Skye Bioscience (SKYE) Risk Analysis

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Transaction, our stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Transaction.

After the completion of the Transaction, our current stockholders are expected to own a smaller percentage of the combined company than their ownership of their respective companies prior to the Transaction. Upon the Closing, on a pro forma basis and based upon the number of shares of Exchange Shares expected to be issued in connection with the Transaction and the Concurrent Financing, pre-Transaction equityholders of the Company are expected to own approximately 5.38% of the combined company, pre-Transaction equityholders of Redx are expected to own approximately 46.17% of the combined company and investors in the Concurrent Financing and the Series A Financing are expected to own approximately 48.45% of the combined company (assuming gross proceeds from the Concurrent Financing of $67.9 million and assuming gross proceeds from the Series A Financing of $36.0 million), in each case, calculated on a fully diluted basis, using the treasury stock method, and, subject to certain assumptions, including (i) a valuation for the Company of $14.5 million (assuming the Company has no net cash as a result of its pre-Closing distributions ("Company Net Cash") as of the Closing), (ii) a valuation for Redx of $125.0 million (iii) the relative capitalization of the Company and Redx and (iv) assuming that the Concurrent Financing is not increased pursuant to the Side Letter. The percentage of the combined company that each party's equityholders will own following the Closing is subject to certain adjustments as described in the Transaction Agreement, including the amount of the final Company Net Cash at Closing.

Our common stock is listed on the Nasdaq Capital Market ("Nasdaq"). In order to maintain this listing, we must satisfy the continued listing requirements and standards of Nasdaq, including a minimum closing bid price requirement for our common stock of $1.00 per share. On March 17, 2026, we received a notification letter from Nasdaq notifying us that, for the last 30 consecutive business days, the closing bid price for our common stock has been below the minimum $1.00 per share required for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5450(a)(1) ("Rule 5450(a)(1)"). We have 180 calendar days, or until September 14, 2026, to regain compliance with the minimum bid price requirement (which, following our transfer to the Nasdaq Capital Market described below, is set forth in Nasdaq Listing Rule 5550(a)(2)) by maintaining a closing bid price of at least $1.00 per share for a minimum of 10 consecutive trading days, subject to Nasdaq's discretion. If we do not regain compliance by September 14, 2026, we may be afforded a second 180 calendar day period to regain compliance, subject to meeting applicable listing standards and written notice of our intention to cure the deficiency during the second compliance period, including by effecting a reverse stock split if necessary. Separately, on May 13, 2026, we received a notification letter from Nasdaq notifying us that our stockholders' equity had fallen below the $10.0 million minimum required for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(1)(A). To resolve this deficiency, we applied to transfer the listing of our common stock to the Nasdaq Capital Market, which has lower continued listing requirements, including a lower minimum stockholders' equity requirement. Nasdaq approved the transfer, which became effective on June 23, 2026, and, as a result, we regained compliance with the stockholders' equity requirement. Our common stock continues to trade on Nasdaq under the symbol "SKYE." The minimum bid price requirement described above continues to apply to our common stock on the Nasdaq Capital Market. In addition, on July 22, 2026, the SEC approved Nasdaq's recently proposed rule changes to (i) adopt Nasdaq Listing Rule 5550(a)(6) to require issuers listed on the Nasdaq to maintain a minimum Market Value of Listed Securities (as defined in Nasdaq Listing Rule 5005(a)(23)) ("MVLS") of at least $5 million for a period of thirty (30) consecutive business days, and (ii) amend Rule 5810 to suspend trading and immediately delist from Nasdaq securities of issuers that do not satisfy the proposed new requirements, and Rule 5815 to set forth the procedures for requesting a hearing before a Hearings Panel and the scope of the Hearings Panel's discretion. MVLS is generally calculated by multiplying the consolidated closing bid price by the number of shares of listed securities outstanding and, where a company has more than one class or series of equity security listed on Nasdaq, the values are aggregated. Under the new rule, if a company's MVLS remains below $5 million for 30 consecutive business days, Nasdaq will issue a Staff Delisting Determination and immediately suspend trading of the company's securities. Unlike many other Nasdaq continued listing standards, the new MVLS requirement does not provide a compliance or cure period before a Staff Delisting Determination is issued. Additionally, a request for a hearing before the Hearings Panel does not automatically stay the suspension of trading. While the Hearings Panel may reverse a Staff Delisting Determination if it concludes that Nasdaq made an error, or in limited circumstances grant an exception of up to 180 calendar days for a company to demonstrate compliance with Nasdaq's initial listing standards - which are generally more stringent than the continued listing standards - there can be no assurance that any such relief would be granted. A company may further appeal an adverse Hearings Panel decision to the Nasdaq Listing and Hearing Review Council; however, the company's securities would generally trade in the over-the-counter market during the pendency of any such appeal. On July 29, 2026, Nasdaq's new continued listing requirement requiring companies to maintain at least $5 million in MVLS was automatically stayed. The rule, which the SEC approved on July 22, would have required companies whose MVLS remained below $5 million for 30 consecutive business days to be immediately suspended and delisted, with no compliance period. Although companies would still have been able to appeal to a Nasdaq Hearings Panel, trading on Nasdaq would not have continued during the appeal. For now, Nasdaq's new $5 million MVLS continued listing requirement is not effective. The Commission must decide whether to review the Division's approval and, if it does, whether to affirm, modify, reverse, set aside, or remand the matter for further proceedings. The Commission may also decline review. During that process, the stay remains in place, and there is no prescribed timeline for the Commission to reach a decision. Because filing a petition for Commission review is generally a prerequisite to seeking judicial review, the matter could ultimately proceed to a federal court of appeals. If that occurs, the listing requirement could remain stayed during the pendency of the litigation, potentially delaying implementation for a significant period of time. There can be no assurance that our MVLS will remain at or above the $5 million threshold for periods long enough to comply with the new standard. Our MVLS may be adversely affected by factors outside of our control, including general market conditions, macroeconomic uncertainty, sector-specific developments, investor sentiment, and volatility in the trading price of our Common Stock. Because the rule is triggered by 30 consecutive business days below the threshold, even a sustained but temporary decline in our stock price could result in non-compliance and the immediate suspension and delisting of our Common Stock. If Nasdaq delists our securities from trading on its exchange at some future date, we would take actions to restore our compliance with Nasdaq's listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below Nasdaq's minimum bid price requirement or prevent future non-compliance with Nasdaq's listing requirements. In the event of a delisting, we could face significant material adverse consequences, including: - a limited availability of market quotations for our securities;- reduced liquidity with respect to our securities;- a determination that our Common Stock is a "penny stock" which will require brokers trading in our ordinary shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our ordinary shares;- a limited amount of news and analyst coverage for our company; and - a decreased ability to issue additional securities or obtain additional financing in the future. If the closing bid price of our common stock continues to trade below $1.00 per share, we intend to implement a reverse stock split to attempt to regain compliance. However, although, we may effect a reverse stock split by action of our board of directors without a stockholder vote, there can be no assurance that a reverse stock split, if effected, would result in our regaining or maintaining compliance with Nasdaq's continued listing requirements. If we are unable to regain compliance within the applicable cure period, including any available extension, our common stock would be subject to delisting from Nasdaq. Further, even if we regain compliance, we may not be able to sustain compliance with the minimum bid price requirement in the long term. A delisting could significantly reduce the liquidity and market price of our common stock, limit investors' ability to buy and sell our common stock, reduce analyst coverage, and negatively affect our ability to access the capital markets or complete strategic transactions on favorable terms, or at all. Delisting could also trigger certain contractual provisions or investor concerns that may further adversely affect us.

The right of our stockholders to receive any future payment for or derive any value from the Company Legacy CVRs will be contingent solely upon our and Redx's (or the combined company's) ability to monetize all or any part of the Legacy Assets (as defined below) pursuant to one or more disposition agreements entered into within the time period specified in the Legacy CVR Agreement, and the timing and amount of the consideration received thereunder . If we and/or Redx or the combined company are not successful in entering into disposition agreements related to the Legacy Assets (as defined below) or receiving payments thereunder within the time period specified in the Legacy CVR Agreement, no payments will be made in respect of the Company Legacy CVRs, and the Company Legacy CVRs will expire valueless. Following the Effective Time, the combined company will have sole authority over whether and how to monetize the Legacy Assets (if at all), and the combined company's only obligations will be to carry out the obligations set forth in the Legacy CVR Agreement. Furthermore, the Company Legacy CVRs will be unsecured obligations of the combined company and all payments under the Company Legacy CVRs and all other obligations under the Legacy CVR Agreement and the Company Legacy CVRs and any rights or claims relating thereto will be subordinated in right of payment to the prior payment in full of all current or future senior obligations of the combined company.

The market price of our Common Stock is subject to significant fluctuations. During the 12-month period ended June 30, 2026, the closing per share sales price of our Common Stock on Nasdaq ranged from a high of $4.9902 on October 3, 2025 to a low of $0.5655 on March 30, 2026. Market prices for securities of pharmaceutical, biotechnology and other life science companies have historically been particularly volatile. In addition, the market price of our Common Stock will likely be volatile based on whether stockholders and other investors believe that we can complete the Transaction or otherwise raise additional capital to support our operations if the Transaction is not consummated and another strategic transaction cannot be identified, negotiated and consummated in a timely manner, if at all. The volatility of the market price of our Common Stock is exacerbated by low trading volume. Additional factors that may cause the market price of our Common Stock to fluctuate include: - the entry into, or termination of, key agreements, including commercial partner agreements;- announcements by commercial partners or competitors of new commercial products, clinical progress or lack thereof, significant contracts, commercial relationships or capital commitments;- the loss of key employees;- future sales of our common stock;- general and industry-specific economic conditions that may affect our research and development expenditures;- the failure to meet industry analyst expectations; and - period-to-period fluctuations in financial results. Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our Common Stock. In the past, following periods of volatility in the market price of a company's securities, stockholders have often instituted class action securities litigation against such companies.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through equity offerings, such as public equity offerings and offerings under the Sales Agreement, and debt financings or other capital sources, including collaborations, licenses and other similar arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or near term operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could have a material adverse effect on our business and operations, as well as the trading price of our common stock. In addition, if we raise funds through future collaborations, licenses and other similar arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us, which may have a material adverse effect on our business, prospects and may reduce the value of our common stock.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us, our business, our market or our competitors. If securities or industry analysts do not continue coverage of our company, the trading price for our stock would be negatively impacted. In the event one or more of the analysts who covers us downgrades our stock, our stock price would likely decline. If one or more of these analysts ceases to cover us or fails to regularly publish reports on us, interest in our stock could decrease, which could cause our stock price or trading volume to decline.

If the price per share of our common stock at the time of exercise of any warrants, options, or any other convertible securities is in excess of the various conversion or exercise prices of these convertible securities, conversion or exercise of these convertible securities would have a dilutive effect on our common stock. As of December 31, 2025, we had outstanding (i) warrants to purchase up to 9,390,042 shares of our common stock at exercise prices ranging from $0.001 to $288 per share, (ii) options to purchase up to 4,528,555 shares of our common stock at exercise prices ranging from $1.06 to $76.25 per share, (iii) 492,488 unreleased restricted stock units exchangeable for shares of our common stock upon vesting. Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to those of our common stock and which result in additional dilution of the existing ownership interests of our common stockholders.

We have a total of 100,000,000 shares of common stock authorized for issuance and up to 200,000 shares of preferred stock with the rights, preferences and privileges that our Board may determine from time to time. As of December 31, 2025, we have reserved; 4,528,555 shares for issuance upon the exercise of outstanding options, 492,488 shares for issuance upon the vesting of outstanding restricted stock units, 148,119 shares for issuance under our omnibus equity incentive plan, 142,500 shares for issuance under our inducement incentive plan, 328,427 shares for issuance under our 2022 employee stock purchase plan, and 9,390,042 shares for issuance upon the exercise of outstanding warrants. As of December 31, 2025, we had no outstanding preferred stock. As of December 31, 2025, we had 53,995,310 shares of common stock unreserved and available for issuance. We may seek financing that could result in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock. We may also make acquisitions that result in issuances of additional shares of our capital stock. Those additional issuances of capital stock would result in a significant reduction of your percentage interest in us. Furthermore, the book value per share of our common stock may be reduced. This reduction would occur if the exercise price of any issued warrants, the conversion price of any convertible notes is lower than the book value per share of our common stock at the time of such exercise or conversion. The addition of a substantial number of shares of our common stock into the market or by the registration of any of our other securities under the Securities Act, may significantly and negatively affect the prevailing market price for our common stock. The future sales of shares of our common stock issuable upon the exercise of outstanding warrants may have a depressive effect on the market price of our common stock, as such warrants would be more likely to be exercised at a time when the price of our common stock is greater than the exercise price.

In January 2024, we closed a private placement transaction and issued pre-funded warrants to purchase a total of 9,978,739 shares of our common stock, of which 3,677,879 have been exercised and 6,300,860 are currently outstanding. Each pre-funded warrant is exercisable for $0.001 per share of common stock underlying such pre-funded warrant. To the extent the pre-funded warrants are exercised, additional shares will be issued and such issuance would dilute existing shareholders and increase the number of shares eligible for resale in the public market.

Under the terms of the securities purchase agreement (the "January 2024 PIPE SPA") entered into with certain investors ("the January 2024 PIPE Investors") in connection with the January PIPE Financing, so long as the January 2024 PIPE Investors continue to beneficially own in the aggregate at least 40% of the securities issued in the January 2024 PIPE Financing (such securities, the "Closing Securities"), the Company may not transfer, license (other than in the ordinary course of business), encumber, or sell a royalty interest in any intellectual property relating to nimacimab unless the Company obtains the written consent of Qualified Investors that, together with their respective affiliates, beneficially own at least a majority of the then outstanding Closing Securities owned by the Qualified Investors and their respective affiliates. The term "Qualified Investors" means any January 2024 PIPE Investor that, together with its affiliates, continues to own at least 80% of the Closing Securities originally purchased by it under the January 2024 PIPE SPA. As of the date of this Annual Report, to our knowledge, the January 2024 PIPE Investors own more than 40% of the Closing Securities. However, the views and interests of the Qualified Investors may differ or divulge from those of us and our other stockholders. As a result, the consent rights of our January 2024 PIPE Investors may have the effect of delaying, deferring or preventing us from pursuing certain strategic transactions that would directly or indirectly result in the transfer of such intellectual property, which may include, among other things, licensing of such intellectual property and/or a merger, consolidation, takeover or other business combination involving us, or discouraging a potential third party from pursuing such a transaction with us, even if such a transaction would benefit other stockholders.

Our executive officers, directors and greater than 5% stockholders, in the aggregate, owned approximately 36% of our outstanding common stock as of December 31, 2025. As a result, such persons, acting together, have the ability to control or significantly influence all matters submitted to our stockholders for approval, including the election and removal of directors and approval of any significant transaction, as well as our management and business affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.

We are a smaller reporting company. For so long as we qualify as a smaller reporting company, we will have the option to take advantage of certain exemptions from various reporting and other requirements that are applicable to other public companies that are not smaller reporting companies, including, but not limited to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. In addition, for as long as we are deemed neither a large accelerated filer nor accelerated filer, we may continue to use the exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act. We will remain a smaller reporting company and non-accelerated filer until we have a public float of $700 million or more as of the last business day of our most recently completed second fiscal quarter and annual revenues of less than $100 million, or a public float of $250 million or more as of the last business day of our most recently completed second fiscal quarter and annual revenues of $100 million or more. We will need to reassess, as of June 30, 2026, whether we will continue to qualify as a smaller reporting company and a non-accelerated filer for filings beyond the fiscal year ending December 31, 2025. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Sales of a substantial number of shares of our common stock by our existing stockholders in the public market or the perception that these sales might occur could significantly reduce the market price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.

Our stock price has been and, in the future, may be subject to substantial volatility. During the fiscal year ended December 31, 2025, the price per share of our common stock has ranged as low as $0.68 and as high as $5.75. Furthermore, the stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by many factors, including: - announcements relating to development, regulatory approvals or commercialization of our product candidates or those of competitors;- results of clinical trials of our product candidates or those of our competitors;- announcements by us or our competitors of significant strategic partnerships or collaborations or terminations of such arrangements;- actual or anticipated variations in our operating results and whether we have achieved key business targets;- sales of our common stock, including sales by our directors and officers or specific stockholders;- changes in, or our failure to meet, financial estimates by us or by any securities analysts who might cover our stock;- changes in securities analysts' buy and/or sell recommendations;- general economic, political, or stock market conditions;- conditions or trends in our industry;- changes in laws or other regulatory actions affecting us or our industry;- stock market price and volume fluctuations of comparable companies and, in particular, those that operate in the biopharmaceutical industry;- announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us;- capital commitments;- investors' general perception of our company, our business, and our prospects;- disputes concerning our intellectual property or other proprietary rights; and - recruitment or departure of key personnel. In the past, stockholders have initiated class action lawsuits against pharmaceutical and biotechnology companies following periods of volatility in the market prices of these companies' stock. For example, in late 2025 and early 2026, we and certain of our officers and directors were sued in a putative class action lawsuit and a related stockholder derivative lawsuit based on allegedly false and misleading statements related to nimacimab. Such litigation, could cause us to incur substantial costs and divert management's attention and resources from our business.