Skye Bioscience Inc

The Company effected a reverse stock split at a ratio of one-for-two hundred and fifty (1-for-250) effective September 8, 2023 (the “Reverse Stock Split”). All share amounts and exercise prices included herein have been adjusted to reflect the Reverse Stock Split.

Summary Compensation Table

The following table sets forth information concerning the compensation earned for services rendered to us for the fiscal years ended December 31, 2023 and 2022 of our named executive officers as determined in accordance with SEC rules.

(1)Amounts reflect the full grant date fair value of RSUs, computed in accordance with ASC Topic 718 -Stock based compensation, rather than the amounts paid to or realized by the named executive officers. The valuation assumptions used in the valuation of options and RSUs may be found in Note 2 to our financial statements included in this annual report on Form 10-K for the year ended December 31, 2023. The amount reported is also the amount that would be reported assuming the highest level of performance conditions are achieved. The restricted stock units vest upon achievement of the following performance milestones, subject to continued services to the Company through the applicable vesting date: an incremental 25% of the restricted stock units vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million, respectively, and an additional 25% vests if the Company achieves a value of $500 million or greater at an exit event. If the Company achieves an exit value greater than $500 million at an earlier date, subject to the executive’s continued services with the Company through such exit event, all of the restricted stock units will vest. No restricted stock units will vest until the compensation committee of the Company determines that shares can be sold into the market to cover withholding tax obligations associated with the vesting of the restricted stock units. As of December 31, 2023, no market capitalization milestone was achieved and no restricted stock units were vested. Amounts reflect the full grant date fair value of stock options, computed in accordance with ASC Topic 718 -Stock based compensation, rather than the amounts paid to or realized by the named executive officers. The value of stock option awards was estimated using the Black-Scholes option pricing model. The valuation assumptions used in the valuation of options and restricted stock units may be found in Note 2 to our financial statements included in this annual report on Form 10-K for the year ended December 31, 2023.

(2)Amounts reflect the cash bonuses earned by our named executive officers for performance of services in 2023 and 2022. Bonuses were based upon achievement of corporate performance goals as determined by the Board.

Narrative Disclosure to Summary Compensation Table

Our compensation committee has historically determined the compensation of our named executive officers. Our compensation committee typically reviews and discusses management’s proposed compensation with the Chief Executive Officer for all executives other than the Chief Executive Officer. Based on those discussions and its discretion, the compensation committee then approves the compensation of each executive officer after discussions without members of management present.

Base Salary

Base salaries for our named executive officers are initially established through arm’s-length negotiations at the time of the executive officer’s hiring, taking into account such executive officer’s qualifications, experience, the scope of his or her responsibilities and competitive market compensation paid by other companies for similar positions within the industry and geography. Annual base salaries are intended to provide a fixed component of compensation to our named executive officers, reflecting their skill sets, experience, roles and responsibilities. Base salaries are reviewed, determined, and approved periodically, typically in connection with our annual performance review process, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. The annualized 2023 base salaries for our named executive officers were as follows: (i) $450,000 for Mr. Dhillon and (ii) $340,000 for Ms. Arsenault.

Annual Performance-Based Compensation

In addition to base salaries, our named executive officers are eligible to receive annual performance-based bonuses, which are designed to provide appropriate incentives to our executive officers to achieve annual performance goals and to reward them for achievement towards these goals. Performance based milestones are approved by the board at the beginning of the year and executive officers are assessed against these performance-based milestones subsequent to year end. With respect to 2023, our compensation committee awarded a bonus of $161,904 to Mr. Dhillon, a bonus of $87,731 to Ms. Arsenault. Please see “Employment and Severance Agreements —Employment Agreements” below for additional information.

Equity Incentives

We believe that our ability to grant equity-based awards is a valuable and necessary compensation tool that aligns the long-term financial interests of our employees, consultants and directors with the financial interests of our shareholders. Our compensation committee periodically reviews the equity incentive compensation of our executive officers, including our named executive officers, and from time to time may grant equity incentive awards to them.

In August 2023, we completed the acquisition of Bird Rock Bio, Inc. and closed a concurrent private placement financing and a convertible note financing. Following the completion of the transaction, our compensation committee, and its advisors undertook a review of the compensation of our executive officers, directors and employees.

Following such review, on August 25, 2023, we granted each of Mr. Dhillon and Ms. Arsenault (i) an option to purchase 9,013 and 13,383 shares of our common stock, respectively, at an exercise price per share of $3.50 and (ii) a contingent option award to, purchase 21,586 and 32,053 shares of our common stock, respectively, at an exercise price per share of $3.50, subject to the approval of an amendment to our Amended and Restated 2014 Omnibus Incentive Plan (the “A&R 2014 Incentive Plan”) to increase the number of shares authorized for issuance under the A&R 2014 Incentive Plan (the “Plan Amendment”). On September 29, 2023 holders of a majority of the voting power of the outstanding capital stock of the Company (the “Majority Stockholders”) and the Board approved the Plan Amendment. These options vest in equal monthly installments over four years, subject to continued services to the Company through the applicable vesting date. If a change in control occurs, 100% of such options will become fully vested.

Additionally, on August 25, 2023, we granted each of Mr. Dhillon and Ms. Arsenault (i) performance-based RSUs covering 81,110 and 53,529 shares of our common stock, respectively, and (ii) contingent performance-based RSUs covering 194,270 and 128,209 shares of our common stock, respectively, subject to approval of the Plan Amendment, which was approved by the Majority Stockholders and the Board on September 29, 2023. These RSUs vest upon achievement of the following performance milestones, subject to continued services to the Company through the applicable vesting date: 25% of the restricted stock units vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million, respectively, and an additional 25% vests if the Company achieves a value of $500 million or greater at an exit event. If the Company achieves an exit value greater than $500 million at an earlier date, subject to the executive’s continued services with the Company through such exit event, all of the RSUs will vest. No RSUs will vest until the compensation committee of the Company determines that shares can be sold into the market to cover withholding tax obligations associated with the vesting of therestricted stock units. As of December 31, 2023, no market capitalization milestone was achieved and no restricted stock units were vested.

For additional information, please see below under “Outstanding Equity Awards at Fiscal Year End.”

Employment and Severance Arrangements

Employment Agreement with Punit Dhillon

On August 7, 2020, we entered into an employment agreement with Mr. Dhillon, our Chief Executive Officer. The agreement provides for an annual base salary of $400,000 per year and an annual discretionary bonus up to 50% of his base salary based on Mr. Dhillon’s achievement of annual corporate milestones agreed to by the Board. Effective June 1, 2022, Mr. Dhillon's annual base salary was increased to $450,000 per year and his annual discretionary bonus eligibility was increased to 60% of his base salary. Mr. Dhillon also receives the normal benefits available to other similarly situated executives and will be entitled to severance pay under the circumstances described below.

Mr. Dhillon’s employment with the Company is at-will. The employment agreement provides that, except for a termination of Mr. Dhillon’s employment for “Cause,” “By Death”, “By Disability” (as such terms are defined in his employment agreement), Mr. Dhillon is entitled to a severance payment equal to 24 months of his then current base salary, less applicable statutory deductions and withholdings if terminated by the Company.

Employment Agreement with Kaitlyn Arsenault

On October 4, 2021, we entered into an employment agreement with Ms. Arsenault, our Chief Financial Officer. The agreement provides for an annual base salary of $300,000 per year and an annual discretionary bonus of up to 35% of her base salary based in part on Ms. Arsenault’s achievement of milestones agreed to by the Board. Effective June 1, 2022, Ms. Arsenault’s annual base salary was increased to $340,000 per year and her annual discretionary bonus eligibility was increased to 40% of her base salary. Ms. Arsenault also receives the normal benefits available to other similarly situated executives and will be entitled to severance pay under the circumstances described below.

Ms. Arsenault’s employment with the Company is at-will. The employment agreement provides that, except for a termination of Ms. Arsenault’s employment for “Cause,” “By Death” or “By Disability” (as such terms are defined in her employment agreement), (a) in the event that following a “Change of Control” (as defined in the Company's Amended and Restated 2014 Omnibus Incentive Plan) Ms. Arsenault’s employment is terminated by the Company, she will be entitled to a severance payment equal to 12 months of her then current base salary less applicable statutory deductions and withholdings, and (b) in the event that prior to a Change of Control, Ms. Arsenault’s employment is terminated by the Company, she would be entitled to a severance payment equal to (i) 6 months of her then current base salary, less applicable statutory deductions and withholdings, if such termination were to occur before April 4, 2023, (ii) 9 months of her then current base salary, less applicable statutory deductions and withholdings, if such termination were to occur on or after April 4, 2023 and before October 4, 2024, and (iii) 12 months of her then current base salary, less applicable statutory deductions and withholdings, if such termination were to occur on or after October 4, 2024.

The foregoing description of the employment agreements above does not purport to be complete and is qualified in its entirety by reference to the full text of the employment agreements attached hereto as an exhibit and incorporated by reference herein.

Outstanding Equity Awards at Fiscal Year-end

As of December 31, 2023, our named executive officers held the following outstanding Company equity awards:

(1)The market value of shares that have not vested is calculated based on the per share closing price of our common stock on December 31, 2023.

(2)The options specified above vest as follows: 1/12th each month on the anniversary of the grant date.

(3)The options specified above vest as follows: 10% vests on the grant date and 90% vests in equal semi-annually installments thereafter over four years.

(4)The options specified above vest as follows: 25% vests on the one year anniversary of the grant date and 1/48th vests monthly thereafter over three years following the one year anniversary of the grant date.

(5)The restricted stock units specified above vest as follows: 33% on each grant date anniversary over three years.

(6)The options specified above vest as follows: 10% vests on the grant date and 90% vests in equal annual installments thereafter over four years.

(7)The options specified above vest as follows: 10% vests on the grant date and 90% vests in equal semi-annually installments thereafter over four years.

(8)The options specified above vest as follows: monthly on the grant date thereafter over four years.

(9)The restricted stock units vest on the following performance milestones: an incremental 25% of the RSUs vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million, respectively, and an additional 25% vests if the Company achieves a value of $500 million or greater at an exit event. If the Company achieves an exit value greater than $500 million at an earlier date, subject to the executive’s continued services with the Company through such exit event, all of the RSUs will vest. No RSUs shall vest until the compensation committee of the Company determines that shares can be sold into the market to cover withholding tax obligations associated with the vesting of the restricted stock units. As of December 31, 2023, no market capitalization milestone was achieved and no RSUs were vested.

Exercises of Options

There were no exercises of stock options by our named executive officers during the year ended December 31, 2023.

Director Compensation

As of December 31, 2023, our policy for the compensation of our non-employee directors is as follows:

•Each non-employee director receives a cash retainer of $40,000 on an annual basis, and an executive chair of the Board, if one is appointed as such and is a non-employee director, receives an additional $40,000 retainer annually.

•Upon election to the Board, non-employee directors receive a one-time award of 20,000 stock options which vest in twelve equal monthly installments. In subsequent annual periods, each non-employee director receives a grant of 20,000 stock options which vest in twelve equal monthly installments.

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

•Audit Committee: $10,000 per year ($20,000 for the chair)

•Compensation Committee: $3,500 per year ($10,000 for the chair)

•Nominating and Corporate Governance Committee: $2,500 per year ($5,000 for the chair)

On January 5, 2023, each of Drs. Dalesandro, Tyle, and Ward received 1,000 options, and on February 14, 2023, Dr. Charych received 1,000 options, which options vest monthly over 12 months. These grants were made in consideration of their service as a director of the Company for the year ended December 31, 2022 and were consistent with the non-employee director compensation policy in place at the time of the grant.

On August 25, 2023, each director other than Mr. Grayson received an annual grant of 20,000 stock options, which vest monthly over 12 months. These grants were made in consideration of their service as a director of the Company for the year ended December 31, 2023 and were consistent with the non-employee director compensation policy as of December 31, 2023.

In connection with Mr. Grayson’s appointment to the Board and in recognition of his skills, experience and future contributions to the Company, the Company paid Mr. Grayson a cash bonus of $350,000 on September 18, 2023. In addition, in recognition of his skills, experience and future contributions to the Company, on August 25, 2023, we granted Mr. Grayson performance-based RSUs covering 72,531 shares of our common stock and contingent performance-based RSUs covering 173,721 shares of our common stock, subject to approval of the Plan Amendment, which was approved by the Majority Stockholders and the Board on September 29, 2023. The restricted stock units vest on the following milestones: 25% of the restricted stock units vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million, respectively, and an additional 25% vests if the Company achieves a value of $500 million or greater at an exit even or greater at an exit event. If the Company achieves an exit value greater than $500 million at an earlier date, subject to Mr. Grayson’s continued services with the Company through such exit event, all of the restricted stock units will vest. No restricted stock units will vest until the compensation committee of the Company determines that shares can be sold into the market to cover withholding tax obligations associated with the vesting of the restricted stock units. As of December 31, 2023, no market capitalization milestone was achieved and no RSUs were vested.

The table below summarizes the compensation paid by us to our non-employee directors for the year ended December 31, 2023. Mr. Dhillon, our employee director, does not receive additional compensation for his services as a member of our Board:

(1)The amounts reported under "Stock Awards" and “Option Awards” in the above table reflect the grant date fair value of these awards as determined in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation - Stock Compensation. The value of stock option awards was estimated using the Black-Scholes option pricing model. The valuation assumptions used in the valuation of options granted may be found in Note 8 to our financial statements included in this annual report on Form 10-K for the year ended December 31, 2023. The annual Board member grants for the year ended December 31, 2023, were granted on August 25, 2023. As of December 31, 2023, each non-employee director is entitled to an annual grant of 20,000 common stock options, all of which vest in twelve equal monthly installments.

(2)The aggregate number of shares issuable upon exercise of option awards outstanding on December 31, 2023 for Dr. Dalesandro was 22,601, of which 9,267 were fully vested.

(3)The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2023 for Dr. Tyle was 22,101, of which 8,767 were fully vested.

(4)The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2023 for Dr. Ward was 22,001, of which 8,667 were fully vested.

(5)The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2023 for Dr. Charych was 21,001, of which 7,501 were fully vested.

(6)The aggregate number of shares issuable upon exercise of option awards outstanding at December 31, 2023 for Mr. Schwab was 20,001, of which 6,667 were fully vested.

(7)As of December 31, 2023, Mr. Grayson had 246,252 restricted stock units with market and performance based vesting conditions. The restricted stock units vest on the following milestones: 25% of the restricted stock units vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million, respectively, and an additional 25% vests if the Company achieves a value of $500 million or greater at an exit event. If the Company achieves an exit value greater than $500 million at an earlier date, subject to Mr. Grayson’s continued services with the Company through such exit event, all of the restricted stock units will vest. Norestricted stock units will vest until the compensation committee of the Company determines that shares can be sold into the market to cover withholding tax obligations associated with the vesting of therestricted stock units. As of December 31, 2023, no market capitalization milestone was achieved and no restricted stock units were vested.

(8)Amount includes the prorated annual cash retainer that Mr. Grayson received for his service from August 18, 2023 to December 31, 2023 and a cash bonus of $350,000 in connection with Mr. Grayson’s appointment to the Board and in recognition of his skills, experience and future contributions to the Company.