Skye Bioscience, Inc.SKYE

Skye Bioscience, Inc. Debt Disclosure

10-KFiled Mar 10, 20262 min read
Debt
Convertible Note - Related Party
On August 15, 2023, the Company entered into a Secured Note and Warrant Purchase Agreement with MFDI, LLC (“MFDI”), pursuant to which the Company issued to MFDI a $5,000,000 secured convertible promissory note (the "Convertible Note") and a warrant to purchase 340,000 shares of common stock on August 18, 2023 . The Convertible Note accrued interest at a rate of 10% per annum and had a fixed conversion price at $5.16.
On August 8, 2024, MFDI exercised the conversion option under the Convertible Note and converted the full principal balance. This conversion resulted in the issuance of 968,973 shares of the Company's common stock and the payment of accrued interest in cash.
In the original accounting for the Convertible Note, the Company allocated $4,068,424 in proceeds to the debt host and $931,576 in proceeds to the freestanding warrants based on relative fair value. The debt discounts of $931,576 and $26,316 related to the warrants, and debt issuance costs, respectively, were amortized over the term of the Convertible Note using the effective interest rate method. Amortization of the debt discount was recognized as non-cash interest expense in Other expense within the Consolidated Statements of Operations.
Accrued interest on the Convertible Note was payable quarterly within 30 days of the last day of each calendar quarter. The debt discounts related to the warrants, and debt issuance costs, were amortized over the term of the Convertible Note using the effective interest rate method. Amortization of the debt discount is recognized as non-cash interest expense in Other (income) expense within the Consolidated Statements of Operations. Through the date of conversion, the Convertible Note is classified as Level 2 of the fair value hierarchy model based on market prices that can be corroborated with observable market data for the Company's common stock.
For the year ended December 31, 2024, the effective interest rate on the Convertible Note was 31.39%.
Interest Expense
There was no interest expense in 2025. The Company’s interest expense for 2024 consists of the following:
Year Ended
December 31,
2024
Related party interest expense – stated rate$302,740 
Legal judgment estimated interest (income) expense
(234,750)
Bond premium
59,929 
Premium on irrevocable letter of credit
22,383 
Non-cash interest expense:
Amortization of debt discount582,550 
Amortization of transaction costs16,456 
$749,308 

Historical Timeline

Fiscal YearFiled
2025Mar 10, 2026Showing above
2024Mar 20, 2025
2023Mar 22, 2024
2022Mar 31, 2023
2021Mar 28, 2022
2020Mar 2, 2021
2019Mar 23, 2020
2018Mar 14, 2019

About Debt Disclosures

Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.

Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.

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