Pasithea Therapeutics Corp. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 30, 2023. This is an annual report, not a standalone fourth-quarter report. Pasithea is a development-stage biotechnology company with Therapeutics and Clinics segments. It discontinued Clinics operations before the filing date.
Financial performance and position
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $486,559 | $15,062 |
| Cost of services | $113,195 | $17,275 |
| Gross margin | $373,364 | $(2,213) |
| Research and development | $2,665,427 | None reported |
| Selling, general and administrative | $12,524,258 | $4,505,200 |
| Operating loss | $(14,816,321) | $(4,507,413) |
| Net loss | $(13,936,452) | $(2,173,521) |
| Basic and diluted loss per share | $(0.55) | $(0.21) |
| Net cash used in operating activities | $(14,561,921) | $(3,174,058) |
- All FY 2022 revenue came from Clinics; Therapeutics generated no revenue. The reported gross margin reflects the Clinics business and is not a product margin.
- Cash was $33.1 million at year-end, down from $53.0 million. Working capital was $32.2 million, versus $52.9 million a year earlier. Management said available working capital was expected to meet needs for 12 months from the financial-statement issuance date, while also stating the company depends on additional equity and/or debt funding to execute development plans.
- Cash used in investing activities was $2.1 million, including $1.8 million for acquired intangible assets; financing activities used $3.2 million, principally the Camac share repurchase. No conventional borrowings are identified in the supplied filing text. Year-end liabilities included $0.9 million of lease liabilities and $0.14 million of warrant liabilities.
- Total assets were $45.2 million and stockholders’ equity was $42.5 million. Accumulated deficit was $19.4 million.
Material changes versus FY 2021
- Net loss increased by $11.8 million; operating loss increased by $10.3 million. SG&A rose $8.0 million, or 178%, reflecting public-company costs, legal and shareholder-campaign expenses, personnel, insurance, board and audit costs, and Clinics marketing. R&D began in 2022, totaling $2.7 million.
- Other income fell by $1.5 million, mainly due to approximately $1.0 million of litigation-settlement costs and a smaller gain from warrant remeasurement. A $1.85 million non-cash gain from the change in fair value of warrant liabilities partially offset operating costs in 2022.
- Revenue rose to $486,559 from $15,062 as U.S. Clinics operations expanded, particularly at-home services in New York. Those operations, along with U.K. services, were subsequently discontinued; Los Angeles clinic operations were also discontinued, and the company was exploring disposal of related property.
- Two acquisitions expanded the pipeline: Alpha-5, acquired in June for shares and warrants, added the PAS-003 program; AlloMek, acquired in October for shares, warrants and cash, added PAS-004. The AlloMek transaction also included up to $5.0 million in milestone payments and contingent sales-based earn-outs.
Outlook, risks and unusual items
- PAS-004: Management planned to file an FDA IND in the second half of 2023 after GMP manufacturing and toxicology work, then begin a Phase 1 study in healthy volunteers if the IND is accepted. A Phase 2 NF1 proof-of-concept study was contemplated as early as the second half of 2024, conditional on positive Phase 1 safety results. These are plans, not assurances.
- Management expected R&D expense to increase in 2023, primarily for PAS-004 manufacturing and clinical development, and SG&A to decrease as acquisition, shareholder-campaign and Clinics-related costs abate. It also expected inflation to continue pressuring costs during 2023.
- Pipeline programs PAS-003 (ALS), PAS-002 (MS) and PAS-001 (schizophrenia) remained at discovery stage. The filing describes early preclinical findings; no human clinical efficacy or safety results are reported. PAS-004’s proposed benefits over existing MEK inhibitors are hypotheses requiring clinical validation.
- Key risks include further financing needs and dilution, clinical and regulatory failure or delay, dependence on third-party manufacturers and research providers, and competition. PAS-004 relied on a single contract manufacturer at the time of filing.
- On January 19, 2023, Nasdaq notified the company that its share price failed the $1.00 minimum bid-price requirement; the initial compliance deadline was July 18, 2023. A reverse split was identified as a possible option, and delisting remained a risk if compliance was not regained.
- The Camac shareholder dispute was settled in December 2022. The company repurchased 3,205,282 shares for approximately $3.2 million and agreed to reimburse expenses; the filing reports approximately $1.0 million of litigation-settlement expense in FY 2022. Prof. Lawrence Steinman, executive chairman, had been a 20% owner of Alpha-5, making that acquisition a related-party transaction.
- Management assessed disclosure controls and internal control over financial reporting as effective at year-end. The independent auditor gave an unqualified opinion on the financial statements but did not attest to internal-control effectiveness.
Important facts for investors to verify
- Cash runway assumptions and financing needs against planned PAS-004 manufacturing and trial costs, including any financing raised after the filing.
- Whether the PAS-004 IND was submitted and accepted, and subsequent clinical, manufacturing and toxicology milestones.
- Whether Clinics shutdown and property disposition were completed, and whether any remaining costs, liabilities or regulatory matters arose.
- Nasdaq bid-price compliance status and any reverse-stock-split or delisting developments after the stated deadline.
- Acquisition-related contingent payments, earn-outs, acquired intangible-asset valuations and potential impairment assumptions.
- Potential dilution from outstanding warrants and options: 15.36 million warrants and 1.30 million options were outstanding at December 31, 2022; the warrants’ exercise prices ranged from $1.88 to $6.25.