Pasithea Therapeutics Corp. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter report. Filed March 28, 2024.
Business context
Pasithea is a clinical-stage biotechnology company with no approved products and no material product revenue. It discontinued its clinics and related support-services operations during 2023 and now reports one segment, Therapeutics. Its lead candidate, PAS-004, is a macrocyclic MEK inhibitor; the FDA cleared its IND in December 2023, and the first-in-human Phase 1 trial began at its first site in February 2024. PAS-003, an ALS antibody program, is ready for manufacturing and IND-enabling studies. PAS-001, a schizophrenia discovery program, remains early stage. The company ceased development of PAS-002 for multiple sclerosis.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue from continuing operations | None reported | None reported |
| General and administrative expense | $7.9 million | $9.9 million |
| Research and development expense | $8.1 million | $2.7 million |
| Loss from operations | $16.0 million | $12.6 million |
| Net loss | $16.0 million | $13.9 million |
| Net cash used in operating activities | $12.8 million | $11.9 million |
| Cash and cash equivalents at year-end | $16.3 million | $33.1 million |
| Working capital at year-end | $14.1 million | $32.3 million |
Gross margin and operating margin are not meaningful for continuing operations because no continuing revenue was reported. The discontinued clinics operations reported $0.5 million of revenue in 2022 and none in 2023.
Total assets were $26.1 million and total liabilities were $2.7 million at December 31, 2023. The balance sheet reports no conventional debt; a $0.4 million note payable received and repaid during 2023 had no net financing cash impact. Current liabilities were $2.6 million. The company reported $0.1 million of warrant liabilities and $0.1 million of lease liabilities.
Material changes versus 2022
- Net loss increased $2.0 million, or 14.5%, to $16.0 million. R&D expense rose $5.4 million, or 203.9%, principally from PAS-004 development, manufacturing and clinical preparation.
- G&A expense fell $2.0 million, or 20.6%, largely because 2022 included nonrecurring shareholder-campaign, litigation and acquisition-related costs. Management expects G&A to decrease in 2024, while R&D is expected to increase with PAS-004 clinical and CMC work.
- Cash declined $16.8 million during 2023. This included $3.7 million spent on a tender offer repurchasing 266,171 shares; operating activities used $12.8 million.
- Loss from discontinued operations improved to $0.5 million from $2.2 million. The Los Angeles clinic assets were sold for $0.15 million, generating a reported gain of approximately $65,000.
Outlook, risks and unusual items
- Going concern and funding: Management says existing working capital is insufficient to fund needs through 12 months from the financial statement issuance date without additional capital. The auditor’s report also states that recurring losses, negative operating cash flows and funding needs raise substantial doubt about the company’s ability to continue as a going concern. The company has no committed external financing source and expects to seek equity, debt, collaboration or other funding.
- Clinical outlook: Management expected initial PAS-004 Phase 1 interim data as early as the second half of 2024 and trial completion in 2025. Subject to Phase 1 results, it planned a Phase 1b/2 study in adult NF1-PN patients in 2025, followed by adolescent and pediatric patients. These are forward-looking plans, not assured milestones.
- Development and operating risks: PAS-004 remains unproven in humans; trials may be delayed, unsuccessful or reveal safety issues. The company relies on third parties for clinical work and manufacturing, including a single CMO for PAS-004 drug substance. It also cites competition, regulatory, intellectual-property, supply-chain and capital-market risks.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to a material weakness in review of the annual tax provision prepared by a third party. An approximately $6.5 million federal and $3.8 million state NOL disclosure error was corrected before filing; it did not affect balance-sheet amounts or require an audit adjustment. Remediation had begun but was not yet complete.
- Capital structure and listing: A 1-for-20 reverse stock split became effective January 2, 2024. Nasdaq confirmed on January 17, 2024 that the company had regained compliance with the minimum bid-price requirement. The company repurchased shares in the 2023 tender offer and had 1,042,415 shares outstanding as of March 23, 2024.
- Other items: The company has a full valuation allowance against deferred tax assets, including disclosed federal and state NOL carryforwards of approximately $24.3 million and $11.6 million, respectively. It reported no legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Current cash balance, actual financing plans and the resulting runway, given the disclosed going-concern uncertainty.
- PAS-004 trial enrollment, safety and interim data, and whether the stated 2024–2025 milestones remain achievable.
- Progress of the tax-control remediation and confirmation that the material weakness has been resolved.
- Current share count, potential dilution from outstanding warrants, options and incentive-plan reserves, and continued Nasdaq listing compliance.
- Whether PAS-003 advances to IND-enabling work and whether the company obtains partners or non-dilutive funding for its earlier-stage programs.