DEF 14A of Skye Bioscience, Inc., Sep 23, 2024

DEF 14A of Skye Bioscience, Inc.

Filed Sep 23, 2024 · FY20230001516551-24-000089

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  1. Summary Compensation Table

    Summary Compensation Table The following table sets forth information concerning the compensation earned for services rendered to us for the years ended December 31, 2023 and 2022 of our named executive officers.

  2. Summary Compensation Table

    | SUMMARY COMPENSATION TABLE | | | | | | | | | Name and Principal Position | Year | Salary ($) | Bonus ($) (2) | Stock Awards ($) (1) | Option Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) | Total ($) | | Punit Dhillon | 2023 | 450,000 | - | 994,364 | 92,974 | 270,000 | 1,807,338 | | CEO | 2022 | 432,577 | 74,000 | - | - | 161,904 | 668,481 | | Kaitlyn Arsenault | 2023 | 340,000 | - | 656,234 | 138,056 | 136,000 | 1,270,290 | | Chief Financial Officer | 2022 | 325,856 | 55,500 | - | - | 87,731 | 469,087 |

  3. Summary Compensation Table

    ___________ (1)Amounts reflect the full grant date fair value of RSUs, computed in accordance with Accounting Standards Codification (“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 our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 22, 2024 (the “2023 Form 10-K”)The amount reported is also the amount that would be reported assuming the highest level of performance conditions are achieved. The RSUs 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 RSUs vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million and $500 million, respectively. As of December 31, 2023, no market capitalization milestone was achieved and no RSUs 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 RSUs may be found in Note 2 to our financial statements included in the 2023 Form 10-K (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.

  4. Outstanding Equity Awards at Fiscal Year-end

    Outstanding Equity Awards at Fiscal Year-end As of December 31, 2023, our named executive officers held the following outstanding Company equity awards:

  5. Outstanding Equity Awards at Fiscal Year-end

    | | Option Awards | | | | | Stock Awards | | | | | Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Un- exercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Market or Payout Value Of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Punit Dhillon, | 10/10/2018(2) | 800 | - | 76.25 | 10/10/2028 | | | | | | CEO/Chairman | 8/7/2020(3) | 25,200 | 10,800 | 11.25 | 8/7/2030 | | | | | | | 12/14/2021(4) | 6,180 | 6,180 | 14.50 | 12/14/2031 | | | | | | | 12/14/2021(5) | | | | | 2,667 | 7,254 | | | | | 8/25/2023(8) | 752 | 8,261 | 3.50 | 8/25/2033 | | | | | | | 9/29/2023(8) | 1,798 | 19,788 | 3.50 | 9/29/2033 | | | | | | | 8/25/2023(9) | | | | | | | 81,110 | 220,619 | | | 9/29/2023(9) | | | | | | | 194,270 | 528,414 | | Kaitlyn Arsenault | 9/15/2021(6) | 880 | 720 | 30.00 | 9/15/2031 | | | | | | CFO | 10/4/2021(7) | 3,520 | 2,880 | 22.50 | 10/4/2031 | | | | | | | 12/14/2021(4) | 3,540 | 3,540 | 14.50 | 12/14/2031 | | | | | | | 12/14/2021(5) | | | | | 1,333 | 3,626 | | | | | 8/25/2023(8) | 1,116 | 12,267 | 3.50 | 8/25/2033 | | | | | | | 9/29/2023(8) | 2,671 | 29,382 | 3.50 | 9/29/2033 | | | | | | | 8/25/2023(9) | | | | | | | 53,529 | 145,599 | | | 9/29/2023(9) | | | | | | | 128,209 | 348,728 |

  6. Outstanding Equity Awards at Fiscal Year-end

    (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 RSUs 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 RSUs 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 and $500 million, respectively. 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.

  7. DIRECTOR COMPENSATION

    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 RSUs vest on the following milestones: 25% of the RSUs vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million and $500 million respectively. 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:

  8. DIRECTOR COMPENSATION

    | DIRECTOR COMPENSATION | | | | | | Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | Option Awards ($) (1) | Total ($) | | Margaret Dalesandro | 54,516 | - | 61,842(2) | 116,358 | | Praveen Tyle | 58,184 | - | 61,842(3) | 120,026 | | Keith Ward | 61,504 | - | 61,842(4) | 123,346 | | Deborah Charych | 35,688 | - | 66,592(5) | 102,280 | | Andy Schwab | 15,988 | - | 58,092(6) | 74,080 | | Paul Grayson | 364,731(8) | 889,458 | -(7) | 1,254,189 |

  9. DIRECTOR COMPENSATION

    (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 the 2023 Form 10-K. 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 on 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 on 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 on 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 on 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 RUSs with market and performance based vesting conditions. The RSUs vest on the following milestones: 25% of the RSUs vest upon the Company achieving a market capitalization of $125 million, $250 million, $400 million and $500 million, respectively. As of December 31, 2023, no market capitalization milestone was achieved and no RSUs 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.

  10. PAY VERSUS PERFORMANCE

    PAY VERSUS PERFORMANCE As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K (the “Pay Versus Performance Rule”), we are providing the following information about the relationship between executive compensation actually paid for our principal executive officer (“PEO”) and Non-PEO named executive officers (“NEOs”) and certain financial performance of the Company for the fiscal years listed below.

  11. PAY VERSUS PERFORMANCE

    | | | | | | Value of Initial Fixed $100 Investment Based On: | | | Fiscal Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for non-PEO NEOs(3) | Average Compensation Actually Paid to non-PEO NEOs(4) | Total Shareholder Return(5) | Net Income ($)(6) | | (a) | (b) | (c) | (d) | (e) | (f) | (h) | | 2023 | $1,807,338 | $1,254,456 | $1,270,290 | $874,797 | $27.2 | $(37,644,784) | | 2022 | $668,481 | $304,870 | $469,087 | $314,576 | $40.5 | $(19,481,602) | | 2021 | $899,701 | $1,087,573 | $363,547 | $316,184 | $130 | $(8,522,182) |

  12. PAY VERSUS PERFORMANCE

    (1)The dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Dhillon (our Chief Executive Officer) for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation-Summary Compensation Table.” (2)The dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Dhillon, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Dhillon during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Dhillon’s total compensation for each year to determine the compensation actually paid:

  13. PAY VERSUS PERFORMANCE

    | Fiscal Year | Reported Summary Compensation Table Total For PEO ($) | Deduction of Reported Value of Equity Awards (a) ($) | Equity Award Adjustments (b) ($) | Compensation Actually Paid to PEO ($) | | 2023 | 1,807,338 | (1,087,338) | 534,456 | 1,254,456 | | 2022 | 668,481 | — | (363,611) | 304,870 | | 2021 | 899,701 | (276,680) | 464,552 | 1,087,573 |

  14. PAY VERSUS PERFORMANCE

    (a) The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year. (b) The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date; and (iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value. The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. The amounts deducted or added in calculating the equity award adjustments are as follows:

  15. PAY VERSUS PERFORMANCE

    | Fiscal Year | Year End Fair Value of Equity Awards Granted During the Fiscal Year ($) (i) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) (ii) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) (iii) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) (iv) | Total Equity Award Adjustments ($) | | 2023 | 554,219 | (35,861) | 4,811 | 11,287 | 534,456 | | 2022 | — | (283,189) | — | (80,422) | (363,611) | | 2021 | 248,541 | 56,566 | — | 159,445 | 464,552 |

  16. PAY VERSUS PERFORMANCE

    (3)The dollar amounts reported in column (d) (i) for 2022 and 2023, the amounts of total compensation reported for Ms. Arsenault (our Chief Financial Officer) for 2022 and 2023 in the “Total” column of the Summary Compensation Table and (ii) for 2021, the average of the amounts of total compensation reported for Ms. Arsenault (our Chief Financial Officer) and Richard Janney (our Former Interim Principal Accounting Officer) for 2021 in the "Total" column of the Summary Compensation Table in the Company's annual report on Form 10-K for the year ended December 31, 2021. (4)The dollar amounts reported in column (e) represent the amount of “compensation actually paid” to Ms. Arsenault in 2022 and 2023 and the average amount of "compensation actually paid" to Ms. Arsenault and Mr. Janney in 2021, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Ms. Arsenault or Mr. Janney during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Ms. Arsenault’s and Mr. Janney's total compensation for the applicable year to determine the compensation actually paid, using the same methodology descried above in Note 2:

  17. PAY VERSUS PERFORMANCE

    | Fiscal Year | Average of Reported Summary Compensation Table Total For Non-PEO NEOs ($) | Deduction of Average of Reported Value of Equity Awards ($) | Equity Award Adjustments (a) ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) | | 2023 | 1,270,290 | (794,290) | 398,797 | 874,797 | | 2022 | 469,087 | — | (154,511) | 314,576 | | 2021 | 363,547 | (163,620) | 116,257 | 316,184 |

  18. PAY VERSUS PERFORMANCE

    (a) The amounts deducted or added in calculating the total equity award adjustments are as follows:

  19. PAY VERSUS PERFORMANCE

    | Fiscal Year | Year End Fair Value of Equity Awards Granted During the Fiscal Year ($) (i) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) (ii) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Year ($) (iii) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year ($) (iv) | Total Equity Award Adjustments ($) | | 2023 | 412,110 | (15,672) | 7,144 | (4,785) | 398,797 | | 2022 | — | (116,501) | — | (38,010) | (154,511) | | 2021 | 107,762 | — | 8,495 | — | 116,257 |

  20. PAY VERSUS PERFORMANCE

    (5)Cumulative total shareholder return (“TSR”) is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. (6)The dollar amounts reported represent the amount of net income (loss) reflected in the Company’s audited financial statements for the applicable year.

  21. Compensation Actually Paid and Cumulative TSR of the Company

    Compensation Actually Paid and Cumulative TSR of the Company The graph below sets forth the relationship between the amount of Compensation Actually Paid to our PEO, the average amount of Compensation Actually Paid to our Non-PEO NEO, and the Company’s cumulative TSR over the three most recently completed fiscal years.

  22. Compensation Actually Paid and Net Income

    Compensation Actually Paid and Net Income The graph below sets forth the amount of Compensation Actually Paid to our PEO, the amount of Compensation Actually Paid to our Non-PEO NEO, and our net income during the three most recently completed fiscal years. All information provided above under the “Pay Versus Performance” heading will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent the Company specifically incorporates such information by reference.