Silo Pharma, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited consolidated results. Silo is a developmental-stage biopharmaceutical company pursuing licensed research and development in neurological, mental-health, and other conditions, including psychedelic-related research. Its reported revenue is primarily license-fee income.
Key financial metrics
| Metric | Three months ended September 30, 2022 | Nine months ended September 30, 2022 |
|---|---|---|
| Revenue | $18,025 | $54,076 |
| Gross profit | $16,566 | $49,698 |
| Operating expenses | $965,720 | $2,020,396 |
| Loss from continuing operations | $949,154 | $1,970,698 |
| Net loss | $983,246 | $2,245,720 |
| Net loss per share, basic and diluted | $0.49 | $1.13 |
- Gross margin was approximately 92% in both periods, but the very small revenue base provides limited indication of commercial economics.
- Nine-month operating cash outflow was $2,611,633, compared with $1,504,145 in 2021. Investing activities provided $86,707; financing activities provided $4,940,948. Cash increased $2,416,022 to $12,253,023.
- At September 30, cash was $12.25 million, working capital was $12.60 million, total assets were $13.05 million, and total liabilities were $1.20 million. Liabilities were principally deferred revenue and operating payables; the filing reports no material borrowings outstanding.
- Equity was $11.85 million and accumulated deficit was $5.51 million. The company reported $77,939 of equity investments at fair value and a $64,800 non-current note receivable, including accrued interest.
Material changes versus the prior comparable period
- Nine-month revenue was nearly flat year over year ($54,076 versus $53,238). Operating expenses increased 9% to $2.02 million, and the continuing-operations loss increased to $1.97 million from $1.80 million.
- Research and development expense rose to $651,750 from $217,962, primarily reflecting research programs with Columbia University, UCSF, and the University of Maryland, Baltimore (UMB). Professional fees declined to $846,617 from $1.27 million.
- Net results swung from $4.99 million income in the first nine months of 2021 to a $2.25 million loss in 2022. The prior-year result included a $6.66 million realized gain on equity investments and a $1.40 million preferred-stock deemed dividend; 2022 included a $104,700 realized investment loss and a $256,382 unrealized loss.
- Cash increased from $9.84 million at December 31, 2021, largely supported by the September 2022 public offering. The company issued 1.15 million shares at $5.00 per share, receiving $4.94 million net proceeds, and issued underwriter warrants for 57,500 shares.
- The 1-for-50 reverse stock split became effective September 15, 2022. The company had 3,138,797 common shares outstanding at September 30.
Outlook, commentary, risks, and unusual items
- Management stated that available cash was expected to fund obligations for at least 12 months from the filing date. The company nevertheless reported a nine-month net loss, operating cash use, and an accumulated deficit.
- No quantified revenue, earnings, or clinical-development guidance was provided. Management plans to pursue research, licensing, and development opportunities; offering proceeds were intended for R&D, sales and marketing, working capital, potential acquisitions, and repayment of certain indebtedness.
- Research remains early-stage. The planned Ketamine Joint Venture with Zylö Therapeutics had not been formed as of the report date. A UMB study had been postponed amid COVID-related delays; the filing cautions that pandemic-related interruptions could delay research and clinical development.
- Future payments under sponsored research agreements were reported at $828,404 for the year ending September 30, 2023. Columbia’s payment schedule was subsequently amended in October 2022, deferring its next $430,825 installment to March 2023, with a further $143,607 due on completion.
- After quarter-end, CEO Eric Weisblum entered a new agreement providing for $350,000 annual base salary, a $100,000 signing bonus, and discretionary annual bonus potential of up to $350,000, plus substantial severance provisions. CFO Daniel Ryweck’s annual base salary was increased to $60,000.
- One licensee accounted for all license-fee revenue, and one licensor accounted for all biopharmaceutical vendor license agreements. Management reported disclosure controls were ineffective, citing insufficient segregation of duties and inadequate system and manual controls. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Most important facts for investors to verify
- Whether cash burn and planned research spending remain consistent with management’s stated minimum 12-month liquidity outlook, including the timing and funding of contractual research payments.
- Progress, milestones, and potential licensing outcomes for the UMB, Columbia, UCSF, and Zylö-related programs; confirm whether the planned joint venture was formed after the filing date.
- The quality and durability of the small license-fee revenue stream, including continued dependence on a single licensee and the status of Aikido-related agreements.
- Potential dilution from outstanding warrants (404,580 at September 30) and future equity financing, as well as use of the September offering proceeds.
- Implementation and remediation of the disclosed material weaknesses in internal controls, and the financial and governance implications of executive compensation and severance terms.
- The filing’s cash-flow discussion contains a financing-activity figure that differs from the cash-flow statement; the statement reports $4,940,948 for the nine months ended September 30, 2022.