Pasithea Therapeutics Corp. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The comparison period is May 12, 2020 (inception) through December 31, 2020, not a full year. Pasithea is an early-stage biotechnology company developing treatments for psychiatric and neurological disorders, with a secondary business providing non-clinical support to ketamine-treatment providers.
Financial performance and position
| Metric | FY2021 | Prior comparable period |
|---|---|---|
| Revenue | $15,062 | $0 |
| Cost of goods sold / gross result | $17,275 / $(2,213) | $0 / $0 |
| Selling, general and administrative expense | $4,505,200 | $40,984 |
| Operating loss | $(4,507,413) | $(40,984) |
| Net loss | $(2,173,521) | $(40,984) |
| Net loss per share, basic and diluted | $(0.21) | $(0.00) |
| Net cash used in operating activities | $(3,174,058) | $(38,689) |
FY2021 other income of $2,333,892 largely reflects a $2,334,400 non-cash gain from the change in fair value of warrant liabilities; it reduced the reported net loss but did not represent operating revenue.
- Cash and liquidity: Cash and cash equivalents were $52,966,706 at year-end; working capital was $52,853,177. Total current assets were $53,300,457 and current liabilities were $447,280.
- Balance sheet: Total assets were $53,320,581; total liabilities were $1,900,080, including $1,452,800 of warrant liabilities. Stockholders’ equity was $51,420,501 and accumulated deficit was $2,214,505. The filing reports no material borrowings or debt balance.
- Cash flows: Investing cash outflow was $21,503; financing cash inflow was $55,929,178. Cash increased by $52,723,056 during the year.
- Margins: Revenue was minimal and cost of goods sold exceeded revenue, producing a gross loss of $2,213. The filing does not present a meaningful positive operating margin.
Material changes and financing
- SG&A rose from $40,984 in the inception period to $4.5 million in 2021, reflecting public-company and operating expansion costs. The company also recorded $750,000 in stock issued for services and $471,250 of stock-based compensation.
- The September 2021 IPO sold 4.8 million units at $5.00 each for $24 million gross proceeds; disclosed offering costs were $3,445,200.
- The November 2021 private placement issued 8.68 million shares and 8.68 million warrants at a combined $3.50 per share-and-warrant, for $30.38 million gross proceeds and approximately $27 million net proceeds. The company also received $7 million from exercise of 1.12 million IPO warrants.
- Management said existing working capital was expected to fund needs for at least 12 months from the date of the financial statements. This is management’s estimate, not a guarantee; the company expects continuing losses and may need additional capital.
Business, outlook, and risks
- The lead drug-discovery programs were at an early stage: a schizophrenia program involving a brain-penetrant small molecule, with research conducted by Evotec, and a multiple-sclerosis tolerizing-vaccine program beginning preclinical work with Hooke Laboratories. The filing reports no approved products and no material product-sales revenue.
- The U.K. ketamine-support operations began services at two Zen clinics in October and December 2021. Pasithea’s disclosed role is business support; clinical providers assess patients and administer treatment. The U.S. business was being developed through support-service arrangements, with planned geographic expansion. Subsequent to year-end, the company announced plans for U.S. clinic activity and an MS research partnership; these are plans or developments, not established financial results.
- The company reported that it held no intellectual property at the filing date, although it intended to pursue future patent applications. It relies on external research partners and clinical/business-service partners.
- Key risks include preclinical and clinical failure, regulatory delays, patient safety and ketamine’s controlled-substance status, and legal uncertainty around off-label treatment, corporate practice of medicine and fee-splitting rules. The company also highlighted limited operating history, ongoing losses, reliance on additional capital, competition, third-party dependence, privacy/cybersecurity exposure, and the possibility of dilution.
- Related-party and governance matters warrant attention: COO Yassine Bendiabdallah had ownership interests in Purecare and Portman, the Zen clinic counterparties; the filing states no payments had been made under those clinic agreements by year-end. The IV Doc subcontract carried a stated monthly fee of $22,500 and a 15-year initial term. Management identified disclosure controls and internal control over financial reporting as effective at year-end; the auditor did not provide an internal-control attestation.
- The independent auditor issued an unqualified opinion on the financial statements. The filing reports no material pending legal proceedings and no income-tax provision for 2021.
Important facts for investors to verify
- Whether the stated 12-month liquidity runway remains adequate after actual spending, expanded operations, and planned research and clinic commitments.
- How quickly clinic-support revenue can grow from the FY2021 base of $15,062, and whether the arrangements can produce sustainable positive gross margins and cash flow.
- The fully diluted share count and potential dilution from outstanding warrants and equity awards. The filing reports 23,008,371 shares at December 31, 2021 and 22,858,371 shares as of March 23, 2022; reconcile these figures and subsequent warrant activity.
- The warrant-liability valuation and the non-cash fair-value gain’s effect on reported earnings, as distinct from operating performance and cash generation.
- Progress, cost, and milestones for the Evotec and Hooke programs, including whether either advances beyond early research or preclinical work.
- Regulatory compliance, related-party terms, and conflict-of-interest safeguards for the Zen clinic and U.S. business-support arrangements, including the economics and enforceability of the agreements.