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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-28 · 314 added, 116 removed, 372 unchanged (54% of the section changed)

Risk Factors.

Any investment in our common stock involves a high degree of risk.

Investors should carefully consider the risks described below and all of the information contained in this Annual Report on Form 10-K before deciding whether to purchase our common stock.

Our business, financial condition or results of operations could be materially and adversely affected by these risks if any of them actually occur.

Our common stock is quoted on the OTCQB under the symbol “SKYE.” This market is extremely limited, and the prices quoted are not a reliable indication of the value of our common stock.

As of the date of this Annual Report, our shares of common stock are thinly traded.

The trading price for our common stock could decline due to any of these risks, and an investor may lose all or part of his or her investment.

Any investment in our securities involves a high degree of risk.

Investors should carefully consider the risks described below and all of the information contained in this Annual Report on Form 10-K before deciding whether to purchase our securities.

Our business, financial condition or results of operations could be materially adversely affected by these risks if any of them actually occur.

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

This market is extremely limited and the prices quoted are not a reliable indication of the value of our common stock.

As of the date of this Annual Report on Form 10-K, there has been very limited trading of shares of our common stock.

The trading price for shares of our common stock could decline due to any of these risks, and an investor may lose all or part of his or her investment.

Some of these factors have affected our financial condition and operating results in the past or are currently affecting us.

We have organized the description of these risks into groupings in an effort to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significant should be attributed to the groupings or order below.

We have organized the description of these risks into groupings in an effort to enhance readability, but many of the risks interrelate or could be grouped or ordered in other ways, so no special significance should be attributed to the groupings or order below .

This Annual Report on Form 10-K also contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks described below and elsewhere in this Annual Report on Form 10-K.

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Risk Factor Summary

Risks Related to our Business and Capital Requirements

• We currently have no product revenues and no products approved for marketing and need substantial additional funding to continue our operations.

• UM is a joint owner of the intellectual property for SBI-100 and SBI-200.

• We currently have no product revenues and no products approved for marketing and need substantial additional funding in the near term to continue our operations.

• Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.

• UM is the owner of intellectual property related to SBI-100 and SBI-200.

• Breach of any of the License Agreements with UM could result in the loss of such license rights that are important to our business and our operations could be materially harmed.

• We are heavily dependent on the success of our early-stage product candidates, which will require significant additional efforts to develop and may prove not to be viable for commercialization.

• We have conducted, and continue to conduct, clinical trials for our product candidates outside of the United States and we may do so for our other product candidates.

However, the FDA and other foreign equivalents may not accept data from such trials, in which case our development plans will be delayed, which could materially harm our business.

• We conduct certain research and development operations through our Australian wholly owned subsidiary.

If we lose our ability to operate in Australia, or if our subsidiary is unable to receive the research and development tax credit allowed by Australian regulations, our business and results of operations could suffer.

• We expect to face intense competition, often from companies with greater resources and experience than we have.

• The current volatility of global financial conditions and inflation could negatively impact our business and financial condition.

• Adverse U.S.

or international geopolitical or economic conditions could negatively affect our business, financial condition and results of operations.

• If we are not able to attract and retain highly qualified personnel, we may not be able to successfully implement our business strategy.

• Our success depends on our ability to protect our intellectual property and our proprietary technologies.

Risks Related To Controlled Substances

• The product candidates we are developing will be subject to U.S.

• If we are unable to prevent disclosure of our trade secrets or other confidential information to third parties, our competitive position may be impaired.

• We engage in transactions with related parties which present possible conflicts of interest that could have an adverse effect on us.

• Unpredictable business disruptions could seriously harm our future revenues and financial condition, increase our costs and expenses, and impact our ability to raise capital.

• The COVID-19 pandemic, related variants and other epidemic diseases has, and could continue to, adversely impact our business, including our drug manufacturing, nonclinical activities and clinical trials.

• Due to our limited resources, we may be forced to focus on a limited number of development candidates which may force us to pass on opportunities that could have a greater chance of clinical success.

• Our business and operations would be adversely affected in the event that our computer systems or those of our partners, contract research organizations, contractors, consultants or other third parties we work with were to suffer system failures, cyber-attacks, loss of data or other security incidents.

• Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could have a material adverse effect on our business, financial condition or results of operations.

• If we fail to enter and maintain successful collaborative arrangements or strategic alliances for our product candidates, we may have to reduce or delay our product candidate development or increase our expenditures.

• The Company is currently subject to lawsuits, and in the future may be subject to additional lawsuits, that could divert its resources and result in the payment of significant damages and other remedies.

• If we are unsuccessful in the resolution of the Cunning Lawsuit, our business may be materially harmed, and we may be required to take actions to reorganize, discontinue or liquidate part or all of our operations.

• If we are not able to favorably resolve our litigation with Ms.

Cunning, we could potentially be required to seek relief through a filing under the U.S.

Bankruptcy Code, either through plan of reorganization or under an alternative plan, which could include liquidation.

• Government authorities extensively regulate our activities.

• Some of the product candidates we are developing, including SBI-100, will be subject to U.S.

controlled substance laws and regulations, and failure to comply with or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, and our financial condition.

• Research restrictions, product shipment delays or prohibitions could have a material adverse effect on our business, results of operations and financial condition.

• Research restrictions, product shipment delays or prohibitions could have a material adv erse effect on our business, results of operations and financial condition.

• Our ability to research, develop and commercialize our drug product candidates is dependent on our ability to obtain and maintain the necessary controlled substance registrations from the DEA.

Risks Related to Government Regulation

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• Laws and regulations affecting therapeutic uses of cannabinoids are constantly evolving.

• Our product candidates may contain controlled substances, the use of which may generate public controversy.

• We may not be able to file investigational new drug applications to commence clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed in a timely manner, or at all.

• If we fail to demonstrate the safety and efficacy of any product candidate that we develop to the satisfaction of the regulatory authorities, we may incur additional costs or experience difficulty in completing, the development and commercialization of such product candidate.

• Nonclinical and clinical drug development involves a lengthy and expensive process with an uncertain outcome.

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• If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

• Our development and commercialization strategy for SBI-100, may depend, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of dronabinol, based on data not developed by us, but upon which the FDA may rely in reviewing our NDA.

• Our development and commercialization strategy for SBI-100 OE, may depend, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of dronabinol, based on data not developed by us, but upon which the FDA may rely in reviewing our NDA.

• Even if we receive marketing approval for a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory requirements or if we experience unanticipated problems with our product candidates, when and if approved.

• Serious adverse events or undesirable side effects or other unexpected properties of any of our product candidates may be identified during development or after approval that could delay, prevent or cause the withdrawal of marketing approval, limit the commercial potential, or result in significant negative consequences following marketing approval.

• We expect to rely on third parties, such as CROs, to conduct some or all of our nonclinical and clinical trials.

If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize any of our product candidates.

• We rely on, and expect to continue relying on, third party contract manufacturing organizations to manufacture and supply product candidates for us, as well as certain raw materials used in the production thereof.

If one of our suppliers or manufacturers fails to perform adequately, we may be required to incur significant delays and costs to find new suppliers or manufacturers.

Risks Related to our Common Stock

• Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize our product candidates and may affect the prices we may set.

• We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws.

If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

• We may be subject to requests for access to our product candidates.

Demand for compassionate use of our unapproved therapies could strain our resources, delay our drug development activities, negatively impact our marketing approval or commercial activities, and result in losses.

• Our stock price may be volatile, which may result in losses to our stockholders.

• Our common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices or at all.

• We cannot assure you that our common stock will become eligible for listing or quotation on any exchange and the failure to do so may adversely affect your ability to dispose of our common stock in a timely fashion.

• We do not anticipate paying any cash dividends.

• Our common stock is subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.

• We will need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.

• Our principal stockholder owns a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

• We have a substantial number of authorized common shares available for future issuance that could cause dilution to our Stockholders’ interest and adversely impact the rights of the holders of our Shares.

• The issuance of shares upon exercise of outstanding warrants, convertible debt and options may cause immediate and substantial dilution to our existing stockholders.

Risks Related to our Business and Capital Requirements

We currently have no product revenues and no products approved for marketing and need substantial additional funding to continue our operations.

• Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

• We may face risks related to the wind-down of EHT’s operations.

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Risks Related to our Business and Capital Requirement

We currently have no product revenues and no products approved for marketing and need substantial additional funding in the near term to continue our operations.

We expect to need substantial additional funding to pursue the clinical development of our product candidates and launch and commercialize any product candidates for which we receive regulatory approval.

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As noted in our audited financial statements for the years ended December 31, 2022 and 2021, the uncertainties surrounding our ability to fund our operations raise substantial doubt about our ability to continue as a going concern.

To date, we have financed our operations entirely through debt and equity financings.

To date, we have financed our operations entirely through debt, equity financings and a strategic acquisition.

We may seek additional funds through public or private equity or debt financing, via strategic transactions or collaborative arrangements.

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There are no assurances that future funding will be available on favorable terms or at all.

If additional funding is not obtained, we may need to reduce, defer or cancel preclinical and lab work, planned clinical trials, or overhead expenditures, which could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or any future commercialization efforts.

If additional funding is not obtained, we may need to reduce, defer or cancel preclinical and lab work, clinical trials, or overhead expenditures, which could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to raise capital when needed or on attractive terms, we could be forced to:

• delay, reduce or eliminate our research and development programs or any future commercialization efforts;

• enter into strategic alliances or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, or on terms that are less favorable than might otherwise be available;

• dispose of technology assets, or relinquish or license on unfavorable terms, our rights to technologies or any future product candidates that we otherwise would seek to develop or commercialize ourselves;

• pursue the sale of our company to a third party at a price that may result in a loss on investment for our stockholders;

• file for bankruptcy or cease operations altogether.

Any of these events could significantly harm our business, financial condition and prospects.

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Our historical financial statements have been prepared under the assumption that we will continue as a going concern.

Our independent registered public accounting firm has issued a report on our audited financial statements for the years ended December 31, 2021 and 2020 that included an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to obtain additional equity financing or other capital, attain further operating efficiencies, reduce expenditures, and, ultimately, generate revenue.

Our current independent registered public accounting firm has issued a report on our audited financial statements for the years ended December 31, 2022 that included an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern Our former independent registered public accounting firm has issued a report on our audited financial statements for the years ended December 31, 2021 that included an explanatory paragraph referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to obtain, among other things, the successful resolution of our litigation with Ms.

Cunning, additional equity financing or other capital, attain further operating efficiencies, reduce expenditures, and, ultimately, generate revenue.

Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

However, if adequate funds are not available to us when we need it, we will be required to curtail our operations which would, in turn, further raise substantial doubt about our ability to continue as a going concern.

We will require additional financing during the second quarter of 2023 to continue operations.

The uncertainty as to the resolution of the Cunning Lawsuit could limit our ability to raise new capital from investors to operate our business.

Additionally, the increased turmoil in the U.S.

capital markets created a substantially more difficult business environment.

Our ability to access the capital markets is expected to be extremely limited.

If adequate funds are not available to us when we need it, we will be required to curtail or perhaps cease our operations which would, in turn, further raise substantial doubt about our ability to continue as a going concern.

The doubt regarding our potential ability to continue as a going concern may adversely affect our ability to obtain new financing on reasonable terms or at all.

Additionally, if we are unable to continue as a going concern, our stockholders may lose some or all of their investment in us.

UM is a joint owner of the intellectual property for SBI-100 and SBI-200.

Intellectual property rights (including any patents and non-manufacturing related know-how) that are conceived by both UM and us during the course of development for both SBI-100 and SBI-200 are to be jointly owned by UM and us, and we may need to seek UM’s consent to pursue, use, license and/or enforce some of these intellectual property rights in the future.

UM is the owner of intellectual property related to SBI-100 and SBI-200.

Intellectual property rights (including any patents, non-manufacturing related know-how and improvements) for both SBI-100 and SBI-200 are owned by UM, and in the future we may need to seek UM’s consent to pursue, use, sub-license and/or enforce some of these intellectual property rights which we are entitled to use pursuant to the License Agreements.

An unexpected deterioration in our relationship with UM may have a material adverse effect on our business, reputation, results of operations and financial condition.

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Breach of any of the License Agreements with UM could result in the loss of such license rights that are important to our business and our operations could be materially harmed.

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If we breach the terms of our License Agreements with UM, or any future license agreement on which our business or product candidates are dependent, UM or other licensors may have the right to terminate the applicable agreement in whole or in part and thereby limit or terminate our rights to the licensed technology and intellectual property and/or any rights we have acquired to develop and commercialize certain product candidates or cause us to have to negotiate new or reinstated licenses on less favorable terms, or enable a competitor to gain access to the licensed technology.

Moreover, disputes may arise regarding intellectual property subject to a license agreement such as our license agreement with UM, including:

Moreover, disputes may arise regarding intellectual property subject to a license agreement such as our license agreements with UM, including:

(i) the scope of the rights granted under the license agreement and other interpretation related issues, (ii) the extent to which our product candidates, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement, (iii) our diligence obligations under the license agreement and what activities satisfy those diligence obligations.

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We are heavily dependent on the success of our early-stage product candidates, which will require significant additional efforts to develop and may prove not to be viable for commercialization.

We have no products approved for sale and all of our product candidates are in preclinical development, including the development of cannabinoid-based formulations.

Further preclinical testing is ongoing and if successful, will be part of a regulatory filing to satisfy Australian regulatory authorities and human research ethics committees ("HREC") requirements that need to be met in order for the candidate compounds and routes of administration to enter testing in humans in Australia.

We have no products approved for sale and all of our product candidates are in clinical and preclinical development.

Our business depends entirely on the successful development, clinical testing, and commercialization of these and any other product candidates we may seek to develop in the future, which may never occur.

The success of our product candidates will depend on several factors, which we may not be able to successfully complete, such as:

The success of our product candidates will depend on several factors, any one of which we may not be able to successfully complete, such as:

• receipt of necessary controlled substance registrations from the DEA;

• successful completion of nonclinical studies and clinical trials;

• receipt of marketing approvals from the FDA and other applicable regulatory authorities;

• obtaining, maintaining and protecting our intellectual property portfolio;

• successful completion of preclinical studies and clinical trials;

• approval from regulatory agencies such as the Food and Drug Administration (the "FDA") or an Institutional Review Board ("IRB"), to conduct our clinical trials;

• receipt of marketing approvals from the Food and Drug Administration (the "FDA") and other applicable regulatory authorities;

• obtaining, maintaining and protecting our intellectual property portfolio, including patents and trade secrets, and regulatory exclusivity for our product candidates;

• identifying, making arrangements and ensuring necessary registrations with third-party manufacturers, or establishing commercial manufacturing capabilities for applicable product candidates;

• launching commercial sales of the products, if and when approved;

• launching commercial sales of the products, if and when approved, whether alone or in collaboration with others;

• acceptance of our products, if and when approved, by patients, the medical community and third-party payors;

• obtaining and maintaining healthcare coverage and adequate reimbursement of our products; and

• effectively competing with other therapies;

• obtaining and maintaining healthcare coverage and adequate reimbursement of our products;

• maintaining a continued acceptable safety profile of our products following approval.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

We expect to conduct clinical trials for certain of our product candidates at sites outside the United States, and this could have impact on how we conduct our clinical trials .

The conduct of clinical trials outside the United States could have a significant impact on us.

Risks inherent in conducting international clinical trials include:

• administrative burdens of conducting clinical trials under multiple foreign regulatory schema;

• foreign currency fluctuations which could negatively impact our financial condition since certain payments are paid in local currencies;

• manufacturing, customs, shipment and storage requirements;

If we do not achieve one or more of these facto rs in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

We have conducted, and continue to conduct, clinical trials for our product candidates outside of the United States and we may do so for our other product candidates.

However, the FDA and other foreign equivalents may not accept data from such trials, in which case our development plans will be delayed, which could materially harm our business.

We have conducted, and continue to conduct our initial Phase 1 clinical trial for SBI -100 OE in Australia.

The acceptance of study data from clinical trials conducted outside the U.S.

or another jurisdiction by the FDA or a comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all.

For example, in cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the

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application on the basis of foreign data alone unless (i) the data are applicable to the U.S.

population and U.S.

medical practice;

(ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations;

and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.

In addition, even where the foreign study data are not intended to serve as the sole basis for approval, the FDA will not accept the data as support for an application for marketing approval unless the study is well-designed and well-conducted in accordance with GCP requirements and the FDA is able to validate the data from the study through an onsite inspection if deemed necessary.

Many foreign regulatory authorities have similar approval requirements.

In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted.

Conducting trials outside the United States also exposes us to additional risks, including risks associated with:

• additional foreign regulatory requirements;

• foreign exchange fluctuations;

• compliance with foreign manufacturing, customs, shipment and storage requirements;

• cultural differences in medical practice and clinical research;

• diminished protection of intellectual property in some countries;

• interruptions or delays in our trials resulting from geopolitical events, such as war or terrorism.

We conduct certain research and development operations through our Australian wholly owned subsidiary.

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In addition, current Australian tax regulations provide for a refundable R&D tax credit equal to 48.5% of qualified expenditures.

If our subsidiary loses its ability to operate in Australia, or if we are ineligible or unable to receive the R&D tax credit, or the Australian government significantly reduces or eliminates the tax incentive program, our business and results of operation may be adversely affected.

If our subsidiary loses its ability to operate in A ustralia, or if we are ineligible or unable to receive the R&D tax credit, or the Australian government significantly reduces or eliminates the tax incentive program, our business and results of operation may be adversely affected.

We expect to face intense competition, often from companies with greater resources and experience than we have.

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If we are unable to compete successfully, we may be unable to grow and sustain our revenue.

The current volatility of global financial conditions could negatively impact our business and financial condition.

The current volatility of global financial conditions and inflation could negatively impact our business and financial condition.

Current global financial conditions and recent market events have been characterized by increased volatility, inflation and the resulting tightening of the credit and capital markets has reduced the amount of available liquidity and overall economic activity.

We cannot guaranty that debt or equity financing, and the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our initiatives, objectives, or requirements.

Economic factors over which the Company has no control, including changes in inflation, interest rates and foreign currency rates may have a potential adverse effect of on revenues, expenses and resulting margins.

We cannot guarantee that debt or equity financing, and the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our initiatives, objectives, or requirements.

Our inability to access sufficient amounts of capital on terms acceptable to us for our operations will negatively impact our business, prospects, liquidity and financial condition.

Global markets have recently experienced increased rates of inflation.

Inflation itself, as well as certain governmental efforts to combat inflation, may have significant negative effects on any economy which the Company does business.

Past governmental efforts to curb inflation also involved other more drastic economic measures.

Any future economic measures to curb inflation could be expected to have similar adverse effects on the level of economic activity in the market, which the Company does business and, in turn, on the operations of the Company.

For example, the Federal Reserve recently raised interest rates multiple times in response to concerns about inflation and it may raise them again.

Higher interest rates, coupled with reduced government spending and volatility in financial markets may increase economic uncertainty and affect consumer spending.

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Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.

Other policies and measures adopted by governments include interest rate adjustments, intervention in the currency markets or actions to adjust or fix the value of the local currency may adversely affect t he Company’s business and results of operations.

or international economic conditions could negatively affect our business, financial condition and results of operations.

We face risks associated with U.S.

and international economic conditions and are subject to events beyond our control including war, public health crises (such as the COVID-19 pandemic), trade disputes, economic sanctions, and their collateral impacts.

or international economic conditions or periods of inflation or high energy prices may contribute to higher unemployment levels, decreased consumer spending, reduced credit availability and declining consumer confidence and demand, each of which poses a risk to our business.

In February 2022, armed conflict escalated between Russia and Ukraine.

The sanctions imposed by the U.S.

and other countries against Russia, following Russia’s invasion of Ukraine, to date include restrictions on selling or importing goods, services, or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia.

and other countries could impose wider sanctions and take other actions should the conflict further escalate.

It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could impact our business, financial condition and results of operations.

If we are not able to attract and retain highly qualified personnel, we may not be able to successfully implement our business strategy.

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Our success depends in large measure on our key personnel, including Mr.

Punit Dhillon, our Chief Executive Officer, Ms.

Kaitlyn Arsenault, our Chief Financial Officer and Mr.

Tu Diep, our Chief Development Officer.

Punit Dhillon, our President and Chief Executive Officer, and Ms.

Kaitlyn Arsenault, our Chief Financial Officer.

The loss of the services of Mr.

Arsenault or Mr.

Diep could significantly hinder our operations.

Dhillon and Ms.

Arsenault could significantly hinder our operations.

We do not currently have key person insurance in effect for Mr.

Arsenault or Mr.

Dhillon and Ms.

In addition, the competition for qualified personnel in the pharmaceutical industry is intense and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the development and operation of our business.

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It is also possible that we or our licensors will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.

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In addition, although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, outside scientific collaborators, contract research organizations, third-party manufacturers, consultants, advisors and other third parties, any of these parties may breach such agreements and disclose such output before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

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In addition, recognition of rights in trade secrets and a willingness to enforce trade secrets differs in certain jurisdictions.

Our operating activities may be restricted as a result of covenants related to the outstanding indebtedness under our Credit Agreement.

We could default on the payment of our indebtedness under our Amended and Restated Multi-Draw Credit Agreement (the “Amended Credit Agreement”) entered into with Emerald Health Sciences, Inc.

("Sciences"), a related party, when it comes due which may result in acceleration of all amounts outstanding under our Amended Credit Agreement.

Additionally, our Amended Credit Agreement restricts, among other things, our ability to incur debt and requires us to comply with certain covenants.

We may not be able to comply with these restrictions and covenants in the future, which could result in an event of default under our Amended Credit Agreement and result in the acceleration of the maturity of the indebtedness under the Amended Credit Agreement.

We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs.

In that case, we may be required to delay, limit, reduce or terminate our product candidate development or commercialization efforts or grant others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We engage in transactions with related parties which present possible conflicts of interest that could have an adverse effect on us.

We have entered, and may continue to enter, into transactions with Sciences and its affiliates and other related parties for financing, corporate, business development and operational services.

We have entered, and may continue to enter, into transactions with affiliates and other related parties for financing, corporate, business development and operational services.

For example, we currently have a sponsored research agreement with VivaCell Biotechnology España, S.L.U ("VivaCell").

Emerald Health Sciences, Inc.

("Sciences"), which holds 17.44% of the outstanding shares of common stock of the Company, also owns a majority of the outstanding shares of VivaCell.

Such transactions may not have been entered into on an arm’s-length basis, and we may have achieved more or less favorable terms because such transactions were entered into with our related parties.

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This could have a material effect on our business, results of operations and financial condition.

The details of certain of these transactions are set forth in “Certain Relationships and Related Party Transactions.” Related party transactions create the possibility of conflicts of interest with regard to our management, we may enter into contracts between us, on the one hand, and related parties, on the other, that may not result in arm’s-length transactions, including that:

The details of certain of these transactions are set forth in “Certain Relationships and Related Party Transactions”.

Related party transactions create the possibility of conflicts of interest with regard to our management, we may enter into contracts between us, on the one hand, and related parties, on the other, that may not result in arm’s-length transactions, including that:

• our executive officers and directors that hold positions of responsibility with related parties may be aware of certain business opportunities that are appropriate for presentation to us as well as to such other related parties and may present such business opportunities to such other parties; and

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Notwithstanding this, it is possible that a conflict of interest could have a material adverse effect on our liquidity, results of operations and financial condition.

We have experienced, and may in the future experience, delays to our SBI-100 clinical trial because of the COVID-19 pandemic and unpredictable business disruptions could seriously harm our future revenues and financial condition, increase our costs and expenses, and impact our ability to raise capital.

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Unpredictable business disruptions could seriously harm our future revenues and financial condition, increase our costs and expenses, and impact our ability to raise capital.

Our operations could be subject to unpredictable events, such as earthquakes, power shortages, telecommunications failures, water shortages, medical epidemics (such as the COVID-19 outbreak) and other natural or man made disasters or business interruptions, for which we are predominantly self-insured.

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Notably, we rely on third party manufacturers to produce our product candidates, and such third party manufacturers ability to manufacture our products could be negatively affected by such events.

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

Therefore, we have shifted our first-in-human studies of the lead drug candidate, SBI-100, from the third quarter of 2021 to the second quarter of 2022.

COVID-19 could also potentially affect the operations of other health or regulatory authorities, such as the DEA, which could result in delays in meeting or approvals from such authorities.

Additionally, COVID-19 has caused significant disruptions to the global financial markets which could impact our ability to raise additional capital.

The extent to which the COVID-19 outbreak impacts our future business and operations will depend on developments that are highly uncertain and cannot be predicted.

As a result, there can be no assurance as to the manner and extent to which the COVID-19 outbreak (or other large-scale disruption) could continue to impact our operations, results and financial condition.

The COVID-19 pandemic, related variants and other epidemic diseases has, and could continue to, adversely impact our business, including our drug manufacturing, nonclinical activities and clinical trials.

The COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce.

For example, the COVID-19 pandemic has in the past negatively impacted our ability to source materials that are part of the eye drop formulation, as well as negatively impacted our patient recruitment in Australia for our clinical trials.

The extent to which the COVID-19 pandemic may impact our business, including our preclinical studies, planned clinical trials, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

We continue to monitor COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of its employees and other third parties with whom the Company does business.

In connection with the COVID-19 pandemic or an outbreak of another highly infectious or contagious disease or other health concern, we may continue to experience disruptions that could severely impact our business, drug manufacturing, nonclinical activities, and clinical trials.

Due to our limited resources, we may be forced to focus on a limited number of development candidates which may force us to pass on opportunities that could have a greater chance of clinical success.

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If a failure, accident or security breach were to occur and cause interruptions in our operations, or the operations of our partners or third-party providers, it could result in a misappropriation of confidential information, including our intellectual property or financial information or clinical trial participant personal data, a material disruption or delay in our drug development programs, and/or significant monetary losses.

For example, the loss of preclinical or clinical trial data from completed, ongoing or planned trials, or chemistry, manufacturing and controls data for our product candidates, could result in delays in regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

For example, during the second quarter of 2022, we were indirectly impacted by a cyberattack on our Phase 1 clinical supply contract manufacturer which delayed our production timeline and the anticipated initiation of enrollment in our Phase 1 clinical studies for SBI-100 OE to the fourth quarter of 2022.

The loss of preclinical or clinical trial data from completed, ongoing or planned trials, or chemistry, manufacturing and controls data for our product candidates, could result in delays in regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

Any such breach, loss or compromise of clinical trial participant personal data may also subject us to civil fines and penalties under the privacy laws of the European Union or other countries as well as state and federal privacy laws in the United States.

We maintain cyber liability insurance;

however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems or the systems of our service providers.

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Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could have a material adverse effect on our business, financial condition or results of operations.

Privacy and data security have become significant issues in the U.S., and in many other jurisdictions where we may in the future conduct our operations.

The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues, which may affect our business and may increase our compliance costs and exposure to liability.

As we receive, collect, process, use and store personal and confidential data, we are or may be subject to diverse laws and regulations relating to data privacy and security.

Compliance with these privacy and data security requirements is rigorous and time-intensive and may increase our cost of doing business, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation and reputational harm, which could materially and adversely affect our business, financial condition and results of operations.

In the U.S., we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their implementing regulations, or collectively, HIPAA, impose, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information held by covered entities and their business associates.

We may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA.

Depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

In addition, state laws govern the privacy and security of health-related and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same requirements, thus complicating compliance efforts.

By way of example, California enacted the California Consumer Privacy Act, or CCPA, effective January 1, 2020, which gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that has increased the likelihood of, and risks associated with, data breach litigation.

The CCPA may increase our compliance costs and potential liability.

Further, the California Privacy Rights Act, or CPRA, generally went into effect on January 1, 2023, and significantly amends the CCPA.

The CPRA imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It also creates a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement and additional compliance investment and potential business process changes may be required.

Similar laws have passed in Virginia, Connecticut, Utah and Colorado, and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The enactment of such laws could have potentially conflicting requirements that would make compliance challenging.

In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition

If we fail to enter and maintain successful collaborative arrangements or strategic alliances for our product candidates, we may have to reduce or delay our product candidate development or increase our expenditures.

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In addition, these kinds of collaborative arrangements and strategic alliances may place certain aspects of the development of our product candidates outside of our control, may require us to relinquish important rights or may otherwise be on terms unfavorable to us.

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Dependence on collaborative arrangements or strategic alliances will subject us to several risks, including the risks that:

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• collaborative arrangements are often terminated or allowed to expire, which would delay development and may increase the cost of developing our product candidates.

The Company is currently subject to lawsuits, and in the future may be subject to additional lawsuits, that could divert its resources and result in the payment of significant damages and other remedies.

From time to time, the Company may be subject to litigation claims through the ordinary course of its business operations or otherwise, regarding, among other things, intellectual property rights matters, employment matters and tax matters.

Litigation to defend the Company against claims by third parties, or to enforce any rights that the Company may have against third parties, may be necessary, which could result in substantial costs and diversion of the Company's resources, causing a material adverse effect on its business, financial condition and results of operations.

Given the nature of the Company's business, it is, and may from time to time in the future be, party to various, and at times numerous, legal, administrative and regulatory inquiries, investigations, proceedings and claims that arise in the ordinary course of business, as well as potential class action lawsuits.

Because the outcome of such legal matters is inherently uncertain, if one or more of such legal matters were to be resolved against the Company for amounts in excess of management's expectations or any applicable insurance coverage or indemnification right, the Company's results of operations and financial condition could be materially adversely affected.

Any litigation to which the Company is a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal, or in payments of substantial monetary damages or fines, the posting of bonds requiring significant collateral, letters of credit or similar instruments, or the Company may decide to settle lawsuits on similarly unfavorable terms.

Moreover, the Company cannot be sure that the remedies available to it at law or under contract, will be sufficient in amount, scope or duration to fully or partially offset any such possible liabilities.

Any of these factors, individually or in the aggregate, could have a material adverse effect on the Company's business, results of operations, cash flows or liquidity.

For a description of certain currently pending legal and regulatory proceedings, see Item 3 “Consolidated Statements and Other Financial Information — Legal Proceedings” of this Annual Report and Item 3 (Legal Proceedings) of this Annual Report.

If we are unsuccessful in the resolution of the Cunning Lawsuit, our business may be materially harmed, and we may be required to take actions to reorganize, discontinue or liquidate part or all of our operations.

As described in more detail under the caption “Legal Proceedings – Cunning Lawsuit”, on January 18, 2023, a jury rendered a verdict in favor of Ms.

Cunning and awarded her $512,500 in economic damages (e.g., lost earnings, future earnings and interest), $840,960 in non-economic damages (e.g., emotional distress) and $3,500,000 in punitive damages.

The plaintiff's counsel has also filed a motion for attorney fees claiming fees of $1,351,850 and a multiplier of 1.5, for a total of $2,027,775.

The Company intends to vigorously challenge the verdict in the trial court and appeal and pursue reimbursement under its existing insurance policies.

However, the outcome of the litigation and the amount recoverable under its existing insurance policies, if any, is inherently uncertain.

While we cannot currently determine the ultimate liability pursuant to this verdict, we recorded an estimate for a legal contingency of $6,205,310 related to the Cunning Lawsuit.

If we are unable to reduce the verdict prior to the rendering of a final judgment by the court or to reach a reasonable settlement with Ms.

Cunning, we would be liable to pay substantial damages in excess of our liquid assets.

Any or all of the foregoing would materially harm our business, fundamentally change our business, and could result in our being required to take actions to discontinue operations, liquidate part or all of our operations or file a petition for bankruptcy in order to reorganize or liquidate.

If we are not able to favorably resolve our litigation with Ms.

Cunning, we could potentially be required to seek relief through a filing under the U.S.

Bankruptcy Code, either through plan of reorganization or under an alternative plan, which could include liquidation.

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If we are not able to favorably resolve our litigation with Ms.

Cunning, we could potentially be required to seek relief through a filing under the U.S.

Bankruptcy Code.

The announcement of a filing under the U.S.

Bankruptcy Code could materially adversely affect the relationships between us and our employees, suppliers, third party contractors and consultants, and others.

Substantial risks would result from any such bankruptcy filing.

• if we were not able to develop a successful plan for reorganization, we would be forced to liquidate;

• the equity interests of our current stockholders and employees could be completely eliminated

Risks Related to Controlled Substances

The product candidates we are developing will be subject to U.S.

Government authorities extensively regulate our activities.

Government authorities in the United States, at the federal, state and local level, and in other countries, extensively regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products such as those we are developing.

The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations, require the expenditure of substantial time and financial resources.

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

Some of the product candidates we are developing, including SBI-100, will be subject to U.S.

The product candidates we plan to develop will contain controlled substances as defined in the CSA.

Some product candidates we plan to develop will contain controlled substances as defined in the CSA.

Controlled substances that are pharmaceutical products are subject to a high degree of regulation under the CSA, which establishes, among other things, certain registration, manufacturing quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA.

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While certain cannabinoids may be classified as Schedule I controlled substances, products approved for medical use in the United States that contain certain cannabinoids must be placed on Schedules II-V, since approval by the FDA satisfies the “accepted medical use” requirement.

If approved by the FDA, we expect the finished dosage forms of our cannabinoid derivative product candidates to be listed by the DEA as a Schedule II or III controlled substance.

Consequently, their manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use will be subject to a significant degree of regulation by the DEA.

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

This decision by the DEA should help the Company expand the network of clinical testing sites, permit a greater cross-section of patients to participate in studies of this drug, as well as speed the initiation of clinical trials for SBI-200.

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

If approved by the FDA, we expect the finished dosage forms of SBI-100 OE to be reevaluated by the DEA and no longer listed as a Schedule I drug.

Consequently, SBI-100 OE's manufacture, importation, exportation, domestic distribution, storage, sale and legitimate use may be subject to a significant degree of regulation by the DEA, if the finished dosage form is determined to be a Schedule II drug.

In addition, the scheduling process may take one or more years, thereby delaying the launch of the drug product in the United States.

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In certain circumstances, violations could lead to criminal proceedings.

Individual states have also established controlled substance laws and regulations.

Individual states may also establish controlled substance laws and regulations that

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may require additional regulatory approvals to conduct research and clinical trials in that state.

As a result, we or our partners or clinical sites may also be required to obtain separate state registrations, permits or licenses in order to be able to receive, handle, and distribute controlled substances for clinical trials.

Delay in obtaining these state registrations, permits or licenses may delay the start of our clinical trials.

While some states automatically schedule a drug based on federal action, other states schedule drugs through rule making or a legislative action.

State scheduling may delay commercial sale of any product for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product.

We or our partners or clinical sites must also obtain separate state registrations, permits or licenses in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions by the states in addition to those from the DEA or otherwise arising under federal law.

We or our partners or clinical sites must also obtain separate state registrations, permits or licenses to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions by the states in addition to those from the DEA or otherwise arising under federal law.

To conduct clinical trials with our product candidates in the United States prior to approval, each of our research sites must obtain and maintain a DEA researcher registration that will allow those sites to handle and dispense the product candidate and to obtain the product.

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Furthermore, state and federal enforcement actions, regulatory requirements, and legislation intended to reduce prescription drug abuse, such as the requirement that physicians consult a state prescription drug monitoring program may make physicians less willing to prescribe, and pharmacies to dispense, our products, if approved.

Research restrictions, product shipment delays or prohibitions could have a material adverse effect on our business, results of operations and financial condition.

Research on and the shipment, import and export of our product candidates and the active pharmaceutical ingredient ("API") used in our product candidates will require research permits, import and export licenses by many different authorities.

Research restrictions, product shipment delays or prohibitions could have a material adv erse effect on our business, results of operations and financial condition.

Research on and the shipment, import and export of our product candidates and the API used in our product candidates will require research permits, import and export licenses by many different authorities.

For instance, in the United States, the FDA, U.S.

Customs and Border Protection, and the DEA;

in Canada, the Canada Border Services Agency, and HC;

in Europe, the EMA and the European Commission;

in Canada, the Canada Border Services Agency, and Health Canada;

in Europe, the European Medicines Agency and the European Commission;

in Australia and New Zealand, the Australian Customs and Border Protection Service, the Therapeutic Goods Administration, the New Zealand Medicines and Medical Device Safety Authority and the New Zealand Customs Service;

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The regulation of controlled substances is complex and subject to stringent controls.

If our partners cannot obtain or maintain the necessary regulatory authorizations that we anticipate will be required for the contemplated development program, our business may suffer, and we may not be able to pursue the discovery, research and development of cannabinoids.

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Laws and regulations affecting therapeutic uses of cannabinoids are constantly evolving.

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Prior to commencing clinical trials in territories with a regulatory authority we must obtain the necessary approvals to commence the clinical studies.

For example, before initiating a clinical trial in the United States for any of our product candidates, we may be required to have an Investigational New Drug application ("IND") in effect for each product candidate.

For example, before initiating a clinical trial in the United States for any of our product candidates, we may be required to have an IND in effect for each product candidate.

Submission of an IND may not result in the FDA allowing clinical trials to begin and, once begun, issues may arise that will require us to suspend or terminate such clinical trials.

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If we fail to demonstrate the safety and efficacy of any product candidate that we develop to the satisfaction of the regulatory authorities, we may incur additional costs or experience difficulty in completing, the development and commercialization of such product candidate.

We are not permitted to commercialize, market, promote, or sell any product candidate in the United States without obtaining marketing approval from the FDA or in other countries without obtaining approvals from comparable foreign regulatory authorities, such as the European Medicines Agency (the “EMA”), and we may never receive such approvals.

To gain approval to market a drug product, we must complete extensive nonclinical development and clinical trials that demonstrate the safety and efficacy of the product for the intended indication to the satisfaction of the FDA or other regulatory authority.

We have not previously submitted a new drug application ("NDA") to the FDA, or similar drug approval filings to comparable foreign authorities, for any product candidate, and we cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval.

We have not previously submitted a NDA to the FDA, or similar drug approval filings to comparable foreign authorities, for any product candidate, and we cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory approval.

If we do not receive regulatory approval for our product candidates, we may not be able to continue our operations.

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The policies of the applicable regulatory agencies could also significantly change in a manner rendering our clinical data insufficient for approval.

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Even if we eventually complete clinical testing and receive approval of a NDA or foreign regulatory filing for a product candidate, the FDA or the applicable foreign regulatory agency may grant approval contingent on the performance of costly additional clinical trials.

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Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether, which could result in increased development costs and cause the value of our company to decline and limit our ability to obtain additional financing.

Our development and commercialization strategy for SBI-100, may depend, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of dronabinol, based on data not developed by us, but upon which the FDA may rely in reviewing our NDA.

The Hatch-Waxman Act added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act ("FDCA"), Section 505(b)(2) permits the filing of a NDA where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.

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Our development and commercialization strategy for SBI-100 OE, may depend, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of dronabinol, based on data not developed by us, but upon which the FDA may rely in reviewing our NDA.

The Hatch-Waxman Act added Section 505(b)(2) to the FDCA, Section 505(b)(2) permits the filing of a NDA where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.

The FDA interprets Section 505(b)(2) of the FDCA, for purposes of approving a NDA, to permit the applicant to rely, in part, upon published literature or the FDA’s previous findings of safety and efficacy for an approved product.

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Such a result could require us to conduct additional testing and costly clinical trials, which could substantially delay or prevent the approval and launch of our product candidates, including SBI-100.

Even if we receive regulatory approval for a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory requirements or if we experience unanticipated problems with our product candidates, when and if approved.

Even if we receive marketing approval for a product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense and subject us to restrictions, withdrawal from the market, or penalties if we fail to comply with applicable regulatory requirements or if we experience unanticipated problems with our product candidates, when and if approved.

Once regulatory approval has been granted, the approved product and its manufacturer are subject to continual review by the FDA, DEA and/or non-U.S.

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In addition, we will be subject to extensive and ongoing regulatory requirements with regard to labeling, packaging, adverse event reporting, storage, distribution, advertising, promotion, recordkeeping and submission of safety and other post-market information.

Manufacturers of our products and manufacturers’ facilities are required to comply with current good manufacturing practice ("cGMP") regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

Manufacturers of our products and manufacturers’ facilities are required to comply with current good manufacturing practice regulations, which include requirements related to quality control and quality assurance as well as the corresponding maintenance of records and documentation Accordingly, we and others with whom we work must continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production and quality control.

We will also be required to report certain adverse reactions and production problems, if any, to the FDA and to comply with requirements concerning advertising and promotion for our products.

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For additional information, see Risk Factor, “ The product candidates we are developing will be subject to U.S.

controlled substance laws and regulations and failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, may adversely affect the results of our business operations, both during non-clinical and clinical development and post-approval, and our financial condition.

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The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling and regulatory requirements.

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regulatory authorities, we could be subject to administrative or judicially imposed sanctions.

Widely publicized events concerning the safety risk of certain drug products have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the imposition by the FDA of risk evaluation and mitigation strategies (“REMS”), to ensure that the benefits of the drug outweigh its risks.

In addition, widely publicized events concerning the safety risk of certain drug products have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the imposition by the FDA of REMS to ensure that the benefits of the drug outweigh its risks.

In addition, because of the serious public health risks of high-profile adverse safety events with certain products, the FDA may require, as a condition of approval, costly REMS programs.

Widely publicized events concerning the safety risk of certain drug products have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the imposition by the FDA of risk evaluation and mitigation strategies, to ensure that the benefits of the drug outweigh its risks.

In addition, widely publicized events concerning the safety risk of certain drug products have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and the imposition by the FDA of risk evaluation and mitigation strategies to ensure that the benefits of the drug outweigh its risks.

In addition, because of the serious public health risks of high-profile adverse safety events with certain products, the FDA may require, as a condition of approval, costly risk evaluation and mitigation strategies programs.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or in other countries.

If we or any future collaboration partner are not able to maintain regulatory compliance, we or such collaboration partner, as applicable, will not be permitted to market our future products and our business will suffer.

Serious adverse events or undesirable side effects or other unexpected properties of any of our product candidates may be identified during development or after approval that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or result in significant negative consequences following marketing approval.

Serious adverse events or undesirable side effects or other unexpected properties of any of our product candidates may be identified during development or after approval that could delay, prevent or cause the withdrawal of marketing approval, limit the commercial potential, or result in significant negative consequences following marketing approval.

Serious adverse events or undesirable side effects caused by, or other unexpected properties of, our product candidates could cause us, an IRB, or regulatory authorities to interrupt, delay or halt our clinical trials and could result in a more restrictive label, the imposition of distribution or use restrictions or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities.

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We expect to rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to conduct our nonclinical and clinical studies on our product candidates in compliance with applicable regulatory requirements.

For example, we have currently engaged with Novotech in Australia to conduct our clinical trials that are expected to begin in the second quarter of 2022.

For example, we are currently engaged with Novotech, a CRO in Australia, to conduct our Phase 1 clinical trial.

These third parties will not be our employees and, except for restrictions imposed by our contracts with such third parties, we will have limited ability to control the amount or timing of resources that they devote to our programs.

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These entities must maintain and comply with valid DEA registrations and requirements.

The FDA and regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly referred to as current good clinical practices ("cGCPs"), for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.

If we or any of our third party contractors fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications.

The FDA and regulatory authorities in other jurisdictions require us to comply with regulations and standards, commonly referred to as current good clinical practices, for conducting, monitoring, recording and reporting the results of clinical trials, in order to ensure that the data and results are scientifically credible and accurate and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.

If we or any of our third party contractors fail to comply with applicable current

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good clinical practices, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications.

In addition, we are required to report certain financial interests of our third party investigators if these relationships exceed certain financial thresholds and meet other criteria.

The FDA or comparable foreign regulatory authorities may question the integrity of the data from those clinical trials conducted by principal investigators who previously served or currently serve as scientific advisors or consultants to us from time to time and receive cash compensation in connection with such services.

Our clinical trials must also generally be conducted with products produced under cGMP regulations.

Our clinical trials must also generally be conducted with products produced under current good manufacturing practice regulations.

Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

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If one of our suppliers or manufacturers fails to perform adequately, we may be required to incur significant delays and costs to find new suppliers or manufacturers.

We currently have no experience in, and we do not own facilities for, manufacturing our product candidates.

We do not own facilities for, manufacturing our product candidates.

We rely on, and expect to continue relying upon, third party manufacturing organizations to manufacture and supply our product candidates and certain raw materials used in the production thereof.

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The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our NDA to the FDA.

We expect that we will not control the manufacturing process of, and will be completely dependent on, our contract manufacturing partners for compliance with cGMP requirements, for manufacture of our drug products.

We expect that we will not control the manufacturing process of, and will be completely dependent on, our contract manufacturing partners for compliance with current good manufacturing practice requirements, for manufacture of our drug products.

If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, DEA or others, they will not be able to secure and/or maintain DEA registrations and regulatory approval for their manufacturing facilities.

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The failure of third party manufacturers or suppliers to perform adequately or the termination of our arrangements with any of them may adversely affect our business.

Healthcare reform measures could hinder or prevent our products candidates’ commercial success, if approved.

In the United States, there have been, and we anticipate there will continue to be, a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell any of our products profitably if approved.

In the United States, the Federal government passed the Patient Protection and Affordable Care Act in 2010, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”).

• increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1%;

• requires collection of rebates for drugs paid by Medicaid managed care organizations

• requires manufacturers to participate in a coverage gap discount program, under which they must agree to offer 50 percent point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and

• imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs” to specified federal government programs.

We expect that state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates if approved, or additional pricing pressure.

The implementation of cost containment measures or other healthcare reform initiatives may prevent us from being able to generate revenue, attain profitability, or commercialize any products for which we may obtain regulatory approval.

The continuing efforts of the government, insurance companies, managed care organizations and other payers of healthcare services to make and implement healthcare reforms may adversely affect our ability to set a price we believe is fair for our products, to generate revenues and achieve or maintain profitability, to raise capital, and to obtain timely approval of our products.

Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize our product candidates and may affect the prices we may set.

In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes to the healthcare system, including cost-containment measures that may reduce or limit coverage and reimbursement for newly approved drugs and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

In particular, there have been and continue to be a number of initiatives at the U.S.

federal and state levels that seek to reduce healthcare costs and improve the quality of healthcare.

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For example, in March 2010, the ACA was enacted in the United States.

Among the provisions of the ACA of importance to our potential product candidates, the ACA:

established an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;

expanded eligibility criteria for Medicaid programs;

increased the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

created a new Medicare Part D coverage gap discount program;

established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research;

and established a Center for Medicare Innovation at the Centers for Medicare and Medicaid Services to test innovative payment and service delivery models to lower Medicare and Medicaid spending.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.

On June 17, 2021, the U.S.

Supreme Court dismissed the most recent judicial challenge to the ACA without specifically ruling on the constitutionality of the ACA.

Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace.

The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, included reductions to Medicare payments to providers, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

In addition, on March 11, 2021, the American Rescue Plan Act of 2021 was signed into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, or AMP, beginning January 1, 2024.

Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescription drugs.

Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

On August 16, 2022, the Inflation Reduction Act of 2022, or IRA, was signed into law.

Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare (beginning in 2026), with prices that can be negotiated subject to a cap;

imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (first due in 2023);

and replaces the Part D coverage gap discount program with a new discounting program (beginning in 2025).

The IRA permits the Secretary of the Department of Health and Human Services (HHS) to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

For that and other reasons, it is currently unclear how the IRA will be effectuated.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws.

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• federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third party payors that are false or fraudulent;

• HIPAA, which created federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters, and as amended by the Health Information Technology and Clinical Health Act and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information;

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• the Health Insurance Portability and Accountability Act, which created federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters, and as amended by the Health Information Technology and Clinical Health Act and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information;

• the federal physician sunshine requirements under the ACA, which require manufacturers of drugs, devices, biologics, and medical supplies to report annually to the U.S.

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We may be subject to requests for access to our product candidates.

Demand for compassionate use of our unapproved therapies could strain our resources, delay our drug development activities, negatively impact our regulatory approval or commercial activities, and result in losses.

We are developing product candidates to treat conditions for which there are currently limited therapeutic options.

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In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.

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Our common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices or at all.

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We cannot assure you that our common stock will become eligible for listing or quotation on any exchange and the failure to do so may adversely affect your ability to dispose of our common stock in a timely fashion.

We may in the future consider actions that make us eligible to list our common shares on a stock exchange.

We have, and may in the future, consider actions that make us eligible to list our common shares on a stock exchange.

For example, we previously applied to list our shares of common stock on the Canadian Stock Exchange ("CSE"), but after consideration, we have determined that we do not currently meet the applicable listing requirements.

We have have decided not to continue with the CSE listing application process for now and we do not anticipate having our shares of common stock listed on the CSE in the foreseeable future.

We may not be able satisfy the initial standards for listing or quotation on any exchange in the foreseeable future or at all.

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These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

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We will need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.

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As of March 29, 2023, Sciences owned 17.44% of our outstanding shares of common stock.

As such, Sciences may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.

As such, Sciences may be able to exert significant influence over elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction.

This concentration of ownership may prevent or discourage unsolicited acquisition proposals or offers for our common stock that some of our stockholders may believe is in their best interest.

We have a substantial number of authorized common shares available for future issuance that could cause dilution of our stockholders’ interest and adversely impact the rights of holders of our common stock.

We have a substantial number of authorized common shares available for future issuance that could cause dilution to our Stockholders’ interest and adversely impact the rights of the holders of our Shares.

We have a total of 5,000,000,000 shares of common stock authorized for issuance and up to 50,000,000 shares of preferred stock with the rights, preferences and privileges that our Board may determine from time to time.

As of March 29, 2023, we have reserved;

34,540,000 shares for issuance upon the exercise of outstanding options, 4,000,000 shares for issuance upon the vesting of outstanding restricted stock units, 16,979,595 shares for issuance under our 2014 equity incentive plan, 5,474,962 shares underlying the Amended Credit Agreement including accrued interest, and 134,312,225 shares for issuance upon the exercise of outstanding warrants.

41,677,750 shares for issuance upon the exercise of outstanding options, 2,680,000 shares for issuance upon the vesting of outstanding restricted stock units, 43,592,069 shares for issuance under our equity incentive plan, 28,000,000 shares for issuance under our 2022 employee stock purchase plan, and 197,134,632 shares for issuance upon the exercise of outstanding warrants.

As of March 29, 2023, we had no outstanding preferred stock.

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If the price per share of our common stock at the time of exercise of any warrants, options, or any other convertible securities is in excess of the various conversion or exercise prices of these convertible securities, conversion or exercise of these convertible securities would have a dilutive effect on our common stock.

As of March 24, 2022, we had outstanding (i) warrants to purchase up to 134,312,225 shares of our common stock at exercise prices ranging from $0.08 to $5.00 per share, (ii) options to purchase up to 34,540,000 shares of our common stock at exercise prices ranging from $0.05 to $0.31 per share, (iii) convertible debt and accrued interest with a conversion price of $0.40 convertible into up to 5,474,962 shares of our common stock, and (iv) 4,000,000 unreleased restricted stock units exchangeable for shares of our common stock upon vesting.

As of March 29, 2023, we had outstanding (i) warrants to purchase up to 197,134,632 shares of our common stock at exercise prices ranging from $0.02 to $5.00 per share, (ii) options to purchase up to 41,677,750 shares of our common stock at exercise prices ranging from $0.02 to $1.80 per share, (iii) 2,680,000 unreleased restricted stock units exchangeable for shares of our common stock upon vesting.

Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to those of our common stock and which result in additional dilution of the existing ownership interests of our common stockholders.

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During 2018, pursuant to the Emerald Financing transaction, the Company underwent a significant ownership change which likely triggered a limitation under Section 382.

If we experience ownership changes as a result of future transactions in our stock, our ability to use our net operating loss carryforwards and other tax attributes to offset U.S.

If we experience ownership changes as a result of future transactions in

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our stock, our ability to use our net operating loss carryforwards and other tax attributes to offset U.S.

federal taxable income may be subject to further limitations, which could potentially result in increased future tax liability to us.

Risks Related to the EHT Acquisition

We may face risks related to the wind-down of EHT’s operations.

On May 11, 2022, we entered into an Arrangement Agreement (as amended, the “Arrangement Agreement”) with EHT pursuant to which we agreed to acquire all of the issued and outstanding common shares of EHT (the “EHT Shares”) pursuant to a plan of arrangement under the Business Corporations Act (British Columbia) (the “Acquisition”).

As previously mentioned, the Acquisition of EHT and its subsidiaries was consummated on November 10, 2022.

As of the date of this Annual Report on Form 10-K, We intend to continue to continue to wind down the operations of EHT and its subsidiaries and focus on the business of SKYE we have divested both of EHT's former operating entities, VDL and EHTC, and are in the process of closing EHT’s legacy tax matters with the Canadian tax authorities.

The ability to realize the benefits of the Acquisition may depend in part on successfully winding down the operations of EHT, including, but not limited to:

the sale of EHT's remaining facilities at terms favorable to us, the timely termination of obsolete contracts, the implementation of cost-cutting measures necessary to maximize the remaining asset balances, the effective management of the termination of remaining personnel and related severance payments, and the implementation of a successful transition plan, which includes the effective cessation of regulatory requirements related to operating in the cannabis industry.

Other risks resulting from the EHT assets and discontinued operations that could diminish the assets being acquired by us include unforeseen expenses, liabilities, or potential off-balance sheet liabilities, including litigation and tax related liabilities.

The difficulties that we encounter in the transition, integration and wind-down processes could have an adverse effect on the level of expenses, and operating results of our business.

As a result of these factors, it is possible that any anticipated benefits from the Acquisition will not be realized.

Unresolved Staff Comments.

We lease our principal executive and corporate offices are located at 11250 El Camino Real, Suite 100, San Diego, CA 92130.

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 1A. Risk Factors