What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-03-22 compared with 2023-03-31 · 153 added, 268 removed, 63 unchanged (87% of the section changed)

3 unchanged sentences

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Unless otherwise provided in this Annual Report, references to “we,” “us,” “our” and “Skye Bioscience” in this discussion and analysis refer to Skye Bioscience, Inc., a Nevada corporation formerly known as Emerald Bioscience, Inc., together with its wholly owned subsidiaries, Nemus, a California corporation, SKYE Bioscience Pty Ltd ("SKYE Bioscience Australia"), an Australian proprietary limited company formerly known as EMBI Australia Pty Ltd., Emerald Health Therapeutics, Inc.

(EHT), Verdélite Sciences, Inc.

(VDL) and Avalite Sciences, Inc.

About Skye Bioscience, Inc.

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

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

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

We have retained Novotech as our contract research organization ("CRO") in Australia and commenced our Phase 1 trial in December 2022.

We have also filed our IND for SBI-100 OE in the United States in anticipation of the start of our Phase 2 clinical trial in 2023, which we expect to commence in mid 2023.

Effective January 19, 2021, we changed our name from Emerald Bioscience, Inc.

to Skye Bioscience, Inc.

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

Previously, it traded under the symbol EMBI.

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

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

SKYE Bioscience Australia is currently conducting our Phase 1 clinical study in Australia.

We expect to report final data from this study in the fourth quarter of 2023.

As described in more detail in the section below titled “ Liquidity and Going Concern ”, without additional funding during the second quarter of 2023, management believes that the Company will not have enough funds to meet its obligations and continue pre-clinical and clinical studies beyond the one year date the consolidated financial statements are issued.

If we do not receive additional funding during of the second quarter of 2023, we likely cannot continue operations.

EHT Acquisition

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

The Acquisition was consummated

Table of Cont ents

on November 10, 2022.

Under the terms of the Arrangement Agreement and the Plan of Arrangement, on November 10, 2022, each share of EHT common stock (“EHT Shares”) outstanding immediately prior to the effective time of the Acquisition (the “Effective Time”) was transferred to the Company in exchange for 1.95 shares (the “Exchange Ratio”) of Company common stock.

The cash and assets of EHT and its subsidiaries acquired in the Acquisition are being used to fund our Phase 1 and Phase 2 clinical trials.

EHT and its subsidiaries are 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 subsidiaries, VDL and Emerald Health Therapeutics Canada, Inc., and are in the process of resolving EHT's legacy tax matters with the Canadian tax authorities.

In February 2023, the closing payment from the sale of VDL provided the Company with $5,547,000.

This Acquisition has been a pivotal financing event for our business, allowing us to extend our cash runway into the second quarter of 2023 and will provide us with future funding as we collect the remaining receivables.

In addition, EHT has a vacant lab facility which we are currently evaluating to determine whether it is practical to bring certain aspects of our research and development activities in house or to divest to generate additional corporate funding.

Our Product Candidates and Significant Contracts.

UM 5050 and UM 8930 License Agreements

We have license agreements with University of Mississippi ("UM") for UM 5050 and UM 8930 for "all fields of use" (each, a "License Agreement" and, collectively, the “License Agreements”).

Pursuant to the License Agreements, UM granted us an exclusive license including, with the prior written consent of UM, the right to sublicense the intellectual property related to UM 5050 (referred to by Skye as SBI-100) and UM 8930 (referred to by Skye as SBI-200) for all fields of use.

All fields of use means no restrictions on use of the underlying inventions, including developing UM 5050 and UM 8930 to treat any disease through any form of delivery under the License Agreements.

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

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

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

While earlier third party research validated the utility of a cannabinoid to provide therapeutic utility against diseases such as glaucoma, available methods of administration were burdened with their own side effects and limitations.

Notably, it is difficult to topically deliver a natural cannabinoid molecule into the eye due to its lipophilic nature.

SBI-100 is a natural cannabinoid that has been chemically modified to reduce the lipophilic nature of the original molecule and enhance the ability to administer the molecule on and through the eye.

It is designed such that after it is introduced into the body, enzymes convert it back to its original active ingredient and enable its beneficial mechanisms of action to be unlocked.

The Company's development team is also considering various routes of administration for SBI-100 into the body for different potential disease applications.

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

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

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

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

SBI-100 OE is comprised of the molecule licensed from UM, SBI-100, plus a proprietary nanoemulsion formulation.

The first-in-human Phase 1 trial of SBI-100 OE is currently being conducted in healthy volunteers in Australia to evaluate this drug candidate's safety, tolerability, pharmacokinetics and pharmacodynamics.

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

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

The Company is currently eligible for a 48.5% refundable tax offset as long as it has aggregate turnover of less than $20 million per annum.

Manufacturing of SBI-100 OE has been conducted in the United States.

We completed the manufacture of the clinical trial material for our Phase 1 clinical trial in September 2022.

We rely on compendial excipients that can be sourced from countries outside the United States, such as China.

In June 2022, we received approval from Belberry Limited, a certified Australian Human Research Ethics Committee, to begin our Phase 1 clinical trial for the study of our lead product candidate, SBI-100 OE.

We subsequently notified the Australian Therapeutics Goods Administration of our intent to initiate our Phase 1 clinical trial through the Clinical Trial Notification

Table of Cont ents

In connection with this marketing approval to initiate the first-in-human trial for SBI-100 OE, we triggered the first milestone payment under our License Agreement for UM 5050 with UM.

We commenced enrollment and dosing of the Phase 1 in November and December 2022.

We expect our Phase 1 study to complete enrollment in the first half of 2023.

The Company has announced that the safety review committee ("SRC") for this study reviewed safety data from the first and second cohorts of the single ascending dose arm of the Phase 1 and recommended advancing to the next cohort.

After the review of the second cohort of safety data, the SRC also provided its recommendation that the study progress to the second arm of the Phase 1 study.

During the third and fourth quarter of 2022, we manufactured the active pharmaceutical ingredient to be used in our Phase 2 clinical trial.

The formulation and packaging of SBI-100 OE for its planned Phase 2 trial will be conducted by NextPharma Oy at its Finnish facility.

NextPharma is a contract manufacturing organization with strong capabilities in preservative-free multi-dose and blow-fill-seal packaging of eye drop dispensers.

In December 2022 we obtained FDA clearance of our Investigational New Drug application to conduct clinical studies in the US, clearing the path to commence our Phase 2 trial in the United States without having to first complete our Phase 1 study.

We expect to begin our Phase 2 trial in the middle of 2023.

The Phase 2 study will be a randomized, controlled, double-masked clinical trial in patients with glaucoma or ocular hypertension to obtain additional data to determine whether the topical delivery of SBI-100 OE is safe and well-tolerated, and whether the IOP is markedly different between SBI-100 OE and the placebo.

In January 2023, our Phase 2 clinical trial protocol received study level approval from a central institutional review board (“IRB”).

Additionally, in February 2023 we announced an agreement with Lexitas Pharma Services, Inc.

(“Lexitas”), a leading full-service ophthalmic-focused contract research organization (“CRO”), to conduct our Phase 2a study for glaucoma and ocular hypertension.

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

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

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

We are further evaluating the possible utility and development of this compound as a therapeutic agent.

General Trends and Outlook

During the second quarter of 2022, we were indirectly impacted by a cyberattack on our Phase 1 clinical supply contract manufacturer.

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

The overall potential delay in our drug product research and development from these types of incidents is unknown, but our operations and financial condition may continue to suffer in the event of continued business interruptions, supply chain issues, delayed clinical trials, production or a lack of laboratory resources due to the pandemic and other global conditions.

It is possible that we may encounter other similar issues relating to the current situation that 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.

Unless otherwise provided in this Annual Report, references to “we,” “us,” “our” and “Skye Bioscience” in this discussion and analysis refer to Skye Bioscience, Inc., a Nevada corporation , together with its wholly owned subsidiaries, Nemus, a California corporation, SKYE Bioscience Pty Ltd ("SKYE Bioscience Australia"), an Australian proprietary limited company, Emerald Health Therapeutics, Inc.

(EHT) a corporation governed by the Business Corporations Act (British Columbia), Birdrock Bio Sub, Inc.

("BRB"), a Delaware corporation, Ruiyi Acquisition Corp, a Delaware corporation and Avalite Sciences, Inc.

(AVI) a corporation governed by the Business Corporations Act (British Columbia).

We are a clinical stage biopharmaceutical company with a mission to pioneer and lead the development of new pharmaceutical products that unlock the potential of the ECS.

Our strategy and clinical assets focus, initially, on the modulation of the CB1 axis to advance the standard of care and provide novel alternative therapies to treat diseases with neuropathic, inflammatory, and metabolic conditions.

Our lead clinical program's product candidate nimacimab, is a peripherally-restricted negative allosteric modulating antibody specific for the human CB1 receptor, administered as a subcutaneous injectable for the treatment of metabolic disorders, including obesity.

We plan to launch a Phase 2 clinical trial of nimacimab, which will include a combination study with a GLP-1 agonist, to treat obesity by mid-year 2024, with final data in late 2025.

In August of 2023, we acquired nimacimab from the acquisition of BRB as a Phase 2 ready asset.

Nimacimab's Phase 1 trial was designed to test the safety and tolerability in a single ascending dose (SAD) in health volunteers and a multiple ascending dose (MAD) in patients with NAFLD.

The Phase 1 study, indicated a strong safety profile and provided important indications of effectiveness in reducing cholesterol levels in the NAFLD population.

Based on the results of this study, we further evaluated other potential use cases for nimacimab in metabolic, inflammatory and fibrotic processes.

Based on our comprehensive review of the overall market, clinical pipeline of competition and potential target product profile (TPP) of nimacimab, in December 2023, we filed an IND to treat patients with obesity in a Phase 2 study.

Our other product candidate, SBI-100 OE, is a Phase 2-stage CB1 agonist (activator) delivered topically into the eye for the treatment of glaucoma and ocular hypertension.

Our proprietary eye drop is a nano emulsion formulation that has been developed in a way that provides enhanced bio-availability and permeability, while also extending the duration of activity.

In February 2024, we announced the completion of patient enrollment in our Phase 2a placebo controlled study designed to treat glaucoma and ocular hypertension and are expecting to report data in Q2 2024.

We commenced dosing of our Phase 1 clinical study for SBI-100 OE in December 2022 and in November 2023 we reported data demonstrating that SBI-100 OE was safe and well-tolerated.

Importantly, we determined that there was minimal systemic exposure of the active metabolite of SBI-100 OE, THC, thus resulting in little to no side effects related to THC intoxication.

Moreover, it was determined that after multiple days of dosing we saw minimal hyperaemia (i.e.

redness of the eyes) following administration of SBI-100 OE.

In preclinical experiments using SBI-100 OE we have demonstrated statistically superior IOP lowering compared to the prostaglandin-based therapy, latanoprost, the current standard-of-care for treating glaucoma.

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

We believe that both of our drug candidates are differentiated in their respective markets and target indications with a large unmet need.

Because the modulation of the ECS through CB1 has been shown to play a role in both glaucoma and obesity, we believe that both our products are strong candidates for marketing authorization as either first or second-line therapies.

In January 2024 and March 2024, we completed two private placement equity transactions with institutional investors, in which we raised combined net aggregate proceeds of approximately $83,500,000.

The capital from the January and March PIPE financings will allow us to fund both of our planned clinical trials for glaucoma and obesity through top line Phase 2 data.

On September 6, 2023, we filed a Certificate of Change and Certificate of Correction with the Secretary of State of the State of Nevada, which effected a reverse stock split, at a ratio of one-for-250, of the Company’s issued and outstanding shares of common ctock (the "Reverse Split").

The Reverse Split was effective on September 8, 2023.

As a result of the Reverse Split, each two-hundred fifty (250) shares of common stock was combined into one (1) share of common stock and the total number of shares of common stock authorized was reduced from 5,000,000,000 to 20,000,000 and the number of shares of common stock issued and outstanding was reduced from 3,078,137,871 shares of common stock to 12,312,551 shares of common stock.

Subsequently, on November 6, 2023, we increased our authorized shares of common stock to 100,000,000.

On August 18, 2023, we completed a strategic transaction to acquire a clinical asset pursuant to an Agreement and Plan of Merger and Reorganization, dated as of August 15, 2023, by and among the Company, Bird Rock Bio, Inc.

and Aquila Merger Sub, Inc., pursuant to which Aquila Merger Sub, Inc.

merged with and into Bird Rock Bio, Inc.

with Bird Rock Bio, Inc.

surviving as a wholly owned subsidiary of the Company (the “BRB Acquisition”).

The purpose of the BRB Acquisition was to acquire BRB's clinical asset, nimacimab, an antibody targeting the CB1 receptor, for development to treat metabolic, inflammatory, and fibrotic conditions.

We were incorporated under the laws of the State of Nevada on March 16, 2011 and are based in San Diego, CA.

Since our incorporation, we have devoted substantially all of our efforts to building our product portfolio through the acquisition of clinical assets and licensing agreements, carrying out research and development, building infrastructure and raising capital.

Financial Overview

We have incurred net losses and generated negative cash flows from operations since inception and expect to incur losses in the future as we continue development activities to support our product candidates through clinical trials.

As a result, we expect to continue to incur operating losses and negative cash flows until our product candidates gain market acceptance and generate significant revenues.

Our net loss for the year ended December 31, 2022 was $19,481,602 , as compared to a net loss of $8,522,182, for the year ended December 31, 2021.

As of December 31, 2022, we had an accumulated deficit of $ 66,737,765 and negative cash flows from operations of $12,744,072 .

As of December 31, 2022, we had unrestricted cash of $1,244,527 as compared to $8,983,007 as of December 31, 2021.

On February 5, 2021, we increased our authorized shares of common and preferred stock to 5,000,000,000 and 50,000,000, respectively.

Critical Accounting Policies and Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the

Table of Cont ents

United States of America.

To date, we have not generated any revenue.

We do not expect to receive any revenue from any drug candidates that we develop unless and until we obtain regulatory approval for, and commercialize, our drug candidates or generate revenue from collaborative agreements with third parties.

Research and Development Expenses

During the year ended December 31, 2023, we incurred $5,819,461 in research and development expenses primarily related to our efforts in conducting the Phase 1 and Phase 2a SBI-100 OE clinical trials.

During the year ended December 31, 2022, we incurred $6,011,805 in research and development expense primarily related to our efforts in conducting the Phase 1 SBI-100 clinical trial and the manufacturing of the API required for the Phase 1 and Phase 2a SBI-100 clinical studies.

We expect that our ongoing research and development expenses will consist of costs incurred for the development of our drug candidates, including, but not limited to:

• license fees;

• employee-related expenses, which include salaries, benefits and stock-based compensation;

• payments to third party contract research organizations and investigative sites;

• payments to third party manufacturing organizations and consultants.

We expect to incur future research and development expenditures to support our nonclinical and clinical studies.

Nonclinical activities include, laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess safety and efficacy.

Subject to the submission and approval by the FDA of our IND, clinical trials may commence and will involve the administration of the investigational new drug candidate to human subjects.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming and the successful development of our drug candidates is highly uncertain.

Our future research and development expenses will depend on the clinical success of each of our drug candidates, as well as ongoing assessments of the commercial potential of such drug candidates.

In addition, we cannot forecast with any degree of certainty which drug candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

We expect to incur increased research and development expenses in the future as we continue our efforts towards advancing our lead program for nimacimab.

Cost to acquire IPR&D Asset

During the year ended December 31, 2023, we incurred a one-time non-cash charge of $21,215,214 related to the acquisition of our lead clinical asset, nimacimab.

This in-process R&D was expensed when purchased in exchange for shares of our common stock, as its only future use was determined to be for drug development.

General and Administrative Expenses

Our general and administrative expenses have fluctuated year-over-year as we have entered into various strategic acquisitions to restructure and re-position our company.

Additionally, as a business in the early stages of drug development we are in the process of scaling our operations by hiring additional employees, and building the infrastructure necessary to increase efficiencies.

These initiatives have resulted in additional costs related to the implementation of certain systems, insurance, legal and accounting related to operating as a public company.

To incentivize our employees and be competitive to retain strong talent we issued additional equity awards in 2023, which have resulted in increased stock-based compensation expense.

We expect that our general and administrative expenses will continue to increase in the future in order to support our expected increase in research and development activities, including increased salaries and other related costs, stock-based compensation and consulting fees for executive, finance, accounting and business development functions.

We also expect general and administrative expenses to increase as a result of additional costs associated with being a public company, including expenses related to compliance with the rules and regulations of the SEC, additional insurance expenses, investor relations activities and other administration and professional services.

Other significant costs are expected to include legal fees relating to patent and corporate matters, facility costs and fees for accounting and other consulting services.

Estimated legal contingency

The estimated legal contingency relates to a wrongful termination suit brought against the former management team that is currently being appealed.

As of December 31, 2023, the maximum amount of the liability is known and we have posted an appellate bond that is collateralized by an irrevocable letter of credit equal to, $9,080,202, approximately 150% of the liability recorded on our balance sheet.

Other Expense

Other expense primarily includes interest expense incurred from our short term convertible debt, a loss related to the divestiture of an asset from our 2022 acquisition and an inducement charge from the conversion of debt.

In both 2023 and 2022 we also reported wind-down costs from our 2022 acquisition of EHT which we do not expect to incur in future periods.

These expenses are offset by interest income earned on our cash balances.

Critical Accounting Estimates

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period.

On an on-going basis, management evaluates its estimates and judgments, including those related to accrued expenses, the percentage of completion as it relates to our clinical accruals, financing operations, contingencies, the fair value of assets acquired in the acquisition, and litigation.

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

1 unchanged sentence

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

These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (the “exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

A fair value hierarchy based on three levels of inputs, of which the first two are considered observable, and the last is considered unobservable, is used to measure fair value:

Valuations for assets and liabilities traded in active markets from readily available pricing sources such as quoted prices in active markets for identical assets or liabilities.

Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

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 our 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.

Convertible Instruments

We account for hybrid contracts with embedded conversion features in accordance with Accounting Standards Codification ("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.

We account 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.

Under ASC 470-20, we record, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the difference between the fair value of the underlying common stock at the commitment date and the embedded effective conversion price.

When we determine that the embedded conversion option should be bifurcated from its host instrument, the embedded feature is accounted for in accordance with ASC 815.

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

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

Table of Cont ents

We also follow ASC 480-10, Distinguishing Liabilities from Equity ("ASC 480-10") when evaluating the accounting for our hybrid instruments.

A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following:

(a) a fixed monetary amount known at inception (for example, a payable settled with a variable number of the issuer’s equity shares);

(b) variations in something other than the fair value of the issuer’s equity shares (for example, a financial instrument indexed to the Standard and Poor’s S&P 500 Index and settled with a variable number of the issuer’s equity shares);

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 Operations.

When determining the short-term vs.

long-term classification of derivative liabilities, we first evaluate the instruments’ exercise provisions.

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, we carefully evaluate all factors that could potentially restrict the instrument from being exercised or create a situation where exercise would be considered remote.

We re-evaluate our derivative liabilities at each reporting period end and make updates for any changes in facts and circumstances that may impact classification.

Warrants Issued in Connection with Financings

We generally account 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 we 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, we record the fair value of the warrants as a liability at each balance sheet date and record changes in fair value in other expense (income), net in our Consolidated Statements of Operations.

These accounting estimates are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in this Annual Report on Form 10-K.

We believe that the following accounting estimates are the most critical to aid you in fully understanding and evaluating our reported financial results and affect the more significant judgments and estimates that we use in the preparation of our consolidated financial statements.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses.

This process involves reviewing contracts and vendor agreements, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost.

We make estimates of our accrued and prepaid clinical expenses on a quarterly basis in our consolidated financial statements based on facts and circumstances known to us at that time.

Examples of estimated accrued research and development expenses include fees paid to contract research organizations (CROs), investigative sites in connection with clinical studies and to vendors related to product manufacturing and development of clinical supplies.

We base our expenses related to clinical study and trial costs on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that conduct and manage clinical studies on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows and expense recognition.

Payments under some of these contracts depend on factors out of our control, such as the successful enrollment of patients and the completion of clinical trial milestones.

In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period.

There have been no material changes in estimates for the periods presented.

Stock-Based Compensation Expense

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

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

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

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

We have stock-based compensation programs, which include restricted stock units (RSUs);

stock options and an employee stock purchase plan.

We account for stock-based compensation expense, including the expense for grants of stock options and RSUs that may be settled in shares of our common stock, based on the fair values of the equity instruments issued.

The fair value is determined on the measurement date, which is generally the date of grant.

The fair value of our RSUs is generally measured at the market price of our common stock on the measurement date.

Additionally, we use the Monte Carlo Simulation model to evaluate the derived service period and fair value of awards with market conditions, including assumptions of historical volatility, time to the next capital raise and risk-free interest rate commensurate with the vesting term.

The fair value for our stock option awards is determined at the grant date using the Black-Scholes valuation model.

Assumptions for the Black-Scholes valuation model used for employee stock awards include:

• Volatility - Stock price volatility is estimated over the expected term based on a blended daily rate of industry peers stock volatility.

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

2 unchanged sentences

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

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

We apply ASC No.

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

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

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

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.

Table of Cont ents

Commitments and Contingencies

We follow 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 us, but which will only be resolved when one or more future events occur or fail to occur.

We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against us or un-asserted claims that may result in such proceedings, we evaluate 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.

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 our 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, we believe that the current litigation matter related to the Cunning Lawsuit will have a material adverse effect on our consolidated financial position, results of operations and cash flows.

Asset Acquisition

We evaluate 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 we have 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.

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

Common stock issued as consideration in an asset acquisition is generally measured based on the acquisition date fair value of the equity interests issued.

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

We also evaluate 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 our name, are recorded on a gross basis as an asset with a corresponding liability in our Consolidated Balance Sheets.

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 relative fair value basis.

Assets Held for Sale

Assets held for sale include the VDL real estate asset, Health Canada license and related intellectual property, that we plan to sell within the next year.

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 original carrying value.

An arrangement was in place to sell the assets of VDL at the time we completed the Acquisition of EHT, as such the VDL assets are considered held for sale and are presented within the Consolidated Balance Sheets.

As of December 31, 2022 the VDL assets are held at carrying value less any costs to sell.

The divestiture of VDL was completed after the balance sheet date on February 9, 2023.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to determine stock-based compensation expense.

However, if actual results are not consistent with our estimates or assumptions, we may be exposed to changes in stock-based compensation expense that could be material or the stock-based compensation expense reported in our financial statements may not be representative of the actual economic cost of the stock-based compensation.

Recently Issued and Adopted Accounting Pronouncements

1 unchanged sentence

While we expect certain recently adopted accounting pronouncements to impact our estimates in future periods, the impact upon adoption was not significant to our current estimates and operations.

Table of Cont ents

Results of Operations

Our results of operations have fluctuated from period to period and may continue to fluctuate in the future, based upon the progress of our clinical trials, our research and development efforts, variations in the level of expenditures related to investor relations and seeking new sources of capital, debt service obligations during any given period, and the uncertainty as to the extent and magnitude of the residual global impacts from the COVID-19 pandemic such as supply chain disruptions and inflation.

Results of operations for any period may be unrelated to results of operations for any other period.

In addition, historical results should not be viewed as indicative of future operating results.

For the years ended December 31, 2022 and 2021

Comparison of the years ended December 31, 2023 and 2022

Research and Development Expenses

Research and development expenses included the following:

• license fees;

• employee-related expenses, which include salaries, benefits and stock-based compensation;

• payments to third party contract research organizations and investigative sites;

• payments to third party manufacturing organizations and consultants.

We expect to incur future research and development expenditures to support our preclinical and clinical studies.

Preclinical activities include, laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess safety and efficacy.

Subject to the submission and approval by the FDA of our IND, clinical trials may commence and will involve the administration of the investigational new drug candidate to human subjects.

Below is a summary of our research and development expenses during the years ended December 31, 2023 and 2022 :

2 unchanged sentences

Research and development expenses $ 5,819,461 $ 6,011,805 $ (192,344) (3) %

Research and development expenses for the year ended December 31, 2022 increased by $3,080,368 when compared to the year ended December 31, 2021.

The increase in research and development expenses was primarily due to an increase in contract research and development activities, including $2,348,534 for the manufacturing of our Phase 1 clinical trial material for SBI-100 OE, the manufacture of API for our Phase 2 study and contracted site initiation costs for our Phase 1 clinical study.

In addition, we incurred an increase of $77,601 in expense for the use of specialized consultants, had increased costs related to lab supplies and materials of $36,105, an increase in compensation cost of $493,281 due to bonus expense and additional headcount from the addition of regulatory and development personnel, an increase in software of $24,956 and an increase in license fees of $86,979 from meeting the first milestone under our license agreement with UM which was offset by the cancellation of UM5070.

Research and development expenses for the year ended December 31, 2023 decreased by $192,344 when compared to the year ended December 31, 2022.

The decrease in research and development expenses was primarily due to a slight delay starting our Phase 2a glaucoma study that we experienced during the second half of 2023.

In addition, the decrease in contract manufacturing costs during 2023 was due to the efficient management of sufficient reserves of clinical trial material from our Phase 1 trial to administer the Phase 2a clinical study for glaucoma.

The overall decline included a decrease of $422,939 and $210,270 in clinical contract costs and consulting, respectively.

Additionally, license fees decreased by $105,356 as the Company achieved a one time milestone payment under our UM 5050 license agreement which was offset by the cancellation of UM 5070.

The decreases were offset by increases of $481,411 and $65,296 in research and development salaries and benefits and general business expenses, respectively, due to the expansion of our clinical and R&D team during 2023.

Cost to acquire IPR&D asset

Below is a summary of our cost to acquire the IPR&D asset during the December 31, 2023 and 2022:

Year Ended December 31,

2023 2022 $ Change

2022 % Change

Cost to acquire IPR&D asset $ 21,215,214 $ — $ 21,215,214 100 %

Cost to acquire the IPR&D asset for the December 31, 2023, increased by $21,215,214 as compared to the year ended December 31, 2022.

The increase is due to the cost to acquire nimacimab in the BRB Acquisition.

General and Administrative Expenses

4 unchanged sentences

General and administrative expenses for the year ended December 31, 2023 increased by $1,757,723 as compared to the year ended December 31, 2022.

The increase in general and administrative expenses was primarily due to an increase in employee wages and board fees of $746,952 related to the hiring of our chief financial officer, the addition of two board members and the special transaction bonus for executives and board members related to the Acquisition.

Additionally, there were increases in professional and legal fees of $732,529 related primarily to preliminary diligence costs associated with the Acquisition which were expensed as incurred during the first quarter and other general legal costs from litigation and the roll out of our employee stock purchase plan and the amendment to our equity incentive plan.

We also had increases in software expense of $169,183 from the implementation of new systems, an increase in facilities and rent expense of $23,290 and increases in travel and

Table of Cont ents

insurance costs totaling $96,210.

The aggregate increase was offset by decreases of $278,224, $202,834 and $119,205 in investor relations expenses, consulting and marketing and other general business expenses, respectively.

The increase in general and administrative expenses was primarily due to an increase in employee wages and board fees of $516,854 related to the addition of three board members and board incentive compensation.

Additionally, there were increases in professional and legal fees of $942,336 related primarily to transaction costs associated with the BRB Acquisition, additional regulatory filings, the reverse stock split and ongoing litigation.

There was also an increase of $282,447 in general business expenditures due to higher investor relations and travel expenses related to the publicity of our repositioning in 2023 to highlight nimacimab as our lead asset for obesity.

Estimated legal contingency

4 unchanged sentences

Estimated legal contingency $ (151,842) $ 6,205,310 $ (6,357,152) N/A

For the year ended December 31, 2022, we recorded an estimated for a legal contingency of $6,205,310 related to the Cunning Lawsuit.

The estimate reflects the full amount of the judgement plus an estimate for the plaintiff's legal fees.

Estimated legal contingency for the year ended December 31, 2023 decreased by $6,357,152 as compared to the year ended December 31, 2022 .

The adjustment to the estimated legal contingency of $151,842 in 2023 was due to the court's determination to decrease the aggregate legal fees owed to the plaintiff in the Cunning Lawsuit .

Other Expense

3 unchanged sentences

Change in fair value of derivative liability $ (3) $ (59,729) $ 59,726 (100) %

Gain on forgiveness of PPP loan — (117,953) 117,953 (100) %

Interest expense 906,270 665,133 241,137 36 %

Interest income (99,974) (19,011) (80,963) 426 %

Finance charge 120,228 — 120,228 N/A

Wind-down costs 456,508 — 456,508 N/A

Finance charge — 120,228 (120,228) (100) %

Loss from asset sale 307,086 — 307,086 N/A

Debt conversion inducement expense 1,383,285 — 1,383,285 N/A

Wind-down costs 409,347 456,508 (47,161) (10) %

Total other expense, net $ 2,906,011 $ 1,163,129 $ 1,742,882 150 %

For the year ended December 31, 2022 , we had net other expense of $1,163,129 primarily related to interest expense and wind down costs associated with the Acquisition.

In addition, we recognized a finance charge of $120,228 from the repricing of the Sciences warrants.

The increase was offset by decreases in interest expense of $104,026 due to a lower average outstanding principal balance outstanding during the year on the Amended Credit Agreement, a decrease in the fair value of the derivative liabilities of $80,894 and interest income of $19,008.

Other expenses were offset by the gain on debt forgiveness realized from the PPP Loan that was realized during the period ended December 31, 2021.

Results of operations for any period may be unrelated to results of operations for any other period.

In addition, historical results should not be viewed as indicative of future operating results.

In particular, to the extent our medical affairs personnel and clinical trial subjects are subject to varying levels of restriction on accessing clinical trial sites due to constraints on the global supply chain, we expect our progress towards executing our clinical trials to be adversely affected.

For the year ended December 31, 2023, we had net other expense of $2,906,011 primarily related to interest expense of $906,270 (including cash and non-cash interest), a non-cash charge of $1,383,285 related to the induced conversion of our Amended Credit Facility, $409,347 in wind down costs associated with the EHT Acquisition and a $307,086 loss from the divestiture of VDL.

The increase was offset by interest income of $99,974.

For the year ended December 31, 2022, we had net other expense of $1,163,129 primarily related to interest expense of $665,133 related to the Amended Credit Agreement and wind down costs of $456,508 associated with the EHT Acquisition.

In addition, we recognized a finance charge of $120,228 from the repricing of warrants.

Liquidity, Going Concern and Capital Resources

Liquidity and Going Concern

We have incurred operating losses and negative cash flows from operations since our inception.

We expect to continue to incur significant losses and negative cash flows from operations through 2023 and into the foreseeable future.

We anticipate that we will continue to incur net losses in order to advance and develop potential drug candidates into preclinical and clinical development activities and support our corporate infrastructure, which includes the costs associated with being a public company.

Historically, we have funded our operations primarily through issuance of equity securities, borrowings from a related party and strategic transactions.

Table of Cont ents

As of December 31, 2022, we had an accumulated deficit of $66,737,765, stockholders’ deficit of $3,008,054 and a working capital deficit of $3,175,408.

We had unrestricted cash of $1,244,527 as of December 31, 2022, as compared to $8,983,007 as of December 31, 2021.

The decrease in our cash balance was primarily attributable to increased research and development expenses related to manufacturing SBI-100 in anticipation of the start of our Phase 2 clinical trial and prepayments to our CRO for our Phase 1 clinical trial, which commenced in the fourth quarter of 2022.

The Company has incurred operating losses and negative cash flows from operations since inception and as of December 31, 2023, had a working capital deficit of $2,250,156 and an accumulated deficit of $104,382,549.

As of December 31, 2023, the Company had unrestricted cash in the amount of $1,256,453.

For the years ended December 31, 2023 and 2022, the Company incurred losses from operations of $34,735,173 and $18,311,732, respectively.

For the years ended December 31, 2023 and 2022, the Company incurred net losses of $37,644,784 and $19,481,602, respectively.

The Company expects to continue to incur significant losses and negative cash flows from operations through 2024 and expects to incur significant losses and negative cash flows from operations in the future.

During 2022, we also expended significant legal and professional resources on the Acquisition and general litigation, including litigation associated with the Cunning Lawsuit, as described in more detail above under the caption "Legal Proceedings - Cunning Lawsuit".

The various Acquisition related transactional delays 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.

Upon closing the Acquisition, we acquired net assets with an estimated fair value of $15,045,412, upon closing the Acquisition we received $6,784,057 in cash and upon the closing of the Verdélite SPA we received a closing payment of $5,547,000 on February 10, 2023.

We expect to collect the remainder of the value from the divestiture of EHT's assets over a four year period.

However, there are significant risks and uncertainties around the timing of these payments and ultimate realization of these assets.

On October 5, 2018, we secured a Credit Agreement with Sciences, that provided us with a credit facility of up to $20,000,000.

On April 29, 2020, we entered into the first amendment to the Credit Agreement with Sciences, which amended and restated the Credit Agreement.

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

Effective September 15, 2021, the disbursement line under the credit facility was closed.

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

The outstanding advances plus accrued interest under the Amended Credit Agreement were due on October 5, 2022 and on November 17, 2022, we 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.

On December 30, 2022, we 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 plus accrued interest which extended our cash runway.

Pursuant to the February 16, 2023 Master Transaction Agreement with Sciences, Sciences agreed to use its best efforts to distribute the shares of Skye held by Sciences to the individual shareholders of Sciences upon Skye's listing to a nationally recognized exchange.

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

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

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

This jury verdict resulted in the recognition of an estimated legal contingency of $6,205,310, this judgement and the trial preparation also increased our overall legal costs for the year ended December 31, 2022.

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

We intend to vigorously challenge the verdict in the trial court and appeal and pursue reimbursement under our existing insurance policies.

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

We expect that the potential expected cash outflows required to pursue legal appeals or other strategies may limit our ability to pursue all of our plans for our business.

Furthermore, the uncertainty as to the resolution of the litigation could limit our ability to raise new capital from investors to operate our business.

Additionally, the increased turmoil in the U.S.

capital markets created a substantially more difficult business environment.

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

Without additional funding during the second quarter of 2023, management believes that the Company will not have enough funds to meet its obligations and continue pre-clinical and clinical studies beyond one year after the date the consolidated financial statements are issued.

If we do not receive additional funding during the second quarter of 2023, we likely cannot continue operations.

These conditions indicate it is probable that there is substantial doubt as to our ability to continue as a going concern, unless we are able to raise sufficient capital to continue our operations.

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

Our consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business.

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

Cunning, our ability to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due.

The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as

Table of Cont ents

a going concern.

Our consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.

Historically, the Company has funded its operations through convertible debt, public equity financings, asset acquisitions and private investments in public equity.

On August 18, 2023, the Company entered into the Convertible Note Financing, the August PIPE Financing and BRB Acquisition which provided the Company with the necessary funds to continue operations, post an appeal bond to stay the execution of the judgment in the Cunning Lawsuit and reposition the Company to focus on nimacimab as its lead clinical asset for obesity.

Following the August 2023 transactions, the Company executed a 1:250 reverse stock split and increased its authorized shares outstanding.

In January 2024 and March 2024, we completed two private placement equity transactions with institutional investors, in which we raised combined net aggregate proceeds of approximately $83,500,000.

The capital from the January and March PIPE financings will allow us to fund both of our planned clinical trials for glaucoma and obesity through top line Phase 2 data.

The Company’s consolidated financial statements have been prepared on the basis of the Company continuing as a going concern for the next 12 months.

Based on its current operational requirements, the Company believes that its current cash will be sufficient to fund its projected operations for at least 12 months from the date of the issuance of these consolidated financial statements.

The follo wing is a summary of our cash flows for the periods indicated and has been derived from our consolidated financial statements which are included elsewhere in this Form 10-K:

Year Ended December 31,

Net cash, case equivalents and restricted cash provided by (used in):

Net cash and restricted cash provided by (used in):

Operating activities $ (13,952,178) $ (12,744,072)

1 unchanged sentence

Financing activities 16,443,270 (208,794)

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

Net increase (decrease) in cash and restricted cash

$ 9,087,548 $ (7,738,471)

Cash Flows from Operating Activities

The primary use of cash for our operating activities during these periods was to fund research development activities for our clinical product candidate, SBI-100 OE, and general and administrative activities.

Our cash used in operating activities also reflected changes in our working capital, net of adjustments for non-cash charges, such as a finance charge from the repricing of the Sciences warrants in connection with the extension of the Amended Credit Agreement, stock-based compensation expense, non-cash interest expense related to the amortization of our debt discounts on our related party Amended Credit Agreement, fair value adjustments related to our warrant liability and an estimated legal contingency related to the Cunning Lawsuit.

Cash used in operating activities of $12,744,072 during the year ended December 31, 2022, reflected a net loss from operations of $19,481,602, the losses were adjusted by aggregate non-cash charges of $7,499,434 and included a $761,904 decrease in our operating assets and liabilities.

Non-cash charges included $629,032 for stock-based compensation expense, $489,595 non-cash interest expense from the amortization of the debt discount on the Amended Credit Agreement, a $59,729 gain from the decrease in fair value of our warrant liability, depreciation and amortization of $114,998, a finance charge of $120,228 due to the Sciences warrant repricing, and a loss of $6,205,310 due to the estimated legal contingency associated with the Cunning Lawsuit.

The net change in our operating assets and liabilities included a $109,943 increase in our prepaid expense and other current assets, an increase in accounts payable of $799,740, and a $1,671,587 decrease in our accrued expense and other current liabilities.

The primary use of cash for our operating activities during these periods was to fund research and development activities for our clinical product candidates, nimacimab and SBI-100 OE, along with general and administrative activities.

Our cash used in operating activities also reflected changes in our working capital, net of adjustments for non-cash charges, such as , stock-based compensation expense, non-cash interest expense related to the amortization of debt discounts on our convertible debt instruments, a charge to induce the conversion of the Amended Credit Agreement during February 2023 and the expense related to the acquisition of our lead asset for obesity, nimacimab.

Cash used in operating activities of $13,952,178 during the year ended December 31, 2023, reflected a net loss of $37,644,784, the loss was adjusted by aggregate non-cash charges of $24,161,912 and included a $469,306 decrease in our operating assets and liabilities.

Non-cash charges included $124,251 of depreciation and amortization, $987,510 for stock-based compensation expense, $329,890 in non-cash interest expense from the amortization of the debt discount on our convertible debt, a gain of $151,843 from the courts decision to reduce the legal fees due to the plaintiff in the Cunning Lawsuit, $307,086 for a non-cash loss on the divestiture of VDL, a debt conversion inducement charge of $1,383,285 related to the conversion of the multi-draw credit agreement and in-process research and development expenses of $21,215,214 related to the acquisition of our lead asset, nimacimab.

The net change in our operating assets and liabilities included a $306,442 increase in our prepaid expense and other current assets, a decrease in accounts payable of $701,285, and a $74,463 decrease in our accrued expense and other current liabilities.

Cash used in operating activities of $12,744,072 during the year ended December 31, 2022, reflected a net loss of $19,481,602, partially offset by aggregate non-cash charges of $7,499,434 and included a $761,904 net change in our operating assets and liabilities.

Non-cash charges included $869,206 for stock-based compensation expense, $593,802 non-cash interest expense from the amortization of the debt discount on the Amended Credit Agreement, a $21,165 loss from the increase in fair value of our warrant liability, depreciation and amortization of $34,131, and a $117,953 gain from the forgiveness of the PPP Loan.

The net change in our operating assets and liabilities included a $434,110 increase in our prepaid expense and other current assets, an increase in accounts payable of $518,638, and a $580,258 increase in our accrued expense and other current liabilities.

Non-cash charges included $629,032 for stock-based compensation expense, $489,595 non-cash interest expense from the amortization of the debt discount on the Amended Credit Agreement, a $59,729 gain from the decrease in fair value of our warrant liability, depreciation and amortization of $114,998, a finance charge of $120,228 due to Sciences warrant repricing, and a loss of $6,205,310 due to the estimated legal contingency associated with the Cunning Lawsuit.

Cash Flows from Investing Activities

Cash provided by continued investing activities of $5,214,395 during the year ended December 31, 2022 consisted of our capital expenditures in relation to the purchase of property plant and equipment of $28,060, cash divested net of proceeds received from the sale of an asset of $66,458 and cash proceeds received from the Acquisition of $5,308,913.

During the year ended December 31, 2021, the Company purchased $90,866 of machinery and office equipment.

Cash provided from investing activities of $6,596,456 during the year ended December 31, 2023 consisted of our capital expenditures in relation to the purchase of property plant and equipment of $12,550, cash divested net of proceeds received from the sale of VDL of $5,532,266 and cash proceeds received from the BRB Acquisition of $1,076,740.

During the year ended December 31, 2022, the Company purchased $28,060 of machinery and office equipment, cash divested net of proceeds received from the sale of an asset of $66,458 and cash proceeds received from the EHT Acquisition of $5,308,913.

Cash Flows from Financing Activities

During the year ended December 31, 2023, cash provided by financing activities included $11,734,947 in net proceeds received from the August 2023 PIPE Financing, $4,973,684 in net proceeds from the issuance of a convertible note, offset by $259,335 in repayments on our insurance premium financing.

During the year ended December 31, 2022 cash used in financing activities included $1,967 in proceeds received in connection with pre-funded warrants and $680,901 in proceeds from the EHT bridge financing, offset by $275,537 in repayments on our insurance premium financing, and $616,125 in prepayments on the Amended Credit Agreement.

During the year ended December 31, 2021 cash provided by financing activities included $7,011,799 in proceeds received in connection with the exercise of warrants, $6,062,774 in net proceeds from the issuance of common stock and warrants and $4,783 received from employee stock option exercises in 2021.

Table of Cont ents

Off-Balance Sheet Arrangements

7 unchanged sentences

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 7. Management’s Discussion and Analysis