SKYE BIOSCIENCE, INC. 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 endedJune 30, 2022 and 2021 (unaudited) and the consolidated financial statements and the related notes thereto included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , together with the notes thereto. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. 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 Quarterly Report on Form 10-Q. Unless otherwise provided in this Quarterly Report, references to "we," "us," "our" and "Skye Bioscience" in this discussion and analysis refer toSkye Bioscience, Inc. , aNevada corporation formerly known asEmerald Bioscience, Inc. , together with its wholly owned subsidiaries,Nemus , aCalifornia corporation, andSKYE Bioscience Pty Ltd. (formerly known as "EMBI Australia Pty Ltd. "), an Australian proprietary limited company.
About
We were incorporated in theState of Nevada onMarch 16, 2011 . We are a preclinical 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. EffectiveJanuary 19, 2021 , we changed our name fromEmerald Bioscience, Inc. toSkye Bioscience, Inc. Our common stock is quoted on the OTCQB under the symbol "SKYE". Previously, it traded under the symbol "EMBI". InAugust 2019 , we formed a new subsidiary inAustralia ,SKYE Bioscience Australia , in order to qualify for the Australian government's research and development tax credit for research and development dollars spent inAustralia . The primary purpose of SKYE Bioscience Australia is to conduct clinical trials for our drug product candidates. We have retained Novotech as our contract research organization "CRO" and expect to commence Phase 1 trial in the fourth quarter of 2022. OnMay 11, 2022 , we entered into an Arrangement Agreement (the "Arrangement Agreement") with Emerald Health Therapeutics, Inc., a corporation existing under the laws of the Province ofBritish Columbia, Canada ("EHT"), pursuant to which we will acquire all of the issued and outstanding common shares of EHT on a basis of 1.95 shares of our common stock per outstanding share of EHT common stock (the "Acquisition"). EHT is currently undergoing a realization process to wind down all prior operations and liquidate substantially all of its remaining assets. We expect this strategic opportunity to be a pivotal financing event for our business allowing us to extend our cash runway into at least the second quarter of 2023 and obtain meaningful clinical data. In addition, EHT has a 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.
Our Product Candidates and Significant Contracts
UM 5050 and UM 8930 License Agreements
We hold license agreements withUniversity of Mississippi ("UM") for UM 5050 and UM 8930 for "all fields of use" (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 and UM 8930 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 compound, SBI-100 Ophthalmic Emulsion ("SBI-100 OE"), a cannabinoid receptor type 1 ("CBR1") agonist, under UM 5050 is expected to allow us to explore related uses for the active moiety of SBI-100 OE. Independent in vitro and in vivo studies have demonstrated the potential use of SBI-100 OE 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. SBI-100 OE is designed to enhance the pharmacokinetics and pharmacodynamics of the active part of the molecule once introduced into the body through various routes of administration being considered by the development team.
The exclusive license of SBI-200, a novel cannabinoid receptor ("CBR") modulator, under UM 8930, is expected to allow us to explore uses in ophthalmic disorders as well as expanded research and development into organ systems outside of
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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.
SBI-100 Ophthalmic Emulsion (SBI-100 OE)
Our lead compound, SBI-100 OE, is initially being developed to treat ocular disease. The first-in-human Phase 1 trial are expected to be conducted in healthy volunteers inAustralia to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of SBI-100 OE. We are eligible under the AusIndustry research and development tax incentive program to obtain a cash incentive from theAustralian 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 inAustralia . The Company may be eligible for either a 43.5% refundable tax offset if it has aggregate turnover of less than$20 million per annum or a 38.5% non-refundable tax offset of eligible research and development expenditure up to$100 million if it has annual turnover of$20 million or more per annum. We are focused on clinical enabling activities, notably, formulation and manufacturing of drug product supply for our first-in-human Phase 1 clinical trial, and completing validation of a pharmacokinetic assay for human samples to support our clinical studies. The manufacturing of SBI-100 OE is conducted inthe United States . Formulation of the eye drop for testing is also performed inthe United States but we rely on excipients that can be sourced from countries outsidethe United States , such asChina . Due to the continuing effects of the COVID-19 pandemic, there could possibly be a negative impact on our ability to source materials that are part of the eye drop formulation, as well as negative impacts to our volunteer and/or patient recruitment inAustralia for clinical studies. Subsequent to the initiation of the Phase 1 study, we intend to file an investigational new drug ("IND") application with theUnited States Food and Drug Administration ("FDA") to study SBI-100 OE in a Phase 2 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 intraocular pressure is markedly different between patients treated with SBI-100 OE and the placebo. Design of the Phase 2 clinical trial will be dependent upon the advice of our clinical advisory board, the FDA and other regulatory bodies. SBI-200 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 theAmerican Association of Pharmaceutical Scientists ("AAPS") meeting held inNovember 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. Further testing will be conducted to further evaluate the possible utility of this compound as a therapeutic agent and we continue to advance our research studies related to SBI-200 to explore different therapeutic applications.
General Trends and Outlook
COVID-19 related
The evolving COVID-19 pandemic has prompted governments and businesses to take unprecedented measures, such as restrictions on travel and business operations, temporary closures of business, quarantines, and shelter-in-place orders. The COVID-19 pandemic has significantly curtailed global economic activity and caused significant volatility and disruption in global financial markets. The COVID-19 pandemic and the measures taken by many countries in response have affected, and could in the future, materially impact the Company's business, results of operations, financial condition and stock price. As we approach the start of our Phase 1 clinical study inAustralia , the ultimate impact on us is unknown. However, we expect that our contract research organizations ("CROs") could experience setbacks during clinical trials from reduced capacity for safety monitoring due to on-site social distancing, reductions in the participant pool or staffing due to vaccination requirements or patients testing positive for COVID-19 prior to enrollment or dosing in the study. To mitigate operational risk our CRO has aCOVID Emergency Management Committee in place to assess the various health and government recommendations, advice, potential risks, and impacts so that proactive measures may be taken, as needed, such as remote patient monitoring. The majority of our workforce continues to be and was remote prior to the COVID-19 pandemic, and therefore our employees have seen little disruption as a result of the COVID-19 pandemic. However, employee safety and well-being is of paramount importance to us in any year and continues to be of particular focus in 2022 in light of the continuing and evolving COVID-19 30
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Table of Contents pandemic. In response to the pandemic, we have supported our employees and government efforts to curb the COVID-19 pandemic through safety and communication efforts and investments, which include:
•Aligning onsite policies to local guidelines and regulation; •Continuing to provide and promote flexibility for onsite employees to reduce density at our facility;
The full extent of the future impact of the COVID-19 pandemic on the Company's operational and financial performance is currently uncertain and will depend on many factors outside of our control, including, without limitation, the timing, extent, trajectory, and the duration of the pandemic; the availability, distribution, acceptance and effectiveness of vaccines, particularly against new variants; the imposition of protecting public safety measures, and the impact of the pandemic on any local operations acrossthe United States ,European Union , andAustralia , where we have operations and conduct laboratory research and clinical studies. 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 will likely 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. 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.
We have incurred operating losses and negative cash flows from operations since inception and as ofJune 30, 2022 , had a working capital deficit of$462,942 and an accumulated deficit of$53,718,840 . As ofJune 30, 2022 , we had unrestricted cash in the amount of$2,929,895 . For the three and six months endedJune 30, 2022 and 2021, we incurred losses from operations of$3,218,360 and$1,829,674 , and 6,106,382 and 3,566,936, respectively. For the three and six months endedJune 30, 2022 and 2021, we incurred net losses of$3,419,278 and$2,024,027 , and$6,462,677 and$4,184,544 , respectively. We expect to continue to incur significant losses through 2022 and expects to incur significant losses and negative cash flows from operations in the future.
Critical Accounting Policies and Estimates
Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgements, including those related to accrued expenses, the percentage of completion as it relates to our clinical accruals, financing operations, contingencies and litigation. Management bases its estimates and judgements 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 judgements about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates and judgements as to the appropriate carrying values of our equity instruments, derivative liability, debt with embedded features, clinical accruals and the valuation of our stock based compensation awards, which are not readily apparent from other sources. We consider certain accounting policies related to fair value measurements, convertible instruments, warrants issued in connection with financings, stock-based compensation expense and earnings per share to be critical accounting policies that require the use of significant judgements and estimates relating to matters that are inherently uncertain and may result in materially different results under different assumptions and conditions. 31 -------------------------------------------------------------------------------- Table of Contents Management assessed the critical accounting policies as disclosed in our Annual Report on Form 10-K for the year endedDecember 31, 2021 and included a new "Asset Acquisition" policy note and made updates to its "Stock-based Compensation" policy note which are critical to its accounting policies and estimates during the six months endedJune 30, 2022 (Note 2).
Recently Issued and Adopted Accounting Pronouncements
See Note 2 to the accompanying Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for information on recently issued accounting pronouncements and recently adopted accounting pronouncements. 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.
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 impact from the COVID-19 pandemic. 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.
Three months ended
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;
and
• 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. Our application to administer our lead drug candidate, SBI-100 OE, in human subjects has been submitted and approval was obtained byBelberry Limited , anAustralian Human Research Ethics Committee (HREC) during the quarter endedJune 30, 2022 . We have received authorization from theAustralian Therapeutics Goods Administration to commence clinical trials and are awaiting the manufacture and delivery of our drug to our CRO inAustralia to do so. We expect to initiate enrollment in our first-in-human study during the fourth quarter of 2022.
Below is a summary of our research and development expenses during the three
months ended
Three Months Ended June 30,
$ Change % Change
2022 2021 2022 vs. 2021 2022 vs. 2021
Research and development expenses $ 1,427,154 $ 880,672 $ 546,482 62 %
Research and development expenses for the three months ended June 30, 2022
increased by $546,482 as compared to the three months ended June 30, 2021 . The
increase in research and development expenses was primarily due to an increase
in contract research and development activities, including amounts paid to our
contract research organization, of approximately $237,000 , increases in lab
supplies and materials of $28,000 and an increase in compensation cost of
approximately $240,000 due to bonus expense and additional headcount from the
addition of regulatory and development personnel.
General and Administrative Expenses
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Below is a summary of general and administrative expenses for the three months
ended
Three Months Ended
$ Change % Change
2022 2021 2022 vs. 2021 2022 vs. 2021
General and administrative expenses $ 1,791,206 $ 949,002 $ 842,204 89 %
General and administrative expenses for the three months ended June 30, 2022
increased by $842,204 as compared to the three months ended June 30, 2021 . The
increase in general and administrative expenses was primarily due to an increase
in employee wages and board fees of approximately $439,000 related to the hiring
of our chief financial officer, Acquisition related bonus payments and the
addition of two board members, an increase in professional fees of approximately
$425,000 related primarily to costs associated with general legal fees, an
increase in software expense of approximately $26,000 , and an increase in
facilities and rent expense of approximately $27,000 . The aggregate increase was
offset by decreases of approximately $42,000 and $59,000 in investor relations
expenses and consulting expenses, respectively.
Other Expense (Income)
Below is a summary of other expense (income) during the three months endedJune 30, 2022 and 2021: Three Months Ended June 30, $ Change % Change 2022 2021 2022 vs. 2021 2022 vs. 2021 Change in fair value of derivative liabilities$ (9,523) $ 120,648 $ (130,171) (108) % Interest expense 205,300 190,058 15,242 8 % Gain on forgiveness of PPP loan - (117,953) 117,953 100 % Total other expense$ 195,777 $ 192,753 $ 3,024 2 % For the three months endedJune 30, 2022 , we had net other expense of$195,777 related to interest expense and a gain from the change in fair value of our warrant liability. When comparing the three months endedJune 30, 2022 and 2021, total other expense remained relatively constant. However, during the three months endedJune 30, 2021 , we recognized a gain from the forgiveness of our PPP loan which was offset by a loss from the increase in value of our derivative liabilities. Gains and losses from the change in fair value of our derivative liabilities are due primarily to fluctuations in our stock price and our volatility during each period. The slight increase in interest expense was due to an increase in the amortization of the debt discount on our Amended Credit Agreement for the period endedJune 30, 2022 , as compared to the period endedJune 30, 2021 .
Six months ended
Below is a summary of our research and development expenses during the six
months ended
Six Months Ended June 30,
$ Change % Change
2022 2021 2022 vs. 2021 2022 vs. 2021
Research and development expenses $ 2,692,807 $ 1,490,328 $ 1,202,479 81 %
Research and development expenses for the six months ended June 30, 2022
increased by $1,202,479 as compared to the six months ended June 30, 2021 . The
increase in research and development expenses was primarily due to an increase
in contract research and development activities, including amounts paid to our
contract research organization of approximately $479,000 , an increase in the use
of specialized consultants of approximately $170,413 , increases in lab supplies
and materials of
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approximately
General and Administrative Expenses
Total general and administrative expenses for the six months endedJune 30, 2022 and 2021, were as follows: Six Months Ended June 30, $ Change % Change 2022 2021 2022 vs. 2021 2022 vs. 2021 General and administrative expenses$ 3,413,575 $ 2,076,608 $ 1,336,967 64 % General and administrative expenses for the six months endedJune 30, 2022 increased by$1,336,967 as compared to the six months endedJune 30, 2021 . The increase in general and administrative expenses was primarily due to an increase in employee wages and board fees of approximately$589,000 related to the hiring of our chief financial officer and the addition of two board members, an increase in professional fees of approximately$815,000 related primarily to preliminary diligence costs associated with the EHT Acquisition which were expensed as incurred during the first quarter, increases in general legal fees, an increase in software expense of approximately$58,000 , and an increase in facilities and rent expense of approximately$61,000 . The aggregate increase was offset by decreases of approximately$134,000 and$98,000 in investor relations expenses and consulting expenses, respectively.
Other Expense (Income)
Total other expense (income) for the six months endedJune 30, 2022 and 2021, was as follows: Six Months Ended June 30, $ Change % Change 2022 2021 2022 vs. 2021 2022 vs. 2021 Change in fair value of derivative liabilities$ (53,178) $ 358,998 $ (412,176) (115) % Interest expense 404,332 374,963 29,369 8 % Gain on forgiveness of PPP loan - (117,953) 117,953 100 % Total other expense$ 351,154 $ 616,008 $ (264,854) (43) % For the six months endedJune 30, 2022 , we had net other expense of$351,154 related to interest expense, offset in part by a gain from the change in fair value of derivative liabilities. The primary reason for the gain on the change in fair value of our derivative liabilities was due to the decrease in our stock price and volatility, for the period endedJune 30, 2022 as compared to the period endedJune 30, 2021 . The increase in interest expense was due to an in increase in the amortization of the debt discount on our Amended Credit Agreement for the period endedJune 30, 2022 , as compared to the period endedJune 30, 2021 . For the six months endedJune 30, 2021 , we had net other expense of$616,008 related to interest expense and a loss from the change in fair value of derivative liabilities. The primary reason for the loss on the change in fair value of our derivative liabilities was due to a increase in our stock price and volatility, for the period endedJune 30, 2021 , Other expenses during the period were offset by the gain on debt forgiveness realized from the PPP Loan.
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 2022 and into the foreseeable future. We
anticipate that we will continue to incur net losses in order to advance and
develop potential drug candidates in preclinical and clinical
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development activities and support our corporate infrastructure, which includes
the costs associated with being a public company and raising capital.
Historically, we have funded our operations primarily through the issuance of
equity securities and borrowings from Sciences.
During the latter part of 2022 and in 2023, we expect to fund our operations
through the strategic Acquisition of EHT and subsequent liquidation of EHT's
assets. Management expects that this funding opportunity will finance the
Company at least through the second quarter of 2023 which will allow Skye to
complete its Phase 1 trial and commence Phase 2 trial. However, the Acquisition
is expected to close no earlier than October 15, 2022 . Therefore, in order to
satisfy our cash flow requirements through the Acquisition date, we are
exploring interim financing solutions to bridge our operational funding
requirements during the pre-close period, are managing the timing of our vendor
payments and have continued to consider other interim funding alternatives.
However, we cannot provide any assurances that such additional funds will be
available on reasonable terms, or at all. If we raise additional funds by
issuing equity securities, dilution to existing stockholders would result.
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 and the
Amended Credit Agreement no longer serves as a potential source of liquidity to
the Company. The outstanding principal advances of $2,464,500 under the Amended
Credit Agreement bear interest at 7% per annum and mature on October 5, 2022 .
As of June 30, 2022 , we had an accumulated deficit of $53,718,840 , stockholders'
deficit of $301,822 and a working capital deficit of $462,942 . We had
unrestricted cash of $2,929,895 as of June 30, 2022 , as compared to $8,983,007
as of December 31, 2021 . The decrease was attributable to operating cash burn
during the six months ended June 30, 2022 , which was accelerated due to
Acquisition related costs and increases in our research and development expenses
as we approach our Phase 1 clinical study. Without additional funding,
management believes that we will not have enough funds to meet our obligations
and continue our preclinical and clinical studies beyond one year after the date
the Condensed Consolidated Financial Statements are issued. 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, 2021 that included an explanatory paragraph referring to our
recurring operating losses and expressing substantial doubt in our ability to
continue as a going concern. Our Condensed 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 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 a going concern. Our Condensed 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.
Cash Flows
The following is a summary of our cash flows for the periods indicated and has been derived from our Condensed Consolidated Financial Statements which are included elsewhere in this Form 10-Q:
Six Months
Ended
2022 2021
Net cash used in operating activities$ (5,815,960) $ (3,019,489) Net cash used in investing activities (86,042)
(10,170)
Net cash (used in) provided by financing activities (151,109)
5,746,583
Cash Flows from Operating Activities
The primary use of cash for our operating activities during the period was to
fund research development activities for our preclinical product candidates 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 stock-based compensation, non-cash interest
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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 depreciation and amortization.
Cash used in operating activities of $5,815,960 during the six months ended
June 30, 2022 , reflected a net loss of $6,462,677 , partially offset by aggregate
non-cash charges of $598,130 and included a $48,587 net change in our operating
assets and liabilities.
Non-cash charges included $281,722 for stock-based compensation expense,
$314,925 non-cash interest expense from the amortization of the debt discount on
the multi-draw credit facility - related party, a $53,178 gain from the decrease
in fair value of our warrant liability and $54,661 in depreciation and
amortization. The net change in our operating assets and liabilities included a
$114,438 increase in our accrued expense and other current liabilities and a
$71,085 increase in our accounts payable.
Cash used in operating activities of $3,019,489 during the six months ended
June 30, 2021 , reflected a net loss of $4,184,544 , partially offset by aggregate
non-cash charges of $789,053 and included a $376,002 net change in our operating
assets and liabilities. Non-cash charges included $258,279 for stock-based
compensation expense, $287,781 non-cash interest expense from the amortization
of the debt discount on the multi-draw credit facility - related party, a
$358,998 loss from the increase in fair value of our warrant liability and a
$117,953 gain from the forgiveness of the PPP Loan. The net change in our
operating assets and liabilities included a $72,427 increase in our prepaid
expense and other current assets, and a $451,429 increase in our accrued expense
and other current liabilities.
Cash Flows from Investing Activities
Our investing activities consist of our capital expenditures in relation to the purchase of property plant and equipment and costs incurred in connection with the acquisition of EHT. During the six months endedJune 30, 2022 and 2021, the Company purchased$5,212 and$10,170 in machinery office equipment, respectively. During the six months endedJune 30, 2022 , the Company made$80,830 in payments for acquisition transaction costs.
Cash Flows from Financing Activities
Cash flows from financing activities primarily reflect proceeds from the sale of our securities and debt financings.
During the six months endedJune 30, 2022 , cash used in financing activities included$1,967 in proceeds received in connection with the exercise of pre-funded warrants and a$153,076 repayment on the our insurance premium loan payable.
During the six months ended
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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