Silo Pharma, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The filing was signed August 11, 2023. Silo is a developmental-stage biopharmaceutical company pursuing licensed research and development programs, including peptide-based drug delivery and psychedelic-related research. Its reported revenue is primarily license-fee income, not product sales.
Financial performance and position
| Metric | Q2 2023 | Six months 2023 | Comparable 2022 period |
|---|---|---|---|
| License-fee revenue | $18,025 | $36,051 | Unchanged in both periods |
| Gross profit | $16,566 | $33,132 | Unchanged in both periods |
| Operating expenses | $1,131,551 | $1,951,602 | Q2: $510,851; six months: $1,054,676 |
| Net loss | $1,012,951 | $1,919,347 | Q2: $658,402; six months: $1,262,474 |
| Net loss per share, basic and diluted | $(0.32) | $(0.61) | Q2: $(0.33); six months: $(0.64) |
| Operating cash used | Not separately stated | $1,242,654 | Six months: $1,189,274 |
- Q2 gross margin was approximately 92%, reflecting the small license-fee revenue base.
- At June 30, cash and cash equivalents were $158,832, with $9,829,129 in short-term U.S. government securities. Working capital was $9,057,493, down from $11,135,738 at year-end 2022.
- Total assets were $10,245,587 and total liabilities were $1,949,923. The filing reports no borrowings or other material interest-bearing debt.
- Operating cash burn was $1.24 million for the first half. Investing cash outflow of $9.83 million was largely the purchase of short-term investments; the substantial drop in cash therefore principally reflects moving funds into investments, not operating cash use alone.
Changes versus prior period
- Revenue was flat year over year, while first-half net loss increased 52% and Q2 net loss increased 53.8%.
- First-half operating expenses rose 85% (approximately), chiefly due to higher professional fees, compensation and research and development. Professional fees increased to $935,565 from $444,427; R&D increased to $333,632 from $275,955.
- Q2 professional fees rose to $570,295 from $248,179. Management cited consulting and legal costs, including patent-related legal fees. First-half SG&A included a $200,000 accrual for Delaware franchise tax.
- Other income/expense improved year over year, including higher interest and dividend income. First-half 2023 also included a $166,034 penalty for early termination of a certificate of deposit.
- The company purchased 57,335 shares for $130,959 through June 30 under a $1 million repurchase authorization; 50,000 shares were cancelled. Common shares outstanding at June 30 were 3,108,797, versus 3,158,797 at year-end.
Outlook, risks and notable items
- Management said available cash and liquid short-term investments should fund obligations for at least 12 months from the filing date. The company nevertheless reported a $1,919,347 first-half loss and a $9,090,475 accumulated deficit.
- License-fee revenue depends on one licensee, which accounted for 100% of customer license revenue in the first half; one licensor accounted for all vendor license agreements.
- The UMB joint-homing-peptide evaluation license was extended through September 30, 2023, with an option to extend through year-end for an additional fee. The filing does not establish that the company exercised that further extension.
- The Ketamine Joint Venture with Zylö Therapeutics had not been formed as of the filing. The Columbia research project was estimated to be 85% complete; a scheduled $430,825 payment remained unpaid at June 30, and related accrued expenses were $359,019.
- Future amounts due under sponsored study and research agreements were reported as $711,758. A separate UMB amount of $92,095 was included in accounts payable.
- The company was discussing the accrued $200,000 Delaware franchise-tax balance with the state. The charge was attributed to the reverse split not reducing authorized shares.
- Management identified material weaknesses in financial reporting controls: insufficient segregation of accounting duties and inadequate system and manual controls. It concluded disclosure controls were not effective at June 30.
- Key risks include financing needs, clinical and research delays or costs, regulatory and intellectual-property risks, and the early-stage nature of the programs. The filing reported no material legal proceedings and no material changes to previously disclosed risk factors.
Investor verification checklist
- Confirm liquidity runway, investment maturities and any need for additional financing; cash alone was $158,832 at quarter-end.
- Track research milestones, project delays and required payments, particularly the Columbia and UMB agreements and the unformed Zylö joint venture.
- Verify resolution and final amount of the $200,000 Delaware franchise-tax accrual.
- Assess whether the company is addressing the disclosed internal-control material weaknesses.
- Monitor licensee concentration, potential milestone or royalty income, and share repurchases and potential dilution from outstanding options and warrants.
- Note that the company purchased an additional 31,394 shares for $65,982 from July 1 through August 10, 2023.