Skye Bioscience, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

6 Months Ended

Jun. 30, 2024

Share-Based Payment Arrangement [Abstract]

Stock Incentive Plan

On October 31, 2014, the Board of Directors ("Board") approved the Company’s 2014 Omnibus Incentive Plan. On June 14, 2022, the Board approved the 2014 Amended and Restated Omnibus Incentive Plan (the “2014 Amended and Restated Plan”) which replaced the 2014 Omnibus Incentive Plan in its entirety.

On September 29, 2023, the Board and holders of the voting power of the outstanding capital stock of the Company adopted and approved Amendment No. 1 to the 2014 Amended and Restated Plan. Amendment No. 1 to the 2014 Amended and the Restated Plan became effective on November 6, 2023. As of June 30, 2024, 2,464,345 shares were authorized for the issuance under the 2014 Amended and Restated Plan.

The Company has reserved shares for issuance under 2014 Amended and Restated Plan upon share option exercise. As of June 30, 2024, the Company had 137,833 shares available for future grant under the 2014 Amended and Restated Plan.

Stock Options

The following is a summary of option activities under the Company’s 2014 Amended and Restated Plan for the six months ended June 30, 2024:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value*
Outstanding, December 31, 2023	498,298	$	8.96	7.24	$	20,441

Granted	768,100	14.40

Cancelled	(2,926)	400.00
Forfeited	(72,873)	8.32
Outstanding, June 30, 2024	1,190,599	$	11.54	9.14	$	1,532,218
Exercisable, June 30, 2024	345,887	$	11.08	8.23	$	591,698

*The aggregate intrinsic value is the sum of the amounts by which the quoted market price of the Company’s stock exceeded the exercise price of the stock options at June 30, 2024 for those stock options for which the quoted market price was in excess of the exercise price ("in-the-money options").

The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2024, was $11.42.

The fair value of the Company's stock option grants were estimated on the date of grant using the Black-Scholes option-pricing model under the following assumptions:


			Six Months Ended June 30, 2024
Dividend yield			0.00%
Volatility factor			99.58% - 99.96%
Risk-free interest rate			4.26% - 4.48%
Expected term (years)			5.27 - 6.08

Restricted Stock Units

On February 29, 2024, the Company granted restricted stock units ("RSUs") to its executive management team and to certain members of the Board with market-based vesting conditions. The RSUs are eligible to vest subject to the achievement and attainment of certain market capitalization target goals and share price targets (market-based vesting conditions). The Company used the Monte Carlo Simulation model to evaluate the derived service period and fair value of awards with market and performance conditions, including assumptions of historical volatility and risk-free interest rate commensurate with the vesting term.

The fair value of the Company's market-based RSUs were estimated on the date of grant under the following assumptions:


			Six Months Ended June 30, 2024
Dividend yield			0.00%
Volatility factor			93.71%
Risk-free interest rate			4.16%
Derived service periods (years)			1.27 - 2.48

The following is a summary of RSU activity during the period ended June 30, 2024:


	Number of Shares	Weighted Average Grant Date Fair Value
Unvested, December 31, 2023	847,777	$	3.66

Granted	275,000	14.21

Unvested, June 30, 2024	1,122,777	$	6.24

Common Stock Issued for Services

Additionally, during the three months ended June 30, 2024, the Company issued 5,000 shares of common stock to a service provider as compensation for services provided. Such shares were issued in a private placement outside of the 2014 Amended and Restated Plan.

Stock-Based Compensation Expense

The Company recognizes stock-based compensation expense using the straight-line method over the requisite service period or derived service period. The Company recognized stock-based compensation expense for the stock options and the RSUs discussed above, in its Unaudited Condensed Consolidated Statements of Operations as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Research and development	$	303,081	$	12,533	$	695,719	$	57,001
General and administrative	1,525,388		90,338		3,610,934		177,449
	$	1,828,469	$	102,871	$	4,306,653	$	234,450

During the three and six months ended June 30, 2024, the first three market based vesting conditions of the RSUs granted in August 2023 were met.

The total amount of unrecognized compensation cost was $11,848,634 as of June 30, 2024. This amount will be recognized over a weighted average period of 2.92 years.