Pasithea Therapeutics Corp. — Q3 2021 Form 10-Q
Business context and period. This unaudited report covers the three and nine months ended September 30, 2021. Pasithea is a pre-revenue biotechnology company pursuing treatments for psychiatric and neurological disorders, with secondary plans to provide business support to ketamine-treatment clinics. Management said core operations had not commenced; the reported activity principally reflected formation, financing and corporate expenses. The company completed its IPO on September 17, 2021.
Financial highlights
| Metric | Q3 / September 30, 2021 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None in Q3 2020 and inception-to-September 2020 period |
| Operating expenses / loss from operations | $1.274 million for Q3; $2.551 million for nine months | $13,970 for Q3 2020; $13,970 from inception through September 2020 |
| Net loss | $1.526 million for Q3; $2.804 million for nine months | $13,970 for Q3 2020; $13,970 from inception through September 2020 |
| Net loss per share | $0.17 for Q3; $0.33 for nine months | $0.00 as reported for comparable periods |
| Cash and cash equivalents | $20.565 million | $243,650 at December 31, 2020 |
| Current assets / current liabilities | $21.034 million / $528,096 | $247,958 / $6,603 at December 31, 2020 |
| Working capital | $20.506 million, based on balance-sheet amounts | $241,355 at December 31, 2020 |
| Cash flow | Nine-month operating cash use: $1.430 million; investing cash use: $8,570; financing cash provided: $21.764 million | Inception-to-September 2020 operating cash use: $23,970; financing cash provided: $33,000 |
Margins are not meaningful because the company reported no revenue. The company reported no debt; total liabilities were $4.567 million, including $4.039 million of warrant liabilities and $528,096 of current liabilities.
Changes, financing and unusual items
- September 2021 IPO: 4.8 million units at $5 each, for $24.0 million gross proceeds. The filing reports approximately $20.6 million net proceeds after underwriting discounts and offering expenses. Each unit included one common share and one warrant.
- Common shares outstanding increased to 13,208,371 at September 30, 2021, from 7,469,125 at December 31, 2020. The underwriters’ option for additional securities lapsed unexercised on October 29, 2021.
- Q3 expenses included $750,000 fair value of 150,000 shares issued for marketing services, stock-based compensation, and legal and professional fees. A prepaid marketing fee of $394,000 was paid; $361,467 remained unamortized at quarter-end.
- Warrants are classified as liabilities and remeasured at fair value. The resulting $252,000 Q3 and nine-month expense reflected an increase in warrant fair value; the $4.039 million closing liability used Level 3 valuation inputs.
Liquidity, outlook and risks
Management stated that available working capital was expected to fund needs for at least 12 months from the financial-statement date. The filing gives no revenue or earnings guidance. It describes UK clinic collaborations under which Pasithea receives 30% of treatment revenues, net of certain staff costs, while partners provide clinical services. The company also disclosed a 15-year U.S. business-support subcontract with a $22,500 monthly fee, plus certain expense reimbursements. These arrangements contrast with the MD&A statement that the company had no contractual obligations.
Management reported no appreciable company-specific COVID-19 impact to date, while warning that future effects were uncertain and could adversely affect the business, liquidity and results. The filing reported no material legal proceedings and no material changes to the prospectus risk factors. The company identified cash concentration above FDIC insurance limits as a potential exposure; it reported no losses. Management said disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Reconcile the filing’s working-capital figures: the balance sheet and MD&A table indicate $20.506 million, while a liquidity note states $20.538 million.
- Assess whether the stated 12-month liquidity runway remains adequate against operating costs, planned biotech development and clinic-related commitments.
- Review the terms, economics and execution status of UK clinic collaborations and the long-term U.S. subcontract, including the monthly fee and reimbursable expenses.
- Evaluate potential dilution and earnings volatility from the IPO warrants, including the Level 3 fair-value assumptions and liability remeasurement.
- Confirm the treatment and duration of marketing and compensation commitments, including the prepaid fee, shares issued for services and stock-based awards.