What changed in this filing

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Item 1. Business

2022-03-28 compared with 2021-03-02 · 115 added, 157 removed, 264 unchanged (51% of the section changed)

We were incorporated in the State of Nevada on March 16, 2011 in the transportation and logistics business.

We are presently a biopharmaceutical company focused on the discovery, development and commercialization of cannabinoid-based therapeutics.

About Skye Bioscience, Inc.

We were incorporated in the State of Nevada on March 16, 2011.

We are a preclinical pharmaceutical company focused on the discovery, development and commercialization of a novel class of cannabinoid derivatives to modulate the endocannabinoid system, which has been shown to play a vital role in overall human health and, notably, in multiple ocular indications.

We are developing novel cannabinoid derivatives through our own directed research efforts and multiple license agreements.

Effective March 25, 2019, we changed our name from Nemus Bioscience, Inc.

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and effective January 19, 2021, we changed our name to Skye Bioscience, Inc.

In August 2019, we formed a new subsidiary in Australia, EMBI Australia Pty Ltd.

in order to qualify for the Australian government’s research and development tax credit for research and development dollars spent in Australia.

The primary purpose of EMBI Australia Pty Ltd.

is to conduct clinical trials for our product candidates.

As of December 31, 2020, we have devoted substantially all of our efforts to securing product licenses, carrying out research and development activities, planning clinical development, building infrastructure and raising capital.

We have not yet realized revenue from our planned principal operations and is a number of years away from potentially being able to do so.

Business Overview

We are a biopharmaceutical company targeting the discovery, development and commercialization of cannabinoid-based therapeutics through a number of license agreements with the University of Mississippi (“UM”).

We continue to be a development and commercialization partner of UM working to bring UM’s proprietary cannabinoid molecules through the development process.

UM 5050 Prodrug Agreements and UM 8930 Analog Agreements

In July 2018, we renewed our ocular licenses for UM 5050, related to the prodrug formulation of tetrahydrocannabinol (“THC”), and UM 8930, related to an analog formulation of cannabidiol (“CBD”).

On May 24, 2019, the ocular delivery licenses were replaced by “all fields of use” licenses for both UM 5050 and UM 8930 (collectively, the “License Agreements”).

Our common stock is quoted on the OTCQB, under the symbol "SKYE".

Previously, it traded under the symbol "EMBI".

In August 2019, we formed a new subsidiary in Australia, SKYE Bioscience Australia, in order to qualify for the Australian government’s research and development tax credit for research and development dollars spent in Australia.

The primary purpose of SKYE Bioscience Australia is to conduct clinical trials for our drug product candidates.

Our Product Candidates and Significant Contracts.

UM 5050 and UM 8930 License Agreements

In May 2019, we executed amended and restated license agreements with University of Mississippi ("UM") which expanded our use of UM 5050 and UM 8930 from ocular delivery only to "all fields of use" (collectively, the “License Agreements”).

Pursuant to the License Agreements, UM granted us an exclusive perpetual license including, with the prior written consent of UM, the right to sublicense the intellectual property related to UM 5050 and UM 8930 for all fields of use.

The License Agreements contain certain milestone payments, annual maintenance, royalty and sublicensing fees payable by us, as defined therein.

The royalty obligations apply by country and by licensed product, and end upon the later of the date that no valid claim of a licensed patent covers a licensed product in a given country, or ten years after the first commercial sale of such licensed product in such country.

Each License Agreement continues, unless earlier terminated, until the later of the expiration of the last to expire of the patents or patent applications within the licensed technology or the expiration of our payment obligations under the License Agreements.

UM may early terminate each License Agreement, by giving written notice of termination, upon our material breach of the License Agreements, including failure to make material payments without cure, material breach of covenants, representations or warranties without cure, material noncompliance of the license grant, a bankruptcy event, our dissolution or cessation of operations, our failure to make reasonable efforts to commercialize at least one product or failure to keep at least one product on the market after the first commercial sale for a continuous period of one year, other than for reasons outside our control, or our failure to meet certain pre-established development milestones.

We may terminate each License Agreement upon 60 days’ written notice to UM.

UM 5070 License Agreement

In January 2017, we entered into a license agreement with UM pursuant to which UM granted us an exclusive, perpetual license, including the right to sublicense, the intellectual property related to a platform of cannabinoid-based molecules (“UM 5070”), to research, develop and commercialize products for the treatment of infectious diseases.

The License Agreement contains certain milestone payments, annual maintenance, royalty and sublicensing fees payable by us, as defined therein.

The License Agreement continues, unless earlier terminated, until the later of the expiration of the last to expire of the patents or patent applications within the licensed technology or the expiration of our payment obligations under the License Agreement.

UM may early terminate each License Agreement, by giving written notice of termination, upon our material breach of the License Agreement, including failure to make material payments without cure, material breach of covenants, representations or warranties without cure, material noncompliance of the license grant, a bankruptcy event, our dissolution or cessation of operations, our failure to make reasonable efforts to commercialize at least one product or failure to keep at least one product on the market after the first commercial sale for a continuous period of one year, other than for reasons outside our control, or our failure to meet certain pre-established development milestones.

We may terminate the License Agreement upon 60 days’ written notice to UM.

Our Product Candidates

Cannabinoids are a class of chemically diverse compounds that are mainly found in extracts from the cannabis plant.

These compounds express their physiological response by binding to cannabinoid (CB1 and CB2) and certain other receptors found throughout the human body.

Some cannabinoids have been observed to exert multiple effects on the human body, including, but not limited to impacting the immune response, nervous system function and repair, gastrointestinal maintenance and motility, motor function in muscles, pancreatic functionality, tissue repair, blood sugar regulation, and integrity of function in the eye (including the optic nerve).

Cannabis and specific cannabinoids have been studied widely and the results suggest that there may be a potential for these compounds to be used in treating many disorders or alleviating disease-associated symptoms.

We are focused on the development of proprietary, synthetic cannabinoid-derived molecules that have been bioengineered to improve solubility, bioavailability and pharmacology of natural cannabinoids, while also providing the Company with strong intellectual property protection.

The following table summarizes certain information regarding our cannabinoid product candidates:

Product Candidate

Development Status

Multiple Targets

Cannabinoid Cocktail

Anti-infective

Our lead compound initially being developed to treat ocular disease is THCVHS, a prodrug of THC.

A prodrug is a medication or compound, that after administration is metabolized into a pharmacological active drug.

The molecule has been designed to make the usually lipophilic THC more hydrophilic to allow for improved transport across the membranes of the eye.

In 2013 and 2014, UM conducted studies of the formulation in the rabbit ocular model which showed that THCVHS was able to penetrate all chambers of the eye which could potentially broaden the proposed therapeutic indications of interest for THCVHS to diseases of the eye that affect the retina and the optic nerve, such as glaucoma, macular degeneration or diabetic retinopathy.

These studies also revealed that THCVHS was able to achieve potentially therapeutic concentrations in the anterior compartment, vitreous humor, and posterior compartment of the normal rabbit eye, which is very similar to the human eye in anatomy and physiology.

All fields of use means that we may develop UM 5050 and UM 8930 to treat any disease through any form of delivery under the License Agreements.

The exclusive license for SBI-100, a cannabinoid receptor type 1 ("CBR1") agonist, under UM 5050 is expected to allow us to explore related uses for the active moiety of SBI-100.

Independent in vitro and in vivo studies have demonstrated the potential use of SBI-100 in a variety of potential indications based on the ability of CBR1 agonists to act as an anti-inflammatory, anti-fibrotic, and/or inhibitor of neovascularization.

The Company has generated data related to these effects using an ex vivo human tissue model of the eye.

SBI-100 is designed to enhance the pharmacokinetics and pharmacodynamics of the active part of the molecule once introduced into the body through various routes of administration being considered by the development team.

The exclusive license of SBI-200, a novel cannabinoid receptor ("CBR") modulator, under UM 8930, is expected to allow us to explore uses in ophthalmic disorders as well as expanded research and development into organ systems outside of ophthalmology.

Potential therapeutic areas beyond ophthalmic indications for SBI-200 may include the central nervous system, the gastrointestinal tract, the endocrine/metabolic system, reproductive system diseases, or as yet unrecognized opportunities.

We have developed strategic collaborations to identify and advance these applications.

Our lead compound, SBI-100, is initially being developed to treat glaucoma and ocular hypertension.

SBI-100 has been designed to make the usually lipophilic cannabinoid more hydrophilic to allow for improved transport across the membranes of the eye.

In 2013 and 2014, UM conducted studies of the formulation in the rabbit ocular model which showed that SBI-100 was able to penetrate all chambers of the eye.

This could potentially broaden the proposed therapeutic indications of interest for SBI-100 to diseases of the eye that affect the retina and the optic nerve, such as macular degeneration or diabetic retinopathy.

These studies also revealed that SBI-100 was able to achieve potentially therapeutic concentrations in the anterior compartment, vitreous humor, and posterior compartment of the normal rabbit eye, which is very similar to the human eye in anatomy and physiology.

Glaucoma is an ocular neuropathy associated with the initiation of programmed cell death, known as apoptosis, of the retinal ganglion cells ("RGCs") of the optic nerve, resulting in the progressive and irreversible loss of vision.

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Cannabinoid receptors are highly concentrated in the eye, especially in the anterior compartment that helps regulate IOP, and the posterior compartment in the area of the retina and optic nerve.

Stimulation of cannabinoid receptors by THC has been previously shown to lower IOP in both animal and human studies.

Additional studies using an alpha-chymotrypsin induced glaucoma model in rabbits were performed by UM in 2013 and 2014 under a grant from the National Institutes of Health (the “NIH”).

Those studies showed that THCVHS was able to reduce IOP by 45% to 50%.

Reduction in IOP was successful in an almost linear dose-responsive manner, with greater decline in IOP associated with higher dosage concentration.

The decline in IOP observed in the rabbit model correlated to historical human data when patients were exposed to systemically administered THC via inhalational methods.

The human studies were conducted by the NIH and the U.S.

Army in the 1970’s where glaucoma patients for the NIH study and normal volunteers for the U.S.

Army study were exposed to THC by smoking marijuana.

Patients tested by the NIH exhibited a decline in IOP ranging from 35% to as high as 65%, correlated to the amount of THC in the plasma.

Normal volunteers in the U.S.

Army study also showed a decrease in IOP of approximately 10% to 20% in a setting of normotension.

While THC from smoking marijuana was able to reduce IOP in humans, the effect was short lived given the short half-life of the THC molecule.

The half-life of the THCVHS used in the rabbit glaucoma model was considerably longer;

however, we intend to formulate THCVHS in order to lengthen the half-life to the degree that it would be effective when dosed once a day.

We examined the THCVHS in further testing using a nanoparticle delivery system to prolong the drug’s half-life in late 2015 and 2016.

The studies were conducted by UM and placed THCVHS into a solid lipid-nanoparticle system (“SLN”) to deliver the drug to the eye using topical drop administration.

The SLN delivery of THCVHS was administered to rabbits that underwent elevated IOP inducement using the alpha-chymotrypsin model.

Data from that experiment confirmed previous studies that showed administration of THCVHS resulted in a 45% reduction in IOP from baseline with a half-life consistent with five to six-times per day dosing.

When THCVHS was administered via SLN delivery in normotensive animals, a lower concentration of THCVHS (0.4% equivalent THC) exhibited a decrease in IOP of approximately 20% while a higher concentration of THCVHS (0.6% equivalent THC) lowered IOP up to 38%.

The use of SLN technology lengthened the half-life of THCVHS equivalent to dosing the drug two to three times a day.

The formulation we are developing for human studies will encapsulate THCVHS in a nanoemulsion including the emulsifier, Carbopol, to increase the residence time of the drug in the eye.

Testing of this formulation in a normotensive animal models revealed statistically significant lowering of the IOP when compared to both latanoprost and timolol, the current standard-of-care in the treatment of IOP, as well as extended pharmacologic activity time that could support once daily dosing.

Further animal experimentation conducted in 2016-2017 examined both the penetration and concentration of THCVHS in key organs of the eye.

The data revealed that IOP declined in a concentration-time dependent manner and could be correlated to the concentration of THC in organs regulating IOP, such as the trabecular meshwork in the anterior compartment and the retina-choroid in the posterior compartment.

The data was important for demonstrating a direct causal relationship between the penetration and concentration of THC with IOP-lowering capability and the presence of THC in multiple compartments of the eye.

Additionally, neither free-THC nor 11-hydroxy-THC (the main active metabolite of THC) was detected in the peripheral circulation of the test animals, indicating that the topical dosage of the test compound remained restricted to the eye, an enclosed organ.

In 2019, UM completed experiments showing that THCVHS was statistically superior in lowering IOP compared to the prostaglandin-based therapy, latanoprost, the current standard-of-care for treating glaucoma.

Significance was reached across multiple timepoints during a seven-day course of dosing using a validated rabbit normotensive ocular model and THCVHS exerted pharmacologic activity consistent with once-daily to twice-daily dosing.

Additionally, we worked with Glauconix Biosciences Inc.

(“Glauconix”) to complete a pilot study to research the mechanism of action and IOP-lowering ability of THC when administered into an ex vivo model of a 3D-human trabecular meshwork using both healthy and glaucomatous-derived tissues.

The Glauconix study validated the mechanism of action of THCVHS in lowering IOP, a defining disease process of hypertensive glaucoma.

Moreover, biomarkers associated with inflammation and fibrosis in both normal and tissues affected by glaucoma were significantly decreased, pointing to anti-inflammatory and anti-fibrotic activities that are often associated with the cannabinoid class of molecules in other disease-states;

and data revealed that biomarkers associated with neovascularization, a disease process of new blood vessel formation that can damage the retina in a variety of ocular diseases, was also inhibited by THC, prompting further study for the utility of this drug in diseases of the retina.

The rabbit ocular model is an accepted animal model for regulatory agencies when considering a candidate drug for human testing and this data will be submitted as part of our investigational new drug application (“IND”) to the Food and Drug Administration (“FDA”).

The manufacturing of the active pharmaceutical ingredient THCVHS is conducted in the United States.

Formulation of the eye drop for testing is also performed in the United States but may utilize regulatory-accepted excipients sourced from countries outside the United States, such as China.

The recent COVID-19 pandemic may impact our ability to source specific materials that are part of the eye drop formulation and could possibly impact volunteer and/or patient recruitment in Australia for our Phase I clinical studies of THCVHS.

The pandemic has resulted in a shift of our first in-human studies, from the second half of 2020 to the third quarter of 2021.

Our first-in-human studies are to be conducted in healthy volunteers and patients with glaucoma and ocular hypertension in Australia (the “THCVHS Clinical Trial”).

Initially, we plan to conduct a Phase 1, first-in-human, randomized, double-blind, placebo-controlled, single-ascending dose (“SAD”) and multiple-ascending dose (“MAD”) study to establish a safe and tolerable dosing window of THCVHS in humans that can be used in the design of subsequent clinical trials.

Subsequently, we may advance THCVHS into a Phase 2 clinical trial provided that data from the Phase 1 clinical trial demonstrates that the topical delivery of THCVHS is safe and well-tolerated, and IOP is markedly different between THCVHS and the placebo.

Design of a subsequent Phase 2 clinical trial will be dependent upon the advice of our Advisory Board, the FDA and other regulatory bodies.

We have embarked on research exploring the utility of different formulations of CBDVHS, our proprietary CBD analog.

Early studies of CBDVHS demonstrated analgesic, anti-inflammation, anti-fibrotic, anti-seizure properties, including the potential treatment and management of several eye diseases, such as uveitis, dry eye syndrome, macular degeneration and diabetic retinopathy.

Data we presented at the American Association of Pharmaceutical Scientists (“AAPS”) meeting held in November 2017, revealed that an ocular formulation of CBDVHS was able to penetrate multiple compartments of the eye, including reaching the retina and the optic nerve.

Further testing will need to be conducted to further evaluate the possible utility of this compound as a therapeutic agent and we continue to advance our research studies related to CBDVHS to explore different therapeutic applications.

Cannabinoid Cocktail

Cannabinoid molecules have been shown in in vitro studies conducted by third parties to possess anti-infective activity against a variety of bacterial strains.

We entered into a research agreement with UM to explore this area in 2015 and have tested a variety of cannabinoids in various strengths, combinations, and delivery systems against a variety of bacterial species found in community, healthcare, and institutional settings such as nursing homes, correctional facilities, and military quarters.

As discussed above in “UM 5070 License Agreement,” in January 2017, we entered into a license agreement with UM pursuant to which UM granted us an exclusive, perpetual license, including the right to sublicense, intellectual property related to UM 5070, a platform of cannabinoid-based molecules to research, develop and commercialize products for the treatment of infectious diseases.

Other Potential Products

We continue to work with UM to explore other potential indications and associated routes of administration based on the expanded UM 5050 and UM 8930 all fields licenses.

Our decision to advance another potential therapeutic candidate will be influenced by a number of criteria, including but not limited to research, preclinical data, synthesis and formulation capability as well as prevailing market conditions.

Stimulation of CBR1 has been previously shown to lower IOP in both animal and human studies.

In 2019, UM completed experiments showing that SBI-100 was statistically superior in lowering IOP compared to the prostaglandin-based therapy latanoprost, the current standard-of-care for treating glaucoma.

Statistical significance was reached across multiple time points during a seven-day course of dosing using a validated rabbit normotensive ocular model and SBI-100 exerted pharmacologic activity consistent with once-daily to twice-daily dosing.

Additional work was also completed to develop a proprietary nanoemulsion formulation.

This intended clinical formulation was developed to optimize the amount of SBI-100 that can be delivered to the eye in a single drop while also improving the duration of activity.

Importantly, this formulation can be sterilized by filtration without impacting the attributes of SBI-100.

This SBI-100 ophthalmic emulsion formulation significantly reduced IOP compared to other commercially available ophthalmic solutions, and will be the final formulation used in future clinical trials of SBI-100.

Lastly, we evaluated the mechanism of action and IOP-lowering ability of the active moiety of SBI-100 when administered into an ex vivo model of a 3D-human trabecular meshwork using both healthy and glaucomatous-induced tissues.

This study validated the mechanism of action of SBI-100 in lowering IOP, a defining disease process of hypertensive glaucoma.

Moreover, biomarkers associated with inflammation and fibrosis in both normal tissue and tissues affected by glaucoma were significantly decreased, pointing to anti-inflammatory and anti-fibrotic activities that are often associated with cannabinoids in other disease-states.

Data also revealed that biomarkers associated with neovascularization, a disease process of new blood vessel formation that can damage the retina in a variety of ocular diseases, was also inhibited by the active moiety, prompting further study for the utility of this drug in diseases of the retina.

The first-in-human Phase 1 trials are expected to be conducted in healthy volunteers in Australia (the “Clinical Trial”) to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of SBI-100.

We are eligible under the AusIndustry research and development tax incentive program to obtain a cash incentive from the Australian Taxation Office.

The tax incentive is available to us based on specific criteria with which we must comply and is based on our eligible research and development spend in Australia.

The Company may be eligible for either a 43.5% refundable tax offset if it has aggregate turnover of less than $20 million per annum or a 38.5% non-refundable tax offset of eligible research and development expenditure up to $100 million if it has annual turnover of $20 million or more per annum.

Prior to August 2020, we executed several agreements and the work underlying those agreements was subsequently delayed to the second quarter of 2022.

Since August 2020, we have been focused on clinical enabling activities, notably:

• formulation and manufacturing of drug product to supply our Phase 1 clinical trial;

• initiating and completing good laboratory practice (“GLP”) toxicology studies to support our Phase 1 clinical trial;

• initiating and completing validation of a pharmacokinetic assay for both animal and human samples to support our preclinical and clinical studies;

• engaging our vendors and contractors to support the finalization of study-related materials for our Phase 1 study, including the finalization of the clinical study protocol and investigator's brochure.

The manufacturing of SBI-100 ophthalmic emulsion is conducted in the United States.

Formulation of the eye drop for testing is also performed in the United States but we rely on compendial excipients that can be sourced from countries outside the United States, such as China.

Due to the continuing effects of the COVID-19 pandemic, there could possibly be a negative impact on our ability to source materials that are part of the eye drop formulation, as well as negative impacts to our volunteer and/or patient recruitment in Australia for clinical studies.

Subsequent to the initiation of the Phase 1 study, we intend to file an investigational new drug ("IND") application with the United States Food and Drug Administration ("FDA") to study SBI-100 ophthalmic emulsion in a Phase 2 randomized, controlled, double-masked clinical trial in patients with glaucoma or ocular hypertension to obtain additional data to determine whether the topical delivery of SBI-100 ophthalmic emulsion is safe and well-tolerated, and whether the IOP is markedly different between SBI-100 and placebo.

Design of the Phase 2 clinical trial will be dependent upon the advice of our clinical advisory board, the FDA and other regulatory bodies.

We have initiated research activities to explore the utility of different formulations of SBI-200.

Early studies of SBI-200 demonstrated analgesic, anti-inflammation, anti-fibrotic and anti-seizure properties, including the potential treatment and management of several eye diseases, such as uveitis, dry eye syndrome, macular degeneration and diabetic retinopathy.

Data we presented at the American Association of Pharmaceutical Scientists ("AAPS") meeting held in November 2017 revealed that an ocular formulation of SBI-200 was able to penetrate multiple compartments of the eye, including reaching the retina and the optic nerve.

Further testing will need to be conducted to further evaluate the possible utility of this compound as a therapeutic agent and we continue to advance our research studies related to SBI-200 to explore different therapeutic applications.

Cannabinoid Pharmaceutical Innovation Program (CPIP)

We are focused on the development of proprietary, synthetic cannabinoid derivatives that have been designed to improve the solubility, bioavailability and pharmacology of cannabinoids, while also providing the Company with strong intellectual property protection.

At the end of 2021, we announced that the Company would establish the Cannabinoid Pharmaceutical Innovation Program, or CPIP, that will focus on targeting important signaling pathways in the endocannabinoid system ("ECS") to realize the therapeutic potential of cannabinoids.

The CPIP reflects the Company’s continued commitment to expand its leadership in cannabinoid-based science and cutting-edge research that can be commercialized through new and existing technologies.

It leverages R&D initiatives with key opinion leaders with specialized research centers in the US and internationally, such as the UM, University of Cordoba and University of Eastern Piedmont.

As a first step in building the CPIP in October 2021, we announced the establishment of a new Exclusive Sponsored Research Agreement ("ESRA") with VivaCell Biotechnology España, S.L.U ("VivaCell" formerly known as Emerald Health Biotechnology España, S.L.U), focused on developing and characterizing novel molecules that can affect the ECS for therapeutic benefit.

This agreement deepens the commitment of Drs.

Munoz and Appendino, who will be the principal investigators and continue to lead our scientific advisory board.

Under the terms of the ESRA the Company will approve and fund designated projects and have exclusive rights to all data and products, and any intellectual property resulting from this research collaboration will be owned by the Company.

Vivacell will receive a single digit royalty on all licensing revenue or other consideration paid to the Company by a third-party licensee, assignee or purchaser related to any product commercialized as part of designated projects.

Through the CPIP the Company intends to expand its relationships with other investigators and institutions who are leaders in the field of cannabinoid research.

Our Competitive Strengths

Cannabis is subject to strict regulation in the United States.

Cannabis and cannabis extracts are classified by the U.S.

Drug Enforcement Administration (the “DEA”), as a Schedule I substance, which means that, under federal law, it has no established medicinal use and may not be marketed or sold in the United States.

In addition, the United States is a party to the Single Convention on Narcotic Drugs, which imposes certain requirements and restrictions on member parties with respect to the cultivation and wholesale trade in cannabis.

Since 1968, UM has held the only contract with the Federal Government to cultivate cannabis on its behalf for research purposes and holds the requisite DEA registrations authorizing it to engage in that activity.

The contract, which is open for competitive bidding at periodic intervals, is administered by the National Institute on Drug Abuse (“NIDA”), an agency within the NIH.

UM’s current contract was awarded in 2015 and runs for a base year of one year with four one-year options.

As the sole contract holder since 1968, UM has developed significant expertise in the extraction, separation, processing and manufacture of cannabinoids.

UM has also engaged in the cultivation of cannabis and the extraction of cannabinoids for purposes of developing drug product candidates apart from its role as NIDA contractor.

We have entered into several research and license agreements with UM and view this collaborative association as a significant strategic advantage in the marketplace.

The only cannabinoid products that are currently approved as drugs in the United States and, to our knowledge, all cannabinoid products in late-stage development, are predominantly orally delivered products.

Cannabinoids, when ingested orally, are subject to significant first pass metabolism by the liver and potential drug-drug interactions, resulting in very high inter-patient and intra-patient variation in bioavailability which can potentially compromise both efficacy and safety.

This has been published in the literature and in product labeling by regulatory agencies worldwide.

These independent assessments correlate with highly variable response rates and safety profiles which, in some cases, have been deemed to have marginal clinical utility.

We have licensed from UM the rights to THCVHS, a pro-drug formulation of THC.

Data from UM supports the delivery of the pro-drug through absorptive routes other than the gastrointestinal tract, which we believe has the potential to mitigate the issue of first-pass metabolism by the liver, potentially enhancing drug bioavailability and predictive pharmacokinetics.

We are also working with UM and other parties on methods to formulate and deliver CBDVHS and a variety of other pharmaceutical-grade cannabinoids to better manage symptoms and/or treat diseases.

We are developing novel, proprietary cannabinoid derivatives that have the potential to treat ophthalmic disorders and other disease with unmet needs.

Our lead product candidate, SBI-100, is being developed for the treatment of glaucoma and ocular hypertension.

Currently, most approved drugs for glaucoma target similar molecular receptors, and have similar mechanisms of action, and as a result there is a significant unmet medical need to develop new drugs that target different receptors using novel mechanisms of action.

SBI-100 has the potential to meet these needs.

The eye is rich in cannabinoid receptors, including CBR1, which is the main target for SBI-100.

Our studies, along with multiple studies from other institutions, have demonstrated that activation of CBR1 can not only result in reduction of IOP in the eye, but also have anti-inflammatory, anti-fibrotic and anti-neovascular effects.

As a novel agent for the potential treatment of glaucoma and ocular hypertension, SBI-100 represents a new treatment opportunity for physicians and patients and we are leading the field in this area of research.

With the implementation of the CPIP, we intend to leverage the potential success of SBI-100 to discover and develop additional novel cannabinoid derivatives capable of targeting multiple cannabinoid receptors in the eye for the treatment of ocular diseases.

Combined with the experience of our management team, scientific and clinical advisors, this provides significant strategic advantage in the marketplace over our competitors.

Our Business Strategy

Our goal is to become a premier developer of synthetic cannabinoid-derived medicines for global markets to treat significant unmet medical needs.

Our goal is to become a premier developer of synthetic cannabinoid derivatives for global markets to treat significant unmet medical needs.

Our current operating strategy includes:

• selection and licensing of potential clinical targets based on internal and external published data, access to appropriate cannabinoids, and the impact of both developmental and market conditions;

prioritization of product candidates based on the potential clinical utility and market of associated target indications;

• prioritization of product candidates based on the potential clinical utility and market for associated target indications;

• development and execution of an intellectual property strategy;

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• obtaining regulatory direction and approval from the FDA, European Medicines Agency ("EMA"), and other regulatory agencies for our product candidates;

research and development of additional indications for our product candidates; and

• discovery, research and development of additional cannabinoid-based drugs for future product candidates; and

• partnering, out-licensing, or selling our product candidates to pharmaceutical companies to maximize profits and to bring our state-of-the-art therapeutics to patients in need.

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We have not established a sales, marketing or product distribution infrastructure because our lead product candidates are still in research, discovery or preclinical development stages.

If and when we obtain approval to market any of our product candidates, we will evaluate what we believe to be the optimal commercialization path for the Company, the respective product candidate, and patients.

We are evaluating what we believe to be the optimal commercialization path for the Company, the respective product candidates, and patients.

Commercialization paths may include licensing, selling, or partnering with other commercial partners.

We may also choose to build a commercial sales and marketing team for some or all of our product candidates.

We will continue to proactively evaluate the best path to commercialization on an ongoing basis.

Manufacturing

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We currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture of any products that we may commercialize.

For all of our future product candidates, we aim to identify and qualify manufacturers to provide the API and fill-and-finish services prior to submission of a New Drug Application (“NDA”) to the FDA.

For all of our future product candidates, we aim to identify and qualify manufacturers to provide the active pharmaceutical ingredient ("API") and fill-and-finish services prior to submission of a New Drug Application ("NDA") to the FDA.

We expect to continue to develop drug candidates that can be produced cost-effectively at contract manufacturing facilities.

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We intend for these patent applications to cover, where possible, claims for composition of matter, medical uses, processes for isolation and preparation, processes for delivery and formulations.

As of the date of this Annual Report, we have licensed from UM three inventions, which include U.S.

As of the date of this Annual Report, we have licensed two inventions from UM which include U.S.

patents as well as a number of foreign counterparts, including the European Union, Japan, Canada and Australia.

The patents that we license, cover composition of matter and preparation of prodrug of THC, analog of cannabidiol, and platform of cannabinoids for the treatment of infectious diseases, and their methods of use.

These patents are expected to expire in 2039.

Additionally, in March 2020, we were notified by the United States Patent and Trademark Office, that a notice of allowance has been issued for the proprietary analog of cannabidiol, CBDVHS.

The official issuance date for the CBDVHS US patent was July 2020.

The expiration date of the US patent for CBDVHS is January 2037.

The patents that we license cover composition of matter and preparation of SBI-100 and other cannabinoid receptor modulators, and their methods of use.

The expiration date of the US patent for SBI-100 is expected to expire in 2029.

Additionally, in July 2020 the United States Patent and Trademark Office granted a patent for SBI-200.

The expiration date of the US patent for SBI-200 is January 2037.

Under our license agreements, UM retains ownership over the licensed patents and control over the maintenance and prosecution of the licensed patents and patent applications.

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A failure to comply with such laws and regulations or prevail in any enforcement action or litigation related to noncompliance could have a material adverse impact on our business, financial condition and results of operations and could cause the market value of our common stock to decline.

Regulation of Cannabis and Cannabinoids

Regulation of Controlled Substances

DEA Regulation

Cannabis, cannabis extracts and some cannabinoids are regulated as “controlled substances” as defined in the Controlled Substances Act (the “CSA”), which establishes registration, security, recordkeeping, reporting, storage, distribution and other requirements administered by the DEA.

Certain cannabinoids are regulated as “controlled substances” as defined in the Controlled Substances Act (the “CSA”), which establishes registration, security, recordkeeping, reporting, storage, distribution and other requirements administered by the DEA.

The DEA is concerned with the control of handlers of controlled substances (and with the equipment and raw materials used in their manufacture and packaging) of controlled substances in order to prevent loss and diversion into illicit channels of commerce.

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A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances.

Cannabis, cannabis extracts and some cannabinoids are listed by the DEA as Schedule I controlled substances under the CSA.

Certain cannabinoids are listed by the DEA as Schedule I controlled substances under the CSA.

Consequently, their manufacture, shipment, storage, sale and use are subject to a high degree of regulation.

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In certain circumstances, violations could lead to criminal prosecution.

The DEA has conducted a scientific review of the chemical structure of CBDVHS and determined that CBDVHS is not a regulated chemical nor controlled substance under the CSA.

This decision by the DEA should help the Company expand the network of clinical testing sites, permit a greater cross-section of patients to participate in studies of this drug, as well as speed the initiation of clinical trials.

THCVHS remains a Schedule I, controlled substance, pending a request to re-schedule THCVHS after a drug approval by the FDA.

The DEA has conducted a scientific review of the chemical structure of SBI-200 and determined that SBI-200 is not a regulated chemical nor controlled substance under the CSA.

SBI-100 remains a Schedule I controlled substance, pending a request to re-schedule SBI-100 after marketing authorization by the FDA.

Food and Drug Administration

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The process required by the FDA before a drug may be marketed in the United States generally involves the following:

completion of preclinical laboratory tests, animal studies and formulation studies in compliance with good laboratory practice (“GLP”) regulations;

submission to the FDA of an IND, which must become effective before human clinical trials may begin;

approval by an institutional review board (“IRB”) at each clinical site before each trial may be initiated;

performance of adequate and well-controlled human clinical trials in accordance with good clinical practice (“GCP”) requirements to establish the safety and efficacy of the proposed drug for each indication;

• completion of preclinical laboratory tests, animal studies and formulation studies in compliance with GLP regulations;

• submission of an Investigational New Drug application ("IND") to the FDA , which must be authorized as open before human clinical trials may begin;

• approval and oversight of each study by an institutional review board ("IRB") before each clinical site may initiate the trial(s);

• performance of adequate and well-controlled clinical trials in accordance with good clinical practice ("GCP") requirements to establish the safety and efficacy of the proposed drug for each indication;

• submission of an NDA to the FDA;

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and

• satisfactory development and completion of a FDA pre-approval inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; and

• FDA review and approval of the NDA.

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An IND sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available clinical data or literature, among other things, to the FDA as part of an IND.

Some preclinical testing may continue even after the IND is submitted.

An IND automatically becomes effective 30 days after receipt by the FDA unless, before that time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold.

In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.

Some nonclinical testing may continue even after the IND is submitted.

An IND generally becomes effective 30 days after receipt by the FDA unless, before that time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold.

In such a case, the IND sponsor and the FDA work to resolve any outstanding concerns before the hold can be lifted and the clinical trial can begin.

As a result, submission of an IND does not always result in the FDA allowing clinical trials to commence.

Clinical Trials

Clinical trials involve the administration of the investigational new drug candidate to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial.

Clinical trials involve the administration of the investigational new drug candidate to humans under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects/patients provide their informed consent in writing for their participation in any clinical trial.

Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated.

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Information about certain clinical trials must be submitted within specific timeframes to the NIH for public dissemination on their www.clinicaltrials.gov website.

Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

Before marketing authorization, human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:

The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness.

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The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product.

Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.

Reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur.

Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all.

Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.

Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Marketing Approval

Assuming successful completion of the required clinical testing, the results of the preclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications.

Assuming successful completion of the required clinical testing, the results of the nonclinical and clinical studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications.

In most cases, the submission of an NDA is subject to a substantial application user fee.

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The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting them for filing, to determine whether they are sufficiently complete to permit substantive review.

The FDA may request additional information rather than accept a NDA for filing.

The FDA may request additional information rather than accept an NDA for filing.

In this event, the application must be resubmitted with the additional information requested.

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The FDA reviews an NDA to determine, among other things, whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held meets standards designed to assure the product’s continued safety, quality and purity.

The FDA may refer an application for a novel drug to an advisory committee.

The FDA may refer an application for a novel drug and/or first-in-class product to an advisory committee.

An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions.

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Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to assure compliance with GCP requirements.

The testing and approval process for a NDA requires substantial time, effort and financial resources, and each may take several years to complete.

Data obtained from preclinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.

The testing and approval process for an NDA requires substantial time, effort and financial resources, and each may take several years to complete.

Data obtained from nonclinical and clinical testing are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.

The FDA may not grant approval on a timely basis, or at all.

After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a complete response letter.

A complete response letter generally contains a statement of specific conditions that must be met to secure final approval of the NDA and may require additional clinical or preclinical testing in order for the FDA to reconsider the application.

A complete response letter generally contains a statement of specific conditions that must be met to secure final approval of the NDA and may require additional clinical or nonclinical testing in order for the FDA to reconsider the application.

Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

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There also are continuing annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.

The FDA may impose a number of post-approval requirements as a condition of approval of a NDA.

The FDA may impose a number of post-approval requirements as a condition of approval of an NDA.

For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

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We are a reporting company with the Securities and Exchange Commission (the "SEC"), and, therefore, subject to the information and reporting requirements of the Exchange Act of 1934, as amended (the "Exchange Act") and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act").

In addition, our financial reporting is subject to United States generally accepted accounting principles (“U.S.

GAAP”), and U.S.

GAAP is subject to change over time.

In addition, our financial reporting is subject to United States Generally Accepted Accounting Principles ("GAAP"), and GAAP is subject to change over time.

We are also subject to federal, state and local laws and regulations applied to businesses generally.

We believe that we are in conformity with all applicable laws in all relevant jurisdictions.

As of the date of this Annual Report, we have a total of six full-time employees.

As of the date of this Annual Report, we have a total of nine full-time employees.

None of our employees are represented by a labor union or covered by a collective bargaining agreement.

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We also intend to utilize independent contractors and outsourced services, such as CROs, and third party manufacturers, where possible and appropriate.

Our Internet website, which is located at http://www.skyebioscience.com , describes our company and our management and provides information about cannabis-based therapeutics.

Our Internet website, which is located at http://www.skyebioscience.com, describes our company and our management and provides information about our technology and products.

Information contained on our website is not incorporated by reference into, and should not be considered a part of, this Annual Report.

FORWARD-LOOKING STATEMENTS

Statements in this Annual Report on Form 10-K that are not descriptions of historical facts are forward-looking statements that are based on management’s current expectations and assumptions and are subject to risks and uncertainties.

Statements in this Annual Report on Form 10-K contain forward-looking statements that are based on management’s current expectations and assumptions and information currently available to management and are subject to risks and uncertainties.

If such risks or uncertainties materialize or such assumptions prove incorrect, our business, operating results, financial condition and stock price could be materially and negatively affected.

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• competition in our industry;

the duration and impact of the novel coronavirus (“COVID-19”) pandemic;

• the duration and impact of the novel coronavirus ("COVID-19") pandemic, or responses to the pandemic on our business, clinical trials or personnel;

• regulatory developments in the United States and foreign countries.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business