Skye Bioscience, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a quarterly report. Skye is a clinical-stage pharmaceutical company developing cannabinoid-based drug candidates, with no approved products and no product revenue.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $6.01 million | $2.93 million |
| General and administrative expense | $6.09 million | $4.92 million |
| Operating loss | $18.31 million | $7.85 million |
| Net loss | $19.48 million | $8.52 million |
| Net loss per share, basic and diluted | $0.04 | $0.02 |
| Net cash used in operating activities | $12.74 million | $6.47 million |
| Cash and cash equivalents at year-end | $1.24 million | $8.98 million |
| Working capital | Deficit of $3.18 million | Not stated here |
| Related-party credit agreement debt at year-end | $1.85 million | $1.97 million total carrying value of advances |
Margins are not meaningful given the absence of product revenue. At December 31, 2022, Skye reported total assets of $9.11 million, total liabilities of $12.12 million, a stockholders’ deficit of $3.01 million and an accumulated deficit of $66.74 million. Cash, cash equivalents and restricted cash declined by $7.74 million during 2022.
Material changes versus 2021
- Net loss more than doubled, and operating cash use increased by about $6.27 million. R&D expense rose 105%, mainly reflecting SBI-100 OE clinical-trial material, Phase 2 API manufacturing and trial start-up costs.
- G&A expense increased 24%, reflecting personnel and board costs, acquisition diligence, legal expenses and new systems; lower investor-relations and other expenses partly offset the increases.
- Skye completed its acquisition of Emerald Health Therapeutics, Inc. (EHT) on November 10, issuing approximately 416.3 million shares. The transaction was accounted for as an asset acquisition, with acquired cash and assets intended to support Skye’s development program and EHT’s former businesses being wound down or divested.
- A $6.21 million estimated legal contingency related to the Cunning lawsuit was recorded in 2022. Other expense also included $456,508 of wind-down costs and a $120,228 finance charge from repricing related-party warrants.
Outlook, risks and unusual items
- Clinical plans: Skye began the SBI-100 OE Phase 1 trial in Australia in late 2022. The safety review committee recommended advancing after reviewing the first two cohorts. Management expected Phase 1 enrollment to complete in the first half of 2023 and final data in the fourth quarter of 2023. FDA clearance of the U.S. IND was received in December 2022; management planned to begin a randomized, controlled Phase 2 study in mid-2023. These are forward-looking expectations, not assured outcomes.
- Funding and going concern: The auditor expressed substantial doubt about Skye’s ability to continue as a going concern. Management said additional funding would be needed in the second quarter of 2023 to meet obligations and continue studies; without it, operations might not continue. The filing cites limited capital-market access and uncertainty around litigation and asset-sale proceeds.
- Subsequent financing and asset sale: In February 2023, the VDL sale provided $5.547 million in cash, with additional payments expected over time. Also in February, Emerald Health Sciences exercised warrants and converted the remaining related-party credit balance into Skye shares; the credit agreement was terminated. These events occurred after year-end and do not change the December 31, 2022 balance-sheet figures.
- Litigation: A jury awarded the former employee $512,500 in economic damages and $840,960 in non-economic damages, plus $3.5 million in punitive damages. The plaintiff also sought attorney fees. Skye said it would challenge the verdict and seek insurance reimbursement, both with uncertain outcomes. The filing reports inconsistent totals for the requested attorney fees ($2.028 million in one passage and $2.043 million in another); the recorded contingency was $6.205 million.
- Development and operational risks: SBI-100 remains a Schedule I controlled substance pending any post-approval rescheduling. Skye relies on external manufacturers and CROs, and reported a 2022 supplier cyberattack that delayed Phase 1 timing. Clinical success, regulatory approval, patient recruitment, supply-chain reliability, funding availability and the realization of EHT assets are uncertain.
- Shareholder and market risks: The stock trades on the OTCQB and is described as thinly traded and volatile. The company reported 971.5 million shares outstanding as of March 29, 2023, with substantial additional shares reserved or issuable under warrants, options and plans.
Most important facts for investors to verify
- Current cash runway, financing sources and whether the company secured sufficient funding to sustain operations and planned clinical trials.
- Actual Phase 1 results and whether the Phase 2 trial began on the stated schedule.
- Final amounts, insurance recovery and appeal or settlement outcome in the Cunning lawsuit; clarify the attorney-fee amount discrepancy.
- Collection timing and amounts for remaining VDL sale proceeds, and final costs and liabilities from the EHT wind-down.
- Post-year-end debt conversion, current debt and share count, including potential dilution from outstanding warrants and options.