Financial Performance - The company incurred a net loss of approximately $2.6 million for the year ended December 31, 2022, and a net loss of approximately $5.8 million in 2021, with an accumulated deficit of approximately $63.6 million as of December 31, 2022[48]. - As of December 31, 2022, the company had approximately $3.6 million in cash and a negative working capital of approximately $131 thousand, indicating insufficient funds to support operations for at least the next 12 months[54]. - 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™[50]. - Future funding requirements will depend on various factors, including the success of clinical studies and market acceptance of pharmaceutical product candidates[55]. - The company faces substantial doubt about its ability to continue as a going concern, which could limit its ability to raise additional funds[59]. Regulatory Approval and Compliance - The company plans to seek regulatory approval for its pharmaceutical product candidates in the United States, the European Union, and other foreign countries, but has not yet submitted any marketing applications[63]. - The regulatory approval process is lengthy and unpredictable, and the company has not obtained regulatory approval for any of its pharmaceutical product candidates[64]. - The company anticipates significant costs associated with commercializing any approved pharmaceutical product candidate, which may exceed expectations due to additional regulatory requirements[53]. - The company intends to seek FDA approval through the Section 505(b)(2) regulatory pathway for its drug candidates SCI-110 and SCI-210, which may involve additional complexities and risks[71]. - The company is subject to ongoing regulatory scrutiny, including compliance with cGMP and QSR regulations, which are critical for manufacturing and quality control[86]. Clinical Development Challenges - The company is heavily dependent on the success of its pharmaceutical product candidates, which are in late preclinical or early clinical development stages[60]. - The company may face difficulties in enrolling patients for clinical studies, which could delay or prevent the testing of its pharmaceutical product candidates[67]. - The limited patient pool for rare diseases and strict eligibility criteria may further restrict the number of available study participants[68]. - Delays in patient recruitment could significantly increase costs and slow down the development and approval process for pharmaceutical product candidates[70]. - The company has faced challenges in obtaining orphan drug designation for SCI-110, with the FDA requiring additional prevalence estimates and clinical data[79]. Market and Competitive Risks - The market may not be receptive to high pricing for the company's repurposed drugs, which could hinder the ability to achieve a return on investment[83]. - Intense competition in the biotechnology and pharmaceutical industries may hinder the company's ability to successfully commercialize its product candidates[106]. - The commercial success of the company's product candidates will depend on market acceptance by physicians, patients, and third-party payors[115]. - Uncertainty regarding insurance coverage and reimbursement for newly approved products could limit the company's ability to market its products effectively[117]. - The company is competing with both established pharmaceutical products and illegal market alternatives, which may impact its market share[110]. Intellectual Property and Legal Risks - The company may face challenges in enforcing its intellectual property rights, particularly with repurposed drug substances that are available in other products[141]. - The company may be subject to claims of intellectual property infringement, which could delay or prevent the commercialization of its product candidates[147]. - If third-party patents cover aspects of the company's formulations or processes, it may need to obtain licenses or redesign its products[149]. - The company may incur substantial litigation expenses defending against claims of intellectual property infringement[151]. - Changes in patent laws could increase uncertainties and costs related to the prosecution and enforcement of patents[152]. Operational and Management Risks - The company currently lacks a marketing and sales organization, which may impede its ability to generate revenue from approved products[113]. - The company may experience difficulties in recruiting additional employees and consultants necessary for its growth[167]. - The company faces risks related to compliance with federal and state healthcare fraud and abuse laws, which could result in substantial penalties[171]. - The company must ensure that all third-party manufacturers comply with regulatory standards, as noncompliance could materially harm business operations and financial results[101]. - The company relies on third-party vendors for product sourcing, which exposes it to price fluctuations and demand disruptions[216]. E-commerce and Market Dynamics - The eCommerce operations of SciSparc Nutraceuticals rely heavily on the Amazon.com marketplace, and any changes to Amazon's policies could negatively impact business operations[192]. - The successful integration of Wellution, a recently acquired business, is critical, as management has limited prior experience in eCommerce operations, which could adversely affect financial results[191]. - The eCommerce operations are subject to seasonal fluctuations, with revenue generally declining in the first quarter following the holiday season[222]. - High-quality customer support is essential for retaining customers, and failure to provide effective support could negatively impact the company's reputation and financial condition[201]. - The company faces risks related to customer complaints and negative publicity, which could harm brand reputation and financial performance[199]. Restructuring and Future Plans - The company plans to transfer its pharmaceutical activities to a new wholly-owned subsidiary, NewCo, as part of a Restructuring Plan announced on January 25, 2023[183]. - The restructuring and potential listing of NewCo on a stock exchange may face delays due to market conditions and regulatory approvals[184]. - The restructuring and listing of NewCo may not achieve anticipated benefits and could expose the company to additional risks, including potential tax liabilities[186]. - The trading price of the company's Ordinary Shares may fluctuate significantly following the restructuring and listing of NewCo, with no assurance of maintaining or increasing market value[188]. - The company has outstanding warrants with exercise prices ranging from $2.57 to $245.00 per Ordinary Share, with specific conditions for their exercise[236].
SciSparc .(SPRC) - 2022 Q4 - Annual Report