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Pasithea Therapeutics Corp.

Pasithea Therapeutics Corp.KTTA财报

Nasdaq · 医疗保健 · 药物制剂

Pasithea Therapeutics Corp. is a clinical-stage biopharmaceutical firm dedicated to developing novel treatments for psychiatric and neurological conditions including treatment-resistant mood disorders. It primarily operates in North American and European markets, targeting patient segments that lack effective existing treatment options.

What changed in Pasithea Therapeutics Corp.'s 10-K — 2021 vs 2022

Top changes in Pasithea Therapeutics Corp.'s 2022 10-K

543 paragraphs added · 815 removed · 124 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

53 edited+197 added−205 removed100 unchanged
The process required by the FDA before our product candidates may be marketed in the United States generally involves the following: ● submission to the FDA of an IND which must become effective before human clinical trials may begin and must be updated annually; ● completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s Good Laboratory Practice regulations; ● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication in accordance with good clinical practice (“GCP”); ● submission to the FDA of an NDA after completion of all pivotal clinical trials; ● a determination by the FDA within 60 days of its receipt of an NDA to file the NDA for review; ● satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the active pharmaceutical ingredient (“API”), and finished drug product are produced and tested to assess compliance with good manufacturing Practices (“cGMP”) regulations; and ● FDA review and approval of an NDA prior to any commercial marketing or sale of the drug in the United States.
The process required by the FDA before our product candidates may be marketed in the United States generally involves the following: ● submission to the FDA of an IND which must become effective before human clinical trials may begin and must be updated annually; ● completion of extensive preclinical laboratory tests and preclinical animal studies, all performed in accordance with the FDA’s Good Laboratory Practice regulations; ● performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication in accordance with good clinical practice (“GCP”); ● submission to the FDA of an NDA or BLA after completion of all pivotal clinical trials; ● a determination by the FDA within 60 days of its receipt of an NDA or BLA to file the NDA or BLA for review; ● satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the active pharmaceutical ingredient (“API”), and finished drug product are produced and tested to assess compliance with good manufacturing Practices (“cGMP”) regulations; and ● FDA review and approval of an NDA or BLA prior to any commercial marketing or sale of the drug in the United States.
We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate. Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational drug product information is submitted to the FDA in the form of an NDA requesting approval to market the product for one or more indications.
We may also suspend or terminate a clinical trial based on evolving business objectives and/or competitive climate. Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational drug product information is submitted to the FDA in the form of an NDA or BLA requesting approval to market the product for one or more indications.
In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.
In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved NDA or BLA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.
After the FDA evaluates the NDA and conducts inspections of manufacturing facilities where the drug product and/or its active pharmaceutical ingredient will be produced, it may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
After the FDA evaluates the NDA or BLA and conducts inspections of manufacturing facilities where the drug product and/or its active pharmaceutical ingredient will be produced, it may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
The FDA could also approve the NDA with a risk evaluation and mitigation strategy (REMS) to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
The FDA could also approve the NDA or BLA with a risk evaluation and mitigation strategy (REMS) to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.
Substantial new provisions affecting compliance were also enacted, which may require us to modify our business practices with healthcare providers and entities. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act.
Substantial new provisions affecting compliance were also enacted, which may require us to modify our business practices with healthcare providers and entities. 25 Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act.
There are also two other possible routes to authorize medicinal products in several countries, which are available for investigational drug products that fall outside the scope of the centralized procedure: o Decentralized Procedure.
There are also two other possible routes to authorize medicinal products in several countries, which are available for investigational drug products that fall outside the scope of the centralized procedure: ● Decentralized Procedure.
Moreover, failure to comply with applicable regulatory requirements may result in, among other things, warning letters, clinical holds, civil or criminal penalties, recall or seizure of products, injunction, disbarment, partial or total suspension of production or withdrawal of the product from the market. Any agency or judicial enforcement action could have a material adverse effect on us. 12 U.S.
Moreover, failure to comply with applicable regulatory requirements may result in, among other things, warning letters, clinical holds, civil or criminal penalties, recall or seizure of products, injunction, disbarment, partial or total suspension of production or withdrawal of the product from the market. Any agency or judicial enforcement action could have a material adverse effect on us. 15 U.S.
Certain states also mandate implementation of compliance programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting of marketing expenditures and pricing information as well as gifts, compensation and other remuneration to physicians. 19 We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
Certain states also mandate implementation of compliance programs, impose restrictions on drug manufacturer marketing practices and/or require the tracking and reporting of marketing expenditures and pricing information as well as gifts, compensation and other remuneration to physicians. 24 We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
Government Regulation and Drug Approval Governmental Regulations Government authorities in the United States (including federal, state and local authorities) and in other countries, extensively regulate, among other things, the manufacturing, research and clinical development, marketing, labeling and packaging, storage, distribution, post-approval monitoring and reporting, advertising and promotion, pricing and export and import of pharmaceutical products, such as our future product candidates.
Government Regulation and Drug Approval Government authorities in the United States (including federal, state and local authorities) and in other countries, extensively regulate, among other things, the manufacturing, research and clinical development, marketing, labeling and packaging, storage, distribution, post-approval monitoring and reporting, advertising and promotion, pricing and export and import of pharmaceutical products, such as our future product candidates.
Investment restrictions therefore affect the corporate structure, operating procedures and other characteristics of our subsidiaries and joint ventures in these and other countries.
Investment restrictions therefore affect the corporate structure, operating procedures and other characteristics of our subsidiaries and joint ventures in these and other countries. 26
Further, and for a transitional period until 31 December 2022, the MHRA may rely on a decision taken by the European Commission on the approval of a new marketing authorisation in the centralized procedure. In addition, the MHRA has the power to have regard to marketing authorizations approved in EU member states.
Further, and for a transitional period until 31 December 2022, the MHRA may rely on a decision taken by the European Commission on the approval of a new marketing authorization in the centralized procedure. In addition, the MHRA has the power to have regard to marketing authorizations approved in EU member states.
The holder of an approved NDA must report, among other things, certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information, and to comply with requirements concerning advertising and promotional labeling for the approved product.
The holder of an approved NDA or BLA must report, among other things, certain adverse reactions and production problems to the FDA, to provide updated safety and efficacy information, and to comply with requirements concerning advertising and promotional labeling for the approved product.
The regulatory authority of the Reference Member State will then be in charge of leading the assessment of the marketing authorization application. 17 o Mutual Recognition Procedure. In the Mutual Recognition Procedure, a medicine is first authorized in one EU Member State, in accordance with the national procedures of that country.
The regulatory authority of the Reference Member State will then be in charge of leading the assessment of the marketing authorization application. ● Mutual Recognition Procedure. In the Mutual Recognition Procedure, a medicine is first authorized in one EU Member State, in accordance with the national procedures of that country.
In order to market a medicinal product in the United Kingdom, a licence or marketing authorization must be obtained from the MHRA The United Kingdom legislation includes multiple assessment routes for applications for medicinal products, including a 150-day national assessment or a rolling review application.
In order to market a medicinal product in the United Kingdom, a license or marketing authorization must be obtained from the MHRA The United Kingdom legislation includes multiple assessment routes for applications for medicinal products, including a 150-day national assessment or a rolling review application.
The exact timing of the Regulation’s application depends on confirmation of full functionality of CTIS through an independent audit. Medicines can be authorized in the EU by using either the centralized authorization procedure or national authorization p rocedures. ● Centralized Procedure (regulated in Regulation (EC) 726/2004).
The exact timing of the Regulation’s application depends on confirmation of full functionality of CTIS through an independent audit. Medicines can be authorized in the EU by using either the centralized authorization procedure or national authorization procedures. ● Centralized Procedure (regulated in Regulation (EC) 726/2004).
The United Kingdom has adopt ed new legislation, the Medicines and Medical Devices Act 2021 and may make changes to the licensing or authorization of medicines in the future. The separate UK authorization system, albeit with transitional recognition procedures in the UK, may lead to additional regulatory costs.
The United Kingdom has adopted new legislation, the Medicines and Medical Devices Act 2021 and may make changes to the licensing or authorization of medicines in the future. The separate UK authorization system, albeit with transitional recognition procedures in the UK, may lead to additional regulatory costs.
Even if such additional information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.
Even if such additional information is submitted, the FDA may ultimately decide that the NDA or BLA does not satisfy the criteria for approval.
An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The central focus of an IND sub mission is on the general investigational plan and the protocol(s) for human studies.
An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human studies.
Our operations in the U.K. involve providing business support services to registered healthcare providers who assess patients, and if appropriate, administer intravenous infusions of ketamine, and our operations in the United States involve providing business support services to entities that furnish similar services to patients who personally pay for those services.
Its operations in the U.K. involved providing business support services to registered healthcare providers who assess patients and, if appropriate, administer intravenous infusions of ketamine. Its operations in the United States involved providing business support services to entities that furnish similar services to patients who personally pay for those services.
Taken together, this evidence has led to the hypothesis that schizophrenia is a neuroimmune disorder mediated by alterations in pro- and anti-inflammatory processes in the central nervous system (CNS). We are currently developing a brain-penetrant small molecules able to down regulate a novel neuroinflammatory pathway for the systemic treatment of schizophrenia.
Taken together, this evidence has led to the hypothesis that schizophrenia is a neuroimmune disorder mediated by alterations in pro- and anti-inflammatory processes in the CNS. We are currently developing a brain-penetrant small molecule able to down regulate C4A, a novel neuroinflammatory pathway, for the systemic treatment of schizophrenia.
Accordingly, we have and plan to continue to investigate our products through the IND framework and seek approval through the NDA pathway.
Accordingly, we have and plan to continue to investigate our products through the IND framework and seek approval through the NDA and BLA pathways.
The DEA, and some states, also conduct periodic inspections of registered establishments that handle controlled substances. Facilities that conduct research, manufacture, store, distribute, import or export controlled substances must be registered to perform these activities and have the security, control and inventory mechanisms required by the DEA to prevent drug loss and diversion.
Facilities that conduct research, manufacture, store, distribute, import or export controlled substances must be registered to perform these activities and have the security, control and inventory mechanisms required by the DEA to prevent drug loss and diversion.
Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program reimbursement methodologies.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, reform government program reimbursement methodologies.
In Europe, for example, a clinical trial application (“CTA”), must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively.
In Europe, for example, a clinical trial application (“CTA”), must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed.
Once the NDA submission has been accepted for filing, within 60 days following submission, the FDA’s goal is to review applications for new molecular entities within ten months of the filing date or, if the application relates to a serious or life-threatening indication and demonstrates the potential to provide a significant improvement in safety or effectiveness over currently marketed therapies, six months from the filing date.
To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational drug product to the satisfaction of the FDA. 17 Once the NDA or BLA submission has been accepted for filing, within 60 days following submission, the FDA’s goal is to review applications for new molecular entities within ten months of the filing date or, if the application relates to a serious or life-threatening indication and demonstrates the potential to provide a significant improvement in safety or effectiveness over currently marketed therapies, six months from the filing date.
Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed. 16 Following the U.K.’s exit from the European Union, a separate regulatory regime applies in the U.K. to clinical trials and licensing of medicines. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.
Following the U.K.’s exit from the European Union, a separate regulatory regime applies in the U.K. to clinical trials and licensing of medicines. The requirements and process governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.
Additionally, approval must also be obtained from each clinical trial site’s institutional review board (“IRB”) before the trials may be initiated, and the IRB must monitor the study until completed. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.
Additionally, approval must also be obtained from each clinical trial site’s institutional review board (“IRB”) before the trials may be initiated, and the IRB must monitor the study until completed.
The DEA is the federal agency responsible for regulating controlled substances, and requires those individuals or entities that manufacture, import, export, distribute, research, or dispense controlled substances to comply with the regulatory requirements in order to prevent the diversion of controlled substances to illicit channels of commerce.
The DEA is the federal agency responsible for regulating controlled substances, and requires those individuals or entities that manufacture, import, export, distribute, research, or dispense controlled substances to comply with the regulatory requirements in order to prevent the diversion of controlled substances to illicit channels of commerce. 20 The DEA categorizes controlled substances into one of five schedules - Schedule I, II, III, IV or V - with varying qualifications for listing in each schedule.
During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity.
If granted, data exclusivity prevents regulatory authorities in the EU from referencing the innovator’s data to assess a generic application. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic product can be marketed until the expiration of the market exclusivity.
We believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel. In particular, we depend on the skills, experience and performance of our senior management and research personnel.
We believe that our future success will depend, in part, on our continued ability to attract, hire and retain qualified personnel. In particular, we depend on the skills, experience and performance of our senior management and research personnel. We compete for qualified personnel with other medical pharmaceutical, and healthcare companies, as well as universities and non-profit research institutions.
Following this, further marketing authorizations can be sought from other EU countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization. ● Furthermore, there is the option to obtain a national authorization in just one Member State.
Following this, further marketing authorizations can be sought from other EU countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization. ● Furthermore, there is the option to obtain a national authorization in just one Member State. 22 In the EU, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity.
Phase I clinical trials are typically closely monitored and may be conducted in patients with the target disease or condition or in healthy volunteers. These studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the investigational drug in humans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness.
These studies are designed to evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the investigational drug in humans, the side effects associated with increasing doses, and if possible, to gain early evidence on effectiveness.
As a result of these electoral developments, it is unlikely that continued legislative efforts will be pursued to repeal ACA. Instead, it is possible that legislation will be pursued to enhance or reform ACA.
As a result of these electoral developments, it is unlikely that continued legislative efforts will be pursued to repeal ACA. Instead, it is possible that legislation will be pursued to enhance or reform ACA. We are not able to state with certainty what the impact of potential legislation will be on our business.
These programs include Fast Track designation, Breakthrough Therapy designation, Priority Review and Accelerated Approval, and the purpose of these programs is to either expedite the development or review of important new drugs to get them to patients more quickly than standard FDA review timelines typically permit. 14 A drug is eligible for Fast Track designation if it is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address unmet medical needs for such disease or condition.
These programs include Fast Track designation, Breakthrough Therapy designation, Priority Review and Accelerated Approval, and the purpose of these programs is to either expedite the development or review of important new drugs to get them to patients more quickly than standard FDA review timelines typically permit.
For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.
The application used to file the NDA or BLA in the United States is similar to that required in Europe, with the exception of, among other things, country-specific document requirements. 21 For other countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country.
Generally, pivotal studies are also Phase III studies but may be Phase II studies if the trial design provides a well-controlled and reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need. 13 The FDA, the IRB or the clinical trial sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.
Generally, pivotal studies are also Phase III studies but may be Phase II studies if the trial design provides a well-controlled and reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need.
Other Health Care Laws We may also be subject to healthcare regulation and enforcement by the US federal government and the states and foreign governments where we may market our product candidates, if approved.
Zen Healthcare also has responsibility under our agreements to obtain all the regulatory approvals and licenses to operate from the aforementioned bodies and complies with the MHRA, CQC and GPhC. 23 Other Health Care Laws We may also be subject to healthcare regulation and enforcement by the US federal government and the states and foreign governments where we may market our product candidates, if approved.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes having employees work from home, while implementing additional safety measures for employees continuing critical on-site work.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. We consider our relations with our employees to be good.
The DEA categorizes controlled substances into one of five schedules — Schedule I, II, III, IV or V — with varying qualifications for listing in each schedule. Schedule I substances by definition have a high potential for abuse, have no currently accepted medical use in treatment in the United States and lack accepted safety for use under medical supervision.
Schedule I substances by definition have a high potential for abuse, have no currently accepted medical use in treatment in the United States and lack accepted safety for use under medical supervision.
It regulates and inspects health and social care services in England and registration is required prior to the provision of health and care services.
It regulates and inspects health and social care services in England and registration is required prior to the provision of health and care services. Further, certain drug and pharmaceutical licenses and registrations may be required for the possession and/or supply of certain drugs.
The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees.
We also use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly for our key employees. The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees.
Controlled Substances The federal Controlled Substances Act of 1970, or CSA, and its implementing regulations establish a “closed system” of regulations for controlled substances. The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements under the oversight of the DEA.
The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements under the oversight of the DEA.
Facilities that manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA registration is specific to the particular location, activity(ies) and controlled substance schedule(s). The DEA inspects all manufacturing facilities to review security, recordkeeping, reporting and handling prior to issuing a controlled substance registration.
Facilities that manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA registration is specific to the particular location, activity(ies) and controlled substance schedule(s). The DEA, and some states, also conduct periodic inspections of registered establishments that handle controlled substances.
The clinical investi gation of a drug is generally divided into three phases. Although the phases are usually conducted sequentially, they may overlap or be combined. The three phases of an investigation are as follows: ● Phase I . Phase I includes the initial introduction of an investigational new drug into humans.
There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries. 16 The clinical investigation of a drug or biologic is generally divided into three phases. Although the phases are usually conducted sequentially, they may overlap or be combined. The three phases of an investigation are as follows: ● Phase I .
Expedited Development and Review Programs for Drugs The FDA maintains several programs intended to facilitate and expedite development and review of new drugs to address unmet medical needs in the treatment of serious or life-threatening diseases or conditions.
Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our products under development. 18 Expedited Development and Review Programs for Drugs The FDA maintains several programs intended to facilitate and expedite development and review of new drugs and biologics to address unmet medical needs in the treatment of serious or life-threatening diseases or conditions.
In addition to salaries, these programs (which vary by country/region and employment classification) include incentive compensation plan, pension, healthcare and insurance benefits, paid time off, family leave, and on-site services, among others. We also use targeted equity-based grants with vesting conditions to facilitate retention of personnel, particularly for our key employees.
We provide competitive compensation and benefits programs to help meet the needs of our employees. In addition to salaries, these programs (which vary by country/region and employment classification) include incentive compensation plans, healthcare and insurance benefits, retirement investments, paid time off, and family leave, among others.
Once granted by the European Commission, the centralized marketing authorization is valid in all EU Member States, Iceland, Norway and Liechtenstein. The application used to file the NDA in the United States is similar to that required in Europe, with the exception of, among other things, country-specific document requirements.
Once granted by the European Commission, the centralized marketing authorization is valid in all EU Member States, Iceland, Norway and Liechtenstein.
Human Capital Management As of December 31, 2021, we had three full time employees, two part time employees and 7 contractors/consultants, in addition to Zen Healthcare’s staff of over 60 team members across three clinics.] None of our employees are represented by a labor union or covered by a collective bargaining agreement.
Employees & Human Capital As of December 31, 2022, we had 15 full time employees, of which seven employees were related to our Therapeutics segment and eight employees were related to our Clinics segment. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
The work is currently being conducted by Evotec, utilizing Evotec’s integrated research and development expertise and state-of-the-art structure-based drug design techniques. The second new chemical entity drug development program is focusing in a tolerizing vaccine in Multiple Sclerosis.
The initial development work and screening is currently being conducted by Evotec, utilizing Evotec’s integrated research and development expertise and state-of-the-art structure-based drug design techniques. Our goal is to continue screening and early development of PAS-001 and seek partnerships and/or collaborators to continue further preclinical development of the program.
Further, certain drug and pharmaceutical licences and registrations may be required for the possession and/or supply of certain drugs. 18 The GPhC is the body responsible for the independent regulation of the pharmacy profession within Great Britain (England, Scotland and Wales) regulation and enforcement by, responsible for the regulation of pharmacists, pharmacy technicians and pharmacy premises.
The GPhC is the body responsible for the independent regulation of the pharmacy profession within Great Britain (England, Scotland and Wales) regulation and enforcement by, responsible for the regulation of pharmacists, pharmacy technicians and pharmacy premises. Zen Healthcare has established consultants and advisors to ensure it operates in accordance with the CQC.
ITEM 1. BUSINESS Overview We are a biotechnology company focused on the research and discovery of new and effective treatments for psychiatric and neurological disorders. Epidemiological data indicate neuropsychiatric disorders as being some of the most prevalent, devastating, and yet poorly treated illnesses.
ITEM 1. BUSINESS Overview We are a biotechnology company primarily focused on the discovery, research and development of innovative treatments for Central Nervous System (“CNS”) disorders and RASopathies.
We do not provide professional medical services, establish or own anti-depression clinics, provide psychiatric assessments, or are responsible for the administration of intravenous infusions of ketamine in the United States.
Operations took place in New York, NY and Los Angeles, CA in the United States, and throughout the U.K. through partnerships with healthcare providers, including Nadelson Medical PLLC and Zen Healthcare. We did not provide professional medical services, psychiatric assessments, or administration of intravenous infusions of ketamine as part of our Clinics segment.
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Our biotech operations focus on developing drugs that target the pathophysiology underlying such disorders rather than symptomatic treatments, with the goal of developing new pharmacological agents that display significant advantages over conventional therapies with respect to efficacy and tolerability. We particularly focus on the cross-talk between the immune system and brain disorders and how immune dysregulation affects CNS function.
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We are leveraging our expertise in the fields of neuroscience, translational medicine, and drug development to advance new molecular entities that target the pathophysiology underlying such diseases, with the goal of bringing life-changing therapies to patients.
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For many years the brain was considered an “immune-privileged” organ. The anatomical and physiological characteristics of the central nervous system, in addition to the presence of the blood brain barrier, were thought to underlie slow immune reactions in the brain.
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We have two business segments, “Therapeutics” and “Clinics.” Our Therapeutics segment performs activities related to discovery, research and development of innovative treatments for CNS disorders and other diseases. Our Clinics segment provided business support services to anti-depression clinics in the U.K. and in the United States.
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However, according to a 2020 article published by Frontiers in Neuroanatomy, a 2020 article published by Nature Reviews Immunology, a 2019 article published by Frontiers in Immunology, and a 2020 article published by Frontiers Pharmacology, recent studies have shown substantial progress in the understanding of neuroimmune interactions, and there is now strong evidence for a close and bi-directional communication between nerve and immune cells.
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Prior to the date of this Annual Report on Form 10-K, we have discontinued our at-home services in New York, NY as well as our services in the U.K. In addition, we have discontinued our clinical operations in Los Angeles, CA and are actively exploring options for the disposal of related property.
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Altered communication between the immune and nervous system is emerging as a common hallmark in neuro-developmental, neurodegenerative, and neuro-immunological diseases. On the one hand, the brain is able to modulate the immune response through the connections between the autonomic nervous system (parasympathetic and sympathetic nerves) and lymphoid organs.
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Accordingly, as of the date of this Annual Report on Form 10-K, we have discontinued the operations of our Clinics segment. Our Therapeutic Pipeline Our therapeutic pipeline currently consists of four programs.
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Furthermore, brain hormones such as corticotrophin-releasing hormone and substance P can regulate cytokine levels. On the other hand, the immune system regulates the brain through its modulation of microglia cells and the release of peripheral cytokines, a phenomenon referred to as “cross talk” due to the close, reciprocal relationship of these two systems.
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Our lead product candidate, PAS-004, is a next-generation macrocyclic (as defined below) mitogen-activated protein kinase, or MEK inhibitor, that we believe may address the limitations and liabilities associated with existing drugs with a similar mechanism of action.
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Our drug discovery efforts focus on neuropsychiatric disorders that, although phenotypically distinct, are pathogenically related. We focus on mechanism-based immune treatments for the treatment of these disorders. The first new chemical entity drug development program is focused on schizophrenia. Schizophrenia is an inherited brain disease and an incurable chronic mental disorder.
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Our remaining three programs are in the discovery stage and are based on novel targets that we believe address limitations in the treatment paradigm of the indications we plan to address, which are currently amyotrophic lateral sclerosis (“ALS”), multiple sclerosis (“MS”) and schizophrenia. 1 Our Lead Program: PAS-004 Our lead therapeutic product candidate, PAS-004 (formerly known as “CIP-137401”), is a next-generation MEK 1 and 2 (“MEK 1/2”) inhibitor designed to be macrocyclic for potential use in the treatment of a range of RASopathies, including neurofibromatosis type 1 (“NF1”) and Noonan syndrome, as well as lamin A/C (“LMNA”) cardiomyopathy and a number of oncology indications.
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With treatment, most recover from the first episode but then relapse. The pathogenetic mechanisms are unknown, while the loss of grey matter and a reduced number of synaptic structures on neurons are evident. Converging lines of genetic, epidemiological and clinical evidence indicate that inflammatory pathways are altered in schizophrenia.
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We acquired PAS-004 in connection with our acquisition of AlloMek Therapeutics, LLC (“AlloMek”), a privately held biotechnology company, in October 2022. PAS-004 is a small molecule allosteric inhibitor of MEK 1/2. MEK 1/2 are two of several protein kinases involved in a signaling cascade, known as the mitogen-activated protein kinase, or MAPK pathway.
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Studies in numerous scientific journals, including a 2013 study from the Journal of Psychiatric Research, a 1998, 2005 and a 2014 study from the Schizophrenia Research, a 2015 study from the Journal of Psychiatry & Neuro Science, a 2009 study from Molecular Psychiatry and a 2004 study from the Journal of Clinical Psychiatry have repeatedly shown that patients with schizophrenia have increased serum and cerebrospinal fluid concentrations of pro-inflammatory cytokines.
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The MAPK pathway is an important pathway in cellular biology which has been a frequent target for drug discovery efforts.
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Infection with the Epstein-Barr virus (EBV) has long been postulated to trigger multiple sclerosis (MS) and recent data, according to a 2022 article published by Science, in a cohort of >10 million people have provided compelling evidence to show that EBV is the trigger for the development of MS.
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The MAPK pathway has been implicated in a variety of diseases, as it functions to drive cell proliferation, differentiation, survival and a variety of other cellular functions that, when abnormally activated, are critical for the formation and progression of tumors, fibrosis and other diseases. MEK inhibitors block phosphorylation (activation) of extracellular signal-regulated kinases (“ERK”).
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Furthermore, in a 2022 article published by Nature, the mechanism through which EBV mediate MS development was elucidated.
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Blocking the phosphorylation of ERK can lead to cell death and inhibition of tumor growth. PAS-004 has been tested in a range of mouse models of various diseases and has completed preclinical testing and animal toxicology studies to support an Investigational New Drug application (an “IND”) with the U.S. Food and Drug Administration (“FDA”).
Removed
Through a process of molecular mimicry, antibodies targeting EBNA-1 residues 386–405 that cross-react with the CNS cell adhesion molecule, glialCAM, Preclinical work is currently being conducted at Hooke Laboratories, a full-service Contract Research Organization (“CRO”) with deep experience in experimental autoimmune encephalomyelitis (“EAE”), the standard animal model of MS.
Added
Additionally, PAS-004 has received orphan-drug designation from the FDA for the treatment of NF1. Existing FDA approved MEK inhibitors are marketed for a range of diseases, including certain cancers and NF1. We believe these MEK inhibitors suffer from certain limitations, including known toxicities.
Removed
Our secondary operations are focused on providing business support services to anti-depression clinics in the U.K. and in the United States. 1 We believe that the current treatments for mental health disorders, such as depression, are inadequate and that conventional medicines have low success rates in long-term treatment.
Added
Unlike current FDA approved MEK inhibitors, PAS-004 is macrocyclic, which we believe may lead to improved pharmacokinetics, tolerability and potency. Macrocycles are large cyclic molecules that can bring increased potency, metabolic stability, and oral bioavailability. Cyclization also offers rigidity for stronger binding with drug target receptors.
Removed
According to an article published by PLOS One, randomized, double-blind, placebo-controlled clinical trials of antidepressants were only effective for 42-51% of patients with MDD. For example, current pharmacotherapies for MDD and BDep have a distinct lag of onset that can generate further distress and impairment in patients.
Added
PAS-004 was designed to provide a longer half-life with what we believe is a better therapeutic window.
Removed
According to an article published in 2000 by The Journal of Clinical Psychiatry, and an article published in 2010 by Pharmaceuticals (Basel), available antidepressant medications usually take several weeks before patients display significant therapeutic benefit. This delayed onset of treatment can result in increased morbidity and increased risk for suicidal behavior.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

61 edited+168 added−418 removed58 unchanged
Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business. 57 We do not currently intend to pay dividends on our Common Stock and, consequently, your ability to achieve a return on your investment will depend on appreciation of the value of our Common Stock.
Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business. We do not currently intend to pay dividends on our Common Stock and, consequently, your ability to achieve a return on your investment will depend on appreciation of the value of our Common Stock.
Even if the claims do not result in litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business. We may be subject to securities litigation, which is expensive and could divert management attention.
Even if the claims do not result in litigation or are resolved in our favor, the time and resources needed to resolve them could divert our management’s resources and seriously harm our business. 46 We may be subject to securities litigation, which is expensive and could divert management attention.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock and Warrants less attractive to investors. We are an “emerging growth company,” as defined in the JOBS Act.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our offering.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.235 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our offering.
The trading market for our Common Stock is influenced by the research and reports that securities or industry analysts publish about us, our business or our market. We do not currently have and may never obtain research coverage by securities or industry analysts.
The trading market for our Common Stock and Warrants is influenced by the research and reports that securities or industry analysts publish about us, our business or our market. We do not currently have and may never obtain research coverage by securities or industry analysts.
The market price of our Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future.
The market price of our Common Stock and Warrants may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future.
We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.
For as long as we continue to be an emerging growth company, we intend to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including: ● being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this 10-K; ● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; ● not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; ● reduced disclosure obligations regarding executive compensation in this 10-K and our periodic reports and proxy statements; and ● exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. 56 We cannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions.
For as long as we continue to be an emerging growth company, we intend to take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including: ● being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure in this 10-K; ● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act; ● not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements; ● reduced disclosure obligations regarding executive compensation in this 10-K and our periodic reports and proxy statements; and ● exemptions from the requirements of holding nonbinding advisory stockholder votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. 45 We cannot predict if investors will find our securities less attractive because we may rely on these exemptions.
These provisions, among other things: ● prohibit cumulative voting; ● authorize our board of directors to amend the bylaws; and ● establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These provisions, among other things: ● prohibit cumulative voting; ● authorize our Board to amend the Bylaws; and ● establish advance notice requirements for nominations for election to our Board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
To the extent that we raise additional capital through the sale of convertible debt or equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price of our Common Stock or trading volume to decline.
If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price of our Common Stock and Warrants or trading volume to decline.
We have incurred and expect to continue to incur increased labor costs and experience staffing challenges related to COVID-19 while the pandemic persists, the extent of which will depend on the severity and duration of the pandemic, among other things.
We have incurred and expect to continue to incur increased labor costs and experience staffing challenges related to COVID-19, the extent of which will depend on the severity and duration of the pandemic, among other things.
In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue adverse or misleading research or reports regarding us, our business model, our intellectual property, our stock performance or our market, or if our operating results fail to meet the expectations of analysts, the price of our Common Stock would likely decline.
In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue adverse or misleading research or reports regarding us, our business model, our future intellectual property, our stock performance or our market, or if our operating results fail to meet the expectations of analysts, the price of our Common Stock and Warrants would likely decline.
Additionally, in many other countries, hospitals owned and operated by the government, and doctors and other hospital employees would be considered foreign officials under the FCPA. Recently the Securities and Exchange Commission (SEC) and Department of Justice (DOJ) have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies.
Additionally, in many other countries, hospitals owned and operated by the government, and doctors and other hospital employees would be considered foreign officials under the FCPA. Recently the Securities and Exchange Commission (“SEC”) and Department of Justice (“DOJ”) have increased their FCPA enforcement activities with respect to biotechnology and pharmaceutical companies.
If certain of our clinics and providers fail to comply with any of these requirements, we could be subject to liability and harm to our brand that may have a material adverse effect on our business.
If certain of our past clinics and providers failed to comply with any of these requirements, we could be subject to liability and harm to our brand that may have a material adverse effect on our business.
The FDA may also issue a public warning letter or untitled letter to the company. If we cannot successfully manage the promotion of our future approved products, we could become subject to significant liability, which would materially adversely affect our business and financial condition.
The FDA may also issue a public warning letter or untitled letter to the company. If we cannot successfully manage the promotion of our future approved products, we could become subject to significant liability, which would materially adversely affect our business and financial condition. Our business activities may be subject to the U.S.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
These factors could also make it more difficult for us to attract and retain qualified members of our Board, particularly to serve on our Audit Committee and compensation committee (“Compensation Committee”), and qualified executive officers.
Our net loss and other operating results are affected by numerous factors, including: ● variations in the level of expense related to the ongoing development of our future product candidates or future development programs; ● results of clinical trials, or the addition or termination of clinical trials or funding support by us or potential future partners; ● our execution of any collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under potential future arrangements or the termination or modification of any such potential future arrangements; ● any intellectual property infringement, misappropriation or violation lawsuit or opposition, interference or cancellation proceeding in which we may become involved; ● additions and departures of key personnel; ● strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; ● if any of our future product candidates receive regulatory approval, the terms of such approval and market acceptance and demand for such approved products; ● regulatory developments affecting our future product candidates, or those of our competitors; and ● changes in general market and economic conditions. 55 If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our Common Stock could decline substantially.
Our net loss and other operating results are affected by numerous factors, including: ● variations in the level of expense related to the ongoing development of our future product candidates or future development programs; ● results of clinical trials, or the addition or termination of clinical trials or funding support by us or potential future partners; ● our execution of any collaboration, licensing or similar arrangements, and the timing of payments we may make or receive under potential future arrangements or the termination or modification of any such potential future arrangements; ● any intellectual property infringement, misappropriation or violation lawsuit or opposition, interference or cancellation proceeding in which we may become involved; ● additions and departures of key personnel; ● strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy; ● if any of our future product candidates receive regulatory approval, the terms of such approval and market acceptance and demand for such approved products; ● regulatory developments affecting our future product candidates, or those of our competitors; and ● changes in general market and economic conditions.
Our certificate of incorporation and bylaws contain provisions that could depress the market price of our securities by acting to discourage, delay or prevent a change in control of our Company or changes in our management that the stockholders of our Company may deem advantageous.
Our amended and restated certificate of incorporation (“Certificate of Incorporation”), and our amended and restated bylaws (“Bylaws”) contain provisions that could depress the market price of our securities by acting to discourage, delay or prevent a change in control of our Company or changes in our management that the stockholders of our Company may deem advantageous.
Certain beneficial owners might have control over us which could delay or prevent a change in corporate control or result in the entrenchment of management and/or the board of directors . As of March 23, 2022, our officers, directors and principal stockholders, beneficially own, in the aggregate, approximately 6.5% of our outstanding Common Stock.
Certain beneficial owners might have control over us which could delay or prevent a change in corporate control or result in the entrenchment of management and/or the Board . As of March 27, 2023, our officers, directors and principal stockholders, beneficially own, in the aggregate, approximately 22.6% of our outstanding Common Stock.
Our inability to react effectively to these and other changes in the health care industry could adversely affect our business. 30 If our labor costs continue to rise, including due to shortages, changes in certification requirements and/or higher than normal turnover rates in skilled clinical personnel; or currently pending or future governmental laws, rules, regulations or initiatives impose additional requirements or limitations on our operations or profitability; or, if we are unable to attract and retain key leadership talent, we may experience disruptions in our business operations and increases in operating expenses, among other things, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
If our labor costs continue to rise, including due to shortages, changes in certification requirements and/or higher than normal turnover rates in skilled clinical personnel; or currently pending or future governmental laws, rules, regulations or initiatives impose additional requirements or limitations on our operations or profitability; or, if we are unable to attract and retain key leadership talent, we may experience disruptions in our business operations and increases in operating expenses, among other things, which could have a material adverse effect on our business, results of operations, financial condition and cash flows.
If securities or industry analysts do not publish research or reports, or if they publish adverse or misleading research or reports, regarding us, our business or our market, our stock price and trading volume could decline.
If securities or industry analysts do not publish research or reports, or if they publish adverse or misleading research or reports, regarding us, our business or our market, the price and trading volume of our Common Stock and Warrants could decline.
If the clinical providers to whom we furnish business support services fail to comply with any of these requirements, we could be subject to liability and harm to our brand that would affect our business. Ketamine is a Schedule III controlled substance under the Controlled Substances Act (CSA).
If the clinical providers to whom we furnished business support services failed to comply with any of these requirements, we could be subject to liability and harm to our brand that would affect our business. Ketamine is a Schedule III controlled substance under the Controlled Substances Act (“CSA”).
Therefore, the associated risk factors relating to our ownership and operation of outpatient clinics dispensing and prescribing intravenous infusions of ketamine in the U.K. include that the MHRA may not approve manufacturing authorization for the production site responsible for production of ketamine; product defects may cause liabilities under civil law for negligence and products liability under the Consumer Protection Act 1987; the medical staff operating the clinics may not be able to comply with standards of performance demanded by the CQC and the GMC code of practice; similarly the operation of the clinics themselves may not comply with CQC rules on hygiene and safety; we may be found not to comply with the Human Medicines Regulations 2012 with respect to advertising requirements (including the prohibition of any advertisement that is likely to lead to the use of a prescription only medicine) or the Advertising Standards Authority standards and rules (The MHRA Blue Guide on Advertising and Promotion of Medicines in the U.K.
Therefore, the associated risk factors relating to our past ownership and operation of outpatient clinics dispensing and prescribing intravenous infusions of ketamine in the U.K. include product defects that may cause liabilities under civil law for negligence and products liability under the Consumer Protection Act 1987; the medical staff operating the clinics may not have complied with standards of performance demanded by the Care Quality Commission (“CQC”) and the General Medical Council (“GMC”) code of practice; similarly the operation of the clinics themselves may not have complied with CQC rules on hygiene and safety; we may be found to not have complied with the Human Medicines Regulations 2012 with respect to advertising requirements (including the prohibition of any advertisement that is likely to lead to the use of a prescription only medicine) or the Advertising Standards Authority standards and rules (The MHRA Blue Guide on Advertising and Promotion of Medicines in the U.K.
If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.
Our estimates regarding the potential market for our product candidates could be inaccurate, and if we do not accurately evaluate the commercial potential for a particular product candidate, we may relinquish valuable rights to that product candidate through strategic collaboration, licensing or other arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.
In addition to the factors discussed in this “Risk Factors” section and elsewhere in this 10-K, these factors include: ● the timing and results of preclinical studies and clinical trials of our future product candidates or those of our competitors; ● the success of competitive products or announcements by potential competitors of their product development efforts; ● regulatory actions with respect to our or our competitors’ product candidates or products; ● actual or anticipated changes in our growth rate relative to our competitors; ● regulatory or legal developments in the United States and other countries; ● developments or disputes concerning patent applications, issued patents or other proprietary rights; ● the recruitment or departure of key personnel; ● announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, or capital commitments; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● fluctuations in the valuation of companies perceived by investors to be comparable to us; ● market conditions in the pharmaceutical and biotechnology sector; ● changes in the structure of healthcare payment systems; ● price and volume fluctuations attributable to inconsistent trading volume levels of our securities; ● announcement or expectation of additional financing efforts; ● sales of our Common Stock by us, our insiders or our other stockholders; ● expiration of market stand-off or lock-up agreements; and ● general economic, industry and market conditions. 54 Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our future product candidates on unfavorable terms to us.
The recent fluctuations in our trading price and future trading in our Common Stock and Warrants may be subject to wide fluctuations in response to a variety of factors, including the following: ● the timing and results of preclinical studies and clinical trials of our future product candidates or those of our competitors; ● the success of competitive products or announcements by potential competitors of their product development efforts; ● regulatory actions with respect to our or our competitors’ product candidates or products; ● actual or anticipated changes in our growth rate relative to our competitors; ● regulatory or legal developments in the United States and other countries; ● developments or disputes concerning patent applications, issued patents or other proprietary rights; ● the recruitment or departure of key personnel; ● announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures, or capital commitments; ● actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ● fluctuations in the valuation of companies perceived by investors to be comparable to us; ● market conditions in the pharmaceutical and biotechnology sector; ● changes in the structure of healthcare payment systems; ● price and volume fluctuations attributable to inconsistent trading volume levels of our securities; ● announcement or expectation of additional financing efforts; ● sales of our Common Stock and Warrants by us, our insiders or our other stockholders; ● expiration of market stand-off or lock-up agreements; and ● general economic, industry and market conditions.
We have no products or services approved for commercial sale and have not generated any material revenue from product sales. To date, we have devoted substantially all of our resources and efforts to organizing and staffing our company, business planning, and product candidate development.
We have a limited operating history upon which you can evaluate our business and prospects. We have no products or services approved for commercial sale and have not generated any material revenue from product sales. To date, we have devoted substantially all of our resources and efforts to organizing and staffing our company, business planning, and product candidate development.
If some investors find our Common Stock less attractive as a result, there may be a less active trading market for our Common Stock and our stock price may be more volatile.
If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Moreover, ketamine has been identified by the DEA as a drug that has been used illegally by predators of sexual assault because it causes individuals to feel detached from their bodies and surroundings.
DEA registrants may also be required to keep and submit certain records of inventory. 48 Moreover, ketamine has been identified by the DEA as a drug that has been used illegally by predators of sexual assault because it causes individuals to feel detached from their bodies and surroundings.
Third Edition 2020) with regard to promotion and marketing of medicinal products; and the prescription of ketamine for the unlicensed indication of acute depressive illness may increase prevalence of serious adverse events during the post marketing vigilance of the new formulation, damaging the commercial reputation of our potential products.
Third Edition 2020) with regard to the promotion and marketing of medicinal products; and the prescription of ketamine for the unlicensed indication of acute depressive illness may have increased the prevalence of serious adverse events, damaging the commercial reputation of our brand and future products.
A restructuring could also result in a loss of contracts or a reduction in revenue under existing contracts. 42 Clinical services in the U.K. include prescribing, dispensing and administering ketamine, which as a Schedule II controlled substance under English laws requires specific manufacture, storing, and administration compliance, for an unlicensed therapeutic indication that poses certain clinical risks to patients.
Past clinical services in the U.K. included prescribing, dispensing and administering ketamine, which as a Schedule II controlled substance under English laws requires specific manufacture, storing, and administration compliance, for an unlicensed therapeutic indication that poses certain clinical risks to patients.
Accordingly, this concentration of ownership may harm the market price of our securities by: ● delaying, deferring, or preventing a change in control; ● entrenching our management and/or the board of directors; ● impeding a merger, consolidation, takeover, or other business combination involving us; or ● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. 58 The ongoing conflict in Ukraine may result in market volatility that could adversely affect our stock price.
Accordingly, this concentration of ownership may harm the market price of our securities by: ● delaying, deferring, or preventing a change in control; ● entrenching our management and/or the Board; ● impeding a merger, consolidation, takeover, or other business combination involving us; or ● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. 47 Exchange rate fluctuations may materially affect our results of operations and financial conditions.
The FDA prohibits the pre-approval promotion of drugs as safe and effective for the purposes for which they are under investigation. Similarly, the FDA prohibits the promotion of approved drugs for new or unapproved indications.
The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting pre-approval promotion and the promotion of off-label uses. The FDA prohibits the pre-approval promotion of drugs as safe and effective for the purposes for which they are under investigation. Similarly, the FDA prohibits the promotion of approved drugs for new or unapproved indications.
In addition, our products and technology may be subject to U.S. and foreign export controls, trade sanctions and import laws and regulations. Governmental regulation of the import or export of our products and technology, or our failure to obtain any required import or export authorization for our products, when applicable, could harm our international sales and adversely affect our revenue.
Governmental regulation of the import or export of our products and technology, or our failure to obtain any required import or export authorization for our products, when applicable, could harm our international sales and adversely affect our revenue.
Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international activities, our ability to attract and retain employees and our business, prospects, operating results and financial condition.
Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international activities, our ability to attract and retain employees and our business, prospects, operating results and financial condition. 39 In addition, our products and technology may be subject to U.S. and foreign export controls, trade sanctions and import laws and regulations.
If one of our future product candidates does not qualify for any expedited review program, then this could result in a longer time period to approval and commercialization of such product candidate, could increase the cost of development of such product candidate, and could harm our competitive position in the marketplace.
If one of our future product candidates does not qualify for any expedited review program, then this could result in a longer time period to approval and commercialization of such product candidate, could increase the cost of development of such product candidate, and could harm our competitive position in the marketplace. 36 We may seek Orphan Drug Designation for our product candidates, and we may be unsuccessful or may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential for market exclusivity.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process, and there is a high risk of failure and we may never succeed in developing marketable products.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process.
If we raise additional funds through up-front payments or milestone payments pursuant to strategic collaborations with third parties, we may have to relinquish valuable rights to our future product candidates, or grant licenses on terms that are not favorable to us.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, intellectual property, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us.
If we are not able to obtain regulatory approvals for use of our future product candidates under development, we will not be able to commercialize such products, and therefore may not be able to generate sufficient revenues to support our business. 39 Our future product candidates could fail to receive regulatory approval from the FDA, the EMA, the MHRA or comparable foreign regulatory authorities or be precluded from commercial marketing for many reasons, including the following: ● the FDA, the EMA, the MHRA or comparable foreign regulatory authorities may disagree with, question or request changes in the design or implementation of our clinical trials; ● the FDA, the EMA, the MHRA or comparable foreign regulatory authorities may determine that our product candidates are not safe and effective, only moderately effective, or have undesirable or unintended side effects, toxicities, or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use; ● the results of clinical trials may not meet the level of statistical significance required by the FDA, the EMA, the MHRA or comparable foreign regulatory authorities for approval; ● we may be unable to demonstrate that our future product candidates or any future therapeutic candidate’s clinical and other benefits outweigh its safety risks; ● the FDA, the EMA, the MHRA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; ● the data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA or other submission, or to obtain regulatory approval in the United States or elsewhere; ● the FDA, the EMA, the MHRA or comparable foreign regulatory authorities may find deficiencies with or fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; ● the approval policies or regulations of the FDA, the EMA, the MHRA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval; and ● the potential risk of our novel therapy and delivery method, including the use of third-party clinical trial sites and therapists.
Our product candidates could fail to receive regulatory approval for many reasons, including the following: ● we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication; ● serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates, or other products containing the active ingredient in our product candidates; ● negative or ambiguous results from our clinical trials or results that may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval; ● we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; ● the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; ● the data collected from clinical trials of our product candidates may not be acceptable or sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere, and we may be required to conduct additional clinical trials; ● the FDA or comparable foreign authorities may disagree regarding the formulation, labeling and/or the specifications of our product candidates; ● the FDA or comparable foreign regulatory authorities may fail to approve or find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and ● the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other therapeutic platforms or product candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success.
Because we have limited resources, we must choose to pursue and fund the development of specific types of treatment, and we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications that later prove to have greater commercial potential.
In certain states, authorized providers must also have a state specific controlled substances registration. DEA registrants may also be required to keep and submit certain records of inventory.
In certain states, authorized providers must also have a state specific controlled substances registration.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.
Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.
The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to operating performance. Broad market and industry factors may negatively affect the market price of our Common Stock, regardless of our actual operating performance.
In addition, the stock market in general, and Nasdaq Capital Markets and emerging growth companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.
Therefore, if our providers who prescribe, dispense and administer ketamine are not properly authorized and registered to do so, we could face substantial civil penalties, suffer significant reputational damage, and expose our business to other liability. 26 If the potential of our future product candidates to treat diseases is not realized, the value of our technology and our development programs could be significantly reduced.
Therefore, if our past providers who prescribed, dispensed and administered ketamine were not properly authorized and registered to do so, we could face substantial civil penalties, suffer significant reputational damage, and expose our business to other liability.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our Common Stock.
As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our Common Stock and Warrants. Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.
Additionally, we and/or associated persons may be found to not be compliant with the Bribery Act 2010, which includes criminal liability. Risks Related to Our Dependence on Third Parties We may rely on third parties to provide us with supplies to produce our future product candidates.
Additionally, we and/or associated persons may be found to not have been compliant with the Bribery Act 2010, which includes criminal liability. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our Common Stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance. 44 If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud.
The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
If any of the following risks actually occur, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations in these circumstances, the market price of our securities would likely decline.
Any decreased use of our products or limitation on our ability to export or sell access to our products would likely adversely affect our business.
Any decreased use of our products or limitation on our ability to export or sell access to our products would likely adversely affect our business. Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.
If we do not adequately address these risks and difficulties or successfully make such a transition, our business will suffer. Clinical services in the US include prescribing, dispensing and administering ketamine, which as a Schedule III controlled substance under US law requires proper authorization and federal and state registration.
Additionally, the market price of our Common Stock and/or our Warrants may decline further and stockholders may lose some or all of their investment. Risks Related to Our Clinics Segment Past clinical services in the US included prescribing, dispensing and administering ketamine, which as a Schedule III controlled substance under US law requires proper authorization and federal and state registration.
In addition, even if we were to obtain approval, regulatory or pricing authorities may approve our future product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products or therapies, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a therapeutic candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that therapeutic candidate.
In addition, the FDA or the applicable foreign regulatory agency also may approve a product candidate for a more limited indication or patient population than we originally requested, and the FDA or applicable foreign regulatory agency may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.
If we are unable to build our own distribution and marketing capabilities or to find suitable partners for the commercialization of our future approved products, we may not generate revenues from them or be able to reach or sustain profitability.
If any of our product candidates are approved for marketing and commercialization and we have not developed or secured third- party marketing, sales and distribution capabilities, we will be unable to successfully commercialize such products and may not be able to generate product revenue. We currently have no sales, marketing or distribution organizational experience or capabilities.
Even if we believe the data collected from clinical trials of our future product candidates are promising, such data may not be sufficient to support approval by the FDA, the EMA, the MHRA or any other regulatory authority.
Even if we believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities. 33 The FDA or any foreign regulatory bodies can delay, limit or deny approval of our product candidates or require us to conduct additional preclinical or clinical testing or abandon a program for many reasons, including: ● the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials; ● the FDA or comparable foreign regulatory authorities may disagree with our safety interpretation of our product candidate; ● the FDA or comparable foreign regulatory authorities may disagree with our efficacy interpretation of our product candidate; ● the FDA or comparable foreign regulatory authorities may regard our CMC package as inadequate.
ITEM 1A. RISK FACTORS An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and the other information in this Annual Report on Form 10-K before investing in our common stock. Our business and results of operations could be seriously harmed by any of the following risks.
ITEM 1A. RISK FACTORS Our future operating results could differ materially from the results described in this annual report due to the risks and uncertainties described below. You should consider carefully the following information about risks in evaluating our business.
General Risk Factors The price of our Common Stock may be volatile, and you could lose all or part of your investment. The trading price of our Common Stock can be highly volatile and subject to wide fluctuations in response to various factors, some of which we cannot control.
We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Risks Related to Our Securities The price of our Common Stock and Warrants may be volatile, and you could lose all or part of your investment.
Future contract manufacturers are or will be subject to all of the risks and uncertainties that we would have if we manufactured the product candidates on our own.
We do not expect to have the resources or capacity to commercially manufacture any of our proposed product candidates if approved and will likely continue to be dependent on third-party manufacturers.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals. Our operations also produce hazardous waste products.
Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials owned by us. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials.
In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by third party service providers is compromised for any reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain marketing approval of our current and future product candidates or otherwise advance our business.
If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for any other reason, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize any product candidate that we develop.
We may not be able to secure and maintain suitable research institutions to conduct our clinical trials. Producing and marketing an approved drug or other medical product is subject to significant and costly post-approval regulation.
We may not be able to secure and maintain suitable research institutions to conduct our clinical trials. If we enter into collaborations with third parties to develop or commercialize our product candidates, our prospects with respect to those product candidates will depend in significant part on the success of those collaborations.
This may limit the programs we are able to pursue and result in significant delays in the development, sale, and manufacture of our future product candidates and products, and may have a material adverse effect on our business, financial condition, and results of operations.
Despite the actions we may have to undertake to minimize the impacts from disruptions to the global economy, there can be no assurances that unforeseen future events in the global supply chain will not have a material adverse effect on our business, financial condition and results of operations.
Removed
If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected.
Added
In addition, we cannot assure investors that our assumptions and expectations will prove to be correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking statements. See “Forward Looking Statements” for a discussion of some of the forward-looking statements that are qualified by these risk factors.
Removed
In such case, the value and trading price of our common stock could decline, and you may lose all or part of your investment. 22 Summary Risk Factors The principal factors and uncertainties that make investing in our ordinary shares risky, include, among others: Risks Relating to our Business ● We have a limited operating history and have no products or services approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability. ● Clinical services in the US include prescribing, dispensing and administering ketamine, which as a Schedule III controlled substance under US law requires proper authorization and federal and state registration.
Added
Factors that could cause or contribute to such differences include those factors discussed below. Summary Risk Factors The following summarizes key risks and uncertainties that could materially adversely affect us.
Removed
If clinical providers to whom we furnish business support services fail to comply with any of these requirements, we could be subject to liability and harm to our brand that would affect our business. ● If the potential of our future product candidates to treat diseases is not realized, the value of our technology and our development programs could be significantly reduced. ● Our future product candidates may cause undesirable side effects that could delay or prevent their regulatory approval or commercialization or have other significant adverse implications on our business, financial condition and results of operations. ● If we are not able to recruit and retain qualified management and scientific personnel, we may fail in developing our technologies and our future product candidates. ● A member of our board of directors will be working for us on a part-time basis resulting in a potential lack of availability due to other commitments. ● Our future product candidates will represent new classes of therapy that the marketplace may not understand or accept. ● We have ongoing challenges with respect to our liquidity and access to capital. ● We have a history of losses and may not be able to achieve profitability going forward. ● Public health threats, including those related to the novel strain of coronavirus, SARS-CoV-2 (which causes the disease now called COVID-19), could have an adverse effect on our operations. ● If we are unable to effectively adapt to changes in the health care industry, our revenue, profitability or liquidity could be adversely affected. ● If our labor costs continue to rise, including due to shortages, changes in certification requirements and/or higher than normal turnover rates in skilled clinical personnel; or currently pending or future governmental laws, rules, regulations or initiatives impose additional requirements or limitations on our operations or profitability; or, if we are unable to attract and retain key leadership talent, we may experience disruptions in our business operations and increases in operating expenses, among other things, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. ● A variety of risks associated with marketing our future product candidates internationally could materially adversely affect our business. ● We plan to operate in a highly regulated sector and may not always succeed in complying fully with applicable regulatory requirements in all jurisdictions where we carry on business. ● Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize any of our future therapeutic candidates and could have a material adverse effect on our business. 23 Risks Relating to Intellectual Property ● If our trade secret and patent position does not adequately protect our future product candidates and uses, others could compete against us more directly, which could harm our business and have a material adverse effect on our business, financial condition and results of operations. ● If we are unable to protect the confidentiality of our proprietary information, trade secrets, and know-how, our competitive position could be impaired and our business, financial condition, results of operations, and prospects could be adversely affected. ● Third-party claims of intellectual property infringement may prevent or delay our product development efforts. ● Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of any future patent applications and the enforcement or defense of any future patents. ● Changes in U.S. patent law, or laws in other countries, could diminish the value of patents in general, thereby impairing our ability to protect our future product candidates. ● Patent terms may be inadequate to protect our competitive position on our future product candidates for an adequate amount of time.
Added
You should read this summary together with the more detailed description of each risk factor contained below. ● We are a clinical stage biopharmaceutical company with a limited operating history. ● We have incurred a history of operating losses and expect to continue to incur substantial costs for the foreseeable future.
Removed
Risks Related to Regulatory Approval and Other Government Regulations ● Any product candidates we may develop in the future may be subject to controlled substance laws and regulations in the territories where the product may be marketed, such as the U.S. and the U.K., and failure to comply with these laws and regulations, or the cost of compliance, may adversely affect the results of our business operations, both during clinical development and post approval, and our financial condition.
Added
We are not currently profitable, and we may never achieve or sustain profitability. ● We will need to raise additional capital to complete the development and commercialization efforts for PAS-004 and our other product candidates.
Removed
In addition, during the review process of our future product candidates, and prior to approval, the FDA and/or other regulatory bodies may require additional data, including with respect to whether our future product candidates have abuse potential, which may delay approval and any potential rescheduling process. ● We cannot market and sell our future product candidates in the United States or in other countries if we fail to obtain the necessary regulatory approvals. ● Final marketing approval of our future product candidates by the FDA or other regulatory authorities for commercial use may be delayed, limited, or denied, any of which could adversely affect our ability to generate operating revenues. ● We may not be able to secure and maintain research institutions to conduct our clinical trials. ● Producing and marketing an approved drug or other medical product is subject to significant and costly post-approval regulation. ● Clinical services in the U.K. include prescribing, dispensing and administering ketamine, which as a Schedule II controlled substance under English laws requires specific manufacture, storing, and administration compliance, for an unlicensed therapeutic indication that poses certain clinical risks to patients.
Added
If we are unable to raise capital when needed, we could be forced to delay, reduce or terminate certain of our development programs or other operations. ● A pandemic, epidemic, or outbreak of an infectious disease, such as COVID-19, could cause a disruption to the development of our product candidates. ● We are dependent primarily on the successful development and commercialization of our lead product candidate, PAS-004, which is not yet approved.
Removed
Further, registration is required with the CQC for the provision of certain health and care services. If certain of our clinics and providers fail to comply with any of these requirements, we could be subject to liability and harm to our brand that may have a material adverse effect on our business.
Added
Our business could be materially adversely affected if one or more of our key product candidates do not perform as well as expected and do not receive regulatory approval.
Removed
Risks Related to Our Dependence on Third Parties ● We may rely on third parties to provide us with supplies to produce our future product candidates.
Added
We cannot give any assurance that we will receive regulatory approval for such product candidate or any other product candidates which is necessary before any of our product candidates can be commercialized. ● Even if we obtain regulatory approval for PAS-004, or any of our other product candidates, such approval may be limited, and we will be subject to stringent, ongoing government regulation The commercial success of our product candidates, if approved, depends partially upon attaining market acceptance by physicians, patients, third-party payors, and the medical community. ● Our business is subject to extensive regulatory requirements, and our product candidates that obtain approval will be subject to ongoing and continued regulatory review, which may result in significant expense and limit our ability to commercialize such products. ● We expect to rely on third parties to conduct our clinical trials and our regulatory submissions for our product candidates, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials and/or regulatory submissions. ● We may rely on third parties to perform many essential services for any products that we commercialize, including distribution, customer service, accounts receivable management, cash collection and adverse event reporting.
Removed
Any problems experienced by these third parties could result in a delay or interruption in the supply of our future product candidates for our clinical trials and future approved products to our customers, which could have a material negative effect on our business. ● We may become dependent upon third parties for services and raw materials needed for the manufacture of our future product candidates, and if these products are successfully commercialized, may become dependent upon third parties for product distribution.
Added
If these third parties fail to perform as expected or to comply with legal and regulatory requirements, our ability to commercialize PAS-004 or our other product candidates will be significantly impacted and we may be subject to regulatory sanctions. ● We will need to further increase the size and complexity of our organization in the future, and we may experience difficulties in executing our growth strategy and managing any growth. ● Our research and development is focused on discovering and developing product candidates which may not make it to the market. ● We are increasingly dependent on information technology, and our systems and infrastructure face certain risks, including cybersecurity and data leakage risks. ● If our intellectual property related to our products or product candidates is not adequate, we may not be able to compete effectively in our market. ● An active trading market for our Common Stock or warrants to purchase shares of our Common Stock that were issued in our Initial Public Offering and are listed on Nasdaq (the “Warrants”) may not be sustained. 27 Risks Related to Our Financial Position and Need for Additional Capital We have a limited operating history and have no products or services approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.
Removed
If any of these third parties fail or are unable to perform in a timely manner, our ability to manufacture and deliver could be compromised. ● If we decide to use third-party manufacturers in the future, they will likely be dependent upon their own third-party suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business. ● We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our future product candidates. 24 ● We will depend on third-party distributors in the future to market and sell our future product candidates which will subject us to a number of risks. ● The successful commercialization of our future product candidates will depend on obtaining reimbursement from government and third-party payors. ● We may enter into arrangements with third-party collaborators to help us develop our product candidates and commercialize our products, and our ability to commercialize such products may be impaired or delayed if collaborations are unsuccessful.
Added
Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development, especially preclinical stage pharmaceutical companies such as ours. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face.
Removed
Risks Related to the Discovery, Development and Commercialization of Our Future Product Candidates ● Interim, “topline” and preliminary data from our future clinical trials that we announce or publish from time to time may change as more data become available and are subject to audit and verification procedures that could result in material changes in the final data. ● We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on other product candidates or indications that may be more profitable or for which there is a greater likelihood of success. ● The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting pre-approval promotion and the promotion of off-label uses. ● We may attempt to secure approval from the FDA or comparable foreign regulatory authorities through an expedited review program, and if we are unable to do so, then we could face increased expense to obtain, and delays in the receipt of, necessary marketing approvals. ● Our relationships with healthcare professionals, clinical investigators, CROs and third-party payors in connection with our current and future business activities may be subject to federal and state healthcare fraud and abuse laws, false claims laws, transparency laws, government price reporting, and health information privacy and security laws, which could expose us to, among other things, criminal sanctions, civil penalties, contractual damages, exclusion from governmental healthcare programs, reputational harm, administrative burdens and diminished profits and future earnings. ● Inadequate funding for the FDA and other government agencies, or future government shutdown and or furlough of government employees, or public health emergencies could hinder their ability to hire and retain key leadership and other personnel, prevent new products and services from being reviewed or approved in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business. ● Our research and development activities could be affected or delayed as a result of possible restrictions on animal testing.

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Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES We do not own any real property. Our principal executive office is located at 1111 Lincoln Road, Suite 500, Miami Beach, FL 33139. We rent approximately 300 square feet of space, which includes our executive offices and research and development operations.
ITEM 2. PROPERTIES We do not own any real property. Our principal executive office is located at 1111 Lincoln Road, Suite 500, Miami Beach, FL 33139. We rent approximately 300 square feet of space, which includes our executive offices. Our research and development facility, utilized by our Therapeutics segment, is located at 458 Carlton Court, South San Francisco, CA.
We believe that our facilities are generally in good condition and suitable to carry on our business. We also believe that, if required, suitable alternative or additional space will be available to us on commercially reasonable terms.
We rent approximately 1,900 square feet of space, which includes our laboratory and offices. We believe that our facilities are generally in good condition and suitable to carry on our business. We also believe that, if required, suitable alternative or additional space will be available to us on commercially reasonable terms.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Removed
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES General We are authorized to issue an aggregate of 500,000,000 shares.
Added
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market information Our Common Stock and Warrants trades on the Nasdaq Capital Market under the symbols “KTTA” and “KTTAW” respectively since September 15, 2021. Prior to that date, there was no public market for our common stock or Warrants.
Removed
The authorized capital stock is divided into 495,000,000 shares of Common Stock having a par value of $0.0001 per share and 5,000,000 shares of preferred stock having a par value of $0.0001 per share.
Added
Holders of Record As of March 27, 2023, we had 44 holders of record of our Common Stock. The actual number of holders of our Common Stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers or held by other nominees.
Removed
As of March 23, 2022, there were 22,858,371 shares of our Common Stock outstanding held by approximately 46 stockholders of record and no shares of our preferred stock outstanding. Listing We have listed our Common Stock on The Nasdaq Capital Market under the symbol “KTTA”.
Added
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have never declared or paid any dividends on our Common Stock.
Removed
Transfer Agent and Registrar The transfer agent and registrar for our Common Stock is VStock Transfer, LLC. Common Stock All shares of Common Stock of the Company are one and the same class, identical in all respects and have equal rights, powers and privileges. Voting.
Added
We currently intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business, and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be made at the discretion of our Board.
Removed
Except as otherwise provided for by resolution of the board of directors, the holders of outstanding shares of Common Stock have the exclusive right to vote on all matters requiring stockholder action. On each matter on which holders of Common Stock are entitled to vote, each outstanding share of such Common Stock is entitled to one vote. Dividends.
Added
Repurchases Pursuant to the Cooperation Agreement entered into in connection with the Camac Action, we repurchased from the Camac Group 3,205,282 shares of our Common Stock beneficially owned by the Camac Group, at a purchase price of $1.0003 per share. Other than the Share Repurchase, there were no repurchases of our Common Stock during the quarter ended December 31, 2022.
Removed
Subject to the rights of holders of any series of outstanding preferred stock, holders of shares of Common Stock have equal rights of participation in the dividends and other distributions in cash, stock or property of the Company when, as and if declared thereon by the board of directors from time to time out of assets or funds of the Company legally available therefor and shall have equal rights to receive the assets and funds of the Company available for distribution to stockholders in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary.
Added
Use of Proceeds from Registered Securities On September 14, 2021, our registration statement on Form S-1 (Registration No. 333-255205) was declared effective by the SEC for our initial public offering (the “Initial Public Offering”) pursuant to which we sold an aggregate of 4,800,000 units consisting of one share of our Common Stock and one Warrant to purchase one share of our Common Stock at a price to the public of $5.00 per unit, for an aggregate offering of approximately $24.0 million.
Removed
Liquidation. Subject to the rights of holders of any series of outstanding preferred stock, holders of shares of Common Stock have equal rights to receive the assets and funds of the Company available for distribution to stockholders in the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary. Rights and Preferences.
Added
EF Hutton acted as the sole book-running manager for the offering. On September 17, 2021, we closed the sale of the units, resulting in net proceeds to us of approximately $20.6 million after deducting underwriting discounts and commissions and other offering expenses.
Removed
Holders of our Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking funds provisions applicable to our Common Stock.
Added
No payments were made by us to directors, officers or persons owning ten percent or more of our Common Stock or to their associates, or to our affiliates.
Removed
The rights, preferences and privileges of the holders of our Common Stock are subject to, and may be adversely affected by, the rights of the holders of share of any series of our preferred stock that we may designate and issue in the future. Fully Paid and Nonassessable.
Added
There has been no material change in the planned use of proceeds from our Initial Public Offering as described in our final prospectus filed with the SEC on September 16, 2021 pursuant to Rule 424(b), except that we no longer plan to use any proceeds from the Initial Public Offering to expand our Clinics segment.
Removed
All of our outstanding shares of Common Stock are fully paid and nonassessable.
Added
Any proceeds that were originally intended to be used to expand the Clinics segment, and that have not already been allocated to such segment, will instead be used to wind down the Clinics segment.
Removed
Preferred Stock Shares of preferred stock of the Company may be issued from time to time in one or more series, the shares of each series to have such voting powers, full or limited, if any, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as are stated and expressed in the resolution or resolutions providing for the issue of such series, adopted by the board of directors.
Added
After the winding down of the Clinics segment, any proceeds that remain will instead be used to further develop our product candidate pipeline as part of our Therapeutics segment. ITEM 6. [Reserved] [Reserved]
Removed
The resolutions providing for issuance of any series of preferred stock may provide that such series shall be superior to, rank equally with or be junior to any other series of preferred stock to the extent permitted by law and the terms of any other series of preferred stock. 60 Anti-Takeover Provisions Some provisions of Delaware law could make the following transactions more difficult: an acquisition of us by means of a tender offer; an acquisition of us by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors.
Removed
It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interests or in our best interests, including transactions that provide for payment of a premium over the market price for our shares.
Removed
These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors.
Removed
We believe that the benefits of the increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms. Undesignated Preferred Stock.
Removed
The ability of our board of directors, without action by our stockholders, to issue up to 5,000,000 shares of undesignated preferred stock with voting or other rights or preferences as designated by our board of directors could impede the success of any attempt to effect a change in control of our company.
Removed
These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our company. Requirements for Advance Notification of Stockholder Nominations and Proposals.
Removed
Our bylaws establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors of a committee of our board of directors.
Removed
Unregistered Sales of Equity Securities During the fiscal year ended December 31, 2021, our financing activities consisted of the following: Subscription Agreements The Company entered into various subscription agreements in connection with a private placement seeking to raise up to $1 million through the sale of 625,000 shares of the Company’s common stock, at a price of $1.60 per share, with a closing date for accepted subscriptions of January 31, 2021.
Removed
The Company issued a total of 395,625 shares for aggregate proceeds received of approximately $633,000 related to such private placement.
Removed
The Company entered into various subscription agreements in connection with a second private placement seeking to raise up to $5 million through the sale of 2,083,333 shares of the Company’s common stock, at a price of $2.40 per share, with a closing date for accepted subscriptions of March 31, 2021.
Removed
The Company issued a total of 239,969 shares for aggregate proceeds received of approximately $576,000 related to such second private placement. The Company issued an additional 153,652 shares of common stock to existing investors related to an administrative correction, with no significant effect on the Company’s financial statements.
Removed
All of the securities issued in the transactions described above were issued without registration under the Securities Act in reliance upon the exemptions provided in Section 4(2) or Regulation S of the Securities Act.
Removed
Except with respect to securities sold pursuant to Regulation S, the recipients of securities in each such transaction acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. Appropriate legends were affixed to the share certificates issued in all of the above transactions.
Removed
Each of the recipients also represented that they were “accredited investors” within the meaning of Rule 501(a) of Regulation D under the Securities Act or had such knowledge and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in its common stock.
Removed
All recipients had adequate access, through their relationships with the Company and its officers and directors, to information about the Company. None of the transactions described above involved general solicitation or advertising. 61

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the fiscal years ended December 31, 2021 and December 31, 2020 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide information necessary to understand our audited consolidated financial statements for the fiscal years ended December 31, 2022 and December 31, 2021 and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations.
This discussion should be read in conjunction with our consolidated financial statements for the fiscal years ended December 31, 2021 and December 31, 2020 and related notes included elsewhere in this 10-K. These historical financial statements may not be indicative of our future performance.
This discussion should be read in conjunction with our consolidated financial statements for the fiscal years ended December 31, 2022 and December 31, 2021 and related notes included elsewhere in this 10-K. These historical financial statements may not be indicative of our future performance.
In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2021, as compared to the fiscal year ended December 31, 2020.
In particular, the discussion is intended to provide an analysis of significant trends and material changes in our financial position and the operating results of our business during the year ended December 31, 2022, as compared to the fiscal year ended December 31, 2021.
November 2021 Private Placement On November 24, 2021, the Company entered into a purchase agreement with institutional investors to issue 8,680,000 common shares (the “PIPE Shares”) and 8,680,000 warrants to purchase up to 8,680,000 shares of common stock in a private placement (“November 2021 Private Placement”). The combined purchase price for one PIPE Share and warrant was $3.50.
November 2021 Private Placement On November 24, 2021, issued 8,680,000 shares of our Common Stock (the “PIPE Shares”) and warrants to purchase up to 8,680,000 shares of our Common Stock (“PIPE Warrants”) in a private placement (“November 2021 Private Placement”). The combined purchase price for one PIPE Share and PIPE Warrant was $3.50.
Based on the foregoing, management believes that the Company will have sufficient working capital to meet its needs through twelve months from the date of these financial statements. Critical Accounting Policies and Estimates Our significant accounting policies are more fully described in the notes to our financial statements included in this 10-K for the fiscal year ended December 31, 2021.
Based on the foregoing, management believes that we will have sufficient working capital to meet our liquidity needs through twelve months from the issuance date of the financial statements included in this annual report.
Current liabilities increased by $440,677 between December 31, 2020 and December 31, 2021, which was primarily attributable to an increase in accounts payable and accrued expenses due to expansion of operations. 64 Liquidity and Capital Resources Year Ended December 31, 2021 2020 Net loss $ (2,173,521 ) $ (40,984 ) Net cash used in operating activities (3,174,058 ) (38,689 ) Net cash provided by (used in) investing activities (21,503 ) - Net cash provided by financing activities 55,929,178 282,339 Effect of foreign currency translation (10,561 ) - Net change in cash and cash equivalents $ 52,723,056 $ 243,650 Cash and cash equivalents increased by $52,723,056 between December 31, 2020 and December 31, 2021, which was primarily attributable to the Company’s sale of its Units, common stock and warrants during the period.
Liquidity and Capital Resources Year Ended December 31, 2022 2021 Net loss $ (13,936,452 ) $ (2,173,521 ) Net cash used in operating activities (14,561,921 ) (3,174,058 ) Net cash used in investing activities (2,061,546 ) (21,503 ) Net cash (used in) provided by financing activities (3,206,244 ) 55,929,178 Effect of foreign currency translation 9,900 (10,561 ) Decrease (increase) in cash and cash equivalents $ (19,819,811 ) $ 52,723,056 The decrease in cash and cash equivalents was primarily attributable to cash used to fund our operations.
The warrants are immediately exercisable, expire five years from the date of issuance and have an exercise price of $3.50 per share of common stock, subject to adjustment as set forth in the warrants. The investors may exercise the warrants on a cashless basis if the warrant shares are not then registered pursuant to an effective registration statement.
The PIPE Warrants are immediately exercisable, expire five years from the date of issuance and have an exercise price of $3.50 per share, subject to adjustment as set forth in the PIPE Warrants. The November 2021 Private Placement resulted in aggregate gross proceeds to us of $30,380,000.
Working Capital December 31, 2021 2020 Current assets $ 53,300,457 $ 247,958 Current liabilities $ 447,280 $ 6,603 Working capital $ 52,853,177 $ 241,355 Current assets increased by $53,052,499 between December 31, 2020 and December 31, 2021, which was primarily attributable to an increase in cash and cash equivalents due to the Company’s sale of its Units, common stock and warrants during the period.
Working Capital As of December 31, 2022 2021 Current assets $ 34,076,693 $ 53,300,457 Current liabilities 1,877,634 447,280 Working capital $ 32,199,059 $ 52,853,177 Working capital decreased by $20.6 million between December 31, 2021 and December 31, 2022 due primarily to cash used to fund our $14.8 million loss from operations for the period ended December 31, 2022.
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Risk Factors.” The full extent to which the COVID-19 pandemic may directly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.
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Risk Factors.” 50 Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to Pasithea Therapeutics Corp. and its subsidiaries, Pasithea Therapeutics Limited (UK), Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, Pasithea Clinics Inc., Alpha-5 Integrin, LLC, and AlloMek Therapeutics, LLC. Pasithea Therapeutics Limited (UK) is a private limited Company, registered in the United Kingdom (UK).
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We have made estimates of the impact of COVID-19 within our financial statements, and although there is currently no major impact, there may be changes to those estimates in future periods. Actual results may differ from these estimates.
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Pasithea Clinics Inc. is incorporated in Delaware, Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, a private limited Company, registered in Portugal, and Alpha-5 Integrin, LLC and AlloMek Therapeutics, LLC, are both Delaware limited liability companies. Overview We are a biotechnology company primarily focused on the discovery, research and development of innovative treatments for central nervous system (CNS) disorders and RASopathies.
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Company Summary We are a biotechnology company focused on the research and discovery of new and effective treatments for psychiatric and neurological disorders. Epidemiological data indicate neuropsychiatric disorders as being some of the most prevalent, devastating, and yet poorly treated illnesses.
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Our primary operations (the “Therapeutics” segment) are focused on developing our lead therapeutic candidate, PAS-004 (CIP-137401), a macrocyclic MEK inhibitor for potential use in a range of CNS-related indications, including neurofibromatosis type 1 and Noonan syndrome as well as lamin A/C cardiomyopathy and certain oncology indications that we acquired from AlloMek Therapeutics, LLC (“AlloMek”) in October 2022.
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We believe that the current treatments for these disorders, such as depression, are inadequate and that conventional medicines have low success rates in long-term treatment. According to an article published by PLOS One, randomized, double-blind, placebo-controlled clinical trials of antidepressants were only effective for 42-51% of patients with MDD.
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PAS-004 has displayed efficacy in a range of mouse models of various diseases and has completed pre-clinical testing and animal toxicology studies to support an Investigational New Drug application (an “IND”) with the U.S.
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For example, current pharmacotherapies for MDD and bipolar depression (BDep) have a distinct lag of onset that can generate further distress and impairment in patients. According to an article published in 2000 by The Journal of Clinical Psychiatry and an article published in 2010 by Pharmaceuticals (Basel), available antidepressant medications usually take several weeks before patients display significant therapeutic benefit.
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Food and Drug Administration (“FDA”) that we plan to file in the second half of 2023 following completion of cGMP manufacturing and finalization of our toxicology program.
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This delayed onset of treatment can result in increased morbidity and increased risk for suicidal behavior.
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We are also focused on the development of our discovery programs through lead identification of drug candidates, including PAS-003, a monoclonal antibody targeting a5b1 integrin for the treatment of ALS, PAS-002, a DNA vaccine targeting GlialCAM for the treatment of Multiple Sclerosis, and PAS-001, a small molecule targeting the compliment component 4 (C4) gene for the treatment of schizophrenia.
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This has been reported in a base population study including 159,810 users of 4 antidepressant drugs showing that the risk of suicidal behavior increased in the first month after starting antidepressants, and in particular during the first 1 to 9 days, regardless of the chemical class of antidepressant.
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Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates.
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This study was published in a 2004 article published by The Journal of the American Medical Association. Similarly, other studies including a 2006 article published by The American Journal of Psychiatry have shown a significantly higher risk of suicide attempts during the first week of antidepressant treatment compared to subsequent weeks.
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Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings, or other capital sources, including potential collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all.
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Furthermore, depressive symptoms are commonly known to affect the ability of patients to function across multiple domains, impacting self-esteem, motivation and cognitive function. Delayed onset of antidepressants contributes to ongoing functional impairment and may interfere with integration back into daily life, in turn delaying full functional recovery.
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If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.
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Furthermore, according to a 2012 article published by Biological Psychiatry and a 2013 article published by Brain Stimulation, the continued presence of depressive symptoms may promote chronic neuronal loss and suppress neurogenesis in the hippocampus. Traditional psychiatric drugs can also cause side effects. Furthermore, the approval of psychotropic drugs with novel mechanisms of action has been rare in recent years.
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Segments Our business is separated into two segments, “Therapeutics” and “Clinics.” Our Therapeutics segment performs activities related to discovery, research and development of innovative treatments for CNS disorders and other diseases. We are in the process of discontinuing our Clinics segment, which provided business support services to anti-depression clinics in the U.K. and in the United States.
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Our biotech operations focus on developing drugs that target the pathophysiology underlying such disorders rather than symptomatic treatments, with the goal of developing new pharmacological agents that display significant advantages over conventional therapies with respect to efficacy and tolerability.
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The Company evaluates the performance of its business segments primarily based on revenues and net income.
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We particularly focus on the cross-talk between the immune system and brain disorders and how immune dysregulation affects CNS function. 62 Company Strategy Our core strategy is to become a leader in solving psychiatric and neurological disorders, one of the world’s biggest clinical problems, through research, development, and commercialization of novel CNS drugs.
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For the years ended December 31, 2022 and 2021, segment operating results were as follows: For the years ended December 31, 2022 2021 Revenues Therapeutics $ - $ - Clinics 486,559 15,062 Total revenues 486,559 15,062 Net loss Therapeutics (11,727,885 ) (1,908,925 ) Clinics (2,208,567 ) (264,596 ) Total net loss $ (13,936,452 ) $ (2,173,521 ) 51 Prior to the date of this Annual Report on Form 10-K, we have discontinued our at-home services in New York, NY as well as our services in the U.K.
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Key elements of our business strategy are as follows: ● Research new drugs or the treatment of CNS disorders targeting the pathophysiology underlying the disease and with different mechanisms of action than conventional psychiatric and neurological drugs. Research will be conducted under the leadership of Professor Lawrence Steinman, a renowned neurologist and immunologist based at Stanford University, and Dr.
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In addition, we have discontinued our clinical operations in Los Angeles, CA and are actively exploring options for the disposal of related property. Accordingly, as of the date of this Annual Report on Form 10-K, we have discontinued the operations of our Clinics segment.
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Tiago Reis Marques, a psychiatrist and neuroscientist at Imperial College and King’s College London; ● Partner with reputable and successful healthcare companies and clinics to support the intravenous administration of ketamine to treat treatment-resistant depression and PTSD; o Create a capital efficient revenue stream with significant client bases across the United States and the U.K., including in Los Angeles, New York City, London; and o Create a diversified revenue stream by establishing and supporting clinics to provide greater visibility of revenue and EBITDA.
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Impact of Inflation We have recently experienced higher costs across our business as a result of inflation, including higher costs related to employee compensation and outside services. We expect inflation to continue to have a negative impact throughout 2023, and it is uncertain whether we will be able to offset the impact of inflationary pressures in the near term.
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Private Placements November 2021 Private Placement On November 24, 2021, the Company entered into a purchase agreement with institutional investors to issue 8,680,000 common shares (the “PIPE Shares”) and 8,680,000 warrants to purchase up to 8,680,000 shares of common stock in a private placement (“November 2021 Private Placement”). The combined purchase price for one PIPE Share and warrant was $3.50.
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Results of Operations Years Ended December 31, 2022 and 2021 Our financial results for the years ended December 31, 2022 and 2021 are summarized as follows: For the years ended December 31, 2022 2021 Change % Change Revenues $ 486,559 $ 15,062 $ 471,497 NM Cost of services 113,195 17,275 95,920 NM Selling, general and administrative 12,524,258 4,505,200 8,019,058 178.0 % Research and development 2,665,427 - 2,665,427 NM Loss from operations (14,816,321 ) (4,507,413 ) (10,308,908 ) 228.7 % Other income, net 879,869 2,333,892 (1,454,023 ) (162.3 )% Net loss $ (13,936,452 ) $ (2,173,521 ) $ (11,762,931 ) 541.2 % Revenues Revenues for the years ended December 31, 2022 and 2021 related to our Clinics segment.
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The investors have contractually agreed to restrict their ability to exercise the warrants such that the number of shares of common stock held by the investors and any of their affiliates after such exercise does not exceed either 4.99% or 9.99% of the Company’s then issued and outstanding shares of common stock, at the investor’s election.
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For the year ended December 31, 2022, revenues increased by approximately $471,000 compared to the year ended December 31, 2021. The increase in revenues is primarily driven by the expansion of our Clinics operations in the U.S. related to the at-home market in New York, NY.
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In connection with the Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the investors.
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Our Therapeutics segment did not generate any revenues during the years ended December 31, 2022 or 2021. Cost of Services Cost of services for the years ended December 31, 2022 and 2021 related to our Clinics segment. For the year ended December 31, 2022, cost of services increased by approximately $96,000 compared to the year ended December 31, 2021.
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Pursuant to the Registration Rights Agreement, the Company are be required to file a resale registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the shares and the warrant shares and to have such Registration Statement declared effective within 60 days after the date of the Purchase Agreement, or 90 days of the date of the Purchase Agreement in the event the Registration Statement is subject to a “full review” by the SEC.
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The increase in cost of services was primarily driven by the expansion of our operations in the U.S.
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The Company are obligated to pay certain liquidated damages to the investor if it fails to file the resale registration statement when required, fail to cause the Registration Statement to be declared effective by the SEC when required, or if it fails to maintain the effectiveness of the Registration Statement.
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Our Therapeutics segment did not incur any costs of services during the years ended December 31, 2022 and 2021. 52 Selling, General and Administrative Selling, general and administrative expense increased by approximately $8.0 million, or 178%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
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Pursuant to a Placement Agent Agreement (the “Placement Agent Agreement”), dated as of November 24, 2021, by and between us and EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), the Company engaged EF Hutton to act as its exclusive placement agent in connection with the November 2021 Private Placement.
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The increase was primarily driven by increases to (i) aggregate costs of approximately $0.9 million in connection with being a public company for the full period in 2022 as compared to the partial period in 2021, and non-recurring corporate communication costs associated with a dissident shareholder campaign, (ii) legal fees of approximately $2.7 million primarily associated with non-recuring costs of a dissident shareholder campaign, litigation settlements, the acquisition of Alpha-5, and increased compliance requirements as a public company, (iii) personnel and third-party contractor costs of approximately $1.6 million related to the hiring of employees and contractors, (iv) insurance of approximately $0.5 million primarily attributable to appropriate directors and officers coverage, (v) bad debt expense of approximately $0.4 million, (vi) Board fees of approximately $0.5 million, (vii) accounting and audit fees of approximately $0.4 million attributable to being a public company for full period in 2022 as compared to the partial period in 2021 and the acquisitions of Alpha-5 and AlloMek, (viii) rent costs of approximately $0.2 million related to our facilities in California and Florida, and (ix) advertising and marketing of approximately $0.4 million related to the Clinics segment.
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Pursuant to the Placement Agent Agreement, the Company paid EF Hutton a cash fee of 9.0% of the gross proceeds raised in the November 2021 Private Placement, and a cash fee equal to 1.0% of the gross proceeds raised in the November 2021 Private Placement for non-accountable expenses, and also reimbursed EF Hutton $70,000 for accountable expenses, including “road show”, diligence, and reasonable legal fees and disbursements for EF Hutton’s counsel.
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For the year ended December 31, 2022, approximately $1.9 million of the total $8.0 million increase was attributable to our Clinics segment. We expect selling, general and administrative expenses to decrease in fiscal year 2023 as we no longer expect to incur non-recurring expenses in connection with acquisitions, the now-resolved dissident shareholder campaign or our Clinics segment.
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Additionally, the Company granted EF Hutton a right of first refusal following the closing of the November 2021 Private Placement, whereby EF Hutton shall have an irrevocable right of first refusal (the “Right of First Refusal”) until November 29, 2022, to act as sole investment banker, sole book-runner, and/or sole placement agent, at EF Hutton’s sole discretion, for each and every future public and private equity and debt offering, including all equity linked financing. 63 On November 29, 2021, the Company consummated the November 2021 Private Placement, pursuant to which it issued 8,680,000 PIPE Shares and 8,680,000 warrants to institutional investors.
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Research and Development Research and development for the year ended December 31, 2022 relates activities performed by our Therapeutics segment, and are primarily focused on the development of PAS-001, PAS-002, PAS-003 and PAS-004. For the year ended December 31, 2022, research and development expenses were $2.7 million.
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The offering price per PIPE Share and accompanying warrant was $3.50, resulting in aggregate gross proceeds of $30,380,000 and net proceeds to the Company, net of underwriter discounts and fees, of approximately $27 million . We bear all fees and expenses incidental to our obligation to register the shares of common stock.
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There were no research and development activities during the year ended December 31, 2021. The increase is due to the commencement and expansion of our drug development activities related to our product candidates.
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Brokerage fees, commissions and similar expenses, if any, attributable to the sale of shares offered will be assumed by the selling stockholder. The Company intends to use such proceeds from the November 2021 Private Placement for general corporate and working capital purposes. A total of 8,680,000 warrants remain outstanding as of December 31, 2021.
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The increase was slightly offset by an increase of approximately $0.2 million of grant income from our grant agreement with FightMND, which we became party to in connection with the acquisition of Alpha-5. We expect research and development expenses to increase in fiscal year 2023 primarily related to manufacturing and clinical development of PAS-004.
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No liability accounting or valuation is deemed necessary for these warrants. Results of Operations Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020.
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Our Clinics segment does not perform any research or development activities. 53 Other Income, Net For the year ended December 31, 2022, Other income, net decreased by approximately $1.5 million, or 162%, as compared to the year ended December 31, 2021. The decrease was primarily driven by losses of $1.0 million associated with litigation settlements.
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Our financial results for the year ended December 31, 2021 are summarized as follows in comparison to the year ended December 31, 2020: Year Ended December 31, 2021 2020 Revenues $ 15,062 $ - Cost of goods sold 17,275 Selling, general and administrative expenses 4,505,200 40,984 Loss from operations (4,507,413 ) (40,984 ) Other income (expense), net 2,333,892 - Loss before income taxes $ (2,173,521 ) $ (40,984 ) The increase is mainly attributable to an increase in selling, general and administrative expenses as a result of the proceeds received from the sale of equity and further expansion of operations, offset partially by the change in fair value of warrant liabilities of $2,334,400.
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The decrease was further driven by a $0.5 million decrease in gains associated with changes in the fair value of our warrant liabilities.
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The warrants are immediately exercisable, expire five years from the date of issuance and have an exercise price of $3.50 per share of common stock, subject to adjustment as set forth in the warrants. The investors may exercise the warrants on a cashless basis if the warrant shares are not then registered pursuant to an effective registration statement.
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Additionally, we paid $3.2 million in cash to repurchase shares of our Common Stock in connection with the Camac Action settlement, and paid $1.7 million in cash in connection with the acquisition of AlloMek.
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The investors have contractually agreed to restrict their ability to exercise the warrants such that the number of shares of common stock held by the investors and any of their affiliates after such exercise does not exceed either 4.99% or 9.99% of the Company’s then issued and outstanding shares of common stock, at the investor’s election.
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The decrease in cash and cash equivalents was driven further by the repurchase of shares in connection with Camac Action settlement, and by cash paid in connection with the acquisition of AlloMek. Liquidity & Capital Resources Outlook As of December 31, 2022, we had $33.1 million in our operating bank accounts and working capital of $32.2 million.
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In connection with the Purchase Agreement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the investors.
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Our major sources of cash have been the proceeds from various private securities offerings, our Initial Public Offering, and the receipt of cash upon the exercise of our outstanding warrants. We are dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute our development plans and continue operations.
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Pursuant to the Registration Rights Agreement, the Company are be required to file a resale registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the shares and the warrant shares and to have such Registration Statement declared effective within 60 days after the date of the Purchase Agreement, or 90 days of the date of the Purchase Agreement in the event the Registration Statement is subject to a “full review” by the SEC.
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Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Exchange Act. 54 Critical Accounting Policies and Estimates Our critical accounting policies, which include (1) revenue recognition, (2) stock-based compensation and (3) fair value measurements, are more fully described in the notes to our financial statements included in our 10-K for the fiscal year ended December 31, 2022.
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The Company are obligated to pay certain liquidated damages to the investor if it fails to file the resale registration statement when required, fail to cause the Registration Statement to be declared effective by the SEC when required, or if it fails to maintain the effectiveness of the Registration Statement.
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We believe that the following critical accounting estimates are particularly subject to management’s judgment and could materially affect our financial condition and results of operations: ● Assumptions used in the Black-Scholes pricing model for valuation of stock option awards, such as expected volatility, risk-free interest rate, expected term and expected dividends. ● Valuation of the liability for Warrants, which requires that we make certain assumptions involving assumptions similar to those described above, as well as to changes in relative fair value. ● Assumptions used in the valuing of our intangible assets related to our acquisition, and those used in the calculation of the potential earnout.
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Pursuant to a Placement Agent Agreement (the “Placement Agent Agreement”), dated as of November 24, 2021, by and between us and EF Hutton, division of Benchmark Investments, LLC (“EF Hutton”), the Company engaged EF Hutton to act as its exclusive placement agent in connection with the November 2021 Private Placement.
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For additional information on critical accounting policies and estimates, see Note 2 to the consolidated Financial Statements, “Summary of Significant Accounting Policies and New Accounting Standards,” in Part I, Item 1, of this Annual Report on Form 10-K.
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Pursuant to the Placement Agent Agreement, the Company paid EF Hutton a cash fee of 9.0% of the gross proceeds raised in the November 2021 Private Placement, and a cash fee equal to 1.0% of the gross proceeds raised in the November 2021 Private Placement for non-accountable expenses, and also reimbursed EF Hutton $70,000 for accountable expenses, including “road show”, diligence, and reasonable legal fees and disbursements for EF Hutton’s counsel.
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New Accounting Standards For discussion of new accounting standards, see Note 2 to the consolidated Financial Statements, “Summary of Significant Accounting Policies and New Accounting Standards,” in Part I, Item 1, of this Annual Report on Form 10-K.
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Additionally, the Company granted EF Hutton a right of first refusal following the closing of the November 2021 Private Placement, whereby EF Hutton shall have an irrevocable right of first refusal (the “Right of First Refusal”) until November 29, 2022, to act as sole investment banker, sole book-runner, and/or sole placement agent, at EF Hutton’s sole discretion, for each and every future public and private equity and debt offering, including all equity linked financing.
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Subsequent Events Nasdaq Deficiency Notice On January 19, 2023, we received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”) indicating that we are not in compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market (the “Bid Price Requirement”).
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On November 29, 2021, the Company consummated the November 2021 Private Placement, pursuant to which it issued 8,680,000 PIPE Shares and 8,680,000 warrants to institutional investors. The offering price per PIPE Share and accompanying warrant was $3.50, resulting in aggregate gross proceeds of $30,380,000.
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The Notice does not result in the immediate delisting of our Common Stock from The Nasdaq Capital Market.
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We bear all fees and expenses incidental to our obligation to register the shares of common stock. Brokerage fees, commissions and similar expenses, if any, attributable to the sale of shares offered will be assumed by the selling stockholder. The Company intends to use such proceeds from the November 2021 Private Placement for general corporate and working capital purposes.
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The Nasdaq Listing Rules require listed securities to maintain a minimum bid price of $1.00 per share and, based upon the closing bid price of our Common Stock for 30 consecutive business days prior to the delivery of the Notice, we no longer meet this requirement.

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