SciSparc signs non-binding LOI to merge with vehicle importer company in Israel

SciSparc announced the signing of a non-binding letter of intent to merge with a leading vehicle importer company in Israel. This merger is expected to be consummated by means of a reverse triangular merger, pursuant to which SciSparc will establish a new wholly-owned Israeli subsidiary, which would in turn merge with and into the Target Company, leaving the Target Company as the surviving company. It is contemplated that upon the successful completion of the Merger, SciSparc will transfer its technologies and product candidates pertaining to pharmaceutical activities, with all associated obligations and liabilities, to a separate legal entity. SciSparc will explore the possible distribution of NewCo shares as dividend in kind to its shareholders. The proposed Merger outlines a comprehensive business combination that will result in the Target Company becoming a wholly-owned subsidiary of SciSparc. The proposed Merger follows the Company’s announcement in June 2022, in which the board of directors resolved to review potential strategic transactions to maximize shareholder value. Following the closing of the Merger, it is expected that the combined company formed as a result of the Merger will continue to trade on the Nasdaq Capital Market under a new name to be agreed upon by both parties. As a result of the Merger, all outstanding shares of the Target Company will be converted into the right to receive ordinary shares of SciSparc and any warrants issued by the Target Company will be converted into the right to receive warrants of SciSparc, provided however that no equity holder of the Target Company shall beneficially own in excess of 9.99% of the Combined Company’s outstanding share capital immediately after the Closing and such equity holder shall be issued pre-funded warrants to purchase ordinary shares of SciSparc in lieu of SciSparc ordinary shares. Following the Closing and the contemplated closing of a concurrent financing round, the Target Company’s equity holders will hold approximately 80% of the Combined Company’s share capital. In the event that the Target Company secures a direct import license pursuant to which the Target Company sells at least 100 vehicles before 36 months lapse from the date of the Closing, the Target Company equity holders as of the date of the Closing will be entitled to receive additional ordinary shares representing in total 7% of the Combined Company’s outstanding share capital immediately following the Closing. Upon Closing, the Combined Company shall transfer an amount of not less than $3 million in cash to the Target Company. The Target Company is a leading vehicle importer in Israel. Its revenues for the first half of 2023 amounted to over $52 million. The Merger is subject to the successful completion of due diligence by both parties, the execution of binding definitive agreements with respect to the Merger and compliance with any regulatory requirements and approvals, including approvals by the shareholders of SciSparc and the Target Company and certain Israeli court approvals.