Silo Pharma, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2021; unaudited. Silo Pharma is a development-stage biopharmaceutical company pursuing university-licensed research for neurological and other conditions, including psychedelic-related research. It also operates the NFID apparel business.
Financial performance and position
| Metric | Q2 2021 | Six months 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | $68,085 | $115,518 | Q2: $2,216; six months: $2,510 |
| Gross profit / margin | $29,589 / 43.5% | $45,072 / 39.0% | Q2: $883 / 39.8%; six months: $1,093 / 43.5% |
| Operating loss | $(510,032) | $(1,478,135) | Q2: $(996,693); six months: $(1,156,051) |
| Net loss | $(461,990) | $(1,392,692) | Q2: $(1,375,031); six months: $(1,613,908) |
| Net loss available to common stockholders | $(461,990) | $(2,796,689) | Q2: $(1,444,031); six months: $(1,682,908) |
| Cash used in operations | $(841,063) for six months | $(340,056) for six months |
Revenue remained minimal. Six-month revenue included $35,213 in license fees and $80,305 in apparel sales. Operating expenses rose to $1.52 million for the six-month period, notably reflecting higher professional fees and $147,448 in research and development expense. The 2021 common-stockholder loss includes a $1.404 million deemed dividend related to the Series C preferred financing.
At June 30, 2021, cash and cash equivalents were $4.15 million, current assets $4.97 million, working capital $4.71 million, total assets $5.00 million, and total liabilities $1.24 million. The balance sheet reported no note payable; the PPP loan was forgiven in April, producing a $19,082 gain. Liabilities included $1.05 million of deferred revenue. Cash increased by $3.02 million during the first half, principally from $3.79 million of net preferred-stock financing proceeds. Cash exceeded FDIC insurance limits by approximately $3.80 million.
Material changes and financing
- Six-month revenue increased from $2,510 to $115,518, while operating loss widened from $1.16 million to $1.48 million. Net loss narrowed, partly because prior-year results included substantial debt-related interest and extinguishment expense.
- Cash rose from $1.13 million at year-end 2020. In February 2021, Silo raised approximately $4.276 million gross through Series C preferred stock and warrants, with $3.794 million reported as net proceeds after offering costs.
- In April, 4,049 Series C shares converted into 13,495,014 common shares. At June 30, 98.64 million common shares were outstanding; 17.35 million warrants were also outstanding, with a weighted-average exercise price of $0.31. The filing reports 98,671,970 common shares outstanding as of August 11.
- Fair-value equity investments were $600,000 at June 30, including a $68,750 six-month unrealized gain on AIkido Pharma shares.
Outlook, risks, and significant items
- Going concern: Management and the financial-statement note state that losses, operating cash use, accumulated deficit of $8.56 million, and minimal revenue raise substantial doubt about Silo’s ability to continue as a going concern for 12 months from issuance. Management says existing cash will not meet working-capital needs for at least 12 months, expects to seek further financing, and cautions that financing may not be available on acceptable terms or at all. No financing arrangements were in place.
- Research and licensing commitments: Silo has university research agreements and license obligations, including potential milestone, royalty, and sublicense payments. It entered a UCSF research agreement totaling $342,850 and a Maastricht study agreement totaling €433,885 (reported as approximately $507,602). A July 2021 UMB research agreement, a subsequent event, provides for $276,285 in fees. The Zylö Therapeutics joint venture had not yet been formed by the report date; Silo agreed to contribute $225,000 if formed.
- Development and market risks: Programs are early-stage and subject to scientific, regulatory, funding, and commercialization uncertainty. The filing identifies potential COVID-19-related research and clinical delays and risks to access to capital. Psilocybin is a Schedule I substance under federal law.
- Controls: Management concluded disclosure controls were ineffective due to material weaknesses, including limited segregation of accounting duties, insufficient review, and inadequate system and manual controls. The company had no audit committee and expected weaknesses to continue until staffing and controls improve.
- The company reported no material legal proceedings and no material change in previously disclosed risk factors. It provided no quantified revenue or profitability guidance.
Key facts for investors to verify
- Cash runway, subsequent cash use, and whether additional capital has been raised or secured; reconcile management’s 12-month funding warning with cash and working capital reported at quarter-end.
- Progress, costs, timelines, and termination or milestone terms for the UMB, Maastricht, UCSF, and Zylö programs, including whether the joint venture was formed and the $225,000 contribution made.
- Potential dilution from outstanding warrants, remaining preferred stock, and any subsequent share issuances.
- Basis and valuation of the AIkido investment and deferred license revenue, and progress toward sublicense milestones and commercial revenue.
- Remediation of the disclosed internal-control weaknesses and status of any audit-committee or finance-staffing changes.