What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-09 · 152 added, 89 removed, 122 unchanged (66% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements (unaudited) for the three and six months ended June 30, 2024 and 2023, together with the notes thereto and the consolidated financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements (unaudited) for the three and nine months ended September 30, 2024 and 2023, together with the notes thereto and the consolidated financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

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Factors that could cause actual results to differ materially from those currently anticipated include those set forth in the section below titled “Risk Factors,” including, without limitation, risks relating to:

• the results of our research and development activities, including uncertainties relating to the discovery of potential product candidates and the preclinical and clinical testing of our product candidates;

• the translation of our preclinical results and data and early clinical trial results in particular relating to safety, efficacy and durability into future clinical trials in humans;

• the timing, progress and results of our clinical trial for nimacimab and our estimates regarding the market opportunity for nimacimab if approved;

• the early stage of our product candidates presently under development;

• our ability to obtain and, if obtained, maintain regulatory approval of our current product candidates, and any of our other future product candidates, and any related restrictions, limitations, and/or warnings in the label of any approved product candidate;

• the early stage of our product candidate presently under development;

• our ability to obtain and, if obtained, maintain regulatory approval of our current product candidate, and any of our other future product candidates, and any related restrictions, limitations, and/or warnings in the label of any approved product candidate;

• our ability to retain or hire key scientific or management personnel;

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• our ability to develop successful sales and marketing capabilities in the future as needed;

• the size and growth of the potential markets for any of our current product candidates, and the rate and degree of market acceptance of any of our current product candidates;

• the size and growth of the potential markets for our current product candidate, nimacimab, and any of our future product candidates, and the rate and degree of market acceptance of our current product candidate and any of our future product candidates;

• our competitive position and the development of competing therapies that are or may become available;

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("EHT") a corporation governed by the Business Corporations Act (British Columbia), Bird Rock 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).

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

We are a clinical-stage biopharmaceutical company focused on unlocking new therapeutic pathways for metabolic health through the development of next-generation molecules that modulate G-protein-coupled receptors ("GPCRs").

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Our product candidate, nimacimab, is a peripherally-restricted negative allosteric modulating antibody specific for the human CB1 receptor (CB1), administered as a subcutaneous injectable initially for the treatment of obesity.

Subsequent to June 30, 2024, we finalized our Phase 2 clinical trial protocol for nimacimab, CBeyond TM , updated our Investigational New Drug file with the FDA and completed the site selection process.

The CBeyond TM clinical trial will include 120 patients, 18 planned clinical trial sites and an exploratory combination arm with a GLP-1 agonist to assess the difference in weight loss, differences in body composition and changes in sleep quality.

We expect our clinical trial to begin screening in Q3 2024 and expect to provide interim and topline data in the second and fourth quarters of 2025, respectively.

This study’s primary endpoint is to evaluate weight loss using nimacimab compared to placebo.

Secondary endpoints include evaluations of safety and tolerability, neuropsychiatric and cognitive evaluation, change in body composition by Dual-Energy X-ray Absorptiometry (DEXA), and changes in key metabolic biomarkers such as triglycerides, insulin and leptin sensitivity.

Given the distinct mechanism and beneficial attributes of nimacimab as a peripheral CB1 inhibitor, within the large and heterogeneous obesity landscape we see significant opportunity for nimacimab to potentially complement GLP-1 agonists and other anti-obesity drug mechanisms of action as well as to have a potential role as a monotherapy.

During the three months ended September 30, 2024, we commenced our Phase 2 clinical trial, CBeyond TM , for nimacimab.

The CBeyond TM clinical trial includes 120 patients, 18 clinical trial sites and an exploratory combination arm with a GLP-1 agonist to assess differences in weight loss, body composition, and other attributes.

The CBeyond TM clinical trial continues to enroll patients and we expect to meet our goal of 50% enrollment by the end of 2024.

We expect to provide interim and topline data in the second and fourth quarters of 2025, respectively.

This CBeyond TM clinical trial's primary endpoint is to evaluate weight loss using nimacimab compared to placebo.

We believe that nimacimab has competitive advantages that differentiate it within the CB1 inhibitor class.

First, as a monoclonal antibody, it is a large molecule that has great difficulty crossing the blood-brain barrier and restricts its engagement to CB1 receptors present in tissue/organs within the periphery of the body (i.e., outside the brain).

Second, it is a negative allosteric modulator, a unique binding mechanism compared to small-molecule CB1 inhibitors, which may confer advantages in terms of its therapeutic index.

Our antibody-based CB1 inhibitor shares many of the characteristics of small molecule inverse agonists by targeting CB1 receptors in adipose tissue to directly increase fat metabolism and indirectly impact hunger hormones.

However, we believe its virtually complete restriction to the periphery eliminates problematic central engagement in the brain.

In the case of small-molecule CB1 inhibitors, CB1 inhibition in the brain has been associated with dose-dependent neuropsychiatric adverse events.

We do not believe that central targeting of CB1 inhibition is required for meaningful efficacy.

To demonstrate this, we have developed a diet-induced obesity (DIO) model using humanized mice with knock-in CB1 receptors to interrogate the in vivo efficacy of nimacimab, a humanized IgG4 anti-CB1 antibody.

During November 2024, we shared initial data from our DIO study with nimacimab showing dose-dependent weight loss as well as positive changes in body composition and glycemic control upon treatment.

Further analysis and repeat studies are underway but we believe that true peripheral CB1 inhibition can positively impact metabolic disorders including obesity.

Given the distinct mechanism and beneficial attributes of nimacimab as a peripheral CB1 inhibitor, within the large and heterogeneous obesity landscape we believe there is significant opportunity for nimacimab to potentially complement GLP-1 agonists and other anti-obesity drug mechanisms of action as well as to have a potential role as a monotherapy.

In January 2024 and March 2024, we completed two private placement equity transactions (the "January and March PIPE Financings") with institutional accredited investors, in which we raised combined net aggregate proceeds of $83,556,563.

The net capital raised from the January and March PIPE Financings along with the reallocation of funds from the elimination of our glaucoma program will allow us to fund our clinical trial for obesity through top-line Phase 2 data and provide us with the ability to expand upon our metabolic program.

In April 2024, Skye uplisted to the NASDAQ Global Market® stock exchange from the OTCQB.

On May 10, 2024, we entered into an Equity Distribution Agreement (the “ATM Agreement”) with Piper Sandler & Co, as the sales agent (the “Sales Agent”), under which we may, from time to time, sell up to $100,000,000 of shares of our common stock through the Sales Agent (the “ATM Offering”).

We are not obligated to, and we cannot provide any assurances that we will make any sales of the shares under the ATM Agreement.

We will pay the Sales Agent a commission for their services in acting as agent in the sale of common stock in an amount up to 3% of the gross sales price per share sold.

During the three and nine months ended September 30, 2024, we did not issue any shares under the ATM Offering.

In June 2024, we completed our Phase 2a double-masked randomized, placebo-controlled trial of SBI-100 Ophthalmic Emulsion (“SBI-100 OE”) in 56 patients with elevated intraocular pressure ("IOP") diagnosed with primary open-angle glaucoma or ocular hypertension.

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We have also terminated our license agreement with the University of Mississippi and other vendor contracts related to the manufacture, development, and sublicense of SBI-100.

We are not obligated to, and we cannot provide any assurances that we will continue to, make any sales of the shares under the ATM Agreement.

We will pay the Sales Agent a commission for their services in acting as agent in the sale of common stock in an amount up to 3% of the gross sales price per share sold.

During the three and six months ended June 30, 2024 , we did not issue any shares under the ATM Offering.

In April 2024, Skye uplisted to the NASDAQ Global Market® stock exchange from the OTCQB and in August of 2024 the Company's Convertible Note was settled for shares of the Company's common stock.

In August of 2024, the Convertible Note (as defined in Note 5 to the accompanying Unaudited Condensed Consolidated

Financial Statements).

with a principal value of $5,000,000 was converted into 968,973 shares of our common stock.

In March of 2023, we appealed the judgment in the Cunning Lawsuit (as defined in Note 9 to the accompanying Unaudited Condensed Consolidated Financial Statements) with the Ninth Circuit Court of Appeals (the "Ninth Circuit").

On October 22, 2024, the Ninth Circuit issued its decision on the appeal and vacated the judgment and remanded the case back to the District Court for a new trial.

By the end of 2024, we expect to exonerate the bond and remove the restriction on our cash balance to extend our cash runway and reallocate the funds to further our clinical pipeline.

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

We also maintain office space in San Francisco, 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.

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To date, we have not generated any revenue.

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

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

Research and Development Expenses

During the three months ended June 30, 2024, we incurred $4,078,751 in research and development expenses primarily related to residual costs from our legacy Phase 2a SBI-100 OE clinical trial and costs from the preparation of the launch of our Phase 2 clinical trial for obesity.

During the three months ended June 30, 2023, we incurred $1,788,434 in research and development expense primarily related to our efforts in conducting the Phase 1 SBI-100 OE clinical trial.

During the six months ended June 30, 2024, we incurred $6,025,201 in research and development expenses primarily related to our efforts in conducting the Phase 2a SBI-100 OE clinical trial and costs from the preparation of the launch of our Phase 2 clinical trial for obesity.

During the six months ended June 30, 2023, we incurred $2,973,314 in research and development expense primarily related to our efforts in conducting the Phase 1 SBI-100 OE clinical trial.

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

During the three months ended September 30, 2024, we incurred $4,883,337 in research and development expenses primarily related to our Phase 2 clinical trial of nimacimab for obesity, manufacturing and residual costs from our legacy Phase 2a SBI-100 OE clinical trial.

During the three months ended September 30, 2023, we incurred $1,254,653 in research and development expense primarily related to our efforts in conducting the Phase 1 SBI-100 OE clinical trial.

During the nine months ended September 30, 2024, we incurred $10,908,538 in research and development expenses primarily related to our Phase 2 clinical trial of nimacimab for obesity, manufacturing and residual costs from our legacy Phase 2a SBI-100 OE clinical trial.

During the nine months ended September 30, 2023, we incurred $4,227,967 in research and development expense primarily related to our efforts in conducting the Phase 1 SBI-100 OE clinical trial.

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

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

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Preclinical and nonclinical activities include early discovery efforts with novel molecules, laboratory evaluation of product chemistry, toxicity and formulation, as well as animal studies to assess safety and efficacy.

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 our current and future drug candidates as well as ongoing assessments of the commercial potential of such drug candidates.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming and the successful development of our lead drug candidate, nimacimab, and any future drug candidate is highly uncertain.

Our future research and development expenses will depend on the clinical success of nimacimab and any future 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.

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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 costs related to operating as a public company.

These initiatives have resulted in additional costs related to the implementation of certain systems, insurance, facilities, legal, tax and accounting costs.

As a public company, we expect to incur additional expenses related to insurance, investor relations activities, legal and other administration and professional services to comply with the rules and regulations of the SEC, FINRA and Nasdaq.

Other significant costs are expected to include legal fees relating to patent and corporate matters, business development costs and fees for consulting services.

To incentivize our employees and be competitive to retain strong talent we issued additional equity awards in 2023 and 2024, 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 and our uplisting to Nasdaq, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, 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.

We also expect that certain general and administrative expenses which are commensurate with headcount, will continue to increase in the future in order to support our expected increase in research and development activities, including increased salaries, technology, facilities and other related costs.

Other (Income) Expense

Other (income) expense primarily includes a gain from the sale of the AVI building (see Note 2 to the accompanying Unaudited Condensed Consolidated Financial Statements), interest income and interest expense incurred from our short term convertible debt.

Critical Accounting Estimates

There have been no material changes in our Critical Accounting Estimates from the information provided in the "Critical Accounting Estimates" section of "Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, e xcept, for the addition of our critical accounting estimate related to the estimate for accrued legal contingencies and related expenses and loss recoveries.

We follow ASC 450, subtopic 450-20 to report accounting for loss contingencies and recoveries.

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 and recoveries related to legal proceedings that are pending 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 or loss recovery indicates that it is probable that a material loss has been incurred or a loss recovery is realizable and the amount of the asset or liability can be estimated, then the estimated asset or liability would be recorded 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.

Recently Issued and Adopted Accounting Pronouncements

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Results of Operations

For the three months ended June 30, 2024 and 2023

For the three months ended September 30, 2024 and 2023

Research and Development Expenses

Below is a summary of our research and development expenses during the three months ended June 30, 2024 and to the same period in 2023:

Three Months Ended June 30,

Below is a summary of our research and development expenses during the three months ended September 30, 2024 and for the same period in 2023:

Three Months Ended September 30,

2024 2023 $ Change

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Research and development expenses $ 4,883,337 $ 1,254,653 $ 3,628,684 289 %

Research and development expenses for the three months ended June 30, 2024 increased by $2,290,317 as compared to the same period in 2023.

The net increase in research and development expenses was primarily due to an increase of $421,263 in research and development salaries and equity based compensation, a net increase of $1,489,843 in contracted clinical costs associated with the completion of our Phase 2a glaucoma clinical trial and the preparation for our Phase 2 clinical trial for obesity.

In connection with the discontinuation of our clinical trials for SBI-100 OE, we incurred contract cancellation fees and other general expenses of $269,189.

In addition, there was an increase in consulting fees of $148,882 related to our clinical trial for obesity, which was offset by a decrease in license fees of $73,087 from the elimination of the SBI-200 license agreement with the University of Mississippi compared to the prior year.

Research and development expenses for the three months ended September 30, 2024, increased by $3,628,684 as compared to the same period in 2023.

The net increase in research and development expenses was primarily due to an increase of $693,556 in research and development salaries and equity based compensation, a net increase of $2,735,109 in contracted clinical and manufacturing costs from our Phase 2 clinical trial of nimacimab for obesity, an increase of $74,758 in consulting expense, and an increase of $122,174 in travel and other business expenses.

Cost to acquire IPR&D asset

Below is a summary of our cost to acquire the IPR&D asset, nimacimab, pursuant to the BRB Acquisition (as defined in Note 2 of to the accompanying Unaudited Condensed Consolidated Financial Statements) during the three months ended September 30, 2024, and for the same period in 2023:

Three Months Ended September 30,

2024 2023 $ Change

2023 % Change

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

Cost to acquire the IPR&D asset for the three months ended September 30, 2024, decreased by $21,215,214 as compared to the same period in 2023.

The decrease is due to the cost of the acquired IPR&D in the BRB Acquisition during the three months ended September 30, 2023 and no acquisition of IPR&D in the same period during 2024.

General and Administrative Expenses

Below is a summary of our general and administrative expenses during the three months ended June 30, 2024 and to the same period in 2023:

Three Months Ended June 30,

Below is a summary of our general and administrative expenses during the three months ended September 30, 2024, and for the same period in 2023:

Three Months Ended September 30,

2024 2023 $ Change

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General and administrative expenses $ 4,638,927 $ 2,235,899 $ 2,403,028 107 %

General and administrative expenses for the three months ended June 30, 2024 increased by $3,120,415 as compared to the same period in 2023.

The increase in general and administrative expenses was primarily due to an increase in salaries and benefits of $1,520,647 from the recognition of stock-based compensation expense.

During the three months ended June 30, 2024, professional fees increased by $945,873 due to services provided under a financial advisory agreement, professional services related to the registration of the resale of shares issued in the January and March 2024 PIPE Financings shares and general corporate legal fees associated with our uplisting to Nasdaq, the filing of our shelf registration statement and the entry into our ATM Agreement.

Other increases included insurance and other general business expenses of $60,755 and $444,713, respectively.

The increases in insurance and general business costs related to increased liability coverage, the initial listing fee paid to Nasdaq and regulatory agency filing fees.

General and administrative expenses for the three months ended September 30, 2024, increased by $2,403,028 as compared to the same period in 2023.

The increase in general and administrative expenses was primarily due to an increase in salaries and benefits of $1,826,208 driven by stock-based compensation expense from the achievement of certain performance based milestones related to RSUs granted to members of management and a member of the board of directors of the Company and increased headcount.

During the three months ended September 30, 2024, professional fees increased by $214,192 due to services provided under a financial advisory agreement, increased corporate tax fees and corporate legal fees related to patent prosecution for nimacimab.

The net increase included an offset of $164,000 from the reduction in general corporate legal expenses related to the Cunning Lawsuit and Partner Re case as compared to the prior period.

Change in Estimate for Legal Contingencies

Total change in estimate for legal contingencies for the three months ended September 30, 2024 and 2023, are as follows:

Three Months Ended September 30,

2024 2023 $ Change

2023 % Change

Change in estimate for legal contingencies $ (4,553,468) $ — $ (4,553,468) 100 %

For the three months ended September 30, 2024, we recorded a change in estimate for legal contingencies (as defined in Note 9 to the accompanying Unaudited Condensed Consolidated Financial Statements) based on changes after September 30, 2024 to the facts and circumstances related to our legal proceedings that existed as of the balance sheet date.

Other (Income) Expense

Below is a summary of our other (income) expense for the three months ended June 30, 2024 and to the same period in 2023:

Three Months Ended June 30,

Below is a summary of our other (income) expense for the three months ended September 30, 2024 and for the same period in 2023:

Three Months Ended September 30,

2024 2023 $ Change

2023 % Change

Interest expense $ 450,052 $ 186,429 $ 263,623 141 %

Interest (income) expense

$ (90,766) $ 271,307 $ (362,073) (133) %

Interest income (907,697) (16,562) (891,135) 5381 %

(Gain) loss from asset sales

(72,837) — (72,837) 100 %

Wind-down costs — (14,677) 14,677 (100) %

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Total other (income) expense $ (1,070,499) $ 240,068 $ (1,310,567) (546) %

For the three months ended June 30, 2024, we had net other income of $510,826 related primarily to the increase in interest income of $952,639 resulting from interest payable on our cash and cash equivalents and restricted cash on deposit with financial institutions, offset by an increase of $263,623 related party interest expense from the Convertible Note (as defined in Note 5 to the accompanying Unaudited Condensed Consolidated Financial Statements).

In addition, during the three months ended June 30, 2023, we recognized wind down costs of $87,072 from the EHT Acquisition .

For the six months ended June 30, 2024 and 2023

For the three months ended September 30, 2024, we had net other income of $1,070,499 related primarily to the increase in interest income of $891,135 resulting from interest earned on our cash and cash equivalents and the restricted cash on deposit with financial institutions, offset by a decrease in interest expense primarily from the reversal of accrued interest on our legal contingency, which was vacated.

The interest income was offset by an increase in interest expense from the Convertible Note (as defined in Note 5 to the accompanying Unaudited Condensed Consolidated Financial Statements).

For the three months ended September 30, 2023, we had net other expense of $240,068 related primarily to interest expense from the premiums on the irrevocable letter of credit and appeal bond for the Cunning Lawsuit (as defined in Note 9 to the accompanying Unaudited Condensed Consolidated Financial Statements), and interest expense from the Convertible Note.

For the nine months ended September 30, 2024 and 2023

Research and Development Expenses

Below is a summary of our research and development expenses during the six months ended June 30, 2024 and to the same period in 2023:

Six Months Ended June 30,

Below is a summary of our research and development expenses during the nine months ended September 30, 2024 and for the same period in 2023:

Nine Months Ended September 30,

2024 2023 $ Change

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Research and development expenses $ 10,908,538 $ 4,227,967 $ 6,680,571 158 %

Research and development expenses for the six months ended June 30, 2024 increased by $3,051,887 as compared to the same period in 2023.

The net increase in research and development expenses was primarily due to an increase of $800,780 in research and development salaries from increased headcount and equity based compensation, a net increase of $1,835,309 in contracted clinical costs associated with clinical trial expenses from the completion of our Phase 2a clinical trial for glaucoma and the preparation for our Phase 2 clinical trial for obesity.

Research and development expenses for the nine months ended September 30, 2024, increased by $6,680,571 as compared to the same period in 2023.

The net increase in research and development expenses was primarily due to an increase of $1,494,336 in research and development salaries from increased headcount and equity based compensation, a net increase of $4,570,417 in contracted clinical costs and manufacturing associated with our clinical trial for nimacimab in obesity and the completion of our Phase 2a clinical trial for SBI-100 OE in glaucoma.

In addition, we had increased travel expenses of $95,275 due to our increased presence at conferences and events during the nine months ended September 30, 2024.

In connection with the discontinuation of our clinical trials for SBI-100 OE, we incurred contract cancellation fees and other general expenses of $335,022.

In addition, there was an increase in consulting fees of $191,095 related to our Phase 2 clinical trial for obesity, which was offset by a decrease in license fees of $70,248 from the elimination of the SBI-200 license agreement with the University of Mississippi in the prior year.

In addition, there was an increase in consulting fees of $265,853 related to our Phase 2 clinical trial for nimacimab in obesity, which was offset by a decrease in license fees of $70,248 from the elimination of the SBI-200 license agreement with the University of Mississippi in the prior year.

Cost to acquire IPR&D asset

Below is a summary of our cost to acquire the IPR&D in connection with the BRB Acquisition asset during the nine months ended September 30, 2024, and for the same period in 2023:

Nine Months Ended September 30,

2024 2023 $ Change

2023 % Change

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

Cost to acquire the IPR&D asset for the nine months ended September 30, 2024, decreased by $21,215,214 as compared to the same period in 2023 .The decrease is due to the cost of the acquired IPR&D in the BRB Acquisition during the nine months ended September 30, 2024 and no acquisition of IPR&D in the same period during 2024.

General and Administrative Expenses

Below is a summary of our general and administrative expenses during the six months ended June 30, 2024 and to the same period in 2023:

Six Months Ended June 30,

Below is a summary of our general and administrative expenses during the nine months ended September 30, 2024, and for the same period in 2023:

Nine Months Ended September 30,

2024 2023 $ Change

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General and administrative expenses $ 13,171,547 $ 5,357,577 $ 7,813,970 146 %

General and administrative expenses for the six months ended June 30, 2024 increased by $5,410,937 as compared to the same period in 2023.

The increase in general and administrative expenses was primarily due to an increase in salaries and benefits of $3,573,816 from increased headcount and the recognition of stock based compensation expense due to the achievement of certain performance based milestones related to RSUs granted to members of management and members of the board of directors of the Company.

During the six months ended June 30, 2024, professional fees increased by $974,077 due to services provided under a financial advisory agreement, professional services related to the registration of the resale of shares issued in the January and March PIPE Financings and general corporate legal fees associated with our uplisting to Nasdaq, the filing of our shelf registration statement, regulatory agency filing fees, legal fees related to nimacimab patent prosecution, increased tax fees due to increased complexity and the entry into the ATM Agreement.

Other increases included board fees, other general business expenses, consulting, insurance and travel of $62,473, $534,914, $113,637, $112,505 and $96,681, respectively.

General and administrative expenses for the nine months ended September 30, 2024, increased by $7,813,970 as compared to the same period in 2023.

The increase in general and administrative expenses was primarily due to an increase in salaries and benefits of $5,389,259 from increased headcount and the recognition of stock based compensation expense due to the achievement of certain performance based milestones related to RSUs granted to members of management and a members of the board of directors of the Company.

During the nine months ended September 30, 2024, professional fees increased by $1,035,567 due to services provided under a financial advisory agreement, professional services related to the registration of the resale of shares issued in the January and March PIPE Financings and general corporate legal fees associated with our uplisting to Nasdaq, the filing of our shelf registration statement, legal fees related to nimacimab patent prosecution, increased tax fees due to increased tax complexity and the entry into the ATM Agreement.

In addition, our general business expenses increased by $875,842 due to regulatory agency filing fees, the Nasdaq initial listing fee, recruiting fees, investor relations fees and corporate events.

Other increases included consulting, insurance, marketing, software and travel of $127,188, $177,458, $130,907, $73,704 and $122,630, respectively.

Change in Estimate for Legal Contingencies

Total change in estimate for legal contingencies for the nine months ended September 30, 2024 and 2023, are as follows:

Nine Months Ended September 30,

2024 2023 $ Change

2023 % Change

Change in estimate for legal contingencies

$ (4,553,468) $ (151,842) $ (4,401,626) 2899 %

For the nine months ended September 30, 2024, we recorded a change in estimate for legal contingencies (as defined in Note 9 to the accompanying Unaudited Condensed Consolidated Financial Statements) based on changes after September 30, 2024 to the facts and circumstances related to our legal proceedings that existed as of the balance sheet date.

Other (Income) Expense

Below is a summary of our other (income) expense for the six months ended June 30, 2024 and to the same period in 2023:

Six Months Ended June 30,

Below is a summary of our other (income) expense for the nine months ended September 30, 2024, and for the same period in 2023:

Nine Months Ended September 30,

2024 2023 $ Change

2023 % Change

Interest expense $ 886,988 $ 204,828 $ 682,160 333 %

Interest (income) expense

$ 796,222 $ 476,135 $ 320,087 67 %

Interest income (2,296,488) (49,669) (2,246,819) 4524 %

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Total other (income) expense $ (2,716,044) $ 2,572,338 $ (5,288,382) (206) %

For the six months ended June 30, 2024, we had net other income of $1,645,545 related primarily to the gain on the sale of the AVI building of $1,145,141, an increase in interest income of $1,355,679, offset by an increase of $682,160 in related party interest expense from the Convertible Note.

For the nine months ended September 30, 2024, we had net other income of $2,716,044 related primarily to the gain on the sale of the AVI building and collections from the sale of VDL of $1,217,978, an increase in interest income of $2,246,819, offset by a net increase of $320,087 in interest expense from an increase in interest on our Convertible Note offset by the reversal of interest from the judgment related to the Cunning Lawsuit.

In addition, during 2023, we incurred a one-time debt conversion inducement expense of $1,383,285 and recognized wind down costs of $455,504 from the EHT Acquisition.

Liquidity and Capital Resources

We have incurred operating losses and negative cash flows from operations since our inception, and as of June 30, 2024, we had working capital of $72,681,890, an accumulated deficit of $117,304,896, and stockholders’ equity of $72,809,051.

We had unrestricted cash and cash equivalents in the amount of $74,120,854 as of June 30, 2024, as compared to $1,256,453 as of December 31, 2023.

For the six months ended June 30, 2024 and 2023, the Company incurred losses from operations of $14,557,821 and $5,943,155, respectively.

For the six months ended June 30, 2024 and 2023, the Company incurred net losses of $12,922,347 and $8,279,020, respectively.

In January 2024 and March 2024, we completed the January and March PIPE Financings, in which we raised combined net aggregate proceeds of $83,556,563.

We have incurred operating losses and negative cash flows from operations since our inception, and as of September 30, 2024, we had working capital of $74,184,006, an accumulated deficit of $121,203,193, and stockholders’ equity of $75,803,375.

We had unrestricted cash and cash equivalents in the amount of $67,412,614 as of September 30, 2024, as compared to $1,256,453 as of December 31, 2023.

For the nine months ended September 30, 2024 and 2023, the Company incurred losses from operations of $19,526,617 and $30,648,916, respectively.

For the nine months ended September 30, 2024 and 2023, the Company incurred net losses of $16,820,644 and $33,224,854, respectively.

In January 2024 and March 2024, we completed the January and March PIPE Financings (as such terms are defined in Note 6 to the accompanying Unaudited Condensed Consolidated Financial Statements), in which we raised combined net aggregate proceeds of $83,556,563.

We expect the capital from the January and March PIPE Financings to fund our Phase 2 clinical trial for obesity through top line Phase 2 data in late 2025 and the potential expansion of our metabolic program.

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The Company has not sold any shares under the ATM Agreement as of the date hereof and is not obligated to, and cannot provide any assurances that the Company will continue to, make any sales of the shares under the ATM Agreement.

Subsequent to June 30, 2024, the holder of the Convertible Note exercised their conversion option and converted the principal balance of the Convertible Note into 968,973 shares of our common stock.

In July 2024, 1,301,573 pre-funded warrants, with an intrinsic value of $10,424,294, were exercised on a cashless basis, resulting in the issuance 1,301,410 shares of our common stock (see Note 6 to the accompanying Unaudited Condensed Consolidated Financial Statements).

In August 2024, the holder of the Convertible Note exercised their conversion option and converted the principal balance of $5,000,000 into 968,973 shares of our common stock.

In March of 2023, we appealed the judgment in the Cunning Lawsuit to the Ninth District Court of Appeals (the "Ninth Circuit").

In October of 2024, the Ninth Circuit issued its decision and vacated the $6,053,468 judgment and remanded the case back to the District Court for the Central District of California for a new trial.

By the end of 2024, we expect to exonerate the bond and recover the $9,080,202 restriction on our cash balance to extend our cash runway and reallocate the funds to further our clinical pipeline.

The Company’s Unaudited Condensed 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 ca sh will be sufficient to fund its projected operations for at least 12 months from the date of the issuance of these consolidated financial statements.

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.

However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially.

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• our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

• the timing of, and the costs involved in, obtaining regulatory approvals for any of our current or future drug candidates;

• the timing of, and the costs involved in, obtaining regulatory approvals for any of nimacimab or any future drug candidates;

• the number and characteristics of the drug candidates we seek to develop or commercialize;

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• the expenses needed to attract and retain skilled personnel;

• the costs associated with being a public company, including of our uplisting to Nasdaq;

• the costs associated with being a public company;

• the amount of revenue, if any, received from commercial sales of our drug candidates, should any of our drug candidates receive marketing approval;

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The following is a summary of our cash flows for the periods indicated and has been derived from our Unaudited Condensed Consolidated Financial Statements which are included elsewhere in this Quarterly Report on Form 10-Q:

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities $ (17,064,377) $ (10,107,460)

Net cash provided by investing activities 1,109,497 5,530,406

Net cash provided by (used in) financing activities 83,556,563 (168,720)

Net cash (used in) provided by investing activities (336,025) 6,603,473

Net cash provided by financing activities 83,556,563 16,465,924

Cash Flows from Operating Activities

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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, depreciation and amortization, amortization of debt discount and the (gain) loss from divestiture of assets.

Cash used in operating activities of $11,801,659 during the six months ended June 30, 2024, reflected a net loss of $12,922,347, partially offset by aggregate non-cash charges of $3,963,183 and included a $2,842,495 net change in our operating assets and liabilities.

Non-cash charges included $4,306,653 for stock-based compensation expense primarily attributable to the vesting of RSUs related to the achievement of certain market based performance milestones, $487,527 in non-cash interest expense debt amortization expense, $1,145,141 gain from the sale of a real estate asset and $246,000 from the write-off of vendor deposits.

Cash used in operating activities of $17,064,377 during the nine months ended September 30, 2024, reflected a net loss of $16,820,644, partially offset by aggregate non-cash charges of $1,515,581 and included a $1,759,314 net change in our operating assets and liabilities.

Non-cash charges included $6,228,270 for stock-based compensation expense primarily attributable to the vesting of RSUs related to the achievement of certain market based performance milestones, $599,006 in non-cash interest expense debt

amortization expense, $1,217,978 gain from the sale of a real estate asset, $123,347 in depreciation and amortization and $325,610 from the write-off of vendor deposits.

The net change in our operating assets and liabilities included a $2,076,835 cash outflow from changes in our prepaid expenses and other current assets, a $711,281 net cash outflow from changes in our accrued expenses and other current liabilities and a $375,760 cash outflow from the repayment of our accounts payable.

Cash used in operating activities of $6,052,759 during the six months ended June 30, 2023, reflected a net loss of $8,279,020, partially offset by aggregate non-cash charges of $1,992,843 and included a $233,418 net change in our operating assets and liabilities.

Cash used in operating activities of $10,107,460 during the nine months ended September 30, 2023, reflected a net loss of $33,224,854, partially offset by aggregate non-cash charges of $23,476,130 and included a $358,736 net change in our operating assets and liabilities.

Cash Flows from Investing Activities

During the six months ended June 30, 2024, the Company purchased $35,644 in machinery and office equipment and recognized $1,145,141 in net proceeds from the sale of the AVI building.

During the six months ended June 30, 2023, the Company purchased $1,860 in machinery office equipment.

During the six months ended June 30, 2023, the Company received $5,532,266 in proceeds related to the divestiture of VDL.

During the nine months ended September 30, 2024, the Company purchased $1,554,003 in machinery and office equipment and recognized $1,217,978 in net proceeds from the sale of the AVI building and the collection of receivables from the sale of VDL (see Note 2 to the accompanying Unaudited Condensed Consolidated Financial Statements).

During the nine months ended September 30, 2023, the Company purchased $5,533 in machinery office equipment, received $5,532,266 in proceeds related to the divestiture of VDL and received $1,076,740 in cash from the acquisition of BRB.

Cash Flows from Financing Activities

Cash flows from financing activities primarily reflect proceeds from the sale of our securities and loan repayments.

During the six months ended June 30, 2024, cash provided by financing activities included $83,556,563 in proceeds received in connection with the January and March PIPE Financings, net of issuance costs.

During the six months ended June 30, 2023, cash used in financing activities included a $168,720 repayment on our insurance premium loan payable.

During the nine months ended September 30, 2024, cash provided by financing activities included $83,556,563 in proceeds received in connection with the January and March PIPE Financings, net of issuance costs.

During the nine months ended September 30, 2023, cash provided by financing activities included $4,973,684 in proceeds received in connection with the Convertible Note net of issuance costs, and $11,734,947 in proceeds received in connection with the 2023 PIPE Financing, net of issuance costs, offset by a $236,681 repayment on our insurance premium loan payable.

Off-Balance Sheet Arrangements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis