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Item 9A. Controls and Procedures

2022-03-28 compared with 2021-03-02 · 836 added, 762 removed, 723 unchanged (69% of the section changed)

5 unchanged sentences

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of the company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

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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 supervision and participation of our Chief Executive Officer and Interim Principal Accounting Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2020, based on criteria for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework - 2013 (COSO 2013 Framework).

Our management, with the supervision and participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2021, based on criteria for effective internal control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework - 2013 (COSO 2013 Framework).

Based on their assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective.

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The following table sets forth certain information as of the date of this Annual Report, with respect to our directors, executive officers and significant employees.

Punit Dhillon

Chief Executive Officer, Chairman, Director

Richard Janney

Interim Principal Accounting Officer

Margaret Dalesandro

Name Age Position

Punit Dhillon 41 Chief Executive Officer, Chairman, Director

Kaitlyn Arsenault 35 Chief Financial Officer

Margaret Dalesandro 75 Director

Jim Heppell 66 Director

Praveen Tyle 62 Director

Keith Ward 52 Director

Biographies of Directors, Executive Officers and Significant Employees

Punit Dhillon.

Dhillon was appointed as a member of our Board in connection with the consummation of the investment in us by Emerald Health Sciences in 2018.

Dhillon currently serves as the Chair of the Board and as the Company’s Chief Executive Officer.

Dhillon was appointed as a member of our Board in 2018.

On December 17, 2019, Mr.

Dhillon was appointed as Chairman of our Board.

Dhillon was appointed as our board Chair.

On August 10, 2020, Mr.

Dhillon was appointed as our Chief Executive Officer.

Dhillon is currently a board member of Emerald Health Pharmaceuticals, Inc., Emerald Health Therapeutics, Inc.

(EMH), a TSX Venture Exchange listed company, and Arch Therapeutics Inc.

Dhillon is a Co-founder and Director of OncoSec Medical Incorporated (NASDAQ:

ONCS) and was formerly the CEO through March 2018.

EMH), a Canadian Securities Exchange listed company, and Arch Therapeutics Inc.

Dhillon was previously a Co-founder and Director of OncoSec Medical Incorporated (NASDAQ:

ONCS) and was formerly the CEO of OncoSec through March 2018.

Prior to OncoSec, Mr.

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INO) from September 2003 until March 2011.

Dhillon has also previously been a consultant and board member for several TSX Venture Exchange listed early-stage life science companies, which matured through advances in their development pipelines and subsequent M&A transactions.

Dhillon has previously been a consultant and board member for several TSX Venture Exchange-listed early-stage life science companies, which matured through advances in their development pipelines and subsequent M&A transactions.

Prior to joining Inovio, Mr.

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(now Lumira Capital Corp.).

Dhillon is an active member in his community and places great value on helping future leaders overcome challenges through mentorship and education and is a co-founder and board member of Young Entrepreneurship Leadership Launchpad (YELL), a not-for-profit and charity organization based in Canada.

Dhillon is an active member of his community and places great value on helping future leaders overcome challenges through mentorship and education.

He is a co-founder and board member of Young Entrepreneurship Leadership Launchpad (YELL), a not-for-profit and charity organization in Canada.

Dhillon has a Bachelor of Arts with honors in Political Science and a minor in Business Administration from Simon Fraser University.

Dhillon’s experience in the biotechnology and pharmaceutical industry, and his experience with publicly traded companies were the primary qualifications that the Board considered in appointing him as a director of the Company.

Heppell was the founder, CEO and director of BC Advantage Life Sciences I Fund, which won the Canadian Venture Capital Deal of the Year Award for having the highest realized return (23.4x its investment in Aspreva Pharmaceuticals) of any venture capital fund in Canada.

Heppell has a Bachelor of Science degree in Microbiology and a law degree from the University of British Columbia.

After being called to the Bar, he worked for six years with Fasken Martineau DuMoulin, during which time he was seconded to the BC Securities Commission for six months.

Heppell then became President and Chief Executive Officer of Catalyst Corporate Finance Lawyers, a boutique corporate finance law firm that focused on building life science and technology companies.

We believe Mr.

Dhillon’s experience in the biotechnology and pharmaceutical industry and his experience with publicly traded companies give him the qualifications necessary to serve as an officer and director of the Company.

Kaitlyn Arsenault, CPA.

Arsenault currently serves as the Company’s Chief Financial Officer.

Arsenault previously served as an independent financial consultant for emerging public and private companies in the life sciences, technology, and FinTech industries from 2014 to 2021.

Prior to her appointment as Chief Financial Officer, she served as the Company's Manager of Financial Reporting and Technical Accounting for the past six years.

Arsenault's experience includes addressing complex technical accounting issues related to equity financings, derivatives, debt instruments, stock-based compensation, revenue recognition, and M&A, among other subjects.

Prior to becoming an independent financial consultant, Ms.

Arsenault spent seven years in public accounting as an assurance manager in Friedman LLP's SEC practice, gaining public and private audit engagement experience across multiple industries.

Arsenault received her Bachelor of Science degree in accounting from Ramapo College of New Jersey and is a Certified Public Accountant in California (active) and New Jersey (inactive).

We believe that Ms.

Arsenault's prior track record with the Company, experience with life science and technology companies, and vast exposure to different accounting and financial issues in the public markets gives her the qualifications and skills necessary to serve as an officer of the Company.

Heppell is a member of the Board and has served as a member of the Board since January 2018.

Heppell currently serves as the Chief Executive Officer and Chair of the Board of Directors of Emerald Health Sciences, Inc.;

Chair of Emerald Health Therapeutics, Inc.

EMH) and Emerald Health Pharmaceuticals, Inc.;

and President of Emerald Health Research Inc.

Formerly, Mr.

Heppell served as a director of Sophiris Bio, Inc.

Heppell was the founder, CEO, and director of the B.C.

Advantage Life Sciences I Fund, which was awarded the Canadian Venture Capital Deal of the Year Award in 2006 for having the highest realized return (23.4x its investment in Aspreva Pharmaceuticals) of any venture capital fund in Canada.

Heppell graduated with a Bachelor of Science degree in Microbiology and a law degree from the University of British Columbia.

After being called to the Bar, he worked for six years with Fasken Martineau DuMoulin, during which he was seconded to the B.C.

Securities Commission for six months.

Heppell then became President and Chief Executive Officer of Catalyst Corporate Finance Lawyers, a boutique corporate finance law firm focused on building life science and technology companies.

He is a past member of the Securities Policy Advisory Committee to the BCSC and is Past-Chairman of the Securities Section of the Canadian Bar Association (B.C.

Heppell taught corporate finance and corporate governance courses at the University of British Columbia, Simon Fraser University and at a number of biotechnology conferences for numerous years.

He is currently a director of a number of public and private life science companies, including Emerald Health Sciences.

The Board considered Mr.

Heppell’s significant experience with life science and technology companies and the public markets in making the decision to appoint him as a director of the Company.

Margaret Dalesandro.

Margaret Dalesandro currently serves on the board of OncoSec Medical Incorporated, a company listed on NASDAQ and a late-stage biotechnology company focused on designing, developing and commercializing innovative therapies and proprietary medical approaches to stimulate and guide an anti-tumor immune response for the treatment of cancer.

For numerous years, Mr.

Heppell taught corporate finance and corporate governance courses at the University of British Columbia, Simon Fraser University, and several biotechnology conferences.

He is currently a director of several public and private life science companies.

We believe Mr.

Heppell’s significant experience with life science and technology companies and the public markets give him the qualifications and skills necessary to serve as a director of the Company.

Margaret Dalesandro, PhD.

Margaret Dalesandro is currently a member of the Board and has served as a member of the Board since August 2020.

Dalesandro served from 2019 through 2021 on the Board of OncoSec Medical Incorporated (NASDAQ:

ONCS), a late-stage biotechnology company focused on designing, developing, and commercializing innovative therapies and proprietary medical approaches to stimulate and guide an anti-tumor immune response for the treatment of cancer.

She served as Chair of the OncoSec Medical Board from early 2020 through 2021.

Dr Dalesandro also serves on the Board of Seelos Therapeutics (NASDAQ:

In addition, Dr.

Dalesandro is currently the President of Brecon Pharma Consulting LLC.

Dalesandro has over twenty-five years of experience leading strategic product development in the pharmaceutical, biotechnology and diagnostics industries.

She has previously served as a Business Director of Integrative Pharmacology at Corning, Incorporated, as a Vice President of Project, Portfolio and Alliance Management at ImClone Systems Inc., as an Executive Director of Project and Portfolio Management at GlaxoSmithKline, and as a Senior Consultant at Cambridge Pharma Consultancy over the course of her career.

Dalesandro earned her Ph.D.

in Biochemistry from Bryn Mawr College and completed a NIH Post-Doctoral Fellowship in Molecular Immunology at the Wake Forest University School of Medicine.

The Board considered Dr.

Dalesandro’s significant experience with life science and technology companies in making the decision to appoint her as a director of the Company.

Richard Janney.

Richard Janney currently is an independent contractor at RoseRyan, Inc.

(“RoseRyan”), a professional services firm which provides accounting and financial advisory services to the Company on a regular basis.

Janney currently serves as the acting Chief Financial Officer of Pinnacle Engines and Tempathic, Inc.

on a part-time basis.

Prior to Tempathic, Inc., Mr.

Janney served as the Chief Financial Officer of Thinc, Inc.

from September 2018 to August 2019, and as the Chief Executive Officer of AFFARI, LLC from 2011 to 2019.

Janney also served as the principal accounting officer of several public and private companies, including Trident Microsystems, Inc., a NASDAQ listed company, and Asyst Technologies, Inc., a NASDAQ listed company.

Janney’s experience also includes being a manager at PricewaterhouseCoopers.

Janney received a B.S.

degree from California Polytechnic University San Luis Obispo in Business Administration with an emphasis in Finance and Accounting.

Dalesandro is the President of Brecon Pharma Consulting LLC.

Dalesandro has over thirty-five years of experience leading strategic product development in the pharmaceutical, biotechnology, and diagnostics industries.

She has previously served as the Business Director of Integrative Pharmacology at Corning, Incorporated;

Vice President of Project, Portfolio and Alliance Management at ImClone Systems Inc.;

Executive Director of Project and Portfolio Management at GlaxoSmithKline;

and Senior Consultant at Cambridge Pharma Consultancy.

During her tenure at Centocor, Inc, Dr.

Dalesandro developed and holds the patents on a diagnostic test for acute coronary syndrome based on the detection of platelet surface integrins.

Dalesandro received her Ph.D.

in Biochemistry from Bryn Mawr College and completed an NIH Post-Doctoral Fellowship in Molecular Immunology at Wake Forest University School of Medicine.

We believe Dr.

Dalesandro’s significant experience with life science and technology companies give her the qualifications and skills necessary to serve as a director of the Company.

Praveen Tyle, PhD.

Praveen Tyle is currently a member of the Board and has served as a member of the Board since July 2021.

Tyle also serves as a member of the Board of Directors of Kiora Pharmaceuticals (NASDAW:

KPRX) and Orient Europharma Co., Ltd.

Tyle is currently President & Chief Executive Officer and Director of Invectys, Inc., an immuno-oncology company born from the world-renowned Pasteur Institute.

Previously, he was Executive Vice President of Lexicon Pharmaceuticals, Inc.

and prior to that he serve as President & Chief Executive Officer and director of Osmotica Pharmaceutical Corp, a company focusing on central nervous system drug development.

In past roles, Dr.

Tyle served at Novartis OTC as Senior Vice President and Global Head of Business Development and Licensing and Senior Vice President & Global Head of Research and Development.

Earlier in his career, he was Corporate Senior Vice President and Chief Scientific Officer of Bausch & Lomb.

Tyle was also an Adjunct Associate Professor of Ophthalmology at the University of Rochester Eye Institute Medical Center, among other current and past academic roles.

He has co-authored over 100 peer-reviewed academic papers and presentations and is named on multiple patents, including patents related to ophthalmic innovations, drug delivery, and glaucoma.

We believe Dr.

Tyles’s significant contributions in the field of ophthalmology and experience with life science companies give him the qualifications and skills necessary to serve as a director of the Company.

Keith Ward, PhD .

Keith Ward is currently a member of the Board and has served as a member of the Board since December 2021.

Ward is a life sciences executive with over 25 years of experience in the biotech and pharmaceutical industry.

Ward currently serves as President and Chief Executive Officer of InterveXion Therapeutics, a private clinical-stage biotech company developing immunotherapies for substance use disorders.

Prior to joining InterveXion, Dr.

Ward served as Executive Vice President and Chief Development Officer for Reata Pharmaceuticals, where he led research and development, clinical operations, regulatory affairs, manufacturing, and project management.

Before that, Dr.

Ward developed ophthalmic pharmaceuticals and medical devices as Global Vice President of Pharmaceutical R&D for Bausch & Lomb.

Ward has also held positions of increasing responsibility within GlaxoSmithKline and SmithKline Beecham Pharmaceuticals.

Ward earned a BSc in toxicology with a minor in chemistry from Northeast Louisiana University and a Ph.D.

in toxicology from the University of North Carolina at Chapel Hill.

We believe Dr.

Ward’s significant experience in biotech and pharmaceutical companies give him the qualifications and skills necessary to serve as a director of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

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SEC regulation requires executive officers, directors and greater than 10% stockholders to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, 2020, our executive officers, directors, and greater than 10% stockholders complied with all applicable filing requirements on a timely basis, except that a Form 4 was filed late by Margaret Dalesandro, resulting in one transaction not being reported on a timely basis.

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, 2021, our executive officers, directors, and greater than 10% stockholders complied with all applicable filing requirements on a timely basis.

Family Relationships

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Term of Office of Directors

Our directors are elected at each annual meeting of stockholders and serve until the next annual meeting of stockholders or until their successor has been duly elected and qualified, or until their earlier death, resignation or removal.

Our directors serve until the next annual meeting of stockholders or until their successor has been duly elected and qualified, or until their earlier death, resignation or removal.

Directors and Officers Involvement in Certain Legal Proceedings

During the past ten years, our directors and executive officers have not been involved in any of the legal proceedings set forth in Item 401(f) of Regulation S-K promulgated by the SEC.

During the past ten years, our current directors and executive officers have not been involved in any of the legal proceedings set forth in Item 401(f) of Regulation S-K promulgated by the SEC.

Board and Committee Meetings

During 2020, our Board met four times (including telephonic meetings) and took action by written consent 17 times.

During 2021, our Board met eleven times (including telephonic meetings) and took action by written consent 18 times.

Each director attended at least 75% of the meetings held by the Board and by each committee on which she or he served while she or he was a director, either in person or by teleconference, during the year.

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Although we do not have a formal policy regarding attendance by members of our Board at each annual meeting of stockholders, we encourage all of our directors to attend.

All of our directors attended our most recent annual general meeting of stockholders.

All our directors other than Dr.

Ward, each of which were elected as directors during 2021, attended our most recent annual general meeting of stockholders.

Audit Committee and Financial Expert

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The members of our audit committee are Mr.

Jim Heppell and Dr.

Margaret Dalesandro.

Jim Heppell, Dr.

Margaret Dalesandro and Dr.

Praveen Tyle.

Jim Heppell serves as chairman of the audit committee and our Board has determined that he is an “audit committee financial expert” as defined by applicable SEC rules.

The Board has determined that Mr.

Jim Heppell and Dr.

Margaret Dalesandro are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules, and we have determined that both Mr.

Jim Heppell and Dr.

Margaret Dalesandro as audit committee members meet the more stringent requirements under Rule 5605(c)(2) of the Nasdaq Listing Rules.

Our audit committee met two times (including telephonic meetings) and took action by written consent one time in 2020 as compensation matters were handled directly by our Board.

The Board has determined that Dr.

Margaret Dalesandro and Dr.

Praveen Tyle are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules, and we have determined that both Dr.

Margaret Dalesandro and Dr.

Praveen Tyle as audit committee members meet the more stringent requirements under Rule 5605(c)(2) of the Nasdaq Listing Rules.

Our audit committee met four times (including telephonic meetings) and acted by written consent one time in 2021.

Our audit committee is responsible for:

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In 2018, the Board dissolved the former compensation and compliance committee and established a new compensation committee which operates under a written charter approved by the Board.

The members of our compensation committee are Mr.

The members of our compensation committee are Dr.

Praveen Tyle, Mr.

Jim Heppell and Dr.

Margaret Dalesandro.

Jim Heppell serves as chairman of the compensation committee.

Our compensation committee did not meet or take action by written consent during 2020.

Praveen Tyle serves as chairman of the compensation committee.

The Board has determined that Dr.

Margaret Dalesandro, Jim Heppell and Dr.

Praveen Tyle are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules.

Our compensation committee met four times (including telephonic meetings) during 2021 and took action by written consent two times during 2021.

Our compensation committee is responsible for the oversight of, and the annual and ongoing review of, the Chief Executive Officer, the compensation of the senior management team, and the bonus programs in place for employees, which includes:

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Nomination and Corporate Governance Committee

In 2018, our Board established a nominating and corporate governance committee that operates under a written charter approved by the Board.

In 2018, our Board established a nomination and corporate governance committee that operates under a written charter approved by the Board.

The members of our nomination and corporate governance committee are Mr.

Jim Heppell and Dr.

Margaret Dalesandro.

Margaret Dalesandro, Dr.

Praveen Tyle and Dr.

Margaret Dalesandro serves as chairman of the nomination and corporate governance committee.

Our nomination and corporate governance committee met once during 2020 (including telephonic meetings) and took action by written consent one time.

The Board has determined that Dr.

Margaret Dalesandro, Dr.

Praveen Tyle, Jim Heppell and Dr.

Keith Ward are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules.

Our nomination and corporate governance committee met four times during 2021 (including telephonic meetings) and took action by written consent one time.

Our nominating and corporate governance committee is responsible for assisting the Board in (1) identifying qualified individuals to become Board members, consistent with criteria approved by the Board, (2) determining the composition of the Board and its committees, (3) selecting the director nominees for the next annual meeting of shareholders, (4) monitoring a process to assess Board, committee and management effectiveness, (5) aiding and monitoring management succession planning and (6) developing, recommending to the Board, implementing and monitoring policies and processes related to our corporate governance guidelines.

Finance and Business Development Committee

In 2018, our Board established a finance and business development committee which operates under a written charter approved by the Board.

The members of our finance and business development committee are Mr.

Punit Dhillon and Mr.

Punit Dhillon serves as chairman of the finance and business development committee.

Our finance and business development committee did not meet but took action by written consent three times in 2020.

Our finance and business development committee is responsible for assisting the Board in (1) matters affecting our balance sheet, including capital structure strategies, debt and equity financings and working capital (2) analysis and assessment of financial and strategic aspects of major acquisitions and divestitures, collaborations and joint ventures, (3) formulating and recommending for approval to the Board our financial policies, including management of the financial affairs of the Company, (4) developing and maintaining relationships with investment banks, financial institutions and other investors and monitor developments in the capital markets and financing trends, and (5) evaluating and making recommendations to the Board concerning business development opportunities.

Nominations to the Board of Directors

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SUMMARY COMPENSATION TABLE

Position Year Salary

($) (1) Option

($) (1) Non-Equity Incentive Plan Compensation

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Other Compensation

Kaitlyn Arsenault 2021 75,000 19,031 58,000 269,240 — — 181,473 602,744

Chief Financial Officer (2) 2020 — — — — — — — —

Richard Janney 2021 — — — — — — 124,350 124,350

Interim PAO (2)

Former Interim PAO (3) 2020 — — — — — — 52,425 52,425

Punit Dhillon 2021 400,000 220,521 116,000 160,680 — — 2,500 899,701

Former CEO/ CMO (3)

Elena Traistaru,

Former Interim PFA (4)

Douglas Cesario,

Former CFO (5)

Former CMO (6)

Avtar Dhillon,

Former Executive Chairman (7)

Amounts reflect the full grant date fair value of stock options and awards, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual.

For the year ended December 31, 2020, other compensation consists of consulting fees charged to the Company by RoseRyan, Inc.

CEO 2020 160,000 — — 387,000 — — — 547,000

(1) Amounts reflect the full grant date fair value of stock options and awards, computed in accordance with ASC Topic 718 - Stock based compensation , rather than the amounts paid to or realized by the named individual.

(2) For the years ended December 31, 2021 and 2020, other compensation consists of consulting fees charged to the Company by KA Consulting, Inc.

and RoseRyan, Inc.

Arsenault's services.

(3) For the years ended December 31, 2021 and 2020, other compensation consists of consulting fees charged to the Company by RoseRyan, Inc.

Richard Janney’s services.

Brian Murphy separated from us, effective August 7, 2020, pursuant to a Separation and Release Agreement between us and Dr.

For the year ended December 31, 2020, other compensation consists of severance payable under Mr.

Murphy’s Separation and Release Agreement.

Elena Traistaru resigned as Interim Principal Accounting Officer, effective September 25, 2020.

For the year ended December 31, 2020, other compensation consists of consulting fees charged to the Company by Ms.

Traistaru’s consulting company.

Douglas Cesario separated from us, effective May 15, 2020, pursuant to a Separation and Release Agreement between us and Mr.

For the year ended December 31, 2020, other compensation consists of severance payable under the Separation and Release Agreement.

Dennis Kim resigned as Chief Medical Officer, effective November 6, 2020.

Avtar Dhillon resigned as Chairman and member of our Board of Directors, effective December 17, 2019.

For the year 2020, other compensation consists of consulting fees earned under the Independent Contractor Agreement (defined below).

See “Director Compensation” below.

For the year 2019, other compensation represents fees earned for services rendered as a member of our Board of Directors.

Employment and Severance Arrangements

Employment Agreement

Employment Agreement and Equity Awards

On August 7, 2020, we entered into an employment agreement with Mr.

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Punit Dhillon options to purchase 9,000,000 shares of the Company’s common stock at an exercise price of $0.045 per share (the then market price of the Company’s shares), with 10% of such options vested immediately upon grant and the remaining 90% vesting equally on each six-month anniversary of the grant date over four and a half years.

The foregoing description of the employment agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the employment agreements attached hereto as an exhibit and incorporated by reference herein.

During the year ended December 31, 2021, Mr.

Dhillon was granted 2,000,000 restricted stock units and 3,090,000 stock options.

The restricted stock units vest 33% on the anniversary of the grant date over a three year period and the stock options vest 25% on the one year anniversary of the grant date and monthly thereafter over a four year period.

On October 4, 2021, we entered into an employment agreement with Ms.

Kaitlyn Arsenault, our Chief Financial Officer.

The agreement provides for an annual base salary of $300,000 per year and an annual discretionary bonus of up to thirty five percent (35%) of her base salary based in part on Ms.

Arsenault’s achievement of milestones agreed to by the Board or the Compensation Committee of the Board.

Arsenault will also receive the normal benefits available to other similarly situated executives and will be entitled to severance pay under the circumstances described below.

Arsenault’s employment with the Company is at-will.

Except for termination of Mr.

Arsenault’s employment for “Cause,” “By Death” or “By Disability” (as such terms are defined in her employment agreement), Ms.

Arsenault will be entitled to a minimum six months’ severance if she is terminated by the Company.

In connection with her appointment, the Company granted Ms.

Arsenault options to purchase 1,600,000 shares of the Company’s common stock at an exercise price of $0.09 per share (the then market price of the Company’s shares), with 10% of such options vested immediately upon grant and the remaining 90% vesting equally in semi-annual installments over four years from issuance.

During the year ended December 31, 2021, Ms.

Arsenault was granted 1,000,000 restricted stock units and 1,770,000 stock options.

On September 15, 2021, prior to Ms.

Arsenault's appointment as CFO, Ms.

Arsenault was granted 400,000 stock options in connection with her consulting arrangement with us.

The stock options vest 10% on the grant date and 90% in equal annual installments thereafter over a period of four years.

The foregoing description of the employment agreements above does not purport to be complete and is qualified in its entirety by reference to the full text of the employment agreements attached hereto as an exhibit and incorporated by reference herein.

Severance Arrangements

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(i) a lump sum cash payment equal to at least six months’ of the executive’s monthly compensation, plus an additional month for each full year of service over six years, (ii) Company-paid premiums for continued health insurance for a period equal to the length of the cash severance period or, if earlier, when executive becomes covered under a subsequent employer’s healthcare plan, and (iii) full vesting of all then-outstanding unvested stock options and restricted stock awards.

On April 29, 2020, we entered into a Separation and Release Agreement with Mr.

Douglas Cesario.

Cesario’s separation was effective May 15, 2020.

Pursuant to the Separation and Release Agreement, Mr.

Cesario agreed to certain ongoing cooperation obligations and to provide certain releases and waivers as contained in the Separation and Release Agreement.

As consideration, we agreed to provide Mr.

Cesario compensation and benefits in accordance with his Employment Agreement as follows:

(i) through the Separation Date, an annualized base salary at the rate in effect for him as of the date of the Separation and Release Agreement;

(ii) a gross payment of $125,000 in consideration for the restrictive covenants contained in the Separation and Release Agreement;

and (iii) a continuation of health insurance benefits for reimbursement for a period of six months following the Separation Date.

On August 7, 2020, we entered into a Separation and Release Agreement with Dr.

Brian Murphy, pursuant to which, Dr.

Murphy resigned as the Company’s Chief Executive Officer and a member of the Board, effective August 7, 2020.

Pursuant to the Separation and Release Agreement, Dr.

Murphy has agreed to certain ongoing cooperation obligations and to provide certain releases and waivers as set out in the Separation and Release Agreement.

As consideration, we have agreed to provide Dr.

Murphy with certain compensation and benefits in accordance with his Employment Agreement as follows:

(i) an aggregate gross sum of $195,000, less federal and state withholdings, as salary continuation over six months in accordance with the Company’s standard biweekly payroll practice;

and (ii) Company’s healthcare benefits (for similarly situated executives as amended from time to time), for a period of six months from the Separation Date.

The foregoing descriptions of the separation and release agreements do not purport to be complete and are qualified in their entirety by reference to the full text of such separation and release agreements attached hereto as exhibits and incorporated by reference herein.

The foregoing descriptions of the change of control severance plan does not purport to be complete and is qualified in its entirety by reference to the full text of such change of control severance plan attached hereto as an exhibit and incorporated by reference herein.

Outstanding Equity Awards at Fiscal Year-end

As of December 31, 2021, our named executive officers held the following outstanding Company equity awards.

Option Awards

Option Awards Stock Awards

Date Number of

Underlying Unexercised

Exercisable Number of

exercisable Option

Price ($) Option

Date Number of

Vested (#) Market

Vested ($) (1)

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200,000 — 0.305 10/10/2028

CEO/Chairman (3) 8/7/2020

2,700,000 6,300,000 0.045 8/7/2030

(4) 12/14/2021

— 3,090,000 0.058 12/14/2031

(5) 12/14/2021

2,000,000 104,000

Kaitlyn Arsenault (6) 9/15/2021

40,000 360,000 0.120 9/15/2031

CFO (7) 10/4/2021

160,000 1,440,000 0.090 10/4/2031

(4) 12/14/2021

— 1,770,000 0.058 12/14/2031

(5) 12/14/2021

1,000,000 52,000

(1) The market value of shares that have not vested is calculated based on the per share closing price of our common stock on December 31, 2021.

(2) The options specified above vest as follows:

1/12 each month on the anniversary of the grant date.

1/12th each month on the anniversary of the grant date.

(3) The options specified above vest as follows:

10% of total vests on the grant date and 1/10 vests semi-annually on the anniversary of the grant date thereafter.

10% vests on the grant date and 90% vests in equal semi-annually installments thereafter over four years.

(4) The options specified above vest as follows:

25% vests on the one year anniversary of the grant date and 1/48th vests monthly thereafter over three years following the one year anniversary of the grant date.

(5) The restricted stock units specified above vest as follows:

33% on each grant date anniversary over three years.

(6) The options specified above vest as follows:

10% vests on the grant date and 90% vests in equal annual installments thereafter over four years.

(7) The options specified above vest as follows:

10% vests on the grant date and 90% vests in equal semi-annually installments thereafter over four years.

Exercises of Options

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Director Compensation

Since October 2018, our policy for the compensation of our non-employee directors has been as follows:

As of December 31, 2021, our policy for the compensation of our non-employee directors is as follows:

Each non-employee director receives a cash retainer of $40,000 on an annual basis, and an executive chair of the Board, if one is appointed as such and is a non-employee director, receives an additional $40,000 retainer annually.

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$1,000 per year ($5,000 for the chair)

Finance and Business Development Special Committee:

$40,000 per year for a non-employee member (no compensation for employee members)

Our directors received the following compensation for their service as our directors during the fiscal year ended December 31, 2020.

The table below summarizes the compensation paid by us to our non-employee directors for the year ended December 31, 2021.

Dhillon, our employee director, does not receive additional compensation for his services as a member of our Board :

DIRECTOR COMPENSATION

Incentive Plan Compensation

Non-Qualified

Deferred Compensation Earnings

Other Compensation

Punit Dhillon

Jim Heppell (2)

96,179 — 18,300 — 114,479

Margaret Dalesandro (3)

Does not include compensation received for services provided as executive officers.

Each non-employee director is entitled to an annual grant of 100,000 common stock options, all of which vest in twelve equal monthly installments.

However, no annual option grants were approved by the Board of Directors in 2020.

Amounts reflect the full grant date fair value of restricted stock awards and stock options, computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual.

We provide information regarding the assumptions used to calculate the value of restricted stock awards and options granted to our directors in Note 2 and 6 to our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

52,500 — 18,300 — 70,800

Praveen Tyle (4)

23,595 — 37,800 — 61,395

Keith Ward (5)

1,984 — 12,750 — 14,734

(1) As of December 31, 2021, each non-employee director is entitled to an annual grant of 150,000 common stock options, all of which vest in twelve equal monthly installments.

The amounts reported under “Option Awards” in the above table reflect the grant date fair value of these awards as determined in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation - Stock Compensation .

The value of stock option awards was estimated using the Black-Scholes option pricing model.

The valuation assumptions used in the valuation of options granted may be found in Note 6 to our financial statements included in this annual report on Form 10-K for the year ended December 31, 2021.

(2) On September 14, 2021, Mr.

Heppell was granted options to purchase 150,000 shares of common stock.

These options have an exercise price of $0.12, vest monthly over one year and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $18,300.

In addition, on August 7, 2020, Mr.

Heppell was granted options to purchase 1,000,000 shares of common stock.

These options have an exercise price of $0.05, vest 10% on the date of grant with the remaining 90% vesting semi-annually over two years and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $40,000.

On October 10, 2018, Mr.

Heppell was granted options to purchase 200,000 shares of common stock.

These options have an exercise price of $0.0.03, are fully vested and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $45,000.

The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2021 for Mr.

Heppell was 1,350,000, of which 787,500 were fully vested.

(3) On September 14, 2021, Dr.

Dalesandro was granted options to purchase 150,000 shares of common stock.

These options have an exercise price of $0.12, vest monthly over one year and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $18,300.

In addition, on August 7, 2020, Dr.

Dalesandro was granted options to purchase 250,000 shares of common stock.

These options have an exercise price of $0.05 and vest 10% on the date of grant with the remaining 90% vesting semi-annually over two years and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $10,000.

The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2021 for Dr.

Dalesandro was 400,000, of which 175,000 were fully vested.

(4) On September 14, 2021, Dr.

Tyle was granted options to purchase 25,000 shares of common stock.

These options have an exercise price of $0.12, vest monthly over one year and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $3,050.

In addition, on July 22, 2021, Dr.

Tyle was granted options to purchase 250,000 shares of common stock.

These options have an exercise price of $0.14 and vest 10% on the date of grant with the remaining 90% vesting semi-annually over two years and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $34,750.

The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2021 for Dr.

Tyle was 275,000, of which 31,250 were fully vested.

(5) On December 14, 2021, Dr.

Ward was granted options to purchase 250,000 shares of common stock.

These options have an exercise price of $0.06, vest monthly over one year and have a term of 10 years from the grant date.

The value of the stock option award was estimated using the Black-Scholes option pricing model and totaled $12,750.

The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2021 for Dr.

Ward was 250,000, of which none have vested.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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Equity Compensation Plan Information

Plan category

Plan category Number of

stock to be issued upon exercise of outstanding options, warrants and rights

(a) Weighted-

average exercise price of outstanding options, warrants and rights

Number of shares of common stock remaining available for future

(b) Number of shares of common stock remaining available for future

plans (excluding shares of common stock reflected in column (a))

Equity compensation plans approved by security holders 39,405,000 $ 0.07 14,132,929

Total 39,405,000 $ 0.07 14,132,929

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information with respect to beneficial ownership of our common stock, by:

The following table sets forth certain information with respect to beneficial ownership of our common stock as of March 24, 2022, by:

• each person known to be the beneficial owner of 5% or more of our outstanding common stock;

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As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.

The information set forth in the table below is based on 350,007,749 shares of our common stock issued and outstanding on February 23, 2021.

The information set forth in the table below is based on 495,925,112 shares of our common stock issued and outstanding on March 24, 2022.

To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

Unless otherwise indicated, the address of each beneficial owner listed below is 5910 Pacific Center Blvd.

Suite 320, San Diego, CA 92121.

Name and Address of Beneficial Owner

Unless otherwise indicated, the address of each beneficial owner listed below is 11250 El Camino Real, Suite 100, San Diego, CA 92130.

Name and Address of Beneficial Owner Beneficial

Ownership Percent

Emerald Health Sciences, Inc.

124,362,213 (2) 24.4 %

Punit Dhillon 4,800,000 (3) *%

Kaitlyn Arsenault 420,000 (4) *%

Richard Janney — *%

Elena Traistaru

Douglas Cesario

James Heppell 1,200,000 (5) *%

Margaret Dalesandro 200,000 (6) *%

Avtar Dhillon

Praveen Tyle 66,667 (7) *%

Keith Ward 104,167 (8) *%

All executive officers and directors as a group (7 persons) 6,790,834 1.4 %

*Denotes less than 1% of our outstanding shares of common stock.

The address of Emerald Health Sciences is 8262, The Landing, 200 - 375 Water St., Vancouver, British Columbia, Canada V6B 0M9.

(1) The address of Sciences is 8262, The Landing, 408 - 55 Water St., Vancouver, British Columbia, Canada V6B 1A1.

(2) Includes (i) 111,387,251 shares of common stock, (ii) 7,500,000 shares issuable on exercise of warrants and (iii) 5,474,962 shares issuable upon the conversion of outstanding principal and accrued interest associated with the Amended Credit Agreement.

Includes 2,000,000 shares of common stock underlying options that may be exercised within 60 days of February 23, 2021.

Includes 525,000 shares of common stock underlying options that may be exercised within 60 days of February 23, 2021.

Includes 81,250 shares of common stock underlying options that may be exercised within 60 days of February 23, 2021.

Brian Murphy separated from us, effective August 7, 2020, pursuant to a Separation and Release Agreement between us and Dr.

Douglas Cesario separated from us, effective May 15, 2020, pursuant to a Separation and Release Agreement between us and Mr.

Includes 1,975,000 shares of common stock underlying options that may be exercised within 60 days of February 23, 2021.

Avtar Dhillon resigned as Chairman and member of our Board of Directors, effective December 17, 2019.

Elena Traistaru resigned as Interim Principal Accounting Officer, effective September 25, 2020.

Dennis Kim resigned as Chief Medical Officer, effective November 6, 2020.

(3) Includes 3,800,000 shares of common stock underlying options that may be exercised within 60 days of March 24, 2022.

(4) Includes 420,000 shares of common stock underlying options that may be exercised within 60 days of March 24, 2022.

(5) Includes 700,000 shares of common stock underlying options that may be exercised within 60 days of March 24, 2022.

(6) Includes 200,000 shares of common stock underlying options that may be exercised within 60 days of March 24, 2022.

(7) Includes 66,667 shares of common stock underlying options that may be exercised within 60 days of March 24, 2022.

(8) Includes 104,167 shares of common stock underlying options that may be exercised within 60 days of March 24, 2022.

Changes in Control

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Emerald Health Sciences

In January 2018, we entered into a securities purchase agreement with Emerald Health Sciences, pursuant to which Emerald Health Sciences purchased a majority of the outstanding equity in us, resulting in a change in control of the Company.

As part of the transaction, the members of Board of the Company, with the exception of Dr.

Brian Murphy, our former CEO, tendered their resignation, and Emerald Health Sciences appointed two nominees to the Board.

In October 2018, the Board appointed Dr.

Avtar Dhillon, the Chairman, CEO and President of Emerald Health Sciences, as the Executive Chairman of the Board.

On December 17, 2019, the Board accepted the resignation of Dr.

Avtar Dhillon, who offered his resignation as the Executive Chairman of the Board and the position of Chairman of the Finance and Business Development Committee of the Board.

The Board also appointed Punit Dhillon, an existing member of the Board, as Chairman of the Board and as Chairman of the Finance and Business Development Committee of the Board, to fill the vacancies in such offices created by the resignation of Dr.

Avtar Dhillon.

On August 7, 2020, Mr.

Punit Dhillon was appointed the CEO of the Company and tendered his resignation as Chairman of the Audit Committee and a member of the Compensation Committee and the Nomination and Corporate Governance Committee.

On February 1, 2018, we entered into an Independent Contractor Agreement (the “Independent Contractor Agreement”) with Emerald Health Sciences, pursuant to which Emerald Health Sciences agreed to provide such services as are mutually agreed between the Company and Emerald Health Sciences, including reimbursements for reasonable expenses incurred in the performance of the Independent Contractor Agreement.

These services may include, but are not limited to, corporate advisory services and technical expertise in the areas of business development, marketing, investor relations, information technology and product development.

The Independent Contractor Agreement had an initial term of ten years and specified compensation to be agreed upon between the Company’s chief executive officer and Emerald Health Sciences’ CEO on a month-to-month basis.

The fee due under this agreement was payable on a monthly basis;

however, if we were unable to make payments due to insufficient funds, then interest on the outstanding balance is accrued at a rate of 12% per annum, calculated semi-annually.

Under this agreement, the Company incurred expenses of $542,000 during the year ended December 31, 2019.

As of December 31, 2019 and 2020, $7,032 remains unpaid.

The Independent Contractor Agreement was terminated effective December 31, 2019.

On October 5, 2018, we entered into the Credit Agreement with Emerald Health Sciences.

The Credit Agreement provides for a credit facility to us of up to $20,000,000 and is unsecured.

Advances under the Credit Agreement bear interest at an annual rate of 7% (payable quarterly in arrears) and mature on October 5, 2022.

At Emerald Health Sciences’ election, advances and unpaid interest may be converted into Common Stock at a fixed conversion price of $0.40, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc.

In connection with each advance under the Credit Agreement, we agreed, if requested by Emerald Health Sciences, to issue Emerald Health Sciences warrants to purchase shares of common stock in an amount equal to 50% of the number of shares of common stock that each advance may be converted into.

The warrants have an exercise price of $0.50 per share, a term of five years and will be immediately exercisable upon issuance.

In January 2018, we entered into a securities purchase agreement with Emerald Health Sciences, Inc.

("Sciences") pursuant to which Sciences purchased a majority of the equity interest us, resulting in a change in control transaction.

Sciences holds a significant interest in our equity as of December 31, 2021 and has provided us with financing under the Amended Credit Agreement.

On October 5, 2018, we entered into the Credit Agreement with Sciences.

The Credit Agreement originally provided for a credit facility to us of up to $20,000,000, and is unsecured.

Advances under the Credit Agreement bear interest at an annual rate of 7% and mature on October 5, 2022.

At Sciences’ election, advances and unpaid interest may be converted into Common Stock at a fixed conversion price of $0.40, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc.

In connection with the advances under the Credit Agreement, we issued Sciences 7,500,000 warrants to purchase shares of common stock.

The warrants have an exercise price of $0.50 per share, a term of five years and are fully vested.

The exercise price is subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events or upon any distributions of assets, including cash, stock or other property to our shareholders.

On November 1, 2018, we affected an initial draw under the Credit Agreement in the amount of $2,000,000 and issued Emerald Health Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement.

On February 1, 2019, we affected the second draw under the Credit Agreement in the amount of $2,000,000 and issued Emerald Health Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement.

On March 29, 2019, we affected the third draw under the Credit Agreement in the amount of $2,000,000 and issued Emerald Health Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement.

On December 20, 2019, we entered into a Warrant Exchange Agreement, pursuant to which Emerald Health Sciences exercised 40.8 million of such warrants and paid the aggregate exercise price of approximately $4.08 million for the related warrant shares in the form of a reduction of the corresponding amount of obligations outstanding under the Credit Agreement.

On November 1, 2018, we affected an initial draw under the Credit Agreement in the amount of $2,000,000 and issued Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement.

On February 1, 2019, we affected the second draw under the Credit Agreement in the amount of $2,000,000 and issued Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement.

On March 29, 2019, we affected the third draw under the Credit Agreement in the amount of $2,000,000 and issued Sciences a warrant to purchase 2,500,000 shares of common stock at an exercise price of $0.50 per share, in accordance with the terms of the Credit Agreement.

On December 20, 2019, we entered into a Warrant Exchange Agreement, pursuant to which Sciences exercised 40.8 million of such warrants and paid the aggregate exercise price of approximately $4.08 million for the related warrant shares in the form of a reduction of the corresponding amount of obligations outstanding under the Credit Agreement.

Upon consummation of the transaction under the Warrant Exchange Agreement, the total outstanding principal amount excluding discounts under the Credit Agreement was $2,014,500.

On April 29, 2020, we entered into an Amended and Restated Multi-Draw Credit Agreement with Emerald Health Sciences, which amends and restates the Credit Agreement, as reported in the current report on the Form 8-K filed with the SEC on April 29, 2020.

The Amended Credit Agreement provides for a credit facility to us in the principal amount of up to $20,000,000, which includes, without limitation, the advances totaling $6,000,000 that were granted prior to the amendment.

On April 29, 2020, we entered into an Amended and Restated Multi-Draw Credit Agreement with Sciences, which amended and restated the Credit Agreement, as reported in the current report on the Form 8-K filed with the SEC on April 29, 2020.

The Amended Credit Agreement provided for a credit facility to us in the principal amount of up to $20,000,000, which includes, without limitation, the advances totaling $6,000,000 that were granted prior to the amendment.

During the year ended December 31, 2020, we received the fourth and fifth advances of $150,000 and $300,000 pursuant to the Amended Credit Agreement.

The advances bear interest at 7% per annum and mature on October 5, 2022.

The Amended Credit Agreement is still in place;

however, there is no guarantee of continued funding under the Amended Credit Agreement.

A portion of the proceeds raised in this offering may be used to pay, in whole or in part, the principal and accrued interest on our Amended Credit Agreement.

See “Use of Proceeds.” The net proceeds of each advance shall be used for general corporate purposes.

On December 19, 2019, we entered into an Independent Contractor Services Agreement with Dr.

Avtar Dhillon, pursuant to which Dr.

Avtar Dhillon will provide ongoing corporate finance and strategic business advisory services to us.

The net proceeds of each advance were used for general corporate purposes.

On March 29, 2021, we entered into amendment two to the Amended Credit Agreement to defer interest payments through the earlier of maturity or prepayment of the principal balance.

On September 15, 2021, we further amended the Amended Credit Agreement to close our access to any further disbursements.

On December 19, 2019, the Company entered into an Independent Contractor Services Agreement with Dr.

Avtar Dhillon, at the time, a member of Sciences Board of Directors and its CEO, pursuant to which Dr.

Dhillon provided ongoing corporate finance and strategic business advisory services to the Company.

In exchange for his services, Dr.

Dhillon initially received a monthly fee of $10,000, with (i) $5,000 paid each month and (ii) $5,000 accruing from the effective date and payable upon the Company’s completion of a material financing.

On March 30, 2020, we amended the Independent Contractor Services Agreement by agreeing to defer payment of 100% of Dr.

Dhillon’s consulting fees until the Board of Directors determined that we had been sufficiently financed to make such payments at which point we would pay Dr.

Dhillon all his accrued consulting fees, and a bonus of 10% of his accrued consulting fees, less applicable tax and other withholdings.

The deferral was paid concurrent with the August 2020 Financing.

After the August 2020 Financing Dr.

Dhillon continues to receive a monthly fee of $10,000 per month for his services.

The Board reviews the monthly rate paid to Dr.

Dhillon within 90 days of the end of each fiscal year.

The Independent Contractor Services Agreement has an initial term of one year and automatically renews thereafter unless terminated earlier by either party.

The Independent Contractor Services Agreement may be terminated by either party for cause upon written notice to the other party if the other party defaults in the performance of the agreement in any material respect or materially breaches the terms of the agreement, or without cause upon 30 days’ prior written notice to the other party.

Under this agreement, for the years ended December 31, 2020 and 2019, we incurred fees of $127,387 and $3,871, respectively.

As of December 31, 2020, we have accrued $10,000 in expense related to the Independent Contractor Services Agreement.

On December 19, 2019, we entered into a Board Observer Agreement with Emerald Health Sciences, our largest shareholder.

The Board Observer Agreement gives a right to Emerald Health Sciences to designate one observer to our Board for so long as Emerald Health Sciences maintains ownership of any securities in the Company.

Under the Board Observer Agreement, the board observer will be permitted to attend all meetings (whether in person, telephonically or otherwise) of the Board in a non-voting, observer capacity.

Emerald Health Sciences appointed Dr.

Avtar Dhillon as its board observer.

The Board Observer Agreement may be terminated by either party for cause upon written notice to the other party if the other party defaults in the performance of the agreement in any material respect or materially breaches the terms of the agreement, or without cause upon 30 days’ prior written notice to the other party.

Emerald Health Biotechnology España, S.L.U.

In January 2021, we entered into a Collaborative Research Agreement with Emerald Health Biotechnology España, S.L.U, a subsidiary of Emerald Health Research, Inc.

which is 100% owned by Emerald Health Sciences.

Under the agreement, Emerald Health Biotechnology España, S.L.

will provide research and development services pursuant to an agreed upon project plan for the research and development of CBDVHS.

The term of the agreement is initially for a one-year period.

The agreement will terminate upon delivery and acceptance of the final deliverable under the project plan or if either party is in breach of the terms of the contract and such breach remains uncured for 45 days.

Payment for services rendered will be based on time and materials billable at reasonable market rates.

Douglas Cesario

In April 2020, we entered into a Separation and Release Agreement with Mr.

Douglas Cesario, our former Chief Financial Officer.

Cesario’s separation was effective May 15, 2020.

Pursuant to the agreement, Mr.

Cesario agreed to certain ongoing cooperation obligations and to provide certain releases and waivers to us as set out in the agreement.

As consideration, we agreed to provide Mr.

Cesario compensation and benefits in accordance with his Employment Agreement as follows:

(i) through May 15, 2020, an annualized base salary at the rate in effect for him as of the date of the agreement;

(ii) a gross payment of $125,000 in consideration for the restrictive covenants contained in the agreement;

and (iii) a continuation of health insurance benefits for a period of six months following May 15, 2020.

In addition, 325,929 unvested stock options granted to Mr.

Cesario were cancelled on May 15, 2020.

On August 7, 2020, we entered into a Separation and Release Agreement with Dr.

Brian Murphy, pursuant to which, Dr.

Murphy resigned as the Company’s Chief Executive Officer and a member of the Board, effective August 7, 2020.

Pursuant to the Separation and Release Agreement, Dr.

Murphy agreed to certain ongoing cooperation obligations and to provide certain releases and waivers to us as set out in the Separation and Release Agreement.

As consideration, we have agreed to provide Dr.

Murphy with certain compensation and benefits as follows:

(i) an aggregate gross sum of $195,000, less federal and state withholdings, as salary continuation over six months in accordance with our standard biweekly payroll practice;

and (ii) a continuation of health insurance benefits (for similarly situated executives as amended from time to time), for a period of six months from the Separation Date.

Dhillon received a monthly fee of $10,000, per month for his services.

Under the Independent Contractor Services Agreement, for the years ended December 31, 2021 and 2020, the Company incurred fees of $94,516 and $127,387, respectively.

On September 14, 2021, Dr.

Dhillon provided his notice to terminate the Independent Contractor Services Agreement, with an effective termination date of October 14, 2021.

In connection with the termination of Dr.

Dhillon’s Independent Contractor Services Agreement, the Company modified Dr.

Dhillon's option awards to accelerate the vesting of 1,650,000 unvested stock options and, extend the post-termination exercise period from 30 days to five years for all of his outstanding awards.

As of October 14, 2021, the Company no longer had any obligations or business relationship with Dr.

On August 10, 2020, Sciences transferred to Dr.

Avtar Dhillon 500,000 shares of the Company’s common stock at a deemed price of $0.10 in exchange for the cancellation of $50,000 of debt.

On August 10, 2020, Sciences, extinguished debt of $186,667 by transferring 1,566,666 shares of the Company’s common stock at a deemed price of $0.10 per share to certain officers, employees and directors of the Company.

In addition, the Board Observer Agreement in place with Sciences was amended in September 2021 to allow any board member or officer of Sciences to act as a representative of Sciences on a non-voting observer basis in meetings of the Board.

On December 14, 2021, the Board Observer Agreement was terminated.

As of December 31, 2021, Jim Heppell and Punit Dhillon are board members of the Company and Emerald Health Pharmaceuticals, a subsidiary of Sciences.

As of December 31, 2021, Jim Heppell is also the CEO and Chairman of Sciences and a director of VivaCell Biotechnology España, S.L.U ("VivaCell"), a wholly owned subsidiary of Sciences.

The Company’s CEO, Punit Dhillon also served as a board member of Sciences and VivaCell until he tendered his resignation from such boards on August 10, 2020 and September 22, 2021, respectively.

VivaCell Biotechnology España, S.L.U (formerly known as Emerald Health Biotechnology España, S.L.U.)

In January 2021 and April 2021, we entered into two separate Collaborative Research Agreements with VivaCell, a research and development entity with substantial expertise in cannabinoid science and a subsidiary of Emerald Health Research, Inc.

which is 100% owned by Sciences.

Under the agreements, VivaCell will provide research and development services pursuant to agreed upon project plans for the research and development of SBI-200 and the preclinical development services for novel derivatives.

The term of each agreement is initially for a one-year period.

The agreements will terminate upon delivery and acceptance of the final deliverables under the project plans or if either party is in breach of the terms of the contract and such breach remains uncured for 45 days.

Payment for services are based on the negotiated amounts for the completion of agreed upon objectives as provided in the Collaborative Research Agreements.

For the year ended December 31, 2021, we incurred $220,418 in expenses under the Collaborative Research Agreements.

The foregoing summary of the Collaborative Research Agreements do not purport to be complete and are qualified in their entirety by the full text of such agreement, a copy of which is attached as an exhibit hereto and incorporated by reference herein.

On October 11, 2021, we entered into an Exclusive Sponsored Research Agreement (the “ESRA”) with VivaCell to fund certain research and development programs which are of mutual interest to both the Company and VivaCell.

We will have the right to use all data, products, and information, including intellectual property which are generated in the performance of the research under each and all projects funded by the Company pursuant to the ESRA, and VivaCell assigns and agrees to assign, to us all rights to any intellectual property created or reduced-to-practice under, or as a part of, a project funded by us pursuant to the ESRA.

The foregoing summary of the ESRA does not purport to be complete and is qualified in its entirety by the full text of such agreement, a copy of which is attached as an exhibit hereto and incorporated by reference herein.

We have agreed to pay to VivaCell a royalty based on any and all licensing revenue or other consideration paid to us by a third-party licensee, assignee or purchaser of intellectual property rights created under the ESRA.

In addition, upon a change of control transaction we have agreed to pay an amount equal to the royalty percentage multiplied by the fair value of the intellectual property created under the ESRA.

Pursuant to the ESRA, VivaCell will provide a budget to be approved by us for each project, and we will make payments in accordance with the approved budget and pay an annual retainer to VivaCell of $200,000 per year.

The initial term of the agreement is one year, with automatic renewal for successive one-year terms unless either party terminates upon 60 days' prior written notice to the other party pursuant to the ESRA.

Review, Approval and Ratification of Related Party Transactions

Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions, such as those described above, with our executive officers, directors and significant stockholders, other than all related party transactions must be approved by directors independent of the parties involved.

However, all of the transactions described above were approved and ratified by the independent members of our Board.

It is the Company's policy that all related party transactions must be approved by directors independent of the parties involved.

All of the transactions described above were approved and ratified by the independent members of our Board.

In connection with the approval of the transactions described above, our Board took into account several factors, including their fiduciary duties to the Company, the relationships of the related parties described above to the Company, the material facts underlying each transaction, the anticipated benefits to the Company and related costs associated with such benefits, whether comparable products or services were available, and the terms we could receive from an unrelated third party.

We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional directors so that such transactions will be subject to the review, approval or ratification of our Board, or an appropriate committee thereof.

On a moving forward basis, our Board will continue to approve any related party transaction based on the criteria set forth above.

Conflicts Related to Other Business Activities

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Director Independence

We have determined that Jim Heppell and Dr.

Margaret Dalesandro are independent members of our Board, as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules.

Insider Trading Policy

On October 31, 2014, our Board adopted an Insider Trading Policy applicable to all directors and officers.

Insider trading generally refers to the buying or selling of a security in breach of a fiduciary duty or other relationship of trust and confidence while in possession of material, non-public information about the security.

Insider trading violations may also include ‘tipping’ such information, securities trading by the person ‘tipped,’ and securities trading by those who misappropriate such information.

The scope of insider trading violations can be wide reaching.

As such, our Board has adopted an Insider Trading Policy that outlines the definitions of insider trading, the penalties and sanctions determined, and what constitutes material, non-public information.

Illegal insider trading is against our policy as such trading can cause significant harm to the reputation for integrity and ethical conduct of our company.

Individuals who fail to comply with the requirements of the policy are subject to disciplinary action, at our sole discretion, including dismissal for cause.

All members of our Board and all executive officers are required to ratify the terms of this policy on an annual basis.

Our Insider Trading Policy is available on our website at http://www.skyebioscience.com .

We have determined that Mr.

Jim Heppell, Dr.

Margaret Dalesandro, Dr.

Praveen Tyle, and Dr.

Keith Ward are independent members of our Board, as that term is defined in Rule 5605(a)(2) of the Nasdaq Listing Rules.

Principal Accounting Fees and Services .

The aggregate fees billed in each of the fiscal years ended December 31, 2020 and 2019, for professional services rendered by Mayer Hoffman McCann P.C.

for the audit of our annual consolidated financial statements included in our Annual Report on Form 10-K and quarterly reviews of the unaudited interim condensed consolidated financial statements included in our Quarterly Reports on Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for 2020 and 2019 were $392,402 and $328,514, respectively.

The aggregate fees billed for each of the fiscal years ended December 31, 2021 and 2020, for professional services rendered by Mayer Hoffman McCann P.C.

for the audit of our annual consolidated financial statements included in our Annual Report on Form 10-K and quarterly reviews of the unaudited interim consolidated financial statements included in our Quarterly Reports on Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the years ended December 31, 2021 and 2020 were $366,736 and $392,402, respectively.

Substantially all MHM’s personnel, who work under the control of MHM shareholders, are employees of wholly owned subsidiaries of CBIZ, Inc., which provides personnel and various services to MHM in an alternative practice structure.

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Prior to engaging Mayer Hoffman McCann P.C.

to perform a particular service, our Board obtains an estimate for the service to be performed.

to perform audit services, our Board obtains an estimate for the service to be performed.

All of the services described above were approved by the members of the Audit Committee of the Board in accordance with its procedures.

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Financial Statements.

The following consolidated financial statements of Skye Bioscience, Inc., together with the report thereon of Mayer Hoffman McCann P.C., an independent registered public accounting firm, are included in this Annual Report on Form 10-K:

199 ), are included in this Annual Report on Form 10-K:

SKYE BIOSCIENCE, INC.

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Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2020 and 2019

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2021 and 2020

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Skye Bioscience, Inc., formerly known as Emerald Bioscience, Inc., and Subsidiaries (“Company”) as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive (loss) income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Skye Bioscience, Inc., formerly known as Emerald Bioscience, Inc., and Subsidiaries ("Company") as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

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CONSOLIDATED BALANCE SHEETS

ASSETS 2021 2020

Current assets

Cash $ 8,983,007 $ 2,469,410

Restricted cash 4,571 4,566

Prepaid expenses 554,217 190,134

Prepaid expenses - related party 13,432 —

Other current assets 56,870 275

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Property and equipment, net 87,710 7,341

Operating lease right-of-use asset 146,972 —

Other assets 8,309 —

Total assets $ 9,855,088 $ 2,671,726

LIABILITIES AND STOCKHOLDERS' EQUITY

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Accrued interest - related party 174,911 44,087

Accrued payroll liabilities 344,450 61,547

PPP loan current — 64,062

Other current liabilities 375,842 197,564

Derivative liabilities 59,732 38,567

PPP loan current

Multi-draw credit agreement - related party 450,000 —

Convertible multi-draw credit agreement - related party, net of discount 1,524,905 —

Operating lease liability, current portion 82,372 —

Total current liabilities 3,912,222 787,199

Noncurrent liabilities

Non-current liabilities

PPP loan non-current — 52,638

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Convertible multi-draw credit agreement - related party, net of discount — 931,103

Derivative liabilities, non-current

Operating lease liability, net of current portion 78,700 —

Total liabilities 3,990,922 2,220,940

Commitments and contingencies (Note 12)

Stockholders’ equity

Preferred stock, $ 0.001 par value;

20,000,000 shares authorized;

no shares issued and outstanding at December 31, 2020 and December 31, 2019

50,000,000 and 20,000,000 shares authorized at December 31, 2021 and 2020;

no shares issued and outstanding at December 31, 2021 and 2020

Common stock, $ 0.001 par value;

500,000,000 shares authorized;

288,074,415 and 182,895,247 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

5,000,000,000 and 500,000,000 shares authorized;

476,108,445 and 288,074,415 shares issued and outstanding at December 31, 2021 and 2020, respectively

476,108 288,074

Additional paid-in-capital 52,644,221 38,896,693

Accumulated deficit ( 47,256,163 ) ( 38,733,981 )

(38,733,981 )

(32,173,282 )

Total stockholders’ equity 5,864,166 450,786

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Year Ended December 31

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Change in fair value of derivative liabilities 21,165 ( 436,270 )

Fair value of derivative liabilities in excess of proceeds

Loss on extinguishment of debt - related party

Gain on forgiveness of PPP loan ( 117,953 ) —

Interest expense 769,159 706,385

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Total other expense (income), net 672,368 270,086

(Loss) income before income taxes

Loss before income taxes ( 8,520,082 ) ( 6,559,099 )

Provision for income taxes 2,100 1,600

Net (loss) income and comprehensive (loss) income

$ (6,560,699 )

(Loss) earnings per common share:

Weighted average shares of common stock outstanding used to compute (loss) earnings per share:

Net loss and comprehensive loss $ ( 8,522,182 ) $ ( 6,560,699 )

Loss per common share:

Basic $ ( 0.02 ) $ ( 0.03 )

Diluted $ ( 0.02 ) $ ( 0.03 )

Weighted average shares of common stock outstanding used to compute loss per share:

Basic 406,599,390 230,746,878

Diluted 406,599,390 231,420,973

See accompanying notes to the consolidated financial statements.

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Cash flows from operating activities:

Net (loss) income

$ (6,560,699 )

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Net loss and comprehensive loss $ ( 8,522,182 ) $ ( 6,560,699 )

Adjustments to reconcile net loss and comprehensive loss to net cash used in operating activities:

Depreciation and amortization 34,131 1,872

Stock-based compensation expense 869,206 302,742

Change in fair value of derivative liabilities 21,165 ( 436,270 )

Fair value of derivative liabilities in excess of proceeds

Loss on extinguishment of debt - related party

Amortization of debt discount

Amortization of debt discount - related party 593,802 544,033

Gain on debt forgiveness ( 117,953 ) —

Changes in assets and liabilities:

Prepaid expenses ( 364,083 ) ( 37,439 )

Prepaid expenses - related parties ( 13,432 ) —

Other current assets ( 56,595 ) 7,275

Other assets ( 8,309 ) —

Accounts payable 533,540 234,531

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Accrued interest – related party 130,824 44,087

Accrued payroll liabilities 282,903 —

Operating lease liability ( 9,534 ) —

Other current liabilities 166,531 ( 161,295 )

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Proceeds from the issuance of common stock and warrants - net of $ 935,260 and $ 854,078 of issuance costs in 2021 and 2020, respectively

6,062,774 6,085,589

Proceeds from warrant exercises 6,999,999 48,533

Proceeds from pre-funded warrant exercises 11,800 —

Proceeds from option exercises 4,783 —

Proceeds from PPP loan — 116,700

Proceeds from multi-draw credit agreement - related party, net of $0 and $9,301 issuance costs in 2020 and 2019, respectively

Prepayment of convertible multi-draw credit agreement - related party

Proceeds from multi-draw credit agreement - related party — 450,000

Net cash provided by financing activities 13,079,356 6,700,822

Net increase (decrease) in cash and restricted cash

Net increase in cash and restricted cash 6,513,602 639,461

Cash and restricted cash , beginning of year

$ 2,473,976 $ 1,834,515

Cash and restricted cash, end of year $ 8,987,578 $ 2,473,976

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Reconciliation of cash and restricted cash:

Cash $ 8,983,007 $ 2,469,410

Restricted cash 4,571 4,566

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Cash paid during the year for:

Interest $ 44,087 $ 117,459

Income taxes 1,600 1,600

Supplemental disclosures of non-cash financing activities:

Beneficial conversion feature on convertible multi-draw credit agreement

Proceeds allocated to equity classified warrants issued with convertible multi-draw credit agreement

Fair value of compound derivative liability bifurcated from convertible multi-draw credit agreement

Establishment of right-of-use asset $ 170,606 $ —

Reclassification of warrant liabilities to equity from exercise of warrants — 26,250

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Stockholders' Equity

Common Stock Additional

Capital Accumulated

Deficit Total

Stockholders'

Shares Amounts

Balance, December 31, 2019 182,895,247 $ 182,895 $ 32,538,445 $ ( 32,173,282 ) $ 548,058

$ (33,225,107 )

$ (15,562,252 )

Stock-based compensation expense — — 302,742 — 302,742

Issuance of common stock and warrants, net of issuance costs of $ 854,078

Warrants issued in connection with convertible multi-draw credit agreement, related party

Beneficial conversion feature in connection with convertible multi-draw credit agreement - related party

56,333,334 56,333 6,029,256 — 6,085,589

Exercise of pre-funded warrants 48,533,334 48,533 — — 48,533

Series B warrant exercises 312,500 313 26,250 — 26,563

Exercise of Emerald financing warrants

Net income for the year ended December 31, 2019

Net loss and comprehensive loss for the year ended December 31, 2020 — — — ( 6,560,699 ) ( 6,560,699 )

Balance, December 31, 2020 288,074,415 $ 288,074 $ 38,896,693 $ ( 38,733,981 ) $ 450,786

$ (32,173,282 )

Stock-based compensation expense 1,350,000 1,350 854,856 — 856,206

Issuance of common stock and warrants, net of issuance costs of $ 935,260

58,111,112 58,111 6,004,663 — 6,062,774

Exercise of pre-funded warrants 11,800,000 11,800 — — 11,800

Series B warrant exercises

Net loss for the year ended December 31, 2020

Exercise of common stock warrants 116,666,668 116,666 6,883,333 — 6,999,999

Exercise of stock options 106,250 107 4,676 — 4,783

Net loss and comprehensive loss for the year ended December 31, 2021 — — — ( 8,522,182 ) ( 8,522,182 )

Balance, December 31, 2021 476,108,445 $ 476,108 $ 52,644,221 $ ( 47,256,163 ) $ 5,864,166

$ (38,733,981 )

See accompanying notes to the consolidated financial statements.

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by merging with Nemus Sub to form a Nevada company.

In January 2018, the Company entered into a securities purchase agreement with Emerald Health Sciences, Inc.

(“Emerald Health Sciences”), pursuant to which Emerald Health Sciences purchased a majority of the equity interest in the Company, resulting in a change in control (the “Emerald Financing”).

As part of the transaction, the Company’s Board members, with the exception of Dr.

Brian Murphy, the Company’s former CEO/CMO, tendered their resignation and Emerald Health Sciences appointed two new nominees to the Board.

Later, in October 2018, the Board appointed Dr.

Avtar Dhillon, the Chairman, Chief Executive Officer and President of Emerald Health Sciences, as the Executive Chairman of the Company’s Board.

On August 7, 2020, Dr.

Brian Murphy resigned and Punit Dhillon was appointed as the Chief Executive Officer of the Company.

Effective March 25, 2019, the Company changed its name from Nemus Bioscience, Inc.

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to Skye Bioscience, Inc.

In August 2019, the Company formed a new subsidiary in Australia, EMBI Australia Pty Ltd., an Australian proprietary limited company (“EMBI 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 EMBI Australia is to conduct clinical trials for the Company’s product candidates.

On December 17, 2019, Dr.

Avtar Dhillon resigned as the Chairman of the Company’s Board and the Company entered into a Board Observer Agreement with Emerald Health Sciences.

Refer to Note 11 - Related Party Matters for additional information.

The Company is a biopharmaceutical company located in San Diego, California that plans to research, develop and commercialize therapeutics derived from cannabinoids through several license agreements with the University of Mississippi (“UM”).

UM is the only entity federally permitted and licensed to cultivate cannabis for research purposes in the United States.

As of December 31, 2020, the Company has devoted substantially all its efforts to securing product licenses, carrying out research and development, building infrastructure and raising capital.

In August 2019, the Company formed a new subsidiary in Australia, SKYE Bioscience Pty Ltd.

(formerly "EMBI Australia Pty Ltd."), an Australian proprietary limited company ("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 the Company’s product candidates.

The Company is a pre-clinical pharmaceutical company located in San Diego, California that researches and develops and plans to commercialize cannabinoid derivatives through its own directed research efforts and through several license agreements with the University of Mississippi ("UM").

As of December 31, 2021, the Company has devoted substantially all its efforts to securing product licenses, carrying out its own research and development, building infrastructure and raising capital.

The Company has not yet realized revenue from its planned principal operations and is a number of years away from potentially being able to do so.

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The Company has incurred operating losses and negative cash flows from operations since inception and as of December 31, 2021, had an accumulated deficit of $ 47,256,163 .

The Company anticipates that it will continue to incur operating losses into the foreseeable future in order to advance and develop a number of potential drug candidates into preclinical and clinical development activities and support its corporate infrastructure which includes the costs associated with being a public company.

As of December 31, 2021, the Company had unrestricted cash in the amount of $ 8,983,007 .

From January 1, 2021 through February 23, 2021, the Company received $3,019,800 in proceeds from the exercise of warrants (Note 13).

For the years ended December 31, 2021 and 2020, the Company incurred losses from operations of $ 7,847,714 and $ 6,289,013 , respectively.

The Company expects to continue to incur significant losses and negative cash flows from operations through 2022 and into the foreseeable future.

The Company’s continued existence is dependent on its ability to raise sufficient additional funding to cover operating expenses and to carry out its research and development activities.

As the Company approaches its first clinical trial, it expects to ramp up research and development spending and to increase cash used in operating activities.

However, based on the Company’s expected cash requirements, without obtaining additional funding by the second half of 2021, management believes that the Company will not have enough funds to commence clinical studies.

However, based on the Company’s expected cash requirements, without obtaining additional funding by the third quarter of 2022, management believes that the Company will not have enough funds to continue clinical studies and pay down its related party debt.

These conditions give rise to substantial doubt as to the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The accompanying Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

On October 5, 2018, the Company entered into a Multi-Draw Credit Agreement (the “Credit Agreement”) with Emerald Health Sciences (See Note 4).

On April 29, 2020, the Company entered into an Amended and Restated Multi-Draw Credit Agreement (the “Amended Credit Agreement”) with Emerald Health Sciences, which amends and restates the Credit Agreement.

The Amended Credit Agreement provides for a credit facility in the principal amount of up to $20,000,000, which includes, without limitation, the advances totaling $6,000,000 that were granted prior to the amendment.

Prior to the date of the Amended Credit Agreement, the Company had made three drawdowns in an aggregate principal amount of $6,000,000 and had issued to Emerald Health Sciences warrants to purchase an aggregate of 7,500,000 shares of common stock of the Company at an exercise price of $0.50 per share of the Company’s common stock, in accordance with the terms of the Credit Agreement.

During the year ended December 31, 2020, the Company effected the fourth and fifth advances under the Amended Credit Agreement in the amounts of $150,000 and $300,000, respectively.

Emerald Health Sciences elected that the fourth and fifth advances are not convertible into shares of Common Stock and no warrants were issued with the advances.

The Company used the proceeds from the advances for general corporate and working capital purposes.

As of December 31, 2020, the Company may draw down up to the remaining amount under the Amended Credit Agreement.

However, the Company does not consider the facility available until advance requests are approved, drawn down and funded.

The Amended Credit Agreement is still in place, however, there is no guarantee of continued funding.

On April 22, 2020, the Company entered into a Paycheck Protection Program Promissory Note in the principal amount of $116,700 (the “PPP Loan”) from City National Bank (the “PPP Loan Lender”).

The PPP Loan was obtained pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S.

Small Business Administration (“SBA”) (Note 4).

On July 31, 2020, the Company entered into the August 2020 Financing (Note 5), pursuant to which the Company sold 56,333,334 common stock units each consisting of one share of common stock and one common stock warrant and 60,333,334 pre-funded units each consisting of one pre-funded warrant and one common stock warrant in a registered public offering.

The net proceeds from the transaction were $6,085,589.

The common stock warrants and prefunded warrants have an exercise price of $0.06 and $0.001, respectively.

The term of the common stock warrants is five years, and the pre-funded warrants are exercisable until all the pre-funded warrants have been exercised in full.

The Company is using the net proceeds of the offering for general corporate purposes, including working capital.

During March 2020, the Company approved a plan to defer up to 50% of the members of senior management’s compensation and 100% of the Board of Director and committee fees indefinitely.

Upon the closing of the August 2020 Financing, the Company’s Board of Directors determined that the Company had been sufficiently financed to pay the deferred salaries and fees, including a 10% retention bonus, to management and the Board in the aggregate amount of $293,078.

The Company plans to continue to pursue funding through public or private equity or debt financings, licensing arrangements, asset sales, government grants or other arrangements.

On October 5, 2018, the Company entered into a Multi-Draw Credit Agreement (the "Credit Agreement") with Emerald Health Sciences ("Sciences"), a related party (See Note 11).

On April 29, 2020, the Company entered into an Amended and Restated Multi-Draw Credit Agreement (the "Amended Credit Agreement") with Sciences.

As of December 31, 2021, the Company had an outstanding principal balance of $ 2,464,500 under the Amended Credit Agreement.

Effective September 15, 2021, the disbursement line under the Amended Credit Agreement was closed and it no longer serves as a potential source of liquidity to the Company.

The outstanding advances plus accrued interest under the Amended Credit Agreement are due on October 5, 2022 (See Note 4).

The Company plans to continue to pursue funding through public equity financings, licensing arrangements, government grants or other strategic arrangements.

However, the Company cannot provide any assurances that such additional funds will be available on reasonable terms, or at all.

If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result.

If the Company raises additional funds by issuing equity securities, dilution to existing stockholders would result.

In December 2019, a novel strain of coronavirus ("COVID-19") emerged in Wuhan, China.

Since then, it has spread to the United States and infections have been reported around the world.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread around the world and throughout the United States and Australia, where the Company has operations and conducts laboratory research and clinical studies.

In response to the outbreak, federal and state authorities in the United States have introduced various recommendations and measures to try to limit the pandemic, including travel restrictions, border closures, nonessential business closures, quarantines, self-isolations, shelters-in-place and social distancing.

The COVID-19 outbreak and the response of governmental authorities to try to limit it are having a significant impact on the private sector and individuals, including unprecedented business, employment and significant economic disruptions to the global financial markets.

These disruptions are likely to impact the Company’s ability to raise additional capital and obtain the necessary funds.

Since then, it has spread to the United States, the European Union, and Australia, where the Company has operations and conducts laboratory research and clinical studies.

The effects of COVID-19 could impact the Company's ability to operate as a going concern and maintain sufficient liquidity to continue operations.

The impact of COVID-19 on companies is evolving rapidly and its future effects are uncertain.

It is possible that the Company may encounter issues relating to the current situation that will need to be considered by management in the future.

The factors to take into account in going concern judgments and financial projections include travel bans, restrictions, government assistance and potential sources of replacement financing, financial health of suppliers and the general economy.

The Company has made adjustments to its operations designed to keep its employees safe and comply with federal, state, and local guidelines.

The extent to which COVID-19 may further impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

In response to COVID-19, the United States government has passed legislation and taken other actions to provide financial relief to companies and other organizations affected by the pandemic.

Notably, the Company relies on third party manufacturers to produce its product candidates.

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

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

In connection with the recent pandemic of a COVID-19, there could possibly be an impact on sourcing materials that are part of the eye drop formulation, as well as impacting volunteer and/or patient recruitment in Australia for clinical studies.

The location of the proposed clinical trial is Melbourne, Australia and since the COVID-19 outbreak in that country, the city has experienced multiple health emergency lockdowns which have had a negative impact on the conduct and timelines of clinical studies.

Therefore, the Company has shifted its first-in-human studies of THCVHS from the second half of 2020 to the third quarter of 2021.

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

Formulation of the eye drop for testing is also performed in the United States but can rely on regulatory-accepted excipients that can be sourced from countries outside the United States.

In connection with the COVID-19 pandemic, there could possibly be an impact on sourcing materials that are part of the eye drop formulation, as well as impacting volunteer and/or patient recruitment in Australia for clinical studies.

The location of the clinical trial are clinical sites in Australia and since the COVID-19 outbreak in that country, the multiple cities have experienced health emergency lockdowns which have had a negative impact on the conduct and timelines of clinical studies.

Therefore, the Company has shifted its first-in-human studies of SBI-100 to the second quarter of 2022.

After considering the plans to alleviate substantial doubt, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The accompanying Consolidated Financial Statements do not include any adjustments that might result from the outcome of this uncertainty.

Summary of Significant Accounting Policies

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Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries SKYE Bioscience Australia and Nemus Sub.

All intercompany accounts and transaction have been eliminated in consolidation.

Use of Estimates

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Actual results could differ from those estimates.

The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates as to the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources.

Such estimates and judgments are utilized for stock-based compensation expense, equity securities, derivative liabilities, and debt with embedded features.

The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates and judgments as to the appropriate carrying values of equity instruments, derivative liabilities, debt with embedded features, and the valuation of stock based compensation awards, which are not readily apparent from other sources.

Risks and Uncertainties

The Company’s operations are subject to a number of risks and uncertainties, including but not limited to, changes in the general economy, the size and growth of the potential markets for any of the Company’s product candidates, results of research and development activities, uncertainties surrounding regulatory developments in the United States and Australia, and the Company’s ability to attract new funding.

The Company’s operations are subject to a number of risks and uncertainties, including but not limited to, changes in the general economy, the size and growth of the potential markets for any of the Company’s product candidates, uncertainties related to the impact of COVID-19 (Note 1), results of research and development activities, uncertainties surrounding regulatory developments in the United States, the European Union and Australia, and the Company’s ability to attract new funding.

Cash, Cash Equivalents and Restricted Cash

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Restricted cash on the balance sheet represents a certificate of deposit held by the Company’s bank as collateral for the Company’s credit cards.

Property and Equipment, net

Property and equipment are stated at cost less accumulated depreciation and amortization.

Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, generally two to three years .

Leasehold improvements are amortized over the shorter of the estimated useful life of the improvements or the remaining lease term.

Expenditures for repairs and maintenance, which do not extend the useful life of the property and equipment, are expensed as incurred.

Upon retirement, the asset cost and related accumulated depreciation are relieved from the accompanying Consolidated Balance Sheets.

Fair Value Measurements

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Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values of the Company’s financial instruments, with the exception of the Amended Credit Agreement and derivative liabilities, including, cash, prepaid expenses, accounts payable, the PPP loan and other current liabilities approximate their fair value due to the short maturities of these financial instruments.

The carrying values of the Company’s financial instruments, with the exception of the Amended Credit Agreement and derivative liabilities, approximate their fair value due to their short maturities.

The derivative liabilities are valued on a recurring basis utilizing Level 3 inputs (Note 3).

As of December 31, 2019, the fair value of the advances under the Amended Credit Agreement was $1,877,938, the carrying amount of the liability on December 31, 2019 was $387,070 and is included in Convertible multi-draw credit agreement - related party, net of discount in the Company’s Consolidated Balance Sheets.

As of December 31, 2020, the Company estimates the fair value of the Amended Credit Agreement to be materially consistent with the fair value estimate as of December 31, 2019, plus the non-convertible advances made in 2020.

As of December 31, 2020, the Company estimated that the fair value of the Amended Credit Agreement to be materially consistent with the fair value estimate as of December 31, 2019 of $ 1,877,938 , plus the non-convertible advances made in 2020.

This determination was based on the following considerations:

(i) the Company has not experienced any significant change in its credit worthiness or operations year over year, (ii) there have been no repayments or convertible draws, (iii) the facility is closer to maturity, and (iv) the embedded conversion feature on the convertible advances is out-of-the-money at the reporting date.

Information pertinent to estimating the fair value of the Amended Credit Agreement includes valuing the embedded conversion feature and considering the discounted cash flows of the interest and principal payments through maturity (Note 4).

As of December 31, 2021, the Company estimated that the fair value of the Amended Credit Agreement, including the non-convertible advances was $ 2,484,768 .

As of December 31, 2021 and 2020, the carrying value of the Amended Credit Agreement was $ 1,974,905 and $ 1,381,103 , respectively.

Information pertinent to estimating the fair value of the Amended Credit Agreement includes valuing the embedded conversion feature using Level 3 inputs and considering the discounted cash flows of the interest and principal payments through maturity (Note 4).

The Company accounts for deferred income tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, net operating loss carryforwards (the “NOLs”) and other tax credit carryforwards.

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The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.

Any interest or penalties would be recorded in the Company’s Consolidated Statements of Comprehensive (Loss) Income in the period incurred.

Any interest or penalties would be recorded in the Company’s Consolidated Statements of Comprehensive Loss in the period incurred.

When necessary, the Company recognizes interest and penalties related to income tax matters in income tax expense.

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Due to the substantial doubt related to the Company’s ability to utilize its deferred tax assets, a valuation allowance for the full amount of the deferred tax assets has been established at December 31, 2021 and 2020.

As a result of this valuation allowance, there are no income tax benefits reflected in the accompanying Consolidated Statements of Comprehensive (Loss) Income to offset pre-tax losses.

As a result of this valuation allowance, there are no income tax benefits reflected in the accompanying Consolidated Statements of Comprehensive Loss to offset pre-tax losses.

The Company recognizes a tax benefit from uncertain tax positions when it is more likely than not (50%) that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position.

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The Company accounts for hybrid contracts with embedded conversion features in accordance with GAAP.

ASC 815, Derivatives and Hedging Activities (“ASC 815”) requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria.

The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

ASC 815, Derivatives and Hedging Activities ("ASC 815") which requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria.

The criteria includes circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible debt instruments with embedded conversion features in accordance with ASC 470-20, Debt with Conversion and Other Options ("ASC 470-20") if it is determined that the conversion feature should not be bifurcated from their host instruments.

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Under ASC 815, a portion of the proceeds received upon the issuance of the hybrid contract is allocated to the fair value of the derivative.

The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in the results of operations.

The derivative is subsequently recorded at fair value at each reporting date based on current fair value, with the changes in fair value reported in the results of operations.

The Company also follows ASC 480-10, Distinguishing Liabilities from Equity ("ASC 480-10") when evaluating the accounting for its hybrid instruments.

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or (c) variations inversely related to changes in the fair value of the issuer’s equity shares (for example, a written put option that could be net share settled).

Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date with a re-measurement reported in other expense (income) in the accompanying Consolidated Statements of Comprehensive (Loss) Income.

Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date with a re-measurement reported in other expense (income), net in the accompanying Consolidated Statements of Comprehensive Loss.

When determining the short-term vs.

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Generally, if a derivative is a liability and exercisable within one year, it will be classified as short-term.

However, because of the unique provisions and circumstances that may impact the accounting for derivative instruments, the Company carefully evaluates all factors that could potentially restrict the instrument from being exercised or create a situation where exercise would be considered remote.

create a situation where exercise would be considered remote.

The Company re-evaluates its derivative liabilities at each reporting period end and makes updates for any changes in facts and circumstances that may impact classification.

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The Company generally accounts for warrants issued in connection with debt and equity financings as a component of equity, unless the warrants include a conditional obligation to issue a variable number of shares or there is a deemed possibility that the Company may need to settle the warrants in cash.

For warrants issued with a conditional obligation to issue a variable number of shares or the deemed possibility of a cash settlement, the Company records the fair value of the warrants as a liability at each balance sheet date and records changes in fair value in other expense (income) in the Consolidated Statements of Comprehensive (Loss) Income.

For warrants issued with a conditional obligation to issue a variable number of shares or the deemed possibility of a cash settlement, the Company records the fair value of the warrants as a liability at each balance sheet date and records changes in fair value in other expense (income), net in the Consolidated Statements of Comprehensive Loss.

Debt Issuance Costs and Interest

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license fees;

employee-related expenses, which include salaries and benefits for the personnel involved in the Company’s preclinical and clinical drug development activities;

facilities expense, and other expenses;

and equipment and laboratory supplies.

employee-related expenses, which include salaries and benefits for the personnel involved in the Company’s preclinical drug development activities, other expenses and equipment and laboratory supplies.

Costs incurred for the rights to use licensed technologies in the research and development process, including licensing fees and milestone payments, are charged to research and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired rights, and are capitalized in situations where there is an identified alternative future use.

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Stock-Based Compensation Expense

Stock-based compensation expense is estimated at the grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period with forfeitures accounted for as they occur.

The Company uses the Black-Scholes Merton option pricing model for estimating the grant date fair value of stock options using the following assumptions:

Volatility - Stock price volatility is estimated over the expected term based on a blended rate of industry peers and the Company’s actual stock volatility adjusted for periods in which significant financial variability was identified.

Stock-based compensation expense is estimated at the grant date based on the fair value of the award, and the fair value is recognized as expense ratably over the vesting period with forfeitures accounted for as they occur.

Upon the exercise of stock option awards, the Company's policy is to issue new shares of its common stock.

The Company uses the Black-Scholes valuation method for estimating the grant date fair value of stock options using the following assumptions:

• Volatility - Expected volatility is estimated using the historical stock price performance over the expected term of the award.

• Expected term - The expected term is based on a simplified method which defines the life as the weighted average of the contractual term of the options and the vesting period for each award.

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ASC 220 Comprehensive Income requires that an entity records all components of comprehensive (loss) income, net of their related tax effects, in its financial statements in the period in which they are recognized.

For the years ended December 31, 2020 and 2019, the comprehensive (loss) income was equal to net (loss) income.

Net (Loss) Income Per Share of Common Stock

The Company applies FASB ASC No.

260, Earnings per Share in calculating its basic and diluted net (loss) income per share.

Basic net (loss) income per share of common stock is computed by dividing net (loss) income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

The diluted net (loss) income per share of common stock is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method.

For purposes of this calculation, options to purchase common stock, restricted stock subject to vesting, warrants to purchase common stock and common shares underlying convertible debt instruments were considered to be common stock equivalents.

For the years ended December 31, 2021 and 2020, the comprehensive loss was equal to net loss.

Loss Per Common Share

The Company applies ASC No.

260, Earnings per Share in calculating its basic and diluted loss per common share.

Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

The diluted loss per share of common stock is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method.

In periods with a reported net loss, such common stock equivalents are excluded from the calculation of diluted net loss per share of common stock if their effect is anti-dilutive.

For additional information regarding the net (loss) income per share, see Note 7 “Net (Loss) Income per Share of Common Stock.”

For additional information regarding the loss per share, see Note 7 “Loss Per Share of Common Share.”

In February 2016, the FASB issued Accounting Standards Update, or ASU, No.

2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements.

The Company adopted the standard effective January 1, 2019.

At the inception of an arrangement, the Company determines whether the arrangement is, or contains, a lease based on the unique facts and circumstances present.

Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term.

The interest rate implicit in the lease contract is typically not readily determinable.

As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.

Lease expense is recognized over the expected term on a straight-line basis.

Operating leases are recognized on the Consolidated Balance Sheets as operating lease right-of-use assets, operating lease liability, current portion and operating lease liability, net of current portion.

Recent Accounting Pronouncements

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance .

The aim of ASU 2021-10 is to increase the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements.

Diversity currently exists in the recognition, measurement, presentation, and disclosure of government assistance received by business entities because of the lack of specific authoritative guidance in GAAP.

The ASU will be effective for annual reporting periods after December 15, 2021, and early adoption is permitted.

Upon implementation, the Company may use either a prospective or retrospective method of adoption when adopting the ASU.

The adoption of ASU 2021-10 will impact the disclosures related to the rebates that the Company receives from the Australian Taxation Office ("ATO") against research and development activities for its Phase I clinical trials in Australia.

The Company currently plans to adopt the provisions of this ASU on the effective date using a prospective adoption method as rebates from the ATO in prior periods have not been material to the Company's financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

The aim of ASU 2021-08 is to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to (1) Recognition of an acquired contract liability, and (2) Payment terms and their effect on subsequent revenue recognized by the acquirer.

The ASU will be effective for annual reporting periods after December 15, 2022, should be applied on a prospective basis and early adoption is permitted.

The adoption of ASU 2021-08 does not currently impact the Company's financial statements.

The Company plans to adopt the provisions of this ASU on the effective date but reserves the right to early adopt this guidance.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

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However, it reserves the right to early adopt these provisions.

Recently Adopted Accounting Pronouncements

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

The aim of ASU 2021-04 is to clarify and reduce diversity in an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

The Company elected to early adopt this guidance as of July 1, 2021, and has applied the guidance as of January 1, 2021, in accordance with the ASU.

The adoption of this guidance had no impact on the interim periods in 2021 prior to the date of adoption.

Upon implementation, the new guidance was applied to the July 2021 Inducement (Note 5), which resulted in recording the value attributable to the Inducement Warrants as an equity issuance cost.

Because this amendment provided clarification where there was a lack of GAAP, management has determined that there was no resulting impact from the adoption of this standard to the financial statements.

In December 2019, the FASB issued ASU No.

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In addition, the amendments simplify income tax accounting in the areas such as income-based franchise taxes, eliminating the requirements to allocate consolidated current and deferred tax expense in certain instances and a requirement that an entity reflects the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

For public companies, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods therein, with early adoption permitted.

The Company plans to adopt this ASU on the effective date of January 1, 2021.

The amendments in the update related to foreign subsidiaries will be applied on a modified retrospective basis, the amendments to franchise taxes will be applied on either a retrospective or modified retrospective basis and all other amendments will be applied on a prospective basis.

Because the Company’s deferred tax assets and liabilities are fully reserved, it does not expect a material impact from the adoption of this standard.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-13 Fair Value Measurement (Topic 820) intended to improve the effectiveness of disclosures around fair value measurements in the notes to financial statements.

The ASU affects all entities that are required to make disclosures about recurring or nonrecurring fair value measurements.

The amendments in this Update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits.

The Company early adopted certain provisions of this ASU upon issuance during the third quarter of 2018 and revised its disclosures to omit the disclosures removed by this ASU on a retrospective basis.

As provided by the ASU, the Company elected to delay adoption of the additional disclosures until January 1, 2020, which include the range and weighed average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty until their effective date.

Upon the effective date, the additional disclosures have been included on a prospective basis in the Company’s financial statements, as applicable.

Because much of this information was disclosed prior to adoption this guidance did not have a substantial impact to the Company's disclosures in the notes to its financial statements and had no impact on the Company’s consolidated financial statements.

The Company adopted this ASU on the effective date of January 1, 2021.

The amendments in the update related to foreign subsidiaries have been applied on a modified retrospective basis, the amendments to franchise taxes were applied on a modified retrospective basis and all other amendments have been applied on a prospective basis.

Because the Company’s deferred tax assets net of deferred tax liabilities are fully reserved, the impact from the adoption of this standard was not material.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements .

The amendments in this ASU represent changes to clarify the ASC, correct unintended application of the guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities.

This new standard was effective beginning January 1, 2021.

The adoption of ASU 2020-10 did not have a material impact on the Company's financial position or results of operations upon adoption.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

The amendments in ASU 2018-15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).

The ASU was effective and adopted by the Company on January 1, 2021.

However, as of the effective date the Company did not have any cloud computing arrangements for which this guidance was applicable.

During the fourth quarter of 2021, the Company entered into hosting arrangements meeting the definition of a service contract for which this guidance will be applicable.

Due to the short term nature of these contracts, the impact to the Company's financial statements from the adoption of this guidance was not material.

Warrants and Derivative Liabilities

There are significant judgments and estimates inherent in the determination of the fair value of the Company’s warrants.

These judgments and estimates include assumptions regarding the Company’s future operating performance, the time to completing a liquidity event and the determination of the appropriate valuation methods.

If the Company had made different assumptions, the fair value of the warrants could have been significantly different (See Note 2).

There are significant judgments and estimates inherent in the determination of the fair value of the Company’s warrants and derivative liabilities.

These judgments and estimates include assumptions regarding the Company’s future operating performance, the time to completing a liquidity event, if applicable, and the determination of the appropriate valuation methods.

If the Company had made different assumptions, the fair value of the warrants and derivative liabilities could have been significantly different (See Note 2).

Warrants vested and outstanding as of December 31, 2021 are summarized as follows:

Source Exercise

(Years) Number of

Pre 2015 Common Stock Warrants $ 1.00 10 1,110,000

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2016 Common Stock Warrants to Service Providers 1.15 10 40,000

2016 Series C Common Stock Warrants to Placement Agent

2017 Series D Common Stock Warrants to Placement Agent 0.25 5 480,000

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2019 Common Stock Warrants 0.35 5 8,000,000

2020 Common Stock Warrants to Placement Agent 0.08 4.99 8,166,667

2021 Inducement Warrants 0.15 5 21,166,667

2021 Inducement Warrants to Placement Agent 0.19 5 1,481,667

2021 Common Stock Warrants 0.09 5 77,777,779

2021 Pre-Funded Warrants 0.0001 Indefinite 19,666,667

2021 Common Stock Warrants to Placement Agent 0.11 5 5,444,445

2020 Pre-Funded Warrants

Total warrants vested and outstanding as of December 31, 2021 154,458,892

August 2020 Financing Warrants

In connection with the August 2020 Financing (Note 5), the Company issued 116,666,668 common stock warrants, 8,166,667 common stock warrants to the placement agent and 60,333,334 pre-funded warrants.

The warrants were equity classified at issuance and of the $6,939,667 in gross proceeds, the Company allocated $2,767,767 and $2,146,997 of the gross proceeds to the common stock warrants and pre-funded warrants on a relative fair value basis, respectively.

The remaining $2,024,903 was allocated to the common stock.

The warrants issued to the placement agent were valued at $261,333 and recorded as equity issuance costs within equity.

The warrants vested immediately and were valued utilizing the Black-Scholes option pricing model with the following assumptions:

Common Stock Warrants

Placement Agent Warrants

July 2021 Inducement Warrants and September 2021 Financing Warrants

In connection with the July 2021 Inducement (Note 5), the Company issued 21,166,667 common stock warrants and 1,481,667 warrants to the placement agent.

The warrants were equity classified at issuance and the Company recorded the fair value of the common stock warrants and placement agent warrants of $ 2,790,884 and $ 192,224 , respectively, as equity issuance costs related to the September 2021 Financing within equity.

The warrants were vested at issuance and were valued utilizing the Black-Scholes Merton option pricing model with the following assumptions:

Warrants Placement Agent

Dividend yield — % — %

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Underlying common stock price $ 0.15 $ 0.15

2019 Common Stock Warrants

During the year ended December 31, 2019, the Company issued 8,000,000 fully vested common stock warrants to investors, in conjunction with the November 2019 Common Stock Offering discussed below (See Note 5).

The warrants are equity classified at issuance and the Company allocated an aggregate of $722,208 of the gross proceeds to the warrants on a relative fair value basis.

The warrants vested immediately and had an estimated aggregate fair value of $1,130,400 utilizing the Black-Scholes option pricing model with the following assumptions:

In connection with the September 2021 Financing (Note 5), the Company issued 77,777,779 common stock warrants, 19,666,667 pre-funded warrants, and 5,444,445 common stock warrants to the placement agent.

The warrants were equity classified at issuance and the Company allocated $ 3,265,676 and $ 943,489 of the gross proceeds to the common stock warrants and pre-funded warrants on a relative fair value basis, respectively.

The common stock warrants issued to the placement agent were valued at $ 421,522 and recorded as equity issuance costs within equity.

The warrants vested immediately and were valued utilizing the Black-Scholes Merton option pricing model with the following assumptions:

Common Stock Warrants Pre-funded

Warrants Placement Agent Warrants

Dividend yield — % — % — %

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Underlying common stock price $ 0.09 $ 0.09 $ 0.09

Emerald Multi-Draw Credit Agreement Warrants

During the year ended December 31, 2019, the Company issued 5,000,000 fully vested common stock warrants to Emerald Health Sciences, in conjunction with advances under the Credit Agreement discussed below (See Note 4).

The warrants are equity classified at issuance and the Company allocated an aggregate of $716,110 of the gross proceeds to the warrants on a relative fair value basis.

The proceeds allocated to the warrants were recorded as discounts to each advance and are being amortized over the term of the debt.

The warrants vested immediately and had an estimated aggregate fair value of $1,830,573 utilizing the Black-Scholes option pricing model with the following assumptions:

August 2020 Financing Warrants

In connection with the August 2020 Financing (Note 5), the Company issued 116,666,668 common stock warrants, 8,166,667 common stock warrants to the placement agent and 60,333,334 pre-funded warrants.

The warrants were equity classified at issuance and of the $ 6,939,667 in gross proceeds, the Company allocated $ 2,767,767 and $ 2,146,997 of the gross proceeds to the common stock warrants and pre-funded warrants on a relative fair value basis, respectively.

The remaining $ 2,024,903 was allocated to the common stock.

The warrants issued to the placement agent were valued at $ 261,333 and recorded as equity issuance costs within equity.

The warrants vested immediately and were valued utilizing the Black-Scholes option pricing model with the following assumptions:

Common Stock Warrants Pre-funded

Warrants Placement Agent Warrants

Dividend yield — % — % — %

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Derivative Liabilities

The following tables summarize the activity of derivative liabilities for the periods indicated:

The following tables summarize the activity of derivative liability for the periods indicated:

Year Ended December 31, 2021

Derivative Liabilities

Derivative Liabilities Issued

Derivative Liability Fair

Derivative Liability Issued Change in

Fair value of

Reclassification

of Derivatives

Derivative Liabilities

Emerald Multi-Draw Credit Agreement - compound derivative liability (1)

Liability Reclassification

of Derivative

to Equity December 31,

Derivative Liability

Emerald Financing - warrant liability (1)

Series B - warrant liability (3)

Total derivative liabilities

Less, noncurrent portion of derivative liabilities

Current balance of derivative liabilities

38,567 — 21,165 — 59,732

Total derivative liability $ 38,567 $ — $ 21,165 $ — $ 59,732

Year Ended December 31, 2020

December 31, 2018, Fair Value of Derivative Liabilities

Fair Value of Derivative Liabilities Issued

2019 , Fair Value of Derivative Liabilities Fair Value of Derivative Liabilities Issued Change in

Fair value of

Reclassification of Derivatives to Equity or Extinguishment

December 31, 2019, Fair Value of Derivative Liabilities

Liabilities Reclassification of Derivatives to Equity

2020, Fair Value of Derivative Liabilities

Emerald Multi-Draw Credit Agreement - compound derivative liability (2)

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Emerald Financing - warrant liability (1)

Series B - warrant liability (3)

Total derivative liabilities

276,024 — ( 237,457 ) — 38,567

Series B - warrant liability (3)

134,579 — ( 108,016 ) ( 26,563 ) —

Total derivative liabilities $ 501,400 $ — $ ( 436,270 ) $ ( 26,563 ) $ 38,567

Less, noncurrent portion of derivative liabilities ( 90,797 ) —

Current balance of derivative liabilities $ 410,603 $ 38,567

*This amount has been included in the calculation of the extinguishment loss recorded in connection with the prepayment of the Emerald Credit Agreement as described in Note 4 below.

Emerald Multi-Draw Credit Agreement Compound Derivative Liability (1)

In connection with the advances under the Credit Agreement (See Note 4), the Company bifurcated a compound derivative liability related to a contingent interest feature and acceleration upon default provision (contingent put option) provided to Emerald Health Sciences.

The Company’s estimate of fair value of the compound derivative liability was determined by using a differential cash flows valuation model, wherein the fair value of the underlying debt facility and its conversion right are estimated both with and without the presence of the contingent interest feature, holding all other assumptions constant.

The resulting difference between the estimated fair values in both scenarios is the estimated fair value of the compound derivative.

The fair value of the underlying debt facility was estimated by calculating the expected cash flows with consideration of the estimated probability of a change in control transaction, defined as an event of default by the agreement, and applying the expected default interest rate from the date of such default through maturity.

The expected cash flows are then discounted back to the reporting date using a benchmark market yield.

The conversion right component of the compound derivative was measured using a standard Black-Scholes Option Pricing model for each payment period.

On April 29, 2020, the Company entered into the Amended Credit Agreement which removed the change in control provision as an event of default for advances before and after the amendment.

As a result of the modification, the contingent interest feature component of the compound derivative is no longer required to be bifurcated as a derivative liability.

During the year ended December 31, 2020, the liability has been reduced to $0 through an adjustment to the change in fair value of derivative liabilities.

Because Emerald Health Sciences would forgo the contingent interest if the contingent put option was exercised upon an event of default, the value ascribed to the contingent put option within the compound derivative is considered de minimis before and after the amendment to the Credit Agreement.

Emerald Financing Warrant Liability (1)

In January and February 2018, the Company issued 44,200,000 warrants to purchase common stock in conjunction with the Emerald Financing.

The warrants vest immediately and have an exercise price of $0.10 per share with a term of five years and are exercisable in cash or through a cashless exercise provision.

The warrants contained an anti-dilution protection feature that provided the investors with price protection if the Company subsequently issued or sold any shares of common stock, stock options, or convertible securities at a price less than the exercise price of $0.10.

In connection with the August 2020 Financing, this provision was waived, and the exercise price was permanently set to $0.10.

In addition, the warrants contain a contingent put option if the Company undergoes a subsequent financing that results in a change in control.

The Emerald Financing Warrants were issued during 2018 in connection with the Emerald Financing, and originally contained a price protection feature.

In connection with the August 2020 Financing, the exercise price was permanently set to $ 0.10 .

The warrants contain a contingent put option if the Company undergoes a subsequent financing that results in a change in control.

The warrant holders also have the right to participate in subsequent financing transactions on an as-if converted basis.

In December 2019, Emerald Health Sciences paid the aggregate exercise price of $4,080,000 in the form of a reduction of the corresponding amount of obligations outstanding under the Credit Agreement to exercise 40,800,000 Emerald Financing Warrants.

Under the Warrant Exercise Agreement between the Company and Emerald Health Sciences, the proceeds from the warrants were first applied directly to the accrued interest balance at the exercise date with the remainder applied to the oldest outstanding principal balances under the Credit Agreement.

Immediately prior to exercise, the warrants were adjusted to fair value which considered the closing trading price on the exercise date (See Note 4).

The Company reviewed the warrants for liability or equity classification under the guidance of ASC 480-10, Distinguishing Liabilities from Equity, and concluded that the warrants should be classified as a liability and re-measured to fair value at the end of each reporting period.

The Company also reviewed the warrants under ASC 815, Derivatives and Hedging/Contracts in Entity’s Own Equity , and determined that the warrants also meet the definition of a derivative.

With the assistance of a third party valuation specialist, the Company valued the warrant liabilities utilizing the Monte Carlo valuation method pursuant to the accounting guidance of ASC 820-10, Fair Value Measurement s.

The warrant liabilities were valued using Monte Carlo simulations conducted at the balance sheet dates using the following assumptions:

Beginning March 31 2021, the Company changed its valuation model for the Emerald Financing Warrant Liability to a Black-Scholes valuation method, as it was determined that a more simplistic model such as the Black-Scholes valuation method yields a substantially similar result as a Monte Carlo simulation due to the Company's current assumptions.

The warrant liabilities were valued at the balance sheet dates using the following assumptions:

As of December 31,

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Underlying common stock price $ 0.05 $ 0.04

Emerald Multi-Draw Credit Agreement Compound Derivative Liability (2)

The resulting difference between the estimated fair values in both scenarios is the estimated fair value of the compound derivative.

The expected cash flows are then discounted back to the reporting date using a benchmark market yield.

The conversion right component of the compound derivative was measured using a standard Black-Scholes Option Pricing model for each payment period.

On April 29, 2020, the Company entered into the Amended Credit Agreement which removed the change in control provision as an event of default for advances before and after the amendment.

As a result of the modification, the contingent interest feature component of the compound derivative is no longer required to be bifurcated as a derivative liability.

During the year ended December 31, 2020, the liability was reduced to $ 0 through an adjustment to the change in fair value of derivative liabilities.

Because Sciences would forgo the contingent interest if the contingent put option was exercised upon an event of default, the value ascribed to the contingent put option within the compound derivative is considered de minimis before and after the amendment to the Credit Agreement.

Series B Warrant Liability (3)

In conjunction with the Redeemable Convertible Series B Preferred Stock financing, the Company issued the 2015 Series B Common Stock Warrants originally exercisable at a price of $1.15 per share.

The warrants were exercisable in cash or through a cashless exercise provision and contain certain cash redemption rights.

The Series B Common Stock Warrants also had a “down-round” protection feature if the Company subsequently issued or sold any shares of common stock, stock options, or convertible securities at a price less than the current exercise price.

The down round provision was triggered and automatically adjusted down to $0.10 on December 28, 2017, after the Company entered into the Convertible Promissory Note (See Note 4) and the strike price was permanently reset to $0.00 on January 19, 2018, as a result of the Emerald Financing.

However, because the remaining warrant holders still had certain cash redemption rights upon the occurrence of certain fundamental transactions, as defined in the Series B Common Stock Warrant agreements, the warrants continued to require liability classification.

After the Emerald Financing repricing occurred, the warrants were valued using a Black Scholes Option Pricing Model.

To compute the fair value of the warrants, the Company utilized the following assumptions in the Black Scholes Merton Option Pricing Model:

Dividend yield

Volatility factor

Risk-free interest rate

Expected term (years)

Underlying common stock price

During the year ended December 31, 2020, 312,500 Series B Common Stock Warrants with an intrinsic value of $ 26,563 were exercised for no consideration per share, which resulted in the issuance of 312,500 shares of common stock.

Prior to exercise, these Series B Common Stock Warrants were adjusted to fair value using a Black Scholes Merton Option Pricing Model which considered the closing trading price on the exercise dates.

Because the exercise price of these options was reset to $0.00, the fair value derived from the valuation model approximated the market value of the Company’s common stock on the exercise dates.

As of December 31, 2020, the remaining Series B Common Stock Warrants expired unexercised.

Prior to exercise, these Series B Warrants were adjusted to fair value using a Black-Scholes valuation method which considered the closing trading price on the exercise dates.

Because the exercise price of these options had been reset to $ 0.00 , the fair value derived from the valuation model approximated the market value of the Company’s common stock on the exercise dates.

The warrants required liability classification because of certain cash redemption rights upon the occurrence of certain fundamental transactions, as defined in the Series B Common Stock Warrant agreements.

Multi-Draw Credit Agreement-Related Party

The Company’s Debt with Emerald Health Sciences consists of the following:

The Company’s Debt with Sciences consists of the following:

As of December 31,

Price 2021 2020

Total principal value of convertible debt—related party $ 0.40 $ 2,014,500 $ 2,014,500

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Carrying value of total convertible debt—related party 1,524,905 931,103

Total principal value of non-convertible debt—related party

Total principal value of non-convertible debt—related party n/a 450,000 450,000

Total carrying value of advances under the multi-draw credit agreement $ 1,974,905 $ 1,381,103

On October 5, 2018, the Company entered into the Credit Agreement with Emerald Health Sciences, a related party (See Note 11).

On April 29, 2020, the Company entered into the Amended Credit Agreement with Emerald Health Sciences, which amends and restates the Credit Agreement.

For all pre-existing and new advances, the Amended Credit Agreement removed the change in control as an event of default (See Note 3) and defers the quarterly payment of interest until the Company completes a capital raise of at least $5,000,000.

As of August 2020, interest is no longer being deferred as a result of the August 2020 Financing.

On October 5, 2018, the Company entered into the Credit Agreement with Sciences, a related party (See Note 11).

On April 29, 2020, the Company entered into the Amended Credit Agreement with Sciences, which amends and restates the Credit Agreement.

For all pre-existing and new advances, the Amended Credit Agreement removed the change in control as an event of default (See Note 3) and deferred the quarterly payment of interest until the Company completed a capital raise of at least $ 5,000,000 .

As of August 2020, interest ceased being deferred as a result of the August 2020 Financing.

The amendments to the pre-existing advances were accounted for as a modification.

For all advances made after the Credit Agreement was amended, advances will be convertible at a reduced conversion price of $0.25 per share of Common Stock, unless Emerald Health Sciences provides notice that the advance will not be convertible.

For all outstanding advances, the Amended Credit Agreement provides for a credit facility to the Company of up to $20,000,000 and is unsecured.

Advances under the Amended Credit Agreement bear interest at an annual rate of 7% and mature on October 5, 2022.

At Emerald Health Sciences’ election, convertible advances and unpaid interest may be converted into common stock at the fixed conversion price of the underlying advance, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc.

As of December 31, 2020, the unused portion of the credit facility is $13,550,000.

The Company does not consider the facility available until advance requests are approved, drawn down and funded.

The Amended Credit Agreement is still in place;

however, there is no guarantee of continued funding under the Amended Credit Agreement.

On March 29, 2021, the Company amended the Amended Credit Agreement to defer interest payments through the earlier of maturity or prepayment of the principal balance.

On September 15, 2021, the Company further amended the Amended Credit Agreement to close the disbursement line.

The amendments were considered a modification for accounting purposes.

Advances under the Amended Credit Agreement are unsecured and bear interest at an annual rate of 7 % and mature on October 5, 2022.

At Sciences' election, convertible advances and unpaid interest may be converted into common stock at the fixed conversion price of the underlying advance, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc.

The Amended Credit Agreement provides for customary events of default which may result in the acceleration of the maturity of the advances in addition to, but not limited to, cross acceleration to certain other indebtedness of the Company.

In the case of an event of default arising from specified events of bankruptcy or insolvency or reorganization, all outstanding advances will become due and payable immediately without further action or notice.

If any other event of default under the Amended Credit Agreement occurs or is continuing, Emerald Health Sciences may, by written notice, terminate its commitment to make any advances and/or declare all the advances with any other amounts payable due immediately.

If any other event of default under the Amended Credit Agreement occurs or is continuing, Sciences may, by written notice, terminate its commitment to make any advances and/or declare all the advances with any other amounts payable due immediately.

If any amount under the Amended Credit Agreement is not paid when due, such overdue amount shall bear interest at an annual default interest rate of the applicable rate plus 10 %, until such amount is paid in full.

In connection with each advance under the Amended Credit Agreement, the Company has agreed to issue to Emerald Health Sciences warrants to purchase shares of common stock in an amount equal to 50% of the number of shares of common stock that each advance may be converted into.

In connection with each advance under the Amended Credit Agreement, the Company agreed to issue to Sciences warrants to purchase shares of common stock in an amount equal to 50 % of the number of shares of common stock that each advance may be converted into.

The warrants have a term of five years that are immediately exercisable upon issuance.

Under the Amended Credit Agreement, Emerald Health Sciences may issue notice that no warrants will be granted at the time of the advance request.

The warrants issued under the Credit Agreement have an exercise price of $0.50 per share and any warrants issued under the Amended Credit Agreement will have a reduced exercise price of $0.35 per share.

The exercise prices are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events or upon any distributions of assets, including cash, stock or other property to the Company’s stockholders (See Note 3).

In accounting for each advance and the warrants issued under the Amended Credit Agreement, the Company allocates the proceeds between the debt host and the freestanding warrants on a relative fair value basis for each advance.

On the date of each advance, if the effective conversion rate of the debt is less than the market value of the Company’s common stock, the Company records a beneficial conversion feature as a discount to the debt and an increase to additional paid-in capital.

All of the warrants issued under the Credit Agreement have an exercise price of $ 0.50 per share.

In accounting for each advance and the warrants issued under the Amended Credit Agreement, the Company allocated the proceeds between the debt host and the freestanding warrants on a relative fair value basis for each advance.

On the date of each advance, if the effective conversion rate of the debt was less than the market value of the Company’s common stock, the Company recorded a beneficial conversion feature as a discount to the debt and an increase to additional paid-in capital.

The debt discounts related to the warrants, beneficial conversion features and compound derivatives, if any, are being amortized over the term of the Amended Credit Agreement using the effective interest rate method.

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The extinguishment loss was calculated as the difference between the fair value of the consideration paid to extinguish the debt and carrying value of the debt host plus the related compound derivative liability.

During the year ended December 31, 2020, the Company effected a fourth and fifth advances in the amounts of $150,000 and $300,000, respectively.

Emerald Health Sciences has elected that the fourth and fifth advances will not be convertible into shares of the Company’s common stock and gave notice to the Company that no warrants will be issued in connection with the advances.

During the year ended December 31, 2020, the Company effected a fourth and fifth advance in the amounts of $ 150,000 and $ 300,000 , respectively.

Sciences has elected that the fourth and fifth advances will not be convertible into shares of the Company’s common stock and gave notice to the Company that no warrants will be issued in connection with the advances.

Aggregate financing costs of $ 63,007 have been incurred and are recorded as a discount to the debt host and are being amortized using the effective interest rate method and recognized as non-cash interest expense over the term of the Amended Credit Agreement.

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On April 24, 2020, the Company received funding from the PPP Loan Lender pursuant to the PPP of the CARES Act administered by the SBA for a principal amount of $ 116,700 .

The PPP Loan matures on April 24, 2022 and bears interest at a rate of 1.00% per year.

Interest and principal are payable monthly commencing on the date the amount of forgiveness determined under section 1106 of the CARES Act is remitted to the Company, but in no event ten months after the last day of the covered period if the Company fails to apply for loan forgiveness.

The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.

Funds from the PPP Loan may only be used by the Company for payroll costs, costs for continuing group healthcare benefits, mortgage interest payments, rent, utility and interest on any other debt obligations that were incurred before October 9, 2020.

All or a portion of the principal from the PPP Loan may be forgiven by the SBA and the PPP Loan Lender upon application by the Company within 60 days but not later than 120 days after loan approval and upon documentation of expenditures in accordance with the SBA requirements.

Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, and covered utilities during an eight-week period, or a longer period if elected by the Company, commencing on the date of loan approval.

For purposes of the CARES Act, payroll costs exclude compensation of an individual employee in excess of $100,000, prorated annually.

Not more than 40% of the forgiveness amount may be for non-payroll costs.

Forgiveness is reduced if full-time headcount declines, or if salaries and wages of employees with salaries of $100,000 or less annually are reduced by more than 25%.

After approval of the forgiveness amount and deferral period, the PPP Loan Lender will provide the Company with written notification of re-amortization of the PPP Loan and the remaining balance.

The PPP Loan had an interest rate of 1.00 % per year and funds from the PPP Loan could only be used by the Company for payroll costs, costs for continuing group healthcare benefits, mortgage interest payments, rent, utility and interest on any other debt obligations that were incurred before October 9, 2020.

On April 5, 2021, the Company submitted an application for the full forgiveness of the PPP Loan to the PPP Loan Lender for the full amount of the loan.

On May 20, 2021, the Company received notification that the application was accepted and that the full amount of the PPP Loan including accrued interest was forgiven.

During the year ended December 31, 2021, the Company has recorded a gain on forgiveness of the PPP loan in an amount of $ 117,953 .

Interest Expense

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Amortization of transaction costs 1,648 1,510

$ 769,159 $ 706,385

Stockholders’ Equity and Capitalization

As of December 31, 2021 and 2020, the Company had reserved shares of common stock, on an as-if converted basis, for issuance as follows:

Options issued and outstanding 35,405,000 22,050,000

Options available for grant under the 2014 Plan 14,132,929 12,790,775

Restricted stock unit awards issued and outstanding 4,000,000 0

Unreleased restricted stock awards issued to a service provider 150,000 0

Common stock underlying the Amended Credit Agreement 5,393,684 5,126,343

Warrants issued and outstanding 154,458,892 157,513,335

213,540,505 197,480,453

Increase to Authorized Shares of Capital Stock

On February 5, 2021, the Company increased its authorized shares of common and preferred stock to 5,000,000,000 and 50,000,000 , respectively.

July 2021 Inducement and September 2021 Financing

On July 21, 2021, the Company entered into an Inducement Offer to Exercise Common Stock Purchase Warrants (the “July 2021 Inducement”) with certain institutional investors and H.C.

Wainwright & Co., LLC ("Wainwright") acting as the placement agent.

As a result, on July 26, 2021, the investors exercised 21,166,667 warrants at their original exercise price of $ 0.06 , for gross proceeds of $ 1,270,000 .

In exchange, the Company granted 21,166,667 new warrants with substantially the same terms and an exercise price of $ 0.15 per share (Notes 2 & 3).

On September 27, 2021, the Company entered into a Securities Purchase Agreement with certain institutional investors for the issuance and sale of securities, with Wainwright acting as the placement agent, pursuant to which the Company sold 58,111,112 shares of common stock and 19,666,667 pre-funded warrants, and issued 77,777,779 common stock warrants, in a registered public offering which closed on September 29, 2021 (the “September 2021 Financing”).

The common stock and pre-funded warrants were sold at a price per share of $ 0.09 and $ 0.0899 , respectively, for gross aggregate proceeds of $ 6,998,034 .

The common stock warrants and pre-funded warrants have an exercise price of $ 0.09 and $ 0.0001 , respectively.

The common stock warrants have a term of five years , and the pre-funded warrants are exercisable until all the pre-funded warrants have been exercised in full (Note 3).

In connection with the July 2021 Inducement and September 2021 Financing, the Company incurred cash issuance costs of $ 935,260 , for net proceeds of $ 6,062,774 .

Additionally, the Company issued warrants to purchase 6,926,112 shares of common stock to the placement agent, which represent 7 % of the total shares of common stock and pre-funded warrants sold in the offering and 7 % of the Inducement Warrants issued (Note 3).

August 2020 Financing

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The placement agent warrants have an exercise price of $ 0.075 per share and a term of five years .

November 2019 Common Stock Offering

In November 2019, the Company sold in a registered direct offering an aggregate of 8,000,000 shares of its common stock, par value $0.001 per share, and warrants to purchase 8,000,000 shares of common stock (Note 3).

The aggregate net proceeds of the transaction were $1,919,372.

Warrant Exercises

During the year ended December 31, 2021, 11,800,000 pre-funded warrants with an intrinsic value of $ 460,200 were exercised in exchange for 11,800,000 shares of common stock for gross proceeds of $ 11,800 .

As of December 31, 2021 all of the pre-funded warrants from the August 2020 Financing have been exercised.

During the year ended December 31, 2021, 116,666,668 of the 2020 common stock warrants, including the warrants that were exercised in connection with the July 2021 Inducement discussed above, with an intrinsic value of $ 8,764,967 were exercised in exchange for 116,666,668 shares of common stock for gross proceeds of $ 6,999,999 .

During the year ended December 31, 2020, the Pre-Funded Warrant holders exercised 48,533,334 warrants with an intrinsic value of $ 2,104,667 , which resulted in the issuance of 48,533,334 shares of common stock.

During the year ended December 31, 2020, the Series B Warrant holders exercised 312,500 warrants with an intrinsic value of $ 26,563 , which resulted in the issuance of 312,500 shares of common stock.

During the year ended December 31, 2019, Emerald Health Sciences exercised 40,800,000 2018 Emerald Financing Warrants with an intrinsic value of $4,284,000, which resulted in the issuance of 40,800,000 shares of common stock.

During the year ended December 31, 2019, the Series B Common Stock Warrant holders exercised 187,500 warrants with an intrinsic value of $144,375, which resulted in the issuance of 187,500 shares of common stock.

Stock-Based Compensation

Stock Incentive Plan

On October 31, 2014, after the closing of the Merger, the Board approved the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”).

On October 31, 2014, the Board approved the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”).

The 2014 Plan initially reserved 3,200,000 shares for future grants.

In October 2018, the Company increased the share reserve under the 2014 Plan to equal 10% of the number of issued and outstanding shares of common stock of the Company.

In October 2018, the Company increased the share reserve under the 2014 Plan to equal 10 % of the number of issued and outstanding shares of common stock of the Company on an evergreen basis.

In August 2020, the Company approved Amendment No.

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Share pool increase 18,803,404

(26,400,000 )

Cancelled 202,500

Forfeited 1,091,250

Granted ( 18,755,000 )

Available as of December 31, 2021 14,132,929

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Options granted under the 2014 Plan may be immediately exercisable if permitted in the specific grant approved by the Board of Directors and, if exercised early may be subject to repurchase provisions.

The shares issued generally vest over a period of one to five years from the date of grant.

The shares issued generally vest over a period of one to four years from the date of grant.

The following is a summary of option activities under the Company’s 2014 Plan for the year ended December 31, 2021:

Exercise Price

Shares Weighted

Exercise Price Weighted

Average Remaining

Term (Years) Aggregate

Outstanding, December 31, 2020 22,050,000 $ 0.06 9.52 $ —

Granted 14,755,000 0.08

Exercised ( 106,250 ) 0.05 13,281

Forfeited ( 1,091,250 ) 0.05

Cancelled ( 202,500 ) 0.05

Outstanding, December 31, 2021 35,405,000 $ 0.07 9.08 $ 134,750

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*The aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the stock options at December 31, 2021 for those stock options for which the quoted market price was in excess of the exercise price ("in-the-money options").

During the year ended December 31, 2021, the Company received gross proceeds of $ 4,783 from the exercise of stock options.

The weighted-average grant-date fair value of stock options granted for the years ended December 31, 2021 and 2020 was $ 0.07 and $ 0.04 , respectively.

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Risk-free interest rate 0.01 - 1.11 %

0.28 - 0.46 %

Expected term (years) 5.27 - 6.13

Restricted Stock Awards

During the year ended December 30, 2020, 643,501 restricted stock awards (“RSAs”) with a weighted average grant date fair value of $0.26 vested and were released from their service condition restriction.

As of December 31, 2020, there are no unvested RSA awards outstanding under the 2014 Plan.

There was no restricted stock award (“RSA”) activity under the Company’s 2014 Plan during the year ended December 31, 2019.

Volatility 119.10 - 138.00 %

92.51 - 107.87 %

In connection with the termination of Dr.

Avtar Dhillon's Independent Contractor Agreement on October 14, 2021 (Note 11), the Company modified Dr.

Dhillon's option awards to accelerate the vesting of 1,650,000 unvested stock options and, extend the post-termination exercise period from 30 days to five years for all of his outstanding awards.

The approval of the modification and receipt of notice to terminate the Independent Contractor Agreement on September 14, 2021, resulted in the recognition of $ 309,487 in stock compensation expense for the year ended December 31, 2021 .

Restricted Stock Units

On December 14, 2021, the Company granted restricted stock units (“RSUs”) to its executive management team.

The RSUs cliff vest 33 % per year on the anniversary of the grant date over a three year period.

The following is a summary of restricted stock unit activity during the year ended December 31, 2021:

Shares Weighted

Unvested, December 31, 2020 — $ —

Granted 4,000,000 0.06

Unvested, December 31, 2021 4,000,000 $ 0.06

There was no RSU activity under the Company’s 2014 Plan during the year ended December 31, 2020.

Awards Granted Outside the 2014 Plan

During the year ended December 31, 2020, 325,929 stock options with a weighted average exercise price of $0.25 were forfeited in connection with the separation and release of the Company’s former CFO.

As of December 31, 2020, an additional 869,144 options vested and outstanding with a weighted average exercise price of $0.25 were cancelled unexercised.

There was no option activity outside of the 2014 Plan during the year ended December 31, 2019.

The total fair value of stock options that vested during the years ended December 31, 2020 and 2019 were $18,252 and $54,756, respectively.

Restricted Stock Awards

The following is a summary of RSA activity outside of the Company’s 2014 Plan during the year ended December 31, 2020:

During the year ended December 31, 2021, the Company granted 1,200,000 and 300,000 restricted shares of common stock to a non-employee consultant for investor relations services under two successive six month service contracts.

Half of the shares will be issued within the first month of entering each service contract and the remaining half will be issued within thirty days from contract completion.

The following is a summary of restricted stock activity outside of the Company’s 2014 Plan during the year ended December 31, 2021:

Shares Weighted

Unvested, December 31, 2020 — $ —

Granted 1,500,000 0.12

Released ( 1,350,000 ) 0.12

*Unvested, December 31, 2021 150,000 $ 0.13

*As of December 31, 2021, the Company has recorded a share issuance liability of $ 13,000 , included in other current liabilities for the vested and unreleased portion of the restricted stock awards (Note 13).

Stock-Based Compensation Expense

The Company recognizes stock-based compensation expense using the straight-line method over the requisite service period.

The Company recognized stock-based compensation expense, including compensation expense for RSAs discussed above, in its Consolidated Statements of Comprehensive (Loss) Income as follows:

The Company recognized stock-based compensation expense, including compensation expense for RSUs discussed above, in its Consolidated Statements of Comprehensive Loss as follows:

Research and development $ 59,653 $ 93,545

General and administrative 809,553 209,197

$ 869,206 $ 302,742

The total amount of unrecognized compensation cost was $ 1,645,478 as of December 31, 2021.

This amount will be recognized over a weighted-average period of 3.12 years.

Net (Loss) Income Per Share of Common Stock

The following tables are a reconciliation of the numerators and denominators used in the calculation of basic and diluted net (loss) income per share computations:

Loss Per Share of Common Stock

The following tables are a reconciliation of the numerators and denominators used in the calculation of basic and diluted net loss per share computations:

For the Year Ended December 31, 2021

(Denominator)

$ (6,560,699 )

(Numerator) Shares

(Denominator) Per-Share

Net loss and comprehensive loss $ ( 8,522,182 )

Loss available to common stockholders ( 8,522,182 ) 406,599,390 $ ( 0.02 )

Effect of Dilutive Securities

Warrants – liability classified

Loss available to common stockholders + assumed conversions $ ( 8,522,182 ) 406,599,390 $ ( 0.02 )

$ (6,906,172 )

For the Year Ended December 31, 2020

(Denominator)

(Numerator) Shares

(Denominator) Per-Share

Net loss and comprehensive loss $ ( 6,560,699 )

Income available to common stockholders ( 6,560,699 ) 230,746,878 $ ( 0.03 )

Effect of Dilutive Securities

Unvested restricted stock

Warrants – liability classified ( 345,473 ) 674,095

Loss available to common stockholders + assumed conversions $ ( 6,906,172 ) 231,420,973 $ ( 0.03 )

$ (8,198,787 )

The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:

Stock options 35,405,000 22,050,000

Unvested restricted stock units 4,000,000 —

Unvested restricted stock 150,000 —

Common shares underlying convertible debt 5,393,684 5,126,343

The components of (loss) income before the income tax provision consist of the following:

Warrants 134,792,225 145,039,240

The components of loss before the income tax provision consist of the following:

United States $ ( 8,446,034 ) $ ( 6,556,280 )

$ (6,556,280 )

Pre-tax (loss) income from operations

$ (6,559,099 )

The Company is subject to taxation in the United States, California and Australia.

The Company’s tax years for 2017 (federal), 2016 (California) and 2019 (Australia) and forward are subject to examination by the United States, California and Australia tax authorities.

Foreign ( 74,048 ) ( 2,819 )

Pre-tax loss and comprehensive loss from operations $ ( 8,520,082 ) $ ( 6,559,099 )

The Company is subject to taxation in the United States, various states, and Australia.

The Company’s tax years for 2018 (federal), 2017 (states) and 2020 (Australia) and forward are subject to examination by the United States, state and Australia tax authorities.

However, to the extent allowed by law, the taxing authorities may have the right to examine periods where NOLs and credits were generated and carried forward and make adjustments up to the amount of the NOL and credit carryforwards.

The Company is not currently under examination by any jurisdiction.

At December 31, 2020, the Company had federal and California NOLs aggregating $30,475,657 and $30,310,672, respectively.

At December 31, 2021, the Company had federal and state NOLs aggregating $ 36,355,745 and $ 36,211,638 , respectively.

If not used, $ 13,129,037 of Federal NOLs and $ 36,138,820 of state NOLs will begin to expire in 2033.

$17,262,620 of federal NOLs will carry forward indefinitely subject to an 80% limitation against taxable income.

$ 23,226,708 of federal NOLs and $ 72,818 of state NOLs will carry forward indefinitely subject to an 80% limitation against taxable income.

At December 31, 2021, the Company had Australia NOLs aggregating $ 71,322 which do not expire.

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The Company’s NOLs and research credit carryforwards are subject to a reserve.

Utilization of the domestic NOL will be subject to a substantial annual limitation due to ownership change limitations that may have occurred, or that could occur in the future, as required by Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state provisions.

Utilization of the domestic NOL could be subject to a substantial annual limitation due to ownership change limitations that may have occurred, or that could occur in the future, as required by Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state provisions.

These ownership changes may limit the amount of NOLs that can be utilized annually to offset future taxable income and tax, respectively.

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Current deferred tax assets/(liabilities):

State taxes $ 441 $ 336

Amortization 109 180

Research and development credits 138,581 54,324

Lease liability 33,906 —

Other 446,623 83,056

Net operating loss 8,887,647 7,679,216

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Deferred tax liabilities

Note discount

Right-of-use asset $ ( 30,939 ) $ —

Discount - Amended Credit Agreement ( 102,791 ) ( 226,897 )

Total deferred tax liabilities ( 133,730 ) ( 226,897 )

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Expected income tax benefit at federal statutory tax rate $ ( 1,789,217 ) $ ( 1,377,411 )

$ (1,377,411 )

State income taxes, net of federal benefit ( 475,287 ) ( 415,249 )

2 unchanged sentences

Uncertain tax positions 557,016 470,838

Change in compound derivative

Loss on extinguishment of debt

Non-deductible interest 36,731 33,925

Stock compensation 31,863 64,273

Research and development credits ( 168,514 ) ( 108,649 )

Rate adjustment 785 —

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As a result of this valuation allowance, there are no income tax benefits reflected in the accompanying statement of operations to offset pre-tax losses.

As a result of this valuation allowance, there are no income tax benefits reflected in the accompanying Consolidated Statements of Comprehensive Loss to offset pre-tax losses.

During the year ended December 31, 2021, the valuation allowance increased by $ 1,783,362 .

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Due to the Company's history of net operating losses, the CARES Act is not expected to have a material impact on the Company's financial statements.

On April 22, 2020, when the Company entered into the PPP Loan with the PPP Loan Lender (Note 4).

On April 22, 2020, the Company entered into the PPP Loan with the PPP Loan Lender (Note 4).

In accordance with the Consolidated Appropriations Act, 2021 enacted on December 27, 2020, certain qualified expenses used with the funds of the PPP Loan are fully deductible for Federal income tax purposes.

Additionally, should the Company receive forgiveness of the PPP loan in the future, the amount will not be considered taxable for Federal income tax purposes.

In 2021, the Company received forgiveness of the PPP loan.

This amount is not considered taxable for Federal or state income tax purposes.

Under the FASB’s accounting guidance related to income tax positions, among other things, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.

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The Company does not expect any significant increases or decreases to the Company’s unrecognized tax positions within the next twelve months.

The Company had no accrual for interest or penalties on the Company’s Balance Sheets at December 31, 2020 and 2019 and has not recognized interest and/or penalties in the Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2020 and 2019.

The Company had no accrual for interest or penalties on the Company’s Consolidated Balance Sheets at December 31, 2021 and 2020 and has no t recognized interest and/or penalties in the Consolidated Statements of Comprehensive Loss for the years then ended .

Other Current Liabilities

1 unchanged sentence

As of December 31

Accrued payroll liabilities

Accrued research and development costs 140,953 93,888

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Total other accrued liabilities 56,368 5,455

$ 375,842 $ 197,564

Significant Contracts - University of Mississippi

UM 5050 Prodrug and UM 8930 Analog Agreements

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

UM 5050 and UM 8930 License Agreements

In July 2018, the Company renewed its ocular licenses for UM 5050 and UM 8930.

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”).

Pursuant to the License Agreements, UM granted the Company 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.

Pursuant to the License Agreements, UM granted the Company an exclusive, perpetual license, including, with the prior written consent of UM, not to be unreasonably withheld, 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, royalty and sublicensing fees payable by the Company, as defined therein.

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The Company made upfront payments for UM 5050 and UM 8930 of $ 100,000 and $ 200,000 , respectively.

In addition, in March 2020, the Company was notified by the United States Patent and Trademark Office, that a notice of allowance was issued for the proprietary analog of cannabidiol, CBDVHS, under the UM 8930 License Agreement.

In addition, in March 2020, the Company was notified by the United States Patent and Trademark Office, that a notice of allowance was issued for SBI-200, under the UM 8930 License Agreement.

As a result, the Company was required to pay UM a fee of $ 200,000 .

The milestone payments payable for each license are as follows:

$100,000 paid within 30 days following the submission of the first Investigational New Drug Application (“NDA”) to the Food and Drug Administration or an equivalent application to a regulatory agency anywhere in the world, for a product;

$200,000 paid within 30 days following the first submission of an NDA, or an equivalent application to a regulatory agency anywhere in the world, for each product that is administered in a different route of administration from that of the early submitted product(s);

$400,000 paid within 30 days following the approval of an NDA, or an equivalent application to a regulatory agency anywhere in the world, for each product that is administered in a different route of administration from that of the early approved product(s).

i) $ 100,000 paid within 30 days following the submission of the first Investigational New Drug Application ("NDA") to the Food and Drug Administration or an equivalent application to a regulatory agency anywhere in the world, for a product;

ii) $ 200,000 paid within 30 days following the first submission of an NDA, or an equivalent application to a regulatory agency anywhere in the world, for each product that is administered in a different route of administration from that of the early submitted product(s);

iii) $ 400,000 paid within 30 days following the approval of an NDA, or an equivalent application to a regulatory agency anywhere in the world, for each product that is administered in a different route of administration from that of the early approved product(s).

The royalty percentage due on net sales under each License Agreement is in the mid-single digits.

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

As of December 31, 2020, with the exception of the fee due for the notice of allowance for CBDVHS, none of the other milestones under these license agreements have been met.

As of December 31, 2021, with the exception of the fee due for the notice of allowance for SBI-200, none of the other milestones under these license agreements have been met.

UM 5070 License Agreement

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The Company may terminate the license agreement upon 60 days’ written notice to UM.

As of December 31, 2020, none of the milestones under this license agreement have been met.

As of December 31, 2021, none of the milestones under this license agreement had been met.

On November 9, 2021, the Company provided its 60 day notice of termination to UM to terminate the UM 5070 license agreement effective January 8, 2022.

Related Party Matters

Emerald Health Sciences

On February 1, 2018, the Company entered into an Independent Contractor Agreement with Emerald Health Sciences, pursuant to which Emerald Health Sciences agreed to provide such services as are mutually agreed between the Company and Emerald Health Sciences, including reimbursement for reasonable expenses incurred in the performance of the Independent Contractor Agreement.

These services included, but were not limited to, corporate advisory services and technical expertise in the areas of business development, marketing, investor relations, information technology and product development.

The Independent Contractor Agreement had an initial term of ten years and specified compensation to be agreed upon between the Company’s Chief Executive Officer and Emerald Health Sciences’ CEO on a month-to-month basis.

The fee due under this agreement was payable on a monthly basis.

Effective December 31, 2019, the Independent Contractor Agreement was terminated.

As of December 31, 2020, and 2019, the Company has accrued $7,032 reimbursable expenses under the Independent Contractor Agreement which have yet to be paid.

Under this agreement, no expenses were incurred for the year ended December 31, 2020.

Under this agreement, for the year ended December 31, 2019, the Company incurred expenses of $542,000.

On December 17, 2019, Dr.

Avtar Dhillon resigned as the Chairman of the Board and the position of Chairman of the Finance and Business Development Committee of the Board.

Concurrently, the Company entered into a Board Observer Agreement with Emerald Health Sciences to allow Dr.

Dhillon to continue as a representative of Emerald Health Sciences as a non-voting observer in future meetings of the Board.

In January 2018, the Company entered into a securities purchase agreement with Sciences pursuant to which Sciences purchased a majority of the equity interest in the Company, resulting in a change in control (the "Emerald Financing").

While Sciences no longer maintains a controlling interest in the Company, it holds a significant equity interest as of December 31, 2021 (Note 13) and has provided the Company with financing under the Amended Credit Agreement (Note 4).

As of December 31, 2020, the Company had accrued $ 7,032 in reimbursable expenses due to Sciences.

No amounts were due to Sciences as of December 31, 2021.

On December 19, 2019, the Company entered into an Independent Contractor Services Agreement with Dr.

Avtar Dhillon, pursuant to which Dr.

Dhillon will provide ongoing corporate finance and strategic business advisory services to the Company.

Avtar Dhillon, at the time, a member of Sciences Board of Directors and its CEO, pursuant to which Dr.

Dhillon provided ongoing corporate finance and strategic business advisory services to the Company.

In exchange for his services, Dr.

On March 30, 2020, the Company and Dr.

Dhillon amended the Independent Contractor Services Agreement by agreeing to defer payment of 100% of Dr.

Dhillon’s consulting fees until the Board of Directors determined that the Company had been sufficiently financed to make such payments at which point the Company agreed to pay Dr.

Dhillon all of his accrued consulting fees, and a bonus of 10% of his accrued consulting fees, less applicable tax and other withholdings.

The deferral was paid concurrent with the August 2020 Financing.

Subsequent to the August 2020 Financing Dr.

Dhillon continues to receive a monthly fee of $10,000 per month for his services.

The Board reviews the monthly rate paid to Dr.

Dhillon within 90 days of the end of each fiscal year.

The Independent Contractor Services Agreement has an initial term of one year and automatically renews thereafter unless terminated earlier by either party.

Under this agreement, for the years ended December 31, 2020 and 2019, the Company incurred fees of $127,387 and $3,871, respectively.

As of December 31, 2020, the Company has accrued $10,000 in expense related to the Independent Contractor Services Agreement.

In addition, on August 10, 2020, Emerald Health Sciences, Inc.

transferred to Dr.

Dhillon received a monthly fee of $ 10,000 , per month for his services.

Under the Independent Contractor Agreement, for the years ended December 31, 2021 and 2020, the Company incurred fees of $ 94,516 and $ 127,387 , respectively.

As of December 31, 2020, the Company accrued $ 10,000 in expense related to the Independent Contractor Services Agreement.

On September 14, 2021, Dr.

Dhillon provided his notice to terminate the Independent Contractor Services Agreement, with an effective termination date of October 14, 2021.

As of October 14, 2021, the Company no longer has any obligations or business relationship with Dr.

Dhillon (Note 6).

On August 10, 2020, Sciences, transferred to Dr.

Avtar Dhillon 500,000 shares of the Company’s common stock at a deemed price of $ 0.10 in exchange for the cancellation of $ 50,000 of debt.

As of December 31, 2020, Jim Heppell and Punit Dhillon are board members of the Company and Emerald Health Pharmaceuticals, a subsidiary of Emerald Health Sciences, Inc.

As of December 31, 2020, Jim Heppell is also a board member of Emerald Health Sciences, Inc.

The Company’s CEO, Punit Dhillon also served as a board member of Emerald Health Sciences, Inc.

until he tendered his resignation from such board on August 10, 2020.

The Company shares the same office location as Emerald Health Pharmaceuticals.

However, the Company’s workforce is remote, there is no written rental agreement with Emerald Health Pharmaceuticals, and no rent is being charged.

On August 10, 2020, Emerald Health Sciences, Inc.

On August 10, 2020, Sciences, Inc.

extinguished debt of $ 186,667 by transferring 1,566,666 shares of the Company’s common stock at a deemed price of $ 0.10 per share to certain officers, employees and directors of the Company.

Contingencies

On December 14, 2021, the Board Observer Agreement was terminated.

Emerald Health Pharmaceuticals, Inc.

On April 30, 2021, the Company entered into a month-to-month lease agreement with Emerald Health Pharmaceuticals, an affiliate of the Company with a significant common shareholder, as the sublessor and the Company as the sublessee.

The Company shared the same office location as Emerald Health Pharmaceuticals in San Diego, California until the termination of the sublease on August 31, 2021.

Under the sublease agreement, the Company paid monthly base rent of $ 4,000 in addition to its share of common area expenses and utilities.

For the year ended December 31, 2021, the Company recognized $ 15,453 in expense under the sublease.

VivaCell Biotechnology España, S.L.U (formerly known as Emerald Health Biotechnology España, S.L.U.)

In January 2021 and April 2021, the Company entered into two separate Collaborative Research Agreements pursuant to a Master Services Agreement with VivaCell Biotechnology España, S.L.U ("VivaCell"), a research and development entity with substantial expertise in cannabinoid science and a subsidiary of Emerald Health Research, Inc.

which is 100 % owned by Sciences.

Under the Collaborative Research Agreements, VivaCell will provide research and development services pursuant to agreed upon project plans for the research and development of SBI-200 and the preclinical development services for novel derivatives.

The term of each agreement is initially for a one-year period.

Payment for services are based on the negotiated amounts for the completion of agreed upon objectives as provided in the Collaborative Research Agreements.

For the year ended December 31, 2021, the Company incurred $ 220,418 in expenses under the Collaborative Research Agreements.

As of December 31, 2021, the Company has recognized a prepaid asset in the amount of $ 8,056 to be offset against future research and development costs under the Collaborative Research Agreements.

On October 11, 2021, the Company entered into an Exclusive Sponsored Research Agreement (the “ESRA”) with VivaCell to fund certain research and development programs which are of mutual interest to both the Company and VivaCell.

The Company will have the right to use all data, products, and information, including intellectual property which are generated in the performance of the research under each and all projects funded by the Company pursuant to the ESRA, and VivaCell assigns and agrees to assign, to the Company all rights to any intellectual property created or reduced-to-practice under, or as a part of, a project funded by the Company pursuant to the ESRA.

The Company has agreed to pay to VivaCell a royalty based on any and all licensing revenue or other consideration paid to the Company by a third-party licensee, assignee or purchaser of intellectual property rights created under the ESRA.

In addition, upon a change of control transaction the Company has agreed to pay an amount equal to the royalty percentage multiplied by the fair value of the intellectual property created under the ESRA.

Pursuant to the ESRA, VivaCell will provide a budget to be approved by the Company for each project, and the Company will make payments in accordance with the approved budget and pay an annual retainer to VivaCell of $ 200,000 per year.

For the year ended December 31, 2021, the Company incurred $ 44,624 in expenses under the ESRA.

As of December 31, 2021, the Company has recognized a prepaid asset in the amount of $ 5,376 to be offset against future research and development costs under the ESRA.

The initial term of the agreement is one year , with automatic renewal for successive one-year terms unless either party terminates upon 60 days' prior written notice to the other party pursuant to the ESRA.

Board Members

As of December 31, 2021, Jim Heppell and Punit Dhillon are board members of the Company and Emerald Health Pharmaceuticals, a subsidiary of Sciences.

As of December 31, 2021, Jim Heppell is also a board member of Sciences and VivaCell.

The Company’s CEO, Punit Dhillon also served as a board member of Sciences and VivaCell until he tendered his resignation from such boards on August 10, 2020 and September 22, 2021, respectively.

Commitments and Contingencies

The Company leases office space for its corporate headquarters, located at 1250 El Camino Real, San Diego, California 92130.

The lease is effective from September 1, 2021 through October 31, 2023 and contains a renewal option for a two-year extension after the current expiration date.

The Company does not expect that the renewal option will be exercised, and has therefore excluded the option from the calculation of the right of use asset and lease liability.

The lease provides for two months of rent abatement and the initial monthly rent is $ 8,067 per month with annual increases of 3 % commencing on November 1, 2022.

The lease includes non-lease components (i.e., property management costs) that are paid separately from rent, based on actual costs incurred, and therefore were not included in the right-of-use asset and lease liability but are reflected as an expense in the period incurred.

In calculating the present value of the lease payments, the Company has elected to utilize its incremental borrowing rate based on the lease term.

For the year ended December 31, 2021, lease expense comprised of $ 30,234 in lease cost from the Company's non-cancellable operating lease.

The remaining lease term and discount rate related to the operating lease are presented in the following table:

December 31, 2021

Weighted-average remaining term – operating lease (in years)

Weighted-average discount rate – operating lease

Future minimum lease payments as of December 31, 2021 are presented in the following table:

2022 $ 97,291

Total future minimum lease payments:

Less imputed interest ( 19,312 )

Total $ 161,072

Operating lease liability $ 82,372

Operating lease liability, net of current portion 78,700

Total lease liability $ 161,072

General Litigation and Disputes

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An unfavorable outcome to any legal matter, if material, could have a materially adverse effect on the Company’s operations or financial position, liquidity or results of operations.

As of December 31, 2020, there were no pending or threatened lawsuits or claims that could reasonably be expected to have a material effect on the Company’s financial position or results of operations.

As of December 31, 2021, the Company is party to a legal proceeding with a former employee alleging wrongful termination.

While there is a reasonable possibility that a loss may have been incurred, due to the stage of the proceedings as of December 31, 2021, the Company is unable to make an estimate as to the amount of the contingency, as the legal proceeding is in the early stage of discovery.

The Company is expensing the legal costs related to this proceeding as incurred.

Subsequent Events

Emerald Health Biotechnology España, S.L.U

In January 2021, the Company entered into a Collaborative Research Agreement with Emerald Health Biotechnology España, S.L.U, a subsidiary of Emerald Health Research, Inc.

which is 100% owned by Emerald Health Sciences.

Under the agreement, Emerald Health Biotechnology España, S.L.

will provide research and development services pursuant to an agreed upon project plan for the research and development of CBDVHS.

The term of the agreement is initially for a one-year period.

Payment for services rendered will be based on time and materials billable at reasonable market rates.

Warrant Exercises

From January 1, 2021 through February 23, 2021 11,800,000 pre-funded warrants were exercised in exchange for 11,800,000 shares of common stock for gross proceeds of $11,800.

From January 1, 2021 through February 23, 2021 50,133,334 common stock warrants were exercised in exchange for 50,133,334 shares of common stock for gross proceeds of $3,008,000.

Increase to Authorized Shares of Capital Stock

On February 5, 2021, the Company increased its authorized shares of common and preferred stock to 5,000,000,000 and 50,000,000, respectively.

On January 20, 2022, 19,666,667 pre-funded warrants with an intrinsic value of $ 1,178,033 were exercised in exchange for 19,666,667 shares of common stock for gross proceeds of $ 1,967 .

Board Members and Related Party Contractor

On January 10, 2022, the Company's Board member, Jim Heppell, was appointed the CEO of Sciences and tendered his resignation from VivaCell.

On February 28, 2022, the Company entered into a standard consulting agreement with the CEO's brother.

Compensation under the agreement is for a rate of approximately $ 75 per hour.

The consulting agreement may be terminated by either party upon providing 15 days of advance notice.

In March 2022, the Company entered into the first project under the ESRA, under which it has committed to a budget of $ 190,000 .

Common Stock Issuance

On March 2, 2022, the Company released 150,000 shares of common stock to a service provider (Note 6).

The following exhibits are filed with this Annual Report on Form 10-K.

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Description of Exhibit

Articles of Incorporation of Registrant, as amended

Amended and Restated Bylaws of Registrant

Certificate of Designation of the Relative Rights and Preferences of the Series B Preferred Stock filed with the Secretary of State of Nevada on August 19, 2015 (4)

Form of Warrants issued by Nemus to certain security holders to purchase an aggregate of 3,000,000 shares of commons stock (2)

Form of Warrants issued by Nemus to certain security holders to purchase an aggregate of 1,000,000 shares of commons stock (2)

Form of Common Stock Purchase Warrant to certain security holders to purchase shares of common stock (3)

Form of Warrant dated April 25, 2015 issued by Nemus Bioscience, Inc.

to holder to purchase 100,000 shares of common stock (4)

Form of Warrant dated April 29, 2015 issued by Nemus Bioscience, Inc.

to holder to purchase 90,000 shares of common stock (5)

Form of Warrant dated April 26, 2015 issued by Nemus Bioscience, Inc.

to holder to purchase 6,000 shares of common stock (5)

Form of Warrant dated June 8, 2015 issued by Nemus Bioscience, Inc.

to holder to purchase 10,000 shares of common stock (6)

Form of Warrant to certain security holders to purchase shares of common stock (4)

Registration Rights Agreement, dated January 7, 2015, by and between Nemus Bioscience, Inc.

and certain investors (7)

Form of Warrant (30)

Form of Warrant (34)

Form of Common Warrant (38)

Form of Pre-Funded Warrant (38)

Nemus Bioscience, Inc.

2014 Omnibus Incentive Plan (2)

Form of Stock Option Agreement under 2014 Omnibus Incentive Plan (2)

Memorandum of Understanding, dated July 31, 2013, between Nemus and University of Mississippi, National Center for Natural Products Research (2)

License Agreement, dated September 29, 2014, between Nemus and the University of Mississippi, School of Pharmacy (2)

Lease Agreement dated September 1, 2014 between University of Mississippi Research Foundation, Inc.

and Nemus (2)

Center Tower Lease dated October 13, 2014, by and between Nemus and Center Tower Associates LLC.

Common Stock Purchase Agreement, dated January 7, 2015, by and between Nemus Bioscience, Inc.

and certain investors (7)

Form of Indemnification Agreement (8)

Nemus Bioscience, Inc.

Officer Change in Control Severance Plan (9)

Form of Registration Rights Agreement between Nemus Bioscience, Inc.

and certain investors (4) 10.22† Form of Restricted Stock Award Agreement under 2014 Omnibus Incentive Plan (10)

License Agreement, dated December 14, 2015, between Nemus and the University of Mississippi, School of Pharmacy (11)

Letter Agreement with Albany Molecular Research Inc.

dated February 5, 2016 (12)

Form of Securities Purchase Agreement between Nemus Bioscience, Inc.

and certain investors (13)

Form of Registration Rights Agreement between Nemus Bioscience, Inc.

and certain investors (13)

Form of Lock-up Agreement between Nemus Bioscience, Inc.

and certain shareholders (14)

Form of Securities Purchase Agreement between Nemus Bioscience, Inc.

and certain investors (15)

Form of Registration Rights Agreement between Nemus Bioscience, Inc.

and certain investors (15)

Form of Lock-up Agreement between Nemus Bioscience, Inc.

and certain shareholders (16)

License Agreement, dated January 10, 2017, between Nemus and the University of Mississippi, School of Pharmacy (17)

Securities Purchase Agreement, dated May 3, 2017, between Nemus Bioscience, Inc.

and Schneider Finance LLC (18)

Financial Guarantee dated May 3, 2017 (19)

Form of Securities Purchase Agreement (20)

Form of Registration Rights Agreement (20) 10.37† Form of Restricted Stock Agreement (21)

Securities Purchase Agreement (21)

Convertible Bridge Promissory Note (22)

Independent Contractor Termination Agreement and Release (23) 10.41* Independent Contractor Agreement (23)

Employment Agreement, dated May 25, 2018, between Nemus Bioscience, Inc.

and Douglas Cesario (24) 10.43† Stock Option Agreement, dated May 25, 2018, between Nemus Bioscience, Inc.

and Douglas Cesario (24)

Letter Agreement, dated July 31, 2018, by and between Nemus Bioscience, Inc.

and Albany Molecular Research Inc.

3.1 Articles of Incorporation of Registrant, as amended (incorporated by reference to Exhibit 3.1 to our Report on Form 10-K filed on March 2, 2021)

3.2 Amended and Restated Bylaws of Registrant (incorporated by reference to Exhibit 3.2 to our Report on Form 10-K filed on March 2, 2021)

4.1 Pre 2015 Common Stock Warrants (incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed on November 3, 2014)

4.2 2015, 2016 and 2017 Form of Common Stock Warrant (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed August 20, 2015)

4.3 2018 Emerald Financing Warrants (incorporated by reference to Exhibit 4.1 and contained in Exhibit 10.1 in exhibit to our Current Report on Form 8-K filed January 22, 2018)

4.4 Emerald Multi-Draw Credit Agreement Warrants (incorporated by reference to Exhibit 4.10 to our Annual Report on Form 10-K filed on March 14, 2019)

4.5 2019 Common Stock Warrants ( incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on November 21, 2019)

4.6 2020 Common Stock Warrants ( inc orporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on August 5, 2020)

4.7 July 2021 Letter Agreement - Inducement ( incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.8 2021 Inducement Warrants ( incorporated by reference to Exhibit 10.

2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.9 September 2021 Securities Purchase Agreement ( incorporated by reference to E xhibit 10.1 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.10 September 2021 Lock-up Agreement ( in corporated by reference to E xhibit 10.2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.11 2021 Common Stock Warrants ( inc orporated by reference to E xhibit 4.1 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.12 2021 Pre-Funded Warrants ( inc orporated by reference to E xhibit 4.2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.13 2021 Common Stock Warrants to Placement Agent ( incorporated by reference to E xhibit 4.3 to our Quarterly Report on Form 10-Q filed November 10, 2021)

10.1† 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.4 to our Current Report on Form 8-K filed on November 3, 2014)

10.2† Amendment No.

1 to 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.

3 to our Current Report on Form 8-K filed on October 12, 2018)

10.3† Amendment No.

2 to 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.

3 to our Current Report on Form 8-K filed on August 12, 2020)

10.4† Form of Stock Option Agreement under 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.5 to our Current Report on Form 8-K filed on November 3, 2014)

10.5†* Form of Restricted Stock Unit Agreement under 2014 Omnibus Incentive Plan

10.6†* Notice of Option Amendment

10.7† Form of Indemnification Agreement ( inco rporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on January 12, 2015)

10.8† Officer Change in Control Severance Plan ( incorporated by referen ce to E xhibit 10.1 to our Current Report on Form 8-K filed on February 27, 2015)

10.9† Employment Agreement, dated August 10, 2020, by and between Emerald Bioscience, Inc.

and Punit Dhillon ( i nc orporated by reference to E xhibit 10.2 to our Current Report on Form 8-K filed on August 12, 2020)

10.10† Employment Agreement, dated October 4, 2021, by and between Skye Bioscience, Inc.

and Kaitlyn Arsenault ( inco rporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on October 6, 2021)

10.11** License Agreement, dated January 10, 2017, between Nemus and the University of Mississippi, School of Pharmacy (UM 5070) ( incorporated by reference to E xhibit 10.1 to our Current Report on Form 8-K/A filed on January 20, 2017)

10.12*|** Restated and Amended License Agreement, dated as of May 24, 2019, by and between the Company and University of Mississippi, School of Pharmacy (UM 5050)

10.13 Restated and Amended License Agreement, dated as of May 24, 2019, by and between the Company and University of Mississippi, School of Pharmacy (UM 8930) ( inco rporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on May 29, 2019)

10.14 Multi-Draw Credit Agreement, dated October 5, 2018, by and between Nemus Bioscience, Inc.

and Emerald Health Sciences, Inc.

Registration Rights Agreement, dated October 5, 2018, by and between Nemus Bioscience, Inc.

and Emerald Health Sciences, Inc.

Amendment No.

1 to 2014 Omnibus Incentive Plan (26)

Master Development and Clinical Supply Agreement, dated February 26, 2019, by and between Nemus Bioscience, Inc.

and Noramco, Inc.

Restated and Amended License Agreement, dated as of May 24, 2019, by and between the Company and University of Mississippi, School of Pharmacy (31)

First Amendment to Master Development and Clinical Supply Agreement, dated as of August 7, 2019, by and between the Company and Noramco, Inc.

Start-Up Agreement, dated as of August 23, 2019, by and between the Company and Novotech (33)

Master Services Agreement, dated as of September 20, 2019, by and between EMBI Australia and Novotech (Australia) Pty Limited (34)

Form of Securities Purchase Agreement, dated as of November 20, 2019, between the Company and certain purchasers set forth in the signature page thereto (35)

Warrant Exercise Agreement, dated as of December 20, 2019, between the Company and Emerald Health Sciences (36)

Independent Contractor Services Agreement, dated as of December 19, 2019, between the Company and Dr.

Avtar Dhillon.

( i ncorporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on October 12, 2018)

10.15 Amended and Restated Multi-Draw Credit Agreement, dated April 29 , 2020, by and between Emerald Bioscience, Inc.

and Emerald Health Sciences, Inc.

Sciences, Inc.

Separation and Release Agreement, dated April 29, 2020, between Emerald Bioscience, Inc.

and Douglas Cesario (37)

Form of Securities Purchase Agreement, dated as of July 31, 2020, between the Company and certain purchasers set forth in the signature page thereto (38)

Separation and Release Agreement, dated August 7, 2020, by and between Emerald Bioscience, Inc.

and Brian Murphy (39)

Employment Agreement, dated August 10, 2020, by and between Emerald Bioscience, Inc.

and Punit Dhillon (39)

( incorporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on April 29, 2020)

10.16 Amendment No.

2 to 2014 Omnibus Incentive Plan (39)

2 to the Amended and Restated Multi-Draw Credit Agreement, dated March 29, 2021 ( incorporated by reference to E xhibit 10.1 to our Quarterly Report on Form 10-Q filed May 7, 2021)

10.17* Amendment No.

3 to the Amended and Restated Multi-Draw Credit Agreement, dated September 15, 2021

10.18 Collaborative Research Agreement, dated January 2021, by and between Skye Bioscience, Inc.

and Emerald Health Biotechnology España, S.L.,

and Emerald Health Biotechnology España, S.L., (incorporated by reference to Exhibit 10.63 to our Annual Report on Form 10-K filed on March 10, 2021)

10.19** Collaborative Research Agreement, dated April 2021, by and between Skye Bioscience, Inc.

and Emerald Health Biotechnology España, S.L., ( incorporated by reference to E xhibit 10.1 to our Q uarterly R eport on Form 10-Q filed on August 6, 2021)

10.20** Exclusive Sponsored Research Agreement, dated October 1 1 , 2021, by and between the Company and Emerald Health Biotechnology España, S.L.

(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on October 15, 2021)

10.2 Office Lease, dated as of August 25, 2021, by and between ROIC California, LLC and the Company (incorporated by reference to Exhibit 99 .1 to our Current Report on Form 8-K filed on September 15, 2021)

21.1* Subsidiaries of the Registrant

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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XBRL Taxonomy Schema Document

XBRL Taxonomy Calculation Linkbase Document 101.def†† XBRL Taxonomy Definition Linkbase Document 101.lab†† XBRL Taxonomy Label Linkbase Document

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Included as exhibit to our Current Report on Form 8-K filed on November 3, 2014.

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Included as exhibit to our Current Report on Form 8-K filed August 20, 2015.

Included as exhibit to our Quarterly Report on Form 10-Q filed May 13, 2015

Included as exhibit to our Quarterly Report on Form 10-Q filed August 14, 2015

Included as exhibit to our Current Report on Form 8-K filed on January 9, 2015.

Included as exhibit to our Current Report on Form 8-K filed on January 12, 2015.

Included as exhibit to our Current Report on Form 8-K filed on February 27, 2015.

Included as exhibit to our Current Report on Form 8-K filed on October 22, 2015.

Included as exhibit to our Current Report on Form 8-K filed on December 18, 2015.

Included as exhibit to our Annual Report on Form 10-K filed on March 21, 2016.

Included as exhibit to our Current Report on Form 8-K filed on October 26, 2016

Included as exhibit to our Current Report on Form 8-K filed on October 27, 2016.

Included as exhibit to our Current Report on Form 8-K filed on December 29, 2016.

Included as exhibit to our Current Report on Form 8-K filed on January 10, 2017.

Included as exhibit to our Current Report on Form 8-K/A filed on January 20, 2017.

Included as exhibit to our Current Report on Form 8-K filed on May 4, 2017.

Included as exhibit to our Current Report on Form 8-K filed on July 11, 2017.

Included as exhibit to our Current Report on Form 8-K filed on November 2, 2017.

Included as exhibit to our Current Report on Form 8-K filed on January 22, 2018.

Included as exhibit to our Current Report on Form 8-K filed on January 3, 2018.

Included as exhibit to our Annual Report on Form 10-K filed on March 19, 2018.

Included as exhibit to our Current Report on Form 8-K filed on June 1, 2018.

Included as exhibit to our Current Report on Form 8-K filed on August 1, 2018.

Included as exhibit to our Current Report on Form 8-K filed on October 12, 2018.

Included as exhibit to our Current Report on Form 8-K filed on March 4, 2019.

Included as exhibit to our Annual Report on Form 10-K filed on March 14, 2019.

Included as exhibit to our Current Report on Form 8-K filed on May 29, 2019.

Included as exhibit to our Current Report on Form 8-K filed on August 8, 2019.

Included as exhibit to our Current Report on Form 8-K filed on August 27, 2019.

Included as exhibit to our Quarterly Report on Form 10-Q filed on September 30, 2019.

Included as exhibit to our Current Report on Form 8-K filed on November 21, 2019.

Included as exhibit to our Current Report on Form 8-K filed on December 20, 2019.

Included as exhibit to our Current Report on Form 8-K filed on April 29, 2020.

Included as exhibit to our Current Report on Form 8-K filed on August 5, 2020

Included as exhibit to our Current Report on Form 8-K filed on August 12, 2020

101.ins†† Instance Document

101.sch†† XBRL Taxonomy Schema Document

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104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed Herewith

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† Management contract or compensatory plan or arrangement.

†† In accordance with Regulation S-T, XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not otherwise subject to liability under these sections.

and is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not otherwise subject to liability under these sections.

Form 10-K Summary .

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a Nevada corporation

March 1, 2021

March 25, 2022 By:

/s/ Punit Dhillon

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(Principal Executive Officer)

March 1, 2021

/s/ Richard Janney

Richard Janney

Interim Principal Accounting Officer

March 25, 2022 By:

/s/ Kaitlyn Arsenault

Kaitlyn Arsenault

Chief Financial Officer

(Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Punit Dhillon

March 1, 2021

/s/ Punit Dhillon March 25, 2022

Punit Dhillon

1 unchanged sentence

(Principal Executive Officer)

/s/ Richard Janney

March 1, 2021

Richard Janney

Interim Principal Accounting Officer

/s/ Kaitlyn Arsenault March 25, 2022

Kaitlyn Arsenault

Chief Financial Officer

(Principal Financial and Accounting Officer)

/s/ Margaret Dalesandro

March 1, 2021

/s/ Margaret Dalesandro March 25, 2022

Margaret Dalesandro

/s/ Jim Heppell

March 1, 2021

/s/ Jim Heppell March 25, 2022

/s/ Praveen Tyle March 25, 2022

/s/ Keith Ward March 25, 2022

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 9A. Controls and Procedures