Pasithea Therapeutics Corp. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; figures are unaudited. Pasithea is a biotechnology company researching treatments for psychiatric and neurological disorders, with secondary operations providing business support services to ketamine-treatment clinics. Its Q1 revenue came from U.K. clinic support services.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $13,658 | $0 |
| Cost of services / gross profit | $12,937 / $721 | $0 / $0 |
| Selling, general and administrative expense | $2,405,258 | $549,609 |
| Operating loss | $2,404,537 | $549,609 |
| Net loss | $1,574,240 | $549,609 |
| Net loss per share, basic and diluted | $0.07 | $0.07 |
| Cash used in operating activities | $2,527,478 | $381,845 |
Gross margin was approximately 5% of revenue. Other income of $830,297 included a $785,297 noncash gain from the decrease in fair value of warrant liabilities and a $45,000 gain from forgiveness of accounts payable.
At March 31, 2022, cash and cash equivalents were $50.3 million, working capital was $50.5 million, total assets were $51.1 million, and total liabilities were $1.1 million. Current liabilities were $433,684; warrant liabilities were $667,503. The filing reports no borrowings or debt balance. Cash declined $2.65 million during the quarter, including $113,867 used for property and equipment purchases. Management believes working capital is sufficient for at least 12 months from the financial statements’ issuance date.
Changes versus the prior comparable period
- Revenue began to appear in Q1 2022, but remained modest; Q1 2021 had no revenue.
- Net loss increased by approximately $1.02 million, primarily reflecting higher SG&A as operations expanded after the 2021 IPO and private placement. The warrant fair-value gain partially offset the operating loss.
- Operating cash use increased to $2.53 million from $0.38 million. No financing cash was raised in Q1 2022, compared with $1.21 million of common-stock proceeds in Q1 2021.
- Weighted-average shares increased to 23.0 million from 8.0 million, reflecting prior equity financings. Cash decreased from $53.0 million at December 31, 2021 to $50.3 million at March 31, 2022.
Outlook, commitments and risks
The filing provides no financial guidance or quantified revenue outlook. Management expects to fund operations from IPO and November 2021 private-placement proceeds and states that liquidity should cover at least 12 months. The company reported no material legal proceedings, no material changes to the risk factors in its 2021 Form 10-K, and no material COVID-19 impact identified to date.
- In February 2022, Pasithea signed an approximately 39-month drug discovery and development agreement with Evotec targeting schizophrenia. Costs are based on $275,000 per FTE annually, plus estimated program materials of about 10% of FTE-based costs; potential stage-gated milestone payments total up to $6.25 million. Amounts depend on staffing and successful progression through research stages.
- A West Hollywood medical-office lease has a 60-month term and initial base rent of $8,336 per month, with annual 4% increases. The commencement date is tied to completion of landlord improvements or April 1, 2022, whichever is later.
- The New York business-support subcontract with The IV Doc is described as having a 15-year term and fees of $22,500 per month; the first two months’ fees were waived, producing the reported $45,000 gain.
- Public and representative warrants are accounted for as liabilities and remeasured at fair value, which can cause earnings volatility. The company also disclosed post-quarter board approvals on May 5, 2022 for 429,447 restricted shares and 200,000 consultant stock options.
Investor facts to verify
- Whether clinic-support revenue can scale enough to offset operating costs, given the very low Q1 revenue and gross profit.
- Cash consumption and the assumptions behind management’s minimum 12-month liquidity assessment, including Evotec spending and milestone exposure.
- Research and development progress, clinical plans, and the timing and funding needed to advance the drug-development strategy; the filing gives no specific financial guidance.
- The effect of warrant remeasurement and potential equity dilution: 12.6 million options, warrants and restricted stock units were excluded from diluted loss per share as antidilutive.
- The commencement and full cost of the West Hollywood lease, and the long-term obligations and operating economics of the The IV Doc subcontract.