UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________________ to __________________________

Commission file number 001-40804

PASITHEA THERAPEUTICS CORP.

(Exact name of registrant as specified in its charter)

Delaware		85-1591963
State or other jurisdiction of		(I.R.S. Employer
incorporation or organization		Identification No.)

1111 Lincoln Road, Suite 500

Miami Beach, Florida

33139

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (702) 514-4174

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	KTTA	The Nasdaq Capital Market
Warrants, exercisable for one share of Common Stock	KTTAW	The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☒

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The registrant had 22,858,371 shares of common stock outstanding as of March 23, 2022. The aggregate market value of the common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2021) was $0, as the registrant had not been publicly-traded as of that such date.

PASITHEA THERAPEUTICS CORP.

2021 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

	Page
PART I

ITEM 1. BUSINESS	1

ITEM 1A. RISK FACTORS	22

ITEM 1B. UNRESOLVED STAFF COMMENTS	59

ITEM 2. PROPERTIES	59

ITEM 3. LEGAL PROCEEDINGS	59

ITEM 4. MINE SAFETY DISCLOSURES	59

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	60

ITEM 6. [RESERVED]	62

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	62

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	66

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	66

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	66

ITEM 9A. CONTROLS AND PROCEDURES	66

ITEM 9B. OTHER INFORMATION	67

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	67

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	68

ITEM 11. EXECUTIVE COMPENSATION	73

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	80

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	82

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	83

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	85

ITEM 16. FORM 10-K SUMMARY	86

SIGNATURES	87

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “10-K”) contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this 10-K, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood of success, plans and objectives of management for future operations, future results of anticipated products and prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-looking statements contained in this 10-K include, but are not limited to, statements about:

	●	the ability of our clinical trials to demonstrate safety and efficacy of our future product candidates, and other positive results;

	●	the timing and focus of our future preclinical studies and clinical trials, and the reporting of data from those studies and trials;

	●	the size of the market opportunity for our future product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;

	●	the success of competing therapies that are or may become available;

	●	the beneficial characteristics, safety, efficacy and therapeutic effects of our future product candidates;

	●	our ability to obtain and maintain regulatory approval of our future product candidates;

	●	our plans relating to the further development of our future product candidates, including additional disease states or indications we may pursue;

	●	existing regulations and regulatory developments in the United States and other jurisdictions;

●

our plans and ability to obtain or protect intellectual property rights, including extensions of patent terms where available and our ability to avoid infringing the intellectual property rights of others;

	●	the need to hire additional personnel and our ability to attract and retain such personnel;

	●	our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

	●	our dependence on third parties;

	●	our financial performance;

	●	the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;

	●	our ability to generate revenue and profit margin under our anticipated contracts which is subject to certain risks;

	●	difficulties in our and our partners’ ability to recruit and retain qualified physicians and other healthcare professionals, and enforce our non-compete agreements with our physicians; and

●

our ability to restructure our operations to comply with future changes in government regulation.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this 10-K and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements.

iii

PART I

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.

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.

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. 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. 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. 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. 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. 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. 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. Several other studies in scientific journals, including a 1997 study from Psychiatry Research, a 2016 study from Nature and a 2012 study from Revista Brasileira de Psiquiatria, have also reported increased complement gene expression, protein concentration, and overall activity in the serum or plasma of schizophrenia cases compared to controls. 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. 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. 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. Furthermore, in a 2022 article published by Nature, the mechanism through which EBV mediate MS development was elucidated. 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.

Our secondary operations are focused on providing business support services to anti-depression clinics in the U.K. and in the United States.

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. 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. 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. 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. 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. 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. 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.

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. Operations currently take place in several districts of London in the United Kingdom. We intend to commence operations in the United States, with operations in New York, Los Angeles, San Diego and San Francisco. In addition, we intend to expand our coverage to other jurisdictions in the United States, including Florida and Nevada. We operate through partnerships with healthcare companies, including with Zen Healthcare and The IV Doc. Our operations in the U.K., and our future operations in the United States, are limited to providing business support services to healthcare companies. In the United States, certain of these business support services are subcontracted to The IV Doc through a Business Support Services Subcontract. 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. Furthermore, we do not obtain or administer ketamine, nor will we maintain any license or registration to own, maintain or dispense controlled substances in the U.K. or in the United States. We provide business support services to properly authorized companies that provide clinical services of the type described above to self-pay patients, and we subcontract certain of these business support services to The IV Doc.

Ketamine was first introduced to the medical community as a surgical anesthetic more than 50 years ago. According to a 2015 article published by Therapeutic Advances in Chronic Disease, and a 2019 article published on the Harvard Medical School’s website, as of the date of this 10-K, ketamine is gaining grounds as a promising treatment for some cases of major depression. It works differently than traditional antidepressants, which target the brain’s serotonin and noradrenalin systems. Ketamine blocks NMDA, a receptor in the brain that is activated by glutamate, a neurotransmitter. A single subanesthetic dose infusion of the NMDA receptor antagonist ketamine has been shown to have potentially rapid and potent antidepressant effects in treatment-resistant MDD as well as for the treatment of post-traumatic stress disorder.

While not approved by the FDA or the MHRA to treat depression, and while recreational use remains prohibited, ketamine has been repurposed for the treatment of MDD. As detailed below, the use of ketamine has been subject to consensus statements by the APA Council of Research Task Force on Novel Biomarkers and Treatments, the Royal College of Psychiatrists Committee on Electroconvulsive Therapy and Related Treatments, the Royal Australian and New Zealand College of Psychiatrists Committee for Evidence-Based Practice, and by an international expert opinion paper published in the American Journal of Psychiatry that was written by an international group of mood disorder experts:

●

APA Council of Research Task Force on Novel Biomarkers and Treatments - A Consensus Statement on the Use of Ketamine in the Treatment of Mood Disorders Council of Research Task Force on Novel Biomarkers and Treatments (April 2017)

The report highlights the current state of the field and the critical issues to be considered when contemplating the use of ketamine for treatment-resistant depression but has not been endorsed or promulgated as policy by the APA. Pursuant to the report, it is recommended that each patient undergo a thorough pre-treatment evaluation process and that the strongest data supporting ketamine’s clinical benefit in psychiatric disorders are in the treatment of major depressive episodes without psychotic features. The report states that most clinical trials and case reports available have used the ketamine hydrochloride dose of 0.5 mg/kg per 40 minutes IV. It has also been noted that at this dose, ketamine does not appear to have any significant effects on the respiratory status of healthy individuals or patients with depression who are otherwise generally healthy. However, ketamine treatment can have meaningful effects on blood pressure and heart rate, and it is recommended that clinicians delivering ketamine treatment be prepared to manage potential cardiovascular events should they occur. It is further recommended that clinicians be familiar with behavioral management of patients with marked mental status changes and be prepared to treat any emergency behavioral situations. Additionally, it is recommended that clinicians develop some level of experience before performing the procedure independently. Furthermore, it is recommended that site-specific standard operating procedures be developed and followed for the delivery of ketamine treatments. The report highlights that the existing data surrounding the benefits of repeated infusions

SEC Form 10-K filed by Pasithea Therapeutics Corp.