Financial Performance - The company incurred significant net losses of approximately $7.5 million for the year ended December 31, 2024, $5.9 million for 2023, and $2.6 million for 2022, with an accumulated deficit of approximately $75 million as of December 31, 2024[52]. - As of December 31, 2024, the company had cash of approximately $2.1 million and working capital of approximately $4.9 million, indicating a need for substantial additional funding to continue operations[60]. - The company may need to seek additional funds sooner than planned due to changing operating plans and market conditions[60]. Revenue Generation - The company has not generated any revenue from the sale of its pharmaceutical product candidates and does not expect material revenues from its early commercialization efforts for CannAmide™[56]. - The company’s ability to generate revenue and achieve profitability depends on successfully completing the development and commercialization of its pharmaceutical product candidates[56]. - The potential addressable patient population for the company's pharmaceutical product candidates may be smaller than anticipated, adversely affecting revenue[122]. Research and Development - The company anticipates significant expenses related to the research and development of its product candidates, regulatory approvals, and establishing a sales and marketing infrastructure[54]. - The company has not yet commenced pivotal clinical studies for any product candidate, which may delay commercialization efforts for several years[53]. - The company may face difficulties in enrolling patients for clinical studies, which could delay or prevent the studies of its pharmaceutical product candidates[79]. Regulatory Challenges - The company plans to seek regulatory approval for its pharmaceutical product candidates in the United States and the European Union, but the approval process is lengthy and unpredictable[69]. - The company has not submitted marketing applications to the FDA or comparable foreign regulatory authorities, which poses a risk to its ability to commercialize its product candidates[68]. - Future legislative and regulatory proposals may materially impact the FDA's ability to operate, potentially slowing the review and approval of new products, adversely affecting the company's business[74]. Competition and Market Risks - The pharmaceutical industry is highly competitive, and the company may face patent litigation and mandatory delays in approval of its potential future NDAs[86]. - The company faces intense competition in the biotechnology and pharmaceutical industries, with many competitors potentially having greater financial and technical resources[125]. - The commercial success of product candidates will depend on market acceptance by physicians, patients, and third-party payors, which is uncertain[132]. Intellectual Property - The company holds a portfolio of seven granted patents and nine patent families, which are crucial for competitive positioning[151]. - The company may face challenges in enforcing intellectual property rights due to the repurposed nature of some drug substances, which could lead to competition from existing pharmaceutical products[157]. - Changes in patent laws could adversely affect the value and scope of the company's patent protections, impacting business operations[166]. Operational Risks - The company relies on third-party contract research organizations (CROs) for clinical studies, and any failure in their performance could delay regulatory approval[111]. - The company does not have internal manufacturing capabilities and relies on third parties for active pharmaceutical ingredients (API), which poses risks to supply continuity[114]. - The company may face challenges in recruiting additional employees and consultants, which could disrupt operations[179]. E-commerce Operations - Wellution, acquired in September 2022, sells hemp-based products on Amazon Marketplace, but management has limited prior experience in eCommerce operations[194]. - The company relies on sophisticated information technologies and systems for its operations, necessitating continuous improvements to maintain competitiveness[197]. - The eCommerce operations are vulnerable to risks related to online payment methods, including potential increases in transaction fees and compliance challenges[217]. Proposed Merger with AutoMax - The proposed merger with AutoMax is expected to result in AutoMax shareholders owning approximately 49.99% of the combined company on a fully-diluted basis[236]. - If the merger is not consummated, the company's share price could decline due to the associated risks and uncertainties[240]. - The company has incurred and expects to continue incurring significant expenses related to the proposed Merger with AutoMax, regardless of whether the Merger is completed[241].
SciSparc .(SPRC) - 2024 Q4 - Annual Report