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Item 9A. Controls and Procedures

2023-03-31 compared with 2022-03-28 · 976 added, 531 removed, 1028 unchanged (59% of the section changed)

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As we are a smaller reporting company, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting.

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Changes in internal control over financial reporting

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Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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Directors, Executive Officers and Corporate Governance .

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Margaret Dalesandro 76 Director

Jim Heppell 66 Director

Deborah Charych 58 Director

Praveen Tyle 63 Director

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Punit Dhillon.

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

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

On December 17, 2019, Mr.

Dhillon was appointed as our board Chair.

On August 10, 2020, Mr.

Dhillon was appointed as our Chief Executive Officer.

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

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

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

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

Prior to OncoSec, Mr.

Dhillon was the Vice President of Finance and Operations at Inovio Pharmaceuticals, Inc.

INO) from September 2003 until March 2011.

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

Prior to joining Inovio, Mr.

Dhillon worked for a corporate finance law firm as a law clerk and worked with MDS Capital Corp.

(now Lumira Capital Corp.).

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

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

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

We believe Mr.

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

Dhillon was appointed as a member of the Board of Directors in 2018.

In December 2019, Mr.

Dhillon was appointed as the Chairman of the Board of Directors.

In August 2020, Mr.

Dhillon was appointed as the Company's Chief Executive Officer.

Dhillon is currently a board member of Arch Therapeutics Inc., a US-based biotechnology company developing a novel approach to stop bleeding (hemostasis), control leaking (sealant), and manage wounds during surgery, trauma, and interventional care (OTCQB:

Dhillon was the co-founder and former President & CEO of OncoSec Medical Incorporated (NASDAQ:

ONCS), a leading biopharmaceutical company developing cancer immunotherapies for the treatment of solid tumors, where he served as an executive until March 2018 and as a director until February 2020.

Prior to that, from September 2003 to March 2011, Mr.

Dhillon served as Vice President of Finance and Operations at Inovio Pharmaceuticals, Inc.

INO), a DNA vaccine development company.

Collectively, Mr.

Dhillon has led and assisted in raising over $500 million through financings and mergers and acquisitions deals, as well as several licensing and development transactions with large pharmaceutical companies including Merck & Co., Inc.

MRK), Bristol Myers Squibb Co (NYSE:

BMY), and Pfizer Inc.

Dhillon also co-founded and is the director of YELL Canada, a registered Canadian charity that partners with schools to support entrepreneurial learning.

Dhillon received his Bachelor of Arts Honors degree in Political Science with a minor in Business Administration from Simon Fraser University.

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

Kaitlyn Arsenault, CPA .

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

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

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

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

Arsenault was appointed as the Company’s Chief Financial Officer in October 2021.

From 2014 to 2021, Ms.

Arsenault previously served as the President of KA Consulting, Inc., a registered public accounting firm in San Francisco, CA, providing independent technical accounting consulting services for emerging public and private companies in the pharmaceutical, life sciences, technology, and FinTech industries.

From September 2016 to October 2021, she served as the Company’s Head of Financial Reporting and Technical Accounting.

Prior to becoming an independent financial consultant, Ms.

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

Arsenault spent seven years in public accounting as an assurance manager in the SEC practice of Friedman LLP (now Marcum LLP), gaining public and private audit engagement experience across multiple industries.

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

We believe that Ms.

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

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

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

Chair of Emerald Health Therapeutics, Inc.

EMH) and Emerald Health Pharmaceuticals, Inc.;

and President of Emerald Health Research Inc.

Formerly, Mr.

Heppell served as a director of Sophiris Bio, Inc.

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

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

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

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

Securities Commission for six months.

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

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

For numerous years, Mr.

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

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

We believe Mr.

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

Margaret Dalesandro, PhD.

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

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

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

Margaret Dalesandro .

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

From 2019 to 2021, Dr.

Dalesandro served on the board of OncoSec Medical Incorporated (NASDAQ:

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

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

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

In addition, Dr.

Dalesandro is the President of Brecon Pharma Consulting LLC.

In addition, she served as Chair of the OncoSec Medical Incorporated Board from early 2020 through 2021.

Since 2021, Dr Dalesandro has served on the board of Seelos Therapeutics, a company focusing on the development of treatments for central nervous system diseases (NASDAQ:

Since 2012, Dr.

Dalesandro has been the President of Brecon Pharma Consulting LLC., a full-service pharma/biotech consultancy focusing on identifying and obtaining critical information early in product development.

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

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

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

Executive Director of Project and Portfolio Management at GlaxoSmithKline;

and Senior Consultant at Cambridge Pharma Consultancy.

During her tenure at Centocor, Inc, Dr.

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

From 2009 to 2012, she served as the Business Director of Integrative Pharmacology in the Life Sciences (Corning Integrated Pharmacology - CIP) division at Corning Incorporated, leading all aspects of the CIP business including commercial, technical, P&L, competitive assessment, strategy, and talent management;

from 2002 to 2009, as Vice President of Project, Portfolio and Alliance Management at ImClone Systems Incorporated, which was a biopharmaceutical company dedicated to developing biologic medicines in the area of oncology;

from 2000 to 2002, as Executive Director of Project and Portfolio Management at GlaxoSmithKline, a global pharmaceutical company producing treatments for respiratory illnesses, HIV, immuno-inflammation, and oncology (among others) (NYSE:

and from 1998 to 2000, as Senior Consultant at Cambridge Pharma Consultancy, Europe's largest pharmaceutical R&D strategy consulting firm.

During her tenure from 1989 to 1998 at Centocor Incorporated, a biotechnology company forming a part of the Johnson & Johnson group of companies and specializing in the production of treatments for infectious, cardiovascular, and autoimmune

Table of Cont ents

diseases and cancer, Dr.

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

Dalesandro received her Ph.D.

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

We believe Dr.

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

Praveen Tyle, PhD.

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

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

KPRX) and Orient Europharma Co., Ltd.

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

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

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

In past roles, Dr.

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

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

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

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

We believe Dr.

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

Keith Ward, PhD .

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

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

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

Deborah Charych.

Deborah Charych is currently a member of the Board and has served as a member since February 2023.

Since October 2018, Dr.

Charych has served as the Co-Founder, Chief Technology Officer, and Advisor of RayzeBio, Inc, an oncology company focused on the targeted delivery of radionuclides.

Charych conceived and led the scientific and operational R&D strategy for RayzeBio, leading a successful Series A financing and launch in August 2020, as well as subsequent Series B, C, and D rounds.

Prior to launching RayzeBio, Dr.

Charych held a number of scientific leadership positions in biotech focused on translational drug development.

From 2017 to 2019, she founded Third Rock Ventures, creating new biotech companies based on strong science, co-founding Maze Therapeutics, which focuses on harnessing the power of human genetics, functional genomics, and data science to advance our understanding of how to more effectively treat patients with severe rare and common diseases.

From 2010 to 2018, Dr.

Charych served as Executive Director of Preclinical and Translational Research at Nektar Therapeutics, conceiving of and leading the pre-clinical and early clinical development of an immuno-oncology pipeline with NKTR-214 and NKTR-358, next-generation IL-2 receptor agonists, which are currently in Phase 3 oncology and Phase 2 autoimmune clinical trials.

At FivePrime Therapeutics from 2007 to 2010, Dr.

Charych was the Director of Biologics Process Development/CMC/Protein Chemistry, leading a team that contributed to the clinical development of novel biologics for pan-FGF and CSF1 antagonist antibodies for oncology and immunology diseases.

From 1998 to 2006, while at Chiron Corporation, she initiated and led a large proteomics effort to guide oncology target discovery, including the discovery of peptide-mimetic binders ('peptoids').

During her time at Lawrence Berkeley National Laboratory from 1993 to 1998, she assumed an academic leadership role as a tenured Principal Investigator, focusing on new biomaterials.

Charych earned a PhD in Physical Chemistry from the University of California in Berkeley, CA and a B.S.

in Chemistry from Carnegie-Mellon University in Pittsburgh, PA.

Charych’s education and significant experience with a wide variety of life science companies give her the qualifications and skills necessary to serve as a director of the Company.

Praveen Tyle.

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

Since 2006, Dr.

Tyle has served as a member of the board at Kiora Pharmaceuticals, a pharmaceutical company that develops therapies for the treatment of eye diseases (NASDAQ:

KPRX) and since 2003, he has served as a member of the board at Orient Europharma Co., Ltd., a pharmaceutical company operating primarily in Asia and producing a wide range of prescription drugs and nutrition products.

Since 2021, Dr.

Tyle has served as President, Chief Executive Officer, and Director of Invectys, Inc., a clinical-stage biopharmaceutical company founded from the world-renowned Pasteur Institute and focused on the development of innovative immunotherapy approaches to treat cancers.

From 2016 to 2021, he was Executive Vice President of Research and Development at Lexicon Pharmaceuticals, Inc., a pharmaceutical company whose genetic approach to drug development is based on Nobel Prize-winning technology (NASDAQ:

From 2013 to 2016, he served as President, Chief Executive Officer, and Director of Osmotica Holdings (Cyprus & Osmotica Pharmaceutical), a company focusing on central nervous system drug development.

From 2011 to 2012, Dr.

Tyle was the Executive Vice President and Chief Scientific Officer of United States Pharmacopeia, an independent scientific nonprofit organization focused on building trust in the supply of safe, quality medicines.

From 2008 to 2010, Dr.

Tyle served as Senior Vice President and Global Head of Business Development and Licensing and Global Head of Research and Development at Novartis OTC, a pharmaceutical company that produces both patented and generic product on a global scale (NYSE:

Earlier in his career, from 2004 to 2008, he was Corporate Senior Vice President and Chief Scientific Officer at Bausch + Lomb Corporation, a company specializing in eye care and whose products and innovations range from pharmaceuticals, lenses, and diagnostic and surgical tools (NYSE:

Since 2005, Dr.

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

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

Tyle earned his B.Pharm.

from Banaras Hindu University in India and received his PhD in Pharmaceutics & Pharmaceutical Chemistry from Ohio State University.

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

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

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

Ward co-founded Kuria Therapeutics, a private pharmaceutical company developing novel ophthalmic and dermal therapeutics, where he currently serves as President and Chief Executive Officer.

Since 2019, Dr.

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

Prior to joining InterveXion, Dr.

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

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

Ward earned a B.S.

in Toxicology with a minor in Chemistry from Northeast Louisiana University and a Ph.D.

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

We believe Dr.

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

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Section 16(a) Beneficial Ownership Reporting Compliance

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Board and Committee Meetings

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

During 2022, our Board met six times (including telephonic meetings) and took action by written consent fifteen times.

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

During 2022, our Board met by special committee eleven times (including telephonic meetings) and took action by written consent two times as a result of the special committee meetings.

Director Attendance at Annual Meetings

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All our directors - other than Dr.

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

Charych, who was elected as director in 2023 - attended our most recent meeting of stockholders.

Audit Committee and Financial Expert

On February 23, 2015, our Board established an audit committee that operates under a written charter that has been approved by our Board.

The members of our audit committee are Mr.

Jim Heppell, Dr.

The members of our audit committee are Dr.

Keith Ward, Dr.

Margaret Dalesandro and Dr.

Praveen Tyle.

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

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

The Board has determined that Dr.

Margaret Dalesandro and Dr.

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

Margaret Dalesandro and Dr.

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

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

Dalesandro and Dr.

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

Dalesandro and Dr.

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

Our audit committee met five times (including telephonic meetings) and acted by written consent two times in 2022.

Our audit committee is responsible for:

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The Audit Committee Charter is filed as Exhibit 99.1 to our Report on Form 8-K filed on February 27, 2015.

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Compensation Committee

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The members of our compensation committee are Dr.

Praveen Tyle, Mr.

Jim Heppell and Dr.

Praveen Tyle, and Dr.

Margaret Dalesandro.

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The Board has determined that Dr.

Margaret Dalesandro, Jim Heppell and Dr.

Margaret Dalesandro and Dr.

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

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

Our compensation committee met three times (including telephonic meetings) during 2022 and took no action by written consent during 2022.

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

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

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

Jim Heppell and Dr.

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

Margaret Dalesandro, Dr.

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Margaret Dalesandro, Dr.

Praveen Tyle, Jim Heppell and Dr.

Praveen Tyle, and Dr.

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

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

Our nomination and corporate governance committee met three times during 2022 (including telephonic meetings) and took action by written consent one time.

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

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A shareholder who wishes to communicate with our Board may do so by directing a written request addressed to our Chief Executive Officer, at the address appearing on the first page of this filing.

Code of Ethics

Table of Cont ents

Code of Ethics and Insider Trading Policy

On October 31, 2014, we adopted a formal code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, as well as our other officers, directors and employees.

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Any amendment or waiver disclosed on our website will remain available on our website for at least 12 months after the initial disclosure.

We maintain an Insider Trading Compliance Policy that prohibits our officers, directors and employees from purchasing or selling any type of security while in possession of material, non-public information relating to the security, whether the issuer of such security is the Company or any other company.

Additionally, no officer, director or employee shall purchase or sell any security of the Company during the period beginning on the 14th calendar day before the end of any fiscal quarter of the Company and ending upon completion of the second full trading day after the public release of earnings data for such fiscal quarter or during any other trading suspension period declared by the Company.

It prohibits officers, directors, or employees from pledging our stock as collateral to secure loans and from engaging in hedging transactions, including zero-cost collars and forward sale contracts.

It further prohibits margin purchases of our stock, short sales of our stock, and any transactions in puts, calls or other derivative securities involving our stock.

Executive Compensation .

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Position Year Salary

($) (4) Stock

($) (1) Option

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Chief Financial Officer (2) 2021 75,000 19,031 58,000 269,240 — — 181,473 602,744

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

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

Punit Dhillon 2022 432,577 298,000 — — — — 2,500 733,077

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

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

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

and RoseRyan, Inc.

Arsenault's services.

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

Richard Janney’s services.

(3) For the years ended December 31, 2022 and 2021, other compensation consists of personal tax preparation fee reimbursements per the executives employment agreement.

(4) In connection with the Acquisition, the Board approved transaction bonuses to be paid to the CEO and CFO of $111,000 and $148,000, respectively, upon the closing of the Acquisition (see Note 5).

As the Acquisition was completed on November 10, 2022, the amounts stated included the transaction bonuses.

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Employment and Severance Arrangements

Employment Agreement and Equity Awards

Employment Agreements and Equity Awards

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

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The agreement provides for an annual base salary of $400,000 per year and an annual discretionary bonus up to fifty percent (50%) of his base salary based on Mr.

Punit Dhillon’s achievement of annual corporate milestones agreed to by the Board.

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

Punit Dhillon’s employment with the Company is at-will.

Dhillon’s achievement of annual corporate milestones agreed to by the Board.

Effective June 1, 2022, Mr.

Dhillon's annual base salary was increased to $450,000 per year and his annual discretionary bonus eligibility was increased to sixty percent (60%) of his base salary.

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

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

Except for termination of Mr.

Punit Dhillon’s employment for “Cause,” “By Death” or “By Disability” (as such terms are defined in his employment agreement), Mr.

Punit Dhillon will be entitled to a minimum six months’ severance if he is terminated by the Company without cause.

Under his employment agreement, Mr.

Punit Dhillon will be eligible to receive a 12-months’ severance if he is employed by the Company for at least 12 months commencing on August 10, 2020, or a 24 months’ severance if he is employed by the Company for at least 24 months commencing on August 10, 2020.

Dhillon’s employment for “Cause,” “By Death”, “By Disability” (as such terms are defined in his employment agreement), Mr.

Dhillon will be entitled to a severance payment equal to twenty-four (24) months of his then current base salary, less applicable statutory deductions and withholdings if terminated by the Company.

In connection with his appointment, the Company granted Mr.

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

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

During the year ended December 31, 2021, Mr.

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

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

The restricted stock units vest in three equal annual installments commencing on the first anniversary of the grant date, which was December 14, 2021.

The stock options vest 25% on the one year anniversary of the grant date and 1/48th monthly thereafter.

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

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

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

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

Effective June 1, 2022, Ms.

Arsenault's annual base salary was increased to $340,000 per year and her annual discretionary bonus eligibility was increased to forty percent (40%) of her base salary.

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

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

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

Arsenault will be entitled to a severance payment equal to six (6) months of her then current base salary, less applicable statutory deductions and withholdings, if she is terminated by the Company.

In connection with her appointment, the Company granted Ms.

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

The restricted stock units vest in three equal annual installments commencing on the first anniversary of the grant date, which was December 14, 2021.

The stock options vest 25% on the one year anniversary of the grant date and 1/48th monthly thereafter.

On September 15, 2021, prior to Ms.

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In either such event, and provided the executive timely executes and does not revoke a general release of claims against us, he or she will be entitled to receive:

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

Table of Cont ents

under a subsequent employer’s healthcare plan, and (iii) full vesting of all then-outstanding unvested stock options and restricted stock awards.

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

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In subsequent annual periods, each non-employee director receives a grant of 250,000 common stock options which vest in twelve equal monthly installments.

Table of Cont ents

Non-employee directors who serve as members of special committees of the Board receive additional compensation as follows:

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66,944 — — — 66,944

Bobby Rai 5,617 — — — 5,617

(1) As of December 31, 2022, each non-employee director is entitled to an annual grant of 250,000 common stock options, all of which vest in twelve equal monthly installments.

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The valuation assumptions used in the valuation of options granted may be found in Note 7 to our financial statements included in this annual report on Form 10-K for the year ended December 31, 2022.

(2) On September 14, 2021, Mr.

The annual Board member grants for the year ended December 31, 2022, were approved in 2023.

(2) On May 18, 2022, Mr.

Heppell resigned from our Board and concurrently entered into a consulting agreement with us pursuant to which Mr.

Heppell would provide mutually agreed upon services related to the wind down of EHT.

In connection with the consulting agreement, Mr.

Heppell was granted options to purchase 4,000,000 shares of common stock.

These options have an exercise price of $0.04, and were subject to certain performance vesting and other vesting conditions pursuant to the consulting agreement.

The vesting conditions of the stock option award provided that 50% of the options were vested upon grant and the remaining 50% (the "Second Tranche") would vest upon the sale of a real estate asset held by EHT at an amount greater than or equal to an amount specified in the Arrangement Agreement (the " Vesting Condition").

On February 9, 2023, the closing date of the sale of the real estate asset held by EHT, the Second Tranche of stock options was cancelled as the Vesting Condition was not satisfied.

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

In addition, on September 14, 2021, Mr.

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

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

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

On October 10, 2018, Mr.

In addition, on October 10, 2018, Mr.

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

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

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

The aggregate number of shares issuable

Table of Cont ents

upon exercise of option awards outstanding at December 31, 2022 for Dr.

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

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The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2022 for Dr.

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

Ward was 250,000, of which 250,000 were fully vested.

(6) Under the consulting agreement, Mr.

Heppell is entitled to a monthly fee of $6,300, which was increased to $16,600 per month upon the closing of the Acquisition.

The consulting agreement provides Mr.

Heppell with a termination payment in an amount equal to the monthly fees through the then-remaining term of the agreement if Mr.

Heppell’s engagement is terminated by the Company without cause.

The consulting contract has been accounted for as an in-substance severance arrangement and $139,615 is recognized in severance expense during the year ended December 31, 2022.

The monthly fee for Mr.

Heppell's consulting agreement was adjusted to include the increased fee payments when the Acquisition closed.

As of December 31, 2022, $47,512 has been paid to Mr.

Heppell and $16,600 is owed and recognized in accounts payable - related party.

The remaining portion of the consulting contract of $75,503 is accrued for in other current liabilities - related party.

The consulting agreement with Mr.

Heppell was terminated on February 9, 2023.

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

Securities Authorized for Issuance under Equity Compensation Plans

The table below includes the following information as of December 31, 2021 for the Company’s 2014 Omnibus Incentive Plan.

Shares available for issuance under the 2014 Omnibus Incentive Plan can be granted pursuant to stock options, stock appreciation rights, restricted stock, restricted stock unit awards, performance awards and other stock-based or cash-based awards, as selected by the plan administrator.

For additional information about the 2014 Omnibus Incentive Plan, refer to Note 6 in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The table below includes the following information as of December 31, 2022 for the Company’s 2014 Amended and Restated Omnibus Incentive Plan (the “2014 Amended and Restated Plan”).

Shares available for issuance under the 2014 Amended and Restated Plan can be granted pursuant to stock options, stock appreciation rights, restricted stock, restricted stock unit awards, performance awards and other stock-based or cash-based awards, as selected by the plan administrator.

For additional information about the 2014 Amended and Restated Plan, refer to Note 8 in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Equity Compensation Plan Information

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Equity compensation plans approved by security holders

2014 Amended and Restated Omnibus Incentive Plan 45,661,730 $ 0.17 42,274,757

2022 Employee Stock Purchase Plan — — 28,000,000

Total 45,661,730 $ — 70,274,757

Table of Cont ents

Security Ownership of Certain Beneficial Owners and Management

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Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares).

In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided.

In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant or vesting of an RSU) within 60 days of the date as of which the information is provided.

In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of such acquisition rights.

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Kaitlyn Arsenault 1,744,114 (4) *%

Richard Janney — *%

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

Margaret Dalesandro 560,417 (5) *%

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Keith Ward 354,167 (7) *%

Deborah Charych 62,500 (8) *%

All executive officers and directors as a group (6 persons) 16,939,701 (9) 1.7 %

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

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

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

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

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

(1) The address of Sciences is 10 th Floor, 595 Howe St., Vancouver, British Columbia, Canada V6B 1A1.

(2) Based on a Schedule 13DA filed with the Company on March 17, 2023.

(3) Includes (i) 2,335,721 shares of common stock held by a family trust of which Mr.

Dhillon is the trustee, (ii) 3,073,209 shares of common stock held directly by Mr.

Dhillon, (iii) 331,500 shares of common stock issuable upon exercise of warrants, (iv) 8,173,906 shares of common stock underlying options that may be exercised within 60 days of March 29, 2023.

(4) Includes 1,410,781 shares of common stock underlying options that may be exercised or RSUs that vest within 60 days of March 29, 2023.

(5) Includes 560,417 shares of common stock underlying options that may be exercised within 60 days of March 29, 2023.

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(8) Includes 62,500 shares of common stock underlying options that may be exercised within 60 days of March 29, 2023.

Table of Cont ents

(9) Consists of (i) 5,408,930 shares beneficially owned by our current executive officers and directors as of March 22, 2023 and (ii) 10,865,938 shares subject to options exercisable or RSUs that vest within 60 days of March 22, 2023, of which 10,865,938 are vested as of such date.

Changes in Control

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Sciences holds a significant interest in our equity as of December 31, 2022 and has provided us with financing under the Amended Credit Agreement.

Jim Heppell was the Chief Executive Officer and a member of the Board of Directors of EHS during the year ended December 31, 2022 and was also a member of the Board of Directors of the Company until May 2022.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Credit Agreement originally provided for an unsecured credit facility of up to $20,000,000.

Advances under the Credit Agreement accumulated interest at an annual rate of 7% and the original maturity date of the facility was October 5, 2022.

From November 1, 2018 to March 2019, Sciences advanced us an aggregate of $6,000,000 under the Credit Agreement.

In connection with the advances under the Credit Agreement, we issued Sciences 7,500,000 warrants with an original exercise price of $0.50 per share and a term of five years.

The warrants were fully vested at issuance.

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

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

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

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

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

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

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

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

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

In exchange for his services, Dr.

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

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

On September 14, 2021, Dr.

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

In connection with the termination of Dr.

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

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

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

On August 10, 2020, Sciences transferred to Dr.

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

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

On November 17, 2022, we entered into an amendment to the Amended Credit Agreement, pursuant to which (i) the Company agreed to prepay 25% of the outstanding principal amount under the Amended Credit Agreement, equal to $616,125, plus all accrued interest of $328,737 (ii) the parties agreed to extend the maturity date to the earlier of December 30, 2022 or the Termination Date (as such term is defined in the Amended Credit Agreement), (iii) the parties agreed to amend the exercise price of the warrants to purchase Company common stock held by Sciences to $0.017 per share and (iv) the parties agreed to use good faith efforts to enter into a customary piggyback registration rights agreement.

On December 14, 2022, the Company and Sciences entered into a piggyback registration rights agreement pursuant to which, among other things, the Company agreed to provide registration rights for the shares of common stock underlying the warrants to purchase Company common stock held by Sciences should the Company file a registration statement with the SEC for the purpose of effecting a public offering of common stock.

On December 30, 2022, we entered into an amendment to the Amended Credit Agreement to extend the maturity date to the earlier of (a) five business days after the closing of the sale of VDL (b) February 28, 2023 or (c) the Termination Date (as such term is defined in the Amended Credit Agreement).

Table of Cont ents

On May 18, 2022, Jim Heppell resigned from our board of directors and concurrently entered into a consulting agreement with us pursuant to which Mr.

Heppell will provide mutually agreed upon services related to the wind down of EHT.

The consulting agreement had an initial minimum term of one-year and will be automatically renewed for a one-year period on the anniversary of the contract unless terminated with 60 days' notice.

Under the consulting agreement, Mr.

Heppell was entitled to a monthly fee of $6,300, which was increased to $16,600 per month upon the closing of the Acquisition.

The consulting agreement provides Mr.

Heppell with a termination payment in an amount equal to the monthly fees through the then-remaining term of the agreement if Mr.

Heppell’s engagement is terminated by us without cause.

In addition, Mr.

Heppell was awarded 4,000,000 stock options which are subject to certain performance and other conditions.

The Company has accounted for the consulting contract as an in-substance severance arrangement and recognized $139,615 in severance expense during the year ended December 31, 2022.

The accrual for Mr.

Heppell's severance was adjusted to include the increased fee payments when the Company closed the Acquisition.

As of December 31, 2022, the Company recognized $16,600, in accounts payable - related party and $75,503 in other current liabilities - related party under this consulting agreement.

As of December 31, 2022, Mr.

Heppell is also a board member and the CEO of Sciences.

Heppell also served on VivaCell's board until he tendered his resignation on January 10, 2022.

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

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

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

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

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

Effective February 16, 2023, the Company and Sciences entered into a master transaction agreement (the "MTA").

Under the MTA, (i) Sciences agreed to exercise 16,641,486 warrants to purchase common stock of the Company (the "Warrants") (ii) the parties agreed that the aggregate exercise price for the Warrants of $282,905 was to be paid through a reduction in the debt owed by the Company to Sciences (the "Credit Consideration") under the Amended Credit Agreement.

On February 22, 2023, the Company issued 16,641,486 shares of common stock to Sciences in connection with the exercise of the Warrants.

Pursuant to the terms of the MTA, after the application of the Credit Consideration to the amounts owed under the Amended Credit Agreement, Sciences agreed to convert the remaining balance of $1,597,236 owed by the Company to Sciences under the Amended Credit Agreement into 41,379,164 shares of common stock of the Company at a conversion price of $0.0386, in accordance with an amendment to the Amended Credit Agreement set forth in the MTA.

Following the issuance of shares described above, the Amended Credit Agreement was terminated in its entirety per the terms of the MTA.

Additionally, under the MTA, Sciences agreed to use its best efforts to transfer all of the common stock of the Company held by Sciences to its shareholders on a pro-rata basis at or immediately prior to the Company's listing to a nationally recognized stock exchange, subject to compliance with applicable securities laws.

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

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

In January 2021 and April 2021, we entered into two separate Collaborative Research Agreements with VivaCell Biotechnology Espana, S.L.U ("VicaCell"), a research and development entity with substantial expertise in cannabinoid science and a subsidiary of Emerald Health Research, Inc.

which is 100% owned by Sciences.

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

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

For the years ended December 31, 2022 and 2021, we incurred $87,927 and $220,418, respectively, in expenses under the Collaborative Research Agreements.

As of December 31, 2021, the Company has recognized a prepaid asset in the amount of $8,056 to be offset against future research and development costs under the Collaborative Research Agreements.

No amounts were due to or from VivaCell under these agreements for the year ended December 31, 2022.

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

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

Table of Cont ents

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

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

For the years ended December 31, 2022 and 2021, we incurred $200,000 and $44,624 in expenses under the ESRA.

As of December 31, 2022 and 2021, we recognized accounts payable of $50,000 and a prepaid asset in the amount of $5,376 to be offset against future research and development costs under the ESRA.

On March 1, 2022, we entered into a research project with VivaCell under the ESRA Agreement for the development of a screening platform for anteroposterior ocular diseases.

The project budget is $190,500.

For the year ended December 31, 2022, we incurred $167,000 of research and development expenses under the ESRA.

As of December 31, 2022, we recognized $7,835, in other current liabilities - related parties related to the first research project.

As of December 31, 2022, we recognized $47,001, in accounts payable - related parties under this agreement.

Review, Approval and Ratification of Related Party Transactions

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Director Independence

We have determined that Mr.

Jim Heppell, Dr.

We have determined that Dr.

Margaret Dalesandro, Dr.

Praveen Tyle, and Dr.

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

Praveen Tyle, Dr.

Keith Ward and Dr.

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

Principal Accounting Fees and Services .

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

The aggregate fees billed for each of the fiscal years ended December 31, 2022 and 2021, for professional services rendered by Marcum LLP.

for the audit of our annual consolidated financial statements included in our Annual Report on Form 10-K and quarterly reviews of the unaudited interim consolidated financial statements included in our Quarterly Reports on Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the years ended December 31, 2022 and 2021 were $125,861 and $—, respectively.

Table of Cont ents

Audit Related Fees

All Other Fees

1 unchanged sentence

Prior to engaging Mayer Hoffman McCann P.C.

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

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

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

Table of Cont ents

Exhibits, Financial Statement Schedules .

Financial Statements.

The following consolidated financial statements of Skye Bioscience, Inc., together with the report thereon of Marcum LLP, an independent registered public accounting firm (PCAOB Firm No.

688 ), are included in this Annual Report on Form 10-K.

Financial Statements.

The following consolidated financial statements of Skye Bioscience, Inc., together with the report thereon of Mayer Hoffman McCann P.C., an independent registered public accounting firm (PCAOB Firm No.

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

Table of Cont ents

SKYE BIOSCIENCE, INC.

AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report s of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 202 2 and 2 021

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

Consolidated Statements of Operations for the years ended December 31, 202 2 and 20 21

Consolidated Statements of Cash Flows for the years ended December 31, 202 2 and 20 21

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 and 2020

Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2022 and 2021

Notes to the Consolidated Financial Statements

Table of Cont ents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Skye Bioscience, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Skye Bioscience, Inc.

(the “Company”) as of December 31, 2022, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph - Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

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

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Marcum LLP

We have served as the Company's auditor since 2022.

East Hanover, New Jersey

March 31, 2023

Table of Cont ents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

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Opinion on the Financial Statements

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

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

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

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

Going Concern Uncertainty

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These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

Our responsibility is to express an opinion on these financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

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/s/ Mayer Hoffman McCann P.C.

We have served as the Company's auditor since 2014.

We have served as the Company's auditor from 2014 to 2022.

Irvine, California

March 25, 2022

Table of Cont ents

SKYE BIOSCIENCE, INC.

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Current assets

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

Cash and cash equivalents $ 1,244,527 $ 8,983,007

Restricted cash 4,580 4,571

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Prepaid expenses - related party — 13,432

Assets held for sale 6,432,216 —

Other current assets 412,018 56,870

Total current assets 8,943,718 9,612,097

Property and equipment, net 87,710 7,341

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

Property, plant and equipment, net 87,854 87,710

Operating lease right-of-use asset, net 71,191 146,972

Other assets 8,309 8,309

Total assets $ 9,111,072 $ 9,855,088

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities

Accounts payable $ 1,669,997 $ 897,880

Accounts payable - related party 2,130 17,032

Accounts payable - related parties 124,901 2,130

Accrued interest - related party 15,814 174,911

Accrued payroll liabilities 657,734 344,450

PPP loan current — 64,062

Other current liabilities 1,422,442 375,842

Derivative liabilities 59,732 38,567

Other current liabilities - related parties 95,850 —

Derivative liability 3 59,732

Estimate for legal contingency 6,205,310 —

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

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

Convertible multi-draw credit agreement - related party, net of $ 0 and $ 487,668 discount and $ 0 and $ 1,927 issuance costs, at December 31, 2022 and 2021, respectively

1,848,375 1,524,905

Operating lease liability, current portion 78,700 82,372

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Non-current liabilities

PPP loan non-current — 52,638

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

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

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

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Commitments and contingencies (Note 14)

Stockholders’ equity

Stockholders’ (deficit) equity

Preferred stock, $ 0.001 par value;

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

50,000,000 shares authorized at December 31, 2022;

no shares issued and outstanding at December 31, 2022 and 2021

Common stock, $ 0.001 par value;

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

5,000,000,000 shares authorized at December 31, 2022;

913,528,958 and 476,108,445 shares issued and outstanding at December 31, 2022 and 2021, respectively

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Accumulated deficit ( 66,737,765 ) ( 47,256,163 )

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

Total liabilities and stockholders’ equity $ 9,855,088 $ 2,671,726

Total stockholders’ (deficit) equity ( 3,008,054 ) 5,864,166

Total liabilities and stockholders’ (deficit) equity $ 9,111,072 $ 9,855,088

See accompanying notes to the consolidated financial statements.

Table of Cont ents

SKYE BIOSCIENCE, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31

2 unchanged sentences

General and administrative 6,094,617 4,916,277

Estimated legal contingency 6,205,310 —

Total operating expenses 18,311,732 7,847,714

Operating loss ( 18,311,732 ) ( 7,847,714 )

Other expense (income)

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

Other expense

Change in fair value of derivative liability ( 59,729 ) 21,165

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

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Interest income ( 19,011 ) ( 3 )

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

Finance charge 120,228 —

Wind-down costs 456,508 —

Total other expense, net 1,163,129 672,368

Loss before income taxes ( 19,474,861 ) ( 8,520,082 )

Provision for income taxes 6,741 2,100

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

Net loss $ ( 19,481,602 ) $ ( 8,522,182 )

Loss per common share

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See accompanying notes to the consolidated financial statements.

Table of Cont ents

SKYE BIOSCIENCE, INC.

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Cash flows from operating activities:

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

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

Net loss ( 19,481,602 ) ( 8,522,182 )

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

Finance charge from Sciences warrant modification 120,228 —

Depreciation and amortization 114,998 34,131

Stock-based compensation expense 629,032 869,206

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

Change in fair value of derivative liability ( 59,729 ) 21,165

Amortization of debt discount - related party 489,595 593,802

Estimate for legal contingency 6,205,310 —

Gain on debt forgiveness — ( 117,953 )

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Prepaid expenses ( 16,396 ) ( 364,083 )

Prepaid expenses - related parties ( 13,432 ) —

Prepaid expenses - related party 13,432 ( 13,432 )

Other current assets 112,907 ( 56,595 )

Other assets ( 8,309 ) —

Other asset — ( 8,309 )

Accounts payable 688,269 533,540

Accounts payable – related party ( 14,902 ) 7,032

Accounts payable – related parties 111,471 ( 14,902 )

Accrued interest – related party ( 159,097 ) 130,824

Accrued payroll liabilities 313,284 282,903

Operating lease liability ( 9,534 ) —

Other current liabilities ( 1,839,252 ) 166,531

Net cash used in operating activities ( 6,474,888 ) ( 6,054,131 )

Other current liabilities - related parties 95,850 —

Operating lease liability ( 82,372 ) ( 9,534 )

Net cash, cash equivalents and restricted cash used in operating activities ( 12,744,072 ) ( 6,474,888 )

Cash flows from investing activities:

Cash divested net of proceeds from the sale of an asset ( 66,458 ) —

Purchases of property and equipment ( 28,060 ) ( 90,866 )

Net cash used in investing activities ( 90,866 ) ( 7,230 )

Cash from asset acquisition, net of transaction costs of $ 1,475,144 for the year ended December 31, 2022

Net cash, cash equivalents and restricted cash provided by (used in) investing activities 5,214,395 ( 90,866 )

Cash flows from financing activities:

Proceeds from the issuance of common stock and warrants - net of $ 0 and $ 935,260 of issuance costs in 2022 and 2021, respectively

6,062,774 6,085,589

Proceeds from warrant exercises — 6,999,999

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Proceeds from option exercises — 4,783

Proceeds from PPP loan — 116,700

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

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

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

Cash and restricted cash , beginning of year

Repayment of loan payable ( 275,537 ) —

Proceeds from EHT bridge financing 680,901 —

Repayment of Amended Credit Agreement ( 616,125 ) —

Net cash, cash equivalents and restricted cash (used in) provided by financing activities ( 208,794 ) 13,079,356

Net (decrease) increase in cash, cash equivalents and restricted cash ( 7,738,471 ) 6,513,602

Cash, cash equivalents and restricted cash , beginning of year

$ 8,987,578 $ 2,473,976

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

Cash, cash equivalents and restricted cash, end of year $ 1,249,107 $ 8,987,578

Supplemental disclosures of cash-flow information:

Reconciliation of cash and restricted cash:

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

Cash and cash equivalents $ 1,244,527 $ 8,983,007

Restricted cash 4,580 4,571

Total cash and restricted cash shown in the consolidated statements of cash flows $ 1,249,107 $ 8,987,578

Table of Cont ents

Cash paid during the year for:

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Supplemental disclosures of non-cash financing activities:

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

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

Deferred issuance costs $ 22,471 $ 170,606

Purchases of property and equipment in other current liabilities 11,300 —

Financing of D&O insurance premium 275,537 —

Release of share liability 13,000 —

Asset acquisition costs in other current liabilities and accounts payable 102,857 —

Stock issued for assets, net of equity issuance costs 3,074,098 —

See accompanying notes to the consolidated financial statements.

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Stockholders' Equity

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

Stockholders' (Deficit) Equity

Common Stock Additional

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Stockholders'

(Deficit) Equity

Shares Amounts

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

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

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

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

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

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

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

Stock-based compensation expense 1,483,332 1,483 627,549 — 629,032

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

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

Exercise of pre-funded warrants 19,666,667 19,667 ( 17,700 ) — 1,967

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

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

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

Common stock, options and warrants issued for asset acquisition, net of issuance costs of $ 25,511

416,270,514 416,270 9,441,885 — 9,858,155

Finance charge from Sciences warrant modification — — 120,228 — 120,228

Net loss for the year ended December 31, 2022 — — — ( 19,481,602 ) ( 19,481,602 )

Balance, December 31, 2022 913,528,958 $ 913,528 $ 62,816,183 $ ( 66,737,765 ) $ ( 3,008,054 )

See accompanying notes to the consolidated financial statements.

Table of Cont ents

SKYE BIOSCIENCE, INC.

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The primary purpose of SKYE Bioscience Australia is to conduct clinical trials for the Company’s product candidates.

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

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

On May 11, 2022, the Company entered into an Arrangement Agreement, as amended on June 14, 2022, July 15, 2022 and October 14, 2022 (the “Arrangement Agreement”) with Emerald Health Therapeutics, Inc., a corporation existing under the laws of the Province of British Columbia, Canada (“EHT”), pursuant to a plan of arrangement under the Business Corporations Act (British Columbia) (the “Acquisition”) (Note 3).

On November 10, 2022, the Company completed the Acquisition and each share of EHT common stock outstanding immediately prior to the effective time of the Acquisition was transferred to the Company in exchange for 1.95 shares of the Company's common stock (the “Exchange Ratio”).

In addition, on November 10, 2022, EHT entered into a share purchase agreement with a third party for the sale of EHT's wholly owned subsidiary, Verdélite Sciences, Inc.

for an aggregate purchase price of $ 9,385,064 , subject to certain adjustments (the "Verdélite SPA").

The sale of this subsidiary will complete the divestiture of EHT's most significant former operating assets (Note 3).

As of December 31, 2022, the Company has devoted substantially all its efforts to securing product licenses, carrying out its own research and development, building infrastructure and raising capital.

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Liquidity and Going Concern

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

The Company has incurred operating losses and negative cash flows from operations since inception and as of December 31, 2022, had a working capital deficit of $ 3,175,408 and an accumulated deficit of $ 66,737,765 .

As of December 31, 2022, the Company had unrestricted cash in the amount of $ 1,244,527 .

For the years ended December 31, 2022 and 2021, the Company incurred losses from operations of $ 18,311,732 and $ 7,847,714 , respectively.

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

For the years ended December 31, 2022 and 2021, the Company incurred net losses of $ 19,481,602 and $ 8,522,182 , respectively.

The Company expects to continue to incur significant losses and negative cash flows from operations through 2023 and expects to incur significant losses and negative cash flows from operations in the future.

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

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

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

As the Company has recently begun its Phase 1 clinical trial in December 2022, it has increased research and development spending and increased cash used in operating activities.

During the year ended December 31, 2022, the Company expended significant resources on the Acquisition and experienced various transactional delays which resulted in the further extension of the outside date to close the Acquisition.

Due to these delays, in October 2022 the Company entered into a working capital loan from EHT to provide funds to continue operations through the date of closing of the Acquisition (Note 3).

These two factors, among others, have resulted in an overall increase in cash used in operating activities for the year ended December 31, 2022.

Based on the Company’s expected cash requirements, management expects that the Company will be able to complete its Phase 1 clinical trial.

However, if the Company cannot obtain additional funding by the second half of 2023, it will not have enough funds to continue clinical studies.

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

Table of Cont ents

On November 10, 2022, the Acquisition was completed and the Company acquired the cash and other assets of EHT (Note 3).

Management expects that the Acquisition will provide funding for the Company into the second quarter of 2023, and that the Company expects to collect payments from the sale of VDL through 2026.

During the year ended December 31, 2022, the Company met its operational funding requirements during the pre-closing period by, among other things, laying off two employees and entering into a $ 700,000 working capital Loan Agreement with EHT (Note 3).

In early 2023, the Company will continue with the liquidation of EHT's assets, including the closing of the Verdélite SPA, and explore additional financing options (Note 15).

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

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

Further, in January 2023, the Company was subject to an unfavorable outcome in a lawsuit with a former employee which resulted in the recognition of an estimated legal contingency of $ 6,205,310 .

The Company strongly believes that this case was incorrectly decided as to liability, the amount of compensatory damages, and the appropriateness and amount of punitive damages.

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 (Note 14).

On October 5, 2018, the Company entered into a Multi-Draw Credit Agreement (the "Credit Agreement") with Emerald Health Sciences ("Sciences"), a related party (See Note 13).

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As of December 31, 2022, the Company had an outstanding principal balance of $ 1,848,375 under the Amended Credit Agreement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The outstanding advances plus accrued interest under the Amended Credit Agreement were due on October 5, 2022 and the Company executed an extension of the maturity date to December 30, 2022 in exchange for the repricing of Sciences warrants and the repayment of 25 % of the outstanding principal balance plus accrued interest.

The Company subsequently negotiated an additional extension of the maturity date to the earlier of February 28, 2023 or the closing Verdélite SPA.

On February 16, 2023, Sciences exercised all of its outstanding warrants and converted the remaining balance of the Amended Credit Agreement (See Notes 5 & 15).

On July 8, 2022, Sciences distributed its shareholdings in EHT to the individual shareholders of Sciences in the form of a return of capital.

As a result, the common ownership interest by Sciences in both Skye and EHT was eliminated.

On February 16, 2023, Sciences covenanted to use it best efforts to distribute its shareholdings in SKYE to the individual shareholders of Sciences upon Skye listing to a national exchange.

During the second quarter of 2022, the Company was indirectly impacted by a cyberattack on the contract manufacturer for its Phase 1 clinical trial material.

This disruption delayed the Company's production timeline and the anticipated initiation of enrollment in the Company's Phase 1 clinical study for SBI-100 Ophthalmic Emulsion ("SBI-100 OE") to the fourth quarter of 2022.

It is possible that the Company may encounter other similar issues relating to supply chain issues, a lack of production or laboratory resources, global economic and political conditions, pandemics or cyberattacks that could cause business disruptions and clinical trial delays which will need to be managed in the future.

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

The Company does not believe that inflation has had a material impact on its operating results during the periods presented.

However, inflation, led by supply chain constraints, federal stimulus funding, increases to household savings, and the sudden macroeconomic shift in activity levels arising from the loosening or removal of many government restrictions and the broader availability of COVID-19 vaccines, has had, and may continue to have, an impact on general and administrative costs such as professional fees, employee costs and travel costs, and may in the future adversely affect the Company's operating results.

In addition, increased inflation has had, and may continue to have, an effect on interest rates.

Increased interest rates may adversely affect the terms under which the Company can obtain, any potential additional funding.

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

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

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

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

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

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

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

Since the COVID-19 pandemic, global supply chain disruptions have become more common and the Company may encounter future issues related to sourcing materials that are part of the eye drop formulation or manufacturing process, as well as impacting volunteer and/or patient recruitment in Australia for clinical studies.

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

Table of Cont ents

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

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Actual results could differ from those estimates.

Assets Held for Sale

On November 10, 2022, the Company completed the Acquisition of EHT in accordance with the Arrangement Agreement.

At the time of the Acquisition there were arrangements in place to sell the acquired assets and liabilities that comprised of two of EHT's subsidiaries, Emerald Health Therapeutics Canada, Inc.

("EHTC") and Verdélite Sciences, Inc.

As a result, EHTC and VDL were considered held for sale since the Acquisition and the Company has classified the associated assets of VDL as held for sale on the Consolidated Balance Sheets and the period costs related to both EHTC and VDL have been presented as wind-down costs in the Consolidated Statements of Operations.

EHTC was divested on December 28, 2022 (see Note 3).

Assets that meet the held for sale criteria are held for sale and reported at the lower of their carrying value or their fair value, less estimated costs to sell.

Changes in fair value are recorded as a gain or loss in the results of operations but not to exceed the original carrying value.

The divestiture of VDL was completed after the balance sheet date on February 9, 2023, refer to Note 15 - Subsequent events for further detail.

Principles of Consolidation

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

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries SKYE Bioscience Australia, EHT, Avalite Sciences, Inc.

("AVI"), VDL, EHTC and Nemus Sub.

All intercompany accounts and transaction have been eliminated in consolidation.

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Actual results could differ from those estimates.

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

The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates and judgments as to the appropriate carrying values of equity instruments, debt with embedded features, estimates related to the Company's estimation of the percentage of completion under its research and development contracts, contingent legal liabilities, fair value of assets acquired in the Acquisition, and the valuation of stock based compensation awards, which are not readily apparent from other sources.

Risks and Uncertainties

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

The Company’s operations are subject to a number of risks and uncertainties, including but not limited to, changes in the general economy, the size and growth of the potential markets for any of the Company’s product candidates, uncertainties related to the current global environment, including economic factors such as inflation, and risks related to the global supply chain disruptions (Note 1), risks related to operating primarily in a virtual environment, results of research and development activities, uncertainties surrounding regulatory developments in the United States, Canada, the European Union and Australia, and the Company’s ability to attract new funding.

Cash, Cash Equivalents and Restricted Cash

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The Company has not experienced any losses on such accounts and does not believe it is exposed to any significant credit risk.

As of December 31, 2021, and 2020, the Company has no cash equivalents.

As of December 31, 2022, and 2021, the Company has $ 25,842 and $ — cash equivalents, respectively.

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

Property and Equipment, net

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

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

Table of Cont ents

Property, Plant and Equipment, net

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

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

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

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

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

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

The derivative liabilities are valued on a recurring basis utilizing Level 3 inputs (Note 5).

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

This determination was based on the following considerations:

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

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

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

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

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

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

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

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

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

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Due to the substantial doubt related to the Company’s ability to utilize its deferred tax assets, a valuation allowance for the full amount of the deferred tax assets has been established at December 31, 2022 and 2021.

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

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

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

Convertible Instruments

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

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

The Company accounts for hybrid contracts with embedded conversion features in accordance with ASC 815, Derivatives and Hedging Activities ("ASC 815") which requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria.

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

Table of Cont ents

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

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

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

When determining the short-term vs.

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

However, because of the unique provisions and circumstances that may impact the accounting for derivative instruments, the Company carefully evaluates all factors that could potentially restrict the instrument from being exercised or

create a situation where exercise would be considered remote.

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

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

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

Debt Issuance Costs and Interest

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license fees;

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

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

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

No cost associated with the use of licensed technologies has been capitalized to date.

No ne of the costs associated with the use of licensed technologies has been capitalized to date.

Table of Cont ents

Stock-Based Compensation Expense

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• Dividends - The dividend yield assumption is based on the Company’s history and expectation of paying no dividends in the foreseeable future.

Comprehensive (Loss) Income

Comprehensive (loss) income is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

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

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

The Company accounts for liability-classified stock option awards (“liability options”) under ASC 718 - Compensation - Stock Compensation (“ASC 718”), under which the Company accounts for its awards containing other conditions as liability classified instruments.

Liability options are initially recognized at fair value in stock-compensation expense and subsequently re-measured to their fair values at each reporting date with changes in the fair value recognized in share-based compensation expense or additional paid-in capital upon settlement or cancellation.

Loss Per Common Share

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

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

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

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

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

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

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

For additional information regarding the loss per share (see Note 9).

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

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

Asset Acquisition

The Company evaluates acquisitions of assets and other similar transactions to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business.

Significant judgment is required in the application of the screen test to determine whether an acquisition is a business combination or an acquisition of assets.

Table of Cont ents

For asset acquisitions, a cost accumulation model is used to determine the cost of an asset acquisition.

Common stock, warrants and options issued as consideration in an asset acquisition are generally measured based on the acquisition date fair value of the equity interests issued.

The Company refers to ASC 718 and utilizes a Black-Scholes Model to value the options and warrants issued is an asset acquisition and includes the fair value of such awards in the purchase consideration.

Direct transaction costs are recognized as part of the cost of an asset acquisition.

The Company also evaluates which elements of a transaction should be accounted for as a part of an asset acquisition and which should be accounted for separately.

Consideration deposited into escrow accounts are evaluated to determine whether it should be included as part of the cost of an asset acquisition or accounted for as contingent consideration.

Amounts held in escrow where we have legal title to such balances but where such accounts are not held in the Company's name, are recorded on a gross basis as an asset with a corresponding liability in our consolidated balance sheet.

The cost of an asset acquisition, including transaction costs, are allocated to identifiable assets acquired and liabilities assumed based on a relative fair value basis.

Goodwill is not recognized in an asset acquisition.

Any difference between the cost of an asset acquisition and the fair value of the net assets acquired is allocated to the non-monetary identifiable assets based on their relative fair values.

However, as of the date of acquisition, if certain assets are carried at fair value under other applicable GAAP the consideration is first allocated to those assets with the remainder allocated to the non-monetary identifiable assets based on a relative fair value basis.

Government Assistance

The Company adopted ASU 2021-10 Government Assistance on January 1, 2022.

The Company accounts for the tax rebates received from the Australian Taxation Office ("ATO") under such guidance.

The Company accounts for the rebates that it receives under the AusIndustry research and development tax incentive program under the income recognition model of IAS 20.

Under this model, when there is reasonable assurance that the rebate will be received, the Company recognizes the income from the tax rebate as an offset to research and development expense during the period which the benefit applies to the research and development costs incurred.

The total tax rebates received under the AusIndustry incentive program were $ 34,189 for the year ended December 31, 2022 related to incentives earned in the prior year and $ — for the year ended December 31, 2021.

As of December 31, 2022 and 2021, the Company has recognized $ 179,687 and $ 44,616 , respectively, in other current assets in its Consolidated Balance Sheets.

Foreign Currency Translation

The Company’s reporting currency and the functional currency of its foreign subsidiaries is the United States dollar.

The local currencies of its foreign subsidiaries are the Canadian Dollar (“CAD”) or Australian dollar (“AUD”).

Assets and liabilities are translated based on the exchange rates at the balance sheet date ( 0.7384 for the CAD, 0.6792 for the AUD as of December 31, 2022 and 0.72610 for the AUD as of December 31, 2021), while expense accounts are translated at the weighted average exchange rate for the period ( 0.7361 for the CAD and 0.6748 for the AUD for the year ended December 31, 2022 and 0.71510 for the AUD as of December 31, 2021).

Equity accounts are translated at historical exchange rates.

The resulting translation adjustments are recognized in general and administrative expenses in the consolidated financial statements.

During the years ended December 31, 2022 and 2021, the Company recorded foreign currency translations of $ 63,717 and $ 6,684 , respectively, which are reflected in general and administrative expenses in the accompanying Consolidated Statements of Operations.

Foreign currency gains and losses resulting from transactions denominated in foreign currencies are recorded in the Consolidated Statements of Operations.

During the years ended December 31, 2022 and 2021, the Company recorded foreign currency transaction loss of $ 3,352 and gain of $ 2,238 , respectively, which is reflected in the general and administrative expenses in the accompanying consolidated statement of operations.

Commitments and Contingencies

The Company follows ASC 440 & ASC 450, subtopic 450-20 to report accounting for contingencies and commitments respectively.

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.

The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

Table of Cont ents

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.

If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

Based upon information available at this time, management believes that the current litigation matter related to the Cunning lawsuit will have a material adverse effect on the Company’s consolidated financial position, results of operations and cash flows.

Refer to Note 14 - Commitments and Contingencies for additional information .

Recent Accounting Pronouncements

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

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

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

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

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

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

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

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

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

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

The Company plans to adopt the provisions of this ASU on the effective date.

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

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The adoption of ASU 2020-06 will likely impact the way the Company calculates its (loss) earnings per share, result in expanded disclosures around convertible instruments and remove the requirement to assess and record beneficial conversion features.

The impact from adoption will depend on whether the Company elects to early adopt this ASU.

The Company currently plans to adopt the provisions of this ASU on the effective date.

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Recently Adopted Accounting Pronouncements

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

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

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

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

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

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

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

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The Board issued this update as part of its Simplification Initiative to improve areas of GAAP and reduce cost and complexity while maintaining usefulness of the financial statements.

The main provisions remove certain exceptions, including the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

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

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

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

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

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

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

This new standard was effective beginning January 1, 2021.

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

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

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

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

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

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

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

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

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

The Company adopted ASU 2021-10 Government Assistance on January 1, 2022 using the prospective adoption method as rebates from the ATO in prior periods have not been material to the Company's financial statements.

The Company accounts for the tax rebates received from the ATO under such guidance.

The Company accounts for the rebates that it receives under the AusIndustry research and development tax incentive program under the income recognition model of IAS 20.

Refer to disclosures under Government Assistance in Note 2 - the Summary of Significant Accounting Policies for additional information on the Company's treatment of tax rebates.

Acquisition of Emerald Health Therapeutics, Inc.

On May 11, 2022, the Company entered into the Arrangement Agreement, as amended on June 14, 2022, July 15, 2022 and October 14, 2022 with EHT, pursuant to a plan of arrangement under the Business Corporations Act (British Columbia).

The Acquisition was consummated on November 10, 2022 (the "Closing Date").

The Company evaluated the accounting for the transaction and accounted for the Acquisition as an asset acquisition due to the wind-down state of EHT (Note 1).

The primary purpose of the Acquisition was to utilize EHT's remaining cash and cash equivalents and liquidate the primary real estate asset owned by EHT in order to fund the Company's operations.

To account for the Acquisition, the Company measured the equity interests issued on the Closing Date (including the value of the options and warrants rolled over) and accumulated the direct costs attributable to the Acquisition.

Table of Cont ents

Upon closing the Acquisition, the Company acquired net assets with an estimated fair value of $ 15,045,412 .

The fair value of the consideration was allocated on a relative fair value basis to the “qualifying assets” in the Acquisition and any excess in the fair value of the assets initially reduced the value of the qualifying assets before reducing the value of the assets held for sale.

The only qualifying asset identified in the Acquisition was AVI.

The fair value of AVI at the time of Acquisition was $ 1,536,275 and the value attributable to AVI was fully eliminated in the Acquisition accounting.

EHT is currently in the final stages of its realization process to wind down all prior operations and liquidate substantially all of its remaining assets.

As of the date of this Annual Report on Form 10K we have divested both of EHT's former operating entities and are in the process of resolving legacy tax matters with the Canadian tax authorities.

In addition, EHT's remaining subsidiary, AVI, owns a vacant laboratory facility that is fully-licensed to handle controlled substances under Canadian regulations, which the Company is currently evaluating for research, development and manufacturing activities.

In negotiating the Exchange Ratio, the Company performed a review of EHT's assets and the costs expected to wind down operations.

However, there are inherent risks and uncertainties around the ultimate liquidation value of EHT.

Upon the Closing Date of the Acquisition, the Company issued each EHT shareholder 1.95 shares of Skye common stock, for each share of EHT common stock outstanding as of the Closing Date.

On November 10, 2022, the Company issued 416,270,514 shares of stock as consideration in the Acquisition and no fractional shares of Skye Common Stock were issued (Note 13).

and Canadian federal income tax purposes, the Acquisition constitutes a taxable exchange by the EHT shareholders.

In addition, all outstanding stock options and warrants of EHT were exchanged for replacement options and warrants of Skye with identical terms, as adjusted in accordance with the Exchange Ratio.

On July 11, 2022, the Company and EHT entered into a consulting agreement pursuant to which representatives of the Company provided administrative assistance to EHT to assist EHT in satisfying its financial reporting, operational and regulatory obligations.

EHT incurred $ 150 for each hour of services provided by the Company.

The consulting agreement terminated on the date of the closing of the Acquisition (Note 13).

The consulting agreement had an effective date of May 12, 2022 and as of December 31, 2022, the Company recorded a receivable of $ 22,542 , which has been eliminated in consolidation at December 31, 2022.

Below is a summary of the total consideration, assets acquired and the liabilities assumed in connection with the Acquisition:

November 10, 2022

Purchase consideration

Common stock $ 9,574,222 (a)

EHT rollover stock options 105,929 (b)

EHT rollover warrants 203,515 (c)

Transaction costs 1,552,490 (d)

Total consideration $ 11,436,156

Assets acquired and liabilities assumed:

Cash and cash equivalents $ 6,784,057

Accounts receivable 14,375

Prepaid Expenses 4,227

Assets held for sale 6,610,662 (e)

Related party loan 680,901 (f)

Other current assets 356,961 (g)

Accounts payable ( 909,048 )

Short term liability ( 557,010 ) (h)

Payroll liabilities ( 577,421 )

Insurance premium loan payable ( 89,851 )

Tax liabilities ( 158,858 )

Other current liabilities ( 722,839 ) (i)

Total net assets acquired $ 11,436,156

Common Stock, The Company issued 416,270,514 shares of common stock at $ 0.023 per share for an aggregate fair value of $ 9,574,222 .

Table of Cont ents

EHT Rollover Stock Options, The estimated fair value of options issued as consideration in the Acquisition was $ 105,929 and 8,282,626 SKYE options were issued after applying the Exchange Ratio.

The assumptions to value these options were as follows (see Note 8):

November 10, 2022

Dividend yield 0.00 %

Volatility 76.61 - 126.45 %

Risk-free interest rate 3.51 - 4.56 %

Expected term (years) 0.02 - 4.83

EHT Rollover Warrants, The estimated fair value of warrants issued as consideration for the Acquisition was $ 203,515 60,947,407 SKYE warrants were issued after applying the Exchange Ratio.

The assumptions used to value these warrants are as follows:

November 10, 2022

Dividend yield 0.00 %

Volatility 102.9 - 114.6 %

Risk-free interest rate 4.29 - 4.53 %

Expected term (years) 0.56 - 2.27

Transaction Costs, The Company incurred aggregate transaction costs of $ 1,945,140 in connection with the Acquisition, of which $ 341,629 were expensed, $ 1,552,490 were considered part of the transaction consideration and $ 25,511 , represented equity issuance costs, which were included as an offset to equity.

Assets held for sale, The Company acquired assets related to EHT and its subsidiaries which are considered held for held for sale in the amount of $ 6,610,662 .

This amount is primarily composed of the following balances:

The adjusted the fair value of the VDL assets held for sale of $ 8,540,732 , net of direct liquidation costs of $ 390,241 , which includes legal costs, advisory fees and other professional fees.

In addition, the VDL assets were further reduced by $ 2,072,981 as a result of the relative fair value allocation.

The resulting carrying value of the asset recorded by the Company is $ 6,467,751 .

The Company acquired deposits related to utilities for EHT's subsidiaries held for sale.

The fair value of these deposits at the time of acquisition is $ 23,910 .

The Company has acquired the value of EHTC's Health Canada license which was transferred with the sale of EHTC (See Divestiture of Emerald Health Therapeutics Canada, Inc.

The value of the license at the time of the acquisition was $ 91,700 .

The Company acquired prepaid expenses related to entities held for sale of $ 27,301 .

Related party loan , on October 17, 2022, the Company and EHT entered into a loan agreement pursuant to which EHT loaned the Company $ 700,000 in accordance with the terms of a promissory note.

Upon closing the Acquisition, the loan was offset by the balance due to Skye under the consulting agreement.

The net related party loan balance was $ 680,901 as of the closing of the Acquisition.

After the closing of the Acquisition, this balance eliminates in consolidation.

Other current assets, The Company acquired other current assets related to EHT and its subsidiaries which are considered held for held for sale in the amount of $ 356,961 .

This amount is primarily composed of the following balances:

The Company acquired deposits related to EHT's excise tax bonds of $ 252,418 .

As a condition of the EHTC and VDL stock purchase agreements it is expected that the cash value of these bonds will be received upon transfer of the Health Canada licenses to the purchasers of EHTC and VDL.

The Company acquired an open receivables balance of $ 104,543 made up of a balance due from the buyer of VDL, a former customer of EHT's of $ 75,396 .

Additionally, this balance includes a property tax refund due of $ 29,147 .

Short-term liability EHT received an upfront deposit of $ 557,010 for the sale of VDL,

Table of Cont ents

Other current liabilities, The Company acquired liabilities related to EHT and its subsidiaries which are considered in the amount of $ 722,839 .

This amount is primarily composed of the following balances:

The Company acquired an outstanding accrued liabilities balance of $ 587,139 .

The majority of the balance includes estimated late fees related to late tax filings.

In accordance with ASC 450, the Company has recorded a contingent liability related credits due to customers of EHT's former operations.

At the time of the Acquisition, this liability was estimated at $ 135,700 .

Wind-down costs consist primarily of employee payroll and benefits, legal fees related to divesting of EHT’s assets and post closing Acquisition related fees, other professional fees for accounting and tax, tax payments, insurance, contract termination costs and operational costs through the cease operations date at each site.

The Company estimates that EHT will incur the following costs in the periods specified below to wind-down its operations:

Quarter ending:

March 31, 2023 315,400

Thereafter 170,500

Total future estimated costs:

*The timing and realization of the expected costs are based on management’s estimates and are subject to change based on various factors, including but not limited to, the sale of EHT facilities at terms favorable to Skye, the timely termination of obsolete contracts, the implementation of cost-cutting measures necessary to maximize the remaining asset balance, the effective management of the termination of remaining personnel and related severance payments, the implementation of a successful transition plan, which includes the effective cessation of regulatory activities and the successful migration of historical data.

Divestiture of Emerald Health Therapeutics Canada, Inc.

On December 28, 2022, approximately six weeks after the Acquisition, the Company entered into a Share Purchase Agreement (“SPA”) with a third-party whereby the Company transferred all of its outstanding and fully paid, non-assessable 11,776,338 shares of common stock (the "EHTC Common Shares"), all of which were held by EHT with no par value, for the total purchase price of $ 110,759 .

The purchase price also includes the transfer of two licenses issued by Health Canada.

EHTC was classified as an asset acquisition and did not meet the criteria of a business at the of Acquisition, and was considered held for sale at the time of Acquisition.

Therefore, the sale of EHTC is determined to be treated as the sale of an asset to a third-party due to the discontinued state of the business at the date of divestment.

No gain or loss related to the divestiture of EHTC was recorded.

Verdélite SPA

On November 10, 2022, EHT and C3, a third-party, entered into the Verdélite SPA effective November 8, 2022, pursuant to which C3 would acquire all of the outstanding shares of VDL, the holder of EHT's most significant real estate asset, for an aggregate purchase price of approximately $ 9,385,064 , subject to certain adjustments.

Prior to closing the Acquisition EHT received a $ 553,800 cash deposit.

Upon closing, the Company will receive cash proceeds of $ 5,547,000 .

The remainder of the purchase price will be paid as follows:

(i) USD$ 369,200 will be payable in five ( 5 ) equal monthly installments payable on the last day of each month beginning on December 31, 2023 and ending April 30, 2024, with interest in accordance with the terms of the Verdélite SPA and (ii) USD$ 2,769,000 will be payable in three ( 3 ) equal installments on each of the 18-month , 30-month , and 42-month anniversaries of the VDL Closing Date, with interest in accordance with the terms of the Verdélite SPA.

This transaction closed on February 9, 2023 (see Note 15).

Prepaid Expenses

Prepaid expenses consist of the following:

As of December 31

Prepaid clinical expenses $ 646,072 $ 470,286

Total other prepaid expenses 204,305 83,931

$ 850,377 $ 554,217

Table of Cont ents

Warrants and Derivative Liabilities

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

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

2017 Common Stock Warrants to Service Provider 0.41 5 125,000

2018 Emerald Financing Warrants 0.10 5 3,400,000

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2021 Common Stock Warrants 0.09 5 77,777,779

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

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

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

2022 Common Stock Warrants to Service Provider 0.04 2 2,000,000

November 2019 EHT Common Stock Warrants* 0.29 5 8,552,630

December 2019 EHT Common Stock Warrants* 0.02 5 9,141,486

December 2019 EHT Common Stock Warrants* 0.15 5 945,750

February 2020 EHT Common Stock Warrants* 0.15 5 20,172,409

June 2020 EHT Common Stock Warrants* 0.10 3 22,135,132

Total warrants outstanding as of December 31, 2022 197,134,632

*Replacement warrants issued on November 10, 2022 in conjunction with the Acquisition (see Note 3).

As of December 31, 2022, all of the Company's warrants are fully vested with the exception of the "2022 Common Stock Warrants to Service Provider."

November 2022 Sciences Warrant Repricing

On November 17, 2022, the Company entered into an Amendment and Acknowledgement Agreement (the "Amendment Agreement") with Sciences.

Under the terms of the Amendment Agreement, the exercise prices of all the outstanding Emerald Multi-Draw Credit Agreement Warrants and the December 2019 EHT Common Stock Warrants were repriced to $ 0.017 .

Refer to Note 6 for further information on the Amendment Agreement.

The Company accounted for the repricing of the warrants as a modification by comparing the fair value of the warrants immediately before and after the modification date to determine the incremental fair value of the repricing.

The aggregate modified fair value of $ 150,851 resulted in an increase in fair value of $ 120,228 .

The Company recorded the incremental fair value as a financial charge to other expense in the Consolidated Statements of Operations for the year ended December 31, 2022.

On the date of modification, the Company revalued the warrants with a Black-Scholes valuation method using the following assumptions as of the repricing date:

Table of Cont ents

November 17, 2022

Dividend yield 0.00 %

Volatility factor 97.53 - 115.96 %

Risk-free interest rate 4.40 - 4.67 %

Expected term (years) 0.96 - 2.12

Underlying common stock price $ 0.017

EHT Rollover Warrants

On November 10, 2022, the Company issued equity classified replacement warrants with a fair value of $ 203,515 in exchange for all outstanding warrants of EHT adjusted in accordance with the Exchange Ratio.

The replacement warrants were exchanged with identical terms, including exercise prices, vest terms, and expiration dates (see Note 3).

2022 Common Stock Warrants Issued to a Service Provider

On April 1, 2022, the Company granted 2,000,000 equity classified warrants with a fair value of $ 35,688 to a service provider at an exercise price of $ 0.04 per share.

The warrants vest monthly over one year and expire on April 1, 2024.

Refer to Note 8 for the summary of stock-based compensation expense.

As of the date of grant, the Company valued the warrants with a Black-Scholes valuation method using the following assumptions:

April 1, 2022 Date of Issuance

Dividend yield 0.00 %

Volatility factor 118.46 %

Risk-free interest rate 1.92 %

Expected term (years) 1.27

Underlying common stock price $ 0.037

July 2021 Inducement Warrants and September 2021 Financing Warrants

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

Common Stock Warrants Pre-funded

Warrants Placement Agent Warrants

Dividend yield — % — % — %

Volatility factor 136.02 % 135.06 % 136.02 %

Risk-free interest rate 1.01 % 1.55 % 1.01 %

Expected term (years) 5.0 10.0 5.00

Underlying common stock price $ 0.09 $ 0.09 $ 0.09

August 2020 Financing Warrants

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

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

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

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

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

Common Stock Warrants Pre-funded

Warrants Placement Agent Warrants

Table of Cont ents

Warrants Pre-funded

Warrants Placement Agent

Dividend yield — % — % — %

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Underlying common stock price $ 0.09 $ 0.09 $ 0.09

Derivative Liabilities

Derivative Liability

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

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2021, Fair Value of Derivative Liabilities

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

$ 90,797 $ — $ ( 90,797 ) $ — $ —

Emerald Financing - warrant liability 38,567 — 21,165 — 59,732

276,024 — ( 237,457 ) — 38,567

Series B - warrant liability (3)

134,579 — ( 108,016 ) ( 26,563 ) —

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

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

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

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

Emerald Financing Warrant Liability

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

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

The warrant liability is valued at the balance sheet dates using the following assumptions:

As of December 31,

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Underlying common stock price $ 0.02 $ 0.05

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

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

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

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

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

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

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

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

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

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

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

Series B Warrant Liability (3)

During the year ended December 31, 2020, 312,500 Series B Common Stock Warrants with an intrinsic value of $ 26,563 were exercised for no consideration per share, which resulted in the issuance of 312,500 shares of common stock.

Prior to exercise, these Series B Warrants were adjusted to fair value using a Black-Scholes valuation method which considered the closing trading price on the exercise dates.

Because the exercise price of these options had been reset to $ 0.00 , the fair value derived from the valuation model approximated the market value of the Company’s common stock on the exercise dates.

The warrants required liability classification because of certain cash redemption rights upon the occurrence of certain fundamental transactions, as defined in the Series B Common Stock Warrant agreements.

Table of Cont ents

The Emerald Financing Warrants expired exercised subsequent to year end.

Multi-Draw Credit Agreement - Related Party

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On April 29, 2020, the Company entered into the Amended Credit Agreement with Sciences, which amends and restates the Credit Agreement.

For all pre-existing and new advances, the Amended Credit Agreement removed the change in control as an event of default (See Note 3) and deferred the quarterly payment of interest until the Company completed a capital raise of at least $ 5,000,000 .

For all pre-existing and new advances, the Amended Credit Agreement removed the change in control as an event of default and deferred the quarterly payment of interest until the Company completed a capital raise of at least $ 5,000,000 .

As of August 2020, interest ceased being deferred as a result of the August 2020 Financing.

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The amendments were considered a modification for accounting purposes.

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

On November 17, 2022, the Company entered into Amendment No.

4 with Sciences.

Under the terms of Amendment No.

4, the parties agreed that the Company would prepay 25 % of the outstanding principal amount equal to $ 616,125 , plus all accrued interest of $ 328,737 through the date of the Amendment No.

In addition, the Amended Credit Agreement was amended to extend the maturity date to the earlier of December 30, 2022 or the Termination Date (as such term is defined in the Credit Agreement) and the parties agreed to use good faith efforts to enter into a customary piggyback registration rights agreement.

In exchange for the extension, the Company agreed to reprice all of the outstanding Sciences warrants to $ 0.017 per share (Note 3).

On December 30, 2022, the Company entered into Amendment No.

5 to the Amended Credit Agreement to extend the maturity date to the earlier of (a) five business days after the closing of the sale of VDL (b) February 28, 2023 or (c) the Termination Date (as such term is defined in the Amended Credit Agreement).

Advances under the Amended Credit Agreement are unsecured and bear interest at an annual rate of 7 %.

At Sciences' election, convertible advances and unpaid interest may be converted into common stock at the fixed conversion price of the underlying advance, subject to customary adjustments for stock splits, stock dividends, recapitalizations, etc.

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The warrants have a term of five years that are immediately exercisable upon issuance.

All of the warrants issued under the Credit Agreement have an exercise price of $ 0.50 per share.

All of the warrants issued under the Credit Agreement had an initial exercise price of $ 0.50 per share which was reset to $ 0.017 per share in connection with Amendment No.

Table of Cont ents

In accounting for each advance and the warrants issued under the Amended Credit Agreement, the Company allocated the proceeds between the debt host and the freestanding warrants on a relative fair value basis for each advance.

2 unchanged sentences

Amortization of the debt discount is recognized as non-cash interest expense and the compound derivatives related to the contingent interest feature and acceleration upon default provision were remeasured at fair value in subsequent periods in the Company’s Consolidated Balance Sheets.

On November 1, 2018, an initial advance was made for $ 2,000,000 and the Company issued 2,500,000 warrants with an exercise price of $ 0.50 per share (See Note 3).

In accounting for the convertible advance and warrants under the Credit Agreement, $ 1,684,920 of the proceeds was allocated to the debt and $ 315,080 was allocated to equity classified warrants.

A beneficial conversion feature of $ 90,080 and a compound derivative liability of $ 204,102 were also recorded.

During the year ended December 31, 2019, the Company initiated two advances, each in the amount of $ 2,000,000 , for an aggregate principal amount of $ 4,000,000 , and the Company issued an aggregate of 5,000,000 warrants with an exercise price of $ 0.50 per share (See Note 3).

In accounting for the convertible advances and warrants, an aggregate amount of $ 3,283,890 was allocated to the debt and $ 716,110 was allocated to equity classified warrants.

A beneficial conversion feature of $ 1,584,850 and compound derivative liabilities of an aggregate of $ 516,058 were recorded (See Note 3).

Of the $ 516,058 in compound derivatives, $ 322,644 was recorded as other expense in the Consolidated Statements of Comprehensive (Loss) Income for the year ended December 31, 2019, as the value of the beneficial conversion feature exceeded the proceeds allocated to the third draw.

From November 1, 2018 to March 2019, Sciences advanced the Company an aggregate of $ 6,000,000 under the Credit Agreement.

In connection with the advances under the Credit Agreement, the Company issued Sciences 7,500,000 warrants with an original exercise price of $ 0.50 per share and a term of five years .

The warrants were fully vested at issuance.

During the year ended December 31, 2019, the Company used $ 3,985,500 in proceeds from the exercise of the 2020 Emerald Financing Warrants to prepay a portion of the outstanding principal balance.

In connection with the prepayment, the Company recorded an extinguishment loss of $ 725,425 in the fourth quarter of 2019.

The extinguishment loss was calculated as the difference between the fair value of the consideration paid to extinguish the debt and carrying value of the debt host plus the related compound derivative liability.

During the year ended December 31, 2020, the Company effected a fourth and fifth advance in the amounts of $ 150,000 and $ 300,000 , respectively.

Sciences has elected that the fourth and fifth advances will not be convertible into shares of the Company’s common stock and gave notice to the Company that no warrants will be issued in connection with the advances.

Aggregate financing costs of $ 63,007 have been incurred and are recorded as a discount to the debt host and are being amortized using the effective interest rate method and recognized as non-cash interest expense over the term of the Amended Credit Agreement.

After the prepayment, the total remaining principal amount excluding discounts under the Credit Agreement was $ 2,014,500 .

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

During the year ended December 31, 2020, the Company received non-convertible advances of $ 150,000 and $ 300,000 pursuant to the Amended Credit Agreement.

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

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

Aggregate financing costs of $ 63,007 have been incurred and are recorded as a discount to the debt host along with discounts recorded on the convertible advances were amortized through the original maturity date of October 5, 2022 using the effective interest rate method, interest expense related to the discounts was recognized as non-cash interest expense in Other expense within the Consolidated Statements of Operations.

For the years ended December 31, 2022 and 2021, the effective interest rate related to the convertible portion of the Amended Credit Agreement was 29.20 % and 43.30 %, respectively.

As of December 31, 2021, the unamortized debt discount on the convertible advances will be amortized over a remaining period of approximately 0.76 years.

As of December 31, 2022, the debt discount on the convertible advances was fully amortized.

As of December 31, 2022, the fair value of the shares underlying the convertible advances under the Amended Credit agreement was $ 73,935 .

As of December 31, 2022, the if-converted value did not exceed the principal balance.

Subsequent to year end, the Company entered into a Master Transaction Agreement with Sciences (the "MTA") that resulted in the conversion of the remaining principal balance of $ 1,848,375 plus accrued interest under the Amended Credit Agreement into 41,379,164 shares of common stock of the Company at a conversion price of $ 0.039 .

Refer to Note 15 - Subsequent Events for further information.

On April 24, 2020, the Company received funding from the PPP Loan Lender pursuant to the PPP of the CARES Act administered by the SBA for a principal amount of $ 116,700 .

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During the year ended December 31, 2021, the Company has recorded a gain on forgiveness of the PPP loan in an amount of $ 117,953 .

Insurance premium loan payable

On February 28, 2022, the Company entered into an annual financing arrangement for a portion of its Directors and Officers Insurance Policy (the “D&O Insurance”) with Marsh & McLennan in an amount of $ 275,537 .

The loan is payable in equal monthly installments of $ 31,149 , matures on October 28, 2022 and bears interest at a rate 4.17 % per annum.

As of December 31, 2022, a total of $ 22,961 remains in prepaid expenses and the loan has been repaid.

Table of Cont ents

Interest Expense

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Related party interest expense – stated rate $ 169,640 $ 174,911

Interest Expense - insurance premium loan payable 5,896 —

PPP loan interest expense – stated rate — 446

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Stockholders’ Equity and Capitalization

As of December 31, 2021 and 2020, the Company had reserved shares of common stock, on an as-if converted basis, for issuance as follows:

The Company reserved shares of common stock, on an as-if converted basis, for issuance as follows:

Options issued and outstanding 42,995,062 35,405,000

Options available for grant under the 2014 Plan 14,132,929 12,790,775

Awards available for grant under the 2014 Plan 42,274,757 14,132,929

Restricted stock unit awards issued and outstanding 2,666,667 4,000,000

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Additionally, the Company issued warrants to purchase 6,926,112 shares of common stock to the placement agent, which represent 7 % of the total shares of common stock and pre-funded warrants sold in the offering and 7 % of the Inducement Warrants issued (Note 5).

August 2020 Financing

On July 31, 2020, the Company entered into a Securities Purchase Agreement with certain institutional investors for the issuance and sale of securities, with H.C.

Wainwright & Co., LLC acting as the placement agent, pursuant to which the Company sold 56,333,334 common units, each consisting of one share of common stock and one warrant to purchase one share of common stock, and 60,333,334 pre-funded units, each consisting of one pre-funded warrant to purchase one share of common stock and one warrant to purchase one share of common stock, in a registered public offering which closed on August 4, 2020 (the “August 2020 Financing”).

The common units and pre-funded units were sold at a price per unit of $ 0.06 and $ 0.059 , respectively, for gross aggregate proceeds of $ 6,939,667 .

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

The common stock warrants have a term of five years , and the pre-funded warrants are exercisable until all the pre-funded warrants have been exercised in full (Note 3).

In connection with the August 2020 Financing, the Company incurred issuance costs of $ 854,078 , for net proceeds of $ 6,085,589 .

Additionally, the Company issued warrants to purchase 8,166,667 shares of common stock to the placement agent, which represent 7 % of the total shares of common stock and pre-funded warrants sold in the offering.

The placement agent warrants have an exercise price of $ 0.075 per share and a term of five years .

Table of Cont ents

Warrant Exercises

During the year ended December 31, 2022, 19,666,667 pre-funded warrants with an intrinsic value of $ 1,178,033 were exercised in exchange for 19,666,667 shares of common stock for proceeds of $ 1,967 .

As of December 31, 2022 all of the pre-funded warrants from the September 2021 Financing have been exercised.

During the year ended December 31, 2021, 11,800,000 pre-funded warrants with an intrinsic value of $ 460,200 were exercised in exchange for 11,800,000 shares of common stock for gross proceeds of $ 11,800 .

1 unchanged sentence

During the year ended December 31, 2021, 116,666,668 of the 2020 common stock warrants, including the warrants that were exercised in connection with the July 2021 Inducement discussed above, with an intrinsic value of $ 8,764,967 were exercised in exchange for 116,666,668 shares of common stock for gross proceeds of $ 6,999,999 .

During the year ended December 31, 2020, the Pre-Funded Warrant holders exercised 48,533,334 warrants with an intrinsic value of $ 2,104,667 , which resulted in the issuance of 48,533,334 shares of common stock.

During the year ended December 31, 2020, the Series B Warrant holders exercised 312,500 warrants with an intrinsic value of $ 26,563 , which resulted in the issuance of 312,500 shares of common stock.

Common Stock Issuance

On March 2, 2022, the Company released 150,000 shares of common stock to a service provider (Note 8).

On November 10, 2022, the Company issued 416,270,514 shares of common stock to EHT shareholders at a 1.95 conversion rate as consideration in the Acquisition (Note 3).

Restricted Stock Units Released

On December 15, 2022, the Company released 1,333,333 restricted stock units that had vested to executives of the Company (Note 8).

Stock-Based Compensation

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On October 31, 2014, the Board approved the Company’s 2014 Omnibus Incentive Plan (the “2014 Plan”).

The 2014 Plan initially reserved 3,200,000 shares for future grants.

In October 2018, the Company increased the share reserve under the 2014 Plan to equal 10 % of the number of issued and outstanding shares of common stock of the Company on an evergreen basis.

In August 2020, the Company approved Amendment No.

2 to the 2014 Plan, which increased the share reserve by an additional 7,876,835 shares over the 10 % of the number of issued and outstanding shares of common stock and removed certain restrictions on the number of shares of common stock and the amount of cash-based awards up to which participants of the 2014 Plan can receive in a calendar year.

The 2014 Plan authorizes the issuance of awards including stock options, stock appreciation rights, restricted stock, stock units and performance units to employees, directors, and consultants of the Company.

As of December 31, 2021, the shares available for future grant under the 2014 Plan are as follows:

On June 14, 2022, in connection with the Acquisition, the Board approved the 2014 Amended and Restated Omnibus Incentive Plan (the “2014 Amended and Restated Plan”) which replaced the 2014 Plan in its entirety.

The 2014 Amended and Restated Plan, among other things, fixed the number of shares that can be issued under the plan to 91,219,570 , provided that each January 1 beginning in 2023 and ending on (and including) January 1, 2032 the number of shares will increase by 5 % of the outstanding shares of Common Stock as of the prior December 31, unless the Board of Directors of the Company decides to a lesser increase.

On September 30, 2022, the Amended and Restated 2014 Plan was approved by the shareholders.

The 2014 Amended and Restated Plan authorizes the issuance of awards including stock options, stock appreciation rights, restricted stock, stock units and performance units to employees, directors, and consultants of the Company.

The Company has reserved shares for issuance under our equity incentive plan upon share option exercise.

As of December 31, 2022, the Company had 42,274,757 shares available for future grant under the 2014 Plan.

As of December 31, 2022, the shares available for future grant under the 2014 Amended and Restated Plan are as follows:

Shares Available for Grant

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Share pool increase 35,731,891

Cancelled 202,500

Forfeited 3,810,345

Cancelled 1,232,218

Granted ( 12,632,626 )

Available as of December 31, 2022 42,274,757

Table of Cont ents

Stock Options

Options granted under the 2014 Plan expire no later than ten years from the date of grant.

Options granted under the 2014 Plan may be either incentive or non-qualified stock options.

Options granted under the 2014 Amended and Restated Plan expire no later than ten years from the date of grant.

Options granted under the 2014 Amended and Restated Plan may be either incentive or non-qualified stock options.

For incentive and non-qualified stock option grants, the option price shall be at least 100 % of the fair value on the date of grants, as determined by the Company’s Board of Directors.

If at any time the Company grants an option, and the optionee directly or by attribution owns stock possessing more than 10 % of the total combined voting power of all classes of stock of the Company, the option price shall be at least 110 % of the fair value and shall not be exercisable more than five years after the date of grant.

Options granted under the 2014 Plan may be immediately exercisable if permitted in the specific grant approved by the Board of Directors and, if exercised early may be subject to repurchase provisions.

Options granted under the 2014 Amended and Restated Plan may be immediately exercisable if permitted in the specific grant approved by the Board of Directors and, if exercised early may be subject to repurchase provisions.

The shares issued generally vest over a period of one to four years from the date of grant.

The following is a summary of option activities under the Company’s 2014 Plan for the year ended December 31, 2021:

The following is a summary of option activities under the Company’s 2014 Amended and Restated Plan for the year ended December 31, 2022:

Shares Weighted

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Outstanding, December 31, 2021 35,405,000 $ 0.07 9.08 $ 134,750

Granted 14,755,000 0.08

Exercised ( 106,250 ) 0.05 13,281

12,632,626 0.49

Forfeited ( 1,232,218 ) 0.47

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*The aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the stock options at December 31, 2022 for those stock options for which the quoted market price was in excess of the exercise price ("in-the-money options").

During the year ended December 31, 2021, the Company received gross proceeds of $ 4,783 from the exercise of stock options.

The weighted-average grant-date fair value of stock options granted for the years ended December 31, 2021 and 2020 was $ 0.07 and $ 0.04 , respectively.

(1) Includes 8,282,626 rollover options issued under the 2014 Plan related to the Acquisition.

Upon the closing of the Acquisition, the entire fair value of the EHT rollover options was allocated to the purchase consideration.

As a result the assumptions below exclude the EHT rollover options (See Note 3)

During the years ended December 31, 2022 and 2021, the Company received $ — and $ 4,783 gross proceeds from the exercise of stock options.

The weighted-average grant-date fair value of stock options granted for the years ended December 31, 2022 and 2021, excluding EHT rollover options issued related to the Acquisition, was $ 0.04 and $ 0.07 , respectively.

The total fair value of the stock options that vested during the years ended December 31, 2022 and 2021 was $ 466,263 and $ 316,929 , respectively.

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The approval of the modification and receipt of notice to terminate the Independent Contractor Agreement on September 14, 2021, resulted in the recognition of $ 309,487 in stock compensation expense for the year ended December 31, 2021 .

Table of Cont ents

In connection with the Acquisition the Company issued a total of 8,282,626 stock options to EHT option holders on November 10, 2022 (Note 3).

The exercise price and rollover option shares were adjusted by the Exchange Ratio at the Acquisition date and retain the vest periods as originally issued.

Stock Option Awards with Performance and Other Conditions

During the year ended December 31, 2022, the Company granted 4,000,000 stock options with an exercise price of $ 0.04 which include a combination of performance vesting conditions and other vesting conditions pursuant to a consulting agreement entered with Mr.

Jim Heppell, a former director of Skye and related party of the Company (Note 13).

The vesting conditions of the stock option award provide that 50 % of the options are vested upon grant and the remaining 50 % will vest upon the sale of a real estate asset held by EHT at an amount greater than or equal to an amount specified in the agreement.

None of the options were exercisable until the Acquisition was consummated on November 10, 2022, (Note 3).

The conditions related to the sale of EHT's real estate are considered other conditions and the condition related to the closing of the Acquisition is considered a performance condition.

When a performance condition is deemed to be probable of achievement, time-based vesting and recognition of stock-based compensation expense commences.

As a result, no share-based compensation expense will be recognized for these stock options until the performance condition is considered to be probable.

As of December 31, 2022, the Company has determined that the sale of the real estate asset is not deemed probable, as the consummation of the sale is not solely within the control of the Company.

As of December 31, 2022, the Company has included $ 73,368 related to the first tranche of these awards in total stock-based compensation expense below.

The Company has evaluated the second tranche and has determined that due to the other conditions contained in these awards that they will be recorded as liability options once the Acquisition is deemed probable and will be remeasured through their settlement date or cancellation (Note 15).

Restricted Stock Units

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The following is a summary of restricted stock unit activity during the year ended December 31, 2022:

Shares Weighted

Shares Weighted Average Grant Date Fair Value

Unvested, December 31, 2021 4,000,000 $ 0.06

Granted 4,000,000 0.06

Released ( 1,333,333 ) 0.06

Unvested, December 31, 2022 2,666,667 $ 0.06

There was no RSU activity under the Company’s 2014 Plan during the year ended December 31, 2020.

Awards Granted Outside the 2014 Plan

Awards Granted Outside the 2014 Amended and Restated Plan

During the year ended December 31, 2021, the Company granted 1,200,000 and 300,000 restricted shares of common stock to a non-employee consultant for investor relations services under two successive six month service contracts.

Half of the shares will be issued within the first month of entering each service contract and the remaining half will be issued within thirty days from contract completion.

The following is a summary of restricted stock activity outside of the Company’s 2014 Plan during the year ended December 31, 2021:

Shares Weighted

Table of Cont ents

The following is a summary of restricted stock activity outside of the 2014 Amended and Restated Plan during the year ended December 31, 2022:

Number of Shares Weighted Average Grant Date Fair Value

Unvested, December 31, 2021 150,000 $ 0.13

Granted 1,500,000 0.12

Released ( 150,000 ) 0.13

*Unvested, December 31, 2022 — $ —

*As of December 31, 2021, the Company has recorded a share issuance liability of $ 13,000 , included in other current liabilities for the vested and unreleased portion of the restricted stock awards (Note 13).

Stock-Based Compensation Expense

The Company recognizes stock-based compensation expense using the straight-line method over the requisite service period.

The Company recognized stock-based compensation expense, including compensation expense for RSUs discussed above, in its Consolidated Statements of Comprehensive Loss as follows:

The Company recognized stock-based compensation expense, including compensation expense for warrants with vesting provisions issued to a service provider (Note 6), and the RSUs discussed above, in its Consolidated Statements of Operations as follows:

Research and development $ 77,965 $ 59,653

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This amount will be recognized over a weighted-average period of 1.81 years.

2022 Employee Stock Purchase Plan

In June 2022, the Company's board of directors approved the 2022 Employee Stock Purchase Plan (the "ESPP").

Under which the Company will offer eligible employees the option to purchase common stock at a 15 % discount to the lower of the market value of the stock at the beginning or end of each participation period under the terms of the ESPP.

Total individual purchases in any year are limited to 15 % of compensation.

The ESPP was approved by the Company's stockholders on September 30, 2022.

As of December 31, 2022, no shares were issued under the ESPP.

Loss Per Share of Common Stock

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For the Year Ended December 31, 2022

(Numerator) Shares

(Denominator) Per-Share

Net loss and comprehensive loss $ ( 8,522,182 )

Loss available to common stockholders ( 8,522,182 ) 406,599,390 $ ( 0.02 )

Loss available to common stockholders + assumed conversions $ ( 8,522,182 ) 406,599,390 $ ( 0.02 )

Loss (Numerator) Shares (Denominator) Per-Share Amount

Net loss $ ( 19,481,602 )

Basic EPS and diluted EPS

Net loss available to common stockholders ( 19,481,602 ) 555,270,089 $ ( 0.04 )

Table of Cont ents

For the Year Ended December 31, 2021

(Numerator) Shares

(Denominator) Per-Share

Net loss and comprehensive loss $ ( 6,560,699 )

Income available to common stockholders ( 6,560,699 ) 230,746,878 $ ( 0.03 )

Effect of Dilutive Securities

Warrants – liability classified ( 345,473 ) 674,095

Loss available to common stockholders + assumed conversions $ ( 6,906,172 ) 231,420,973 $ ( 0.03 )

Income (Numerator) Shares (Denominator) Per-Share Amount

Net loss $ ( 8,522,182 )

Basic EPS and diluted EPS

Net loss available to common stockholders ( 8,522,182 ) 406,599,390 $ ( 0.02 )

The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been anti-dilutive:

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Pre-tax loss and comprehensive loss from operations $ ( 19,474,861 ) $ ( 8,520,082 )

The Company is subject to taxation in the United States, various states, and Australia.

The Company’s tax years for 2018 (federal), 2017 (states) and 2020 (Australia) and forward are subject to examination by the United States, state and Australia tax authorities.

The components of the income tax expense consisted of the following:

Current income tax expense

State 6,741 2,100

Total current income tax expense 6,741 2,100

The Company is subject to taxation in the United States, various states, Australia, and Canada.

The Company’s tax years for 2019 (federal), 2018 (States), 2021 (Australia) and 2018 (Canada) and forward are subject to examination by the United States, state, Australian, and Canadian tax authorities.

However, to the extent allowed by law, the taxing authorities may have the right to examine periods where NOLs and credits were generated and carried forward and make adjustments up to the amount of the NOL and credit carryforwards.

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$ 29,180,112 of federal NOLs and $ 133,168 of state NOLs will carry forward indefinitely subject to an 80% limitation against taxable income.

At December 31, 2021, the Company had Australia NOLs aggregating $ 71,322 which do not expire.

At December 31, 2022, the Company had Australia NOLs aggregating $ 131,687 which do not expire and $ 77,737,683 of Canadian NOLS which begin to expire in 2023.

At December 31, 2022, the Company had Canadian capital loss carryforwards of approximately $ 33,301,494 which may be carried forward indefinitely.

Table of Cont ents

At December 31, 2022, the Company had federal and California research credit carryforwards of approximately $ 454,417 and $ 132,221 , respectively.

The federal research credit carry forwards will begin to expire in 2040, unless previously utilized and the California research credits will carry forward indefinitely.

The federal research credit carry forwards will begin to expire in 2040, unless previously utilized.

The California research credits will carry forward indefinitely.

The Company’s NOLs and research credit carryforwards are subject to a reserve.

Utilization of the domestic NOL could be subject to a substantial annual limitation due to ownership change limitations that may have occurred, or that could occur in the future, as required by Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state provisions.

These ownership changes may limit the amount of NOLs that can be utilized annually to offset future taxable income and tax, respectively.

Additionally, the Company had Canadian SR&ED credits as of December 31, 2022 of $ 919,820 which may be carried forward indefinitely.

Utilization of the domestic NOL and research credits could be subject to a substantial annual limitation due to ownership change limitations that may have occurred, or that could occur in the future, as required by Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state provisions.

These ownership changes may limit the amount of NOLs and credits that can be utilized annually to offset future taxable income and tax, respectively.

In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders.

Upon the occurrence of an ownership change under Section 382 as outlined above, utilization of the NOLs are subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the NOL before utilization.

Upon the occurrence of an ownership change under Section 382 as outlined above, utilization of the NOLs and credits are subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the NOLs and credits before utilization.

While the Company has not performed a Section 382 study, multiple ownership changes may have already occurred as the Company raised capital through the issuance of stock.

6 unchanged sentences

Research and development credits 1,199,256 138,581

Capitalized research and development costs 1,000,777 —

Lease liability 16,565 33,906

Other 446,623 83,056

Contingent legal accrual 1,306,097 —

Capital loss carryforwards 8,824,896 —

Net operating loss 30,648,168 8,887,647

Other 975,897 446,623

Gross deferred tax assets 43,972,473 9,507,307

7 unchanged sentences

The provision for income taxes on earnings subject to income taxes differs from the statutory Federal rate at December 31, 2022 and 2021, due to the following:

Table of Cont ents

As of December 31,

4 unchanged sentences

Uncertain tax positions 884,911 557,016

Reduction in compound derivative 4,974,768 —

Non-deductible interest 35,624 36,731

6 unchanged sentences

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

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

During the year ended December 31, 2022, the valuation allowance increased by $ 34,583,912 .

4 unchanged sentences

The Company elects to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021.

In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

Due to the Company's history of net operating losses, the CARES Act is not expected to have a material impact on the Company's financial statements.

On April 22, 2020, the Company entered into the PPP Loan with the PPP Loan Lender (Note 4).

On April 22, 2020, the Company entered into the PPP Loan with the PPP Loan Lender.

In accordance with the Consolidated Appropriations Act, 2021 enacted on December 27, 2020, certain qualified expenses used with the funds of the PPP Loan are fully deductible for Federal income tax purposes.

12 unchanged sentences

The Company does not expect any significant increases or decreases to the Company’s unrecognized tax positions within the next twelve months.

The Company had no accrual for interest or penalties on the Company’s Consolidated Balance Sheets at December 31, 2021 and 2020 and has no t recognized interest and/or penalties in the Consolidated Statements of Comprehensive Loss for the years then ended .

The Company had no accrual for interest or penalties on the Company’s Consolidated Balance Sheets at December 31, 2022 and 2021 and has no t recognized interest and/or penalties in the Consolidated Statements of Operations for the years then ended .

Table of Cont ents

Other Current Liabilities

1 unchanged sentence

As of December 31

Accrued research and development costs 140,953 93,888

Accrued legal expense 133,537 57,596

Accrued board fees 44,984 40,625

Research and development costs $ 40,597 $ 140,953

Legal expense 227,350 133,537

Insurance loan payable 55,451 —

Board fees — 44,984

Deposit - Verdelite SPA 553,800 —

Acquisition related contingent liability 134,896 —

Total other accrued liabilities 410,348 56,368

20 unchanged sentences

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

As of December 31, 2021, with the exception of the fee due for the notice of allowance for SBI-200, none of the other milestones under these license agreements have been met.

Table of Cont ents

As of December 31, 2022, the Company has paid the fee due for the notice of patent allowance for the proprietary molecule under the UM 8930 License Agreement.

In July 2022, the Company met milestone i) above under its UM 5050 license agreement upon submission of our application for authorization to conduct the Company's Phase 1 trial of SBI-100 OE to the Therapeutic Goods Administration in Australia.

As of December 31, 2022, none of the other milestones under these license agreements have been met.

UM 5070 License Agreement

5 unchanged sentences

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

The license agreement continues, unless terminated, until the later of the expiration of the last to expire of the patents or patent applications within the licensed technology or expiration of the Company’s payment obligations under the license.

UM may terminate the license agreement, effective with the giving of notice, if:

(a) the Company fails to pay any material amount payable to UM under the license agreement and do not cure such failure within 60 days after UM notifies us of such failure, (b) the Company materially breaches any covenant, representation or warranty in the license agreement and do not cure such breach within 60 days after UM notifies the Company of such breach, (c) the Company fails to comply in any material respect with the terms of the license and do not cure such noncompliance within 60 days after UM notifies us of such failure, (d) the Company is subject to a bankruptcy event, (e) the Company dissolves or ceases operations or (f) if after the first commercial sale of a product during the term of the license agreement, the Company materially fails to make reasonable efforts to commercialize at least one product or fail to keep at least one product on the market after the first commercial sale for a continuous period of one year, other than for reasons outside of the Company’s control.

The Company may terminate the license agreement upon 60 days’ written notice to UM.

As of December 31, 2021, none of the milestones under this license agreement had been met.

On November 9, 2021, the Company provided its 60 day notice of termination to UM to terminate the UM 5070 license agreement effective January 8, 2022.

The agreement was terminated effective January 8, 2022 pursuant to a termination notice provided to UM by the Company on November 9, 2021, and none of the milestones under this license agreement were met.

Related Party Matters

1 unchanged sentence

In January 2018, the Company entered into a securities purchase agreement with Sciences pursuant to which Sciences purchased a majority of the equity interest in the Company, resulting in a change in control (the "Emerald Financing").

While Sciences no longer maintains a controlling interest in the Company, it holds a significant equity interest as of December 31, 2021 (Note 13) and has provided the Company with financing under the Amended Credit Agreement (Note 4).

As of December 31, 2020, the Company had accrued $ 7,032 in reimbursable expenses due to Sciences.

No amounts were due to Sciences as of December 31, 2021.

While Sciences no longer maintains a controlling interest in the Company, it holds a significant equity interest as of December 31, 2022 and has provided the Company with financing under the Amended Credit Agreement (Note 6).

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

3 unchanged sentences

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

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

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

On September 14, 2021, Dr.

1 unchanged sentence

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

Dhillon (Note 6).

On August 10, 2020, Sciences, transferred to Dr.

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

On August 10, 2020, Sciences, Inc.

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

No expenses were incurred under this agreement during the year ended December 31, 2022.

Under this agreement, for the year ended December 31, 2021, the Company incurred fees of $ 94,516 .

On May 18, 2022, Jim Heppell resigned from the Company's board of directors and concurrently entered into a consulting agreement with the Company pursuant to which Mr.

Heppell will provide services mutually agreed upon by the Company.

The consulting agreement has an initial minimum term of one-year and will be automatically renewed for a one-year period on the anniversary of the contract unless terminated with 60 days' notice.

Under the consulting agreement, Mr.

Heppell is entitled to a monthly fee of $ 6,300 , which was increased to $ 16,600 per month upon the closing of the Acquisition.

The consulting agreement provides Mr.

Heppell with a termination payment in an amount equal to the monthly fees through the then-remaining term of the agreement if Mr.

Heppell’s engagement is terminated by the Company without cause.

In addition, Mr.

Heppell was awarded 4,000,000 stock options which are subject to certain performance and other conditions (Note 8).

The Company has accounted for the consulting contract as an in-substance severance arrangement and recognized $ 139,615 in severance expense during the year ended December 31, 2022.

The accrual for Mr.

Heppell's severance was adjusted to include the increased fee payments when the Company closed the Acquisition.

As of December 31, 2022, the Company recognized $ 16,600 , in accounts payable - related party and $ 75,503 in other current liabilities - related party under this consulting agreement.

As of December 31, 2022, Mr.

Heppell is a board member of Emerald Health Pharmaceuticals, Inc.

and was a board member of EHT until the closing of the Acquisition (Note 3).

As of December 31, 2022, Sciences owns 12.4 % and 48 % of the Company and Emerald Health Pharmaceuticals, Inc., respectively.

As of December 31, 2022, Mr.

Heppell is also a board member and the CEO of Sciences.

Heppell also served on VivaCell's board until he tendered his resignation on January 10, 2022.

Table of Cont ents

1 unchanged sentence

Emerald Health Pharmaceuticals, Inc.

On April 30, 2021, the Company entered into a month-to-month lease agreement with Emerald Health Pharmaceuticals, an affiliate of the Company with a significant common shareholder, as the sublessor and the Company as the sublessee.

On April 30, 2021, the Company entered into a month-to-month lease agreement with Emerald Health Pharmaceuticals, Inc.

("EHP") an affiliate of the Company with a significant common shareholder, as the sublessor and the Company as the sublessee.

The Company shared the same office location as Emerald Health Pharmaceuticals in San Diego, California until the termination of the sublease on August 31, 2021.

Under the sublease agreement, the Company paid monthly base rent of $ 4,000 in addition to its share of common area expenses and utilities.

For the year ended December 31, 2021, the Company recognized $ 15,453 in expense under the sublease.

For the years ended December 31, 2022 and 2021, the Company recognized $ — and $ 15,453 , respectively, in expense under the sublease.

As of December 31, 2022, the Company has $ 11,300 in accounts payable due to EHP related to the purchase of office furniture.

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

3 unchanged sentences

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

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

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

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

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

For the years ended December 31, 2022 and 2021, the Company incurred $ 87,927 and $ 220,418 , respectively, in expenses under the Collaborative Research Agreements.

As of December 31, 2021, the Company has recognized a prepaid asset in the amount of $ 8,056 to be offset against future research and development costs under the Collaborative Research Agreements.

No amounts were due to or from VivaCell under these agreements for the year ended December 31, 2022.

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

3 unchanged sentences

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

For the year ended December 31, 2021, the Company incurred $ 44,624 in expenses under the ESRA.

As of December 31, 2021, the Company has recognized a prepaid asset in the amount of $ 5,376 to be offset against future research and development costs under the ESRA.

For the years ended December 31, 2022 and 2021, the Company incurred $ 200,000 and $ 44,624 in expenses under the ESRA.

As of December 31, 2022 and 2021, the Company has recognized accounts payable of $ 50,000 and a prepaid asset in the amount of $ 5,376 to be offset against future research and development costs under the ESRA.

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

Board Members

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

As of December 31, 2021, Jim Heppell is also a board member of Sciences and VivaCell.

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

On March 1, 2022, the Company entered into a research project with VivaCell under the ESRA Agreement for the development of a screening platform for anteroposterior ocular diseases.

The project budget is $ 190,500 .

For the year ended December 31, 2022, the Company incurred $ 167,000 of research and development expenses under the ESRA.

As of December 31, 2022, the Company recognized $ 7,835 , in other current liabilities - related parties related to the first research project.

As of December 31, 2022, the Company recognized $ 47,001 , in accounts payable - related parties under this agreement.

Table of Cont ents

Management Conflicts

The Company's CEO Punit Dhillon, was a board member of the Company and EHT (Note 3) through the closing date of the Acquisition.

Dhillon also served as a board member of Sciences, VivaCell and, Emerald Health Pharmaceuticals, Inc.

("EHP") until he tendered his resignation from such boards on August 10, 2020, September 22, 2021 and August 19, 2022, respectively.

On July 8, 2022, Punit Dhillon was appointed to serve as the interim principal executive officer of EHP under a consulting arrangement.

On October 28, 2022, Mr.

Dhillon resigned as the interim principal executive officer of EHP and the consulting arrangement was terminated.

On February 28, 2022, the Company entered into a standard consulting agreement with the CEO's brother to assist with diligence on the EHT Acquisition due to his knowledge and expertise as a former executive of EHT.

Compensation under the agreement is for a rate of approximately $ 73 per hour.

The consulting agreement may be terminated by either party upon providing 15 days of advance notice.

For the year ended December 31, 2022, the Company incurred $ 46,684 , in consulting expenses under this agreement of which $ 21,977 is included in wind down costs.

As of December 31, 2022, the Company recorded $ 12,511 to other current liabilities - related parties related to this consulting agreement.

Commitments and Contingencies

5 unchanged sentences

In calculating the present value of the lease payments, the Company has elected to utilize its incremental borrowing rate based on the lease term.

For the year ended December 31, 2021, lease expense comprised of $ 30,234 in lease cost from the Company's non-cancellable operating lease.

For the years ended December 31, 2022 and 2021, lease expense comprised of $ 90,701 and $ 30,234 , respectively in lease cost from the Company's non-cancellable operating lease.

The remaining lease term and discount rate related to the operating lease are presented in the following table:

3 unchanged sentences

Future minimum lease payments as of December 31, 2022 are presented in the following table:

2022 $ 97,291

Total future minimum lease payments:

1 unchanged sentence

Total $ 78,700

December 31, 2022 December 31, 2021

Operating lease liability $ 78,700 $ 82,372

6 unchanged sentences

An unfavorable outcome to any legal matter, if material, could have a materially adverse effect on the Company’s operations or financial position, liquidity or results of operations.

As of December 31, 2021, the Company is party to a legal proceeding with a former employee alleging wrongful termination.

While there is a reasonable possibility that a loss may have been incurred, due to the stage of the proceedings as of December 31, 2021, the Company is unable to make an estimate as to the amount of the contingency, as the legal proceeding is in the early stage of discovery.

The Company is expensing the legal costs related to this proceeding as incurred.

Table of Cont ents

Wendy Cunning vs Skye Bioscience, Inc.

The Company is a party to a legal proceeding with a former employee alleging, among other things, wrongful termination, violation of whistleblower protections under the Sarbanes-Oxley Act of 2002 and retaliation under California law against the Company relating to certain actions and events that occurred with the Company's former management during the employee's employment term from March 2018 to July 2019.

The case, entitled Wendy Cunning vs Skye Bioscience, Inc., was filed in U.S.

District Court for the Central District of California (the “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 strongly believes that this case was incorrectly decided as to liability, the amount of compensatory damages, and the appropriateness and amount of punitive damages.

The Company intends to challenge the verdict in the trial court and appeal and pursue reimbursement under its existing insurance polices, but given the jury verdict, we have determined that a loss is probable and accordingly have recorded a legal contingency expense and a current balance sheet liability for the total amount of the jury verdict.

The Company has recorded an aggregate estimate for the legal contingency of $ 6,205,310 based on the outcome Management assessed to be the best estimate that is reasonably possible to occur.

Dependent on the appeal, it is reasonably possible that the legal contingency booked could materially change after the issuance of these financials.

EHT Class Action Lawsuit

In July 2020, Emerald Health Therapeutics, Inc., a subsidiary of the Company, was added as a defendant in a proposed class action commenced against a large number of Canadian license holders including Aurora Cannabis Inc.;

Aurora Cannabis Enterprises Inc.;

Aleafia Health Inc.;

Canopy Growth Corporation;

Emblem Cannabis Corp.;

Cronos Group Inc.;

Tilray Canada Ltd.;

Organigram Holdings Inc.;

OrganigramCo;

MediPharm Labs Corp.;

Broken Coast Cannabis Ltd.;

Emerald Cannabis Corporation;

and EmeraldCo.

The proposed class action was commenced in the Alberta Court of Queen’s Bench sitting at Calgary.

The plaintiffs allege that the defendants, including Emerald Health Therapeutics, Inc., marketed and sold medicinal and recreational cannabis products with an advertised content of THC and CBD and that the amount of THC and/or CBD as contained on the label was wrong and outside the permissible variability limits.

The claim alleges the following causes of action indiscriminately against all of the defendants:

breach of contract and breach of consumer protection legislation, including the various Sale of Goods Acts and Consumer Protection Acts;

common law and statutory misrepresentation;

negligence in product labelling;

breach of the duty to warn;

unjust enrichment;

waiver of tort.

The claim seeks an aggregate of $ 505 million in damages as against all of the defendants) and $ 5,000,000 in punitive damages against each defendant plus an accounting of revenues from each defendant.

We are disputing the allegations and have been and will continue to vigorously defend against the claims.

The Company disputes the allegations and has been and will continue to vigorously defend against the claims.

The proceedings are still at an early stage.

Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult, particularly where key factual and legal issues have not been resolved.

For these reasons, the ultimate timing or outcome cannot be predicted, or possible losses or a range of possible losses cannot be reasonably estimated.

Subsequent Events

Warrant Exercises

On January 20, 2022, 19,666,667 pre-funded warrants with an intrinsic value of $ 1,178,033 were exercised in exchange for 19,666,667 shares of common stock for gross proceeds of $ 1,967 .

Board Members and Related Party Contractor

On January 10, 2022, the Company's Board member, Jim Heppell, was appointed the CEO of Sciences and tendered his resignation from VivaCell.

On February 28, 2022, the Company entered into a standard consulting agreement with the CEO's brother.

Compensation under the agreement is for a rate of approximately $ 75 per hour.

The consulting agreement may be terminated by either party upon providing 15 days of advance notice.

In March 2022, the Company entered into the first project under the ESRA, under which it has committed to a budget of $ 190,000 .

Common Stock Issuance

On March 2, 2022, the Company released 150,000 shares of common stock to a service provider (Note 6).

Sciences Warrant Exercise and Conversion of Amended Credit Agreement

Effective February 16, 2023, Company and Sciences entered into the MTA.

Sciences is the largest stockholder of the Company, with beneficial ownership of 17.44 % of the Company's outstanding common stock following the transactions described below.

Under the MTA, Sciences agreed to exercise 16,641,486 warrants to purchase common stock of the Company (the "MTA Warrants").

Under the MTA, the parties agreed that the aggregate exercise price for the MTA Warrants of $ 282,905 was to be paid through a reduction in the debt owed by the Company to Sciences (the "Credit Consideration") under that certain Amended Credit Agreement.

On February 22, 2023, the Company issued 16,641,486 shares of common stock to Sciences in connection with the exercise of the MTA Warrants.

Pursuant to the terms of the MTA, after the application of the Credit Consideration to the amounts owed under the Amended Credit Agreement, Sciences agreed to convert the remaining balance of $ 1,597,236 owed by the Company to Sciences under the Amended Credit Agreement into 41,379,164 shares of common stock of the Company at a conversion price of $ 0.0386 , in accordance with an amendment to the Amended Credit Agreement set forth in the MTA.

Following the issuance of shares described above, the Amended Credit Agreement was terminated in its entirety per the terms of the MTA.

Table of Cont ents

Termination of Related Party Contractor

On February 9, 2023, the Company terminated the consulting agreement with Mr.

The second tranche of stock options issued to Mr.

Heppell were cancelled upon the closing of the Verdélite SPA.

Divestiture of VDL

On February 9, 2023, EHT, and C3 entered into a second amendment to the Verdélite SPA whereby the parties amended the Verdélite SPA to allow for the first installment payment to be paid through a promissory note (the "Promissory Note").

On February 9, 2023, the parties closed the transactions contemplated by the Verdélite SPA and o n February 10, 2023, the Promissory Note was paid off in its entirety and the Company received a closing payment of $ 5,547,000 .

Upon the divestiture of the VDL, C3 and VDL are not considered related parties to the Company.

Refer to Note 3 for additional information on the Verdélite SPA, including the payment terms of the remaining installments .

Table of Cont ents

The following exhibits are filed with this Annual Report on Form 10-K.

1 unchanged sentence

Description of Exhibit

2.1 Arrangement Agreement, dated May 11, 2022, by and between the Company and EHT (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed on May 11, 2022)

2.2 Amendment No.

1 to the Arrangement Agreement, dated June 14, 2022, by and between the Company and EHT (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 1 7 , 2022)

2.3 Amendment No.

2 to the Arrangement Agreement, dated July 15, 2022, by and between the Company and EHT (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 21, 2022)

2.4 Amendment No.

3 to the Arrangement Agreement, dated October 18, 2022, by and between the Company and EHT (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on October 19, 2022)

2.5 Loan Agreement and Note, dated October 17, 2022, by and between the Company and EHT (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on October 19, 2022)

2.6 Share Purchase Agreement, dated November 8, 2022, by and between Emerald Health Therapeutics, Inc., 14428773 Canada Inc., Verdelite Sciences, Inc., Verdelite Property Holdings, Inc.

and C3 Centre Holding Inc.

(incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q filed on November 14, 2022)

2.7 Amendment No.

1 to the Share Purchase Agreement, dated January 26, 2023, by and between Emerald Health Therapeutics, Inc., 14428773 Canada Inc., Verdelite Sciences, Inc., Verdelite Property Holdings, Inc.

and C3 Centre Holding Inc.

(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 27, 2023)

2.8 Amendment No.

2 to the Share Purchase Agreement, dated February 9, 2023, by and between Emerald Health Therapeutics, Inc., 14428773 Canada Inc., Verdelite Sciences, Inc., Verdelite Property Holdings, Inc.

and C3 Centre Holding Inc.

(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 15, 2023)

3.1 Articles of Incorporation of Registrant, as amended (incorporated by reference to Exhibit 3.1 to our Report on Form 10-K filed on March 2, 2021)

5 unchanged sentences

4.5 2019 Common Stock Warrants (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on November 21, 2019)

4.6 2020 Common Stock Warrants ( inc orporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on August 5, 2020)

4.7 July 2021 Letter Agreement - Inducement ( incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.8 2021 Inducement Warrants ( incorporated by reference to Exhibit 10.

2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.9 September 2021 Securities Purchase Agreement ( incorporated by reference to E xhibit 10.1 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.10 September 2021 Lock-up Agreement ( in corporated by reference to E xhibit 10.2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.11 2021 Common Stock Warrants ( inc orporated by reference to E xhibit 4.1 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.12 2021 Pre-Funded Warrants ( inc orporated by reference to E xhibit 4.2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.13 2021 Common Stock Warrants to Placement Agent ( incorporated by reference to E xhibit 4.3 to our Quarterly Report on Form 10-Q filed November 10, 2021)

10.1† 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.4 to our Current Report on Form 8-K filed on November 3, 2014)

10.2† Amendment No.

1 to 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.

3 to our Current Report on Form 8-K filed on October 12, 2018)

10.3† Amendment No.

2 to 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.

3 to our Current Report on Form 8-K filed on August 12, 2020)

10.4† Form of Stock Option Agreement under 2014 Omnibus Incentive Plan ( incorporated by reference to E xhibit 10.5 to our Current Report on Form 8-K filed on November 3, 2014)

10.5†* Form of Restricted Stock Unit Agreement under 2014 Omnibus Incentive Plan

10.6†* Notice of Option Amendment

10.7† Form of Indemnification Agreement ( inco rporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on January 12, 2015)

10.8† Officer Change in Control Severance Plan ( incorporated by referen ce to E xhibit 10.1 to our Current Report on Form 8-K filed on February 27, 2015)

4.6 2020 Common Stock Warrants (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on August 5, 2020)

4.7 2021 Inducement Warrants (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.8 September 2021 Lock-up Agreement (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.9 2021 Common Stock Warrants (incorporated by reference to Exhibit 4.1 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.1 2021 Pre-Funded Warrants (incorporated by reference to Exhibit 4.2 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.11 2021 Common Stock Warrants to Placement Agent (incorporated by reference to Exhibit 4.3 to our Quarterly Report on Form 10-Q filed November 10, 2021)

4.12* 2022 Form of Warrant Issued to Former EHT Warrant Holders

Table of Cont ents

4.13 Piggyback Registration Rights Agreement, dated December 14, 2022, by and between the Company and Emerald Health Sciences, Inc.

(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on December 19, 2022)

4.14* Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

10.1† Skye Bioscience, Inc.

2014 Amended and Restated Omnibus Incentive Plan (incorporated by reference to Appendix D our definitive proxy statement filed on August 31, 2022)

10.2† Form of Stock Option Agreement under 2014 Amended and Resta ted Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on November 3, 2014)

10.3† Form of Restricted Stock Unit Agreement under 2014 Amended and Restated Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K filed on March 28, 2022)

10.4† Form of Stock Option Award Agreement - For Canadian Optionees under 2014 Amended and Restated Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q filed on November 14, 2022)

10.5† Notice of Option Amendment (incorporated by reference to Exhibit 10.6 to our Annual Report on Form 10-K filed on March 28, 2022)

10.6† Skye Bioscience, Inc.

2022 Employee Stock Purchase Plan (incorporated by reference to Appendix C to our definitive proxy statement filed on August 31, 2022)

10.7† Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 12, 2015)

10.8† Officer Change in Control Severance Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 27, 2015)

10.9† Employment Agreement, dated August 10, 2020, by and between Emerald Bioscience, Inc.

and Punit Dhillon ( i nc orporated by reference to E xhibit 10.2 to our Current Report on Form 8-K filed on August 12, 2020)

and Punit Dhillon (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on August 12, 2020)

10.10† Employment Agreement, dated October 4, 2021, by and between Skye Bioscience, Inc.

and Kaitlyn Arsenault ( inco rporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on October 6, 2021)

10.11** License Agreement, dated January 10, 2017, between Nemus and the University of Mississippi, School of Pharmacy (UM 5070) ( incorporated by reference to E xhibit 10.1 to our Current Report on Form 8-K/A filed on January 20, 2017)

10.12*|** Restated and Amended License Agreement, dated as of May 24, 2019, by and between the Company and University of Mississippi, School of Pharmacy (UM 5050)

10.13 Restated and Amended License Agreement, dated as of May 24, 2019, by and between the Company and University of Mississippi, School of Pharmacy (UM 8930) ( inco rporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on May 29, 2019)

10.14 Multi-Draw Credit Agreement, dated October 5, 2018, by and between Nemus Bioscience, Inc.

and Emerald Health Sciences, Inc.

( i ncorporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on October 12, 2018)

and Kaitlyn Arsenault (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on October 6, 2021)

10.11** License Agreement, dated January 10, 2017, between Nemus and the University of Mississippi, School of Pharmacy (UM 5070) (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K/A filed on January 20, 2017)

10.12** Restated and Amended License Agreement, dated as of May 24, 2019, by and between the Company and University of Mississippi, School of Pharmacy (UM 5050) (incorporated by reference to Exhibit 10.12 to our Annual Report on Form 10-K filed on March 28, 2022)

10.13** Restated and Amended License Agreement, dated as of May 24, 2019, by and between the Company and University of Mississippi, School of Pharmacy (UM 8930) (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 29, 2019)

10.14 Amended and Restated Multi-Draw Credit Agreement, dated April 29, 2020, by and between Emerald Bioscience, Inc.

and Emerald Health Sciences, Inc.

( incorporated by reference to E xhibit 10.1 to our Current Report on Form 8-K filed on April 29, 2020)

(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 29, 2020)

10.15 Amendment No.

2 to the Amended and Restated Multi-Draw Credit Agreement, dated March 29, 2021 ( incorporated by reference to E xhibit 10.1 to our Quarterly Report on Form 10-Q filed May 7, 2021)

2 to the Amended and Restated Multi-Draw Credit Agreement, dated March 29, 2021 (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed May 7, 2021)

10.16 Amendment No.

3 to the Amended and Restated Multi-Draw Credit Agreement, dated September 15, 2021

3 to the Amended and Restated Multi-Draw Credit Agreement, dated September 15, 2021 (incorporated by reference to Exhibit 10.17 to our Annual Report on Form 10-K filed on March 2 8 , 2022)

10.17 Amendment and Acknowledgment Agreement, dated November 17, 2022, by and between the Company and Emerald Health Sciences, Inc.

(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on November 23, 2022)

10.18 Amendment No.

5 to Multi-Draw Credit Agreement, dated December 30, 2022, by and between the Company and Emerald Health Sciences, Inc.

(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 6, 2023)

10.19 Master Transaction Agreement, dated February 16, 2023, by and between the Company and Emerald Health Sciences, Inc.

(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 23, 2023)

Table of Cont ents

10.2 Collaborative Research Agreement, dated January 2021, by and between Skye Bioscience, Inc.

1 unchanged sentence

10.21** Collaborative Research Agreement, dated April 2021, by and between Skye Bioscience, Inc.

and Emerald Health Biotechnology España, S.L., ( incorporated by reference to E xhibit 10.1 to our Q uarterly R eport on Form 10-Q filed on August 6, 2021)

and Emerald Health Biotechnology España, S.L., (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on August 6, 2021)

10.22** Exclusive Sponsored Research Agreement, dated October 11, 2021, by and between the Company and Emerald Health Biotechnology España, S.L.

1 unchanged sentence

10.23 Office Lease, dated as of August 25, 2021, by and between ROIC California, LLC and the Company (incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K filed on September 15, 2021)

16.1 Changes in Registrant's Certifying Accountant - Letter of Mayer Hoffman McCann P.C.

to the Securities and Exchange Commission, dated June 17, 2022 (incorporated by reference to Exhibit 16.1 to our Current Report on Form 8-K filed on June 1 7 , 2022)

16.2 Changes in Registrant's Certifying Accountant - Letter of Friedman, LLP to the Securities and Exchange Commission, dated September 29, 2022 (incorporated by reference to Exhibit 16.1 to our Current Report on Form 8-K filed on October 3, 2022)

21.1* Subsidiaries of the Registrant

23.1* Consent of Independent Registered Public Accounting Firm

23.1* Independent Registered Public Accounting Firm's Consent

23.2* Independent Registered Public Accounting Firm's Consent

31.1* Certification of Principal Executive Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934

13 unchanged sentences

† Management contract or compensatory plan or arrangement.

and is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not otherwise subject to liability under these sections.

†† In accordance with Regulation S-T, XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not otherwise subject to liability under these sections.

Form 10-K Summary .

Table of Cont ents

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

22 unchanged sentences

Margaret Dalesandro

/s/ Jim Heppell March 25, 2022

/s/ Deborah Charych March 31, 2023

Deborah Charych

/s/ Praveen Tyle March 31, 2023

1 unchanged sentence

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

What changed 10-K

Item 9A. Controls and Procedures