor general macroeconomic conditions;
●
changes in legal or regulatory requirements, or increased legal or regulatory scrutiny, adversely affecting our products;
●
failure of our brands, and products, digital promotion activities or negative publicity about the performance or effectiveness of our existing brands and products; and
●
disruptions or delays in the online retailers and, or in addition to, logistics providers distributing our products.
There is no assurance that we will successfully
identify new opportunities or develop and bring new products to market on a timely basis, which could materially and adversely affect
our business and operating results and compromise our ability to generate revenue.
The eCommerce operations' use of social media and email
by SciSparc Nutraceuticals may adversely impact our reputation or subject us to fines or other penalties.
We use social media and email as part of our digital
marketing efforts. As laws and regulations rapidly evolve to govern the use of these channels, the failure by us, our employees or third
parties acting at on our behalf to abide by applicable laws and regulations in the use of these channels could adversely affect our reputation
or subject us to fines or other penalties. In addition, our employees or third parties acting on our behalf may knowingly or inadvertently
make use of social media in ways that could lead to the loss or infringement of intellectual property, as well as the public disclosure
of proprietary, confidential or sensitive personal information of our business, employees, customers or others. Any such inappropriate
use of social media or email could also cause reputational damage.
34
Customers value readily available information
concerning retailers and their goods and services and often act on such information without further investigation and with no regard to
its accuracy. Our customers may engage with us online through our social media platforms, including Facebook and Instagram, by providing
feedback and public commentary about all aspects of our business. Information concerning us or our retailers and brands, whether accurate
or not, may be posted on social media platforms at any time and may have a disproportionately adverse impact on our brand, reputation
or business. The harm may be immediate without affording us an opportunity for redress or correction and could have a material adverse
effect on our business, results of operations, financial condition and prospects.
With respect to the eCommerce operations of SciSparc Nutraceuticals,
if our emails are not delivered and accepted or are routed by email providers less favorably than other emails, or our sites or mobile
applications are not accessible or are treated disadvantageously by Internet service providers, our business may be substantially harmed.
If email providers or Internet service providers,
or ISPs, implement new restrictive email or content delivery or accessibility policies, including with respect to net neutrality, or begin
enforcement of existing policies, it may become more difficult to deliver emails to our customers or for customers to access our sites,
products and services. For example, certain email providers, including Google, categorize our emails as "promotional", and
these emails are directed to an alternate, and less readily accessible, section of a customer's inbox. If email providers materially
limit or halt the delivery of our emails, or if we fail to deliver emails to customers in a manner compatible with email providers'
email handling or authentication technologies, our ability to contact customers through email could be significantly restricted. In addition,
if we are placed on "spam" lists or lists of entities that have been involved in sending unwanted, unsolicited emails, our
operating results and financial condition could be substantially harmed. Further, if ISPs prioritize or provide superior access to our
competitors' content, our business and results of operations may be negatively impacted.
The eCommerce operations of SciSparc Nutraceuticals
are subject to risks related to online payment methods.
We accept payments using a variety of methods,
including credit card, debit card, PayPal, Payoneer, credit accounts (including promotional financing) and gift cards. For certain payment
methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs
and lower profitability. In addition, our credit card and other payment processors could impose receivable holdback or reserve requirements
in the future. We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards,
and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to
payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change
or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with the rules or requirements of any provider
of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently
accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction
fees and may lose, or face restrictions placed upon, our ability to accept credit card or debit card payments from customers or to facilitate
other types of online payments. If any of these events were to occur, our business, financial condition and operating results could be
materially adversely affected.
With respect to the eCommerce operations of SciSparc Nutraceuticals,
if we are unable to manage our inventory effectively, our operating results could be adversely affected.
To ensure timely delivery of products, we generally
enter into purchase orders in advance with manufacturers. As a result, we are vulnerable to demand and pricing shifts and to suboptimal
selection and timing of product purchases. We rely on our procurement team to order products and we rely on our data analytics to inform
the levels of inventory we purchase, including when to reorder items that are selling well and when to write off items that are not selling
well. In these instances, we may be unable to always predict the appropriate demand for our products by customers with accuracy, which
may result in inventory shortages, inventory write offs and lower gross margins.
35
If our sales and procurement teams do not predict
demand well or if our algorithms do not help us reorder the right products or write off the right products timely, we may not effectively
manage our inventory, which could result in inventory excess or shortages, and our operating results and financial condition could be
adversely affected.
The eCommerce operations of SciSparc Nutraceuticals, including
the costs and supply chain, are subject to risks associated with sourcing, importing and warehousing.
We source the products we offer from third-party
vendors and, as a result, we may be subject to price fluctuations or demand disruptions. Our operating results could be negatively impacted
by increases in the prices of our products, and we have no guarantees that prices will not rise. In addition, as we expand into new categories
and types of products, we expect that we may not have strong purchasing power in these new areas, which could lead to higher costs than
we have historically seen in our current product categories and types. We may not be able to pass increased costs on to customers, which
could adversely affect our operating results.
In addition, we cannot guarantee that products
we receive from vendors will be of sufficient quality or free from damage or defects, or that such merchandise will not be damaged during
shipping or storage. While we take measures to ensure product quality and avoid damage, including evaluating vendor facilities, operations
and product samples, conducting inventory inspections and inspecting returned products, we cannot control merchandise while it is out
of our possession or prevent all damage while in our distribution centers. We may incur additional expenses and our reputation could be
harmed if or current or potential customers believe that our merchandise is not of high quality or may be damaged.
Risks associated with the suppliers from whom our products are
sourced could materially adversely affect our financial performance, as well as our reputation and brand.
We depend on our ability to provide our customers
with a wide range of products from high quality suppliers in a timely and efficient manner. Our agreements with most of our suppliers
do not provide for the long-term availability of merchandise or the continuation of particular pricing practices, nor do they usually
restrict such suppliers from selling products to other buyers or directly themselves. There can be no assurance that our current suppliers
will continue to seek to sell us products on current terms or that we will be able to establish new or otherwise extend current supply
relationships to ensure product acquisitions in a timely and efficient manner and on acceptable commercial terms. Our ability to develop
and maintain relationships with reputable suppliers and offer high quality products to our customers is critical to our success. If we
are unable to develop and maintain relationships with suppliers that would allow us to offer a sufficient amount and variety of quality
products on acceptable commercial terms, our ability to satisfy our customers' needs, and therefore our long-term growth prospects,
would be materially adversely affected.
We also are unable to predict whether any of the
countries in which our suppliers' products are currently manufactured or may be manufactured in the future will be subject to trade
restrictions imposed by the U.S. or foreign governments or the likelihood, type or effect of any such restrictions. Any event causing
a disruption or delay of imports from suppliers with international manufacturing operations, including the imposition of additional import
restrictions, restrictions on the transfer of funds or increased tariffs or quotas, could increase the cost or reduce the supply of merchandise
available to our customers and materially adversely affect our financial performance as well as our reputation and brand. Our competitors
may have greater existing inventory positions and other advantages that may allow them to price more competitively relative to our products.
Furthermore, some or all of our suppliers' foreign operations may be adversely affected by political and financial instability,
resulting in the disruption of trade from exporting countries, restrictions on the transfer of funds or other trade disruptions.
36
We may not accurately forecast revenues,
profitability and appropriately plan our expenses.
We base our current and future expense levels
on our operating forecasts and estimates of future income and operating results. Income and operating results are difficult to forecast
because they generally depend on the volume and timing of the orders we receive, which are uncertain. Additionally, our business is affected
by general economic and business conditions around the world. A softening in income, whether caused by changes in consumer preferences,
a weakening in global economies or inflation, may result in decreased net revenue levels, and we may be unable to adjust our spending
in a timely manner to compensate for any unexpected shortfall in income. This inability could cause our income (loss) from operations
after tax in a given quarter to be lower or higher than expected. We also make certain assumptions when forecasting the amount of expense
we expect related to our share-based payments, which includes the expected volatility of our share price, and the expected life of equity
awards granted. These assumptions are partly based on historical results. If actual results differ from our estimates, our operating results
in a given quarter may be lower than expected.
The eCommerce operation's operating
results of SciSparc Nutraceuticals are subject to seasonal fluctuations.
The eCommerce business is seasonal in nature and
the fourth quarter is a significant period for our operating results due to the holiday season. As a result, revenue generally declines
and loss from operations generally increases in the first quarter sequentially from the fourth quarter of the previous year. Any disruption
in our ability to process and fulfill customer orders during the fourth quarter could have a negative effect on our quarterly and annual
operating results. For example, if a large number of customers purchase our products in a short period of time due to increased holiday
demand, inefficient management of our inventory may prevent us from efficiently fulfilling orders, which may reduce sales and harm our
brands.
The inability to acquire, use or maintain our marks and domain
names for our sites could substantially harm our business and operating results.
We currently have registered trademarks for our
brands in numerous jurisdictions and have registered the Internet domain names for our websites, as well as various related domain names.
However, we have not registered our trademarks or domain names in all major international jurisdictions. Domain names generally are regulated
by Internet regulatory bodies. If we do not have, or cannot obtain on reasonable terms, the ability to use our marks in a particular country
or to use or register any of our domain names, we could be forced either to incur significant additional expenses to market our products
within that country, including the development of a new brand and the creation of new promotional materials and packaging, or to elect
not to sell products in that country. Either result could materially adversely affect our business, financial condition and operating
results.
Furthermore, the regulations governing domain
names and laws protecting marks and similar proprietary rights could change in ways that block or interfere with our ability to use relevant
domains or our current brand names. Furthermore, we might not be able to prevent third parties from registering, using or retaining domain
names that interfere with our consumer communications or infringe or otherwise decrease the value of our marks, domain names and other
proprietary rights. Regulatory bodies also may establish additional generic or country-code top-level domains or may allow modifications
of the requirements for registering, holding or using domain names. As a result, we may not be able to register, use or maintain the domain
names that utilize the Wellution name in all of the countries in which we currently or intend to conduct business.
Any significant disruption in service on
our websites or apps or in our computer systems, a number of which are currently hosted or provided by third-party providers, could materially
affect our ability to operate, damage our reputation and result in a loss of customers, which would harm our business and results of operations.
Our ability to sell and market our products relies
on FBA platform whose functionality relies upon a number of third-party related services, including those relating to cloud infrastructure,
technology services, servers, open-source libraries and vendor application programming interfaces. Any disruption or loss of any of these
third-party services could have a negative effect on our business, results of operations, financial condition and prospects. We may experience
interruptions in our systems, including server failures that temporarily slow down or interfere with the performance of our platforms
and the ability to sell on eCommerce marketplaces.
37
Interruptions in these systems, whether due to
system failures, human input errors, computer viruses or physical or electronic break-ins, and denial-of-service attacks on us, third-party
vendors or communications infrastructure, could affect the availability of our services on our platform and prevent or inhibit the ability
of selling our products. Volume of traffic and activity on eCommerce marketplaces spikes on certain days, such as during a Black Friday
promotion, and any such interruption would be particularly problematic if it were to occur at such a high-volume time. Problems with the
reliability of our systems or third-party marketplaces could prevent us from earning revenue and could harm our reputation. Damage to
our reputation, any resulting loss of customers, eCommerce confidence and the cost of remedying these problems could negatively affect
our business, results of operations, financial condition and prospects.
Our ability to maintain communications, network
and computer hardware in the countries in which they are used may in the future be subject to regulatory review and licensing, and the
failure to obtain any required licenses could negatively affect our business. Our systems and infrastructure are predominately reliant
on third parties. Problems faced by our third-party service providers with the telecommunications network providers with whom they contract
or with the systems by which they allocate capacity among their users, including us, could adversely affect the experience of our customers.
Our third-party service providers could decide to close their facilities without adequate notice. Any financial difficulties, such as
bankruptcy or reorganization, faced by our third-party service providers or any of the service providers with whom they contract may have
negative effects on our business, the nature and extent of which are difficult to predict. If our third-party service providers are unable
to keep up with our needs for capacity, this could have an adverse effect on our business. Any errors, defects, disruptions or other performance
problems with our services could harm our reputation and may have a material adverse effect on our business, results of operations, financial
condition and prospects.
Risks Related to the Ownership of Our Securities
We will need additional capital in the future.
Raising additional capital by issuing securities may cause dilution to existing shareholders.
We have incurred losses every
year since our inception. If we continue to use cash at our historical rates of use we will need significant additional financing, which
we may seek through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing
arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, an existing shareholder's
ownership interest will be diluted, and the terms of any such offerings may include liquidation or other preferences that may adversely
affect the then existing shareholders rights. Debt financing, if available, would result in increased fixed payment obligations and may
involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt or making
capital expenditures. If we raise additional funds through collaboration, strategic alliance or licensing arrangements with third parties,
we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms
that are not favorable to us.
We do not know whether a market for the
Ordinary Shares will be sustained or what the trading price of the Ordinary Shares will be and as a result it may be difficult for you
to sell your Ordinary Shares
.
Although our Ordinary Shares
are listed on Nasdaq, an active trading market for the Ordinary Shares may not be sustained. It may be difficult for you to sell your
Ordinary Shares without depressing the market price for the Ordinary Shares or at all. Further, an inactive market may also impair our
ability to raise capital by selling Ordinary Shares and may impair our ability to enter into strategic partnerships or acquire companies,
products, or services by using our equity securities as consideration.
Sales of a substantial number of our Ordinary
Shares in the public market by our existing shareholders could cause our share price to fall.
Sales of a substantial number
of our 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.
38
The exercise of outstanding warrants will
cause significant dilution to holders of our equity securities and could adversely affect the price of our Ordinary Shares.
As of April 24, 2023, holders
of warrants may exercise their warrants into up to 9,500,188 Ordinary Shares. In the event that such warrants are exercised in full, the
ownership interest of existing holders of our equity securities will be diluted and may have a negative effect on the trading price of
our Ordinary Shares.
The market price of our securities may be
highly volatile, and you may not be able to resell your Ordinary Shares at or above the price you paid.
The market price of our Ordinary
Shares is volatile. Our Ordinary Share price is and will continue to be subject to wide fluctuations in response to a variety of factors,
including the following:
●
adverse results or delays in preclinical studies or clinical trials;
●
reports of adverse events in our product candidates or clinical trial failures of our product candidates;
●
inability to obtain additional funding;
●
any delay in filing a regulatory submission for any of our product or product candidates and any adverse development or perceived adverse development with respect to the review of that regulatory submission by the FDA or European or Asian authorities;
●
failure to successfully develop and commercialize our products or product candidates;
●
failure to enter into strategic collaborations or failure to successfully integrate acquisitions we have made;
●
failure by us or strategic collaboration partners to prosecute, maintain or enforce our intellectual property rights;
●
changes in laws or regulations applicable to future products;
●
inability to scale up our manufacturing capabilities through third-party manufacturers, inability to obtain adequate product supply for our products or the inability to do so at acceptable prices;
●
introduction of new products or technologies by our competitors;
●
failure to meet or exceed financial projections we may provide to the public;
●
failures or delays in our intended Restructuring Plan;
●
failure to meet or exceed the financial expectations of the investment community;
●
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by our competitors;
●
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our platform technologies, technologies, products or product candidates;
●
additions or departures of key scientific or management personnel;
●
significant lawsuits, including patent or shareholder litigation;
●
changes in the market valuations of similar companies;
●
changes in general conditions in the economy and the financial markets;
●
sales of our securities by us or our shareholders in the future; and
●
trading volumes of our securities.
39
In addition, companies trading
in the stock market have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating
performance of these companies. Broad market and industry factors may negatively affect the market price of our Ordinary Shares, regardless
of our actual operating performance.
Outstanding warrants and pre-funded warrants
to acquire our Ordinary Shares are speculative in nature. Furthermore, holders of our warrants and pre-funded warrants will have no rights
as shareholders until such holders exercise their warrants and acquire our Ordinary Shares.
Until holders of the warrants
and pre-funded warrants acquire our Ordinary Shares upon exercise of the warrants and pre-funded warrants, holders of the warrants and
pre-funded warrants will have no rights with respect to our Ordinary Shares underlying such warrants and pre-funded warrants. Upon exercise
of the warrants and pre-funded warrants, the holders thereof will be entitled to exercise the rights of a holder of Ordinary Shares only
as to matters for which the record date occurs after the exercise date.
Our warrants and pre-funded
warrants only represent the right to acquire Ordinary Shares at a fixed price, and in the case of the warrants, for a limited period of
time. Specifically, holders of the warrants and pre-funded warrants that we issued in private placements in March 2019, March 2020, March
2021 and June 2022 and in our November 2020 public offering may exercise their right to acquire Ordinary Shares and pay an exercise price
per Ordinary Shares (in the case of the pre-funded warrants, $0.001 per Ordinary Share and in the case of other warrants, ranging from
$2.57 to $245.00 per Ordinary Share), subject to adjustment upon certain events, and in the case of warrants only prior to five years
from their respective issuance dates, after which date any unexercised warrants will expire and have no further value.
We cannot assure you that our Ordinary Shares
will remain listed on Nasdaq or any other securities exchange.
Our 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".
In
addition, on March 10, 2023, 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.
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.
Failure to achieve and maintain effective
internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, results
of operation or financial condition. In addition, current and potential shareholders could lose confidence in our financial reporting,
which could have a material adverse effect on the price of our Ordinary Shares.
Effective internal controls
are necessary for us to provide reliable financial reports and effectively prevent fraud. We are required to document and test our internal
control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments
of the effectiveness of our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal
control, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude
on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Disclosing deficiencies
or weaknesses in our internal control, failing to remediate these deficiencies or weaknesses in a timely fashion or failing to achieve
and maintain an effective internal control environment may cause investors to lose confidence in our reported financial information, which
could have a material adverse effect on the price of our Ordinary Shares. If we cannot provide reliable financial reports or prevent fraud,
our operating results could be harmed.
40
We have not paid, and do not intend to pay,
dividends on our Ordinary Shares and, therefore, unless our traded securities appreciate in value, our investors may not benefit from
holding our securities.
We have not paid any cash
dividends on our Ordinary Shares since inception. We do not anticipate paying any cash dividends our Ordinary Shares in the foreseeable
future. Moreover, the Israeli Companies Law-1999, or the Companies Law, imposes certain restrictions on our ability to declare and pay
dividends. As a result, investors in our Ordinary Shares will not be able to benefit from owning these securities unless their market
price becomes greater than the price paid by such investors and they are able to sell such securities. We cannot assure you that you will
ever be able to resell our securities at a price in excess of the price paid.
We may be a "passive foreign investment
company," or PFIC, for U.S. federal income tax purposes in the current taxable year or may become one in any subsequent taxable
year. There generally would be negative tax consequences for U.S. taxpayers that are holders of our Ordinary Shares if we are or were
to become a PFIC.
In general, we will be treated
as a PFIC for U.S. federal income tax purposes in any taxable year in which either (1) at least 75% of our gross income is "passive
income" or (2) on average at least 50% of our assets by value produce passive income or are held for the production of passive income.
Passive income for this purpose generally includes, among other things, certain dividends, interest, royalties, rents and gains from commodities
and securities transactions and from the sale or exchange of property that gives rise to passive income. Passive income also includes
amounts derived by reason of the temporary investment of funds, including those raised in a public offering. In determining whether a
non-U.S. corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest (by value) is taken into account. We do not believe that we would be deemed a PFIC for 2022. If we are a PFIC
in any taxable year during which a U.S. taxpayer holds the Ordinary Shares, such U.S. taxpayer would be subject to certain adverse U.S.
federal income tax rules. In particular, if the U.S. taxpayer did not make an election to treat us as a "qualified electing fund,"
or QEF, or make a "mark-to-market" election, then "excess distributions" to the U.S. taxpayer, and any gain realized
on the sale or other disposition of the Ordinary Shares by the U.S. taxpayer: (1) would be allocated ratably over the U.S. taxpayer's
holding period for the Ordinary Shares; (2) the amount allocated to the current taxable year and any period prior to the first day of
the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to each of the other taxable
years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for that year, and an interest
charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each such other taxable year.
In addition, if the U.S. Internal Revenue Service, or the IRS, determines that we are a PFIC for a year with respect to which we have
determined that we were not a PFIC, it may be too late for a U.S. taxpayer to make a timely QEF or mark-to-market election. U.S. taxpayers
that have held the Ordinary Shares during a period when we were a PFIC will be subject to the foregoing rules, even if we cease to be
a PFIC in subsequent years, subject to exceptions for U.S. taxpayer who made a timely QEF or mark-to-market election. A U.S. taxpayer
can make a QEF election by completing the relevant portions of and filing IRS Form 8621 in accordance with the instructions thereto. U.S.
taxpayers that hold the Ordinary Shares are strongly urged to consult their tax advisors about the PFIC rules, including tax return filing
requirements and the eligibility, manner, and consequences to them of making a QEF or mark-to-market election with respect to the Ordinary
Shares in the event that we are a PFIC. See Item 10.E. "Taxation-U.S. Federal Income Tax Considerations-Passive Foreign Investment
Companies" for additional information.
41
Risks Related to Israeli Law and Our Operations
in Israel
Provisions of Israeli law may make it easy
for our shareholders to demand that we convene a shareholders meeting, and/or allow shareholders to convene a shareholder meeting without
the consent of our management, which may disrupt our management's ability to run our company.
Section 63(b) of the Companies
Law may allow any one or more of our shareholders holding at least 5% of our voting rights to demand that we convene a special shareholders
meeting. Also, in the event that we choose 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 us to cover the costs, within reason, and as a result thereof, our directors might
be required to repay us such costs. If our shareholders decide to exercise these rights in a way inconsistent with our management's
strategic plans, our management's ability to run our company may be disrupted, and this process may entail significant costs to
us.
Our operations are subject to currency and
interest rate fluctuations.
We incur expenses in U.S. dollars
and NIS, but our financial statements are denominated in U.S. dollars. U.S. dollars is our functional currency and is the currency that
represents the principal economic environment in which we operate. As a result, we are affected by foreign currency exchange fluctuations
through both translation risk and transaction risk. As a result, we are exposed to the risk that the NIS may appreciate relative to the
dollar, or, if the NIS instead devalues relative to the dollar, that the inflation rate in Israel may exceed such rate of devaluation
of the NIS, or that the timing of such devaluation may lag behind inflation in Israel. In any such event, the dollar cost of our operations
in Israel would increase and our dollar-denominated results of operations would be adversely affected.
Provisions of Israeli law and our amended
and restated articles of association may delay, prevent or otherwise impede a merger with, or an acquisition of, our company, which could
prevent a change of control, even when the terms of such a transaction are favorable to us and our shareholders.
Provisions of Israeli law and
our amended and restated articles of association could have the effect of delaying or preventing a change in control and may make it more
difficult for a third party to acquire us or our shareholders to elect different individuals to our board of directors, even if doing
so would be considered to be beneficial by some of our shareholders, and may limit the price that investors may be willing to pay in the
future for our Ordinary Shares. Among other things:
●
Israeli corporate law regulates mergers and requires that a tender offer be effected when more than a specified percentage of shares in a company are purchased;
●
Israeli corporate law does not provide for shareholder action by written consent, thereby requiring all shareholder actions to be taken at a general meeting of shareholders;
●
our amended and restated articles of association divide our directors into three classes, each of which is elected once every three years;
●
our amended and restated articles of association require a vote of the holders of a majority of our outstanding Ordinary Shares entitled to vote present and voting on the matter at a general meeting of shareholders (referred to as simple majority), and the amendment of a limited number of provisions, such as the provision stating that each year the term of office of only one class of directors will and dividing our directors into three classes, requires a vote of the holders of 65% of the voting power represented at a general meeting of our shareholders and voting thereon has been obtained, provided the majority constitutes more than 33.33% of the total issued and outstanding share capital as of the record date of such meeting. The affirmative vote of at least three-quarters (3/4) of the directors, in addition to the approval of our shareholders, is also required in order to amend our amended and restated articles of association;
●
our amended and restated articles of association provide that director vacancies may be filled by our board of directors;
42
●
subject to certain exceptions, our amended and restated articles of association restrict us from engaging in certain business combination transactions, with any shareholder who holds 15% or more of our voting power. The transactions subject to such restrictions include mergers, consolidations and dispositions of our assets with a market value of 10% or more of our assets or outstanding shares. Subject to certain exceptions, such restrictions will apply for a period of three years following each time a shareholder became the holder of 15% or more of our voting power; and
●
subject to certain exceptions, our amended and restated articles of association restrict certain transactions which may have a significant effect on the Company's structure, assets or business, including significant mergers and acquisitions, a disposition of all or substantially all of the assets of the Company, a voluntary dissolution and material changes to the principal business of the Company.
Further, Israeli tax considerations
may make potential transactions undesirable to us or to some of our shareholders whose country of residence does not have a tax treaty
with Israel granting tax relief to such shareholders from Israeli tax. With respect to mergers, Israeli tax law allows for tax deferral
in certain circumstances but makes the deferral contingent on the fulfillment of numerous conditions, including a holding period of two
years from the date of the transaction during which certain sales and dispositions of shares of the participating companies are restricted.
See "Item 10.E. Taxation-Israeli Tax Considerations and Government Programs" for additional information.
It may be difficult to enforce a judgment
of a United States court against us and our officers and directors and the Israeli experts named in this Annual Report in Israel or the
United States, to assert United States securities laws claims in Israel or to serve process on our officers and directors and these experts.
We were incorporated in Israel
and our corporate headquarters are located in Israel. All of our executive officers and directors and the Israeli experts named in this
Annual Report are located in Israel. All of our assets and most of the assets of these persons are located in Israel. Service of process
upon us or our non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against us or our non-U.S.
directors and executive officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel
that it may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel, or obtain a judgment based
on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation of U.S.
securities laws against us or our non-U.S. officers and directors because Israel may not be the most appropriate forum to bring such a
claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable
to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming
and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding case law in Israel addressing
the matters described above. Israeli courts might not enforce judgments rendered outside Israel, which may make it difficult to collect
on judgments rendered against us or our non-U.S. officers and directors.
Moreover, an Israeli court
will not enforce a non-Israeli judgment if it was given in a state whose laws do not provide for the enforcement of judgments of Israeli
courts (subject to exceptional cases), if its enforcement is likely to prejudice the sovereignty or security of the State of Israel, if
it was obtained by fraud or in the absence of due process, if it is at variance with another valid judgment that was given in the same
matter between the same parties, or if a suit in the same matter between the same parties was pending before a court or tribunal in Israel
at the time the foreign action was brought.
Our principal executive offices, most of
our research and development activities and other significant operations are located in Israel, and, therefore, our results may be adversely
affected by political, economic and military instability in Israel.
Our executive offices, corporate
headquarters and principal research and development facilities are located in Israel. In addition, all of our officers and directors are
residents of Israel. Accordingly, political, economic and security conditions in Israel and the surrounding region may directly affect
our business. Any conflicts, political instability, terrorism, cyberattacks or any other hostilities involving Israel or the interruption
or curtailment of trade between Israel and its present trading partners could adversely affect our operations. Ongoing and revived hostilities
in the Middle East or other Israeli political or economic factors, could harm our operations.
43
Our 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 direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government
coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have
a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business
conditions and could harm our results of operations.
The Israeli government is currently
pursuing extensive changes to Israel's judicial system. In response to the foregoing developments, individuals, organizations and
institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment
in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations,
downgrades in credit rating, increased interest rates, increased volatility in securities markets, and other changes in macroeconomic
conditions. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our results
of operations and our ability to raise additional funds, if deemed necessary by our management and board of directors.
Further, in the past, the State
of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of
Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial
condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which
could also adversely impact our business.
Finally, many Israeli citizens
are obligated to perform several days, and in some cases more, of annual military reserve duty each year until they reach the age of 40
(or older, for reservists who are military officers or who have certain occupations) and, in the event of a military conflict, may be
called to active duty. In response to increases in terrorist activity, there have been periods of significant call-ups of military reservists.
It is possible that there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which
may include the call-up of members of our management. Such disruption could materially adversely affect our business, prospects, financial
condition and results of operations.
Competition for skilled technical and other
personnel in Israel is intense, and as a result we may fail to attract, recruit, retain and develop qualified employees, which could materially
and adversely impact our business, financial condition and results of operations.
We compete in a market marked
by rapidly changing technologies and an evolving competitive landscape. In order for us to successfully compete and grow, we must attract,
recruit, retain and develop personnel with requisite qualifications to provide expertise across the entire spectrum of our intellectual
capital and business needs.
Our principal research and
development as well as significant elements of our general and administrative activities are conducted at our headquarters in Israel,
and we face significant competition for suitably skilled employees in Israel. While there has been intense competition for qualified human
resources in the Israeli high-tech industry historically, the industry experienced record growth and activity in 2021, both at the earlier
stages of venture capital and growth equity financings, and at the exit stage of initial public offerings and mergers and acquisitions.
This flurry of growth and activity has caused a sharp increase in job openings in both Israeli high-tech companies and Israeli research
and development centers of foreign companies, and intensification of competition between these employers to attract qualified employees
in Israel. As a result, the high-tech and bio-tech industry in Israel has experienced significant levels of employee attrition and is
currently facing a severe shortage of skilled human capital, including engineering, research and development, sales and customer support
personnel. Many of the companies with which we compete for qualified personnel have greater resources than we do, and we may not succeed
in recruiting additional experienced or professional personnel, retaining personnel or effectively replacing current personnel who may
depart with qualified or effective successors. Failure to retain or attract qualified personnel could have a material adverse effect on
our business, financial condition and results of operations.
44
Your rights and responsibilities as a holder
of our securities will be governed by Israeli law, which differs in some material respects from the rights and responsibilities of shareholders
of U.S. companies.
We are incorporated under Israeli
law. The rights and responsibilities of holders of our Ordinary Shares are governed by our amended and restated articles of association
and the Companies Law. These rights and responsibilities differ in some respects from the rights and responsibilities of shareholders
in typical U.S. corporations. In particular, pursuant to the Companies Law, each shareholder of an Israeli company has to act in good
faith and in a customary manner in exercising his or her rights and fulfilling his or her obligations toward the Company and other shareholders
and to refrain from abusing his or her power in the Company, including, among other things, in voting at the general meeting of shareholders,
on amendments to a company's articles of association, increases in a company's authorized share capital, mergers and certain
transactions requiring shareholders' approval under the Companies Law. In addition, a controlling shareholder of an Israeli company
or a shareholder who knows that it possesses the power to determine the outcome of a shareholder vote or who has the power to appoint
or prevent the appointment of a director or officer in the Company, or has other powers toward the Company has a duty of fairness toward
the Company. However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist
in understanding the implications of these provisions that govern shareholder behavior.
We received Israeli government grants for
certain of our past research and development activities and programs, some of which we sold or are in the process of selling. The terms
of such grants may require us, in the future, to pay royalties and to satisfy specific conditions if and to the extent we receive future
royalties or in order to complete the sale of such grant based technologies and programs. We may be required to pay penalties in addition
to payment of the royalties.
Our research and development
efforts with respect to some of our past activities, which was focused on developing an immunotherapeutic monoclonal antibody for the
treatment of Alzheimer's disease, which we sold in March 2015, and our Anti-CD3 technology directed toward the treatment of inflammatory
and autoimmune diseases, which in part was returned and re-assigned to Hadasit Medical Research Services & Development Ltd., or Hadasit,
and in part is still in the process of being sold, were financed in part through royalty-bearing grants from the Israeli Innovation Authority,
or the IIA. As of December 31, 2022, we had received the aggregate amount of approximately $1.1 million from the IIA for the development
of our abovementioned technologies. As of December 31, 2021, our contingent liabilities regarding IIA grants received by us were in an
aggregate amount of $1.2 million including interest. With respect to such grants, we are committed to pay certain royalties up to $1.2
million relating only to technologies in our possession and excluding any royalties for technologies that we sold to third parties. We
are required to comply with the requirements of the Israeli Encouragement of Industrial Research, Development and Technological Innovation
Law, 5744-1984, as amended, or the Innovation Law, and related regulations, or the Research Law, with respect to those past grants. When
a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer
or license of such know-how, and the transfer of manufacturing or manufacturing rights of such products, technologies or know-how outside
of Israel, without the prior approval of the IIA. Therefore, the discretionary approval of an IIA committee would be required for any
transfer or license to third parties inside or outside of Israel of know how or for the transfer outside of Israel of manufacturing or
manufacturing rights related to those aspects of such technologies. We may not receive those approvals. Furthermore, the IIA may impose
certain conditions on any arrangement under which it permits us to transfer technology or development.
Under the Innovation Law and
the regulations thereunder, a recipient of IIA grants is required to return the grants by the payment of royalties of 3% to 6% on the
revenues generated from the sale of products (and related services) developed (in whole or in part) under an IIA program up to the total
amount of the grants received from IIA, linked to the U.S. dollar and bearing interest at an annual rate of the London Interbank Offered
Rate, or LIBOR, applicable to U.S. dollar deposits, as published on the first business day of each calendar year.
The United Kingdom's
Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit
rates for LIBOR after 2021. The grants received from the IIA bear an annual interest rate based on the 12-month LIBOR. Accordingly, there
is considerable uncertainty regarding the publication of LIBOR beyond 2021. In September 2021, the Bank of Israel, which determines annual
interest rates, published a directive which stated that annual interest at a variable rate linked to the LIBOR rate for loans in U.S.
dollars will be replaced by the Secured Overnight Financing Rate, or the SOFR, in June 2023. While it is not currently possible to determine
precisely whether, or to what extent, the replacement of LIBOR with SOFR would affect us, the implementation of SOFR may increase our
financial liabilities to the IIA.
The transfer or license of
IIA-supported technology or know-how outside of Israel and the transfer of manufacturing of IIA-supported products, technology or know-how
outside of Israel may involve the payment of significant amounts, depending upon the value of the transferred or licensed technology or
know-how, our research and development expenses, the amount of IIA support, the time of completion of the IIA-supported research project
and other factors. These restrictions and requirements for payment may impair our ability to sell, license or otherwise transfer our technology
assets outside of Israel or to outsource or transfer development or manufacturing activities with respect to any product or technology
outside of Israel. Furthermore, the consideration available to our shareholders in a transaction involving the transfer outside of Israel
of technology or know-how developed with IIA funding (such as a merger or similar transaction) may be reduced by any amounts that we are
required to pay to the IIA.
45
General Risk Factors
As a "foreign private issuer"
we are permitted to and follow certain home country corporate governance practices instead of otherwise applicable SEC requirements, which
may result in less protection than is accorded to investors under rules applicable to domestic U.S. issuers.
Our status as a foreign private
issuer also exempts us from compliance with certain SEC laws and regulations, including the proxy rules and the short-swing profits recapture
rules. In addition, we will not be required under the Exchange Act to file current reports and financial statements with the SEC as frequently
or as promptly as U.S. domestic companies whose securities are registered under the Exchange Act and we will generally be exempt from
filing quarterly reports with the SEC. Also, although the Companies Law requires us to disclose the annual compensation of our five most
highly compensated senior officers on an individual basis, this disclosure is not as extensive as that required of a U.S. domestic issuer.
Furthermore, as a foreign private issuer, we are also not subject to the requirements of Regulation FD (Fair Disclosure) promulgated under
the Exchange Act. These exemptions and leniencies will reduce the frequency and scope of information and protections to which you are
entitled as an investor.
International expansion of our business
exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the
United States or Israel.
Other than our headquarters
and other operations which are located in Israel (as further described below), we currently have limited international operations, but
our business strategy incorporates potentially significant international expansion, particularly in anticipation of approval of our product
candidates. We plan to maintain sales representatives and conduct physician and patient association outreach activities, as well as clinical
trials, outside of the United States and Israel. Doing business internationally involves a number of risks, including but not limited
to:
●
multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;
●
failure by us to obtain regulatory approvals for the use of our products in various countries;
●
additional potentially relevant third-party patent rights;
●
complexities and difficulties in obtaining protection and enforcing our intellectual property;
●
difficulties in staffing and managing foreign operations;
●
complexities associated with managing multiple payor reimbursement regimes, government payors or patient self-pay systems;
●
limits in our ability to penetrate international markets;
●
financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations;
●
natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;
●
an outbreak of a contagious disease, such as coronavirus, which may cause us, third party vendors and manufacturers and/or customers to temporarily suspend our or their respective operations in the affected city or country;
●
certain expenses including, among others, expenses for travel, translation and insurance; and
●
regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, or FCPA, its books and records provisions or its anti-bribery provisions.
Any of these factors could
significantly harm our future international expansion and operations and, consequently, our results of operations.
46
Failure to comply with the FCPA could subject
us to penalties and other adverse consequences.
We are subject to the FCPA,
which generally prohibits companies, such as us, whose securities are listed in the United States, from paying, offering or authorizing
payment or offering of anything of value, directly or indirectly, to any foreign government official, political party or candidate for
public office for the purpose of influencing any act or decision of such foreign person in order to assist companies like us in obtaining
or retaining business. The FCPA also obligates companies like us, whose securities are listed in the United States, to comply with accounting
provisions requiring the companies to maintain books and records that accurately and fairly reflect all transactions of the companies,
including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international
operations. The U.S. Department of Justice and the SEC, which have responsibility for enforcement of the FCPA, both consider employees
of government-operated health care systems to be "foreign officials" for FCPA purposes. In addition, the U.S. Department of
Justice and the SEC are both engaged in a long-running FCPA compliance review of pharmaceutical companies. If our employees or agents
are found to have engaged in conduct that violates the FCPA, we would be held responsible and could suffer severe penalties and other
consequences, including adverse publicity and damage to our reputation.
Cybersecurity issues, security breaches
and other disruptions could compromise our information, expose us to liability and harm our reputation and business.
Our business relies upon information
technology systems operated by us and by our third-party service providers. These systems may fail or experience operational disruption,
experience cybersecurity attacks, or be damaged by computer viruses and unauthorized access. In the ordinary course of our business we
collect and store sensitive data, including intellectual property, personal information and our proprietary business information. The
secure maintenance and transmission of this information is critical to our operations and business strategy. We rely on commercially available
systems, software, tools and domestically available monitoring to provide security for processing, transmitting and storing this sensitive
data.
Hackers may attempt to penetrate
our computer systems, and, if successful, misappropriate personal or confidential business information. In addition, an associate, contractor
or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain such information, and
may purposefully or inadvertently cause a breach involving such information. While we continue to implement additional protective measures
to reduce the risk of and detect cyber incidents, cyber-attacks are becoming more sophisticated and frequent, and the techniques used
in such attacks change rapidly. If our third-party vendors fail to protect their information technology systems and our confidential and
proprietary information, we may be vulnerable to disruptions in service and unauthorized access to our confidential or proprietary information
and we could incur liability and reputational damage and the further development and commercialization of our product candidates could
be delayed. While we have not, to our knowledge, experienced any material IT system failures or cybersecurity attacks to date, we cannot
assure you that our data protection efforts and our investment in information technology will prevent significant breakdowns, data leakages,
breaches in our systems or those of our third-party vendors and other contractors and consultants, or other cyber incidents that could
have a material adverse effect upon our reputation, business, operations or financial condition. If such an event were to occur and cause
interruptions in our operations, it could result in a material disruption of our development programs, business operations, a breach of
sensitive personal information or a loss or corruption of critical data assets including trade secrets or other proprietary information.
For example, the loss of clinical trial data from future clinical trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. Such IT system failures, cybersecurity attacks or vulnerabilities to
our or our third-party vendors' information security programs or defenses could result in legal liability, reputational damage,
business interruption, and our competitive position could be harmed and the further development and commercialization of our products
or any future products could be delayed or disrupted. Moreover, containing and remediating any IT system failure, cybersecurity attack
or vulnerability may require significant investment of resources.
Our information technology
networks and infrastructure may still be vulnerable to damage, disruptions or shutdowns due to attack by hackers or breaches, employee
error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters or other
catastrophic events. Furthermore, significant security breaches or disruptions of our internal information technology systems or those
of our third-party vendors and other contractors and consultants could result in the loss, misappropriation and/or unauthorized access,
use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property,
proprietary business information and personal information), which could result in financial, legal, business and reputational harm to
us., Any such compromise could disrupt our operations, damage our reputation and subject us to additional costs and liabilities, any of
which could adversely affect our business.
We may be subject to securities litigation,
which is expensive and could divert management attention.
In the past, companies that
have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the
target of this type of litigation in the future. Litigation of this type could result in substantial costs and diversion of management's
attention and resources, which could seriously hurt our business. Any adverse determination in litigation could also subject us to significant
liabilities.
If securities or industry analysts do not
publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations
or publish negative reports regarding our business or our shares, the share price and trading volume of our securities could decline.
The trading market for our
Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business,
our market or our competitors. We do not have any control over these analysts and we cannot provide any assurance that analysts will cover
us or provide favorable coverage. If any of the analysts who may cover us adversely change their recommendation regarding our securities,
or provide more favorable relative recommendations about our competitors, the price of our securities would likely decline. If any analyst
who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial
markets, which in turn could cause the price or trading volume of our securities to decline.
47
ITEM 4. INFORMATION ON THE COMPANY
A. History and Development of the Company
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 Companies Law. Our registered
office and principal place of business is located at 20 Raul Wallenberg St., Tower A, 2
nd
Floor, Tel Aviv 6971916, Israel.
Our telephone number in Israel is: +972-73-3447180.
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 Annual Report, and the reference to our website in this Annual Report is an inactive textual reference only. The SEC also
maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC. Our filings with the SEC will also be available to the public through the SEC's website at www.sec.gov.
We are a foreign private issuer
as defined by the rules under the Securities Act and the Exchange Act. Our status as a foreign private issuer also exempts us from compliance
with certain laws and regulations of the SEC, including the proxy rules and the short-swing profits recapture rules. In addition, we will
not be required to file annual, quarterly and current reports and financial statements with the SEC as frequently or as promptly as U.S.
domestic companies registered under the Exchange Act.
Our capital expenditures for
2022, 2021 and 2020 amounted to $9,200, $35,000 and $0, respectively. These expenditures were primarily for purchases of fixed assets.
Our purchases of fixed assets primarily include, computers, and equipment used for the development of our products, and we financed these
expenditures primarily from cash on hand.
B. Business Overview
Overview
We are a specialty clinical-stage
pharmaceutical company. Our focus is creating and enhancing a portfolio of technologies and assets based on cannabinoid therapies. With
this focus, we are currently engaged in the following development programs based on Δ9-tetrahydrocannabinol, or THC, and/or CBD
and/or other CBR agonists: SCI-110 for the treatment of TS, for the treatment of OSA, and for the treatment of Alzheimer's disease
and agitation; SCI-160 for the treatment of pain; and SCI-210 for the treatment of ASD, and SE. We also have a majority-owned subsidiary
whose business focuses on the sale of hemp seeds oil-based products and others on the Amazon.com 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 of the central nervous system such as TS, OSA 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 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.
48
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 are developing a regulatory dossier to be submitted to the FDA,
BfArM and the MoH, for our SCI-110 program for TS.
In February 2021, we announced
an agreement with The Israeli Medical Center for Alzheimer's, to conduct a phase IIa clinical trial to evaluate the safety, tolerability
and efficacy of SCI-110 in patients with Alzheimer's disease and agitation using our proprietary cannabinoid-based technology. Sporadic
observation in healthy or sick individuals indicated that cannabis products and in particular THC have calming and anti-anxiety effects.
Based on our pre-clinical and clinical experience using SCI-110 we believe that this treatment may potentially be found to be more safe
and efficacious than THC alone. In November 2022, we announced positive interim results from our Phase IIa trial of SCI-110 in patients
with Alzheimer's disease and agitation. Agitation manifests in the course of Alzheimer's disease progression in almost all
affected patients, increasing patients' suffering and burden of care. This Phase IIa clinical trial is an open label study, which
includes 20 patients diagnosed with Alzheimer's disease and agitation, to evaluate the safety, tolerability and efficacy trends
of twice daily oral administration of SCI-110. In December 2021, The Israeli Medical Center for Alzheimer's recruited the first
patient to participate in the phase IIa clinical trial. Additionally, following positive results in a pre-clinical study that consisted
of in vitro tests which showed synergy between CBD and PEA, we announced in December 2019 progression of SCI-210 into a clinical stage,
and our plans to initiate a randomized, double blind placebo controlled study to evaluate the potential efficacy, safety and tolerability
of SCI-210 in treating patients with ASD. In 2022, we received approval from the Ethics Committee of The Soroka University Medical Center
and the MoH to conduct the Company's clinical trial for SCI-210 in patients suffering from ASD. We also have a pending regulatory
request submitted to the Israeli Medical Cannabis Agency, or IMCA, for this clinical study.
In addition, in March 2021,
we announced an agreement with The Sheba Fund for Health Services and Research at Chaim Sheba Medical Center to examine the potential
role of SCI-210 on SE. The study commenced in the second half of 2021. In December 2022, we announced positive results from the study
which reaffirm the potential of its proprietary combination products to have a positive effect while minimizing adverse side effects for
SE treatment.
For our proprietary SCI-160,
in August 2021, we announced positive top-line results for a controlled pre-clinical trial on neuropathic and post-operative pain. The
study "An evaluation of SCI-160 on neuropathic pain in the rat spared nerve injury (SNI) model and post-surgical pain in the rat
hind paw incision model," was designed to help assess the potential of SCI-160. Key findings from the pre-clinical trial are that
SCI-160 significantly alleviates pain up to six hours after injection as compared with vehicle-treated animals. Daily SCI-160 injections
significantly alleviate subject pain from mechanical stimuli as compared with vehicle-treated animals, for up to seven days after surgery.
Daily injections of SCI-160 significantly alleviate pain in a hind paw incision model of post-surgical pain up to four days post surgery
as compared with vehicle treated animals, and SCI-160 analgesic effects are prolonged in the presence of PEA. Collectively, the results
indicated that treatment with SCI-160 significantly alleviates both chronic and acute pain. Based on the positive results, we are continuing
the development of SCI-160 towards a first in-human clinical study.
Our Pharmaceutical Drug Development Programs
SCI-110 - TS, Alzheimer's
disease and agitation and OSA
We believe that our pharmaceutical
product candidate, SCI-110, offers a safe and potentially effective solution for a variety of medical concerns. Despite being in its early
phases of clinical testing, the application of SCI-110 has extended into several treatments, including TS, OSA and Alzheimer's disease
and agitation.
49
TS
TS is a neuropsychiatric disorder,
characterized by physical (motor) tics and vocal (phonic) tics. Motor tics generally precede the development of phonic tics in TS, and
the onset of simple tics usually predates that of complex tics. TS ranges from mild symptoms to loud noises and forceful movements that
can result in self-injury (e.g. punching oneself in the face, repeating other people's words or involuntary swearing). Many with
TS experience additional neurobehavioral problems and comorbidities including inattention, hyperactivity and impulsivity, anger control
problems, sleep difficulties, and obsessive-compulsive symptoms. Pharmacotherapy is used when symptoms are more severe and interfere with
the ability to function. Furthermore, according to the CDC, in most cases, the prevalence of tics decreases during adolescence and early
adulthood, and sometimes disappears entirely; therefore, there are a limited number of adults with TS and it is usually manifested mainly
through moderate to severe symptoms.
Market Size
The exact number of people
with TS is unknown. The prevalence of TS and TS symptoms is greater in children than in adults. The global TS drugs market size (revenues
of total drugs sold) was approximately $80 million in 2019 and is expected to reach $98.7 million by 2023. North America dominated the
TS market in 2018 and is estimated to hold the largest market size today and in the future owing to high incidences of TS, highly aware
population, advanced healthcare infrastructure, and favorable government initiatives. One out of 162 children in the U.S. have TS, and
it affects three out of every 1,000 children between the ages of 6 and 17.
Current Treatment
Pharmacological intervention
is considered the first line of therapy for TS, but is reserved for more severe symptoms that interfere with the individual's ability
to function. Today, a full class of drugs that interact with dopamine and non-dopamine systems in the brain are used in the treatment
of TS symptoms. Many of the drugs used to treat TS are limited to the treatment of a narrow range of TS symptoms (mainly tics), and are
associated with severe side effects, both of which limit their utility. Furthermore, several of these drugs have a black box warning on
their label due to their potentially lethal effect. A black box warning is the strictest warning put in the labeling of prescription drugs
or drug products by the FDA when there is reasonable evidence of an association of a serious hazard with the drug.
The medications commonly used
to treat symptoms of TS can be divided into the following groups:
●
Antipsychotic medications: belong to a class of drugs primarily used to manage psychosis (including haloperidol, pimozide and fluphenazine), all of which are associated with severe side effects (including weight gain, sedation, akathisia (a state of agitation, distress, and restlessness), nausea and tardive dyskinesia (involuntary movements of the face and jaw), among others).
●
Alpha2 Adrenergic Agonists: belong to a class of drugs primarily used to manage hypertension and migraine headaches prevention (including clonidine and guanfacine), which have limited utility despite common application to children with Attention Deficit Hyperactivity Disorder, or ADHD. Similar to antipsychotic medications, these also are associated with several side effects, and some of them, such as clonidine, might even be lethal.
●
Benzodiazepines, an anticonvulsant or antiepileptic drug: belong to a class of drugs primarily used to manage seizures, panic disorder and movement disorders. Of these, Clonazepam is used off-label for the reduction of tics in TS patients, which also has associated negative side effects.
As the currently used medications
are managing only a small number of disease symptoms with limited efficacy and questionable safety, there is a clear unmet medical need
for the management of TS.
Our SCI-110 Solution for
TS
Our SCI-110 platform is a drug
candidate for the treatment of TS.
On April 4, 2018, we announced
topline results of our Phase IIa investigator-initiated study at Yale University of SCI-110 for the treatment of TS. The study was a single-arm,
open-label trial, in which each subject both received one daily treatment of SCI-110 via oral administration and was followed-up for a
period of 12 weeks. 16 subjects participated in the study and received SCI-110 at the Yale University Child Study Center at Yale University.
The primary endpoint of the study was to assess the performance of SCI-110 in the treatment of adult patients suffering from symptoms
of TS, as measured by the Yale Global Tic Severity Scale Total Tic Score, or YGTSS-TTS, the customary index for assessing symptom severity.
Treatment was given in a dose titration regimen with a maximum dose of SCI-110 consisting of 10mg dronabinol and 800mg CannAmide™.
50
The topline results of the
study showed that each of these 16 subjects with medication-refractory TS sustained a significant reduction of tic symptoms (paired t-test:
YGTSS-TTS mean difference (mean +/- SD) =7.9+/-8.4, t= 3.7, df=15, p=0.002) from baseline (YGTSS-TTS: 38.4 +/- 8.3) to endpoint YGTSS-TTS:
30.5 +/- 10.9). This resulted in an average tic reduction of 21% across the entire sample of 16 TS subjects. Six of the 16 medication-refractory
TS subjects experienced a response to treatment as defined by a reduction in YGTSS-TTS of greater than 25%. Improvement over time with
treatment was also observed when generalized linear models were used to analyze repeated measures data on the YGTSS-TTS. In the study,
SCI-110 demonstrated no significant effects on comorbid ADHD, anxiety, depression or obsessive-compulsive disorder, or OCD, symptoms.
The medication was generally well-tolerated by the subjects with only two subjects stopping treatment early (one due to sedation and another
due to lack of improvement in tic symptoms). 12 of the 16 subjects elected to proceed with a 24-week extension phase of the trial, which
was also completed.
Following the Phase IIa study,
we plan to initiate a multinational, multicenter, Phase IIb randomized, double-blind, placebo controlled study to evaluate safety, tolerability
and efficacy of daily oral SCI-110 in treating adults with TS, with Yale Child Study Center at Yale University, USA, Hannover Medical
School, Germany and Tel-Aviv Sourasky Medical Center, Israel. The study is expected to include approximately 84 patients. Study patients
are randomized to either oral SCI-110 or placebo at a 1:1 ratio. The overall estimated study duration is 18-24 months. We may also be
required to conduct further preclinical studies in parallel to our clinical plans as part of registration process with the FDA and EMA.
Following these studies, if successful, we intend to conduct a Phase III, multinational, multicenter, randomized, double-blind, parallel-group,
placebo controlled study to evaluate the safety, tolerability and efficacy of up to twice daily oral SCI-110 in treating TS. During 2022,
we received Ethics Committee approvals from Hannover Medical School in Hannover, Germany, and the Tel Aviv Sourasky Medical Center and
we are planning to submit an application to the IRB of the Child Study Center at Yale School of Medicine. In addition, we received the
MoH approval to conduct the study in Israel, and we are developing a regulatory dossier to be submitted to the FDA and BfArM, for our
SCI-110 program for TS.
In June 2016, we submitted
a request for orphan drug designation to the FDA for SCI-110 for the treatment of TS. The request is still pending and we are in communication
with FDA. Our last communication was in December 2020 when we received a letter from FDA raising a concern that it will be hard to limit
the use of the pharmaceutical product to the subset of patients we are pursuing. There is no assurance that we will successfully obtain
orphan drug designation for TS. However, in light of the fact that we disagree with this concern expressed by the FDA, we requested a
clarification call. In the clarification call conducted on February 2, 2021, we agreed with the FDA concern about our ability to limit
the use of the pharmaceutical product to the subset of patients in addition to a safety concern associated with THC treatment in pediatrics
population so we suggested to amend our preliminary request and asked to include only adults in the treated population. An amendment letter
was discussed and the FDA described what it would want to see in such an amendment. In March we sent our response to the FDA. In June
2021, we received a response from the FDA, explaining that they are unable to grant our request until new information becomes available
to support our request for orphan drug designation. We will re-visit the application after we obtain clinical results from our upcoming
phase IIb study in TS.
If the FDA does not allow us
to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional
data and information and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required
to obtain FDA approval, and complications and risks associated with FDA approval, would substantially increase. In a pre-IND meeting we
had with FDA in February 2018, the FDA did not oppose our plans to submit an NDA via the 505(b)(2) pathway relying, in part, on clinical
and nonclinical information from literature related to dronabinol and the FDA's previous finding of safety and efficacy for the
reference listed drug (Marinol).
51
Alzheimer's disease and Agitation
Alzheimer's disease is
the most common type of dementia, accounting for over two-thirds of cases of dementia. Alzheimer's disease is a neurodegenerative
disease that causes progressive and disabling impairment of cognitive functions including memory, comprehension, language, attention,
reasoning and judgment. Symptoms of Alzheimer's disease depend on the stage of the disease. Neuropsychiatric symptoms like apathy,
social withdrawal, disinhibition, agitation, psychosis, insomnia, poor appetite and wandering are also common in the mid to late stages.
Market Size
It is estimated that the global
Alzheimer's therapeutics market is projected to reach $13.57 billion by 2027 from $7.42 billion in 2019 with a compounded annual
growth rate of 9.2% through 2027, which is primarily attributed to the increasing pipeline drug development and increasing investments
for drug development biomarkers.
Current Treatment
The current pharmacological
treatment of agitation in Alzheimer's disease has an unsatisfactory benefit/risk ratio and often involves using off-label drugs.
Antipsychotic drugs, which are the most frequently used drugs for this purpose, are only marginally better than placebo.
Our SCI-110 Solution for
Alzheimer's disease and Agitation
The drug product, SCI-110,
is a unique proprietary combination of dronabinol (synthetic delta-9-tetrahydrocannabinol (Δ
⁹
-THC),
and PEA.
In February 2021, we signed
an agreement with The Israeli Medical Center for Alzheimer's, to conduct a phase IIa clinical trial to evaluate the safety, tolerability
and efficacy of SCI-110 in patients with Alzheimer's disease and agitation using our proprietary cannabinoid-based technology. The
study's primary objective is the safety of SCI-110 and the secondary objective is the ability of the compound to ameliorate agitation
and other behavioral disturbances in patients with Alzheimer's disease. The study will be initiated immediately after receipt of
all the required approvals from the IRB and the MoH. The study, titled "Clinical Study Protocol Phase II-a open label trial to evaluate
the safety, tolerability and efficacy trend of SCI-110 in patients with Alzheimer's Disease and agitation," is expected to
be conducted under the leadership of Dr. Alex Kaplan, MD, Principal Investigator and board-certified geriatrician. In December 2021, The
Israeli Medical Center for Alzheimer's recruited the first patient to participate in the phase IIa clinical trial. In November 2022,
we announced positive interim results from our Phase IIa trial of SCI-110 in patients with Alzheimer's disease and agitation. At
the interim analysis, the study met its primary endpoints of safety, including non-treatment related adverse events and drop out patients
from the study; specifically, SCI-110 did not cause delirium, oversedation, hypotension or falls even in the highest dose tested (12.5MG
Dronabinol+400mg PEA).
In addition, the interim analysis
showed that the study also met its secondary endpoint of Change from Baseline to end of treatment in agitation measured by the Cohen Mansfield
Agitation Inventory, or CMAI; out of the eight patients enrolled, six showed amelioration in agitation with no need to use rescue medication
to control agitation. CMAI is a standard measure for measuring agitation in people with dementia.
Additionally, the interim analysis
showed in the exploratory endpoints that appetite was increased in six out of the eight patients, as measured by the Edinburgh Feeding
Evaluation in Dementia Scale. No effect was observed on cognitive measurements and sleep quality, as measured by the Mini Mental State
Exam, and by the Alzheimer's Disease Assessment Scale-cognitive subscale (for cognitive impairment assessments) and the Pittsburgh
Sleep Quality Index (for quality of sleep assessment).
This Phase IIa clinical trial
is an open label study, which includes 20 patients diagnosed with Alzheimer's disease and agitation, to evaluate the safety, tolerability
and efficacy trends of twice daily oral administration of SCI-110. At the interim analysis, the study met its primary endpoints of safety,
including non-treatment related adverse events and drop out patients from the study; specifically, SCI-110 did not cause delirium, oversedation,
hypotension or falls even in the highest dose tested (12.5MG Dronabinol+400mg PEA). In addition, the interim analysis showed that the
study also met its secondary endpoint of Change from Baseline to end of treatment in agitation measured by the CMAI; out of the eight
patients, six showed amelioration in agitation with no need to use rescue medication to control agitation. Additionally, the interim analysis
showed in the exploratory endpoints that appetite was increased in six out of the eight patients, as measured by the Edinburgh Feeding
Evaluation in Dementia Scale. No effect was observed on cognitive measurements and sleep quality, as measured by the Mini Mental State
Exam, and by the Alzheimer's Disease Assessment Scale-cognitive subscale (for cognitive impairment assessments) and the Pittsburgh
Sleep Quality Index (for quality of sleep assessment). In general, the study medication was well tolerated with no negative response to
the treatment observed during the duration of the study (32 days of treatments and seven days for follow-up after the study drug was stopped).
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SCI-210 - ASD and SE
We believe that our pharmaceutical
product candidate, SCI-210, offers a safe and potentially effective solution for a variety of medical concerns. Despite being in its early
phases of pre-clinical and clinical testing, the application of SCI-210 has extended into several treatments, including ASD and SE.
ASD
ASD is a neurodevelopmental
disorder. The specific etiologies and neural bases of autism remain largely unknown; it has been proposed that alterations in multiple
genes in combination with environmental factors constitute the cause for the development of the autism phenotype. ASD is characterized
by early dysfunction in communication and social interactions, presenting with repetitive, restrictive, stereotyped patterns of behavior
and loss of interest in diverse activities. Additionally, ASD is frequently accompanied by impairments in adaptive functioning, sensory
processing disorder, aggression, or self-injury.
Market Size
It is estimated that the global
ASD therapeutics market was approximately $3.3 billion in 2018 and is expected to reach approximately $4.6 billion by 2026 with a compounded
annual growth rate of 4.3% during such time period.
Current Treatment
No cure exists for ASD. The
goal of treatment is to maximize patients' ability to function by reducing ASD symptoms and supporting development and learning.
Treatment options may include: (i) behavior and communication therapies - successful programs typically include a team of specialists
and a variety of activities to improve social skills, communication and behavior; and (ii) medications - to date, no medication can improve
the core signs of ASD, specific medications can help control comorbidity symptoms. The main symptoms to be treated in patients with ASD
are: epilepsy, aggression, hyperactivity, irritability, attention deficit, sleep problems, obsessions and anxiety. Antipsychotic drugs
are sometimes used to treat severe behavioral problems and antidepressants may be prescribed for anxiety. Among the main drugs used in
the treatment of ASD are typical antipsychotics such as Haloperidol, Thioridazine, Chlorpromazine and the atypical risperidone, Olanzapine
and Clozapine, whose use is more common. These are used with the objective to treat the child's behavioral problems by blocking
the D2 dopaminergic channels, causing a diminished reaction to stimuli known as "neuroleptic syndrome," observed as calm and
quiet behavior in the child. In turn, some atypical antipsychotics also exhibit an antagonism of type 2A receptors for serotonin, aside
from their effect on the D2 channels. It is important to individualize the patient when these drugs are administered, since there are
no pre-established criteria for dosing and such drugs could present extrapyramidal adverse effects such as tremors, sialorrhea, sedation,
impaired liver function, etc. Serotonin reuptake inhibitors such as Fluoxetine, Paroxetine and Sertraline are given to children with autism
because they have been found to increase 25% of serotonin levels in platelets and serum. This treatment is based on suppressing symptoms
such as anxiety, depression, OCDs, and self-injurious behavior.
Unfortunately, about 40% of
children with ASD and disruptive behavior do not respond well to standard behavioral and medical treatment. Consequently, an exceptionally
high percentage of parents are seeking help through unproven methods, including the use of compounds made of the cannabis plant.
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Our SCI-210 Solution for
ASD
The drug product SCI-210 is
a proprietary drug candidate based on two components: (1) CBD, and (2) CannAmide™.
In December 2019, we announced
the progression of SCI-210 into clinical stage. In light of this, we plan to initiate a randomized, double blind placebo controlled study
to evaluate the efficacy, safety and tolerability of SCI-210 in treating patients with ASD. We have received a regulatory approval to
conduct the study from the MoH and the Helsinki Committee at the Soroka University Medical Center. We also have a pending regulatory request
submitted to the IMCA for this clinical study. On August 8, 2022, we announced that we have received approval from the MoH to conduct
the Company's clinical trial for SCI-210 in patients suffering ASD and on January 9, 2023, we signed an agreement with the Soroka
University Medical Center in Be'er-Sheva, Israel to conduct the Company's clinical study for SCI-210 in patients suffering
from ASD.
SE
SE is a common life threatening
medical emergency characterized by an acute, prolonged epileptic seizure. SE can represent either the exacerbation of a pre-existing seizure
or the initial manifestation of epilepsy. In order to avoid neurological sequelae, a timely treatment should be started. When the continuous
seizure does not respond to conventional drug treatment, SE can pose serious life threatening risks.
In 2018, GW's Epidiolex,
a plant-based, pharmaceutical grade CBD extract was approved by the FDA for the treatment of seizures associated with two rare and severe
forms of epilepsy. Our study for SCI-210 previously met its endpoint (efficacy) when comparing its effect to the effect of CBD alone in
an in-vitro hepatocytes model of fat accumulation; the effect of CBD was enhanced by the addition of PEA, lowering the required effective
concentration of CBD. In this study, we hope to meet the study endpoint (efficacy) when comparing treatment using our pharmaceutical product
candidate compared to the effect of CBD alone on SE and its neurological cognitive sequelae.
Market Size
According to the World Health
Organization, or WHO, report on epilepsy in 2019, around 50 million people have epilepsy. In addition, it has been estimated that the
global epilepsy market size would grow from $10.6 billion in 2021 to $14.9 billion towards the end of 2031.
North
America accounted for approximately 50% of the global epilepsy therapeutics market in 2021. The U.S. is the largest epilepsy drug market
in North America.
In 2017, the Americas held
a 41% market share ($1.49 billion) and are projected to hold such position, estimated to be $1.6 billion in 2023.
Current Treatment
The first-line treatment for
early SE mainly comprises the administration of benzodiazepines, the most frequently used of which include Diazepam, Lorazepam, and Midazolam.
Seizures continue and progress to established SE in about 40% of patients with Convulsive Status Epilepticus (CSE) despite benzodiazepine
administration as the first-line treatment. The second-line treatment for established SE consists of a loading dose of antiepileptic drugs.
Frequently used antiepileptic drugs include Phenytoin or Fosphenytoin, Valproate, Levetiracetam, Phenobarbital, and Lacosamide. There
is no clear evidence for the relative superiority of any of these drugs.
Our SCI-210 Solution for
SE
The drug product SCI-210 is
a proprietary drug candidate based on two components: (1) CBD, and (2) CannAmide™.
54
In March 2021, we entered an
agreement with The Sheba Fund for Health Services and Research, to perform a pre-clinical study for the evaluation of our SCI-210 drug
development program for the treatment of SE. The pre-clinical study is expected to investigate the potential advantage of our proprietary
combination of SCI-210 by harnessing the "sparing effect" phenomenon. In the study, the effect of SCI-210 is compared to CBD
single treatment in animal model (mice) of SE. The study commenced in the second half of 2021. On December 7, 2022, we announced positive
results from our study of SCI-210 on SE, conducted at The Sheba Fund for Health Services and Research at Chaim Sheba Medical Center, which
reaffirm the potential of its proprietary combination products to have a positive effect while minimizing adverse side effects. Our SCI-210
platform combines PEA with CBD. The non-clinical trial objective was to study the potential therapeutic effects of SCI-210 on SE and on
neuro-biochemical markers for neurological cognitive sequelae. A pilocarpine SE-induced mice (C57BL/6 male) model to study SCI-210's
effects on seizure severity and mortality was used. After calibration, four groups of animals were studied: an effective-high dose CBD
group, a sub-effective dose CBD group, a SCI-210 group (a combination of sub-effective CBD dose and PEA) and a non-treated control group.
The results indicated differences in mortality rate as well as seizure rates over time. In the low-CBD group, a higher mortality rate
(although not significant) was found and therefore it is reasonable to believe that no significant impact on neuronal protection was achieved.
In the high-CBD group, higher, although not significant, levels of neuronal protection were found together with a decreased mortality
rate when compared to control. The level of neuronal protection in the SCI-210 treatment was significantly higher compared to the control
group and no mortality was found in this group. It was concluded that SCI-210 treatment may potentially be more effective than a CBD monotherapy.
Moreover, since the concentrations used in the combo treatment are significantly lower than those recommended for CBD monotherapy, this
treatment also has the potential to be safer.
Our SCI-160 Pain Solution
Pain is the most common reason
for physician consultation in most developed countries. It is a major symptom in many medical conditions and can interfere with a person's
quality of life and general functioning. Opioid medications can provide short, intermediate or long acting analgesia depending upon the
specific properties of the medication and whether it is formulated as an extended release drug. Opioids are efficacious analgesics in
chronic malignant pain and modestly effective in nonmalignant pain management. However, there are associated adverse effects, especially
during the commencement or change in dose. Prolonged opioid use may cause drug tolerance, chemical dependency, diversion and addiction.
The potency and availability of these substances, despite their high risk of addiction and overdose, have made them popular both as formal
medical treatments and as recreational drugs. Due to their sedative effects on the medulla oblongata, opioids in high doses present the
potential for respiratory depression, and may cause respiratory failure and death. In a 2013 review study published in Fundamental &
Clinical Pharmacology, various studies were cited demonstrating that cannabinoids exhibit comparable effectiveness to opioids in models
of acute pain and even greater effectiveness in models of chronic pain. Cannabis produces several compounds with various known activities
known together as cannabinoids, such as THC and cannabidiol (CBD). In general, cannabinoids bind and act through the two characterized
CRP: CB1 and CB2. However, activation of the CB1 receptor (as for example in the case of THC) leads to unwanted psychoactive "high"
and other adverse events, whereas activation of CB2 does not lead to any psychoactivity. In addition and unrelated to the above sentence,
the affinity of the cannabis derived cannabinoids to these receptors is limited and partial. Newly synthetic cannabinoid HU-433, a specific
CB2 agonist with high CB2 receptor affinity, was specifically synthesized by Prof. Raphael Mechoulam from Hebrew University of Jerusalem
and is our proprietary new chemical entity.
In July 2018, we executed a
license agreement with Yissum, the technology transfer company of the Hebrew University of Jerusalem, for SCI-160, a synthetic cannabinoid
synthesized by Prof. Mechoulam. We completed two preliminary preclinical studies evaluating analgesic and opioid-sparing effects of this
compound in a rat model of acute and chronic pain. In the preclinical studies, SCI-160 was well tolerated and did not cause any significant
adverse clinical effects. In addition, efficacy studies demonstrated the analgesic superiority of SCI-160 over control and were comparable
to high-dose morphine analgesic effects and in some instances exerted greater potency. These preclinical studies in SCI-160 were able
to meet their endpoints - efficacy and safety - for both acute and chronic pain.
Market Size
The
global pain management drugs market size was estimated at $78.14 billion in 2022 and is projected to hit around $115
billion by 2032, growing at a CAGR of 3.94% during the forecast period 2023 to 2032. On the basis of geography, North America dominated
the market and captured more than 45% revenue share in 2022.
According
to the U.S. National Center for Health Statistics, over 310 million major procedures are performed annually, of which approximately 40
to 50 million are in the U.S. and 20 million in Europe. Moreover, there is a rise in the rate of surgeries worldwide which is the primary
reason for the growing consumption of pain management drugs. Subsequently, the increased cancer therapies associated with pain incidence
and a rising geriatric population having various therapies drive the market. Consumer preference for pain management therapies is influenced
by their high availability, ease of access, heightened awareness, cost-effectiveness, and rapid relief.
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Furthermore,
rising road accidents due to the increasing number of vehicles and traffic violations lead to related trauma injuries, which create demand
for pain management post surgeries. According to the WHO, 1.3 million people die yearly from road traffic crashes. Between 20 and 50 million
people suffer from non-fatal injuries, with many incurring a disability due to their injury.
Current Treatment
Currently available treatments
are antidepressant and anticonvulsant analgesics, opioids and nonsteroidal anti-inflammatory drugs. These are inadequate to control all
pain or are associated with limiting side effects (e.g., most problematic being sedation with the antidepressant and anticonvulsant group,
constipation with the opioids and gastrointestinal and cardiovascular effects with the Non-steroidal anti-inflammatory drugs, or NSAIDs).
Our SCI-160 Solution for
pain
SCI-160 is a newly synthetic
cannabinoid, a specific CB2 agonist with high CB2 receptor affinity.
For our proprietary SCI-160,
in August 2021, we announced positive top-line results for a controlled pre-clinical trial on neuropathic and post-operative pain. The
study "An evaluation of SCI-160 on neuropathic pain in the rat spared nerve injury (SNI) model and post-surgical pain in the rat
hind paw incision model," was designed to help assess the potential of SCI-160. Key findings from the pre-clinical trial are that
SCI-160 significantly alleviates pain up to six hours after injection as compared with vehicle-treated animals. Daily SCI-160 injections
significantly alleviate subject pain from mechanical stimuli as compared with vehicle-treated animals, for up to seven days after surgery.
Daily injections of SCI-160 significantly alleviate pain in a hind paw incision model of post-surgical pain up to four days post surgery
as compared with vehicle treated animals and SCI-160 analgesic effects are prolonged in the presence of PEA. Collectively, the results
indicated that treatment with SCI-160 significantly alleviates both chronic and acute pain. Based on the positive results, we are continuing
the development of SCI-160 towards a first in-human clinical study.
Other Programs
Our CannAmide™ Anti-Inflammatory
and Chronic Pain Solution
CannAmide™ is a cannabimimetic
compound that regulates endocannabinoid levels by enhancing receptor sensitivity and inhibiting their metabolism, and is particularly
attractive therapeutically as it appears to have a very high safety profile with low or no abuse liability. Although numerous clinical
trials have shown the favorable effect of PEA as an analgesic agent it has low solubility.
In July 2019, we announced
the issuance of a product license for our proprietary PEA oral tablet CannAmide™ by Health Canada's Natural and NNHPD, for
the recommended use as an anti-inflammatory and to help relieve chronic pain. This license was issued by the NNHPD under the authority
of the NHPR. Dosage form of the described natural health product is tablets composed of 400mg PEA with a recommended dose of one tablet
three times a day. Chronic pain is estimated to affect 38% of people worldwide, and according to an analysis by the World Health Organization,
half of the most prevalent conditions responsible for living with disability is characterized by the presence of different kinds of pain.
With the NNHPD license, we are able to offer safe and beneficial non-opiate pain management products. CannAmide™'s active
compound PEA is a cannabimimetic compound that regulates endocannabinoid levels by enhancing receptor sensitivity and inhibiting their
metabolism, and is particularly attractive therapeutically as it appears to have a very high safety profile with low or to no possibility
for abuse. Additionally, on February 9, 2021, we announced that we have begun commercial production of our proprietary PEA oral tablets
CannAmide™, which will be marketed to pharmacies and other retail outlets across Canada following our entering into a distribution
agreement. Furthermore, on February 10, 2021, we announced that we had entered into an agreement with Procaps, a leader in contract development
and manufacturing services in softgel advanced technologies for the global pharmaceutical and nutraceutical industries, to develop and
commercially manufacture both of our drug candidates, SCI-110 and our proprietary PEA oral tablets CannAmide™, in softgel capsule
form.
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Cannabinoids have great therapeutic
potential and have been used for years for medicinal purposes. For example, cannabis and cannabinoids are being used to improve the quality
of life of patients with numerous and diverse indications (oncological patients, chronic pain conditions, etc.). We believe that the novel
approaches and unique mechanism of action of our proprietary technology platforms, including our drug delivery systems and unique combination
and specific dosages, may be expanded to treat additional diseases and unmet medical needs.
In the future, we may consider
expanding our pipeline to include these additional indications.
Collaboration with Clearmind
On March 7, 2022, we entered
into a cooperation agreement, or the Cooperation Agreement, with Clearmind. The Cooperation Agreement includes, among others, examination
of the benefit of integrating the core technologies of each company to explore the development of psychedelic-centric drug candidates
and targeting mental health-related diseases. Pursuant to the terms of the Cooperation Agreement, we conducted a joint pre-clinical study
with Clearmind. Under the Cooperation Agreement, we aim to pursue, develop and commercialize psychedelic-centric drug candidates. Our
collaboration with Clearmind has resulted as of the date of this Annual Report, in the filing of nine patent applications. All patent
applications refer to the combination of SciSparc's CannAmide™ with Clearmind's 5-Methoxy-2-aminoindane, or MEAI, an
innovative proprietary psychedelic treatment for addictions and others.
In May 2022, we announced that
our collaboration with Clearmind resulted in the filing of a provisional patent application related to a psychedelic combination therapy
treating numerous binge behaviors. The patent application referred to the combination of our CannAmide™ with Clearmind's MEAI.
The patent application followed successful pre-clinical studies that showed a significant dose dependent effect for MEAI treatment in
reducing alcohol consumption of treated animals, with additional significant effect for the CannAmide™ treatment at the lower sub-effective
MEAI dose. Additionally, in May 2022, we announced positive safety profile results from our joint pre-clinical trial with Clearmind. The
trial tested the proprietary combination of our CannAmide™ with Clearmind's psychedelic molecule, MEAI, for alcohol consumption.
A histopathology assessment was conducted on several organs (heart, lungs, liver, kidneys, brain, pancreas, spleen, and thyroid gland)
from all experiment groups (n=3-5 per group) to determine the safety of the proprietary combination of MEAI and CannAmide™ versus
control (mice) that were not exposed to alcohol). The severity of changes was scored by a 5-point scale by a qualified blinded toxicologist
(Schafer et al., Toxicol Pathol 2018, 46:256-265). The results indicated a high safety profile of the combination treatment with no treatment-related
changes observed.
In June 2022, we announced
that our collaboration with Clearmind resulted in the filing of a provisional patent application related to treating cocaine addiction.
The patent application refers to the proprietary combination of our CannAmide™ with Clearmind's MEAI, for treating cocaine
addiction.
In August 2022, we announced
additional positive pre-clinical results of our psychedelic-based pharma collaboration for treatment for cocaine addiction using MEAI.
These pre-clinical study results added to our announcements regarding our collaboration with Clearmind for their combination treatment
based on our CannAmide™ compound and Clearmind's MEAI for various addictions, including pre-clinical studies results, the
filing of two provisional patent applications related to compositions comprising MEAI and n-acylethanolamines and uses thereof and treating
cocaine addiction. The pre-clinical trial was led by Professor Gal Yadid and his team from the Gonda Multidisciplinary Brain Research
Center located at Bar Ilan University (Ramat Gan, Israel) and was designed to evaluate the possible reward-like effects of MEAI with connection
to cocaine and its ability to abolish cocaine-induced conditioned place preference. In the pre- clinical trial, the self-administration
paradigm was utilized, which is the gold-standard model for examining drug addiction and is based on operant conditioning. Rats were catheterized
and trained to self-administer cocaine. The results identified a statistically significant sub-group within the study, in a non-biased
manner and high integrity, which dramatically responded to the treatment, significantly decreasing the craving for cocaine as compared
to non-treated control group. This sub-group, representing 60% of animals, showed a very high response within the group.
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In September 2022, we announced
that Clearmind filed a provisional patent application related to metabolic syndromes including obesity, regarding our collaboration with
Clearmind. The patent application is the third of the collaboration, each referring to the proprietary combination of our PEA and Clearmind's
MEAI.
In February 2023, we announced
that announced that Clearmind filed three provisional patent applications were filed by Clearmind with the USPTO as a part of our ongoing
collaboration. The patent applications refer to novel proprietary combinations of lysergic acid diethylamide, psilocybin, and N,N-dimethyltryptamine
and our PEA. Additionally, in February 2023, we announced that as part of our ongoing collaboration with Clearmind, Clearmind filed three
provisional patent applications with the USPTO, for unique combinations of future psychedelic-based compounds. The patent applications
refer to novel proprietary combinations of 3,4 Methylenedioxymethamphetamine, Ibogaine and Ketamine each with our PEA.
Collaboration with Polyrizon
On May 31, 2022, we entered
into a collaboration agreement with Polyrizon Ltd., or Polyrizon, a biotech company focused on the development of innovative medical device
hydrogels delivered in the form of nasal sprays, or the Polyrizon Collaboration Agreement. As part of this collaboration, we will work
together to develop a unique technology for the treatment of pain, based on our SCI-160 platform and Polyrizon's Trap and Target
TM
intranasal
drug delivery technology to target the central nervous system. We have agreed to pay development fees to Polyrizon up to a total of $2,550,000
upon the completion of certain milestones, as well as royalties in the low single digits upon sales of products under the agreement and
additional royalties for sales under any sublicense by us.
Acquisition of Wellution™
On September 14, 2022, we entered
into the Wellution Acquisition Agreement with Merhavit M.R.M Holding and Management Ltd., or M.R.M, and the other parties named therein,
to acquire from M.R.M its rights to purchase, the Wellution™ brand. In connection therewith, we incorporated a new wholly owned
subsidiary, SciSparc Nutraceuticals, to hold the new assets of the Brand. The Brand sells hemp-based products, including hemp gummies,
hemp oil capsules, hemp gel, hemp cream, detox pills, height pills, antibacterial creams, and anti-aging creams, among other beauty and
hair treatment products that are all manufactured in the United States. In total, the Brand has over 40,000 product reviews, many of which
are 4 and 5-star reviews.
The closing of the acquisition
of the Brand occurred on September 30, 2022 and in accordance with the Wellution Acquisition Agreement, at the closing, we paid a base
cash payment of $4.59 million. Upon the lapse of 12 months from the closing, September 30, 2023, we will pay, pursuant to the Wellution
Acquisition Agreement, an additional deferred cash payment of a multiple of three times the amount by which the acquired Brand EBITDA
exceeds $1.12 million (defined as SDE, which is defined in the Wellution Acquisition Agreement and includes certain price adjustments
such as research and development expense).
In accordance with the Wellution
Acquisition Agreement, at the closing, we issued to M.R.M $15 million worth of warrants to purchase up to an aggregate amount of 2,142,857
of our Ordinary Shares, or the M.R.M Warrants. The M.R.M Warrants have an exercise price of $7.00 per share and an exercise period of
five years from the closing, until September 30, 2027. The M.R.M Warrants will become exercisable during the exercise period upon the
earlier of (i) an achievement of $100 million of gross sales by the Brand in the aggregate or (ii) if the price of our Ordinary Shares
closes at $10.00 or above.
On
February 23, 2023, we entered into the Wellution Sale Agreement with Jeffs' Holdings and Jeffs' Brands, pursuant to which,
at the closing on March 28, 2023, Jeffs' Holdings acquired from us a number of shares of common stock of SciSparc Nutraceuticals,
equal to approximately a 49% interest in our wholly owned subsidiary, SciSparc Nutraceuticals, which owns the Wellution
TM
Brand,
for a cash consideration of $2.5 million. In addition to the cash consideration upon closing, we received from Jeffs' Brands an
additional amount accounting for certain purchase price adjustments related to inventory and working capital, which adjustments increased
the purchase price by approximately $489,330.
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Following
the closing of the Wellution Sale Agreement on March 28, 2023, including an equity conversion of the financing amounts we previously provided
to SciSparc Nutraceuticals for working capital, we hold approximately 51% of the outstanding capital stock of SciSparc Nutraceuticals.
In
connection with the Wellution Sale Agreement, at the closing, Jeffs' Brands and SciSparc Nutraceuticals entered into a consulting
agreement, or the Wellution Management Agreement for the provision of services by Jeffs' Brands for the management of the Brand
for a monthly fee of $20,000. Jeffs' Brands also received a one-time signing bonus at the closing in the amount of $51,000. The
Wellution Management Agreement is in effect for an undefined period of time and may be terminated by either party with 30 days'
advance notice.
In
addition, pursuant to the Wellution Sale Agreement, at the closing, we undertook a share exchange with Jeffs' Brands, in which we
acquired 247,415 ordinary shares of Jeffs' Brands and Jeffs' Brands acquired 360,297 of our Ordinary Shares, in each case
having an aggregate value of $288,238, or the Share Exchange. The number of shares exchanged was calculated based on the average closing
price of the shares on the Nasdaq for the 30 consecutive trading days ending on the third trading day immediately prior to the closing
date.
Joint
Venture with Jeffs' Brands
On November 15, 2022, we entered
into a letter of intent with Jeffs' Brands, to establish a joint venture for the development of a new food supplements product line
and its online marketing, or the Jeffs' Joint Venture. Pursuant to the letter of intent, we will form a joint venture together
with Jeffs' Brands in which we will each own 50%. Upon entry into definitive agreements, we will be responsible for the development
of the new food supplement product line that will be marketed on the Internet by Jeffs' Brands. Decision regarding the products
for development will be made mutually by the parties and will be based on Jeffs' Brands' advanced technology analysis of in-demand
products with potential high profitability. As further detailed above, on March 28, 2023, we consummated the Wellution Sale Agreement
to sell a 49% interest in SciSparc .Nutraceuticals. We intend to work together with Jeffs' Brands to incorporate the activity of
the intended Jeffs' Joint Venture through SciSparc Nutraceuticals.
Restructuring Plan
On January 25, 2023, we announced
that our board of directors resolved to pursue a Restructuring Plan which involves transferring our pharmaceutical activities to NewCo.
As part of the Restructuring Plan, we intend to examine the possibility of listing NewCo on a leading stock exchange, while maintaining
our controlling interest in NewCo such that we will continue to control our current business activities. We also intend to explore other
potential new opportunities, activities and investments in a variety of sectors.
Any restructuring and possible
listing of NewCo on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory
approvals, receipt of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions to
effectuate such corporate restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended
restructuring and listing of NewCo or that they will be completed at all. As of the date of this Annual Report, we have not initiated
the Restructuring Plan.
Intellectual Property
Our intellectual property portfolio
comprises seven granted U.S. patents, pending patent applications in nine families, all of which are currently international PCT applications
or PCT applications that have entered the national phase. Of this portfolio, we have exclusively licensed one granted U.S. patent from
Dekel and one patent family from Yissum. Our intellectual property portfolio also includes two trademarks.
Internally Developed Patent Applications
In March 2013, we filed a provisional
application with the USPTO for the technology of proprietary sequences of anti-CD3 antibody and the utilization of the latter in various
autoimmune diseases, as well as in hepato-pathologies. The provisional application has been converted to a PCT and then entered a National
Status in December 2014 in the U.S., with the European Patent Office, or EPO, and in China, Canada and Japan. In the U.S. it received
a grant status in June 2018.
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In April 2015, we filed a provisional application
with the USPTO for combinations of cannabinoids, n-acylethanolamines, and inhibitors of n-acylethanolamine degradation, which, in April
2016 was converted into an international PCT application that subsequently entered national phase in the following state entities: U.S.,
EPO, Israel, Australia, Canada, China and Japan. The technology is directed to utilizing the potentiating effect of n-acylethanolamines
on cannabinoids for any cannabinoid amenable indication, including but not limited to analgesia and TS. The 20-year term of any patent
issuing from this application would expire in April 2036. In August and September 2021, the patent was granted in Australia and Japan,
respectively, and three patents have been issued in the U.S., two in December 2021 and one in February 2022. In December 2022, we were
granted a patent from the EPO.
In May 2015, we filed a provisional
application with the USPTO for combinations of opioids, n-acylethanolamines, and inhibitors of n-acylethanolamines degradation, which,
in May 2016 was converted into an international PCT application that subsequently entered national phase in the following state entities:
U.S., EPO, Israel, Australia, Canada, China and Japan. The technology is directed to potentiating effect of N-acylethanolamines on opioids
for opioid amenable indications. The 20-year term of any patent issuing from this application would expire in May 2036. In July 2021,
the patent was granted in Australia.
In July 2016, we filed a provisional
application with the USPTO for the use of cannabinoids for potentiating the efficacy of antibiotics, which in July 2017 was converted
into an international PCT application that subsequently entered national phase in the following state entities: U.S., EPO, Canada and
China. The 20-year term of any patent issuing from this application would expire in July 2037. In November 2022, the USPTO issued this
patent called "Compositions and Methods of Potentiating Antimicrobials" .
In January 2018, we filed a
provisional application with the USPTO directed to methods of treating OSA, which in January 2019 was converted into an international
PCT application that subsequently entered national phase in the following state entities: U.S., EPO, Canada and Australia. The 20-year
term of any patent issuing from this application would expire in January 2039.
In April 2019, we filed a provisional
application with the USPTO directed to compositions and methods for potentiating derivatives of 4-aminophenols, which in April 2020 was
converted into an international PCT application. The PCT application subsequently entered the national phase in Australia, Canada, China,
EPO, Israel, India, Japan, Mexico, Russia, and the U.S. The 20-year term of any patent issuing from this application would expire in April
2040.
In August 2020, we filed a
provisional application with the USPTO directed to methods for maintaining microvascular integrity, which in August 2021 was converted
into an international PCT application. The PCT application subsequently entered the national phase in Australia, Canada, China, EPO, Israel,
India, Japan, and the U.S. The 20-year term of any patent issuing from this application would expire in August 2041.
In August 2022, we received
an Israeli patent for our core technology that treats central nervous systems disorders. The invention relates to "Pharmaceutical
compositions comprising cannabinoids and N-acylethanolamines, and methods for their use in preventing and treating a variety of cannabinoid-treatable
conditions."
In November 2022, the USPTO
granted us a new patent - U.S. Patent No. 11,491,172, title: COMPOSITIONS AND METHODS OF POTENTIATING ANTIMICROBIALS. This patent further
strengthens our intellectual property portfolio and protection of our core technologies, and in one of the most important markets in the
world. This is SciSparc's seventh granted patent in the United States.
60
In-Licensed Patents and Patent Applications
In May 2015, we entered into
an exclusive, irrevocable, worldwide license agreement with Dekel for certain technology and one granted U.S. patent related to compositions
and methods for treating inflammatory disorders. The agreement became effective in August 2015 immediately after we and Dekel entered
into an amendment to the license agreement. Pursuant to the license agreement, in May 2016 we issued Dekel 200,000 of our Ordinary Shares
at a price per share of NIS 0.5 on account of future royalty payments. Also, pursuant to the license agreement, we are obligated to pay
Dekel fees based on specific milestones and royalties upon commercialization. The milestone payments include: (i) $25,000 upon the successful
completion of preclinical trials (which milestone was met in November 2016, resulting in this payment becoming due, and which was paid
in March 2017); (ii) $75,000 upon the successful completion of a Phase I/IIa trial (which was paid in April 2018); and (iii) $75,000 upon
the earlier of generating net revenues of at least $200,000 from the commercialization of the technology or the approval of the FDA /
the EMA of a drug based on the licensed assets. In each case, and subject to our discretion, the respective milestone payments are payable
in cash or equity based on a price per Ordinary Share of NIS 0.5. The royalty payments are 8% for commercialization and 35% pursuant to
a sub-license of the licensed assets. The patent expiration dates of any patents maturing from this application would likely be 2029.
On July 14, 2019, we entered
into an amendment to the license agreement, to encompass our and Dekel's original intention to exclude certain consumer packaged
goods (including, inter alia, food, beverage, cosmetics, pet products and hemp based products, which are sources of nutrients or other
substances which may have a nutritional effect) from the scope of the licensed products and the field of our activity, as described in
the license agreement, which intention was not reflected in the license agreement, and therefore, desired and agreed to amend the license
agreement to reflect the foregoing clarification, as well as certain additional less material matters as discussed in the amendment. The
amendment also prescribes a specific development plan under the license agreement requiring us to invest in the licensed technology (as
defined under the license agreement) formulation development and maintenance of a total annual investment cap of $350,000 and for a non-compete
and non-solicitation obligation by Dekel and Dr. Shmulewitz, our former chairman and chief executive officer, towards our field of activity.
On July 29, 2018, we
entered into an exclusive, worldwide, sublicensable, royalty-bearing license agreement with Yissum for a license to make commercial use
of the licensed technology, in order to develop, obtain regulatory approvals, manufacture, market, distribute or sell products, or the
Yissum License Agreement. According to the Yissum License Agreement, we were required to pay Yissum an initial payment of $133,000, and
shall pay Yissum royalties at the rates of 3% of net sales, subject to the royalty reductions as described in the Yissum License Agreement.
All right, title and interest in and to the Yissum License Agreement shall vest solely in Yissum, and we shall hold and make use of the
rights granted. All rights in the development results shall be solely owned by us, except to the extent that an employee of the Yissum,
including the researcher, is considered an inventor of a patentable invention arising from the development results, in which case such
invention and all patent applications and/or patents claiming such invention shall be owned jointly by us and Yissum, as appropriate,
and Yissum's share in such joint patents shall be automatically included in the Yissum License Agreements.
Other Intellectual Property Protection
In addition to patent and trademark
protection, we intend to use other means to protect our proprietary rights, including pursuing marketing or data exclusivity periods,
orphan drug status, and similar rights that are available under regulatory provisions in certain countries, including but not limited
to the United States, Europe, Canada, Japan, and China.
We also rely on trade secrets,
know-how, and continuing innovation to develop and maintain our competitive position. We cannot be certain that patents will be granted
with respect to any of our pending patent applications or with respect to any patent applications filed by us in the future, nor can we
be sure that any of our existing patents or any patents granted to us in the future will be commercially useful in protecting our technology.
We also seek regulatory approval
for our products for indications with high unmet medical need, great market potential, and where we have a proprietary position through
patents covering various aspects of our products, including but not limited to: composition, dosage, formulation, use, and manufacturing
process. Our success depends, in part, on an intellectual property portfolio that supports future revenue streams and erects barriers
to our competitors. We are maintaining and building our patent portfolio through filing new patent applications, prosecuting existing
applications, and licensing and acquiring new patents and patent applications.
61
Despite these measures, any
of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated. Intellectual
property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide
competitive one. For more information, see Item 3D. "Risk Factors-Risks Related to our Intellectual Property."
The following table summarizes
our portfolio of patents:
Country
Status
Filing Date
Title
Estimated
Expiration Date
Product Covered
Australia
Granted
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
Australia
Pending
19-Jul-2021
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
Canada
Pending
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
United States of America
Granted
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
May 2036
THX-110 THX-210
United States of America
Pending
01-Oct-2019
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
United States of America
Granted
10-Oct-2019
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
October 2037
THX-110 THX-210
United States of America
Granted
30-Aug-2019
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
October 2037
THX-110 THX-210
United States of America
Pending
27-Aug-2021
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
United States of America
Pending
27-Aug-2021
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
United States of America
Pending
12-Nov-2021
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
Israel
Granted
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
Israel
Pending
31-Mar-2022
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
China (People's Republic)
Pending
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
European Patent Convention
Pending
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
European Patent Convention
Pending
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
Japan
Granted
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
Japan
Pending
30-Mar-2021
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
Australia
Granted
17-May-2016
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
62
Country
Status
Filing Date
Title
Estimated
Expiration Date
Product Covered
Australia
Pending
30-Jun-2021
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
Israel
Pending
17-May-2016
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
China (People's Republic)
Pending
17-May-2016
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
Japan
Pending
17-May-2016
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
Japan
Pending
30-Apr-2021
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
European Patent Convention
Pending
17-May-2016
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
United States of America
Pending
27-Nov-2020
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
Canada
Pending
17-May-2016
COMBINATIONS OF OPIOIDS AND N-ACYLETHANOLAMINES
May 2036
United States of America
Pending
29-Jul-2020
COMPOSITIONS AND METHODS FOR TREATING OBSTRUCTIVE SLEEP APNEA
January 2039
THX-110
European Patent Convention
Pending
28-Aug-2020
COMPOSITIONS AND METHODS FOR TREATING OBSTRUCTIVE SLEEP APNEA
January 2039
THX-110
Australia
Pending
24-Aug-2020
COMPOSITIONS AND METHODS FOR TREATING OBSTRUCTIVE SLEEP APNEA
January 2039
THX-110
Hong Kong
Pending
24-Aug-2020
COMPOSITIONS AND METHODS FOR TREATING OBSTRUCTIVE SLEEP APNEA
January 2039
THX-110
Canada
Pending
25-Jan-2019
COMPOSITIONS AND METHODS FOR TREATING OBSTRUCTIVE SLEEP APNEA
January 2039
THX-110
Australia
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
Canada
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
China
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
European Patent Convention
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
Hong Kong
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
Israel
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
India
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
Japan
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
Mexico
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
Israel
Granted
19-Apr-2016
COMBINATIONS OF CANNABINOIDS AND N-ACYLETHANOLAMINES
April 2036
THX-110 THX-210
63
Country
Status
Filing Date
Title
Estimated
Expiration Date
Product Covered
Russia
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
Hong Kong
Pending
18-Mar-2022
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
United States of America
Pending
22-Apr-2020
COMPOSITIONS AND METHODS FOR POTENTIATING DERIVATIVES OF 4-AMINOPHENOLS
April 2040
China
Pending
12-Mar-2013
HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)
March 2033
United Kingdom
Pending
12-Mar-2013
HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)
March 2033
Germany
Pending
12-Mar-2013
HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)
March 2033
France
Pending
12-Mar-2013
HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)
March 2033
United States of America
Granted
12-Mar-2013
HUMANIZED ANTIBODIES TO CLUSTER OF DIFFERENTIATION 3 (CD3)
March 2033
United States of America
Granted
09-Jun-2020
COMPOSITIONS AND METHODS OF POTENTIATING ANTIMICROBIALS
July 2037
European Patent Convention
Pending
11-Jan-2019
COMPOSITIONS AND METHODS OF POTENTIATING ANTIMICROBIALS
July 2037
China
Pending
11-Jan-2019
COMPOSITIONS AND METHODS OF POTENTIATING ANTIMICROBIALS
July 2037
United States of America
Granted
* Compositions comprising CB receptor agonists, uses thereof and methods for their preparation
October 2029
THX-160
United Kingdom
Granted
* Composition comprising cb receptor agonists and uses thereof
October 2029
THX-160
Germany
Granted
* Composition comprising cb receptor agonists and uses thereof
October 2029
THX-160
France
Granted
* Composition comprising cb receptor agonists and uses thereof
October 2029
THX-160
United States of America
Granted
29-Jul-09
* COMPOSITIONS AND METHODS FOR TREATING INFLAMMATORY DISORDERS
July 2029
Australia
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
Canada
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
China
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
European Patent Convention
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
Israel
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
India
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
Japan
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
United States of America
Pending
2-Aug-21
METHODS FOR MAINTAINING MICROVASCULAR INTEGRITY
August 2041
We have also been granted a
trademark for CannAmide™ in the United States with registration pending.
64
Sales and Transfer of Intellectual Property
Assets
Transaction with Former Subsidiary
In June 2016, we entered
into a share transfer agreement with our former subsidiary, Orimmune Bio Ltd., or Orimmune, and Karma Link Ltd., or Karma Link. According
to the agreement, we agreed to sell our interests in Orimmune to Karma Link, and also use our best efforts to transfer to and assign
Orimmune our rights in the Anti-CD3 technology
On December 13, 2018, an additional
amendment to the transfer agreement was signed, or the Additional Amendment, between us, Karma Link and Orimmune, under which it was agreed
that Orimmune (and Karma Link) will be assigned certain rights in IP related to the licensed technology owned by us, subject to certain
conditions precedent. In 2021, we received the approval of the IIA to complete the assignment and we are now seeking to complete the transaction.
As of the date of this Annual Report on Form 20-F, the conditions precedent have not yet been completed and the assignment of the intellectual
property rights related to the licensed technology owned by us has not yet been transferred.
MitoCare X Bio
On March 10, 2022, we entered
into a Founders and Investment Agreement with Dr. Alon Silberman, or the MitoCareX Agreement. Pursuant to the MitoCareX Agreement, we
invested an initial amount of $700,000 in MitoCareX and agreed to invest over the next two years an additional $1,000,000, subject to
the achievement of certain pre-determined milestones as agreed upon in the MitoCareX Agreement, for up to a 50.01% ownership in MitoCareX.
MitoCareX is focused on the discovery and development of potential drugs for cancers and other life-threatening conditions. The MitoCareX
Agreement also contains customary representations, warranties, covenants and indemnification provisions and on March 31, 2022, the closing
conditions were met.
On February 17, 2023, we announced
that MitoCareX has achieved its first milestone pursuant to the MitoCareX Agreement. The first milestone refers to the establishment of
MitoCareX's cloud-based computing infrastructure that is expected to allow its future expansion into machine learning system. The
system is harnessed to investigating mitochondrial carriers that are crucial for cell viability. As a result of MitoCareX meeting this
milestone, we invested an additional $400,000 in MitoCareX and increase our share ownership holdings in MitoCareX Bio from 31.48% to 41.92%.
Commercialization
Although we started early commercialization
of our proprietary PEA oral tablets CannAmide™, we intend to build a global commercial infrastructure to effectively support the
commercialization of our main pharmaceutical product candidates, if and when we believe regulatory approval of a pharmaceutical product
candidate in a particular geographic market appears imminent.
To develop the appropriate
commercial infrastructure, we will likely have to invest significant amounts of financial and management resources, some of which we expect
to commit prior to completing the regulatory process for our pharmaceutical product candidates. Where appropriate, we may elect in the
future to utilize strategic partners, distributors, or contract sales forces to assist in the commercialization of our pharmaceutical
products. In certain instances we may consider building our own commercial infrastructure.
65
Competition
The biotechnology and pharmaceutical
industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While
we believe that our scientific knowledge, technology and development experience provide us with competitive advantages, we face potential
competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic
institutions, governmental agencies and public and private research institutions. Any product candidates that we successfully develop
and commercialize will compete with existing therapies and new therapies that may become available in the future.
The first THC-based pharmaceutical,
a pill sold under the commercial name of Marinol (scientific name: dronabinol), was developed by a company called Unimed Pharmaceuticals,
with funding provided by the National Cancer Institute. In 1985, Marinol received FDA approval as a treatment for chemotherapy-related
nausea and vomiting. Today, Marinol is marketed by AbbVie, Inc. Since the introduction of Marinol into the market, other pharmaceuticals
containing THC have also been developed. These include generic oral capsules of dronabinol, such as those marketed by SVC Pharma LP and
Akorn Inc., Meda AB's Cesamet (nabilone), a synthetic derivative of THC, and Sativex (nabiximols), a whole cannabis extract administered
as an oral spray. Furthermore, to the best of our knowledge, there are multiple companies that are working in the cannabis therapeutic
area and are pursuing regulatory approval for their product candidates. For example, GW, which markets Sativex, a botanical cannabinoid
oral mucosal for the treatment of spasticity due to multiple sclerosis, received FDA approval in the United States in June 2018 for Epidiolex,
a liquid formulation of highly purified cannabidiol extract, as a treatment for Dravet's Syndrome, Lennox Gastaut Syndrome, and
various childhood epilepsy syndromes. In addition, GW is developing, among others, CBDV based therapy for ASD and therapy for neonatal
hypoxic-ischemic encephalopathy and schizophrenia. Zynerba is developing a transdermal formulation of cannabidiol for Fragile X and certain
refractory epilepsies and ASD. Skye is focused on developing proprietary, synthetic cannabinoid-derived molecules to treat glaucoma and
other diseases with significant unmet need. Corbus Pharmaceuticals Holdings is seeking FDA approval for their synthetic cannabinoid for
systemic sclerosis, cystic fibrosis, dermatomyositis and systemic lupus erythematosus and metabolism and solid tumors. RespireRx is developing
dronabinol for OSA treatment. Synendos is a developer of endocannabinoid modulators for the treatment of CNS disorders. It has developed
pharmaceutical products to restore the natural function of the brain and treat neuropsychiatric disorders. Synendos is developing small
molecules as selective endocannabinoid reuptake inhibitors that increase the levels of endogenous cannabinoids to treat CNS disorders
caused by cannabinoid deficiency. Inversago Pharma (formerly GIcare Pharma) is focused on developing peripheral cannabinoid (CB1) receptor
antagonist/inverse agonist for the treatment of metabolic diseases such as obesity, insulin resistance, and liver fibrosis. Its drug INV-101
(Inverse agonist of peripheral CB1) under phase-1.
Our competitors, either alone
or through their strategic partners, might have substantially greater name recognition and financial, technical, manufacturing, marketing
and human resources than we do and significantly greater experience and infrastructure in researching and developing pharmaceutical products,
obtaining FDA and other regulatory approvals of those products and commercializing those products around the world. They may also have
intellectual property portfolios that provide them with significant competitive advantages or create substantial barriers in our target
markets.
Manufacturing
We currently contract with
third parties for the manufacturing and testing of our product candidates for preclinical trials and clinical trials and also intend to
do so in the future. We do not own or operate manufacturing facilities for the production of clinical quantities of our product candidates.
The use of contracted manufacturing and reliance on collaboration partners is relatively cost-efficient and may eliminate the need to
directly invest in manufacturing facilities and additional staff.
To date, our third-party manufacturers
have met our manufacturing requirements. We expect third-party manufacturers to be capable of providing sufficient quantities of our product
candidates to meet anticipated full scale commercial demands. To meet our projected needs for commercial manufacturing, third parties
with whom we currently work might need to increase their scale of production, or we will need to secure alternate suppliers. We believe
that there are alternate sources of supply that can satisfy our clinical and commercial requirements, although we cannot be certain that
identifying and establishing relationships with such sources, if necessary, would not result in significant delay or material additional
costs.
66
Government Regulation
FDA Approval Process
In the United States, pharmaceutical
product candidates are subject to extensive regulation by the FDA. The FDC Act, and other federal and state statutes and regulations,
govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion, marketing,
distribution, post-approval monitoring, reporting, sampling, and import and export of pharmaceutical drug product candidates. Failure
to comply with applicable U.S. rules and regulations may subject a company to a variety of administrative or judicial sanctions, such
as FDA refusal to approve pending NDAs, warning letters, product candidate recalls, product candidate seizures, total or partial suspension
of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
Pharmaceutical drug product
candidate development in the United States typically involves pre-clinical laboratory and animal testing, the submission to the FDA of
an IND Application, which must become effective before clinical testing may commence, and adequate, well-controlled clinical trials to
establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market
approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity and
novelty of the product candidate or disease.
Nonclinical tests include laboratory
evaluation of an API or drug substance and drug product's candidate chemistry, formulation and toxicity, as well as animal trials
to assess the characteristics and potential safety and efficacy of the product candidate. The conduct of the nonclinical toxicology studies
must comply with federal regulations and requirements, including GLP. The results of nonclinical testing are submitted to the FDA as part
of an IND along with other information, including information about product candidate chemistry, manufacturing and controls, and a proposed
clinical trial protocol. Long term nonclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue
after the IND is submitted.
A 30-day waiting period after
the submission of an original IND is required prior to the commencement of clinical testing in humans. If the FDA has not imposed a clinical
hold on the IND or otherwise commented or questioned the IND within this 30-day period, the proposed clinical trial proposed in the IND
may begin. In practice, a submitting party should contact the division after this 30 day period to ensure that the FDA has reviewed the
IND to the extent that they can assure there will be no hold placed on the IND.
Clinical trials involve the
administration of the investigational product to healthy volunteers or patients under the supervision of a qualified investigator. Clinical
trials must be conducted: (i) in compliance with federal regulations, (ii) in compliance with GCP, an international standard meant to
protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors. Clinical protocols
and details of the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated.
Each protocol and any amendment involving testing of U.S. patient study subjects within the United States and subsequent protocol amendments
must be submitted to the FDA as part of the IND.
The FDA may order the temporary
hold of a clinical trial at any time or impose other sanctions if the FDA believes that the clinical trial either is not being conducted
in accordance with FDA requirements, regulations or presents a potentially unacceptable risk to the clinical trial subjects. The trial
protocol and informed consent information for subjects in clinical trials must also be submitted to an IRB for approval. An IRB may impose
other conditions for the protocol and may also require the clinical trial at the site to be halted, either temporarily or permanently,
for failure to comply with the IRB's requirements.
67
505(b)(2) Regulatory Approval Process
Section 505(b)(2) of the FDC
Act, or 505(b)(2), provides an alternate regulatory pathway to FDA approval for new or improved formulations or new uses of previously
approved drug products. Specifically, 505(b)(2) permits the filing of an NDA where at least some of the information required for approval
comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference, or use from
the person by or for whom the investigations were conducted. The applicant may rely upon the FDA's prior findings of safety and
efficacy for an approved product that acts as the reference listed drug for purposes of a 505(b)(2) NDA. The FDA may also require 505(b)(2)
applicants to perform additional studies or measurements to support any changes from the reference listed drug. The FDA may then approve
the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for
any new indication sought by the 505(b)(2) applicant.
Orange Book Listing
Section 505 of the FDC Act
describes three types of marketing applications that may be submitted to the FDA to request marketing authorization for a new drug. A
Section 505(b)(1) NDA is an application that contains full reports of investigations of safety and efficacy. A Section 505(b)(2) NDA is
an application that contains full reports of investigations of safety and efficacy, but where at least some of the information required
for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a
right of reference or use from the person by or for whom the investigations were conducted. This regulatory pathway enables the applicant
to rely, in part, on the FDA's prior findings of safety and efficacy for an existing product, or published literature, in support
of its application.
In seeking approval for a drug
through an NDA, including a 505(b)(2) NDA, applicants are required to list with the FDA patents whose claims cover the applicant's
product. Upon approval of an NDA, each of the patents listed in the application for the drug is then published in Approved Drug Products
with Therapeutic Equivalence Evaluations, also known as the Orange Book. These products may be cited by potential competitors in support
of approval of a 505(b)(2) NDA.
Any applicant who submits a
505(b)(2) NDA referencing a drug listed in the Orange Book must certify to the FDA that (1) no patent information on the drug product
that is the subject of the application has been submitted to the FDA; (2) such patent has expired; (3) the date on which such patent expires;
or (4) such patent is invalid or will not be infringed upon by the manufacture, use or sale of the drug product for which the application
is submitted. This last certification is known as a Paragraph IV certification. Generally, 505(b)(2) NDA cannot be approved until all
listed patents have expired, except where 505(b)(2) NDA applicant challenges a listed patent through a Paragraph IV certification. If
the applicant does not challenge the listed patents or does not indicate that it is not seeking approval of a patented method of use,
the 505(b)(2) NDA application will not be approved until all of the listed patents claiming the referenced product have expired.
Although some of our product
candidates are based on repurposed drugs, there are at present no patents or other exclusivities listed in the Orange Book pertaining
to a product containing the active ingredient dronabinol.
Exclusivity
Three-year exclusivity is available
to the holder of an NDA, including a 505(b)(2) NDA, for a particular condition of approval, or change to a marketed product, such as a
new formulation for a previously approved product, if one or more new clinical trials, other than bioavailability or bioequivalence trials,
was essential to the approval of the application and was conducted or sponsored by the applicant. This three-year exclusivity period protects
against FDA approval of 505(b)(2) NDAs for the condition of the new drug's approval. As a general matter, three-year exclusivity
does not prohibit the FDA from approving 505(b)(2) NDAs for generic versions of the original, unmodified drug product. Five-year and three-year
exclusivity will not delay the submission or approval of a full NDA; however, an applicant submitting a full NDA would be required to
conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to
demonstrate safety and efficacy.
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NDA Submission and Review by the FDA
Assuming successful completion
of the required clinical and nonclinical testing, among other items, the results of product development, including chemistry, manufacture
and controls, nonclinical studies and clinical trials are submitted to the FDA, along with proposed labeling, as part of an NDA. The submission
of an NDA requires payment of a substantial user fee to the FDA. These user fees must be paid at the time of the first submission of the
application, even if the application is being submitted on a rolling basis. Fee waivers or reductions are available in some circumstances.
One basis for a waiver of the application user fee is if the applicant employs fewer than 500 employees, including employees of affiliates,
the applicant does not have an approved marketing application for a product that has been introduced or delivered for introduction into
interstate commerce, and the applicant, including its affiliates, is submitting its first marketing application.
The cost of preparing and submitting
an NDA is substantial, mainly due to the non-clinical and clinical trial costs. Under federal law, the submission of most NDAs is additionally
subject to a substantial application user fee; the fee in the fiscal year 2020 is $2,942,965.
The FDA has 60 or 74 days from
its receipt of an NDA to determine whether the application will be accepted for filing based on the agency's threshold determination
that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth
review. The FDA has agreed to certain performance goals in the review of NDAs. Most such applications for standard review drug product
candidates are reviewed within 10 to 12 months, while most applications for priority review drugs are reviewed in six months. Priority
review can be applied to drugs that the FDA determines offer major advances in treatment or provide a treatment where no adequate therapy
exists. The review process for both standard and priority review may be extended by FDA for three additional months to consider certain
late-submitted information, or information intended to clarify information already provided in the submission.
The FDA may also refer applications
for novel drug product candidates, or drug product candidates that present difficult questions of safety or efficacy, to an advisory committee,
which is typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application
should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.
Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, the FDA
will inspect the facility or the facilities at which the drug substance and drug product are manufactured. The FDA will not approve the
drug product candidate unless compliance with or current cGMP is satisfactory and the NDA contains data that provide substantial evidence
that the drug is safe and effective in the indication studied.
After the FDA evaluates the
NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally
outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider
the application. If, or when, those deficiencies have been addressed to the FDA's satisfaction in a resubmission of the NDA, the
FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of
requested information.
An approval letter authorizes
commercial marketing of the drug with specific prescribing information for specific indications. As a condition of NDA approval, the FDA
may require a REMS plan to help ensure that the benefits of the drug outweigh the potential risks. REMS can include medication guides,
communication plans for health care professionals, and ETASU. An ETASU can include, but are not limited to, special training or certification
for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The
requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product candidate approval
may require substantial post-approval testing and surveillance to monitor the drug's safety or efficacy. Once granted, product candidate
approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.
Disclosure of Clinical Trial Information
Sponsors of clinical trials
of certain FDA-regulated product candidates, including prescription drugs, are required to register and disclose certain clinical trial
information on a public website (clinicaltrials.gov) which is maintained by the U.S. National Institutes of Health. Information related
to the product candidate, patient population, phase of investigation, study sites and investigator, and other aspects of the clinical
trial is made public as part of the registration. Sponsors are also obligated to disclose the results of these trials after completion.
Disclosure of the results of these trials can be delayed until the product candidate drug product or new indication being studied has
been approved. Competitors may use this publicly available information to gain knowledge regarding the design and progress of our development
programs.
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Fast Track Designation and Accelerated Approval
The FDA has programs to facilitate
the development, and thus expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or
condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition.
These therapies for serious conditions are approved and available to patients as soon as it can be concluded that the therapies'
benefits outweigh their risk. Under the Fast Track Program, the sponsor of a new drug candidate may request that FDA designate the drug
candidate for a specific indication as a Fast Track drug concurrent with, or after, the filing of the IND for the drug candidate. FDA
must determine if the drug candidate qualifies for Fast Track designation within 60 days of receipt of the sponsor's request.
Under the FDA's accelerated
approval regulations, FDA may approve a drug for a serious or life-threatening illness that provides meaningful therapeutic benefit to
patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. Accelerated approval
may also be based on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely
to predict an effect on irreversible morbidity or mortality or other clinical benefit, considering the severity, rarity or prevalence
of the condition and the availability or lack of alternative treatments.
In clinical trials, a surrogate
endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a
patient feels, functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A
drug product that is approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of
confirmatory or post-approval clinical trial(s) to confirm the effect on the clinical endpoint. Failure to conduct required post-approval
studies, or confirm a clinical benefit during post-marketing studies, will allow FDA to withdraw the drug from the market on an expedited
basis. All promotional materials for drug candidates approved under accelerated approval regulations are subject to prior review by FDA.
In addition to other benefits
such as the ability to use surrogate endpoints and engage in more frequent interactions with FDA, FDA may initiate review of sections
of a Fast Track drug's NDA before the application is complete. This rolling review is available if the applicant provides, and FDA
approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees. However, FDA's
time period goal for reviewing an application does not begin until the last section of the NDA is submitted. Additionally, the Fast Track
designation may be withdrawn by FDA if FDA believes that the designation is no longer supported by data emerging in the clinical trial
process.
Patent Term Extension
After NDA approval, owners
of relevant drug patents may apply for up to a five-year patent extension. The allowable patent term extension is calculated as half of
the drug's testing phase, the time between IND submission and NDA submission, and all of the review phase-the time between NDA submission
and approval up to a maximum of five years. The time can be shortened if FDA determines that the applicant did not pursue approval with
due diligence. The total patent term after the extension may not exceed 14 years.
For patents that might expire
during the application phase, the patent owner may request an interim patent extension. An interim patent extension increases the patent
term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is
reduced by one year. The director of the USPTO must determine that approval of the drug covered by the patent for which a patent extension
is being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted.
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Advertising and Promotion
Once an NDA is approved, a
drug product will be subject to certain post-approval requirements. Products manufactured or distributed by us pursuant to FDA approvals
are subject to continuing regulation by the FDA, including manufacturing, periodic reporting, product sampling and distribution, advertising,
promotion, drug shortage reporting, compliance with any post-approval requirements imposed as a conditional of approval such as Phase
4 clinical trials, REMS and surveillance, recordkeeping and reporting requirements, including adverse experiences. For instance, FDA closely
regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising,
off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.
Drugs may be marketed only
for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established
in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and
FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires
clinical data similar to that in the original application. The FDA uses the same procedures and actions in reviewing NDA supplements as
it does in reviewing NDAs.
Adverse Event Reporting and GMP Compliance
Adverse event reporting and
submission of periodic reports are required following FDA approval of an NDA. The FDA also may require post-marketing testing, known as
Phase 4 testing, REMS and surveillance to monitor the effects of an approved product candidate, or the FDA may place conditions on an
approval that could restrict the distribution or use of the drug product. In addition, quality-control, drug manufacture, packaging, and
labeling procedures must continue to conform with cGMPs after approval. Drug manufacturers and certain of their subcontractors are required
to register their establishments with the FDA and certain state agencies. Registration with the FDA subjects entities to periodic unannounced
inspections by the FDA, during which the FDA inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers
must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory
authorities may withdraw product candidate approvals or request product candidate recalls if a company fails to comply with regulatory
standards, if it encounters problems following initial marketing or if previously unrecognized problems are subsequently discovered.
Pediatric Exclusivity and Pediatric Use
The Best Pharmaceuticals for
Children Act, or BPCA, provides NDA holders a six-month extension of any exclusivity-patent or non-patent-for a drug if certain conditions
are met. Conditions for exclusivity include a determination by the FDA that information relating to the use of a new drug in the pediatric
population may produce health benefits in that population; a written request by the FDA for pediatric studies; and agreement by the applicant
to perform the requested studies and the submission to the FDA; and the acceptance by the FDA, of the reports of the requested studies
within the statutory timeframe. Applications under the BPCA are treated as priority applications.
In addition, under the Pediatric
Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the
claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation
for which the drug is safe and effective, unless the sponsor has received a deferral or waiver from the FDA. Unless otherwise required
by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted. The required pediatric
assessment must assess the safety and effectiveness of the product candidate for the claimed indications in all relevant pediatric subpopulations
and support dosing and administration for each pediatric subpopulation for which the product candidate is safe and effective. The sponsor
or FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several
reasons, including a finding that the drug is ready for approval for use in adults before pediatric studies are complete or that additional
safety or effectiveness data need to be collected before the pediatric studies begin. Under PREA, the FDA must send a non-compliance letter
requesting a response with 45 days to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit
a request for approval of a pediatric formulation.
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Orphan Drugs
Under the Orphan Drug Act,
the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition-generally a disease or condition with
a prevalence of fewer than 200,000 individuals in the United States. Orphan drug designation must be requested before submitting an NDA.
After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by
the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with an FDA orphan drug
designation is entitled to a seven-year exclusive marketing period in the United States for that drug product candidate for that indication.
During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease,
except in limited circumstances, such as a showing of clinical superiority to the product candidate with orphan drug exclusivity. Orphan
drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different
disease or condition. Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA
application user fee. In addition to the potential seven years of market exclusivity after approval, orphan drug designation status qualifies
sponsors for tax credits for qualified clinical trials and exemption from user fees.
Special Protocol Assessment
A company may reach an agreement
with the FDA under the Special Protocol Assessment, or SPA, process as to the required design and size of clinical trials intended to
form the primary basis of an efficacy claim. According to its performance goals, the FDA is supposed to evaluate the protocol within 45
days of the request to assess whether the proposed trial is adequate, and that evaluation may result in discussions and a request for
additional information. An SPA request must be made, and all open issues must be resolved before the clinical trial begins. If a written
agreement is reached, it will be documented and made part of the administrative record. Under the FDC Act and FDA guidance implementing
the statutory requirement, an SPA is generally binding upon the FDA except in limited circumstances, such as if the FDA identifies a substantial
scientific issue essential to determining safety or efficacy after the study begins, public health concerns emerge that were unrecognized
at the time of the protocol assessment, the sponsor and FDA agree to the change in writing, or if the study sponsor fails to follow the
protocol that was agreed upon with the FDA.
Controlled Substances
The CSA and its implementing
regulations establish a "closed system" of regulations for controlled substances. The CSA imposes registration, security,
recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements under the oversight of the DEA.
The DEA is the federal agency responsible for regulating controlled substances, and requires those individuals or entities that manufacture,
import, export, distribute, research, or dispense controlled substances to comply with the regulatory requirements in order to prevent
the diversion of controlled substances to illicit channels of commerce.
The DEA categorizes controlled
substances into one of five schedules-Schedule I, II, III, IV or V-with varying qualifications for listing in each schedule. Schedule
I substances by definition have a high potential for abuse, have no currently accepted medical use in treatment in the United States and
lack accepted safety for use under medical supervision. Schedule I substances may be used only in federally approved research programs
and may not be marketed or sold for dispensing to patients in the United States. Pharmaceutical product candidates having a currently
accepted medical use that are otherwise approved for marketing may be listed as Schedule II, III, IV or V substances, with Schedule II
substances presenting the highest potential for abuse and physical or psychological dependence, and Schedule V substances presenting the
lowest relative potential for abuse and dependence. The regulatory requirements are more restrictive for Schedule II substances than Schedule
III substances. For example, all Schedule II drug prescriptions must be signed by a physician, physically presented to a pharmacist in
most situations and cannot be refilled.
Following NDA approval of a
drug containing a Schedule I controlled substance, that substance must be rescheduled as a Schedule II, III, IV or V substance before
it can be marketed. In 2015, the Improving Regulatory Transparency for New Medical Therapies Act, removed uncertainty associated with
timing of the DEA rescheduling process after NDA approval. Specifically, it requires DEA to issue an "interim final rule,"
pursuant to which a manufacturer may market its product candidate within 90 days of FDA approval. The new law also preserves the period
of orphan marketing exclusivity for the full seven years such that this period only begins after DEA scheduling. This contrasts with the
previous situation whereby the orphan "clock" began to tick upon FDA approval, even though the product candidate could not
be marketed until DEA scheduling was complete.
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Facilities that manufacture,
distribute, import or export any controlled substance must register annually with the DEA. The DEA registration is specific to the particular
location, activity(ies) and controlled substance schedule(s). For example, separate registrations are required for importation and manufacturing
activities, and each registration authorizes which schedules of controlled substances the registrant may handle. However, certain coincident
activities are permitted without obtaining a separate DEA registration, such as distribution of controlled substances by the manufacturer
that produces them.
The DEA inspects all manufacturing
facilities to review security, recordkeeping, reporting and handling prior to issuing a controlled substance registration. The specific
security requirements vary by the type of business activity and the schedule and quantity of controlled substances handled. The most stringent
requirements apply to manufacturers of Schedule I and Schedule II substances. Required security measures commonly include background checks
on all employees and physical control of controlled substances through storage in approved vaults, safes and cages, and through use of
alarm systems and surveillance cameras. An application for a manufacturing registration as a bulk manufacturer (not a dosage form manufacturer
or a repacker/relabeler) for a Schedule I or II substance must be published in the Federal Register, and the application is open for 30
days to permit interested persons to submit comments, objections or requests for a hearing. A copy of the notice of the Federal Register
publication is forwarded by DEA to all those registered, or applicants for registration, as bulk manufacturers of that substance. Once
registered, manufacturing facilities must maintain records documenting the manufacture, receipt and distribution of all controlled substances.
Manufacturers must submit periodic reports to the DEA of the distribution of Schedule I and II controlled substances, Schedule III narcotic
substances, and other designated substances. Registrants must also report any controlled substance thefts or significant losses, and must
obtain authorization to destroy or dispose of controlled substances. As with applications for registration as a bulk manufacturer, an
application for an importer registration for a Schedule I or II substance must also be published in the Federal Register, which remains
open for 30 days for comments. Imports of Schedule I and II controlled substances for commercial purposes are generally restricted to
substances not already available from domestic supplier or where there is not adequate competition among domestic suppliers. In addition
to an importer or exporter registration, importers and exporters must obtain a permit for every import or export of a Schedule I and II
substance or Schedule III, IV and V narcotic, and submit import or export declarations for Schedule III, IV and V non-narcotics. In some
cases, Schedule III non-narcotic substances may be subject to the import/export permit requirement, if it is necessary to ensure that
the United States complies with its obligations under international drug control treaties.
For drugs manufactured in the
United States, the DEA establishes annually an aggregate quota for the amount of substances within Schedules I and II that may be manufactured
or produced in the United States based on the DEA's estimate of the quantity needed to meet legitimate medical, scientific, research
and industrial needs. This limited aggregate amount of cannabis that the DEA allows to be produced in the United States each year is allocated
among individual companies, which, in turn, must annually apply to the DEA for individual manufacturing and procurement quotas. The quotas
apply equally to the manufacturing of the API/drug substance and production of dosage forms. The DEA may adjust aggregate production quotas
a few times per year, and individual manufacturing or procurement quotas from time to time during the year, although the DEA has substantial
discretion in whether or not to make such adjustments for individual companies.
Individual states may also
maintain separate controlled substance laws and regulations, including licensing, recordkeeping, security, distribution, and dispensing
requirements. State Authorities, including Boards of Pharmacy, regulate use of controlled substances in each state. Failure to maintain
compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can result in enforcement
action that could have a material adverse effect on our business, operations and financial condition. The DEA may seek civil penalties,
refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could
lead to criminal prosecution.
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Europe/Rest of World Government Regulation
In addition to regulations
in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution
of our products to the extent we choose to develop or sell any products outside of the United States. The approval process varies from
country to country and the time may be longer or shorter than that required to obtain FDA approval. The requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
Whether or not we obtain FDA
approval for a product candidate, we must obtain the requisite approvals from regulatory authorities in non-U.S. countries prior to the
commencement of clinical trials or marketing of the product candidate in those countries. Certain countries outside of the United States
have a process that requires the submission of a Clinical Trial Application, or CTA, much like an IND prior to the commencement of human
clinical trials. In Europe, for example, a CTA must be submitted to the competent national health authority and to independent ethics
committees in each country in which a company intends to conduct clinical trials. Once the CTA is approved in accordance with a country's
requirements, clinical trial development may proceed in that country.
The requirements and process
governing the conduct of clinical trials, product candidate licensing, pricing and reimbursement vary from country to country, even though
there is already some degree of legal harmonization in the European Union member states resulting from the national implementation of
underlying European Union legislation. In all cases, the clinical trials are conducted in accordance with GCP and other applicable regulatory
requirements.
To obtain regulatory approval
of an investigational drug under the European Union. regulatory systems, we must submit a MAA. This application is similar to the NDA
in the United States, with the exception of, among other things, country-specific document requirements. Drugs can be authorized in the
European Union by using (i) the centralized authorization procedure, (ii) the Mutual Recognition Procedure, or MRP, (iii) the decentralized
procedure or (iv) national authorization procedures. The initial Sativex approvals were a consequence of an application under the De-Centralized
Procedure, or DCP, to the European Union member state of Spain.
The European Commission implemented
the centralized procedure for the approval of human drugs to facilitate marketing authorizations that are valid throughout the European
Economic Area, or EEA. This procedure results in a single marketing authorization granted by the European Commission that is valid across
the European Union, as well as in Iceland, Liechtenstein and Norway (forming together the EEA). The centralized procedure is compulsory
for human drugs that are: (i) derived from biotechnology processes, such as genetic engineering, (ii) contain a new active substance indicated
for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative diseases, autoimmune and other immune dysfunctions
and viral diseases, (iii) officially designated "orphan drugs" (drugs used for rare human diseases) and (iv) advanced-therapy
medicines, such as gene- therapy, somatic cell-therapy or tissue-engineered medicines. The centralized procedure may at the request of
the applicant also be used for human drugs which do not fall within the above mentioned categories if the human drug (a) contains a new
active substance which, on the date of entry into force of this Regulation, was not authorized in the Community; or (b) the applicant
shows that the medicinal product candidate constitutes a significant therapeutic, scientific or technical innovation or that the granting
of authorization in the centralized procedure is in the interests of patients or animal health at the European Community level.
Under the centralized procedure
in the European Union, the maximum timeframe for the evaluation of a MAA by the EMA is 210 days (excluding clock stops, when additional
written or oral information is to be provided by the applicant in response to questions asked by the Committee for Medicinal Products
for Human Use, or CHMP, with adoption of the actual marketing authorization by the European Commission thereafter. Accelerated evaluation
might be granted by the CHMP in exceptional cases, when a medicinal product candidate is expected to be of a major public health interest
from the point of view of therapeutic innovation, defined by three cumulative criteria: (1) the seriousness of the disease to be treated;
(2) the absence of an appropriate alternative therapeutic approach, and (3) anticipation of exceptional high therapeutic benefit. In this
circumstance, EMA ensures that the evaluation for the opinion of the CHMP is completed within 150 days and the opinion issued thereafter.
Should any Member State refuse
to recognize the marketing authorization by the reference member state, on the grounds of potential serious risk to public health, the
issue will be referred to the Committee for the Mutual Recognition and Decentralized Procedures human. Within a timeframe of 60 days,
member states shall, within the coordination group, make all efforts to reach a consensus. If this fails, the procedure is submitted to
the CHMP for arbitration. The opinion of the CHMP is then forwarded to the Commission, for the start of the decision making process. As
in the centralized procedure, this process entails consulting various European Commission Directorates General and the Standing Committee
on Human Medicinal Product candidates or Veterinary Medicinal Product candidates, as appropriate. Since the initial approvals of Sativex
in the United Kingdom and Spain, there have been three "waves" of additional approvals under three separate MRPs. Each of
these procedures have been completed without any referral, and therefore without any delay.
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For other countries outside
of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical
trials, product candidate licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical trials
are conducted in accordance with GCP and the other applicable regulatory requirements.
If we fail to comply with applicable
foreign regulatory requirements, we may be subject to, among other things, fines, suspension of clinical trials, suspension or withdrawal
of regulatory approvals, product candidate recalls, seizure of product candidates, operating restrictions and criminal prosecution.
In addition, most countries
are parties to the Single Convention on Narcotic Drugs 1961, which governs international trade and domestic control of narcotic substances,
including cannabis extracts. Countries may interpret and implement their treaty obligations in a way that creates a legal obstacle to
our obtaining marketing approval for Sativex and our other product candidates in those countries. These countries may not be willing or
able to amend or otherwise modify their laws and regulations to permit Sativex or our other product candidates to be marketed, or achieving
such amendments to the laws and regulations may take a prolonged period of time. In that case, we would be unable to market our product
candidates in those countries in the near future or perhaps at all.
Expanded Access to Investigational Drugs
in the U.S.
An investigational drug may
be eligible for clinical use outside the context of a manufacturer's clinical trial of the drug. "Expanded access" refers
to the use of an investigational drug where the primary purpose is to diagnose, monitor, or treat a patient's disease or condition
rather than to collect information about the safety or effectiveness of a drug. Expanded access INDs are typically sponsored by individual
physicians to treat patients who fall into one of three FDA-recognized categories of expanded access: expanded access for individual patients,
including for emergency use; expanded access for intermediate-size patient populations; and expanded access for large patient populations
under a treatment IND or treatment protocol. For all types of expanded access, the FDA must determine prior to authorizing expanded access
that: (1) the patient or patients to be treated have a serious or life threatening disease or condition and there is no comparable or
satisfactory alternative therapy; (2) the potential patient benefit justifies the potential risks of use and that the potential risks
are not unreasonable in the context of the disease or condition to be treated; and (3) granting the expanded access will not interfere
with the initiation, conduct, or completion of clinical studies in support of the drug's approval. In addition, the sponsor of an
expanded access IND must submit IND safety reports and, in the cases of protocols continuing for one year or longer, annual reports to
the FDA. Expanded access programs are not intended to yield information relevant to evaluating a drug's effectiveness for regulatory
purposes. If a patient enrolled in one of our clinical trials is not eligible or able to continue enrollment, we may be required to continue
to provide our product candidate to such patient through expanded access.
Pricing and Reimbursement in the U.S.
Sales of pharmaceutical product
candidates in the United States will depend, in part, on the extent to which the costs of the product candidates will be covered by third-party
payers, such as government health programs, commercial insurance and managed health care organizations. These third-party payers are increasingly
challenging the prices charged for medical product candidates and services. Additionally, the containment of health care costs has become
a priority of federal and state governments, and the prices of drugs have been a focus in this effort. The United States government, state
legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls,
restrictions on reimbursement and requirements for substitution of generic product candidates. Adoption of price controls and cost-containment
measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net
revenue and results. If these third-party payers do not consider our product candidates to be cost-effective compared to other available
therapies, they may not cover our product candidates after approval as a benefit under their plans or, if they do, the level of payment
may not be sufficient to allow us to sell our product candidates on a profitable basis.
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The Medicare Prescription Drug,
Improvement, and Modernization Act of 2003, or the MMA, imposed new requirements for the distribution and pricing of prescription drugs
for Medicare beneficiaries and included a major expansion of the prescription drug benefit under Medicare Part D. Under Part D, Medicare
beneficiaries may enroll in prescription drug plans offered by private entities which will provide coverage of outpatient prescription
drugs. Part D plans include both stand-alone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare
Advantage plans. Unlike Medicare Part A and B, Part D coverage is not standardized. Part D prescription drug plan sponsors are not required
to pay for all covered Part D drugs, and each drug plan can develop its own drug formulary that identifies which drugs it will cover and
at what tier or level. However, Part D prescription drug formularies must include drugs within each therapeutic category and class of
covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug
plan must be developed and reviewed by a pharmacy and therapeutic committee. Government payment for some of the costs of prescription
drugs may increase demand for product candidates for which we receive marketing approval. However, any negotiated prices for our product
candidates covered by a Part D prescription drug plan will likely be lower than the prices we might otherwise obtain. Moreover, while
the MMA applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations
in setting their own payment rates. Any reduction in payment that results from the MMA may result in a similar reduction in payments from
non-governmental payers.
The ACA was enacted in March
2010. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the law. The ACA may be modified,
amended or reaped at any time and may or may not be replaced with a different law or health care payment system. The ACA is expected to
continue to have a significant impact on the health care industry. With regard to pharmaceutical product candidates, among other things,
the ACA may expand and increase industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements
under the Medicare D program. Since the enactment of the ACA, numerous regulations have been issued providing further guidance on its
requirements. The ACA continues to be implemented through regulation and government activity but is subject to possible amendment, additional
implementing regulations and interpretive guidelines. Several states have decided not to expand their Medicaid programs and are seeking
alternative reimbursement models to provide care to the uninsured. The manner in which these issues are resolved could materially affect
the extent to which and the amount at which pharmaceuticals are reimbursed by government programs such as Medicare, Medicaid and Tricare.
We are unable to predict the full impact of any potential modification, amendment, or repeal of the ACA.
Our ability to commercialize
any products successfully also will depend in part on the extent to which coverage and adequate reimbursement for our products, once approved,
and related treatments will be available from third-party payors, such as government health administration authorities, private health
insurers and managed care organizations. Third-party payors determine which medications they will cover and separately establish reimbursement
levels. Even if we obtain coverage for a given product by a third-party payor, the third-party payor's reimbursement rates may not
be adequate to make the product affordable to patients or profitable to us, or the third-party payors may require co-payments that patients
find unacceptably high. Patients who are prescribed medications for the treatment of their conditions, and their prescribing physicians,
generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Patients are unlikely
to use our products unless coverage is provided, and reimbursement is adequate to cover all or a significant portion of the cost of our
products. Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical
and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available
or subsequently become available.
Government authorities and
other third-party payors are developing increasingly sophisticated methods of controlling healthcare costs, such as by limiting coverage
and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring that drug companies provide
them with predetermined discounts from list prices as a condition of coverage, are using restrictive formularies and preferred drug lists
to leverage greater discounts in competitive classes and are challenging the prices charged for medical products. Further, no uniform
policy for determining coverage and reimbursement for drug products exists among third-party payors in the United States. Therefore, coverage
and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often
a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each
payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
76
We cannot be sure that coverage
and reimbursement will be available for any product that we commercialize and, if reimbursement is available, that the level of reimbursement
will be adequate. Coverage and reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing
approval. If coverage and reimbursement are not available, or if reimbursement is available only to limited levels, we may not successfully
commercialize any product candidate for which we obtain marketing approval.
As a condition of receiving
Medicaid coverage for prescription drugs, the Medicaid Drug Rebate Program requires manufacturers to calculate and report to CMS their
AMP, which is used to determine rebate payments shared between the states and the federal government and, for some multiple source drugs,
Medicaid payment rates for the drug, and for drugs paid under Medicare Part B, to also calculate and report their average sales price,
which is used to determine the Medicare Part B payment rate for the drug. In January 2016, CMS issued a final rule regarding the Medicaid
Drug Rebate Program, effective April 1, 2016, that, among other things, revised the manner in which the AMP is calculated by manufacturers
participating in the program and implemented certain amendments to the Medicaid rebate statute created under the ACA. Drugs that are approved
under an NDA, including a 505(b)(2) NDA, are subject to an additional requirement to calculate and report the manufacturer's best
price for the drug and inflation penalties which can substantially increase rebate payments. On December 21, 2020, CMS issued a final
rule that made changes to the Medicaid Drug Rebate Program regulations in several areas, including some changes to the treatment of value-based
purchasing arrangements and price reporting for patient benefit programs sponsored by pharmaceutical manufacturers.
For NDA drugs, the Veterans
Health Care Act of 1992 requires manufacturers to calculate and report to the Department of Veterans Affairs a different price called
the Non-Federal AMP, offer the drugs for sale on the Federal Supply Schedule, and charge the government no more than a statutory price
referred to as the Federal Ceiling Price, which includes an inflation penalty. A separate law requires manufacturers to pay rebates on
these drugs when paid by the Department of Defense under its TRICARE Retail Pharmacy Program. Knowingly submitting false pricing information
to the government creates potential federal False Claims Act liability.
Further, there has been increasing
legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there have been
several recent U.S. Congressional inquiries and proposed and enacted legislation at the federal and state levels designed to, among other
things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the
cost of drugs under Medicare, and reform government program reimbursement methodologies for drugs. We expect that the pharmaceutical industry
will continue to experience pricing pressures due to the trend toward managed healthcare, particularly towards specialty pharmacy, the
increasing influence of managed care organizations, and additional legislative proposals. For example, CMS issued an interim final rule
on November 27, 2020 designed to test whether a Most-Favored-Nation model will help control growth in spending for Medicare Part B drugs
without adversely affecting quality of care. This followed an Executive Order issued in September 2020 that directed the Secretary of
DHHS to implement new payment models under the Medicare Part B and Part D programs to curb "unfair" and high drug prices in
the United States. Implementation of this interim final rule has been blocked by a temporary restraining order and preliminary injunctions
through various court actions. The Most-Favored-Nation model will not be implemented without further rulemaking, and the new Biden administration
may choose to modify the model, move forward with the model as is, or withdraw it. Nonetheless, we expect that there will continue to
be a number of U.S. federal and state proposals to implement governmental pricing controls and limit the growth of healthcare costs, including
the cost of prescription drugs. It is unknown what form any such changes or any law would take, and how or whether it may affect the biopharmaceutical
industry as a whole or our business in the future. We expect that changes or additions to the ACA, the Medicare and Medicaid programs,
such as changes allowing the federal government to directly negotiate drug prices, and changes stemming from other healthcare reform measures,
especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect
on the health care industry in the United States.
At the state level, legislatures
have been increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing,
including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure
and transparency measures, drug price increases, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
On the federal level, the Trump Administration issued a final rule in 2020 for the safe importation of drugs from Canada and other countries.
During the 2020 presidential campaign, President Biden also supported a proposal to limit drug price increases to no more than the inflation
rate. Additional health reform measures may continue and affect our business in unknown ways. In July 2021, the Biden administration released
an executive order, "Promoting Competition in the American Economy," with multiple provisions aimed at increasing competition
for prescription drugs. The DHHS has released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing
reform and potential legislative policies that Congress could pursue to advance these principles. While no legislation or administrative
actions have been finalized to implement these principles, Congress is considering legislation that, if passed, could have significant
impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases and allowing Medicare to negotiate
pricing for certain covered drug products. The impact of these legislative, executive, and administrative actions and any future healthcare
measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is unclear. The implementation
of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or
commercialize any of the product candidates for which we receive approval.
77
As noted above, the marketability
of any products for which we receive regulatory approval for commercial sale may suffer if the government and other third-party payors
fail to provide adequate coverage and reimbursement. We expect that an increasing emphasis on cost containment measures in the U.S. will
continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time.
Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less
favorable coverage policies and reimbursement rates may be implemented in the future.
Pricing and Reimbursement in Foreign Countries
In addition, in some foreign
countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing
vary widely from country to country. For example, a member state of the European Union may approve a specific price for the medicinal
product candidate. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical
product candidates will allow favorable reimbursement and pricing arrangements for any of our product candidates. Historically, product
candidates launched in the European Union do not follow price structures of the United States and generally tend to be significantly lower.
As another example, in Canada,
for patented drugs, the Patented Medicines Prices Review Board (PMPRB) uses the median international publicly available ex-factory list
price (using prices in 11 pre-determined countries) as the maximum price the company is allowed to charge. The PMPRB is a quasi-judicial
body with a regulatory mandate to prevent pharmaceutical patentees from charging consumers excessive prices during the market exclusivity
period. This agency then monitors the prices charged by patentees for patented drugs on an ongoing basis. Under the Canadian Patent Act,
patentees are required to file price and sales information about their patented drug products at introduction and twice a year thereafter
for each strength of each dosage form of each patented drug product sold in Canada.
Other Health Care Laws and Compliance Requirements
In the United States, our activities
are potentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the CMS, other
divisions of the DHHS (e.g., the Office of Inspector General), the U.S. Department of Justice and individual U.S. Attorney offices within
the Department of Justice, and state and local governments.
The federal AKS prohibits,
among other things, any person or entity, from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly
or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, the referral of an individual for, or purchasing,
leasing, ordering, or arranging for the purchase, lease or order of, any good, facility, item or service reimbursable, in whole or in
part, by Medicare, Medicaid or other federal healthcare programs. The term remuneration has been interpreted broadly to include anything
of value, including unlawful financial inducements paid to prescribers and beneficiaries, as well as impermissible promotional practices.
There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions
and safe harbors are drawn narrowly. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory
safe harbor does not make the conduct per se illegal under the federal AKS. Instead, the legality of the arrangement will be evaluated
on a case-by-case basis based on a cumulative review of all of its facts and circumstances. Additionally, the ACA amended the intent requirement
of the federal AKS so that a person or entity no longer needs to have actual knowledge of the federal AKS, or specific intent to violate
it, to have violated the statute. The ACA also provided that a violation of the federal AKS is grounds for the government or whistleblower
to assert that a claim for payment of items or services resulting from such violation constitutes a false or fraudulent claim for purposes
of the civil False Claims Act.
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In addition, in November 2020,
DHHS finalized a regulation aimed at lowering prescription drug prices and out-of-pocket spending for prescription drugs by excluding
rebates on prescription drugs paid by manufacturers to or purchased by Medicare Part D plan sponsors or PBMs acting under contract with
Medicare Part D plan sponsors from the existing discount safe harbor under the federal AKS. The regulation reflects the first change to
the AKS discount safe harbor since the Medicare Part D program was established. In addition to the rebate exclusions, two new safe harbors
were added. One of these new safe harbors protects point-of-sale reductions in price from a manufacturer to a plan sponsor under Medicare
Part D or a MCO for a prescription drug payable, in whole or in part, by a plan sponsor under Medicare Part D or a MCO, provided certain
conditions are met. The other protects certain fixed-fee services arrangements between manufacturers and PBMs.
The federal civil and criminal
false claims laws, including the federal False Claims Act, prohibit, among other things, any person or entity from knowingly presenting,
or causing to be presented, a false claim for payment to, or for approval by, the federal government, including the Medicare and Medicaid
programs, or knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim
to avoid, decrease or conceal an obligation to pay money to the federal government.
The civil monetary penalties
statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented
a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or
is false or fraudulent.
HIPAA created additional federal
criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit
program, including public and private payors, or obtain, by means of false or fraudulent pretenses, representations or promises, any of
the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of whether the payor is
public or private, knowingly and willfully embezzling or stealing from a health care benefit program, willfully obstructing a criminal
investigation of a health care offense and knowingly and willfully falsifying, concealing or covering up by any trick or device a material
fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services
relating to healthcare matters. The ACA amended the federal health care fraud criminal statute implemented under HIPAA so that a person
or entity no longer needs to have actual knowledge of the statute, or the specific intent to violate it, to have violated the statute.
Additionally, the federal Open
Payments program pursuant to the Physician Payments Sunshine Act, created under Section 6002 of the ACA and its implementing regulations,
require some manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid
or the Children's Health Insurance Program (with specified exceptions) to report annually information related to specified payments
or other transfers of value provided to physicians and teaching hospitals, or to entities or individuals at the request of, or designated
on behalf of, the physicians and teaching hospitals and to report annually specified ownership and investment interests held by physicians
and their immediate family members. The SUPPORT Act, signed into law on October 24, 2018, expanded Sunshine Act reporting to include data
for physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse
midwifes. The amendment applies to reports submitted to CMS on or after January 1, 2022.
In addition, we may be subject
to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended
by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, impose requirements
relating to the privacy, security and transmission of individually identifiable health information on HIPAA covered entities and their
business associates, including mandatory contractual terms and the implementation of certain safeguards of such information. Among other
things, HITECH makes HIPAA's security standards directly applicable to business associates, independent contractors or agents of
covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.
HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable
to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts
to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions. In addition,
state laws govern the privacy and security of health information in some circumstances, many of which differ from each other in significant
ways, may not have the same effect and may not be preempted by HIPAA, thus complicating compliance efforts.
79
Many states have also adopted
laws similar to each of the above federal laws, which may be broader in scope and apply to items or services reimbursed by any payor,
including commercial insurers. We may also be subject to state laws that require pharmaceutical companies to comply with the pharmaceutical
industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, and/or state
laws that require drug manufacturers to report information related to marketing expenditures or payments and other transfers of value
to physicians and other healthcare providers.
Enforcement actions can be
brought by federal or state governments or, in some cases, as "qui tam" actions brought by individual whistleblowers in the
name of the government. Depending on the circumstances, failure to comply with these laws can result in penalties, including criminal,
civil and/or administrative criminal penalties, damages, fines, disgorgement, debarment from government contracts, individual imprisonment,
additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve
allegations of non-compliance with these laws, exclusion from government programs, refusal to allow us to enter into supply contracts,
including government contracts, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our
operations, any of which could adversely affect our business.
In order to distribute product
candidates commercially, we must comply with state laws that require the registration of manufacturers and wholesale distributors of pharmaceutical
product candidates in a state, including, in certain states, manufacturers and distributors who ship product candidates into the state,
even if such manufacturers or distributors have no place of business within the state. Some states also impose requirements on manufacturers
and distributors to establish the pedigree of product candidate in the chain of distribution, including some states that require manufacturers
and others to adopt new technology capable of tracking and tracing product candidate as it moves through the distribution chain. Several
states have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, file periodic reports with
the state, make periodic public disclosures on sales, marketing, pricing, clinical trials and other activities or register their sales
representatives. Other legislation has been enacted in certain states prohibiting pharmacies and other health care entities from providing
certain physician prescribing data to pharmaceutical companies for use in sales and marketing, and prohibiting certain other sales and
marketing practices. All of our activities are potentially subject to federal and state consumer protection and unfair competition laws.
The Foreign Corrupt Practices Act
The FCPA prohibits any U.S.
individual or business from paying, offering or authorizing payment or offering of anything of value, directly or indirectly, to any foreign
official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the
individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United
States to comply with accounting provisions requiring the companies to maintain books and records that accurately and fairly reflect all
transactions of the companies, including international subsidiaries, and to devise and maintain an adequate system of internal accounting
controls for international operations.
Grants from the IIA
Our research and development
efforts mainly with respect to our past activities (with respect to immunotherapy programs such as the Anti-CD3) were financed in part
through royalty-bearing grants from the IIA. As of December 31, 2022, we had received the aggregate amount of approximately $1.1 million
from the IIA for the development of our abovementioned technologies. With respect to such grants, we are committed to pay royalties of
up to an aggregate amount of approximately $1.2 million relating only to technologies in our possession and excluding any royalties for
technologies that we sold to third parties. We are further required to comply with the requirements of the Research Law, with respect
to those past grants. In addition, any change of control and any change of ownership of our Ordinary Shares that would make a non-Israel
citizen or resident an "interested party" as defined in the Research Law requires prior written notice from the IIA. When
a company develops know-how, technology or products using IIA grants, the terms of these grants and the Research Law restrict the transfer
of such know-how inside or outside of Israel, and the transfer outside of Israel of manufacturing or manufacturing rights of such products,
technologies or know-how, without the prior approval of the IIA. None of our current projects in the field of cannabinoid therapeutics
are supported by the IIA, yet if eligible, we might apply for such support in the future.
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Current Regulatory Status of SciSparc's
Pharmaceutical Products
United States
The active ingredient in our
pharmaceutical product candidate SCI-110 is a Schedule I controlled substance. Other drug candidates in our portfolio are either not controlled
or as yet to be scheduled.
Our drug candidate SCI-110
is being developed, among others, for the treatment of TS. TS may be considered a serious condition with a potentially disabling nature.
Thus, it may be eligible for a fast-tracked submission. However, a request for eligibility may be filed by us later in the development
of this molecule. In June 2016, we submitted a request for orphan drug designation to the FDA for SCI-110 for the treatment of TS. In
a letter dated September 29, 2016, the FDA informed us that our request could not be granted at such time and is being held in abeyance
until and subject to us providing additional information pertaining to the overall prevalence of TS in both children and adults, and further
clinical data to support our scientific rationale for our request for orphan drug designation within 12 months. In September 2017, we
responded to such FDA letter within the designated time frame and provided the FDA with our articulated and reasoned responses including
documentation and clinical data that supports it. On December 26, 2017, we received the FDA's response to our response. The FDA
accepted that there is adequate scientific rationale for the treatment of TS with SCI-110 mainly through the preliminary results of ongoing
clinical trials, suggesting that SCI-110 may provide benefit in treating TS. However, the FDA stated that it was unable to grant our request
and indicated that we did not provide adequate prevalence estimates, and any evidence to support our statement that only moderate to severe
TS patients would require pharmacological treatment. We further responded in January 2018 by providing the requested information. On January
23, 2020, following additional correspondence with the FDA, the FDA still did not grant us our request due to fact that we have not yet
provided adequate prevalence estimates. However, the FDA did agree with our position that we could potentially qualify for orphan drug
designation with respect to the moderate-to-severe TS sub-group population only rather than the entire population. After we had provided
additional prevalence estimates, the FDA raised a concern in its letter, dated December 7, 2020, about our ability to limit the use of
the pharmaceutical product to the subset of patients we are pursuing. Due to the fact that we disagree with this concern, we requested
a clarification call. In the clarification call conducted on February 2, 2021, we agreed with the FDA concern about our ability to limit
the use of the pharmaceutical product to the subset of patients in addition to a safety concern associated with THC treatment in pediatrics
population so we suggested to amend our preliminary request and asked to include only adults in the treated population. An amendment letter
was discussed and the FDA described what it would want to see in such an amendment. In March 2021, we sent our response to the FDA. In
June 2021, we received a response from the FDA explaining that they are unable to grant our request until new information becomes available
to support our request for orphan drug designation. We will re-visit the application after we obtain clinical results from our upcoming
phase IIb study in TS.
Canada
NNHPD Approval
Pursuant to a non-traditional
class III Product License Application, CannAmide™ (TheraPEA) received Health Canada approval (NPN 80093504) from the NNHPD on July
23, 2019. In the approval letter, the NNHPD confirmed that the application was in compliance with section 7 of the NHPR. The dosage of
1 x 400 mg tablet 3 times daily was approved for the following use: "Studies show that PEA may be used as an anti-inflammatory to
help relieve chronic pain".
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Any labels used in the marketing
of TheraPEA must reflect the information outlined on the product license and must comply with the labelling requirements as per Part 5
of the NHPR. In addition, natural health products, such as TheraPEA, must be manufactured, packaged, labelled, imported, distributed or
stored in accordance with GMP as required by NHPR or in accordance with equivalent requirements if the natural health product is imported.
Pursuant to the NHPR, companies
are required to provide the NNHPD with the Canadian site information prior to commencing the importation and/or sale of the natural health
products in Canada.
Changes made in respect of
a licensed product require the submission of an amendment, notification or a new product license application as per sections 11, 12 and
13 of the NHPR.
C. Organizational Structure
SciSparc Nutraceuticals Inc.
is our majority-owned subsidiary (approximately 51%), a company focused on e-commerce operations of Wellution™, a top- seller account
of Amazon, which sells hemp-based products. Brain Bright Ltd. is an inactive wholly-owned subsidiary. In addition, we also own 85% of
the issued and outstanding share capital of Evero Health Ltd., a company focused on the development and commercialization of SCI-110 sleep
technology.
On November 17, 2022, we invested
$1.5 million in Clearmind in connection with its initial public offering on the Nasdaq Capital Market, in exchange for 230,769 common
shares of Clearmind, representing 9.33% of the outstanding share capital of Clearmind.
We also hold approximately
31.48% of MitoCareX Bio Ltd., an Israeli private company
.
D. Property, Plants and Equipment
Our offices are located at
20 Raul Wallenberg Street, Tower A, 2nd Floor, Tel Aviv 6971916, Israel, where we currently occupy approximately 120 square meters,
under a joint lease with a third-party for a total of 240 square meters. The lease ends on June 30, 2023, with an option of renewal for
an additional thirty-six (36) months. Our current monthly rent payment is NIS 10,200 (approximately $3,300).
We consider that our current
office space is sufficient to meet our anticipated needs for the foreseeable future and is suitable for the conduct of our business. However,
we are currently assessing our future needs and have not renewed our lease as of the date hereof.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND
PROSPECTS
The following discussion and
analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Annual Report. This
discussion and other parts of this Annual Report contain forward-looking statements based upon current expectations that involve risks
and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking
statements as a result of several factors, including those set forth under Item 3.D. "Risk Factors" and elsewhere in this
Annual Report. We report financial information under 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. Our discussion and analysis
for the year ended December 31, 2020 can be found in our Annual Report for the fiscal year ended December 31, 2021, filed with the SEC
on April 28, 2022.
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The following financial data
in this narrative are expressed in thousands, except for share and per share data or as otherwise noted.
A. Operating Results
During the year ended December 31, 2022, we have
started generating revenues through our subsidiary SciSparc Nutraceuticals, which owns the Wellution™ brand. Total revenues recognized
in the year ended December 31, 2022, amounted to $1,347 thousand.
Operating Results
To date, we have not generated
revenue from our drug development segment from the sale of any pharmaceutical product candidates, and we do not expect to generate significant
revenue in this business within the next year at least. As of December 31, 2022, we had an accumulated deficit of approximately $64 million.
Our operating activities are described below under "Operating Expenses."
Revenues
Since the acquisition of the
Wellution™ brand, we have generated revenues in the amount of $1,347 thousand.
Cost of goods sold
The cost of goods sold comprises
mainly purchase of products and transportation costs to the Company's warehouse. Since the acquisition of the Wellution™ brand,
the cost of goods sold amounted to $322 thousand.
Operating Expenses (in thousands of dollars)
Our current operating expenses
consist of two components - research and development expenses and general and administrative expenses.
Research and Development Expenses, net
Our research and development
expenses consist primarily of salaries and related personnel expenses, research and preclinical studies, chemistry and formulations, regulatory,
professional and other related research and development expenses.
The following table discloses
the breakdown of research and development expenses:
December 31,
2022
2021
USD in thousands
Wages and related expenses
436
357
Share-based payments
264
27
Clinical studies
369
172
Research and preclinical studies
703
165
Chemistry and formulations
281
335
Regulatory, professional and other expenses
750
934
2,803
1,990
We expect that our research
and development expenses will materially increase as we plan to continue clinical trials and develop new products.
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General and Administrative Expenses
General and administrative
expenses consist primarily of salaries, professional service fees for accounting, legal, bookkeeping, investor relations, Amazon transaction
fees, advertising and promotion on Amazon, regulatory and other general and administrative expenses.
The following table discloses
the breakdown of general and administrative expenses:
December 31,
2022
2021
USD in thousands
Wages and related expenses
437
256
Share-based payment
633
16
Professional and directors' fees
2,499
2,417
Investor relations and business expenses
1,486
784
Office maintenance, rent and other expenses
224
135
Wellution operating expenses
907
-
Regulatory expenses
162
165
Business development expenses
161
5
Total
6,509
3,778
Comparison of the year ended December 31, 2022 to the year ended
December 31, 2021 (in thousands of dollars)
Results of Operations
December 31,
2022
2021
USD in thousands
Revenues
1,347
-
Cost of goods sold
322
-
Gross profit
1.025
-
Research and development expenses
2,803
1,990
General and administrative expenses
6,509
3,778
Operating loss
8,287
5,768
Company's share of losses of company accounted for at equity, net
109
-
Financial expense (income), net
(5,818
)
21
Net loss
2,592
5,789
Net loss attributable to holders of Ordinary Shares
2,592
5,789
Research and Development Expenses
Our research and development
expenses for the year ended December 31, 2022, amounted to $2,803, representing an increase of $813, or 41%, compared to $1,990 for the
year ended December 31, 2021. The increase was primarily attributable to an increase of $972 in share-based compensation, clinical studies,
research and pre-clinical studies, reflecting the acceleration of clinical studies that were initiated in the previous year.
General and Administrative Expenses
Our general and administrative
expenses totaled $6,509 for the year ended December 31, 2022, representing an increase of $2,731, or 72%, compared to $3,778 for the year
ended December 31, 2021. The increase resulted primarily from the inclusion of results of our new subsidiary Scisparc Nutraceuticals,
which amounted to $907, and comprised mainly by Amazon transaction fees, advertising, and promotion on Amazon. Another main reason for
the increase is the increase of $703 in investor relations and business expenses, an increase of $617 in share-based compensation, and
an increase of $181 in wages and related expenses.
84
Operating Loss
Our operating loss for the
year ended December 31, 2022, was $8,287, representing an increase of $2,519, or 44%, as compared to an operating loss of $5,768 for the
year ended December 31, 2021.
Financial Expense and Income
Financial expense and income
consist of revaluations of instruments measured at fair value, exchange rate differences, bank fees, loans interest and other transactional
costs.
We recognized financial income
in the amount of $7,832 for the year ended December 31, 2022, as compared to no financial income for the year ended December 31, 2021.
The financial income recognized in 2022 was primarily due to changes in the fair value of warrants.
We recognized financial expenses
for the year ended December 31, 2022, of $2,014, representing an increase of $41,993, as compared to financial expense of $21 for the
year ended December 31, 2021. The financial expenses recognized in 2022 are primarily due to issuance expenses of shares and warrants
in the amount of $1,204, and losses from the change in the fair value of our investment in securities in the amount of $770.
Total Comprehensive Loss
Our total comprehensive loss
for the year ended December 31, 2022, was $2,592, representing a decrease of $3,197, or 55%, as compared to $5,789 for the year ended
December 31, 2021.
B. Liquidity and Capital Resources (in thousands of dollars)
Overview
Since our inception in 2004,
and through December 31, 2022, we have funded our operations principally with $75,225 from the issuance of Ordinary Shares and ADSs, warrants
and pre-funded warrants. As of December 31, 2022, we had $3,574 in cash, $77 in trade receivables, $131 in other accounts receivable,
$668 in inventory, and an additional amount of $60 in short-term bank deposits.
In the event that
additional financing is required from outside sources, we may not be able to raise such financing on terms acceptable to us or at all.
If we are unable to raise additional capital when desired, our business, operating results, and financial condition would be adversely
affected, and there is substantial doubt about our ability to continue as a going concern.
The table below presents our
cash flows for the periods indicated:
December 31,
2022
2021
USD in thousands
Operating activities
(7,917
)
(5,061
)
Investing activities
(7,084
)
(70
)
Financing activities
11,700
10,060
Net increase in cash and cash equivalents
(1)
(3,301
)
4,929
(1)
During the year ended December
31, 2022 and 2021, we did not have any cash equivalents.
Operating Activities
Net cash used in operating
activities was $7,917 during 2022 in comparison to $5,061 during 2021. The increase of $2,856 was primarily attributable to an increase
in research and development and general and administrative expenses.
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Investing Activities
Net cash used in investing
activities was $7,084 during 2022 in comparison to $70 during 2021. The increase of $7,014 was primarily attributable to a purchase of
the Wellution brand in the amount of $4,861, and investment in MitoCareX in the amount of $700, and an investment in securities of Clearmind
in the amount to $1,500.
Net cash used in investing
activities of $70 during the year ended December 31, 2021, primarily reflected the investment in restricted bank deposits and purchase
of fixed assets.
Financing Activities
Net cash provided by financing
activities of $11,700 in the year ended December 31, 2022, primarily consisted $9,005 of net proceeds from the issuance of share capital,
pre-funded warrants and warrants and $2,770 from warrant exercises.
Net cash provided by financing
activities of $10,060 in the year ended December 31, 2021, primarily consisted $7,699 of net proceeds from the issuance of share capital,
pre-funded warrants and warrants and $2,568 from warrant exercises.
On May 27, 2022, we announced
the entrance into a securities purchase agreement, which closed on June 1, 2022, with a single healthcare-focused institutional investor
for aggregate gross proceeds of approximately $10,000, before deducting fees to the placement agent and other offering expenses payable
by us, or the 2022 Private Placement. In connection with the 2022 Private Placement, we issued 3,546,100 units and pre-funded units at
a purchase price of $2.82 per unit (or $0.001 less per pre-funded unit), priced at-the-market under Nasdaq rules. Each unit and pre-funded
unit consisted of one Ordinary Share (or Ordinary Share equivalent) and two non-tradable warrants each exercisable for one Ordinary Share
for $2.57 (for a total of 7,092,200 shares underlying the warrants). The warrants have a term of five years from the issuance date. No
actual units were issued in the 2022 Private Placement. Aegis Capital Corp. was the exclusive placement agent in connection with the 2022
Private Placement.
On June 30, 2022, the Company
and the institutional investor entered into a letter agreement and agreed, among other things, to amend: (i) the warrants to: (a) extend
the termination date for exercising the warrants from June 1, 2027 to June 1, 2029; and (b) amend the exercise price from $2.57 per share
to $2.63 per share; and (ii) the securities purchase agreement to reflect a new purchase price of $2.88 per unit (or $0.001 less per pre-funded
unit), resulting in additional gross proceeds to the Company of $212,766. On August 19, 2022,
3,211,100
of the pre-funded warrants were fully exercised at a nominal exercise price of $0.001 per share, which resulted in an issuance of 3,211,100
Ordinary Shares.
On September 14, 2022, we
entered into Wellution Acquisition Agreement, pursuant to which we acquired the Wellution™ brand. We established SciSparc Nutraceuticals,
a wholly owned subsidiary, to hold the new assets, which is also a party to the Wellution Acquisition Agreement.
On September 30, 2022, we
closed the acquisition of the Brand and paid a base cash payment of $4,590. In 12 months following the closing date, we will pay an additional
deferred cash payment of a multiple three times the amount by which the acquired Brand's SDE (as defined in the Wellution AcquisitionAgreement)
exceeds $1,120. In addition, at the closing we issued the M.R.M Warrant to M.R.M, consisting of $15 million worth of warrants to purchase
up to 2,142,857 of our Ordinary Shares.
On
February 23, 2023, we entered into the Wellution Sale Agreement with Jeffs' Holdings and Jeffs' Brands, pursuant to which,
at the closing, which occurred on March 28, 2023, which occurred on March 28, 2023,Jeffs' Holdings acquired from us a number of
shares of common stock of SciSparc Nutraceuticals equal to approximately a 49% interest in our wholly owned subsidiary, SciSparc Nutraceuticals,
which owns the Wellution
TM
brand, for a consideration of $2,500 in cash, and an additional deferred cash payment of approximately
$489.
In
connection with the closing, we and Jeffs' Brands will undertake a mutual share exchange in the amount of approximately $288 of
ordinary shares from each of us and Jeffs' Brands. The number of shares in the share exchange was calculated based on the average
closing price of the relevant company's shares for 30 consecutive trading days ending on the third trading day immediately prior
to the closing. Accordingly, we will acquire 247,415 ordinary shares of Jeffs' Brands and Jeffs' Brands will acquire 360,297
ordinary shares from us having an aggregate value of $288,238.
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Following
the closing of the transaction, which included an equity conversion of the financing amounts of approximately $700 previously provided
by the Company to SciSparc Nutraceuticals for working capital, into shares of common stock at the price per share of the Wellution Sale
Agreement, we hold approximately 51% of SciSparc Nutraceuticals.
In
connection with the Wellution Sale Agreement, at the closing, Jeffs' Brands and SciSparc Nutraceuticals entered into the Wellution
Management Agreement for management services of the Wellution
TM
brand by Jeffs' Brands, for a monthly fee of $20, Jeffs'
Brands also received a one-time signing bonus in the amount of $51.
On March 1, 2021, we entered
into a definitive agreement with several accredited and institutional investors providing for the issuance of an aggregate of 1,152,628
units, as follows: (a) 916,316 units, at a price of $7.07 per unit, consisting of (i) one ADS and (ii) a Series A Warrant to purchase
an equal number of units purchased and a Series B Warrant to purchase half the number of units, and (b) 236,312 pre-funded units, at a
price of $7.069 per unit, consisting of (i) one pre-funded warrant to purchase one ADS and (ii) a Series A Warrant to purchase an equal
number of units purchased and a Series B Warrant to purchase half the number of units. The pre-funded warrants have an exercise price
of $0.001 per full ADS and will be exercisable at any time after the date of issuance upon payment of the exercise price. The Series A
Warrants have an exercise price of $7.07, subject to adjustments therein. The Series B Warrants have an exercise price equal to $10.60,
subject to adjustments therein. The Series A Warrants and the Series B Warrants are exercisable six months from the date of issuance and
have a term of exercise equal to five years from the initial exercise date. As of April 23, 2022, there were 1,142,628 Series A Warrants,
576,314 Series B Warrants and 18,156 pre-funded warrants outstanding. Aegis Capital Corp. acted as exclusive placement agent in connection
with this offering and received a transaction fee equal to $0.4949 per unit and $0.4949 per pre-funded unit sold at the closing. The offering
closed on March 4, 2021, and resulted in gross proceeds to us of approximately $8.15 million.
Share Buyback Program
On July 6, 2022, we announced
that our board of directors authorized a $1 million buyback program for our Ordinary Shares. However, as of the date of this Annual Report
we have not proceeded with the buyback program and do not currently intend to do so. If we wish to effect the buyback program in the future,
we would be required to file a motion seeking a court approval in Israel for the buyback program and the effectiveness of the buyback
plan, if formally approved, will be contingent upon such approval.
Current Outlook
We have financed our operations
to date primarily through proceeds from sales of our Ordinary Shares and ADSs as well as exercises of warrants and options to purchase
Ordinary Shares or ADSs, as the case may be. We have incurred losses and generated negative cash flows from operations since August 2004.
Since August 2004, we have not generated any revenue from the sale of pharmaceutical product candidates and we do not expect to generate
revenues from sale of our pharmaceutical product candidates in the next few years.
As of December 31, 2022, our
cash, including short-term bank deposits, was $3,634.
We believe that our existing
cash resources will not be sufficient to finance our operating activities in the foreseeable future; however, we expect that we will require
substantial additional capital to complete the development of, and to commercialize, our product candidates. If we do seek to raise additional
capital, there can be no guarantee or assurance that we will be successful in raising such additional capital or that the term of such
capital raise will be on terms favorable to us.
In September 2022, we purchased
Wellution™, a business and brand which sells hemp-based products on the Amazon.com marketplace.
87
On January 25, 2023, we announced
that our board of directors resolved to pursue a Restructuring Plan which involves transferring our pharmaceutical activities to NewCo.
As part of the Restructuring Plan, we intend to examine the possibility of listing NewCo on a leading stock exchange, while maintaining
our controlling interest in NewCo such that we will continue to control our current business activities. We also intend to explore other
potential new opportunities, activities and investments in a variety of sectors.
Any restructuring and possible
listing of NewCo on a stock exchange may be subject to, among other things, market conditions, tax or other business analyses, regulatory
approvals, receipt of any necessary consents, final approvals from our board of directors and satisfaction of any closing conditions to
effectuate such corporate restructuring and listing of NewCo. There can be no assurance regarding the ultimate timing of the intended
restructuring and listing of NewCo or that they will be completed at all.
In addition, our operating
plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional financing sooner
than planned. Our efforts to commercialize our proprietary PEA oral tablets CannAmide™ may not lead to any revenue or revenue at
the level at which we are expecting. Our future capital requirements will depend on many factors, including:
●
the progress and costs of our research and development activities;
●
the costs of manufacturing our product candidates;
●
the costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights;
●
the potential costs of contracting with third parties to provide marketing and distribution services for us or for building such capacities internally; and
●
the magnitude of our general and administrative expenses.
Until we can generate significant
recurring revenues, we expect to satisfy our future cash needs through debt and/or equity financings. We cannot be certain that additional
funding will be available to us on acceptable terms, if at all. This raises substantial doubts about our ability to continue as a going
concern. If funds are not available, we may be required to delay, reduce the scope of, or eliminate research or development plans
for, or commercialization efforts with respect to our product candidates.
C.  Research and development, patents and licenses, etc.
For a description of our research
and development programs and the amounts that we have incurred over the last two years pursuant to those programs, please see "Item
5. Operating and Financial Review and Prospects-A. Operating Results-Operating Expenses-Research and Development Expenses, net"
and "Item 5. Operating and Financial Review and Prospects-A. Operating Results-Comparison of the year ended December 31, 2022 to
the year ended December 31, 2021-Research and Development Expenses."
D.  Trend information
The COVID-19 pandemic has
impacted companies in Israel and around the world, and as its trajectory remains highly uncertain, and although the impact of COVID-19
has lessened in Israel recently, we cannot predict the duration and severity of the outbreak and its containment measures for our Company.
Further, we cannot predict impacts, trends and uncertainties involving the pandemic's effects on economic activity, the size of
our labor force, and the extent to which our income, profitability, liquidity, or capital resources may be materially and adversely affected.
See also "Item 3.D. - Risk Factors-Risks Related to Our Business Operations-Widespread public health pandemics, including COVID-19,
could have a material and adverse effect on our business, financial condition and results of operations."
E.  Critical Accounting Estimates
We describe our significant
accounting policies more fully in Note 2 and the significant accounting judgments, estimates and assumptions used in the preparation of
the financial statements in Note 3 to our financial statements for the year ended December 31, 2022. We believe that the accounting policies
below are critical in order to fully understand and evaluate our financial condition and results of operations.
88
We prepare our financial statements
in accordance with IFRS. At the time of the preparation of the financial statements, our management is required to use estimates, evaluations,
and assumptions which affect the application of the accounting policy and the amounts reported for assets, obligations, income, and expenses.
Any estimates and assumptions are continually reviewed. The changes to the accounting estimates are credited during the period in which
the change to the estimate is made.
Going Concern
We
have a shareholders' equity of $6,449 thousand as of December 31, 2022, and negative operating cash flows in recent years. We expect
to continue incurring losses and negative cash flows from operations until our pharmaceutical products reach commercial profitability.
Our plans to reduce the going concern risk include the continued commercialization of our products, maintaining cost efficiency and raising
capital through the sale of additional equity securities, debt or capital inflows from strategic partnerships.
Intangible Assets
Separately acquired intangible
assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination
are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized
development costs, are recognized in profit or loss when incurred.
Intangible assets with a finite
useful life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired.
The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.
Contingent Liabilities
The evaluations of provisions
and contingent liabilities are based on best professional judgment, taking into consideration the stage of the proceedings, as well as
cumulative legal experience in the various topics. Whereas the results of the lawsuits shall be determined by the courts, these results
may differ from these evaluations.
Share-Based Compensation
Our employees and other service
providers are entitled to benefits by way of share-based compensation settled with company options to shares. The cost of transactions
with employees settled with capital instruments is measured based on the fair value of the capital instruments on the granting date. The
fair value is determined using an accepted options pricing model. The model is based on share price, grant date and on assumptions regarding
expected volatility, expected lifespan, expected dividend, and a no risk interest rate.
The cost of the transactions
settled with capital instruments is recognized in profit or loss together with a corresponding increase in the equity over the period
in which the performance and/or service takes place, and ending on the date on which the relevant employees are entitled to the benefits,
or the Vesting Period. The aggregate expense recognized for transactions settled with capital instruments at the end of each reporting
date and until the Vesting Period reflects the degree to which the Vesting Period has expired and our best estimate regarding the number
of options that have ultimately vested. The expense or income in profit or loss reflects the change of the aggregate expense recognized
as of the end of the reported period.
We selected the Black-Scholes
option-pricing model as a fair value method for our options awards. The option-pricing model requires a number of assumptions:
Expected dividend yield
- The expected dividend yield assumption is based on our historical experience and expectation of no future dividend payouts. We have
historically not paid cash dividends and have no foreseeable plans to pay cash dividends in the future.
Volatility
- The expected
volatility is based on fluctuations in the price of our Ordinary Share prices on the Nasdaq.
Risk free interest rate
- The risk free interest rate is based on the U.S. Treasury yield curve, in accordance with the option's contractual term.
89
Contractual term
-
An option's contractual term must at least include the Vesting Period and the employees' historical exercise and post-vesting
employment termination behavior for similar grants. If the amount of past exercise data is limited, that data may not represent a sufficiently
large sample on which to base a robust conclusion on expected exercise behavior.
Share price
- The share
price is determined according to the last known or above closing price of our Ordinary Shares at the grant date.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth
information regarding our executive officers, key employees and directors as of April 24, 2023:
Name
Age
Position
Itschak Shrem
75
President and Director
Amitay Weiss
60
Chairman of the Board of Directors
Oz Adler
36
Chief Executive Officer and Chief Financial Officer
Dr. Adi Zuloff-Shani
54
Chief Technologies Officer
Amnon Ben Shay
(1)(2)(3)
60
Director
Alon Dayan
(1)(2)(3)
47
Director
Moshe Revach
(3)
47
Director
Liat Sidi
(3)
48
Director
Lior Vider
(1)(2)(3)
46
Director
(1)
Member of the Compensation Committee
(2)
Member of the Audit Committee
(3)
Independent Director (as determined by our Board of Directors, pursuant to the definition prescribed to such term under Nasdaq Stock Market rules)
Mr. Itschak Shrem
was
appointed to serve as our President in January 2022, prior to which he served as our Chairman from August 2020 to January 2022. Mr. Shrem
has more than 40 years of experience in financial markets and venture capital. In 1991, Mr. Shrem founded Dovrat Shrem Ltd., an investment
banking, management and technology company. Prior to that, he spent 15 years at Clal Israel Ltd., where he served in various capacities,
including chief operating officer, and was responsible for capital markets and insurance businesses. In 1993, Mr. Shrem founded Pitango
Venture Capital Fund (formerly, Polaris) and served as a partner of Pitango Funds I, II and III. He has been the Managing Director of
Yaad Consulting 1995 Ltd. since 1995. Previously, Mr. Shrem served on the board of Tel-Aviv Sourasky Medical Center, the Weizman Institute
Eden Spring Ltd., Rail Vision Ltd., Nano Dimension Ltd., Ormat Industries Ltd., Retalix Ltd. and as chairman of Sphera Funds Management
Ltd. Mr. Shrem holds a B.A. in Economics and Accounting from Bar-Ilan University and an M.B.A. from Tel-Aviv University.
Mr. Amitay Weiss
has
served on our Board of Directors since August 2020 and as our Chairman since January 2022. Mr. Weiss served as our Chief Executive Officer
from August 2020 to January 2022. Mr. Weiss currently serves as chairman of the board of directors of Automax Motors Ltd. (TASE: AMX.TA),
as a director of Jeffs' Brands Ltd. (Nasdaq: JFBR) and as an external director of Cofix Group Ltd. (TASE: CFCS). Mr. Weiss also
chairs and serves as director on the board of director of several public and private companies, including, Clearmind, Maris Tech Ltd.
(Nasdaq: MTEK) and Save Foods Inc. (Nasdaq: SVFD). In 2016, Mr. Weiss founded Amitay Weiss Management Ltd. and now serves as its chief
executive officer. From 2001 until 2015, Mr. Weiss served as vice president of business marketing & development and in various other
positions at Bank Poalei Agudat Israel Ltd. from the First International Bank of Israel group. Mr. Weiss holds a B.A. in economics from
New England College, an M.B.A. in business administration from Ono Academic College in Israel, an Israeli branch of University of Manchester
and an LL.B. from the Ono Academic College.
90
Mr. Oz Adler, CPA,
was
appointed to serve as our Chief Executive Officer in January 2022 and has served as our Chief Financial Officer since April 2018 and previously
held served as our VP Finance from March 2018 until April 2018 and as our Controller from September 2017 to March 2018. Mr. Adler has
experience in a wide variety of managerial, financial, tax and accounting roles. Mr. Adler currently serves on the board of directors
of numerous private, such as Polyrizon Ltd., and public companies, including Jeffs' Brands Ltd. (Nasdaq: JFBR), Rail Vision Ltd.
(Nasdaq: RVSN) and Clearmind (CSE: CMND), (OTC: CMNDF), (FSE: CWY), and previously served as the chief financial officer of Medigus Ltd.
(Nasdaq: MDGS) from December 2020 to April 2021. From 2012 until 2017, Mr. Adler was employed as a certified public accountant at Kost
Forer Gabbay & Kasierer, a member of Ernst & Young Global. Mr. Adler holds a B.A. in Accounting and Business management from The
College of Management, Israel.
Dr. Adi Zuloff-Shani
has
served as our Chief Technologies Officer since February 2016. Dr. Zuloff-Shani has more than 20 years of experience as a research and
development executive. Prior to joining us, and from 2012 to 2016, Dr. Zuloff-Shani served as a vice president development at Macrocure
Ltd. (Nasdaq: MCUR) where besides leading all research and development activities, she interacted and was involved with the activities
of all departments including clinical, operations, quality assurance, quality control, finance, and regulatory affairs. Dr. Zuloff-Shani
currently serves as the Chief Executive Officer of Clearmind. She has also served as the Chairman of Orsus Therapeutics, Inc. since November
2022. Dr. Zuloff-Shani holds a Ph.D. in human biology and immunology from Bar-Ilan University, Israel.
Mr. Amnon Ben Shay
has served as a member of our Board of Directors since January 2021 and served as our external director under the Companies Law between
January 2021 and January 2022. Mr. Ben Shay has been serving as the chief financial officer of Hadar Hasharon Marketing and Distributions
Ltd. since 2019. Mr. Ben Shay previously served on the board of directors of Azorim Investments and Building Development Company Ltd.
(TASE: AZRM), Value Capital One Ltd. (TASE: VALU) and B.G.I. Investments (1961) Ltd. (TASE: BGI). From 2017 to 2019, Mr. Ben Shay served
as the chief financial officer of Fridenson Air & Ocean Ltd. From 2014 to 2017, he served as the chief financial officer of Abetrans
Logistics Ltd. Prior to that, Mr. Ben Shay served as the chief financial officer of Isline Export and Import Services Ltd. from 2010 to
2013. Prior to the year 2009, Mr. Ben Shay served as the chief financial officer of several Israeli real estate investment groups. Mr.
Ben Shay holds a B.A. in economics and business and an M.B.A in business, both from The Hebrew University of Jerusalem, Israel, and an
accounting certificate from The College of Management Academic Studies, Israel.
Mr. Alon Dayan
has
served as a member of our Board of Directors since January 2021 and served as our external director under the Companies Law between January
2021 and January 2022. Mr. Dayan is the founder of L1-Systems Ltd. and has been serving as its chief executive officer since 2015. Since
2018, Mr. Dayan has served as the chief executive officer of Virtual Crypto Technologies Inc. (OTC: VBIX) from 2018 to 2019, which he
founded as well. Prior to that, he served as a business development manager at Elbit Systems Ltd. from 2006 to 2013. Mr. Dayan holds a
B.A. in electronical engineering from Ariel University, Israel.
Mr. Moshe Revach
has
served as a member of our board of directors since September 2022. Mr. Revach also previously served as our director since August 2020
until his resignation on March 13, 2022. Mr. Revach serves as deputy mayor of the city of Ramat Gan, Israel, has headed both
the sports and government relations departments in the Ramat Gan municipality since 2013, and has served in various other Ramat Gan municipality
positions since 2008. Mr. Revach serves as a director of L.L.N IT solutions, a wholly-owned subsidiary of the Jewish Agency
for Israel, of Jeffs' Brands Ltd. (Nasdaq: JFBR) and of Biomedico Hadarim Ltd. Mr. Revach previously served as a director of
the RPG Economic Society and Jewish Experience Company on behalf of the Jewish Agency. Mr. Revach holds an LL.B from the Ono Academic
College, Israel, and a B.A. in management and economics from the University of Derby.
Ms. Liat Sidi
has served
as our Director since August 2020. Ms. Sidi serves as the manager of the accounting department for Foresight Autonomous Holdings Ltd.
(Nasdaq and TASE: FRSX). Ms. Sidi previously served as an accountant for Panaxia Labs Israel Ltd. (TASE: PNAK) from 2015 to 2020 and as
an accountant for Soho Real Estate Ltd. from 2015 to 2016. Ms. Sidi also served as an accountant for Feldman-Felco Ltd. from 2006 to 2010
and as an accountant for Eli Abraham accounting firm from 2000 to 2006. Ms. Sidi completed tax, finance and accounting studies in Ramat
Gan College of Accounting.
91
Mr. Lior Vider
has
served as our Director since August 2020. Mr. Vider has served as a senior investment portfolio manager at Forte Investment House Ltd.
since 2021. Mr. Vider previously served as chief investment manager for Impact Investment Management Ltd., from the Union Bank group,
from 2007 to 2010 and as chairman of the board of directors and a member of the group's investment committee of Rahkia Capital Markets
Ltd. from 2006 to 2007. Mr. Vider also served as a director at Endymed Medical Ltd. and Apollo Power Ltd. Mr. Vider founded and managed
sponser.co.il, a financial portal specializing in services for investors from 2005 to 2017. Mr. Vider holds a B.A. in industry and management
engineering from Shenkar College in Israel.
Scientific Advisory Board
We have a Scientific Advisory
Board of eleven award winning and active physicians and scientists in the field(s) of: psychiatry and child psychiatry, TS, neurology,
Alzheimer's disease, hospice and palliative medicine neurobiology, pharmacology and neuropsychopharmacology, organic and medicinal
chemistry, cannabinoids and drug discovery. We consult with the members of our Scientific Advisory Board on a regular basis.
Prof. Yossi Tam
received
his B.Med.Sc., M.Sc., Ph.D. and D.M.D. from the Hebrew University of Jerusalem. He did his postdoctoral training at the National Institutes
of Health (NIH), and in 2014 he moved to the Hebrew University to head the Obesity and Metabolism Laboratory at the Institute for Drug
Research, where he focuses on targeting the endocannabinoid system for Obesity, Diabetes and the metabolic syndrome. Prof. Tam won major
national and international grants. He authored over 80 peer-reviewed papers in leading journals (such as Science, Nature Medicine, Cell
Metabolism, JCI, PNAS, Hepatology, Gastroenterology, Molecular Metabolism, to name a few), and three book chapters, with 5,412 citations
yielding an H-index of 36. In addition, Prof. Tam co-invented 14 patents that were commercialized to different pharmaceutical companies
for further clinical development and testing. Prof. Tam also serves as the Director of the Hebrew University's Multidisciplinary
Center for Cannabinoid Research and a Scientific Advisory Board Member of several biotech companies, which develop a portfolio of non-psychoactive
cannabinoid-modulating medicines for unmet market needs. Prof. Tam's research projects over the past twenty years have crossed subjects,
disciplines and methodologies, yet the main research interests remain focused on the different pathophysiological aspects of the endocannabinoid
system. Having a clinical background with basic science training, he has always been interested in how science can directly improve people's
everyday lives. Thus, he has strived unceasingly to integrate his clinical curiosity and experimental knowledge, in order to deepen the
understanding of clinically relevant research questions.
Prof. Elon Eisenberg,
is the Dean of the Faculty of Medicine at the Technion - Israel Institute of Technology. Prof. Eisenberg is a Professor of Neurology and
Pain Medicine at the Faculty of Medicine and holds the Otto Barth Family Academic Chair in Biomedical Science. Prof. Eisenberg graduated
from Sackler School of Medicine, Tel-Aviv University in Israel. Prof. Eisenberg completed a residency in Neurology, at Rambam Medical
Center, Haifa, Israel, and Neurology - Pain Fellowship at Massachusetts General Hospital, Harvard Medical School in Boston, USA. Prof.
Eisenberg has been the director of the Institute of Pain Medicine at Rambam Health Care Campus, Haifa, Israel, and the President of the
Israeli Pain Association. Prof. Eisenberg is currently the director of the Pain Research Unit at the Institute of Pain Medicine, Rambam
Health Care Campus. H Prof. Eisenberg's main areas of research include mechanisms and treatment of pain with special emphasis on
neuropathic pain, CRPS, cancer pain, opioids and cannabinoids. Prof. Eisenberg has published about two-hundred articles, book chapters
and other manuscripts in various areas of pain
Prof. James Leckman, M.D.
is the Neison Harris Professor of Child Psychiatry, Psychiatry, Psychology and Pediatrics at Yale University. Prof. Leckman is a well-known
child psychiatrist and patient-oriented clinical investigator. For more than 20, years he served as the Director of Research for the Yale
Child Study Center. His peers have regularly selected him as one of the Best Doctors in America. Dr. Leckman is the author or co-author
of over 430 original articles published in peer-reviewed journals, twelve books, and 140 book chapters. Dr. Leckman has a longstanding
interest in Tourette syndrome and Obsessive-Compulsive Disorder (OCD). His research on these disorders is multifaceted from phenomenology
and natural history, to neurobiology to genetics, to risk factor research and treatment studies. One area of active research interest
concerns the role of the immune system in the pathobiology of Tourette syndrome and other neuropsychiatric disorders.
92
Prof. Michael Davidson
currently serves, among other things, as Chairman of the Israeli Medical Centre for Alzheimer's Disease Care and Research in
Ramat Gan and Chairman of the department of psychiatry at the Nicosia University Medical School. Prof. Davidson served as Chief Psychiatrist
at the Department of Psychiatry of the Sheba Medical Centre in Tel-Hashomer for six years. Prof. Davidson holds a secondary professorship
at the Sackler School of Medicine of Tel Aviv University and at the Mount Sinai School of Medicine in New York. Prof. Davidson is considered
an international expert on Alzheimer's disease and schizophrenia is the author of approximately 350 publications in scientific literature.
Prof. Daniele Piomelli
serves as the Louise Turner Arnold Chair in Neurosciences and Professor of Anatomy and Neurobiology, Pharmacology, and Biological Chemistry
at University of California, Irvine. Prof. Piomelli is also the founding director of the drug discovery and development unit (D3) at the
Italian Institute of Technology in Genoa, Italy, as well as the Editor in Chief of Cannabis and Cannabinoid Research of Cannabis and Cannabinoid
Research. Prof. Piomelli's research has resulted in several contributions to the pharmacology of lipid based signaling molecules
including endocannabinoid substances and lipid amides. Prof. Piomelli is the author of more than 400 peer reviewed articles and books
and has received several awards and honors. Prof. Piomelli studied Pharmacology and Neuroscience at Columbia University, and the Rockefeller
University, and earned his degree of Doctor of Pharmacy from University of Naples.
Prof. Kirsten Müller-Vahl
is a Professor
of Psychiatry at the Department of Psychiatry, Socialpsychiatry and Psychotherapy at the Hannover Medical School, Germany. Prof. Müller-Vahl
is a specialist in both neurology and adult psychiatry. She serves as the head of the TS outpatient department and over the past twenty-five
years, Prof. Müller-Vahl has investigated more than 4000 patients with TS, both children and adults. She serves on the scientific
advisory board of the German Tourette Syndrome Association and is the current president of the European Society of the study of Tourette
syndrome (ESSTS), the national German Association for Cannabinoid Medicines (ACM) as well as the International Alliance for Cannabinoid
Medicines (IACM). Her scientific work related to TS includes a large number of clinical trials funded by the EU (TS-EUROTRAIN: FP7-PEOPLE-2012-ITN,
No. 316978; EMTICS: EU FP7-HEALTH-2011, 278367), by the NIMH (TIC-GENETICS (1R01MH115958-01), by the German ministry of education and
research (BMBF) (ONLINE-TICS: 01KG1421) and the German Research Foundation (DFG) (CANNA-TICS: NCT03087201). At the 9th IACM Conference
on Cannabinoids in Medicine in 2017 she received the "IACM Award 2017 for Clinical Research" for her special achievements
regarding the re-introduction of cannabis and cannabinoids as medicine.
Prof. Müller-Vahl has
published more than 180 scientific articles, is the author of several book chapters and the leading German textbook on TS, and co-editor
of the leading German textbook on cannabis-based medicine. She is author of several guidelines on TS including ESSTS guidelines and treatment
guidelines published by the American Academy of Neurology (AAN).
Prof. Avi Weizman
is
a Professor of Child and Adult Psychiatry at the Sackler Faculty of Medicine of Tel Aviv University, a former Director of the Felsentein
Medical Research Center and the head of the Laboratory for Biological and Molecular Psychiatry and the head of the Research Unit at the
Geha Mental Health Center. Prof. Weizman's research involves the investigation of brain mechanisms of mental disorders. Currently,
it focuses on neurodevelopmental disorders, the development of new strategies for treating psychotic disorders, and the psychopharmacology
of mental disorders. Prof. Weizman is the author of more than 760 original papers, five full books, 28 book chapters, and 60 review articles.
After completing his residency in Psychiatry, Prof. Weizman spent two years as a visiting scientist at the National Institute of Mental
Health in Bethesda, MD.
Dr. Michael H. Bloch, M.D.,
M.S.
graduated from Yale School of Medicine and completed his child and adult psychiatry training at Yale. His research interests
focus on studying TS, obsessive-compulsive disorder (OCD) and trichotillomania (TTM) across the lifespan and developing better pharmacological
treatments for children with depression, anxiety and ADHD. His research focuses on developing better treatments for children and adults
with these conditions particularly through clinical trials and meta-analysis. He has over 200 peer-reviewed publications and is currently
the Research Review Editor for the Journal of Child Psychology and Psychiatry. He also serves on the scientific advisory boards of the
Tourette Association of America and the TLC Foundation for Body-Focused Repetitive Behaviors.
Prof. Saoirse O'Sullivan, PhD
received her doctorate from Trinity College Dublin in 2001 and moved to the University of Nottingham in 2002 as a Research fellow where
she began researching cannabinoid pharmacology through basic and clinical research. She was made Lecturer in 2007 and Associate Professor
in 2011 and Full Professor in 2019. Prof. O'Sullivan has over 40 peer reviewed articles, six reviews and three books chapters on
the topic of cannabinoid pharmacology, with specific interests on the cardiovascular and gastrointestinal effects of cannabinoids and
therapeutic potential of cannabis-based medicines. Prof. O'Sullivan's research methodologies span from cellular and animal
models to human healthy volunteer studies and early phase clinical trials. In 2016, Prof. O'Sullivan was named the International
Cannabinoid Research Society Young Investigator of the year. Prof. O'Sullivan now runs an independent consulting company called
CanPharmaConsulting Ltd, and through this, acts as scientific advisor to Artelo Biosciences, Inc., CBD Science Group PLC, Scisparc, FSD
Pharma Inc., and Dragonfly Biosciences Ltd. She is the science lead for the Centre for Medicine Cannabis, working to shape the UK's
new medicinal cannabis regime for patients. She is also secretary to the International Cannabinoid Research Society.
93
Dr. Mellar P. Davis, MD,
FCCP FAAHPM
is a Professor of Palliative Medicine, the Geisinger Commonwealth School of Medicine and a member of the Palliative Care
Department, and Section Head, Geisinger Medical System Danville, PA. He has been a member of the Geisinger Medical Staff since August
2016. In his role as Section Head, Dr. Davis is responsible for developing palliative care services throughout the Geisinger Medical System
including outpatient and inpatient services. In addition, Dr. Davis works with the Geisinger Hospice Services to develop and coordinate
care within the central region. Dr. Davis was a member of the Cleveland Clinic Palliative Care section, Taussig Cancer Institute and fellowship
director until joining the Geisinger Medical System. Dr. Davis was the co-chair of the Palliative Care Study Group of the Multinational
Association of Supportive Care (MASCC) and a past board member since 2010. Dr. Davis has been a Professor of Medicine in The Cleveland
Clinic Lerner College of Medicine, Case Western Reserve University, since 2009 and was elected as a Fellow to the American Academy of
Hospice and Palliative Medicine in 2010. Dr. Davis is Editor in Chief of Progress on Palliative Care. Dr. Davis' present duties
are as the Associate Editor in Chief of PC Fast Article Critical Summary for Clinicians in Palliative Care.
Prof. Avi Schroeder
is the head of the Targeted Drug Delivery and Personalized Medicine Group, at the Technion, Israel Institute of Technology, and has translational
research experience with the development of liposome-based clinical systems. He is the author of 60 scientific papers in the field of
nanotechnology and medicine and is the inventor on 17 patents, and a recipient of 30 national and international innovation awards. Prof.
Schroeder is a scientific entrepreneur, starting multiple successful Technion spin-outs. Prof. Schroeder received three degrees in Chemical
Engineering from the Ben-Gurion University of the Negev and his postdoctoral training took place at MIT.
Family Relationships
There are no family relationships
between any members of our executive management and our directors.
Arrangements for Election of Directors and
Members of Management
We are not a party to, and
there are no arrangements or voting agreements that we are aware of for the election of our directors and members of management.
B. Compensation
Compensation
The following table presents
in the aggregate all compensation we paid to all of our directors and senior management, as a group for the year ended December 31, 2022.
The table does not include any amounts we paid to reimburse any of such persons for costs incurred in providing us with services during
this period.
94
All amounts reported in the
tables below reflect the cost to the Company, in thousands of U.S. Dollars, for the year ended December 31, 2022.
USD in thousands
Salary/Fee
Pension,
Retirement
and Other
Similar
Benefits
(1)
Share-
Based
Compensation
(2)
All directors and senior management as a group, consisting of 9 persons
$
1,820
120
$
639
(1)
Represents the directors and senior
management's payment of mandatory social benefits made by the Company on behalf of such officer. Such benefits may include, to
the extent applicable to the executive, payments, contributions and/or allocations for savings funds, education funds (referred to in
Hebrew as "
Keren Hishtalmut
"), pension, severance, risk insurances (e.g., life or work disability insurance) and payments
for social security.
(2)
Computed based on fair value for
Ordinary Shares options granted and estimated using the Black-Scholes option pricing model.
In accordance with the Companies
Law, the table below reflects the compensation granted to our five most highly compensated officers or directors during or with respect
to the year ended December 31, 2022.
Annual Compensation
Executive Officer
Salary/Fee
Pension, Retirement and Other Similar
Benefits
Share-
Based
Compensation
(1)
Total
USD in thousands
Amitay
Weiss
Chairman and Former Chief Executive Officer
(2)
$
499
$
-
$
120
$
619
Dr. Adi Zuloff-Shani
Chief Technologies Officer
$
296
$
55
$
171
$
522
Oz
Adler
Chief Executive Officer and Chief Financial Officer
(3)
$
358
$
64
$
127
$
549
Itschak
Shrem
President and Former Chairman
(4)
$
499
$
-
$
120
$
619
Lior
    Vider
Director
$
32
$
-
$
21
$
53
(1)
Share-based compensation includes the cost of our non-cash share-based compensation in 2022.
(2)
Mr. Weiss resigned from his position as Chief Executive Officer, effective January 10, 2022, and was subsequently appointed to serve as the Chairman of the Board of Directors.
(3)
Mr. Adler was appointed to serve as the Company's Chief Executive Officer, effective January 10, 2022.
(4)
Mr. Shrem resigned from his position as Chairman of the Board of Directors, effective January 10, 2022, and was subsequently appointed to serve as the President of the Company.
95
Employment and Services Agreements with
Executive Officers
We have entered into written
employment agreements and/or consulting agreements with each of our executive officers. All of these agreements contain customary provisions
regarding noncompetition, confidentiality of information and assignment of inventions. However, the enforceability of the noncompetition
provisions may be limited under applicable law. Most of these agreements are terminable by either party upon 30 days' prior written
notice. However, a longer 90 day notice period is required with respect to each of our executive officers. In addition, we have entered
into agreements with each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount
and to the extent that these liabilities are not covered by directors and officers insurance. Members of our senior management are eligible
for bonuses each year, subject to a pre-determined target-based bonus plan, which is usually set during the first quarter of each calendar
year following the recommendation of our compensation committee and the approval of our Board of Directors. The annual bonuses are payable
upon meeting objectives and targets that are set by our Chief Executive Officer and compensation committee and approved annually by our
Board of Directors.
For a description of the terms
of our options and option plans, see Item 6.E. "Share Ownership
"
below.
As required by the Companies
Law, our compensation committee and Board of Directors approved, and recommended to the shareholders of the Company to approve, amended
terms of compensation of our Chief Executive Officer, Mr. Oz Adler, our President, Mr. Itschak Shrem, and our and Chairperson of the Board
of Directors, Mr. Amitay Weiss, as set forth below. Such terms are in line with our Compensation Policy and were approved by the Company's
shareholders on February 10, 2022.
●
President and Chairperson of the Board of Directors
- a monthly fee in the amount of NIS 52,500 (approximately $14,919) and an annual target bonus of up to six monthly salaries, or eight
in the case of overachievement.
In addition, on September 15, 2022, our shareholders approved a special one-time bonus of $90,000 to each of
Mr. Amitay Weiss, in his previous capacity as the Company's Chief Executive Officer
and
Mr. Itschak Shrem, in his previous capacity as the Company's Chairman of the Board of Directors.
●
Chief Executive Officer
-
a monthly fee in the amount of NIS 66,000 (approximately $18,755) and an annual target bonus of up to six monthly salaries, or eight
in the case of overachievement, plus applicable pension, retirement and other similar benefits.
Directors' Service Contracts
We do not have written agreements
with any director providing for benefits upon the termination of his/her employment with us.
C. Board Practices
Corporate Governance Practices
As an Israeli company, we
are subject to various corporate governance requirements under the Companies Law. However, pursuant to regulations promulgated under the
Companies Law, companies with shares traded on certain U.S. stock exchanges, including the Nasdaq, may, subject to certain conditions,
"opt out" from the requirements to appoint external directors and related rules concerning the composition of the audit committee
and compensation committee of the board of directors, other than the gender diversification rule, which requires the appointment of a
director from the other gender if, at the time a director is appointed, all members of the board of directors are of the same gender.
In accordance with these regulations, following our listing on the Nasdaq, in January 2022, we elected to "opt out" from these
requirements of the Companies Law. Under these regulations, the exemptions from such Companies Law requirements will continue to be available
to us so long as: (i) we do not have a "controlling shareholder", as such term is defined under the Companies Law, (ii) our
shares are traded on certain U.S. stock exchanges, including the Nasdaq, and (iii) we comply with the director independence requirements
and the audit committee and compensation committee composition requirements under U.S. laws, including the rules of the applicable exchange,
that are applicable to U.S. domestic issuers.
96
We are a "foreign private
issuer", as such term is defined in Rule 405 under the Securities Act. As a foreign private issuer we are permitted to comply with
Israeli corporate governance practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements
we are not following and the equivalent Israeli requirement. As a foreign private issuer, we are exempt under the Exchange Act from, among
other things, the rules prescribing 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 periodic reports and financial statements with the SEC as frequently or as promptly as
U.S. companies whose securities are registered under the Exchange Act.
For more information regarding
our corporate governance practices and foreign private issuer status, see "Item 16.G Corporate Governance" below.
Board of Directors
Our Board of Directors presently
consists of seven members. Nasdaq listing standards require that a majority of our Board of Directors be independent. These standards
provide, among other things, that a person will be considered an independent director if he or she is not an officer of the company and
is, in the view of the company's board of directors, free of any relationship that would interfere with the exercise of independent
judgment. We believe that Mr. Vider, Ms. Sidi, Mr. Ben Shay, Mr. Revach and Mr. Dayan are all currently considered "independent"
for purposes of the Nasdaq rules. As such, our Board of Directors is comprised of a majority of independent directors as such term is
defined in the Nasdaq rules. Our amended and restated articles of association provide that the number of directors shall be set by the
general meeting of the shareholders provided that it will consist of not less than three and not more than 12 directors. Pursuant to the
Companies Law, the overall planning and management of our business is vested in our Board of Directors. Our Board of Directors may exercise
all powers and may take all actions that are not specifically granted to our shareholders or to management. Our executive officers are
responsible for our day-to-day management and have individual responsibilities established by our Board of Directors. Our Chief Executive
Officer is appointed by, and serves at the discretion of, our Board of Directors. All other executive officers are appointed by the Board
of Directors or by our Chief Executive Officer, provided that he was authorized by the Board of Directors to do so. Their terms of employment
are subject to the approval of our Board of Directors' Compensation Committee (see "-Compensation Committee
"
)
and of the Board of Directors (and in case the terms are not compatible with the provisions of the compensation policy, to our shareholders'
approval as well), and are subject to the terms of any applicable employment agreements that we may enter into with them.
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 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 of association.
Our directors are divided
among the three classes as follows:
●
the Class I directors consist
of Ms. Liat Sidi and Mr. Amnon Ben Shay, and their terms will expire at our annual general meeting of shareholders to be held in 2024;
●
the Class II directors consist
of Mr. Alon Dayan, Mr. Moshe Revach and Mr. Lior Vider and their terms will expire at our annual general meeting of shareholders to be
held in 2025; and
●
the Class III directors consist
of Mr. Amitay Weiss and Mr. Itschak Shrem and their terms will expire at our annual general meeting of shareholders to be held in 2023.
97
In addition, our amended and
restated articles of association allow our Board of Directors to appoint directors to fill vacancies on our Board of Directors or in addition
to the acting directors (subject to the limitation on the number of directors and their qualifications), until the next general meeting
in which directors may be appointed or such appointment terminated.
Under the Companies Law, nominations
for directors may be made by any shareholder holding at least 1% of our outstanding voting power. However, any such shareholder may make
such a nomination only if a written notice of such shareholder's intent to make such nomination has been given to our Board of Directors.
Any such notice must include certain information, a description of all arrangements between the nominating shareholder and the proposed
director nominee(s) and any other person pursuant to which the nomination(s) are to be made by the nominating shareholder, the consent
of the proposed director nominee(s) to serve as our director(s) if elected and a declaration signed by the nominee(s) declaring that there
is no limitation under the Companies Law preventing their election and that all of the information that is required to be provided to
us in connection with such election under the Companies Law has been provided.
Under the Companies Law, our
Board of Directors must determine the minimum number of directors who are required to have accounting and financial expertise. Our Board
of Directors has determined that the minimum number of directors of our company who are required to have accounting and financial expertise
is one.
Our Board of Directors is
required to elect one director to serve as the Chairman of the Board of Directors to preside at the meetings of the Board of Directors
and may also remove that director as Chairman. Pursuant to the Companies Law, neither the chief executive officer nor any of his or her
relatives is permitted to serve as the Chairman of the Board of Directors, and a company may not (subject to a certain time-limited exemption,
as described below) vest the Chairman or any of his or her relatives with the chief executive officer's authorities. In addition,
a person who reports, directly or indirectly, to the chief executive officer may not serve as the Chairman of the Board of Directors;
the Chairman may not be vested with authorities of a person who reports, directly or indirectly, to the chief executive officer; and the
Chairman may not serve in any other position in the company or a controlled company, but he or she may serve as a director or chairman
of a controlled company. However, and notwithstanding the foregoing, the Companies Law permits the shareholders of a company to determine,
for periods not exceeding three years from each such determination, that the Chairman or his or her relative may serve as chief executive
officer or be vested with the chief executive officer's authorities, and that the chief executive officer or his or her relative
may serve as Chairman or be vested with the Chairman's authorities. Such determination of a company's shareholders requires
either: (1) the approval of at least the majority of the shares of those shareholders present and voting on the matter (other than controlling
shareholders and those having a personal interest in the determination); or (2) that the total number of shares opposing such determination
does not exceed 2% of the total voting power in the company.
The Board of Directors may,
subject to the provisions of the Companies Law, delegate any or all of its powers to committees of the Board of Directors, and it may,
from time to time, revoke such delegation or alter the composition of any such committees, subject to certain limitations. Unless otherwise
expressly provided by the Board of Directors, the committees shall not be empowered to further delegate such powers. The composition and
duties of our audit committee and compensation committee, are described below. See "-Committees of the Board of Directors"
below.
Role of Board of Directors in Risk Oversight
Process
The Board of Directors oversees
how management monitors compliance with our risk management policies and procedures, and reviews the adequacy of the risk management framework
in relation to the risks faced by us. Our Board of Directors encourages management to promote a culture that incorporates risk management
into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management
meetings, and conducts specific strategic planning and review sessions that include a focused discussion and analysis of the risks we
face. Senior management reviews these risks with the Board of Directors focusing on particular business functions, operations or strategies,
and presents the steps taken by management to mitigate or eliminate such risks. The Board of Directors is assisted in its oversight role
by an internal auditor. The internal auditor undertakes both regular and ad hoc reviews of risk management controls and procedures, the
results of which are reported to our audit committee. See "-Committees of the Board of Directors-Internal Auditor" below.
98
Leadership Structure of the Board of Directors
In accordance with the Companies
Law and our amended and restated articles of association, our Board of Directors is required to appoint one of its members to serve as
Chairman of the Board of Directors. Our Board of Directors has appointed Mr. Amitay Weiss to serve as Chairman of the Board of Directors,
effective January 10, 2022, and subsequently further named as the President of the Company, Mr. Itschak Shrem, the authorities of the
Chairman of the Board of Directors as well.
Alternate Directors
Our amended and restated articles
of association provide, consistent with the Companies Law, that any director, and with respect to external directors (to the extent required
under applicable law - see the description of the External Directors Relief Resolution under "-External Directors" below)
– only subject to certain preconditions, may appoint another person to serve as his alternate director, provided such person has
the qualifications prescribed under the Companies Law to be appointed and to serve as a director and is not already serving as a director
or an alternate director of the company. The term of an alternate director may be terminated at any time by the appointing director and
automatically terminates upon the termination of the term of the appointing director. An alternate director has the same rights and responsibilities
as a director. To date there are no alternate director appointments in effect.
External Directors
Under the Companies Law, companies
incorporated under the laws of the State of Israel that are "public companies" are required to appoint at least two external
directors who meet the qualification requirements under the Companies Law. Pursuant to regulations promulgated under the Companies Law,
companies with shares traded on certain U.S. stock exchanges, including Nasdaq, which do not have a "controlling shareholder,"
may, subject to certain conditions, "opt out" from the Companies Law requirements to appoint external directors and related
Companies Law rules concerning the composition of the audit committee and compensation committee of the board of directors (other than
the gender diversification rule under the Companies Law, which requires the appointment of a director from the other gender if at the
time a director is appointed all members of the board of directors are of the same gender). In accordance with these regulations, in January
2022, following our listing on Nasdaq, our Board of Directors elected to "opt out" from the Companies Law requirement to appoint
external directors and related Companies Law rules concerning the composition of the audit committee and compensation committee of our
board of directors.
Fiduciary Duties of Office Holders
The Companies Law imposes
a duty of care and a duty of loyalty on all office holders of a company. "Office holders" includes the chief executive officer,
general manager, chief business manager, deputy general manager, vice general manager, any other person assuming the responsibilities
of any of the above positions regardless of that person's title, and a director, or a manager directly subordinate to the chief
executive officer or general manager.
The duty of care requires
an office holder to act with the level of care with which a reasonable office holder in the same position would have acted under the same
circumstances. The duty of care of an office holder includes a duty to use reasonable means to obtain:
●
information on the advisability of a given action brought for his approval or performed by him by virtue of his position; and
●
all other important information pertaining to these actions.
99
The duty of loyalty of an
office holder requires an office holder to act in good faith and for the benefit of the company, and includes a duty to:
●
refrain from any conflict of interest between the performance of his duties in the company and his performance of his other duties or personal affairs;
●
refrain from any action that constitutes competition with the company's business;
●
refrain from exploiting any business opportunity of the company to receive a personal gain for himself or others; and
●
disclose to the company any information or documents relating to the company's affairs which the office holder has received due to his position as an office holder.
On February 15, 2022, we filed
a lawsuit in the Economic Division of the Tel Aviv Court against six of our former directors, including our former interim chief executive
officer and executive chairman, which included allegations of breaches of their fiduciary duties (duty of care and duty of loyalty) under
the Companies Law. See "Legal Proceedings" in Item 8.A below for additional information.
Approval of Related Party Transactions under
Israeli Law
General
Under the Companies Law, we
may approve an action by an office holder from which the office holder would otherwise have to refrain, as described above, if:
●
the office holder acts in good faith and the act or its approval does not cause harm to the company; and
●
the office holder disclosed the nature of his or her interest in the transaction (including any significant fact or document) to the company at a reasonable time before the company's approval of such matter.
Disclosure of Personal Interests of an Office
Holder
The Companies Law requires
that an office holder disclose to the company, promptly, and, in any event, not later than the board meeting at which the transaction
is first discussed, any direct or indirect personal interest that he or she may have and all related material information known to him
or her relating to any existing or proposed transaction by the company.
A "personal interest"
includes the personal interest of a person for whom the office holder holds a voting proxy or the personal interest of the office holder
with respect to his or her vote on behalf of a person for whom he or she holds a proxy even if such shareholder has no personal interest
in the matter.
If the transaction is an extraordinary
transaction, the office holder must also disclose any personal interest held by:
●
the office holder's relatives; or
●
any corporation in which the office holder or his or her relatives holds 5% or more of the shares or voting rights, serves as a director or general manager or has the right to appoint at least one director or the general manager.
An office holder is not, however,
obliged to disclose a personal interest if it derives solely from the personal interest of his or her relative in a transaction that is
not considered an extraordinary transaction.
100
Under the Companies Law, an
extraordinary transaction is a transaction:
●
not in the ordinary course of business;
●
not on market terms; or
●
that is likely to have a material effect on the company's profitability, assets or liabilities.
The Companies Law does not
specify neither to who within us nor the manner in which required disclosures are to be made. We require our office holders to make such
disclosures to our Board of Directors.
Under the Companies Law, once
an office holder complies with the above disclosure requirement, the board of directors may approve a transaction between the company
and an office holder, or a third party in which an office holder has a personal interest, unless the articles of association provide otherwise
and provided that the transaction is in the company's interest and is performed by the office holder in good faith. If the transaction
is an extraordinary transaction, first the audit committee and then the board of directors, in that order, must approve the transaction.
Under specific circumstances, shareholder approval may also be required. Any director (and any person, in general) who has a personal
interest in an extraordinary transaction, which is considered at a meeting of the board of directors or the audit committee, may not be
present at this meeting or vote on this matter, unless the chairman of the relevant committee or board of directors determines that he
or she should be present in order to present the transaction that is subject to approval. If a majority of the board of directors or the
audit committee, as the case may be, has a personal interest in the approval of a transaction, then all directors may participate in discussions
of the audit committee or the board of directors (as applicable) on such transaction and the voting on approval thereof, but shareholder
approval is also required for such transaction.
Under the Companies Law, all
arrangements as to compensation and indemnification or insurance of office holders require approval of the compensation committee and
board of directors, and compensation of office holders who are directors must be also approved, subject to certain exceptions, by the
shareholders, in that order. If shareholders of a company do not approve the compensation terms of office holders, other than directors,
the compensation committee and board of directors may override the shareholders' decision, subject to certain conditions.
Disclosure of Personal Interests of a Controlling
Shareholder
Under the Companies Law, the
disclosure requirements that apply to an office holder also apply to a "controlling shareholder" of a public company. Extraordinary
transactions with a controlling shareholder or in which a controlling shareholder has a personal interest, including a private placement
in which a controlling shareholder has a personal interest, as well as transactions for the provision of services whether directly or
indirectly by a controlling shareholder or his or her relative, or a company such controlling shareholder controls, and transactions concerning
the terms of engagement of a controlling shareholder or a controlling shareholder's relative, whether as an office holder or an
employee, require the approval of the audit committee or the compensation committee, as the case may be, the board of directors and a
majority of the shares voted by the shareholders of the company participating and voting on the matter in a shareholders' meeting.
In addition, the shareholder approval must fulfill one of the following requirements:
●
at least a majority of the shares held by shareholders who have no personal interest in the transaction and are voting at the meeting must be voted in favor of approving the transaction, excluding abstentions; or
●
the shares voted by shareholders who have no personal interest in the transaction who vote against the transaction represent no more than 2% of the voting rights in the company.
In addition, any extraordinary
transaction with a controlling shareholder or in which a controlling shareholder has a personal interest with a term of more than three
years requires the abovementioned approval every three years; however, such transactions not involving the receipt of services or compensation
can be approved for a longer term, provided that the audit committee determines that such longer term is reasonable under the circumstances.
Pursuant to regulations promulgated
under the Companies Law, certain transactions with a controlling shareholder or his or her relative, or with directors, that would otherwise
require approval of a company's shareholders may be exempt from shareholder approval upon certain determinations of the audit or
compensation committee and board of directors.
101
The Companies Law requires
that every shareholder that participates, in person, by proxy or by voting instrument, in a vote regarding a transaction with a controlling
shareholder, must indicate in advance or in the ballot whether or not that shareholder has a personal interest in the vote in question.
Failure to so indicate will result in the invalidation of that shareholder's vote.
The term "controlling
shareholder" is defined in the Companies Law as a shareholder with the ability to direct the activities of the company, other than
by virtue of being an office holder. A shareholder is presumed to be a controlling shareholder if the shareholder holds 50% or more of
the voting rights in a company or has the right to appoint the majority of the directors of the company or its general manager. The definition
a "controlling shareholder" is deemed to include any shareholder that holds 25% or more of the voting rights in a company
if no other shareholder holds more than 50% of the voting rights in the company. For the purpose of determining the holding percentage
stated above, two or more shareholders who have a personal interest in a transaction that is brought for the company's approval
are deemed as joint holders. According to the foregoing, the Companies Law recognizes a situation where there exists a "controlling
shareholder" regarding a particular matter or in relation to a particular transaction, although such shareholder would not be considered
to have a controlling interest on an ongoing basis or in any other case.
Duties of Shareholders
Under the Companies Law, a
shareholder has a duty to refrain from abusing its power in the company and to act in good faith and in an acceptable manner in exercising
its rights and performing its obligations to the company and other shareholders, including, among other things, voting at general meetings
of shareholders on the following matters:
●
amendment of the articles of association;
●
increase in the company's authorized share capital;
●
merger; and
●
the approval of "related party" transactions and acts of office holders that require shareholder approval.
A shareholder also has a general
duty to refrain from oppressing and discriminating against other shareholders.
The remedies generally available
upon a breach of contract will also apply to a breach of the above mentioned duties, and in the event of oppression of other shareholders,
additional remedies are available to the injured shareholder.
In addition, any controlling
shareholder, any shareholder that knows that its vote can determine the outcome of a shareholder vote and any shareholder that, under
a company's articles of association, has the power to appoint or prevent the appointment of an office holder, or has another power
with respect to a company, is under a duty to act with fairness towards the company. The Companies Law does not describe the substance
of this duty except to state that the remedies generally available upon a breach of contract will also apply in the event of a breach
of the duty to act with fairness, taking the shareholder's position in the company into account.
Committees of the Board of Directors
Our Board of Directors has
established two standing committees, both of which (the audit committee and the compensation committee) are mandatory (and to date comprised
of the same members and combined into one functional committee which resides as a unified committee). In addition, occasionally our Board
of Directors may form sub-committees for certain matters on an ad hoc basis, such as a pricing committee or a nomination and corporate
governance committee, with advisory powers only, operating under a framework and guidelines as outlined and defined in advance by our
Board of Directors.
102
Audit Committee
Companies Law Requirements
Under the Companies Law, we
are required to appoint an audit committee.
Listing Requirements
Under the corporate governance
rules of Nasdaq, we are required to maintain an audit committee consisting of at least three independent directors, each of whom is financially
literate and one of whom has accounting or related financial management expertise.
Our audit committee, acting
pursuant to a written charter, consists of Mr. Vider, Mr. Ben Shay and Mr. Dayan. Mr. Ben Shay serves as chairperson of our audit committee.
All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC
and the corporate governance rules of Nasdaq. Our Board of Directors has determined that Amnon Ben Shay is an audit committee financial
expert as defined by the SEC rules and has the requisite financial experience as defined by the corporate governance rules of Nasdaq.
Audit Committee Role
Under the Companies Law, our
audit committee is responsible for:
●
determining whether there are deficiencies in the business management practices of our company, and making recommendations to the Board of Directors to improve such practices;
●
determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest and whether such transaction is extraordinary or material under Companies Law) (see "-Approval of Related Party Transactions under Israeli Law");
●
examining our internal controls and internal auditor's performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities;
●
examining the scope of our auditor's work and compensation and submitting a recommendation with respect thereto to our Board of Directors or shareholders, depending on which of them is considering the appointment of our auditor;
●
establishing procedures for the handling of employees' complaints as to the management of our business and the protection to be provided to such employees;
●
determining whether certain acts of an office holder not in accordance with his or her fiduciary duty owed to the company are extraordinary or material and to approve such acts and certain related party transactions (including transactions in which an office holder has a personal interest) and whether such transaction is extraordinary or material under the Companies Law (see "-Approval of Related Party Transactions Under Israeli Law");
●
deciding whether to approve and to establish the approval process (including by tender or other competitive proceedings) for certain transactions with a controlling shareholder or in which a controlling shareholder has a personal interest; and
●
determining the process of approving of transactions that are not negligible, including determining the types of transactions that will be subject to the approval of the audit committee.
103
We have adopted an audit committee
charter setting forth among others, the responsibilities of the audit committee consistent with the rules of the SEC and Nasdaq listing
rules, including, among others, the following:
●
considering and making recommendations to the Board of Directors on our financial statements, reviewing and discussing the financial statements and presenting its recommendations with respect to the financial statements to the Board of Directors prior to the approval of the financial statements by our Board of Directors;
●
oversight of our independent registered public accounting firm and recommending the engagement, compensation or termination of engagement of our independent registered public accounting firm to the Board of Directors in accordance with Israeli law;
●
recommending the engagement or termination of the person filling the office of our internal auditor, reviewing the services provided by our internal auditor and reviewing effectiveness of our system of internal control over financial reporting;
●
recommending the terms of audit and non-audit services provided by the independent registered public accounting firm for pre-approval by our Board of Directors; and
●
reviewing and monitoring, if applicable, legal matters with significant impact, reviewing regulatory authorities' findings, receiving reports regarding irregularities and legal compliance, acting according to "whistleblower policy" and recommending to our Board of Directors if so required, and overseeing our policies and procedures regarding compliance with applicable financial and accounting related standards, rules and regulations.
Compensation Committee
Companies Law Requirements
Under the Companies Law, the
board of directors of any public company must establish a compensation committee. The compensation committee must be comprised of at least
three directors.
Listing Requirements
Our compensation committee
is acting pursuant to a written charter, and consists of Mr. Vider, Mr. Ben Shay and Mr. Dayan. Mr. Ben Shay is the Chairperson of the
compensation committee. Our Board of Directors has determined that each member of our compensation committee is independent under the
corporate governance rules of Nasdaq, including the additional independence requirements applicable to the members of a compensation committee.
Compensation Committee Role
Our compensation committee
reviews and recommends to our Board of Directors: (1) the annual base compensation of our executive officers and directors; (2) annual
incentive bonus, including the specific goals and amount; (3) equity compensation; (4) employment agreements, severance arrangements,
and change in control agreements/provisions; (5) retirement grants and/or retirement bonuses; and (6) any other benefits, compensation,
compensation policies or arrangements.
The duties of the compensation
committee include the recommendation to the company's board of directors of a policy regarding the terms of engagement of office
holders, to which we refer as a Compensation Policy. The Compensation Policy must be adopted by the company's Board of Directors,
after considering the recommendations of the Compensation Committee. The Compensation Policy is then brought for approval by our shareholders
and is subject to special majority requirements. On February 10, 2022, our shareholders approved our new Compensation Policy, which unless
amended shall remain in effect until February 9, 2025.
104
Compensation Policy
The Compensation Policy must
serve as the basis for decisions concerning the financial terms of employment or engagement of executive officers and directors, including
exculpation, insurance, indemnification or any monetary payment or obligation of payment in respect of employment or engagement. The Compensation
Policy must be approved (or reapproved) not longer than every three years, and relate to certain factors, including advancement of the
company's objectives, the company's business and its long-term strategy, and creation of appropriate incentives for executives.
It must also consider, among other things, the company's risk management, size and the nature of its operations. The Compensation
Policy must furthermore consider the following additional factors:
●
the knowledge, skills, expertise and accomplishments of the relevant office holder (director or executive);
●
the director's or executive's roles and responsibilities and prior compensation agreements with him or her;
●
the relationship between the terms offered and the average and median compensation of the other employees of the company, including those employed through manpower companies;
●
the impact of disparities in salary upon work relationships in the company;
●
the possibility of reducing variable compensation at the discretion of the board of directors; and the possibility of setting a limit on the exercise value of non-cash variable compensation; and
●
as to severance compensation, the period of service of the director or executive, the terms of his or her compensation during such service period, the company's performance during that period of service, the person's contribution towards the company's achievement of its goals and the maximization of its profits, and the circumstances under which the person is leaving the company.
The Compensation Policy must
also include the following principles:
●
the link between variable compensation and long-term performance and measurable criteria;
●
the relationship between variable and fixed compensation, and the ceiling for the value of variable compensation;
●
the conditions under which a director or executive would be required to repay compensation paid to him or her if it was later shown that the data upon which such compensation was based was inaccurate and was required to be restated in the company's financial statements;
●
the minimum holding or vesting period for variable, equity-based compensation; and
●
maximum limits for severance compensation.
The Compensation Policy must
also consider appropriate incentives from a long-term perspective and maximum limits for severance compensation.
The Compensation Committee
is responsible for (1) recommending the Compensation Policy to a company's Board of Directors for its approval (and subsequent approval
by our shareholders) and (2) duties related to the compensation policy and to the compensation of a company's office holders as
well as functions previously fulfilled by a Company's Audit Committee with respect to matters related to approval of the terms of
engagement of office holders, including:
●
recommending whether a compensation policy should continue in effect, if the then-current policy has a term of greater than three years (approval of either a new compensation policy or the continuation of an existing compensation policy must in any case occur every three years);
●
recommending to the board of directors periodic updates to the compensation policy;
●
assessing implementation of the compensation policy; and
●
determining whether the compensation terms of the chief executive officer of the company need not be brought to approval of the shareholders.
105
Internal Auditor
Under the Companies Law, the
Board of Directors of an Israeli public company must also appoint an internal auditor nominated and supervised by the audit committee.
Our internal auditor is Mr. Daniel Shapira, who has been serving as our internal auditor since March 2006. Mr. Shapira is a Certified
Public Accountant and holds a B.A. degree in Economics and Accounting from Bar-Ilan University, Israel.
The role of the internal auditor
is to examine whether a company's actions comply with the law and proper business procedure. Our Chairman acts as the internal auditor's
organizational supervisor. The internal auditor will submit his internal auditor's work plan for the approval of our audit committee.
The internal auditor may not be an "interested party" or office holder, or a relative of any interested party or office holder,
and may not be a member of the company's independent accounting firm or its representative. The Companies Law defines an interested
party as a holder of 5% or more of the shares or voting rights of a company, any person or entity that has the right to nominate or appoint
at least one director or the general manager of the company or any person who serves as a director or as the general manager of a company.
Our internal auditor is not our employee, but the managing partner of a firm which specializes in internal auditing.
Remuneration of Directors
Under the Companies Law, remuneration
of directors is subject to the approval of the compensation committee, thereafter by the board of directors and thereafter by the general
meeting of the shareholders. In case the remuneration of the directors is in accordance with regulation applicable to remuneration of
the external directors then such remuneration shall be exempt from the approval of the general meeting.
Insurance
Under the Companies Law and
our amended and restated articles of association, a company may obtain insurance for any of its office holders for:
●
a breach of his or her duty of care to the company or to another person, including a breach arising out of the negligent conduct of the office holder;
●
a breach of his or her duty of loyalty to the company, provided that the office holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice the company's interests;
●
a financial liability imposed upon him or her in favor of another person concerning an act performed by such office holder in his or her capacity as an officer holder;
●
any other insurable action in accordance with the Companies Law;
●
expenses incurred by an office holder relating to an administrative enforcement proceeding conducted with respect to such office holder including reasonable litigation expenses and attorneys' fees; and
●
payments to the party injured by the violation, in accordance with the Securities Law.
We currently have liability
insurance providing total coverage of $5 million per claim and in the aggregate for the benefit of all of our directors and officers and
company coverage for securities claims. We also have an excess Side A difference in conditions policy providing a total coverage of $2.5
million per claim and in the aggregate for the benefit of all of our directors and officers for claims against them, which may operate
as a primary coverage in certain cases, subject to policy terms and conditions.
106
Indemnification
The Companies Law and our
amended and restated articles of association provide that we may indemnify an office holder against:
●
a financial liability imposed on him or her in favor of another person by any judgment concerning an act performed in his or her capacity as an office holder, 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 a 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 must detail the abovementioned foreseen events and amount or criteria;
●
reasonable litigation expenses, including attorneys' fees, incurred by the office holder: (i) 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 (a) no indictment (as defined in the Companies Law) was filed against such office holder as a result of such investigation or proceeding; and (b) no financial liability as a substitute for the criminal proceeding (as defined in the Companies Law) was imposed upon him or her 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 (ii) in connection with a monetary sanction;
●
reasonable litigation expenses, including attorneys' fees, expended by the office holder or charged to him or her by a court relating to an act performed in his or her capacity as an office holder, in connection with: (1) proceedings that the company institutes, or that another person institutes on the company's behalf, against him or her; (2) a criminal charge of which he or she was acquitted; or (3) a criminal charge for which he or she was convicted for a criminal offense that does not require proof of criminal thought;
●
expenses incurred by an office holder relating to an administrative enforcement proceeding conducted with regard to such office holder, including reasonable litigation expenses and including attorneys' fees;
●
payment to the party injured by the violation; and
●
liability or expense otherwise permitted as an indemnification by the Companies Law.
Our amended and restated articles
of association allow us to indemnify our office holders up to a certain amount. The Companies Law also permits a company to undertake
in advance to indemnify an office holder, provided that if such indemnification relates to financial liability imposed on him or her,
as described above, then the undertaking should be limited:
●
to categories of events that the board of directors determines are likely to occur in light of the operations of the company at the time that the undertaking to indemnify is made; and
●
in amount or criterion determined by the board of directors, at the time of the giving of such undertaking to indemnify, to be reasonable under the circumstances.
We have entered into indemnification
agreements, with each of our directors and with certain members of our senior management. Each such indemnification agreement provides
the office holder with indemnification to the fullest extent permitted under applicable law and up to a certain amount, and including
with respect to liabilities resulting from our initial public offering in the United States and any other subsequent public offerings,
and to the extent that the directors and officers insurance do not cover these liabilities.
Exculpation
Under the Companies Law, an
Israeli company may not exculpate an office holder from liability for a breach of his or her duty of loyalty, but may exculpate in advance
an office holder from his or her liability to the company, in whole or in part, and for damages caused to the company as a result of a
breach of his or her duty of care (other than in relation to distributions), but only if a provision authorizing such exculpation is included
in its articles of association. A company may not exculpate a director from liability arising out of a prohibited dividend or distribution
to shareholders. Our amended and restated articles of association provide that we may exculpate any office holder from liability to us
to the fullest extent permitted by law.
We have entered into exculpation
agreements with each of our current directors and executive officers undertaking to exculpate and release our office holders from any
and all liability to us related to any breach by them of their duty of care to us to the fullest extent permitted by law and including
with respect to liabilities resulting from our initial public offering in the United States and any other subsequent public offerings.
107
Limitations
The Companies Law provides
that we may not exculpate or indemnify an office holder nor enter into an insurance contract that would provide coverage for any liability
incurred as a result of any of the following: (1) a breach by the office holder of his or her duty of loyalty unless (in the case of indemnity
or insurance only, but not exculpation) the office holder acted in good faith and had a reasonable basis to believe that the act would
not prejudice us; (2) a breach by the office holder of his or her duty of care if the breach was carried out intentionally or recklessly
(as opposed to merely negligently); (3) any action taken or omission committed with the intent to derive an illegal personal benefit;
or (4) any fine or forfeit levied against the office holder.
Equity Incentive Plans
Israeli Share Option Plan (2015); Israeli
Share Option Plan (2005)
In July 2005, we adopted the
Israeli Share Option Plan (2005), or the 2005 Plan, which was in force for a period of 10 years. Upon the expiration of the 2005 Plan,
we adopted the Israeli Share Option Plan (2015), or the 2015 Plan. There are no options outstanding under our 2005 Plan and all new options
are granted under the 2015 Plan.
Under the 2015 Plan, we grant
options to purchase our Ordinary Shares to our officers, employees, consultants and other service providers. As of April 24, 2023, 357,153
 Ordinary Shares were reserved for issuance under the 2015 Plan, of which options to purchase 183,284 Ordinary Shares were issued
and outstanding thereunder. Of such outstanding options, options to purchase 123,911  Ordinary Shares were vested as of April 24,
2023, with a weighted average exercise price of $6.25 per share.
The 2015 Plan was designed
to reflect the provisions of the Israeli Income Tax Ordinance (New Version) 5721-1961, or the Ordinance, mainly Sections 102 and 3(i),
which afford certain tax advantages to Israeli employees, officers, and directors who are granted share options in accordance with its
terms. Section 102 of the Ordinance allows employees, directors, and officers, who are not controlling shareholders and who are Israeli
residents, to receive favorable tax treatment for compensation in the form of shares or share options. Section 102 of the Ordinance includes
two alternatives for tax treatment involving the issuance of share options or shares to a trustee for the benefit of the grantees and
also includes an additional alternative for the issuance of share options or shares directly to the grantee. Sections 102(b)(2) and 102(b)(3)
of the Ordinance, which provide the most favorable tax treatment for grantees, permit the issuance to a trustee under the "capital
gain" tax regime. In order to comply with the terms of the "capital gain" tax regime, all share options granted under
a specific plan and subject to the provisions of Section 102 of the Ordinance, as well as the shares issued upon exercise of such share
options and other shares received following any realization of rights with respect to such share options, such as share dividends and
share splits, must be registered in the name of a trustee selected by the board of directors and held in trust for the benefit of the
relevant employee, director, officer or service provider. The trustee may not release these share options or shares to the relevant grantee
before the second anniversary of the registration of the share options in the name of the trustee. However, under this regime, our ability
to deduct an expense with respect to the issuance of the share options or shares might be limited. Section 3(i), which permits the issuance
of share options under the "income from labor" tax regime, does not provide for similar tax benefits.
The 2015 Plan may be administered
by our Board of Directors either directly or upon the recommendation of a committee appointed by our Board of Directors. Our compensation
committee recommends to the Board of Directors, and the Board of Directors determines or approves the eligible individuals who receive
share options under the 2015 Plan, the number of Ordinary Shares covered by those share options, the terms under which such share options
may be exercised, and other terms and conditions of the share options, all in accordance with the provisions of the 2015 Plan. Share option
holders may not transfer their share options except in the event of death or transfer in accordance with law and the provisions of the
2015 Plan. Our compensation committee or Board of Directors may at any time amend or terminate the 2015 Plan; however, any amendment or
termination may not adversely affect any share options or shares granted under such 2105 Plan prior to such action. The share option exercise
price is determined by the Board of Directors, following the recommendation of the compensation committee, and specified in each option
award agreement.
108
Awards under the 2015 Plan
may be granted until December 2025, 10 years from December 2015. Share options granted under the 2015 Plan generally vest over three years
commencing on the date of grant such that the options shall vest on a quarterly basis in equal portions, unless otherwise provided in
a specific share option grant agreement and such option agreements may contain acceleration provisions upon certain merger, acquisition,
or change of control transactions. Share options, other than certain incentive share options, that are not exercised within the term set
forth under each award agreement shall expire, unless otherwise determined by our Board of Directors. Except as otherwise determined by
the Board of Directors or as set forth in an individual's award agreement, in the event of termination of employment or services
for reasons of disability or death, the grantee, or in the case of death - his or her legal successor, may exercise share options that
have vested prior to termination within a period of twenty four months from the date of disability or death. If we terminate a grantee's
employment or service for cause (as this term is defined under the Plan), all of the grantee's unvested share options will expire
on the date of termination, yet share options which by that date the offeree's eligibility to exercise has already been formed shall
remain exercisable. If a grantee's employment or service is terminated for any other reason other than for cause, the grantee may
exercise his or her vested share options within 90 days of the date of termination, unless otherwise provided in a specific share option
grant agreement. In the event of (i) a sale of all or substantially all of our assets or (ii) our consolidation or merger in which we
are not the ongoing or surviving corporation, then, and unless otherwise determined in the agreement or by the Board of Directors, we
shall be entitled to determine that all of the outstanding unexercised share options held by or for the benefit of any grantee shall be
assumed or substituted for an appropriate number of share options of the successor company, provided that the aggregate amount of the
exercise price for such share options shall be equal to the aggregate amount of the exercise price of our unexercised share options held
by each grantee at such time. In addition, and unless otherwise determined by our Board of Directors, upon the occurrence of certain events,
as further described in the 2015 Plan (among others, a merger transaction (or the like), liquidation and/or dissolution, recapitalization,
rights offering, distribution of bonus shares, dividends and capital reorganization), a grantee's rights to purchase shares under
the 2015 Plan shall be adjusted as provided therein.
D. Employees.
On December 31, 2020, we had
3 full-time employees. On December 31, 2021, we had 4 full-time employees. On December 31, 2022, we had 3 full-time employees, 2 of whom
were members of senior management: our Chief Executive Officer who is also our Chief Financial Officer and Chief Technologies Officer.
None of our current employees
and officeholders is represented by labor unions or covered by collective bargaining agreements. We believe that we maintain good relations
with all of our employees. However, in Israel, we are subject to certain Israeli labor laws, regulations and national labor court precedent
rulings, as well as certain provisions of collective bargaining agreements applicable to us by virtue of extension orders issued in accordance
with relevant labor laws by the Israeli and Industry of Economy and which apply such agreement provisions to our employees even though
they are not part of a union that has signed a collective bargaining agreement.
E. Share Ownership.
See "Item 7.A. Major Shareholders"
below.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
A. Major Shareholders
None of the Company's
shareholders own more than 5% of the Company's issued and outstanding ordinary shares.
109
Unless indicated otherwise,
the following table lists the number of our shares beneficially owned by each of our directors, our executive officers and our directors
and executive officers as a group as of April 24, 2023:
Executive Officers and Directors
Number of
Ordinary
Shares
Beneficially
Owned (1)
Percent of
Class (2)
Itschak Shrem
24
,
590
(3)
*
%
Amitay Weiss
29
,
590
(4)
*
Oz Adler
22
,
481
(5)
*
Dr. Adi Zuloff-Shani
22
,
660
(6)
*
Amnon Ben Shay
3
,
666
(7)
*
Alon Dayan
3
,
666
(7)
*
Liat Sidi
3
,
666
(7)
*
Lior Vider
3
,
666
(7)
*
Moshe Revach
3
,
666
(7)
*
All directors and executive officers as a group (9 persons)
117
,
651
1.68
%
*
Less than 1%.
(1)
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary Shares relating to options currently exercisable or exercisable within 60 days of the date of this table are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.
(2)
The percentages shown are based on 6,860,090 Ordinary Shares issued and outstanding as of April 24, 2023, plus Ordinary Shares relating to options and warrants currently exercisable or exercisable within 60 days of the date of this table, which are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person.
110
(3)
Includes 3,857 Ordinary Shares and options to purchase 20,733 Ordinary
Shares at an exercise price of $6.50 per share. In addition, Mr. Shrem holds options to purchase 10,367 Ordinary Shares that are not exercisable
within 60 days. Mr. Shrem's options have an expiration date of January 3, 2028, and a weighted average exercise price of $6.50..
(4)
Includes 8,857 Ordinary Shares and options to purchase 20,733 Ordinary
Shares at an exercise price of $6.50 per share. In addition, Mr. Weiss holds options to purchase 10,367 Ordinary Shares that are not exercisable
within 60 days. Mr. Weiss's options have an expiration date of January 3, 2028, and a weighted average exercise price of $6.50.
(5)
Includes options to purchase 20,733 Ordinary Shares at an exercise price of $6.50 per share, options to purchase 1,606 Ordinary Shares at an exercise price $210 per share and options to purchase 142 Ordinary Shares at an exercise price $392 per share. In addition, Mr. Adler holds options to purchase 10,367 Ordinary Shares that are not exercisable within 60 days. Mr. Adler's options have an expiration date of August 31, 2023 to October 10, 2029, and a weighted average exercise price of $18.
(6)
Includes options to purchase 178 Ordinary Shares at an exercise price of NIS 2,971 (approximately $900) per share, options to purchase 321 Ordinary Shares at an exercise price of $392 per share, options to purchase 1,428 Ordinary Shares at an exercise price of $210 per share and options to purchase 20,733 Ordinary Shares at an exercise price of $6.50 per share. In addition, Dr. Zuloff-Shani holds options to purchase 10,367 Ordinary Shares that are not exercisable within 60 days. Dr. Zuloff-Shani's options have an expiration date of August 28, 2023 to October 10, 2029, and a weighted average exercise price of $23.86.
(7)
Includes options to purchase 3,666 Ordinary Shares at an exercise price of $6.50 per share. Each of Amnon Ben Shay, Alon Dayan, Liat Sidi, Lior Vider and Moshe Revach holds options to purchase 1,834 Ordinary Shares that are not exercisable within 60 days. The options have an expiration date of January 3, 2028, and a weighted average exercise price of $6.50.
Changes in Percentage Ownership by Major
Shareholders
To our knowledge, other than
as disclosed in the table above, our other filings with the SEC and this Annual Report, there has been no significant change in the percentage
ownership held by any major shareholder during the past three years.
Voting Rights
No major shareholders listed
above had or have voting rights with respect to their Ordinary Shares that are different from the voting rights of other holders of our
Ordinary Shares.
Record Holders
As of April 24, 2023, there
were 21 holders of record of our Ordinary Shares, 6 of which have a registered address in the United States.
These numbers are not representative
of the number of beneficial holders of our shares nor is it representative of where such beneficial holders reside, since many of these
shares were held of record by brokers or other nominees.
Change in Control Arrangements
We are not controlled by another
corporation, by any foreign government or by any natural or legal persons except as set forth herein, and there are no arrangements known
to us which would result in a change in control at a subsequent date.
111
B. Related Party Transactions
Employment Agreements
We have entered into written
employment agreements with Mr. Oz Adler, our Chief Executive Officer and Chief Financial Officer, and Dr. Adi Zuloff-Shani, our Chief
Technologies Officer. Each of these agreements contains customary provisions regarding noncompetition, confidentiality of information
and assignment of inventions. However, the enforceability of the noncompetition provisions may be limited under applicable law. These
agreements are terminable by either party upon 30 days' prior written notice. In addition, we have entered into agreements with
each executive officer and director pursuant to which we have agreed to indemnify each of them up to a certain amount and to the extent
that these liabilities are not covered by directors and officers insurance. Members of our senior management are eligible for bonuses
each year. The bonuses are payable upon meeting objectives and targets that are set by our Chief Executive Officer and approved annually
by our Board of Directors that also set the bonus targets for our Chief Executive Officer. See Item 6.B. "Compensation-Employment
and Service Agreements with Executive Officers" and see the descriptions of exculpation and indemnification agreements and directors
and officers insurance arrangements in Item 6.A. "Directors and Senior Management" and Item 6.C. "Board Practices-Insurance,"
- "Indemnification" and "-Exculpation."
Options
Since our inception, we have
granted options to purchase our Ordinary Shares to our employees, officers, service providers and certain of our directors. Such option
agreements may contain acceleration provisions upon certain merger, acquisition, or change of control transactions. We describe our option
plans under Item 6.E. "Share Ownership-Equity Incentive Plans." If the relationship between us and an executive officer or
a director is terminated, except for cause (as defined in the various option plan agreements), options that are vested will generally
remain exercisable for 90 days after such termination.
Commercial Agreements
Clearmind
On March 7, 2022, we entered
into the Cooperation Agreement with Clearmind, a company in which Dr. Adi Zuloff-Shani, our Chief Technologies Officer, Mr. Weiss, our
President, and Mr. Adler, our Chief Executive Officer and Chief Financial Officer serve as officers and directors. See Item 4.B. "Business
Overview-
Collaboration with Clearmind
" for additional information.
On November 17, 2022, we invested
$1.5 million in Clearmind in connection with its initial public offering on the Nasdaq Capital Market, in exchange for 230,769 common
shares of Clearmind, representing 9.33% of the outstanding share capital of Clearmind.
Polyrizon
On May 31, 2022, we entered
into the Polyrizon Collaboration Agreement with Polyrizon. Mr. Adler, our Chief Executive Officer and Chief Financial Officer, serves
as a director in Polyrizon. See Item 4.B. "Business Overview -
Collaboration with Polyrizon
" for additional information.
Jeffs' Brands
On November 15, 2022, we entered
into a letter of intent with Jeffs' Brands, to establish the Jeffs' Joint Venture. See Item 4.B. "Business Overview
–
Joint Venture with Jeffs' Brands
" for additional information.
On
February 23, 2023, we entered into the Secondary Purchase Agreement with Jeffs' Brands and Jeffs' Holdings.
See
Item 4.B. "Business Overview—
Wellution
" for additional information.
Mr. Oz Adler, our Chief Executive
Officer and Chief Financial Officer, is the chairman of the board of directors of Jeffs' Brands, Mr. Amitay Weiss, our
chairman of the board of directors and Mr. Moshe Revach, a member of our board of directors, are both directors in Jeffs' Brands.
C. Interests of Experts and Counsel
Not applicable.
112
ITEM 8. FINANCIAL INFORMATION.
A. Consolidated Statements and Other Financial Information.
See Item 18. "Financial
Statements."
Legal Proceedings
Claims Against our Former Directors
On February 15, 2022, we filed
a lawsuit against our former directors in the Economic Division of the Tel Aviv Court, case number 34426-02-22, or the Lawsuit. The Lawsuit
names six former directors, including our former interim chief executive officer and executive chairman, Dr. Ascher Shmulewitz, as defendants,
or the Defendants, and includes allegations of breaches of fiduciary duties (duty of care and duty of loyalty) of the Defendants under
the Companies Law.
The Lawsuit challenges a transaction
approved by the Defendants in August 2018, to acquire, via one of our subsidiaries, Therapix Healthcare Resources, Inc., eight pain clinics
and a fully equipped laboratory from Anesthesia Services Associates PLLC. (d/b/a Comprehensive Pain Specialist), or the Transaction. The
Lawsuit claims that the Defendants breached their fiduciary duties when approving the Transaction, causing us significant harm. The Lawsuit
claims damages in the amount of NIS 13,114,200 (approximately $4.12 million), which accounts for, as of the date of the filing of the
Lawsuit, the amounts invested by the Company in the Transaction and indirect expenses arising from the Transaction.
2020 Insolvency Petition
On July 23, 2020, we submitted
to the Tel Aviv Court, or the Court, a petition pursuant to the Israeli Insolvency and Economic Rehabilitation Law, 2018, to commence
proceedings for the economic rehabilitation of the Company, or the Petition. In the Petition submitted to the Court, we stated that it
is insolvent (as determined by the cash flow test) and unable to pay its debts to our creditors.
On August 6, 2020, L.I.A.
Pure Capital Ltd., or Pure Capital, filed with the Court, requesting an order to have the results of the Company's annual general
meeting held on August 4, 2020 declared invalid, mainly due to our reliance on discretionary voting of the depositary bank for our ADSs.
The Court asked for the Company and former directors' response by no later than August 13, 2020, which was subsequently extended.
On August 11, 2020, Pure Capital
proposed to deposit $1.5 million with the Company's temporary trustee nominated by the Court to cover and pay all of our debts,
without derogating from any other creditor's rights towards us, or the Pure Capital Proposal. The Pure Capital Proposal was made
subject to the replacement of our board of the directors as of the date of the Pure Capital Proposal, or the Prior Board, with Pure Capital's
designated nominees that were voted upon at the adjourned annual general meeting of the Company's shareholders on August 4, 2020
(as discussed below). The Court issued an order on August 14, 2020, or the Order, approving the Pure Capital Proposal and settlement
agreement submitted to the Court by the parties thereto.
In accordance with the terms
of the Order and following the deposit by Pure Capital, the Prior Board was replaced with: Itschak Shrem (chairman), Amity Weiss (also
was appointed to act as the Company's Chief Executive Officer), Moshe Revach, Lior Amit, Lior Vider and Liat Sidi. Following the
issuance of the Order, a related case that was filed by Pure Capital with the Court was withdrawn as well.
Dividends
We have never declared or
paid any cash dividends on our Ordinary Shares and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash
dividends, if any, in the future will be at the discretion of our Board of Directors and will depend on then-existing conditions, including
our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our Board
of Directors may deem relevant.
113
The distribution of dividends
may also be limited by the Companies Law, which permits the distribution of dividends only out of retained earnings or earnings derived
over the two most recent fiscal years, whichever is higher, provided that there is no reasonable concern that payment of a dividend will
prevent a company from satisfying its existing and foreseeable obligations as they become due.
Payment of dividends may be
subject to Israeli withholding taxes. See Item 10.E. "Taxation" for additional information.
B. Significant Changes
No significant change, other
than as otherwise described in this Annual Report, has occurred in our operations since the date of our consolidated financial statements
included in this Annual Report.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Our Ordinary Shares are listed
on the Nasdaq Capital Market, trading under the symbol "SPRC".
B.  Plan of Distribution
Not applicable.
C.  Markets
Our Ordinary Shares are traded
on the Nasdaq under the symbol "SPRC".
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
A copy of our amended and
restated articles of association is attached as Exhibit 1.1 to this Annual Report. The information called for by this Item is set forth
in Exhibit 2(d) to this Annual Report on Form 20-F and is incorporated by reference into this Annual Report.
C. Material Contracts
We have not entered into any
material contract within the two years prior to the date of this Annual Report, other than contracts entered into in the ordinary course
of business, as otherwise described herein in "Item 4.A. History and Development of the Company" above, "Item 4.B. Business
Overview" above, "Item 5.A. Operating Results" above, or "Item 7.B. Related Party Transactions" above.
114
D. 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 countries that are, or have been, in a state of
war with Israel.
E. Taxation.
ISRAELI TAX CONSIDERATIONS AND GOVERNMENT PROGRAMS
The following is a description
of the material Israeli income tax consequences of the ownership of our Ordinary Shares. The following also contains a description of
material relevant provisions of the current Israeli income tax structure applicable to companies in Israel, with reference to its effect
on us. To the extent that the discussion is based on new tax legislation which has not been subject to judicial or administrative interpretation,
there can be no assurance that the tax authorities will accept the views expressed in the discussion in question. The discussion is not
intended, and should not be taken, as legal or professional tax advice and is not exhaustive of all possible tax considerations.
The following description
is not intended to constitute a complete analysis of all tax consequences relating to the ownership or disposition of our Ordinary Shares.
Shareholders should consult their own tax advisors concerning the tax consequences of their particular situation, as well as any tax consequences
that may arise under the laws of any state, local, foreign or other taxing jurisdiction.
General Corporate Tax Structure in Israel
Israeli resident companies
are generally subject to corporate tax, currently at the rate of 23% of a company's taxable income. Capital gains derived by an
Israeli resident company are subject to tax at the prevailing corporate tax rate. Under Israeli tax legislation, a corporation will be
considered as an "Israeli resident company" if it meets one of the following: (i) it was incorporated in Israel; or (ii) the
control and management of its business are exercised in Israel.
The Encouragement of Research, Development
and Technological Innovations in the Industry Law, 5744-1984
Under the Innovation Law,
research and development programs which meet specified criteria and are approved by a committee of the IIA are eligible for grants of
up to 50% of the project's expenditure, as determined by the research committee, and subject to the benefit track under which the
grant was awarded. A company that receives a grant from the IIA, or a grant recipient, is typically required to pay royalties from the
revenues generated from the sale of products and related services developed, in whole or in part pursuant to, or as a result of, a research
and development program funded by the IIA. Under the regular benefits tracks, the royalties are generally at a range of 3.0% to 5.0% of
revenues until the entire IIA grant is repaid, together with an annual interest generally equal to the 12 month LIBOR applicable to dollar
deposits that is published on the first business day of each calendar year. The obligation to pay royalties is contingent on actual income
generated from such products and services. In the absence of such income, no payment of such royalties is required.
The United Kingdom's
Financial Conduct Authority, which regulates LIBOR, announced in July 2017 that it will no longer persuade or require banks to submit
rates for LIBOR after 2021. The grants received from the IIA bear an annual interest rate based on the 12-month LIBOR. Accordingly, there
is considerable uncertainty regarding the publication of LIBOR beyond 2021. While it is not currently possible to determine precisely
whether, or to what extent, the withdrawal and replacement of LIBOR would affect us, the implementation of alternative benchmark rates
to LIBOR may increase our financial liabilities to the IIA.
115
The terms of the Innovation
Law also require that the manufacture of products developed with government grants be performed in Israel. The transfer of manufacturing
activity outside Israel is subject to the prior approval of the IIA (such approval is not required for the transfer of a portion of the
manufacturing capacity which does not exceed, in the aggregate, 10% of the portion declared to be manufactured outside of Israel in the
applications for funding, in which case only notification is required). It should be noted that the terms of the Innovation Law do not
restrict the export of products that incorporate the funded technology. Under the regulations of the Innovation Law, assuming we receive
approval from the IIA to manufacture our IIA-funded products outside Israel, our liability to the IIA may be increased depending upon
the manufacturing volume that is performed outside of Israel as follows:
Manufacturing Volume Outside of Israel
Royalties
to the IIA as
a Percentage
of Grant
Up to 50%
120
%
between 50% and 90%
150
%
90% and more
300
%
If the manufacturing is performed
outside of Israel by us, the rate of royalties payable by us on revenues from the sale of products manufactured outside of Israel will
increase by 1% over the regular rates. A company requesting funds from the IIA also has the option of declaring in its IIA grant application
its intention to perform part of its manufacturing outside Israel, thus avoiding the need to obtain additional approval under the same
manufacturing scope indicated at the application. On January 6, 2011, the Innovation Law was amended to clarify that the potential increased
royalties specified in the table above will apply even in those cases where the IIA approval for transfer of manufacturing outside of
Israel is not required, namely when the volume of the transferred manufacturing capacity is less than 10% of total capacity.
The know-how developed within
the framework of the IIA plan may not be transferred to third parties outside Israel without the prior approval of the IIA. The approval,
however, is not required for the export of any products developed using grants received from the IIA. The IIA approval to transfer know-how
created, in whole or in part, in connection with an IIA-funded project to a third party outside Israel is subject to payment of a redemption
fee to the IIA calculated according to a formula provided under the Innovation Law that is based, in general, on the ratio between the
aggregate IIA grants and our aggregate investments in the project that was funded by these IIA grants, multiplied by the transaction consideration
taking into account a depreciation mechanism, and less royalties already paid to the IIA. According to regulations promulgated under the
Innovation Law, the maximum amount payable to the IIA in case of transfer of know how outside Israel shall not exceed six times the amount
of the grants received plus interest, with a possibility to reduce such payment to up to three times the amount of the grants received
plus interest if the grant recipient undertakes to continue the research and development activity in Israel for a period of three years
after the transfer of knowhow, and maintain at least 75% of the research and development employees the company had for the six months
before the know-how was transferred, subject to additional conditions specified in the regulations.
Transfer of know-how to an
Israeli entity is subject to the IIA approval and to an undertaking of the recipient Israeli entity to undertake all the transferor's
obligations to the IIA and to comply with the provisions of the Innovation Law and related regulations, including the restrictions on
the transfer of know-how and the obligation to pay royalties, as further described in the Innovation Law and related regulations.
The restrictions under the
Innovation Law will continue to apply even after we will repay the full amount of royalties payable pursuant to the grants. In addition,
the government of the State of Israel may from time to time audit sales of product candidates which it claims incorporate technology funded
via IIA programs and this may lead to additional royalties being payable on additional product candidates.
These restrictions may impair
our ability to outsource manufacturing or otherwise transfer our know-how outside Israel and may require us to obtain the approval of
the IIA for certain actions and transactions and pay additional royalties or other payments to the IIA. If we fail to comply with certain
restrictions under the Innovation Law, we may be subject to mandatory repayment of grants received by us (together with interest and penalties),
as well as be exposed to criminal charges.
116
Our research and development
efforts have been financed, partially, through grants that we have received from the IIA. We therefore must comply with the requirements
of the Innovation Law and related regulations. Our total outstanding obligation to the IIA, respectively, including the interest accrued
through December 31, 2021, amounts to approximately $1.2 million.
Tax Benefits for Research and Development
under the Innovation Law
Israeli tax law allows, under
certain conditions, a tax deduction for expenditures, including capital expenditures, in scientific research in the fields of industry,
agriculture, transportation or energy, for the year in which they are incurred. Expenditures are deemed related to scientific research
and development projects, if:
●
The expenditures are approved by the relevant Israeli government ministry, determined by the field of research;
●
The research and development must be for the promotion of the company; and
●
The research and development is carried out by or on behalf of the company seeking such tax deduction.
The amount of such deductible
expenses is reduced by the sum of any funds received through government grants for the finance of such scientific research and development
projects. No deduction under these research and development deduction rules is allowed if such deduction is related to an expense invested
in an asset depreciable under the general depreciation rules of the Israeli Income Tax Ordinance (New Version) 1961, or the Ordinance.
Expenditures not so approved are deductible in equal amounts over three years.
From time to time we may apply
the IIA for approval to allow a tax deduction for all research and development expenses during the year incurred. There can be no assurance
that such application will be accepted.
Law for the Encouragement of Capital Investments, 5719-1959
The Law for the Encouragement
of Capital Investments, 5719-1959, generally referred to as the Investment Law, provides certain incentives for capital investments in
production facilities (or other eligible assets) by "Industrial Enterprises" (as defined under the Investment Law).
The Investment Law was significantly
amended effective April 1, 2005 (which we refer to as the 2005 Amendment), further amended as of January 1, 2011 (which we refer
to as the 2011 Amendment) and further amended as of January 1, 2017 (which we refer to as the 2017 Amendment). Pursuant to the 2005 Amendment,
tax benefits granted in accordance with the provisions of the Investment Law prior to its revision by the 2005 Amendment remain in force
but any benefits granted subsequently are subject to the provisions of the 2005 Amendment. Similarly, the 2011 Amendment introduced new
benefits to replace those granted in accordance with the provisions of the Investment Law in effect prior to the 2011 Amendment. However,
companies entitled to benefits under the Investment Law as in effect prior to January 1, 2011 were entitled to choose to continue
to enjoy such benefits, provided that certain conditions are met, or elect instead irrevocably to forego such benefits and have the benefits
of the 2011 Amendment apply. The 2017 Amendment introduced new benefits for Technological Enterprises, alongside the existing tax benefits.
Taxation of our Shareholders
Capital Gains
Capital gain tax is imposed
on the disposal of capital assets by an Israeli resident, and on the disposal of such assets by a non-Israeli resident if those assets
are either (i) located in Israel; (ii) are shares or a right to a share in an Israeli resident corporation, or (iii) represent, directly
or indirectly, rights to assets located in Israel, unless a tax treaty between Israel and the seller's country of residence provides
otherwise. The Ordinance, distinguishes between "Real Gain" and the "Inflationary Surplus." Real Gain is the excess
of the total capital gain over Inflationary Surplus. Inflationary Surplus is computed generally on the basis of the increase in the Israeli
Consumer Price Index or, in certain circumstances, according to the change in the foreign currency exchange rate, between the date of
purchase and the date of disposal. Inflationary Surplus is not subject to tax in Israel.
117
Real Gain accrued by individuals
on the sale of our Ordinary Shares will be taxed at the rate of 25%. However, if the shareholder claims deduction of interest and linkage
differences expenses in connection with the purchase and holding of such shares or the individual shareholder is a "Controlling
Shareholder" (i.e., a person who holds, directly or indirectly, alone or together with such person's relative or another person
who collaborates with such person on a permanent basis, 10% or more of one of the Israeli resident company's "means of control"
including, among other things, the right to company profits, voting rights, the right to the company's liquidation proceeds and
the right to appoint a company director) at the time of sale or at any time during the preceding 12 months period, such gain will be taxed
at the rate of 30%.
Real Gain derived by corporations
will be generally subject to the regular corporate tax rate (23% in 2022).
Individual and corporate shareholder
dealing in securities in Israel for whom the income from the sale of securities is considered "business income" as defined
in Section 2(1) of the Ordinance are taxed at the tax rates applicable to business income- 23% for corporations in 2021 and a marginal
tax rate of up to 47% in 2021 for individuals, unless the benefiting provisions of an applicable tax treaty applies. Certain Israeli institutions
who are exempt from tax under Section 9(2) or Section 129(C)(a)(1) of the Ordinance (such as exempt trust fund, pension fund) may be exempt
from capital gains tax from the sale of shares.
Capital Gains Taxes is
Applicable also to Non-Israeli Resident Shareholders
. A non-Israeli resident (whether an individual or a corporation) who derives
capital gains from the sale of shares in an Israeli resident company may be exempt from Israeli capital gain tax so long as the following
cumulative conditions are met: (i) the shares were purchased upon or after the registration of the securities on a recognized stock exchange,
outside of Israel (such as Nasdaq) (ii) the seller does not have a permanent establishment in Israel to which the derived capital gain
is attributed, and (iii) with respect to securities listed on a recognized stock exchange outside of Israel, such shareholders are not
subject to the Israeli Income Tax Law (Inflationary Adjustments) 5745-1985. However, non-Israeli corporation will not be entitled to the
foregoing exemptions if Israeli residents (a) have a controlling interest of more than 25% in such non-Israeli corporation, or (b) are
the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly and indirectly.
In addition, such exemption would not be available to a person whose gains from selling or otherwise disposing of the securities are deemed
to be business income.
If not exempt, a non-Israeli resident
would generally be subject to tax on capital gain at the ordinary corporate tax rate (23% in 2022) if generated by a company, or at the
rate of 25%, if generated by an individual, or 30%, if generated by an individual who is a "Controlling Shareholder", at the
time of sale or at any time during the preceding 12-month period (or if the shareholder claims a deduction for interest and
linkage differences expenses in connection with the purchase and holding of such shares).
Additionally, a sale of shares
by a non-Israeli resident may be exempt from Israeli capital gains tax under the provisions of an applicable tax treaty. For example,
under the Convention Between the Government of the United States of America and the Government of the State of Israel with respect to
Taxes on Income, as amended, or the United States-Israel Tax Treaty, the sale, exchange or other disposition of shares by a shareholder
who is a United States resident (for purposes of the United States-Israel Tax Treaty) holding the shares as a capital asset and is entitled
to claim the benefits afforded to such a resident by the United States.-Israel Tax Treaty, or a Treaty U.S. Resident, is generally exempt
from Israeli capital gains tax unless either: (i) the capital gain arising from such sale, exchange or disposition is attributed to real
estate located in Israel; (ii) the capital gain arising from such sale, exchange or disposition is attributed to royalties; (iii) the
capital gain arising from the such sale, exchange or disposition is attributed to a permanent establishment of the shareholder which is
maintained in Israel, under certain terms; (iv) such Treaty U.S. Resident holds, directly or indirectly, shares representing 10% or more
of the voting capital during any part of the 12-month period preceding the disposition, subject to certain conditions; or (v) such Treaty
U.S. Resident, if an individual, was present in Israel for a period or periods of 183 days or more in the aggregate during the relevant
taxable year. In any such case, the sale, exchange or disposition of such shares would be subject to Israeli tax, to the extent applicable;
however, under the United States-Israel Treaty, a U.S. resident would be permitted to claim a credit for the Israeli tax against the U.S.
federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign
tax credits. The United States-Israel Treaty does not provide such credit against any U.S. state or local taxes.
118
In some instances where our
shareholders may be liable for Israeli tax on the sale of their Ordinary Shares, the payment of the consideration may be subject to the
withholding of Israeli tax at source. Shareholders may be required to demonstrate that they are exempt from tax on their capital gains
in order to avoid withholding at source at the time of sale. Specifically, in transactions involving a sale of all of the shares of an
Israeli resident company, in the form of a merger or otherwise, the Israel Tax Authority may require from shareholders who are not liable
for Israeli tax to sign declarations in forms specified by this authority or obtain a specific exemption from the Israel Tax Authority
to confirm their status as non-Israeli residents, and, in the absence of such declarations or exemptions, may require the purchaser of
the shares to withhold taxes at source.
Either the purchaser, the
Israeli stockbrokers or financial institution through which the shares are held is obliged, subject to the above mentioned exemptions,
to withhold tax upon the sale of securities from the Real Gain at the rate of 25%.
At the sale of securities
traded on a stock exchange, a detailed return, including a computation of the tax due, must be filed and an advance payment must be made
on January 31 and July 31 of every tax year in respect of sales of securities made within the previous six months. However, if all tax
due was withheld at source according to applicable provisions of the Ordinance and regulations promulgated thereunder, the aforementioned
return need not be filed and no advance payment must be paid, provided that (i) such income was not generated from business conducted
in Israel by the taxpayer, (ii) the taxpayer has no other taxable sources of income in Israel with respect to which a tax return is required
to be filed, and (iii) the taxpayer is not obligated to pay Excess Tax (as further explained below). Capital gain is also reportable on
the annual income tax return.
Dividends
A distribution of dividends
from income, to an Israeli resident individual, will generally be subject to income tax at a rate of 25%. However, a 30% tax rate will
apply if the dividend recipient is a Controlling Shareholder (as defined above in this section) at the time of distribution or at any
time during the preceding 12 months period. If the recipient of the dividend is an Israeli resident corporation, generally, such dividend
will be exempt from income tax provided the income from which such dividend is distributed was derived or accrued within Israel (although,
if such dividends are subsequently distributed to individuals, the aforesaid will apply).
Non-Israeli residents (whether
individuals or a corporations) are generally subject to Israeli income tax on the receipt of dividends paid on our Ordinary Shares at
the rate of 25% or 30% with respect to a Controlling Shareholder (as defined above) at the time of receiving the dividend or on any time
during the preceding twelve months, the applicable tax rate, which tax will be withheld at source, unless relief is provided in a treaty
between Israel and the shareholder's country of residence subject to the receipt in advance of a valid certificate from the Israel
Tax Authority allowing for a reduced tax rate). Such dividends are generally subject to Israeli withholding tax at a rate of 25% so long
as the shares are registered with a Nominee Company (whether the recipient is a Controlling Shareholder or not). For example, under the
United States-Israel Tax Treaty, the maximum rate of tax withheld at source in Israel on dividends paid to a holder of our Ordinary Shares
who is a Treaty U.S. Resident is 25%. However, generally, the maximum rate of withholding tax on dividends, not generated by a Preferred
Enterprise, that are paid to a United States corporation holding 10% or more of the outstanding voting capital throughout the tax year
in which the dividend is distributed as well as during the previous tax year, is 12.5%, provided that not more than 25% of the gross income
for such preceding year consists of certain types of dividends and interest. The aforementioned rates will not apply if the dividend income
was generated through a permanent establishment of the U.S. resident which is maintained in Israel.
A non-Israeli resident who
receives dividends from which tax was withheld is generally exempt from the obligation to file tax returns in Israel with respect to such
income, provided that (i) such income was not generated from business conducted in Israel by the taxpayer, (ii) the taxpayer has no other
taxable sources of income in Israel with respect to which a tax return is required to be filed, and (iii) the taxpayer is not obligated
to pay excess tax (as further explained below).
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Excess Tax
Individuals who are subject
to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at
a rate of 3% on annual income exceeding a certain threshold (NIS 663,240 for 2022, which amount is linked to the annual changes to the
Israeli Consumer Price Index), including, but not limited to income derived from dividends, interest and capital gains.
Foreign Exchange Regulations
Non-residents of Israel who
hold our Ordinary Shares are able to receive any dividends, and any amounts payable upon the dissolution, liquidation and winding up of
our affairs, repayable in non-Israeli currency at the rate of exchange prevailing at the time of conversion. However, Israeli income tax
is generally required to have been paid or withheld on these amounts.
Estate and Gift Tax
Israeli law presently does
not impose estate or gift taxes.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL
INFORMATION AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSIDERED TO BE, LEGAL OR TAX ADVICE. EACH U.S. HOLDER SHOULD CONSULT WITH HIS
OR HER OWN TAX ADVISOR AS TO THE PARTICULAR U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF ORDINARY SHARES
AND AMERICAN DEPOSITARY SHARES, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND POSSIBLE CHANGES IN THE
TAX LAWS.
Subject to the limitations
described in the next paragraph, the following discussion summarizes the material U.S. federal income tax consequences to a "U.S.
Holder" arising from the purchase, ownership and sale of the Ordinary Shares. For this purpose, a "U.S. Holder" is a
holder of Ordinary Shares that is: (1) an individual citizen or resident of the United States, including an alien individual who is a
lawful permanent resident of the United States or meets the substantial presence residency test under U.S. federal income tax laws; (2)
a corporation (or entity treated as a corporation for U.S. federal income tax purposes) or a partnership (other than a partnership that
is not treated as a U.S. person under any applicable U.S. Treasury regulations) created or organized under the laws of the United States
or the District of Columbia or any political subdivision thereof; (3) an estate, the income of which is includable in gross income for
U.S. federal income tax purposes regardless of source; (4) a trust if a court within the United States is able to exercise primary supervision
over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust; or
(5) a trust that has a valid election in effect to be treated as a U.S. person to the extent provided in U.S. Treasury regulations.
This summary is for general
information purposes only and does not purport to be a comprehensive description of all of the U.S. federal income tax considerations
that may be relevant to a decision to purchase our Ordinary Shares. This summary generally considers only U.S. Holders that will own our
Ordinary Shares as capital assets. Except to the limited extent discussed below, this summary does not consider the U.S. federal tax consequences
to a person that is not a U.S. Holder, nor does it describe the rules applicable to determine a taxpayer's status as a U.S. Holder.
This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, final, temporary and proposed U.S.
Treasury regulations promulgated thereunder, administrative and judicial interpretations thereof, (including with respect to the TCJA
of 2017), and the U.S./Israel Income Tax Treaty, all as in effect as of the date hereof and all of which are subject to change, possibly
on a retroactive basis, and all of which are open to differing interpretations. We will not seek a ruling from the IRS with regard to
the U.S. federal income tax treatment of an investment in our Ordinary Shares by U.S. Holders and, therefore, can provide no assurances
that the IRS will agree with the conclusions set forth below.
120
This discussion does not address
all of the aspects of U.S. federal income taxation that may be relevant to a particular U.S. holder based on such holder's particular
circumstances and in particular does not discuss any estate, gift, generation-skipping, transfer, state, local, excise or foreign tax
considerations. In addition, this discussion does not address the U.S. federal income tax treatment of a U.S. Holder who is: (1) a bank,
life insurance company, regulated investment company, or other financial institution or "financial services entity;" (2) a
broker or dealer in securities or foreign currency; (3) a person who acquired our Ordinary Shares in connection with employment or other
performance of services; (4) a U.S. Holder that is subject to the U.S. alternative minimum tax; (5) a U.S. Holder that holds our Ordinary
Shares as a hedge or as part of a hedging, straddle, conversion or constructive sale transaction or other risk-reduction transaction for
U.S. federal income tax purposes; (6) a tax-exempt entity; (7) real estate investment trusts or grantor trusts; (8) a U.S. Holder that
expatriates out of the United States or a former long-term resident of the United States; or (9) a person having a functional currency
other than the U.S. dollar. This discussion does not address the U.S. federal income tax treatment of a U.S. Holder that owns, directly
or constructively, at any time, Ordinary Shares representing 10% or more of our voting power. Additionally, the U.S. federal income tax
treatment of partnerships (or other pass-through entities) or persons who hold Ordinary Shares through a partnership or other pass-through
entity are not addressed.
Each prospective investor
is advised to consult his or her own tax adviser for the specific tax consequences to that investor of purchasing, holding or disposing
of our Ordinary Shares, including the effects of applicable state, local, foreign or other tax laws and possible changes in the tax laws.
Taxation of Dividends Paid on our Ordinary
Shares
We do not intend to pay dividends
in the foreseeable future. In the event that we do pay dividends, and subject to the discussion under the heading "Passive Foreign
Investment Companies" below and the discussion of "qualified dividend income" below, a U.S. Holder will be required
to include in gross income as ordinary income the amount of any distribution paid on our Ordinary Shares (including the amount of any
Israeli tax withheld on the date of the distribution), to the extent that such distribution does not exceed our current and accumulated
earnings and profits, as determined for U.S. federal income tax purposes. The amount of a distribution which exceeds our earnings and
profits will be treated first as a non-taxable return of capital, reducing the U.S. Holder's tax basis for the Ordinary Shares to
the extent thereof, and then capital gain. We do not expect to maintain calculations of our earnings and profits under U.S. federal income
tax principles and, therefore, U.S. Holders should expect that the entire amount of any distribution generally will be reported as dividend
income.
In general, preferential tax
rates for "qualified dividend income" and long-term capital gains are applicable for U.S. Holders that are individuals, estates
or trusts. For this purpose, "qualified dividend income" means, inter alia, dividends received from a "qualified foreign
corporation." A "qualified foreign corporation" is a corporation that is entitled to the benefits of a comprehensive
tax treaty with the United States which includes an exchange of information program. The IRS has stated that the Israel/U.S. Tax Treaty
satisfies this requirement, and we believe we are eligible for the benefits of that treaty.
Dividends will not qualify
for the preferential rate if we are treated, in the year the dividend is paid or in the prior year, as a PFIC, as described below under
"Passive Foreign Investment Companies." A U.S. Holder will not be entitled to the preferential rate: (1) if the U.S. Holder
has not held our Ordinary Shares for at least 61 days of the 121 day period beginning on the date which is 60 days before the ex-dividend
date, or (2) to the extent the U.S. Holder is under an obligation to make related payments on substantially similar property. Any days
during which the U.S. Holder has diminished its risk of loss on our Ordinary Shares are not counted towards meeting the 61-day holding
period. Finally, U.S. Holders who elect to treat the dividend income as "investment income" pursuant to Code section 163(d)(4)
will not be eligible for the preferential rate of taxation.
The amount of a distribution
with respect to our Ordinary Shares will be measured by the amount of the fair market value of any property distributed, and for U.S.
federal income tax purposes, the amount of any Israeli taxes withheld therefrom. Cash distributions paid by us in NIS will be included
in the income of U.S. Holders at a U.S. dollar amount based upon the spot rate of exchange in effect on the date the dividend is includible
in the income of the U.S. Holder, and U.S. Holders will have a tax basis in such NIS for U.S. federal income tax purposes equal to such
U.S. dollar value. If the U.S. Holder subsequently converts the NIS into U.S. dollars or otherwise disposes of it, any subsequent gain
or loss in respect of such NIS arising from exchange rate fluctuations will be U.S. source ordinary exchange gain or loss.
121
Taxation of the Disposition of our Ordinary
Shares
Except as provided under the
PFIC rules described below under "Passive Foreign Investment Companies," upon the sale, exchange or other disposition of our
Ordinary Shares, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between such U.S. Holder's
tax basis for the Ordinary Shares in U.S. dollars and the amount realized on the disposition in U.S. dollar (or its U.S. dollar equivalent
determined by reference to the spot rate of exchange on the date of disposition, if the amount realized is denominated in a foreign currency).
The gain or loss realized on the sale, exchange or other disposition of Ordinary Shares will be long-term capital gain or loss if the
U.S. Holder has a holding period of more than one year at the time of the disposition. Individuals who recognize long-term capital gains
may be taxed on such gains at reduced rates of tax. The deduction of capital losses is subject to various limitations.
Gain realized by a U.S. Holder
on a sale, exchange or other disposition of our Ordinary Shares will generally be treated as U.S. source income for U.S. foreign tax credit
purposes. A loss realized by a U.S. Holder on the sale, exchange or other disposition of our Ordinary Shares is generally allocated to
U.S. source income. The deductibility of a loss realized on the sale, exchange or other disposition of our Ordinary Shares is subject
to limitations. An additional 3.8% net investment income tax (described below) may apply to gains recognized upon the sale, exchange or
other taxable disposition of our Ordinary Shares by certain U.S. Holders who meet certain income thresholds.
Passive Foreign Investment Companies
Special U.S. federal income
tax laws apply to U.S. taxpayers who own shares of a corporation that is a PFIC. We will be treated as a PFIC for U.S. federal income
tax purposes for any taxable year that either:
●
75% or more of our gross income
(including our pro rata share of gross income for any company, in which we are considered to own 25% or more of the shares by value),
in a taxable year is passive; or
●
At least 50% of our assets,
averaged over the year and generally determined based upon fair market value (including our pro rata share of the assets of any company
in which we are considered to own 25% or more of the shares by value) are held for the production of, or produce, passive income.
For this purpose, passive
income generally consists of dividends, interest, rents, royalties, annuities and income from certain commodities transactions and from
notional principal contracts. Cash is treated as generating passive income.
We do not believe that we
would be deemed a PFIC for 2022   . The tests for determining PFIC status are applied annually, and it is difficult to
make accurate projections of future income and assets which are relevant to this determination. In addition, our PFIC status may depend
in part on the market value of our Ordinary Shares. Accordingly, there can be no assurance that we currently are not or will not become
a PFIC.
If we currently are or become
a PFIC, each U.S. Holder who has not elected to mark the shares to market (as discussed below), would, upon receipt of certain distributions
by us and upon disposition of our Ordinary Shares at a gain: (1) have such distribution or gain allocated ratably over the U.S. Holder's
holding period for the Ordinary Shares, as the case may be; (2) the amount allocated to the current taxable year and any period prior
to the first day of the first taxable year in which we were a PFIC would be taxed as ordinary income; and (3) the amount allocated to
each of the other taxable years would be subject to tax at the highest rate of tax in effect for the applicable class of taxpayer for
that year, and an interest charge for the deemed deferral benefit would be imposed with respect to the resulting tax attributable to each
such other taxable year. In addition, when shares of a PFIC are acquired by reason of death from a decedent that was a U.S. Holder, the
tax basis of such shares would not receive a step-up to fair market value as of the date of the decedent's death, but instead would
be equal to the decedent's basis if lower, unless all gain were recognized by the decedent. Indirect investments in a PFIC may also
be subject to these special U.S. federal income tax rules.
The PFIC rules described above
would not apply to a U.S. Holder who makes a QEF election for all taxable years that such U.S. Holder has held our Ordinary Shares while
we are a PFIC, provided that we comply with specified reporting requirements. Instead, each U.S. Holder who has made such a QEF election
is required for each taxable year that we are a PFIC to include in income such U.S. Holder's pro rata share of our ordinary earnings
as ordinary income and such U.S. Holder's pro rata share of our net capital gains as long-term capital gain, regardless of whether
we make any distributions of such earnings or gain. In general, a QEF election is effective only if we make available certain required
information. The QEF election is made on a shareholder-by-shareholder basis and generally may be revoked only with the consent of the
IRS. We do not intend to furnish U.S. Holders annually with information needed in order to complete IRS Form 8621 and to make and maintain
a valid QEF election for any year in which we or any of our subsidiaries are a PFIC. Therefore, the QEF election will not be available
with respect to our Ordinary Shares.
U.S. Holders who hold our
Ordinary Shares during a period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC. U.S. Holders
are strongly urged to consult their tax advisors about the PFIC rules.
122
Tax on Net Investment Income
Subject to certain adjustments
under the PFIC rules, U.S. Holders who are individuals, estates or trusts will generally be required to pay a 3.8% Medicare tax on their
net investment income (including dividends on and gains from the sale or other disposition of our Ordinary Shares), or in the case of
estates and trusts on their net investment income that is not distributed. In each case, the 3.8% Medicare tax applies only to the extent
the U.S. Holder's total adjusted income exceeds applicable thresholds.
Tax Consequences for Non-U.S. Holders of Ordinary
Shares
Except as provided below,
an individual, corporation, estate or trust that is not a U.S. Holder referred to below as a non-U.S. Holder, generally will not be subject
to U.S. federal income or withholding tax on the payment of dividends on, and the proceeds from the disposition of, our Ordinary Shares.
A non-U.S. Holder may be subject
to U.S. federal income tax on a dividend paid on our Ordinary Shares or gain from the disposition of our Ordinary Shares if: (1) such
item is effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States and, if required by
an applicable income tax treaty is attributable to a permanent establishment or fixed place of business in the United States; or (2) in
the case of a disposition of our Ordinary Shares, the individual non-U.S. Holder is present in the United States for 183 days or more
in the taxable year of the disposition and other specified conditions are met. Any dividend income or gain described in clause (1) above
will be subject to U.S. federal income tax on a net income tax basis in the same manner as a U.S. Holder and, with respect to corporate
holders, a branch profits tax imposed at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) may
also apply to its effectively connected earnings and profits (subject to adjustments). Any dividend income or gain described in clause
(2) above that is not effectively connected with the conduct by a Non-U.S. Holder of a trade or business within the U.S. generally will
be subject to 30% withholding tax (or such lower rate as may be specified by an applicable income tax treaty) net of certain U.S. source
capital losses.
In general, non-U.S. Holders
will not be subject to backup withholding with respect to the payment of dividends on our Ordinary Shares if payment is made through a
paying agent, or office of a foreign broker outside the United States. However, if payment is made in the United States or by a U.S. related
person, non-U.S. Holders may be subject to backup withholding, unless the non-U.S. Holder provides an applicable IRS Form W-8 (or a substantially
similar form) certifying its foreign status, or otherwise establishes an exemption.
The amount of any backup withholding
from a payment to a non-U.S. Holder will be allowed as a credit against such holder's U.S. federal income tax liability and may
entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Information Reporting and Withholding
A U.S. Holder may be subject
to backup withholding at a rate of 24% with respect to cash dividends and proceeds from a disposition of Ordinary Shares. In general,
backup withholding will apply only if a U.S. Holder fails to comply with specified identification procedures. Backup withholding will
not apply with respect to payments made to designated exempt recipients, such as corporations and tax-exempt organizations. Backup withholding
is not an additional tax and may be claimed as a credit against the U.S. federal income tax liability of a U.S. Holder, provided that
the required information is timely furnished to the IRS.
123
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to certain
information reporting requirements of the Exchange Act, applicable to foreign private issuers and under those requirements will file reports
with the SEC. 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 will also available to the public through the SEC's website at www.sec.gov.
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. domestic companies whose securities are registered under the Exchange Act. However, we 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 may submit to the SEC, on a Form
6-K, unaudited quarterly financial information.
We maintain a corporate website
at http://www.scisparc.com. Information contained on, or that can be accessed through, our website and the other websites referenced above
do not constitute a part of this Annual Report. We have included these website addresses in this Annual Report solely as inactive textual
references.
I. Subsidiary Information.
Not applicable.
J.
Annual Report to Security Holders.
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
In the ordinary course of
our operations, we are exposed to certain market risks, primarily changes in foreign currency exchange rates and interest rates.
Quantitative and Qualitative Disclosure About
Market Risk
We are exposed to market risks
in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse
changes in financial market prices and rates. Our current investment policy is to invest available cash in bank deposits with banks that
have a credit rating of at least A-minus. However, a substantial majority of our cash is held in current bank accounts that do not bear
interest. In the future, we intend to hold most of our cash in deposits that bear interest. Given the current low rates of interest we
receive, once we begin to hold most of our cash in deposits that bear interest, we do not expect to be adversely affected if such rates
are reduced. Our market risk exposure is primarily a result of NIS/U.S. dollar exchange rates, which is discussed in detail in the following
paragraph.
Foreign Currency Exchange Risk
Our results of operations
and cash flow are subject to fluctuations due to changes mainly in NIS/U.S. dollar currency exchange rates. As of December 31, 2022, the
vast majority of our liquid assets are held in U.S. dollars, and the majority of our expenses is denominated in U.S. dollars. Changes
of both 5% and 10% in the U.S. Dollar/NIS exchange rate would decrease/increase our loss for 2022 by less than 1%, respectively. However,
these historical figures may not be indicative of future exposure, as we expect that the percentage of our NIS denominated expenses will
materially decrease in the near future, therefore reducing our exposure to exchange rate fluctuations. Beginning October 1, 2018, our
functional currency is the U.S. dollar.
We do not hedge our foreign
currency exchange risk. In the future, we may enter into formal currency hedging transactions to decrease the risk of financial exposure
from fluctuations in the exchange rates of our principal operating currencies. These measures, however, may not adequately protect us
from the material adverse effects of such fluctuations.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN
EQUITY SECURITIES
Not applicable.
124
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES
Not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS
OF SECURITY HOLDERS AND USE OF PROCEEDS
On September 15, 2022, our
shareholders approved our amended and restated articles of association which became effective immediately thereof. Our amended and restated
articles of association contain certain modifications to the required approvals for certain shareholder votes, including the required
approval for any amendment to our amended and restated articles of association, which now requires, in addition to the approval of shareholders,
also the approval of the Board of Directors with the affirmative vote of at least three-quarters (3/4) of the directors then in office
and entitled to vote thereon. See "Item 10. Additional Information—B. Memorandum and Articles of Association" for further
description of the rights of securities holders.
ITEM 15. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures
Our management, with the participation
of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022, or the Evaluation Date. Based
on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective
in recording, processing, summarizing and reporting, on a timely basis, information required to be included in periodic filings under
the Exchange Act and that such information is accumulated and communicated to management, including our principal executive and financial
officers, as appropriate to allow timely decisions regarding required disclosure.
(b) Management's Annual Report on Internal
Control over Financial Reporting
Management is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.
Our internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with IFRS. We have a program for the review of our internal
control over financial reporting to ensure compliance with the requirements of the Exchange Act and Section 404 of the Sarbanes-Oxley
Act. Our internal control over financial reporting includes those policies and procedures that:
●
pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
●
provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS;
●
provide reasonable assurance
that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
●
provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect
on the financial statements.
Because of its inherent limitations,
internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our management, with the participation
of our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting
as of December 31, 2022. In conducting its assessment of internal control over financial reporting, management based its evaluation on
the Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
as of December 31, 2022. Based on its evaluation, our management has concluded that our internal control over financial reporting was
effective as of December 31, 2022.
125
(c) Attestation Report of the Registered Public
Accounting Firm
Not
applicable (we are exempt from this requirement due to our status under the Exchange Act as a non-accelerated filer as of the current
time).
(d) Changes in Internal Control over Financial
Reporting
During the year ended December
31, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
ITEM 16. [Reserved]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
All of the members of our
audit committee are "independent," as such term is defined under Nasdaq rules. In addition, our Board of Directors has determined
that Amnon Ben Shay is an audit committee financial expert, as defined under the rules under the Exchange Act.
ITEM 16B. CODE OF ETHICS
We have adopted a written
code of ethics that applies to our officers and employees, including our principal executive officer, principal financial officer, principal
controller and persons performing similar functions as well as our directors. Our Code of Ethics and Conduct is posted on our website
at http://www.scisparc.com. Information contained on, or that can be accessed through, our website does not constitute a part of this
Annual Report and is not incorporated by reference herein. If we make any amendment to the Code of Ethics and Conductor grant any waivers,
including any implicit waiver, from a provision of the code, we will disclose the nature of such amendment or waiver on our website to
the extent required by the rules and regulations of the SEC including the instructions to Item 16B of Form 20-F. We have not granted any
waivers under our Code of Business Conduct and Ethics.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Kost Forer Gabbay & Kasierer
(a member of EY Global), served as our principal independent registered public accounting firm for each of the two years ended December
31, 2021 and 2022. Kost Forer Gabbay & Kasierer (a member of EY Global) has served as our principal independent registered public
accounting firm since 2009.
The following table provides
information regarding fees paid by us to Kost Forer Gabbay & Kasierer and/or other member firms of EY Global for all services, including
audit services, for the years ended December 31, 2021 and 2022:
Year Ended
December 31,
2021
2022
Audit fees
(1)
$
120,000
$
120,000
Audit-related fees
(2)
22,500
22,500
Tax fees
$
-
$
-
All other fees
-
-
Total
$
142,500
$
142,500
(1)
Includes professional services rendered in connection with the audit of our annual financial statements, review of our interim financial statements.
(2)
Includes professional services rendered in connection with the fees relating to our public equity offerings and related filings.
All of the services provided above were
approved by our audit committee and by our board of directors.
Pre-Approval of Auditors' Compensation
Our audit committee charter
provides, among others, that our audit committee is responsible for: (1) pre-approving audit and non-audit services provided to us by
the independent registered public accounting firm; (2) reviewing and approving disclosures relating to fees and non-audit services required
to be included in the SEC reports; and (3) establishing pre-approval policies and procedures for the engagement of independent accountants
to render us services. Subject to the Board of Directors' and shareholders' approval, if and to the extent required by applicable
law, the audit committee shall have the authority to approve all audit engagement fees and terms and all non-audit engagements, as may
be permissible, with the independent registered public accounting firm.
126
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS
FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY
THE ISSUER AND AFFILIATED PURCHASERS
Not applicable.
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING
ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
We are a "foreign private
issuer", as such term is defined in Rule 405 under the Securities Act. As a foreign private issuer we are permitted to comply with
Israeli corporate governance practices instead of the corporate governance rules of Nasdaq, provided that we disclose which requirements
we are not following and the equivalent Israeli requirement.
We rely on this "foreign
private issuer exemption" with respect to the following items:
●
Quorum.
While the Nasdaq rules require that the quorum for purposes of any meeting of the holders of a listed company's common voting stock, as specified in the company's bylaws, be no less than 33 1/3% of the company's outstanding common voting stock, under Israeli law, a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our amended and restated articles of association provide that a quorum of two or more shareholders holding at least 15% of the voting rights present in person or by proxy is required for commencement of business at a general meeting. However, the quorum set forth in our amended and restated articles of association with respect to an adjourned meeting consists of any number of shareholders present in person or by proxy.
●
Shareholder approval.
Although the Nasdaq rules generally require shareholder approval of equity compensation plans and material amendments thereto, we follow Israeli practice, which is to have such plans and amendments approved only by the board of directors, unless such arrangements are for the compensation of chief executive officer or directors, in which case they also require the approval of the compensation committee and the shareholders. In addition, rather than follow the Nasdaq rules requiring shareholder approval for the issuance of securities in certain circumstances, we follow Israeli law, under which a private placement of securities requires approval by our board of directors and shareholders if it will cause a person to become a controlling shareholder (generally presumed at 25% ownership) or if: (a) the securities issued amount to 20% or more of our outstanding voting rights before the issuance; (b) some or all of the consideration is other than cash or listed securities or the transaction is not on market terms; and (c) transaction will increase the relative holdings of a shareholder that holds 5% or more of our outstanding share capital or voting rights or will cause any person to become, as a result of the issuance, a holder of more than 5% of our outstanding share capital or voting rights.
●
Executive Sessions
. The Nasdaq rules require that independent directors of a Nasdaq listed company must meet regularly in executive session (without members of management present), and such executive sessions should occur at least twice a year. In this regard we have elected to adopt the practices of our home country, Israel, which does not require independent directors to meet regularly in executive sessions separate from the full board of directors
.
●
Nomination of our directors
. Nasdaq rules require director nominations of a Nasdaq listed company to be made or recommended solely by independent directors and the director nominations process be addressed by a formal written charter or board resolution. We follow the requirements of Israeli law, which does not require us to have a formal written charter addressing the director nominations process. The nominations for directors, which are presented to shareholders by a board of directors, are generally made by the board of directors itself, in accordance with the provisions of the Companies Law. Nominations need not be made by a nominating committee of a board of directors consisting solely of independent directors or by a vote consisting solely of our independent directors in order to determine which persons shall be nominated for election by our shareholders.
We otherwise intend to comply
with the rules generally applicable to U.S. domestic companies listed on Nasdaq. We may, however, in the future decide to rely upon the
"foreign private issuer exemption" for purposes of opting out of some or all of the other corporate governance rules.
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
127
PART III
ITEM 17. FINANCIAL STATEMENTS
We have elected to provide
financial statements and related information pursuant to Item 18.
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial
statements and the related notes required by this Item are included in this Annual Report beginning on page F-1.
ITEM 19.
EXHIBITS
Incorporation by Reference
Exhibit
No.
Exhibit Description
Form
File No.
Exhibit
No.
Filing Date
Filed/
Furnished
1.1
Amended and Restated Articles of Association of SciSparc Ltd.
F-3
333-269839
3.1
February 16, 2023
2.1
Description of Securities
*
2.2
Form of Warrant, pursuant to Securities Purchase Agreement, dated March 19, 2020
6-K
001-38041
99.4
March 23, 2020
2.3
Warrant, pursuant to Share Transfer Agreement, dated May 15, 2020
6-K
001-38041
99.3
May 19, 2020
2.4
Form of Warrant
6-K
001-38041
4.2
November 24, 2020
2.5
Form of Pre-Funded Warrant
6-K
001-38041
99.4
March 2, 2021
2.6
Form of Series A Warrant
6-K
001-38041
99.5
March 2, 2021
2.7
Form of Series B Warrant
6-K
001-38041
99.6
March 2, 2021
2.8
Form of Ordinary Share Purchase Warrant, pursuant to Securities Purchase Agreement, dated May 27, 2022
6-K
001-38041
99.5
May 27, 2022
2.9
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
2.10
Share Purchase Warrant, pursuant to Assignment and Assumption Agreement dated September 12, 2022
6-K
001-38041
99.4
September 30, 2022
4.1
Form of Indemnification Agreement
20-F
001-38041
4.12
May 1, 2017
4.2
Form of Exculpation Agreement
20-F
001-38041
4.5
March 30, 2021
4.3
Compensation Policy for Executive Officers and Directors
20-F
001-38041
4.3
April 28, 2022
4.4†
License Agreement dated May 20, 2015, by and between the Company and Dekel Pharmaceuticals Ltd.
F-1
333-214458
10.1
December 6, 2016
4.5††
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
July 29, 2019
4.6
Israeli Share Option Plan (2015)
F-1
333-214458
10.5
November 4, 2016
4.7
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
128
4.8
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
4.9
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
4.10
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
4.11
Warrant Agent Agreement, dated November 23, 2020
6-K
001-38041
4.1
November 24, 2020
4.12
Form of Securities Purchase Agreement
6-K
001-38041
4.6
November 24, 2020
4.13
Form of Securities Purchase Agreement, dated March 1, 2021
6-K
001-38041
99.2
March 2, 2021
4.14
Placement Agency Agreement
6-K
001-38041
99.3
March 2, 2021
4.15
Securities Purchase Agreement between SciSparc Ltd. and the investor named therein, dated May 27, 2022.
6-K
001-38041
99.2
May 27, 2022
4.16
Registration Rights Agreement between the Company and the investor named therein, dated May 27, 2022.
6-K
001-38041
99.3
May 27, 2022
4.17
Asset Purchase Agreement between the Company, SciSparc Nutraceuticals Inc. and the parties named therein, dated September 12, 2022
6-K
001-38041
99.3
September 30, 2022
4.18
Assignment and Assumption Agreement between the Company and M.R.M. Merhavit Holdings and Management Ltd, dated September 12, 2022
6-K
001-38041
99.2
September 30, 2022
4.19
Letter Agreement between the Company and the investor named therein, dated June 30, 2022
6-K
001-38041
99.1
July 1, 2022
8.1
List of Subsidiaries
*
12.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
*
13.1
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350.
**
15.1
Consent of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, independent registered accounting firm for the Registrant.
*
101.INS
Inline XBRL Instance Document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).
*
Filed herewith.
**
Furnished 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) is the type that
SciSparc Ltd. treats as private or confidential.
129
SIGNATURES
The registrant hereby certifies
that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
Annual Report on Form 20-F filed on its behalf.
SCISPARC LTD.
By:
/s/ Oz Adler
Oz Adler
Chief Executive Officer
Date May 1, 2023
130
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2022
U.S. DOLLARS IN THOUSANDS
INDEX
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID
1281
)
F-2 - F-3
Consolidated Statements of Financial Position
F-4 - F-5
Consolidated Statements of Comprehensive Loss
F-6
Consolidated Statements of Changes in Equity
F-7
Consolidated Statements of Cash Flows
F-8- F-10
Notes to Consolidated Financial Statements
F-11 - F-49
F-
1
Kost Forer Gabbay & Kasierer
144 Menachem
Begin Road,
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Shareholders and
the Board of Directors of
SCISPARC LTD. (formerly
known as THERAPIX BIOSCIENCES LTD.)
Opinion on the Financial Statements
We have audited the accompanying
consolidated statements of financial position of SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) and its subsidiaries (the
"Company") as of December 31, 2022, and 2021, and the related consolidated statements of comprehensive loss, changes in equity
and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the
"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company at December 31, 2022, and 2021, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with International Financial Reporting
Standards ("IFRS") as issued by the International Accounting Standards Board.
The Company's Ability to Continue as
a Going Concern
The accompanying consolidated
financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has suffered recurring losses from operations, negative cash flows from operating activities and has stated that
substantial doubt exists about the Company's ability to continue as a going concern. Management's evaluation of the events
and conditions and management's plans regarding these matters are also described in Note 1. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
F-
2
Critical Audit Matters
The critical audit matter communicated below is
a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the
audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Liquidity and Capital Resources
Description of the Matter
As discussed in Note 1 to the consolidated financial
statements, the Company has incurred losses since inception, and expects to continue to incur losses for the foreseeable future. At December
31, 2022, the Company's cash and cash equivalents position is not sufficient to fund the Company's planned operations for
at least a year beyond the date of the issuance of the consolidated financial statements. Those factors raise substantial doubt about
the Company's ability to continue as a going concern.
We determined the Company's ability to continue as a going concern
is a critical audit matter due to the estimation and execution uncertainty regarding the Company's future cash flows and the risk
of bias in management's judgments and assumptions in estimating these cash flows to conclude the Company would have sufficient liquidity
to sustain itself for at least a year beyond the date of the issuance of the consolidated financial statements. This in turn led to a
high degree of auditor subjectivity and judgment to evaluate the audit evidence supporting the liquidity conclusions.
How We Addressed the Matter
    in Our Audit
Addressing the matter involved performing procedures and evaluating
audit evidence in connection with our overall opinion on the consolidated financial statements. Our audit procedures included, among
others, testing the reasonableness of the forecasted revenue, operating expenses, and uses and sources of cash used in management's
assessment of whether the Company has sufficient liquidity to fund operations for at least one year from the consolidated financial statement
issuance date. This testing included inquiries with management, consideration of positive and negative evidence impacting management's
forecasts, the Company's financing arrangements in place as of the report date, market and industry factors, we evaluated management's
analysis of their impact on the forecasted cash flows.
We assessed the adequacy of the Company's
going concern disclosures included in Note 1 to the consolidated financial statements.
/s/
KOST FORER GABBAY & KASIERER
Tel Aviv, Israel
KOST FORER GABBAY & KASIERER
May 1
, 2023
A Member of Ernst & Young Global
We have served as the Company's auditor since 2009.
F-
3
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,
2022
2021
Note
USD in thousands
ASSETS
CURRENT ASSETS:
Cash
4
$
3,574
$
6,875
Restricted deposit
60
45
Trade receivables
77
-
Other accounts receivable
6
131
2,904
Inventory
5
668
-
4,510
9,824
NON-CURRENT ASSETS:
Intangible asset, net
11
4,717
-
Investments in company accounted for at equity
7
591
-
Investments in financial assets
8, 24e
730
Property and equipment, net
10
57
92
6,095
92
$
10,605
$
9,916
The accompanying notes are an integral part of
the consolidated financial statements.
F-
4
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31,
2022
2021
Note
USD in thousands
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables
12
$
1,199
$
1,199
Other accounts payable
13
193
154
Warrants
18h
2,737
359
Lease liability
9
27
45
4,156
1,757
NON-CURRENT LIABILITIES:
Lease liability
-
18
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY:
18
Share capital and premium
58,592
58,541
Reserve from share-based payment transactions
19
5,180
4,331
Warrants
18
5,190
5,190
Foreign currency translation reserve
2d
497
497
Transactions with non-controlling interests
559
559
Accumulated deficit
(
63,569
)
(
60,977
)
Total equity
6,449
8,141
Total liabilities and equity
$
10,605
$
9,916
The accompanying notes are an integral part of
the consolidated financial statements.
F-
5
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Year ended December 31,
2022
2021
2020
Note
USD in thousands (except per share data)
Revenues
20
$
1,347
$
-
$
-
Cost of goods sold
20
(
322
)
Gross profit
1,025
-
-
Research and development expenses
21a
2,803
1,990
649
General and administrative expenses
21b
6,509
3,778
1,902
Operating loss
8,287
5,768
3,293
Company's share of losses of company accounted for at equity, net
21c
109
-
742
Finance income
21d
(
7,832
)
-
(
630
)
Finance expenses
21e
2,014
21
872
Loss before income taxes
2,578
5,789
3,535
Taxes on income
14
-
-
Total comprehensive loss
2,592
5,789
3,535
Attributable to:
Equity holders of the Company
2,592
5,789
3,482
Non-controlling interests
-
-
(
53
)
2,592
5,789
3,535
Basic loss per ordinary share attributable to equity holders of the Company:
22
0.57
2.83
0.10
Diluted loss per ordinary share attributable to equity holders of the Company:
22
0.57
2.83
0.11
The accompanying notes are an integral part of
the consolidated financial statements.
F-
6
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the Company
Share capital and premium
Reserve from share-based payment transactions
Warrants
Transactions with non-
controlling interests
Foreign currency translation reserve
Accumulated deficit
Total
Non-
controlling interests
Total equity
USD in thousands
Balance at January 1, 2020
$
45,636
$
4,862
$
464
$
261
$
497
$
(
51,706
)
$
14
$
-
$
14
Loss
-
-
-
-
-
(
3,482
)
(
3,482
)
(
53
)
(
3,535
)
Warrants reclassification
(
464
)
(
464
)
(
464
)
Issue of share capital, net of issue expenses (1)
2,763
-
2,207
-
-
-
4,970
-
4,970
Conversion of convertible debentures (Note 14b)
3
-
-
-
-
-
3
-
3
Non-controlling interests
-
-
-
298
-
-
298
53
351
Expiration of share options
638
(
638
)
-
-
-
-
-
-
-
Cost of share-based payment
-
91
-
-
-
-
91
-
91
Balance at December 31, 2020
$
49,040
4,315
2,207
559
497
(
55,188
)
1,430
-
1,430
Loss
-
-
-
-
-
(
5,789
)
(
5,789
)
-
(
5,789
)
Exercise of warrants (3)
6,110
-
(
1,352
)
-
-
-
4,758
-
4,758
Issue of share capital, net of issue expenses (2)
3,364
-
4,335
-
-
-
7,699
-
7,699
Expiration of share options
27
(
27
)
-
-
-
-
-
-
-
Cost of share-based payment
-
43
-
-
-
-
43
-
43
Balance at December 31, 2021
$
58,541
4,331
5,190
559
497
(
60,977
)
8,141
-
8,141
Loss
-
-
-
-
-
(
2,592
)
(
2,592
)
-
(
2,592
)
Exercise of warrants
3
-
-
-
-
-
3
-
3
Cost of share-based payment
48
849
-
-
-
-
897
-
897
Balance at December 31, 2022
$
58,592
$
5,180
$
5,190
$
559
$
497
$
(
63,569
)
$
6,449
$
-
$
6,449
(1)
Net of issue expenses of $784
(2)
Net of issue expenses of $449
(3)
Net of issue expenses of $358
The accompanying notes are an integral part of
the consolidated financial statements.
F-
7
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2022
2021
2020
USD in thousands
Cash flows from operating activities:
Loss
$
(
2,592
)
$
(
5,789
)
$
(
3,535
)
Adjustments to reconcile loss to net cash used in operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization
187
33
164
Cost of share-based payment
897
43
91
Finance expenses (income), net
(
6,585
)
9
(
476
)
Group's share of losses of company accounted for at equity, net
109
-
795
Losses from remeasurement of investment in financial assets
770
-
-
(
4,622
)
85
574
Working capital adjustments:
Decrease (increase) in other accounts receivable
3
170
(
519
)
Increase (decrease) in trade payables
-
353
(
752
)
Increase (decrease) in other accounts payable
39
120
(
75
)
Increase in trade receivables
(
77
)
-
-
Increase in inventory
(
668
)
-
-
(
703
)
643
(
1,346
)
Net cash used in operating activities
$
(
7,917
)
$
(
5,061
)
$
(
4,307
)
The accompanying notes are an integral part of
the consolidated financial statements.
F-
8
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2022
2021
2020
USD in thousands
Cash flows from investing activities:
Investment (withdrawal) in restricted bank deposits
$
(
15
)
$
(
35
)
$
24
Purchase of property and equipment
(
8
)
(
35
)
-
Investment in a company accounted for at equity
(
700
)
-
-
Purchase of financial assets at fair value through profit or loss
(
1,500
)
-
-
Purchase of intangible asset
(
4,861
)
-
-
Net cash provided by (used in) investing activities
(
7,084
)
(
70
)
24
Cash flows from financing activities:
Proceeds from issue of share capital (net of issuance expenses)
9,005
7,699
2,650
Exercise of warrants (a)
2,770
2,568
2,376
Payment of issuance expenses related to previous period
3
-
116
Interest paid on lease liability
(
8
)
-
(
7
)
Repayment of lease liability
(
70
)
(
19
)
(
26
)
Repayment of short-term credit
-
(
188
)
(
1,410
)
Receipt of short-term credit from others, net
-
-
1,660
Net cash provided by financing activities
11,700
10,060
5,359
Increase (decrease) in cash
(
3,301
)
4,929
1,076
Cash at the beginning of the period
6,875
1,946
870
Cash at the end of the period
$
3,574
$
6,875
$
1,946
The accompanying notes are an integral part of
the consolidated financial statements.
F-
9
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
2022
2021
2020
USD in thousands
(a)
Significant non-cash transactions
:
Right-of-use asset recognized with corresponding lease liability
-
78
-
Registration of warrants
-
2,480
-
Unpaid issue expenses
$
-
$
290
$
-
The accompanying notes are an integral part of
the consolidated financial statements.
F-
10
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 1:-
GENERAL
a.
SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.) ("SciSparc"
or the "Company" or the "Group"), a pharmaceutical company, was incorporated in Israel and commenced its operations
on August 23, 2004. Until March 2014, SciSparc and its subsidiaries at the time (the "Group") were mainly engaged in developing
several innovative immunotherapy products and SciSparc's own patents in the immunotherapy field. In August 2015, the Company decided
to adopt a different business strategy and began focusing on developing a portfolio of approved drugs based on cannabinoid molecules.
With this focus, the Company is currently engaged in the following development programs based on Δ9-tetrahydrocannabinol ("THC")
and/or non-psychoactive cannabidiol for the treatment of Tourette syndrome, Alzheimer's disease and agitation, pain, autism
spectrum disorder and Status Epilepticus. The headquarters of the Company are located in Tel Aviv, Israel.
The Company was previously a dual-listed
company, whereby it listed (a) its ordinary shares, no par value each ("ordinary shares"), on the Tel-Aviv Stock Exchange
("TASE") from December 26, 2005 until its delisting on August 7, 2018, and (b) its American Depository Shares ("ADSs")
on the Nasdaq Capital Market ("Nasdaq") following its initial public offering ("IPO") on March 27, 2017, at which
time it raised $
13,700
, until its suspension from listing, and subsequent delisting, from Nasdaq on July 2, 2020 and September 21, 2020,
respectively. Following the delisting of the ADSs from Nasdaq, the Company's ADSs were listed on the Pink Sheets and then subsequently
upgraded to the OTCQB on December 8, 2020. On August 26, 2021, the Company's ADSs were mandatorily cancelled and were exchanged
for ordinary shares at a one-for-one ratio. On December 22, 2021, the Company's ordinary shares were re-listed on Nasdaq and
began trading under the symbol "SPRC".
As of December 31, 2022, the Company
had three private subsidiaries, including a company incorporated under the laws of Israel: Evero Health Ltd ("Evero"); an
inactive company incorporated under the laws of Israel: Brain Bright Ltd ("Brain Bright"); and a company incorporated under
the laws of the State of Delaware: Scisparc Nutraceuticals Inc. ("Scisparc US" and together with Evero and Brain Bright, the
"Subsidiaries").
The consolidated financial statements
of the Company for the year ended December 31, 2022, were approved on April 27, 2023, and signed on May 1, 2023 (the "Approval
Date").
F-
11
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 1:-
GENERAL (CONT.)
b.
The Group incurred operating losses since its incorporation and expects
to continue to incur operating losses for the foreseeable future. As of December 31, 2022, the Group had an accumulated deficit of approximately
$
64,009
as a result of recurring operating losses.
A
s
of the Approval Date, the Group has started recognizing revenues from sales. However, its pharmaceuticals operations are dependent on
its ability to raise additional funds from existing and/or new investors. This dependency will continue until the Group will be able to
completely finance its operations by generating revenue from its products. These abovementioned factors raise substantial doubt about
the Group's ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts
and classifications of assets and liabilities that might result should the Group be unable to continue as a going concern.
c.
Definitions and Meanings:
The Company
-
SciSparc Ltd. (formerly known as Therapix Biosciences Ltd.)
The Group
-
SciSparc Ltd. (formerly Therapix Biosciences Ltd.) and its Subsidiaries, as detailed in Note 1a.
Subsidiaries
-
Companies that are controlled by the Company, as defined in IFRS 10, "
Consolidated Financial Statements
", and whose accounts are consolidated with those of the Company (if active).
Associates
-
An entity over which the Company has significant influence, as defined in IAS 28, "
Investment in Associates and Joint Ventures
" and is not a Subsidiary.
Related Parties
-
As defined in IAS 24, "
Related Party Disclosures
".
IAS
-
International Accounting Standards issued by the International Accounting Standards Board ("IASB").
IFRS
-
International Financial Reporting Standards issued by the IASB.
F-
12
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have
been applied consistently in the financial statements for all periods presented, unless otherwise stated.
a.
Basis of presentation of the financial statements:
These financial statements have been
prepared in accordance with IFRS, as issued by the IASB.
The Company's financial statements
have been prepared on a cost basis, unless otherwise indicated.
The Company has elected to present
the profit or loss items using the function of expense method.
The financial statements are presented
in USD and all values are rounded to the nearest thousand ('000), except when otherwise indicated.
b.
The operating cycle:
The operating cycle of the Company
is
one year
.
c.
Consolidated financial statements:
The consolidated financial statements
comprise the financial statements of companies that are controlled by the Company (Subsidiaries). Control of a company is achieved when
the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. Potential voting rights are considered when assessing whether an entity has control over
the other entity. The consolidation of the financial statements commences on the date on which control is obtained and ends when such
control ceases.
The financial statements of the Company
and of the Subsidiaries are prepared as of the same dates and periods. The consolidated financial statements are prepared using uniform
accounting policies by all companies in the Group. Significant intra-Group balances and transactions and gains or losses resulting from
intra-Group transactions are eliminated in full in the consolidated financial statements.
Non-controlling interests in subsidiaries
represent the equity in subsidiaries not attributable, directly or indirectly, to a parent. Non-controlling interests are presented in
equity separately from the equity attributable to the equity holders of the Company. Profit or loss and components of other comprehensive
income are attributed to the Company and to non-controlling interests. Losses are attributed to non-controlling interests even if they
result in a negative balance of non-controlling interests in the consolidated statement of financial position.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
d.
Functional currency and foreign currency:
The functional currency of the Company, which is the currency that best reflects the economic environment in which the Company operates and conducts its transactions is the U.S. Dollar ("USD" or "$"), since it's the primary currency of the economic environment in which the Company operates. The consolidated financial statements are also presented in USD since the Company believes that preparing the consolidated financial statements in USD provides more relevant information to the users of the consolidated financial statements.
e.
Acquisition of a single asset company:
Upon the acquisition
of a single asset company, the Group evaluates whether it is the acquisition of a business or of an asset. To be considered a business,
the acquisition must include, at a minimum, an input and a substantive process that together can significantly contribute to the creation
of outputs. The acquisition is accounted for as a business combination if the single asset company is a business. If it is not a business,
the acquisition is accounted for as the acquisition of assets and liabilities. In such an acquisition, the cost of the acquisition includes
transaction costs which are allocated to the identifiable acquired assets and liabilities proportionally based on their fair value on
the acquisition date. In such case, goodwill and deferred taxes in respect of the temporary differences existing as of the acquisition
date are not recognized.
f.
Restricted deposits:
A restricted deposit is cash invested
in a short-term deposit (between three months and one year) or in a long-term deposit (with a maturity of more than one year from the
date of investment). Restricted deposits are designated to secure the Company's office facilities lease agreements and its credit
cards.
g.
Investment in joint arrangements:
Joint arrangements
are arrangements in which the Company has joint control. Joint control is the contractually agreed sharing of control of an arrangement,
which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
1.
Joint ventures:
In joint ventures
the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint venture is accounted
for at equity
2.
Joint operations:
In joint operations
the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities relating to the arrangement.
The Company recognizes in relation to its interest its share of the assets, liabilities, revenues and expenses of the joint operation.
The acquisition
of interests in a joint operation which represents a business, as defined in IFRS 3, is accounted for using the acquisition method, including
the measurement of the identifiable assets and liabilities at fair value, the recognition of deferred taxes arising from this measurement,
the accounting treatment of the related transaction costs and the recognition of goodwill or bargain purchase gains. This applies to the
acquisition of the initial interest and additional interests in a joint operation that represents a business.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
h.
Investments in associates:
Associates are companies in which the Group has significant
influence over the financial and operating policies without having control. The investment in an associate is accounted for using the
equity method.
i.
Investments accounted for using the equity method:
The Group's investments
in associates and joint ventures are accounted for using the equity method.
Under the equity
method, the investment in the associate or in the joint venture is presented at cost with the addition of post-acquisition changes in
the Group's share of net assets, including other comprehensive income of the associate or the joint venture. Gains and losses resulting
from transactions between the Group and the associate or the joint venture are eliminated to the extent of the interest in the associate
or in the joint venture. The cost of the investment includes transaction costs.
Goodwill relating
to the acquisition of an associate or a joint venture is presented as part of the investment in the associate or the joint venture, measured
at cost and not systematically amortized. Goodwill is evaluated for impairment as part of the investment in the associate or in the joint
venture as a whole.
The financial statements
of the Company and of the associate or joint venture are prepared as of the same dates and periods. The accounting policies applied in
the financial statements of the associate or the joint venture are uniform and consistent with the policies applied in the financial statements
of the Group.
Upon the acquisition
of an associate or a joint venture achieved in stages when the former investment in the acquiree was accounted for pursuant to the provisions
of IFRS 9, the Group applies the principles of IFRS 3 regarding business combinations achieved in stages. Consequently, equity interests
in the acquiree that had been held by the Group prior to achieving significant influence or joint control are measured at fair value on
the acquisition date and are included in the acquisition consideration while recognizing a gain or loss resulting from the fair value
measurement.
The equity method
is applied until the loss of significant influence in the associate or loss of joint control in the joint venture or classification as
investment held for sale.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
j.
Property and equipment, net:
Property and equipment are measured
at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and any related investment
grants and excluding day-to-day servicing expenses.
Depreciation is calculated on a straight-line
basis over the useful life of the assets at annual rates as follows:
%
Mainly %
Lab equipment
6
-
50
33
Computers
33
-
50
33
Office furniture and equipment
20
-
33
25
Leasehold improvements
see below
-
Leasehold improvements are depreciated
on a straight-line basis over the shorter of the lease term (including the extension option held by a company and intended to be exercised)
and the expected life of the improvement.
The useful life, depreciation method
and residual value of an asset are reviewed at least each year-end and any changes are accounted for prospectively as a change in accounting
estimate. Depreciation of an asset ceases at the earlier of: the date that the asset is classified as held for sale and the date that
the asset is derecognized.
k.
Intangible assets:
Separately acquired intangible assets
are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination
are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalized
development costs, are recognized in profit or loss when incurred.
Intangible assets with a finite useful
life are amortized over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired.
The amortization period and the amortization method for an intangible asset are reviewed at least at each year end.
l.
Impairment of non-financial assets:
The Company evaluates the need to record
an impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable.
If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The
recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash
flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that
does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are
recognized in profit or loss.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
m.
Financial instruments:
1.
Financial assets:
Financial assets are measured upon
initial recognition at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets, except
for financial assets measured at fair value through profit or loss in respect of which transaction costs are recorded in profit or loss.
The Company classifies and measures
debt instruments in the financial statements based on the following criteria:
-
The Company's business model for managing financial assets; and
-
The contractual cash flow terms of the financial asset.
a)
Debt instruments are measured at amortized cost when:
The Company's business model
is to hold the financial assets in order to collect their contractual cash flows, and the contractual terms of the financial assets give
rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. After initial
recognition, the instruments in this category are measured according to their terms at amortized cost using the effective interest rate
method, less any provision for impairment.
On the date of initial recognition,
the Company may irrevocably designate a debt instrument as measured at fair value through profit or loss if doing so eliminates or significantly
reduces a measurement or recognition inconsistency, such as when a related financial liability is also measured at fair value through
profit or loss.
b)
Debt instruments are measured at fair value through profit or loss when:
A financial asset which is a debt instrument
does not meet the criteria for measurement at amortized cost or at fair value through other comprehensive income. After initial recognition,
the financial asset is measured at fair value and gains or losses from fair value adjustments are recognized in profit or loss.
c)
Equity instruments and other financial assets held for trading:
Investments in equity instruments do
not meet the above criteria and accordingly are measured at fair value through profit or loss.
Other financial assets held for trading
such as derivatives, including embedded derivatives separated from the host contract, are measured at fair value through profit or loss
unless they are designated as effective hedging instruments.
Dividends from investments in equity
instruments are recognized in profit or loss when the right to receive the dividends is established.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
m.
Financial instruments: (Cont.)
2.
Derecognition of financial assets:
A financial asset is derecognized only
when:
-
The contractual rights to the cash flows from the financial asset have expired;
-
The Company has transferred substantially all the risks and rewards deriving from the contractual rights to receive cash flows from the financial asset or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset; or
-
The Company has retained its contractual rights to receive cash flows from the financial asset but has assumed a contractual obligation to pay the cash flows in full without material delay to a third party.
3.
Financial liabilities:
a)
Financial liabilities measured at amortized cost:
Financial liabilities are initially
recognized at fair value less transaction costs that are directly attributable to the issue of the financial liability.
After initial recognition, the Company
measures all financial liabilities at amortized cost using the effective interest rate method, except for financial liabilities at fair
value through profit or loss such as derivatives.
b)
Financial liabilities measured at fair value through profit or loss:
At initial recognition, the Company
measures financial liabilities that are not measured at amortized cost at fair value. Transaction costs are recognized in profit or loss.
After initial recognition, changes
in fair value are recognized in profit or loss.
4.
Derecognition of financial liabilities:
A financial liability is derecognized
only when it is extinguished, that is when the obligation specified in the contract is discharged or cancelled or expires. A financial
liability is extinguished when the debtor discharges the liability by paying in cash, other financial assets, goods or services, or is
legally released from the liability.
5.
Offsetting financial instruments:
Financial assets and financial liabilities
are offset and the net amount is presented in the statement of financial position if there is a legally enforceable right to set off the
recognized amounts and there is an intention either to settle on a net basis or to realize the asset and settle the liability simultaneously.
The right of set-off must be legally enforceable not only during the ordinary course of business of the parties to the contract but also
in the event of bankruptcy or insolvency of one of the parties. In order for the right of set-off to be currently available, it must not
be contingent on a future event, there may not be periods during which the right is not available, or there may not be any events that
will cause the right to expire.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
m.
Financial instruments: (Cont.)
6.
Compound financial instruments:
Convertible debentures which contain
both an equity/derivative component and a liability component are separated into two components. This separation is performed by first
determining the liability component based on the fair value of an equivalent non-convertible liability. The value of the conversion component
is determined to be the residual amount. Directly attributable transaction costs are apportioned between the equity component and the
liability component based on the allocation of proceeds to the equity and liability components.
7.
Issue of a unit of securities:
The issue of a unit of securities involves
the allocation of the proceeds received (before issue expenses) to the securities issued in the unit based on the following order: financial
derivatives and other financial instruments measured at fair value in each period. Then fair value is determined for financial liabilities
that are measured at amortized cost. The proceeds allocated to equity instruments are determined to be the residual amount. Issue costs
are allocated to each component pro rata to the amounts determined for each component in the unit.
n.
Research and development expenditures:
Research expenditures are recognized
in profit or loss when incurred.
The conditions enabling capitalization
of development costs as an asset have not yet been met and, therefore, all development expenditures are recognized in profit or loss when
incurred.
o.
Finance income and expenses:
Finance income and expenses comprise
interest income on amounts invested and exchange rate gains and losses. Interest income is recognized as it accrues using the effective
interest method. Finance income and expenses derive also from changes in the fair value of financial liabilities measured at fair value
through profit or loss. Borrowing costs are recognized in profit or loss using the effective interest method.
p.
Fair value measurement:
Fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date. Fair value measurement is based on the assumption that the transaction will take place in the asset's or the liability's
principal market, or in the absence of a principal market, in the most advantageous market.
The fair value of an asset or a liability
is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants
act in their economic best interest.
Fair value measurement of a non-financial
asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best
use or by selling it to another market participant that would use the asset in its highest and best use.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
p.
Fair value measurement: (Cont.)
The Company uses valuation techniques
that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured
at fair value or for which fair value is disclosed are categorized into levels within the fair value hierarchy based on the lowest level
input that is significant to the entire fair value measurement:
Level 1
-
Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2
-
Inputs other than quoted prices included within Level 1 that are observable directly or indirectly.
Level 3
-
Inputs that are not based on observable market data (valuation techniques which use inputs that are not based on observable market data).
q.
Taxes on income:
Current or deferred taxes are recognized
in profit or loss, except to the extent that they relate to items which are recognized in other comprehensive income or equity.
1.
Current taxes:
A current tax liability is measured
using the tax rates and tax laws that have been enacted or substantively enacted by the reporting date as well as adjustments required
in connection with the tax liability in respect of previous years.
2.
Deferred taxes:
Deferred taxes are computed in respect
of temporary differences between the carrying amounts in the financial statements and the amounts attributed for tax purposes.
Deferred taxes are measured at the
tax rate that is expected to apply when the asset is realized, or the liability is settled, based on tax laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets are reviewed at
each reporting date and reduced to the extent that it is not probable that they will be utilized. Deductible carryforward losses and temporary
differences for which deferred tax assets had not been recognized are reviewed at each reporting date and a respective deferred tax asset
is recognized to the extent that their utilization is probable.
Taxes that would apply in the event
of the disposal of investments in investees have not been taken into account in computing deferred taxes, as long as the disposal of the
investments in investees is not probable in the foreseeable future. Also, deferred taxes that would apply in the event of distribution
of earnings by investees as dividends have not been taken into account in computing deferred taxes, since the distribution of dividends
does not involve an additional tax liability or since it is the Company's policy not to initiate distribution of dividends from
a subsidiary that would trigger an additional tax liability.
Taxes on income that relate to distributions
of an equity instrument and to transaction costs of an equity transaction are accounted for pursuant to IAS 12, "
Income Taxes
".
Deferred taxes are offset if there
is a legally enforceable right to offset a current tax asset against a current tax liability and the deferred taxes relate to the same
taxpayer and the same taxation authority.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
r.
Share-based payment transactions:
The Company's employees and other
service providers may receive remuneration in the form of share-based payments ("Equity-settled transactions").
Equity-settled transactions:
The cost of equity-settled transactions
with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined using an acceptable
option pricing model ("OPM"). As for service providers, the cost of the transactions is measured at the fair value of the
goods or services received as consideration for equity instruments granted.
The cost of equity-settled transactions
is recognized in profit or loss together with a corresponding increase in equity during the period in which the performance and/or service
conditions are to be satisfied ending on the date on which the relevant employees become entitled to the award (the "Vesting Period").
The cumulative expense recognized for equity-settled transactions at the end of each reporting period until the vesting date reflects
the extent to which the Vesting Period has expired and the Company's best estimate of the number of equity instruments that will
ultimately vest.
No expense is recognized for awards
that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective
of whether the market condition is satisfied, provided that all other vesting conditions (service and/or performance) are satisfied.
If the Company modifies the conditions
on which equity-instruments were granted, an additional expense is recognized for any modification that increases the total fair value
of the share-based payment arrangement or is otherwise beneficial to the employee/other service provider at the modification date.
If a grant of an equity instrument
is cancelled, it is accounted for as if it had vested on the cancellation date and any expense not yet recognized for the grant is recognized
immediately. However, if a new grant replaces the cancelled grant and is identified as a replacement grant on the grant date, the cancelled
and new grants are accounted for as a modification of the original grant, as described above.
s.
Earnings (loss) per share:
Earnings (loss) per share are calculated
by dividing the income (loss) attributable to equity holders of the Company by the weighted number of ordinary shares outstanding during
the period.
Basic loss per ordinary share includes
only ordinary shares that were outstanding during the period.
Potential ordinary shares are included
in the computation of diluted loss per ordinary share when their conversion increases loss per ordinary share from continuing operations.
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
t.
Employee benefit liabilities:
The Company has several employee-benefit
plans:
1.
Short-term employee benefits:
Short-term employee benefits are benefits
that are expected to be settled wholly before twelve months after the end of the annual reporting period in which the employees render
the related services. These benefits include salaries, paid annual leave, paid sick leave, recreation and social security contributions
and are recognized as expenses as the services are rendered. A liability in respect of a cash bonus or a profit-sharing plan is recognized
when the Company has a legal or constructive obligation to make such payment as a result of past service rendered by an employee and a
reliable estimate of the amount can be made.
2.
Post-employment benefits:
The plans are normally financed by contributions
to insurance companies and classified as defined contribution plans or as defined benefit plans.
The Company has defined contribution
plans to its employees according to the specific laws per country.
u.
Provisions:
A provision in accordance with IAS 37,
"
Provisions, Contingent Liabilities and Contingent Assets
", is recognized when the Company has a present obligation
(legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects part or all of
the expense to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset but only when
the reimbursement is virtually certain. The expense is recognized in the statement of profit or loss net of any reimbursement.
Following are the types of provisions
included in the financial statements:
Legal claims:
A provision for claims is recognized
when the Company has a present legal or constructive obligation as a result of a past event, it is more likely than not that an outflow
of resources embodying economic benefits will be required by the Company to settle the obligation and a reliable estimate can be made
of the amount of the obligation.
v.
Leases:
The Company elected to apply the provisions
of IFRS 16, "
Leases
" ("IFRS 16") using the modified retrospective method (without restatement of comparative
data).
The accounting policy for leases applied
effective from January 1, 2019, is as follows:
The Company accounts for a contract as
a lease when the contract terms convey the right to control the use of an identified asset for a period of time in exchange for consideration.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
v.
Leases: (Cont.)
1.
The Company as a lessee:
For leases in which the Company is the
lessee, the Company recognizes on the commencement date of the lease a right-of-use asset and a lease liability, excluding leases whose
term is up to 12 months and leases for which the underlying asset is of low value. For these excluded leases, the Company has elected
to recognize lease payments as an expense in profit or loss on a straight-line basis over the lease term (see Note 9). In measuring the
lease liability, the Company has elected to apply the practical expedient in IFRS 16 and separates the lease components from the non-lease
components (such as management and maintenance services, etc.) included in a single contract.
On the commencement date, the lease
liability includes all unpaid lease payments discounted at the interest rate implicit in the lease, if that rate can be readily determined,
or otherwise using the Company's incremental borrowing rate. After the commencement date, the Company measures the lease liability
using the effective interest rate method.
On the commencement date, the right-of-use
asset is recognized in an amount equal to the lease liability plus lease payments already made on or before the commencement date and
initial direct costs incurred. The right-of-use asset is measured applying the cost model and depreciated over the shorter of its useful
life and the lease term.
The Company tests for impairment of
the right-of-use asset whenever there are indications of impairment pursuant to the provisions of IAS 36, "
Impairment of Assets
".
2.
Lease extension and termination options:
A non-cancelable lease term includes
both the periods covered by an option to extend the lease when it is reasonably certain that the extension option will be exercised, and
the periods covered by a lease termination option when it is reasonably certain that the termination option will not be exercised.
In the event of any change in the expected
exercise of the lease extension option or in the expected non-exercise of the lease termination option, the Company remeasures the lease
liability based on the revised lease term using a revised discount rate as of the date of the change in expectations. The total change
is recognized in the carrying amount of the right-of-use asset until it is reduced to zero, and any further reductions are recognized
in profit or loss.
3.
Lease modifications:
If a lease modification does not reduce
the scope of the lease and does not result in a separate lease, the Company remeasures the lease liability based on the modified lease
terms using a revised discount rate as of the modification date and records the change in the lease liability as an adjustment to the
right-of-use asset.
If a lease modification reduces the
scope of the lease, the Company recognizes a gain or loss arising from the partial or full reduction of the carrying amount of the right-of-use
asset and the lease liability. The Company subsequently remeasures the carrying amount of the lease liability according to the revised
lease terms, at the revised discount rate as of the modification date and records the change in the lease liability as an adjustment to
the right-of-use asset.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (CONT.)
w.
Amendment
to IAS 1, "Presentation of Financial Statements":
In January 2020, the IASB issued
an amendment to IAS 1, "Presentation of Financial Statements" regarding the criteria for determining the classification of liabilities
as current or non-current ("the Original Amendment"). In October 2022, the IASB issued a subsequent amendment ("the Subsequent
Amendment").
According to the Subsequent Amendment:
Only covenants with which an entity
must comply on or before the reporting date will affect a liability's classification as current or non-current.
An entity should provide disclosure
when a liability arising from a loan agreement is classified as non-current and the entity's right to defer settlement is contingent on
compliance with future covenants within twelve months from the reporting date. This disclosure is required to include information about
the covenants and the related liabilities. The disclosures must include information about the nature of the future covenants and when
compliance is applicable, as well as the carrying amount of the related liabilities. The purpose of this information is to allow users
to understand the nature of the future covenants and to assess the risk that a liability classified as non-current could become repayable
within twelve months. Furthermore, if facts and circumstances indicate that an entity may have difficulty in complying with such covenants,
those facts and circumstances should be disclosed.
According to the Original Amendment,
the conversion option of a liability affects the classification of the entire liability as current or non-current unless the conversion
component is an equity instrument.
The Original Amendment and Subsequent
Amendment are both effective for annual periods beginning on or after January 1, 2024, and must be applied retrospectively. Early application
is permitted.
The Company is evaluating the
effects of the Amendments on its financial statements.
x.
Amendment
to IAS 8, "Accounting Policies, Changes to Accounting Estimates and Errors":
In February 2021, the IASB issued an amendment to IAS 8,
"Accounting Policies, Changes to Accounting Estimates and Errors" ("the Amendment"), in which it introduces a new
definition of "accounting estimates".
Accounting estimates are defined as
"monetary amounts in financial statements that are subject to measurement uncertainty". The Amendment clarifies the distinction
between changes in accounting estimates and changes in accounting policies and the correction of errors.
The Amendment is to be applied prospectively
for annual reporting periods beginning on or after January 1, 2023 and is applicable to changes in accounting policies and changes in
accounting estimates that occur on or after the start of that period. Early application is permitted.
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LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 3:-
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
In the process of applying the significant
accounting policies, the Company has made the following judgments which have the most significant effect on the amounts recognized in
the financial statements:
a.
Judgments:
-
Discount rate for a lease liability:
When a company in the Group is unable
to readily determine the discount rate implicit in a lease in order to measure the lease liability, such company uses an incremental borrowing
rate. That rate represents the rate of interest that the Company would have to pay to borrow over a similar term and with similar security,
the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment. When there are no
financing transactions that can serve as a basis, said company determines the incremental borrowing rate based on its credit risk, the
lease term and other economic variables deriving from the lease contract's conditions and restrictions.
-
Effective control:
The Company assesses whether it controls
a company in which it holds less than the majority of the voting rights by, among others, reference to the size of its holding of voting
rights relative to the size and dispersion of holdings of the other vote holders including voting patterns at previous shareholders'
meetings.
-
Determining the fair value of share-based payment transactions:
The fair value of share-based payment
transactions is determined upon initial recognition by an acceptable OPM. The inputs to the model include share price, exercise price
and assumptions regarding expected volatility, expected life of share option, risk-free interest and expected dividend yield.
b.
Estimates and assumptions:
The preparation of the financial statements
requires management to make estimates and assumptions that have an effect on the application of the accounting policies and on the reported
amounts of assets, liabilities, revenues and expenses. Changes in accounting estimates are reported in the period of the change in estimate.
The key assumptions made in the financial
statements concerning uncertainties at the reporting date and the critical estimates computed by the Company that may result in a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
-
Legal claims:
In estimating the likelihood of outcome
of legal claims filed or threatened to commence against the Company and/or its Subsidiaries and/or affiliates, the Company relies on its
management's best knowledge and estimations and where applicable, on the opinion of their legal counsels. These estimates are based,
among others, on management's familiarity of and proximity to the circumstances, and also on the legal counsels' best professional
judgment, taking into account the stage of proceedings and legal precedents in respect of the different issues. Since the outcome of the
claims might be determined in courts and/or other quasi-judicial tribunals, the results could differ from these estimates.
F-
25
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 3:-
SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (CONT.)
b.
Estimates and assumptions: (Cont.)
-
Lease extension and/or termination options:
In evaluating whether it is reasonably
certain that a company of the Group will exercise an option to extend a lease or not exercise an option to terminate a lease, the Company
considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend or not
exercise the option to terminate such as: significant amounts invested in leasehold improvements, the significance of the underlying asset
to the Company's operation and whether it is a specialized asset, the company's past experience with similar leases, etc.
After the commencement date, the Company
reassesses the term of the lease upon the occurrence of a significant event or a significant change in circumstances that affects whether
the company is reasonably certain to exercise an option or not exercise an option previously included in the determination of the lease
term, such as significant leasehold improvements that had not been anticipated on the lease commencement date, sublease of the underlying
asset for a period that exceeds the end of the previously determined lease period, etc.
-
Fair value of financial instruments:
When the fair values of financial assets
and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined
using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, estimation is required in establishing fair values. The models are tested for
validity by calibrating to prices from any observable current market transactions in the same instrument when available.
NOTE 4:-
CASH
December 31,
2022
2021
Cash for immediate withdrawal - in USD
$
3,443
$
6,590
Cash for immediate withdrawal - in NIS
131
285
$
3,574
$
6,875
F-
26
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 5:-
INVENTORY
December 31,
2022
2021
Goods in transit
$
198
$
-
Finished goods
470
-
$
668
$
-
NOTE 6:-
OTHER ACCOUNTS RECEIVABLE
December 31,
2022
2021
Government authorities
$
45
$
52
Other receivables
46
2,504
Prepaid expenses
40
348
$
131
$
2,904
NOTE 7:-
INVESTMENT IN ASSOCIATES AND INVESTMENTS IN INVESTEES
a.
Sale of Orimmune Bio Ltd.:
On June 22, 2016, the Company entered
into a share transfer agreement (the "Transfer Agreement") with its then wholly owned subsidiary, Orimmune Bio Ltd. ("Orimmune")
and Karma Link Ltd. (the "Buyer"), whereby the Company would sell its interests in Orimmune to the Buyer, and also use its
best efforts to transfer to and assign Orimmune its rights in the Anti-CD3 technology.
On December 13, 2018, an additional amendment
to the Transfer Agreement was signed (the "Second Amendment") between the parties, under which it was agreed that Orimmune
will be assigned certain rights in intellectual property ("IP") related to the licensed technology owned by the Company subject
to certain conditions precedent which were still not met as of December 31, 2022. As of the Approval Date, the conditions precedent have
not yet been completed and the assignment of the IP related to the licensed technology owned by us has not yet been transferred.
b.
Coeruleus - Joint Venture Transaction
On May 15, 2020, the Company entered into a series of transactions (together, the "Joint Venture Transaction"), including a definitive share transfer agreement with Capital Point Ltd. ("Capital Point"), an Israeli holding company traded on the TASE, and Evero, pursuant to which Capital Point sold to Evero
5,952,469
ordinary shares, NIS
0.01
par value each, of Coeruleus Ltd. (the "Purchased Coeruleus Shares" and "Coeruleus," respectively), an Israeli company and a subsidiary of Capital Point (owns approximately
46
%), engaged in, among others, developing innovative medications based on the active generic substance flumazenil, including a sublingual spray to reduce the side effects of hypnotic sleep medication, and a sublingual spray to improve function and quality of life in patients with hepatic encephalopathy. The Purchased Coeruleus Shares represented approximately
35
% of the issued and outstanding share capital of Coeruleus. In consideration thereof, Evero issued and sold to Capital Point
176,470
ordinary shares, NIS
1.00
par value each, constituting
15
% of the issued and outstanding share capital of Evero, which was valued at $
351
, based on apportionment of the fair market value of the Company as reflected on Nasdaq as of May 15, 2020. Following the transaction, Capital Point held approximately
11
% of Coeruleus' issued and outstanding share capital. The transaction costs of $
51
were also capitalized as part of the investment in associate.
As part of the Joint Venture Transaction,
the Company transferred to Evero its SCI-110 sleep technology, to be fully owned by Evero, under the terms and conditions of an asset
purchase agreement. In addition, the Company issued to Capital Point a warrant (the "Capital Point Warrant") to purchase $
340
of ordinary shares of the Company. Pursuant to the terms of the Capital Point Warrant, the exercise price per ordinary share is equal
to the closing price of the Company's ordinary shares on the trading day on which the notice of exercise was actually received by
the Company and shall be paid by transferring to the Company a duly executed share transfer deed for
9,577
ordinary shares of Evero. The
Capital Point Warrant is exercisable for twelve months starting from May 15, 2021, until May 15, 2022.
F-
27
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 7:-
INVESTMENT IN ASSOCIATES AND INVESTMENTS IN INVESTEES (CONT.)
b.
Coeruleus - Joint Venture Transaction
(Cont.)
On November 29, 2020, the shareholders
of Coeruleus approved an investment from its shareholders of approximately $
30
. The Company did not participate in this investment in
Coeruleus and therefore, as of the completion of such financing, the Company held less than
1
% of the issued and outstanding shares of
Coeruleus. As of December 31, 2022, the fair value of the Company's investment in Coeruleus is $nil.
c.
MitocareX - Joint Venture Transaction
On March 10, 2022, the Company entered into a Founders and Investment Agreement with Dr. Alon Silberman, or the MitoCareX Agreement. Pursuant to the MitoCareX Agreement, the Company invested an initial amount of $
700
, and agreed to invest over the next
two years
, an additional $
1,000
, subject to the achievement of certain pre-determined milestones as agreed upon in the MitoCareX Agreement, for up to a
50.01
% ownership in MitoCareX Bio Ltd. ("MitoCareX"). MitoCareX is focused on the discovery and development of potential drugs for cancers and other life-threatening conditions. The MitoCareX Agreement also contains customary representations, warranties, covenants, and indemnification provisions. On March 31, 2022, the closing conditions were met, and the Company paid the initial investment amount of $
700
to MitoCareX. As of December 31, 2022, the Company owns
31.48
% of the outstanding shares of MitocareX.
On February 17, 2023, MitoCareX achieved its first milestone pursuant to the MitoCare X Agreement. The first milestone refers to the establishment of MitoCareX's cloud-based computing infrastructure that is expected to allow its future expansion into machine learning system. The system is harnessed to investigating mitochondrial carriers that are crucial for cell viability. As a result of MitoCareX meeting this milestone, the Company will invest an additional $
400
in MitoCareX and increase its share ownership in MitoCareX Bio from
31.48
% to
41.92
%.
During the year ended December 31, 2022, the Company recorded equity losses from the investment in MitoCareX in the amount of $
109
.
The table below summarizes the fair value of the
investment in MitoCareX:
Balance at January 1, 2022
$
-
Investment date March 31, 2022
700
Equity losses from investment in MitoCareX
(
109
)
Balance at December 31, 2022
$
591
NOTE 8:-
INVESTMENT IN FINANCIAL ASSETS
On November 17, 2022, the Company invested
$
1,500
in the initial public offering of Clearmind Medicine Inc. ("Clearmind") and received
230,769
common shares of Clearmind,
resulting in the Company holding
9.33
% of share capital of Clearmind. Clearmind is a psychedelic pharmaceutical biotech company focused
on the discovery and development of novel psychedelic-derived therapeutics to solve widespread and underserved health problems, including
alcohol use disorder. Its primary objective is to research and develop psychedelic-based compounds and attempt to commercialize them as
regulated medicines, foods or supplements. Shares of Clearmind are listed for trading on Nasdaq and the Canadian Securities Exchange under
the symbol "CMND" and the Frankfurt Stock Exchange under the symbol "CWY."   As of December 31, 2022, the
listed share price of Clearmind on Nasdaq was $
3.16
, and the Company has recorded a loss in its statements of comprehensive loss of $
771
on its investment.
NOTE 9:-
LEASES
On September 1, 2020, the Company entered
into a one-year lease agreement ("the 2020 Lease") with a third party for an area of approximately
100
square meters for the
Company's offices in the district of Tel Aviv, Israel. The yearly lease fee was set at approximately $
44
, linked to the NIS. The
lease expired on
August 31, 2021
. The Company did not exercise its option to extend the lease until August 31, 2026.
On July 1, 2021, the Company entered
into a two-year joint lease agreement ("the 2021 Lease") with a third party and for a total area of approximately
240
square
meters, whereby the Company occupies approximately
120
square meters for the Company's offices, in the district of Tel Aviv, Israel.
The Company and the third party have an option to extend for an additional three-year term. The yearly lease fee was set at approximately
$
40
, linked to the NIS.
F-
28
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 10:-
PROPERTY AND EQUIPMENT, NET
Assets owned and used by the Company
Right-of-
use assets
Computers
Lab
equipment
Office
furniture
and
equipment
Leasehold
office
Total
Cost:
Balance at January 1, 2022
$
7
$
-
$
29
$
78
$
114
Purchases
4
-
4
-
8
Balance at December 31, 2022
11
-
33
78
122
Accumulated depreciation:
Balance at January 1, 2022
1
-
1
20
22
Depreciation
2
-
2
39
43
Balance at December 31, 2022
3
-
3
59
65
Depreciated cost at December 31, 2022
8
-
30
19
57
Balance at January 1, 2021
$
20
$
12
$
23
$
-
$
55
New leases
-
-
-
78
78
Purchases
6
-
29
-
35
Disposals
(
19
)
(
12
)
(
23
)
-
(
54
)
Balance at December 31, 2021
7
-
29
78
114
Accumulated depreciation:
Balance at January 1, 2021
19
12
13
-
44
Depreciation of leases
-
-
-
20
20
Depreciation
1
-
11
-
12
Disposals
(
19
)
(
12
)
(
23
)
-
(
54
)
Balance at December 31, 2021
1
-
-
20
22
Depreciated cost at December 31, 2021
6
-
28
58
92
Depreciation expenses for the years
ended December 31, 2022, 2021 and 2020 amounted to $
43
, $
32
and $
7
, respectively.
NOTE 11:-
INTANGIBLE ASSET
On September 30, 2022, the Company announced
the closing of the acquisition of Wellution
TM
, a top seller Amazon.com Marketplace account (the "Brand"), American
food supplements and cosmetics brand and trademark (the "Acquisition"). In connection with the Acquisition, the Company incorporated
a new wholly owned Delaware subsidiary, SciSparc Nutraceuticals Inc., to hold the new assets. The definitive agreement for the acquisition
of the Brand was entered into with Merhavit M.R.M Holding and Management Ltd ("M.R.M").
At the closing, the Company paid a
base cash payment of $
4,540
and in 12 months following the closing agreed to pay an additional deferred cash payment equal to a multiple
of 3 times the amount by which the Brand's EBITDA exceeds $
1,120
during the 12-month period following the closing of the Acquisition.
The Company paid an additional $
321
as purchase costs.
In addition, the Company issued to
M.R.M $
15,000
worth of warrants to purchase ordinary shares of the Company at an exercise price of $
7.00
per share (with a cashless exercise
mechanism) and with an exercise period of
five years
from the closing of the Acquisition (the "September 2022 Warrants").
The September 2022 Warrants will become exercisable upon the earlier of (i) an achievement of $
100
million of gross sales by the Brand
in the aggregate or (ii) if the price of our Ordinary Shares closes at $
10.00
or above.
F-
29
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 11:-
INTANGIBLE ASSET (CONT.)
The Company reviewed the transaction
and deemed it to be the purchase of assets for accounting purposes under generally accepted accounting principles and not as a business
combination. The Company reviewed the guidance under IFRS 3 for the transaction and determined that the fair value of the gross assets
acquired was concentrated in a single identifiable asset, a brand. Accordingly, the Company treated the transaction as an asset acquisition.
On the closing date of the acquisition, the Company fully recognized the acquisition amount total of $
4,861
as an intangible asset, to
be amortized over a period of
10
years.
The table below
summarizes the fair value of the intangible asset:
Balance at January 1, 2022
$
-
Purchase date September 30, 2022
4,861
Depreciation of intangible asset
(
144
)
Balance at December 31, 2022
$
4,717
During the year ended December 31,
2022, the Company recognized depreciation expenses in respect to intangible asset in the amount of $
144
.
The estimated fair values of the tangible
and intangible assets in respect of the acquisition of the Wellution™ brand are provisional and are based on information that
was available as of the acquisition date to estimate the fair value of these amounts. The Group's management believes the information
provides a reasonable basis for estimating the fair values of these amounts but is waiting for additional information necessary to finalize
those fair values. Therefore, provisional measurements of fair value that appear are subject to change. The Group expects to finalize
the tangible and intangible assets valuation and complete the acquisition accounting as soon as practicable but no later than the measurement
period.
NOTE 12:-
TRADE PAYABLES
December 31,
2022
2021
Accrued expenses
$
901
$
758
Open debts
298
441
$
1,199
$
1,199
F-
30
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 13:-
OTHER ACCOUNTS PAYABLE
December 31,
2022
2021
Employees and payroll accruals
$
102
$
45
Accrued vacation
77
38
Other payables
14
71
$
193
$
154
NOTE 14:-
FINANCIAL INSTRUMENTS
a.
Classification of financial assets and financial liabilities:
The financial assets and financial liabilities
in the consolidated statements of financial position are classified by groups of financial instruments pursuant to IFRS 9, "
Financial
Instruments
" ("IFRS 9"):
December 31,
2022
2021
Financial assets:
Cash and restricted deposits
$
3,634
$
6,920
Government authorities
45
52
Other receivables
46
2,504
Investments in financial assets
591
-
Total financial assets at amortized cost
4,316
9,476
Financial liabilities:
Credit from others
102
45
Warrants liability
2,737
359
Lease liability
27
18
Total financial and lease liabilities
$
2,866
$
422
F-
31
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 14:-
FINANCIAL INSTRUMENTS (CONT.)
b
.
Bridge Loan
On January 15, 2020, the Company entered
into a bridge loan agreement (the "Bridge Loan") with a third party, in which the third party lent to the Company $
50
(the
"Bridge Loan Amount"). On April 17, 2020, the Bridge Loan Amount was fully repaid by the Company, including interest in the
amount of $
2
. Accordingly, the Bridge Loan was terminated with no further effect.
c
.
Line of Credit
On September 8, 2020, the Company entered
into a certain credit agreement (the "Credit Facility"), with M.R.M. Merchavit Holdings and Management Ltd. (the "Lender"),
whereby the Lender agreed to extend a line of credit to the Company in the aggregate amount of $
200
, or the Credit Amount. According to
the terms of the Credit Facility, $
100
of the Credit Amount (the "Loan Amount"), was immediately drawn on the date of the
Credit Facility, and the remaining $
100
was available be drawn on an as-needed basis. The Loan Amount was due upon the earlier of
one
year
from September 8, 2020 or at such time that the Company raised $
1,500
.
The Lender was entitled to a transaction and interest fee
of $5 (plus VAT) that was offset from the Credit Facility for the immediately drawn $100 and 5% from any additional withdrawal amount
from the Credit Facility. On November 24, 2020, the Loan Amount was fully repaid by the Company.
d
.
Dekel
On March 19, 2020,
the Company entered
into a securities purchase agreement with Dekel Pharmaceutical Ltd. ("Dekel") pursuant to which Dekel agreed to invest in
the Company through a private placement transaction (the "Private Placement"). At the time of the Private Placement, Dekel
was considered as a related party to the Company; however, it is no longer a related party to the Company. In connection with the Private
Placement, Dekel received convertible promissory notes (the "Notes"), with an aggregate original principal amount of approximately
$
350
, at an aggregate purchase price of $
315
to be paid in several tranches spread across a twelve-month period. In addition, the Company
issued a warrant to purchase up to
314,285
ordinary shares of the Company (the "Private Placement Warrant") and
40,000
ordinary
shares. The initial tranche of the Private Placement was for a principal amount of $
220
at a purchase price of $
198
. The Notes are unsecured,
have a maturity date of
March 23, 2021
, bear interest at a rate of
12
% per annum, and may be converted, at the election of the holder,
into ordinary shares at an initial conversion price of $
0.35
per ordinary share (the "Fixed Conversion Price"), subject to
adjustments. After the six-month anniversary of the issuance of the Notes, the conversion price shall be equal to the lower of the Fixed
Conversion Price or
70
% of the lowest trading price of the ordinary shares as reported on Nasdaq or any exchange upon which the ordinary
shares of the Company are traded at such time, for the 20 prior trading days including the day upon which a notice of conversion is received
by the Company or its transfer agent. The Private Placement Warrant is exercisable at any time on or after the actual closing date and
on or prior to the close of business on the five-year anniversary of the date of issuance, at an initial exercise price of $
0.35
per ordinary
share, subject to adjustment. On November 8, 2020, the Notes were terminated and the initial tranche was fully repaid by the Company.
General Overview of Valuation Approaches
used in the Valuation:
Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
F-
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 14:-
FINANCIAL INSTRUMENTS (CONT.)
d
.
Dekel (Cont.)
Economic methodology:
The warrants' fair value was calculated
using the Black–Scholes OPM, which takes into account the parameters as disclosed below for each period valuated, in which a valuation
was performed at (i) the issuance date, and (ii) each reporting date with the following assumptions:
December 31,
2022
December 31,
2021
March 23,
2020
Dividend yield (%)
0
0
0
Expected volatility (%)
72
148
122.01
Risk-free interest rate (%)
4.00
0.87
0.38
Underlying Share Price ($)
0.756
6.23
0.43
Exercise price ($)
24.50
24.50
24.50
Warrants fair value ($)
0
4.15
0.36
e
.
Financial risk factors:
The Company's activities expose
it to various financial risks such as market risks (foreign currency risk and interest risk), credit risk and liquidity risk. The Company's
comprehensive risk management plan focuses on activities that reduce to a minimum any possible adverse effects on the Company's
financial performance.
Risk management is performed by management
in accordance with the policies approved by the Company's board of directors (the "Board"). The Board establishes written
principles for the overall risk management activities as well as specific policies with respect to certain exposures to risks such as
exchange rate risk, credit risk and the investments of surplus funds.
1.
Market risks:
Foreign currency risk:
The Company is exposed to exchange rate
risk resulting from the exposure to different currencies, mainly from transactions in NIS. Exchange rate risk arises from recognized liabilities
that are denominated in a foreign currency other than the functional currency.
2.
Credit risks:
All cash and restricted deposits related
to the Company are held in two banks in Israel which are considered financially solid.
3.
Liquidity risk:
The Company monitors the risk of a shortage
of funds on a regular basis and acts to raise funds to satisfy its liabilities. As of December 31, 2022, the Company expects to settle
all of its financial liabilities in less than one year.
The carrying amounts of cash and restricted
deposits, and all other financial assets and liabilities approximate their fair value.
Refer to Note 1c for more information.
F-
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 15:-
EMPLOYEE BENEFIT LIABILITIES
Employee benefits consist of short-term
benefits and post-employment benefits.
Post-employment benefits:
According to the labor laws and the Israeli
Severance Pay Law, 1963 (the "Severance Pay Law"), the Company is required to pay compensation to an employee upon dismissal
or retirement or to make current contributions in defined contribution plans pursuant to Section 14 of the Severance Pay Law, as specified
below. The Company's liability is accounted for as a post-employment benefit. The computation of the Company's employee benefit
liability is made in accordance with a valid employment contract based on the employee's salary and employment term which establish
the entitlement to receive the compensation.
The post-employment benefits are normally
financed by contributions classified as defined benefit plans or as defined contribution plans as detailed below.
Defined contribution plans:
Section 14 of the Severance Pay Law applies
to a substantial part of the compensation payments, pursuant to which the fixed contributions paid by the Company into pension funds and/or
policies of insurance companies release the Company from any additional liability to employees for whom said contributions were made.
These contributions and contributions for compensation represent defined contribution plans.
Year ended December 31,
2022
2021
2020
Expenses in respect of defined contribution plans
$
115
$
98
$
52
NOTE 16:-
TAXES ON INCOME
a.
Tax rates applicable to the Company:
The Israeli statutory corporate tax rate
and real capital gains tax rate were
23
% in 2022, 2021, and 2020.
b.
Tax assessments:
The assessments of the Company are
deemed final through the 2016 tax year.
c.
Carryforward tax losses and other temporary differences:
The Company has accumulated tax losses
since its inception.
As of December 31, 2022, the Company's
net carryforward tax losses are estimated to grow to approximately $
58,000
.
F-
34
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 17:-
CONTINGENT LIABILITIES, COMMITMENTS, CLAIMS AND LIENS
a.
License Agreement with Dekel Pharmaceuticals Ltd.:
In May 2015, the Company entered into
an exclusive, irrevocable, worldwide license agreement with Dekel for certain technology and one granted U.S. patent related to compositions
and methods for treating inflammatory disorders (the "Dekel License Agreement"). The Dekel License Agreement became effective
in August 2015.
Pursuant to the Dekel License Agreement,
the Company is obligated to pay Dekel fees based on specific milestones and royalties upon commercialization. The milestone payments include:
(i) $25 upon the successful completion of preclinical trials (which milestone was met in November 2016; this milestone was paid in cash
in March 2017); (ii) $75 upon the successful completion of a Phase I/IIa trial; and (iii) $75 upon the earlier of generating net revenues
of at least $200 from the commercialization of the technology or the approval of the U.S. Food and Drug Administration or the European
Medicines Agency, of a drug based on the licensed assets. In each case, and subject to the Company's discretion, the respective
milestone payments are payable in cash or equity based on a price per ordinary share of NIS 0.5. The royalty payments are 8% for commercialization
and 35% pursuant to a sub-license of the licensed assets. The patent expiration dates of any patents maturing from this application would
likely be 2029.
On July 14, 2019, an amendment to the
Dekel License Agreement was signed (the "Amendment"), which encompasses the Company and Dekel's original intention to
exclude certain consumer packaged goods (meaning, inter alia, food, beverage, cosmetics, pet products and hemp based products, which are
sources of nutrients or other substances which may have a nutritional effect) from the scope of the licensed products and the field of
activity of the Company described in the Dekel License Agreement. The parties agreed to amend the Dekel License Agreement to reflect the
foregoing clarification, as well as certain additional less material matters as discussed in the Amendment.
The Amendment also prescribes for a specific
development plan under the Dekel License Agreement requiring the Company to invest in the licensed technology (as defined under the License
Agreement) formulation development and maintenance a total annual investment to be capped at $
350
. The Amendment also included a non-compete
and non-solicitation obligation by Dekel and Dr. Ascher Shmulewitz, the Company's former Executive Chairman of the Board and former
interim Chief Executive Officer, towards the Company's field of activity.
On November 13, 2019, an additional milestone
under the Dekel License Agreement, in the amount of $
75
, was reached upon the successful completion of a Phase IIa clinical trial. The
Company paid the milestone amount on April 13, 2020.
F-
35
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 17:-
CONTINGENT LIABILITIES, COMMITMENTS, CLAIMS AND LIENS (CONT.)
b.
License Agreement with Yissum Research Development Company of the Hebrew University of Jerusalem Ltd. ("Yissum"):
On July 29, 2018, the Company entered
into an exclusive, worldwide, sublicensable, royalty-bearing license with Yissum for a license to make commercial use of the licensed
technology, in order to develop, obtain regulatory approvals, manufacture, market, distribute or sell products, all within the field and
the territory only, as determined in the agreement (the "Yissum License Agreement"). According to the Yissum License Agreement,
the Company shall pay Yissum royalties at the rates of future net sales, subject to the royalty reductions as described in the Yissum
License Agreement. The Company is also obligated to pay sublicense fees out of the sublicense consideration. All right, title and interest
in and to the Yissum License Agreement shall vest solely in Yissum, and the Company shall hold and make use of the rights granted. All
rights in the development results shall be solely owned by the Company, except to the extent that an employee of Yissum, including the
researcher, is considered an inventor of a patentable invention arising from the development results, in which case such invention and
all patent applications and/or patents claiming such invention shall be owned jointly by the Company and Yissum, as appropriate, and Yissum's
share in such joint patents shall be automatically included in the Yissum License Agreement.
c.
Agreement with Hannover Medical School:
On April 11, 2017, the Company entered
into an investigator-initiated study contract with Hannover Medical School ("MHH") to conduct during 2018 a phase IIb clinical
trial titled "A Randomized, Double-Blind, Placebo controlled study to Evaluate the Safety, Tolerability and Efficacy of Up to Twice
Daily Oral SCI-110 in Treating Adults with Tourette Syndrome" in treating approximately 20 Tourette syndrome subjects aged 18 to
65. Upon the execution of the agreement the Company paid the first installment in the amount of $
122
out of a total estimated amount of
approximately $
776
. Due to regulatory and strategic reasons, the Company decided to change the study design from investigator-initiated
to an industry sponsored trial. During October 2017, a discussion was carried out between the Company and MHH and the latter was informed
about this change and a termination letter stating the above was sent to MHH on November 19, 2017. MHH has acknowledged that part of the
first instalment that was paid by the Company, in accordance with the initial agreement, will be used to set-off amounts owed under a
new agreement or will be paid back to the Company.
On August 13, 2018, the Company entered
into an agreement with MHH to conduct a clinical investigation and laboratory services for a randomized, double-blind, placebo-controlled
proof of concept study to evaluate the safety, tolerability and efficacy of daily oral SCI-110 in treating adults with Tourette syndrome,
which agreement was subsequently updated on December 2, 2021, in an estimated amount of $
1,385
.
d.
Agreement with Yale University:
On July 27, 2022, the Company entered into an agreement with Yale University to conduct a clinical investigation and laboratory services for a randomized, double-blind, placebo-controlled, cross over study to evaluate the safety, tolerability and efficacy of daily oral SCI-110 in treating adults with Tourette syndrome in treating approximately 10 Tourette syndrome subjects aged 18 to 65. The total estimated amount of the agreement is approximately $
370
.
F-
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 17:-
CONTINGENT LIABILITIES, COMMITMENTS, CLAIMS AND LIENS (CONT.)
e
.
On July 23, 2020, the Company submitted to the Tel Aviv-Jaffa District Court (the "Court") a petition pursuant to the Israeli Insolvency and Economic Rehabilitation Law, 2018, to commence proceedings for the economic rehabilitation of the Company (the "Petition"). In the Petition submitted to the Court, the Company stated that it is insolvent (as determined by the cash flow test) and unable to pay its debts to the Company's creditors.
On August 6, 2020, L.I.A. Pure Capital Ltd. ("Pure Capital") filed with the Court a demand, requesting an order to have the results of the Company's annual general meeting held on August 4, 2020, declared invalid, mainly due to the Company's reliance on discretionary voting of the depositary bank for the Company's then outstanding ADSs. The Court asked for the Company and directors' response by no later than August 13, 2020, which was subsequently extended.
On August 11, 2020, Pure Capital proposed to deposit $
1,500
with the Company's temporary trustee nominated by the Court to cover and pay all of the Company's debts, without derogating from any other creditor's rights towards the Company (the "Pure Capital Proposal"). The Pure Capital Proposal was made subject to the replacement of the Company's Board as of the date of the Pure Capital Proposal (the "Prior Board") with Pure Capital's designated nominees that were voted upon at the adjourned annual general meeting of the Company's shareholders on August 4, 2020 (as discussed below). The Court issued an order on August 14, 2020 (the "Order"), approving the Pure Capital Proposal and settlement agreement submitted to the Court by the parties thereto.
In accordance with the terms of the Order and following the deposit by Pure Capital, the Prior Board was replaced with: Itschak Shrem (chairman), Amity Weiss (also appointed to act as the Company's Chief Executive Officer), Moshe Revach, Lior Amit, Lior Vider and Liat Sidi. Following the issuance of the Order, a related case that was filed by Pure Capital with the Court was withdrawn as well.
On December 15, 2020, Mr. Lior Amit tendered his resignation from the Board and on March 13, 2022, Mr. Moshe Revach tendered his resignation from the Board and then later re-joined the Board in September 2022.
NOTE 18:-
EQUITY
a.
Composition of share capital:
December 31,
2022
December 31,
2021
Authorized
Issued and
outstanding
Authorized
Issued and
outstanding
Number of shares
Ordinary shares
75,000,000
6,798,840
25,714,285
3,091,740
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 18:-
EQUITY (CONT.)
a.
Composition of share capital: (Cont.)
Reverse Share Splits
On September 17, 2020,
the Company convened
a special general meeting of its shareholders, whereby the shareholders approved, inter alia, (i) an increase to the Company's share
capital from
500,000,000
ordinary shares to
750,000,000
ordinary shares; and (ii) a reverse split of the Company's share capital
up to a ratio of 20:1 (the "Reverse Split").
On October 16, 2020, the Company convened
a special general meeting of its shareholders, whereby the shareholders approved an increase to the Company's share capital from
750,000,000
ordinary shares to
1,800,000,000
ordinary shares.
On October 1, 2020, the Company's
Board resolved that the final ratio for the Reverse Split will be 20:1, which went effective on October 16, 2020. Concurrently with
the Reverse Split, a change to the ratio of its ADSs to its ordinary shares was effective pursuant to which each ADS representing
40
ordinary
shares changed to each ADS representing
140
ordinary shares. This resulted in a reverse split on the Company's American Depositary
Receipt program.
On March 2, 2021, the Company convened
a special general meeting of its shareholders, whereby the shareholders approved to eliminate the par value of the ordinary shares and
an increase to the Company's share capital from
1,800,000,000
ordinary shares to
3,600,000,000
ordinary shares.
On July 19, 2021,
the Company's
Board resolved that the final ratio for the Second Reverse Split will be 140:1, which went effective on August 9, 2021. Concurrently
with the Second Reverse Split, a change to the ratio of its ADSs to its Ordinary Shares was effective pursuant to which each ADS representing
140 ordinary shares changed to each ADS representing 1 ordinary share.
Consequently, all share numbers, share
prices, and exercise prices have been retroactively adjusted in these consolidated financial statements for all periods presented.
On September 15, 2022, the Company convened
an annual general meeting of its shareholders, whereby the shareholders approved to increase to the Company's share capital to
75,000,000
ordinary shares with no par value.
b.
Changes in share capital:
Issued and outstanding share capital:
Number of
ordinary
shares
Balance at January 1, 2022
3,091,740
Issuance of share capital – June 2022 Financing Round (Note 18h)
335,000
Exercise of pre-funded warrants (Note 18g)
100,000
Exercise of pre-funded warrants (Note 18h)
3,211,100
Share issued to a consultant (Note 18f)
61,000
Balance at December 31, 2022
6,798,840
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 18:-
EQUITY (CONT.)
c.
Rights attached to shares:
Voting rights at the shareholders meeting,
right to dividends, rights upon liquidation of the Company and right to nominate the directors in the Company.
d.
Capital management in the Company:
The Company's capital management
objectives are to preserve the Company's ability to ensure business continuity thereby creating a return for the shareholders, investors
and other interested parties. The Company is not under any minimal equity requirements nor is it required to attain a certain level of
capital return.
e.
Financing Rounds: (Cont.)
1.
April 2020 Financing Round
On April 1, 2020,
the Company entered
into a definitive securities purchase agreement (the "April 2020 Purchase Agreement") with institutional investors to purchase
of 4,166,168 units, each consisting of (i) one pre-funded warrant to purchase one ordinary share and (ii) one Series B warrant to purchase
one ordinary share, at a purchase price of $0.2999 per unit. The Series B warrants have an exercise price of $0.43 per ordinary share,
are exercisable upon issuance and expire five years from the date of issuance. The offering resulted in gross proceeds to the Company
of approximately $1,250. The closing of the sale of the securities took place on April 3, 2020. After the closing of the April 2020 Purchase
Agreement and until the Approval Date, all pre-funded warrants were exercised. In addition, 4,166,168 of the Series B warrants were exercised
pursuant to a cashless exercise mechanism as described in the April 2020 Purchase Agreement for no further consideration to the Company.
As of the Approval Date, all Series B warrants were exercised.
The Series B warrants are classified
as a financial liability that will be measured at fair value, through profit or loss, as of the issuance date and on any following financial
reporting date (accordingly, issue expenses related to the Series B warrants will be recorded through profit or loss). No consideration
will be left to attribute to the pre-funded warrants, which is an equity instrument.
The valuation of the conversion component
of the Series B warrants was set at fair value, as required in IFRS 9, and in accordance with IFRS 13, and was categorized as Level 3
by the Company.
F-
39
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 18:-
EQUITY (CONT.)
e.
Financing Rounds: (Cont.)
2.
November 2020 Financing Round
On November 20, 2020, the Company completed
an offering for gross proceeds of $
4,200
by way of the issuance of an aggregate of
835,447
units, each consisting of
(i) one ordinary
share and (ii) two warrants to purchase one ordinary share each, at a purchase price of $5.02 per unit ("November 2020
Warrants"). The November 2020 Warrants have an exercise price of $5.02 per ordinary share, will be exercisable upon issuance
and will expire five years from the date of issuance.
The November 2020 Warrants are classified
as issued warrants in the Company's equity.
During the year ended December 31,
2021, the Company issued
1,004,494
ordinary shares in respect of the exercise of
1,004,494
November 2020 Warrants. During the year ended
December 31, 2022, there were no exercises of November 2020 Warrants.
f.
Additional issuance of ordinary shares:
On July 21, 2021, the Company issued
a consultant
6,000
ordinary shares.
On August 2, 2022, the Company issued
a consultant
24,000
ordinary shares in respect of services rendered.
On November 1, 2022, the Company issued
a consultant
37,000
ordinary shares in respect of services rendered.
g.
March 2021 Financing Round
On March 4, 2021,
the Company completed
a private offering with several accredited and institutional investors for gross proceeds of $8,150, providing for the issuance of an
aggregate of 1,152,628 units, as follows: (a) 916,316 units at a price of $7.07 per unit, consisting of (i) one ordinary share of the
Company, and (ii) a Series A Warrant to purchase an equal number of units purchased (the "2021 Series A Warrants") and a Series
B Warrant (the "2021 Series B Warrants" and, collectively with the 2021 Series A Warrants, the March 2021 Warrants) to purchase
half the number of units, and (b) 236,312 pre-funded units at a price of $7.069 per unit, consisting of (i) one pre-funded warrant to
purchase one ordinary share and (ii) one 2021 Series A Warrant and one 2021 Series B Warrant.
The Series A Warrants have an exercise
price of $
7.07
per ordinary share and the Series B Warrants have an exercise price of $
10.60
per ordinary share).
Both were exercisable upon issuance and will expire
five years
from the date of issuance.
The March 2021 Warrants are classified
as issued warrants in the Company's equity.
During the year ended December 31, 2021,
the Company issued
128,156
ordinary shares in respect of the exercise of
10,000
2021 Series A Warrants and the exercise of
118,156
of
pre-funded warrants.
During the year ended December 31, 2022,
the Company issued
100,000
ordinary shares in respect of the exercise of
100,000
pre-funded warrants.
h.
June 2022 Financing Round
On June 1, 2022,
the Company completed
a private offering with an investor for gross proceeds of $
10,210
(the "June 2022 Private Placement"), providing for the issuance
of an aggregate of
3,546,100
units and pre-funded units, as follows: (a) 335,000 units at a price of $2.88 per unit, each consisting of
(i) one ordinary share of the Company, and (ii) two warrants each to purchase one ordinary share (the "June 2022 Warrants"),
and (b) 3,211,100 pre-funded units at a price of $2.819 per unit, each consisting of (i) one pre-funded warrant to purchase one ordinary
share and (ii) two June 2022 Warrants.
The June 2022 Warrants have an exercise
price of $
2.63
per ordinary share. The June 2022 Warrants were exercisable upon issuance and will expire seven years from the
date of issuance.
F-
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 18:-
EQUITY (CONT.)
h.
June 2022 Financing Round
(Cont.)
General Overview of Valuation Approaches
used in the Valuation:
Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Economic methodology:
The June 2022 Warrants' fair value
was calculated using the Black–Scholes option pricing model, which takes into account the parameters as disclosed below for each
period valuated, in which a valuation was performed at (i) the issuance date, and (ii) each reporting date with the following assumptions:
December 31,
2022
June 1,
2022
Dividend yield (%)
0
0
Expected volatility (%)
72
72
Risk-free interest rate (%)
3.97
2.74
Underlying share price ($)
0.756
2,87
Exercise price ($)
2.63
2.63
Warrants fair value ($)
2,396
10,209
The June 2022 Warrants are classified
as current warrant liability in the Company's balance sheet, as they are exercisable at any given time.
During the year ended December 31, 2022,
the Company issued
3,211,100
ordinary shares in respect of the exercise of
3,211,100
pre-funded warrants.
NOTE 19:-
SHARE-BASED PAYMENT TRANSACTIONS
a.
The cost of share-based payment recognized in the financial statements:
The expenses due to share-based compensation
for the years ended December 31, 2022, 2021 and 2020, recognized in the financial statements in respect of the share option plan of the
Company is shown in the following table, detailed by departments:
Year ended December 31,
2022
2021
2020
Research and development expenses
$
264
$
27
$
69
General and administrative expenses
633
16
22
$
897
$
43
$
91
1.
The 2005 and 2015 ESOP of the Company:
During 2005, the Board adopted the 2005
Employees Share Option Plan (the "2005 ESOP"). Ten years later the Board adopted a new plan - the 2015 Employees Share Option
Plan (the "2015 ESOP"). Under both the 2005 ESOP and 2015 ESOP, the Company may grant its employees and other service providers
options to purchase the Company's ordinary shares ("Share Options").
On November 13, 2019, the Board reserved
an additional number of
6,788
Share Options for the purposes of the 2015 ESOP, bringing the amount of Share Options reserved under the
2015 ESOP to
15,714
.
On April 21, 2021, the Board reserved
an additional number of
338,929
Share Options for the purposes of the 2015 ESOP, bringing the amount of Share Options reserved under
the 2015 ESOP to
357,143
, out of which a total of
161,114
were still available for grant as of December 31, 2022.
F-
41
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 19:-
SHARE-BASED PAYMENT TRANSACTIONS (CONT.)
a.
The cost of share-based payment recognized in the financial statements: (Cont.)
2.
On March 12, 2019, the Board approved and granted
1,171
ordinary shares under the 2015 ESOP to a new consultant of the Company. The exercise price was set at $
420.00
per share Option.
The fair value for Share Options
granted to the consultant was estimated using the Black-Scholes OPM with the following parameters:
Dividend yield (%)
0
Expected volatility (%)
76
Risk-free interest rate (%)
2.61
Expected life of share options (years)
10
The fair value of the Share Options
was set at $
224
per Share Option.
3.
On October 10, 2019 (the "2019 Grant Date"),
the Board approved the grant of 72 Share Options under the 2015 ESOP to directors, officers and employees, some of which required the approval of the general meeting of the Company's shareholders (the "2019 General Meeting"), which occurred on January 15, 2020. Following the resignation of some directors and employees on December 31, 2019, 15 Share Options (were not granted. Out of the 57 Share Options that were granted, 10 Share Options didn't require the General Meeting's approval. The date of commencement for all Share Options granted, the date on which the vesting started, was the 2019 Grant Date. The exercise price was set at $210.00 per Share Option.
According to IFRS 2, "
Share-based
Payment
", the fair value of the Share Options was estimated using the Black-Scholes OPM, in which the fair value estimation
for the Share Options which required the 2019 General Meeting's approval was calculated based on parameters as of December 31, 2019.
Based on the above-mentioned, hereinafter
are the parameters used in order to estimate the fair value of the Share Options using the Black-Scholes OPM:
December 31,
2019
October 10,
2019
Underlying ordinary share price
78.12
154
Dividend yield (%)
0
0
Expected volatility (%)
73
70
Risk-free interest rate (%)
1.91
1.67
Expected life of Share Options (years)
9.78
10
The fair value of the Share Options
approved on October 10, 2019 by the Board, and on January 15, 2020 at the General Meeting (valuated as of December 31, 2019) was set at
$114.1 and $51.1, per Share Option, respectively.
F-
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 19:-
SHARE-BASED PAYMENT TRANSACTIONS (CONT.)
4.
On January 3, 2022 (the "2022 Grant Date"), the Board approved the grant of
178,140
Share Options under the 2015 ESOP to directors, officers, employees and consultants, some of which required the approval of the general meeting of the Company's shareholders (the "2022 General Meeting"), which occurred on February 10, 2022. The date of commencement for all Share Options granted, the date on which the vesting started, was the 2022 Grant Date. The exercise price was set at $
6.50
per Share Option.
The fair value for Share Options
granted to the consultant was estimated using the Black-Scholes OPM with the following parameters:
February 2,
2022
January 3,
2022
Underlying ordinary share price
4.99
6.73
Dividend yield (%)
0
0
Expected volatility (%)
133
134
Risk-free interest rate (%)
2.00
1.46
Expected life of Share Options (years)
6
6
The fair value of the Share Options
granted on January 3, 2022, was set at $6.09 per Share Option, and the fair value of the Share Options granted on February 10, 2022, was
set at $4.41 per Share Option
.
5.
During the year ended December 31, 2022, the Company granted consultants Restricted Share Units ("RSUs") in respect of services rendered. The RSU's were granted at a discount rate of
25
% to share price quoted on the date of each grant. The total fair value of the RSU's granted to consultants was $
70
.
6.
During the year ended December 31, 2022, the Company issued consultants
61,000
ordinary shares in respect of services rendered. The ordinary were granted at a discount rate of
25
% to share price quoted on the date of each grant. The total fair value of the RSU's granted to consultants was $
48
.
F-
43
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 19:-
SHARE-BASED PAYMENT TRANSACTIONS (CONT.)
b.
Movement during the year:
1.
The following table lists the number of Share Options, the weighted average exercise prices of share options and changes in directors (and former directors), officers, employees and consultants share options during the years ended on December 31, 2022, and 2021:
Number of
Share
Options
Weighted
average
exercise
price
USD
2022
Share Options outstanding at the beginning of the year
5,431
2.95
Share Options granted during the year
178,140
6.50
Share Options outstanding at the end of the year
183,571
6.39
Share Options exercisable at the end of the year
107,679
6.30
2021:
Share Options outstanding at the beginning of the year
5,643
$
2.41
Share Options granted during the year
-
-
Share Options forfeited during the year
(
212
)
2.50
Share Options expired during the year
-
-
Share Options outstanding at the end of the year
5,431
2.95
Share Options exercisable at the end of the year
4,416
3.28
2.
No Share Options were granted during 2021.
3.
The weighted average remaining contractual life of the Share Options outstanding was
5.03
years and
6.35
years as of December 31, 2022, and 2021, respectively.
4.
The range of exercise prices of Share Options outstanding at the end of the year was $
6.5
- $
844
(inclusive) as of December 31, 2022, and $
210
- $
955
(inclusive) as of December 31, 2021.
F-
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 20:-
REVENUES AND COST OF REVENUES
Our revenues consist of revenue derived
from sales on Amazon. The following table discloses the breakdown of our revenues, cost of sales and gross profit for the periods set
forth below:
December 31,
2022
2021
Revenues
$
1,347
$
-
Cost of goods sold
322
-
Gross profit
$
1,025
$
-
NOTE 21:-
ADDITIONAL INFORMATION TO THE ITEMS OF PROFIT OR LOSS
Year ended December 31,
2022
2021
2020
a.
Research and development expenses:
Wages and related expenses
$
436
$
357
$
322
Share-based payment
264
27
69
Regulatory, professional and other expenses
750
934
119
Research and preclinical studies
703
165
139
Clinical studies
369
172
-
Chemistry and formulations
281
335
-
2,803
1,990
649
b.
General and administrative expenses:
Wages and related expenses
437
256
237
Share-based payment
633
16
22
Professional and directors' fees
2,499
2,417
1,283
Business development expenses
161
5
58
Regulatory expenses
162
165
98
Office maintenance, rent and other expenses
224
135
182
Wellution operating expenses
907
-
-
Investor relations and business expenses
1,486
784
22
General and administrative expenses:
6,509
3,778
1,902
c.
Other expenses:
Impairment of company accounted for at equity
-
-
742
Group's share of losses of company accounted for at equity, net
109
-
-
109
-
742
d.
Finance income:
Net change in fair value of financial liabilities designated at fair value through profit or loss
(
7,832
)
-
(
630
)
(
7,832
)
-
(
630
)
e.
Finance expenses:
Issuance expenses related to warrants
1,204
6
835
Exchange rate differences, net
4
3
12
Losses from remeasurement of investment in financial assets
770
-
-
Finance expense in respect of leases
15
4
7
Finance expenses from interest and commissions
21
8
18
$
2,014
$
21
$
872
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45
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 22:-
LOSS PER SHARE/ADS
a.
Details of the number of shares and loss used in the computation of loss per share:
Year ended December 31,
2022
2021
2020
Amounts used in the computation of basic and diluted loss
Weighted
number of
shares (*)
Loss
Weighted
number of
shares (*)
Loss
Weighted
number of
shares (*)
Loss
In
thousands
USD
In
thousands
USD
In
thousands
USD
Continuing operations:
Basic loss per share
4,575
(
2,592
)
2,049
$
(
5,789
)
258
$
(
3,482
)
Effect of potential dilutive ordinary shares
-
-
-
-
7
(
468
)
Diluted loss per share
4,575
(
2,592
)
2,049
(
5,789
)
265
(
3,950
)
b.
The computation of diluted loss per share did not include the following convertible securities since their inclusion would decrease the loss per share (anti-dilutive effect):
1.
Share Options to employees, officers, directors and consultants; and
2.
Non-marketable warrants to investors.
F-
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SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 23:-
OPERATING SEGMENTS
The Company applies the principles
of IFRS 8, "
Operating Segments
"
("IFRS 8"), regarding operating segments. The segment
reporting is based on internal management reports of the Company's management, which are regularly reviewed by the chief operating
decision maker to make decisions about resources to be allocated and assess performance. According to the principles of IFRS 8, the Company's
management determined that as of December 31, 2022, the Company has two reportable segments – (1) development of drugs based on
cannabinoid molecules to be approved by an official regulatory authority (the Company's operation); and (2) online sales of a various
range of hemp-based products including hemp gummies, hemp oil capsules, hemp gel, hemp cream, detox pills, height pills, antibacterial
creams, and anti-aging creams, among other beauty and hair treatment products that are all manufactured in the United States.
Year ended December 31, 2022
Drug Development
Online Sales
Total
Revenues
External
$
-
$
1,347
$
1,347
Inter-segment
-
-
-
Total
-
1,347
1,347
Segment loss (gain)
8,405
(
118
)
8,287
Company's share of losses of company accounted for at equity, net
109
Finance expense (income), net
(
5,818
)
Tax expense
14
Loss
2,592
Year ended December 31, 2021
Drug
Development
Online
Sales
Total
Revenues
External
$
-
$
-
$
-
Inter-segment
-
-
-
Total
-
-
-
Segment loss
5,768
-
5,768
Finance expense (income), net
21
Loss
5,789
Year ended December 31, 2020
Drug
Development
Online
Sales
Total
Revenues
External
$
-
$
-
$
-
Inter-segment
-
-
-
Total
-
-
-
Segment loss
3,293
-
3,293
Finance expense (income), net
242
Loss
3,535
F-
47
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD
in thousands (except share data)
NOTE 23:-
OPERATING SEGMENTS (CONT.)
As of December 31, 2022
Drug
Development
Online
Sales
Total
Segment Assets
$
9,664
$
941
$
10,605
Segment Liabilities
$
4,021
$
135
$
4,156
As of December 31, 2021
Drug
Development
Online
Sales
Total
Segment Assets
$
9,916
$
-
$
9,916
Segment Liabilities
$
1,775
$
-
$
1,775
NOTE 24:-
TRANSACTIONS AND BALANCES WITH RELATED PARTIES
a.
Balances with related parties:
December 31,
2022
December 31,
2021
Key
management
personnel
Other
related
parties
Key
management
personnel
Other
related
parties
Current liabilities
$
70
$
55
$
447
$
-
b.
Transactions with related parties (not including amounts described in Note 24c):
Year ended December 31,
2022
2021
2020
Research and development expenses
$
208
$
-
$
-
c.
Benefits to key management personnel (including directors):
Year ended December 31,
2022
2021
2020
Short-term benefits
$
1,940
$
962
$
746
Cost of share-based payment
$
779
$
43
$
91
d.
Mr. Oz Adler, our Chief Executive Officer and Chief Financial Officer, is the chairman of the board of directors of Jeffs' Brands.
e.
On March 7, 2022, we entered into the Cooperation Agreement with Clearmind, a company in which Dr. Adi Zuloff-Shani, our Chief Technologies Officer, Mr. Weiss, our President, and Mr. Adler, our Chief Executive Officer and Chief Financial Officer serve as officers and directors.
During the year ended December 31, 2022, the Company recognized expenses in respect of the Cooperation Agreement with Clearmind in the amount of $
208
, and the balance owed to Clearmind as of December 31, 2022, was $
55
.
On November 17, 2022, we invested $
1.5
million
in Clearmind in connection with its initial public offering on the Nasdaq Capital Market, in exchange for
230,769
common shares of Clearmind,
representing
9.33
% of the outstanding share capital of Clearmind (see also note 8).
F-
48
SCISPARC LTD. (FORMERLY THERAPIX BIOSCIENCES
LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
USD in thousands (except share data)
NOTE 25:-
EVENTS AFTER THE REPORTING DATE
On
February 23, 2023, the Company signed an agreement with Jeffs' Brands Holdings ("NewCo") Inc. a recently newly-formed
wholly owned subsidiary of Jeffs' Brands and Jeffs' Brands, pursuant to which, at the closing and upon the terms and conditions
set forth in the Agreement, NewCo Inc. will acquire from the Company a number of shares of stock equal to approximately a
49
% interest
in the Company's wholly owned subsidiary, SciSparc Nutraceuticals Inc., which owns Wellution
TM
, for $
2,500
in cash,
and additional deferred cash payments of approximately $
489,330
accounting for price adjustments related to inventory and working capital,
which will be paid in
five
equal monthly installments beginning in May 2023 (the "Price Adjusment"). As collateral for the
payment in full of the Price Adjustment, SciSparc will hold back such number of shares of common stock of SciSparc Nutraceuticals, equal
to the outstanding due amount of the Price Adjustment (the "Holdback Shares"). Following the closing of the transaction on
March 22, 2023, which included an equity conversion of financing amounts previously provided to SciSparc Nutraceuticals Inc. by the Company
for working capital, and the release of the Holdback Shares upon the payment in full of the Price Adjustment the Company will hold approximately
51
% of SciSparc Nutraceuticals Inc.
Pursuant
to the agreement, at the closing of the transaction, Jeffs' Brands and SciSparc Nutraceuticals Inc. entered into a consulting agreement,
pursuant to which Jeffs' Brands will provide management services to SciSparc Nutraceuticals Inc. for the Wellution
TM
brand for a monthly fee of $
20
and Jeffs' Brands will receive a one-time signing bonus in the amount of $
51
. The consulting agreement
is for an undefined period of time and may be terminated by either party with 30 days advance notice.
In
addition, in connection with the closing of the transaction, the Company and Jeffs' Brands, engaged in a mutual share exchange in
the amount of $
288,238
of ordinary shares from each of us and Jeffs' Brands. The number of shares in the share exchange was calculated
based on the average closing price of the relevant company's shares for 30 consecutive trading days ending on the third trading
day immediately prior to the closing. Accordingly, the Company acquired
247,415
ordinary shares of Jeffs' Brands and Jeffs'
Brands acquired
360,297
ordinary shares of us having an aggregate value of $
288,238
, which was adjusted from $
300,000
according to the
4.99
% ownership limit included in the definitive agreements.
-
- - - - - - - - - - - - - - - - - - - - - - - -
F-49