Silo Pharma, Inc 10-Q for FY2022 Q3
Silo Pharma, Inc. (SILO)
About this 10-Q
Silo Pharma, Inc filed this 10-Q on November 10, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $983.25K
- compared with net income of $6.39M a year earlier
- Diluted EPS
- -$0.49
- compared with $3.16 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from ___________ to ___________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s telephone number, including area code)
| Not applicable | ||
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||
| The |
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.
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 registration was required to submit such files).
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 | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check mark 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
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 10, 2022,
SILO PHARMA, INC. AND SUBSIDIARY
FORM 10-Q
SEPTEMBER 30, 2022
TABLE OF CONTENTS
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | our ability to obtain additional funds for our operations; |
| ● | our financial performance; |
| ● | risks relating to the timing and costs of clinical trials and the timing and costs of other expenses; |
| ● | risks related to market acceptance of products; |
| ● | intellectual property risks; |
| ● | the impact of government regulation and developments relating to our competitors or our industry; |
| ● | our competitive position; |
| ● | our industry environment; |
| ● | our anticipated financial and operating results, including anticipated sources of revenues; |
| ● | assumptions regarding the size of the available market, benefits of our products, product pricing and timing of product launches; |
| ● | our estimates of our expenses, losses, future revenue and capital requirements, including our needs for additional financing; |
| ● | our ability to attract and retain qualified key management and technical personnel; |
| ● | statements regarding our goals, intensions, plans and expectations, including the introduction of new products and markets; and |
| ● | our cash needs and financing plans. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
ii
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SILO PHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Equity investments | ||||||||
| Prepaid expenses and other current assets - current | ||||||||
| Total Current Assets | ||||||||
| Note receivable - non-current, including interest receivable of $4,800 and $1,210 at | ||||||||
| Prepaid expenses - non-current | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Insurance payable | ||||||||
| Deferred revenue - current portion | ||||||||
| Total Current Liabilities | ||||||||
| LONG TERM LIABILITIES: | ||||||||
| Deferred revenue - long-term portion | ||||||||
| Total Long Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitment and Contingencies (see Note 8) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock, $ | ||||||||
| Series B convertible preferred stock, $ | ||||||||
| Series C convertible preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying condensed notes to unaudited consolidated financial statements.
1
SILO PHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| LICENSE FEE REVENUES: | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUES | ||||||||||||||||
| GROSS PROFIT | ||||||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Compensation expense | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Research and development | ||||||||||||||||
| Insurance expense | ||||||||||||||||
| Bad debt recovery | ( | ) | ( | ) | ( | ) | ||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| LOSS FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSE): | ||||||||||||||||
| Interest income (expense), net | ( | ) | ( | ) | ||||||||||||
| Other income from equity shares earned for lock up agreement | ||||||||||||||||
| Gain on forgiveness of PPP note payable | ||||||||||||||||
| Net realized gain (loss) on equity investments | ( | ) | ||||||||||||||
| Net unrealized gain (loss) on equity investments | ( | ) | ( | ) | ||||||||||||
| Other expense | ( | ) | ||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ||||||||||||
| (LOSS) INCOME FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||||||||||
| DISCONTINUED OPERATIONS: | ||||||||||||||||
| Gain from sale of assets of discontinued operations, net of tax | ||||||||||||||||
| Loss from discontinued operations, net of tax | ( | ) | ( | ) | ( | ) | ||||||||||
| LOSS FROM DISCONTINUED OPERATIONS | ( | ) | ( | ) | ( | ) | ||||||||||
| NET (LOSS) INCOME | ( | ) | ( | ) | ||||||||||||
| Deemed dividend | ( | ) | ||||||||||||||
| NET (LOSS) INCOME AVAILABLE TO COMMON STOCKHOLDERS | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| NET (LOSS) INCOME PER COMMON SHARE: | ||||||||||||||||
| Continuing operations - basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Continuing operations - diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Discontinued operations - basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Discontinued operations - diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying condensed notes to unaudited consolidated financial statements.
2
SILO PHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(UNAUDITED)
| Additional | Total | |||||||||||||||||||||||||||||||||||
| Series B Preferred Stock | Series C Preferred Stock | Common Stock | Paid In | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Stock options issued as stock based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series C preferred stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balance, March 31, 2022 | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Stock options issued as stock based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Amortization of prepaid stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance, June 30, 2022 | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Sale of common stock | - | - | ||||||||||||||||||||||||||||||||||
| Rounding of share due to reverse stock split | - | - | ||||||||||||||||||||||||||||||||||
| Stock options issued as stock based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Amortization of prepaid stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2022 | - | $ | - | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||||||||||
| Series B Preferred Stock | Series C Preferred Stock | Common Stock | Paid In | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series C preferred stock issued for cash, net of offering cost | ||||||||||||||||||||||||||||||||||||
| Deemed dividend upon issuance of preferred stock | - | ( | ) | |||||||||||||||||||||||||||||||||
| Common stock warrants granted for services | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of Series C preferred stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ||||||||||||||||||||||||||||||||||
| Net income | - | - | - | |||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
See accompanying condensed notes to unaudited consolidated financial statements.
3
SILO PHARMA, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Bad debt recovery | ( | ) | ( | ) | ||||
| Stock-based compensation and professional fees | ||||||||
| Amortization of prepaid stock-based professional fees | ||||||||
| Net realized loss (gain) on equity investments | ( | ) | ||||||
| Net unrealized loss (gain) loss on equity investments | ( | ) | ||||||
| Equity shares earned for lock up agreement | ( | ) | ||||||
| Gain on forgiveness of PPP note payable and accrued interest | ( | ) | ||||||
| Gain from disposal of assets from discontinued operations | ( | ) | ||||||
| Change in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Assets of discontinued operations | ( | ) | ||||||
| Interest receivable | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Insurance payable | ||||||||
| Deferred revenue | ( | ) | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net proceeds from sale of equity investments | ||||||||
| Collection on note receivable written off prior to 2019 | ||||||||
| Collection on note receivable | ||||||||
| NET CASH PROVIDED BY INVESTING ACTIVITIES | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Net proceeds from sale of preferred stock | ||||||||
| Net proceeds from sale of common stock | ||||||||
| Advance from a related party | ||||||||
| Repayment of advance from a related party | ( | ) | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS: | ||||||||
| CASH AND CASH EQUIVALENTS - beginning of the period | ||||||||
| CASH AND CASH EQUIVALENTS - end of the period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Increase in equity investments recorded as deferred revenue pursuant to a patent license agreement | $ | $ | ||||||
| Note receivable issued in connection with asset purchase agreement | $ | $ | ||||||
See accompanying condensed notes to unaudited consolidated financial statements.
4
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 1 – ORGANIZATION AND BUSINESS
Silo Pharma, Inc. (formerly Uppercut Brands, Inc.) (the “Company”) was incorporated in the State of New York on July 13, 2010, under the name Gold Swap, Inc. On January 24, 2013, the Company changed its state of incorporation from New York to Delaware.
The Company is a developmental stage biopharmaceutical company focused on merging traditional therapeutics with psychedelic research. The Company seeks to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. The Company is focused on merging traditional therapeutics with psychedelic research for people suffering from indications such as depression, post-traumatic stress disorder (“PTSD”), Alzheimer’s, Parkinson’s, and other rare neurological disorders. The Company’s mission is to identify assets to license and fund the research which the Company’s believes will be transformative to the well-being of patients and the health care industry. The Company was engaged in the development of a streetwear apparel brand, NFID (see below).
On October 4, 2013, the Company filed a Form N-54A and elected to become a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company previously elected to be treated for federal income tax purpose as a regulated investment company, (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended, (the “Code”). Through September 29, 2018, the Company met the definition of RIC in accordance with the guidance under Accounting Standards Codification (“ASC”) Topic 946 “Financial Services – Investment Companies”. On September 29, 2018, the Company filed Form N-54C, Notification of Withdrawal of Election to be Subject to Section 55 through 65 of the 1940 Act, as the Company changed the nature of its business so as to cease to be a business development company (See Note 2 – Basis of Presentation). Additionally, since 2017, the Company has been subject to income taxes at corporate tax rates.
On May 21, 2019, the Company filed an amendment to its Certificate of Incorporation with the State of Delaware to change its name from Point Capital, Inc. to Uppercut Brands, Inc. Thereafter, on September 24, 2020, the Company filed an amendment to its Certificate of Incorporation with the State of Delaware to change its name from Uppercut Brands, Inc. to Silo Pharma, Inc.
On April 8, 2020, the Company incorporated a new wholly-owned subsidiary, Silo Pharma Inc., in the State of Florida. The Company has also secured the domain name www.silopharma.com. The Company has been exploring opportunities to expand the Company’s business by seeking to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. In July 2020, through the Company’s newly formed subsidiary, the Company entered into a commercial evaluation license and option agreement with University of Maryland, Baltimore (“UMB”) (see Note 8) pursuant to which, among other things, UMB granted the Company an exclusive, option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license to with respect to certain technology. The option was extended and exercised on January 13, 2021. On February 12, 2021, the Company entered into a Master License Agreement with UMB (see Note 8). The Company plans to actively pursue the acquisition and/or development of intellectual property or technology rights to treat rare diseases, and to ultimately expand the Company’s business to focus on this new line of business.
On September 30, 2021, the Company entered into and closed on an Asset Purchase Agreement (the “Asset Purchase Agreement) with NFID, LLC, a Florida limited liability company (the “Buyer”), whereby the Buyer purchased from the Company certain assets, properties, and rights in connection with the Company’s NFID trademark name, logos, domain, and apparel clothing and accessories for a purchase price of $60,000 in the form of a promissory note amounting to $60,000. The promissory note bears 8% interest per annum and matures on October 1, 2023. Accordingly, the results of operations of this component, for all periods presented, are separately reported as “discontinued operations” on the condensed consolidated statements of operations (see Note 4).
On March 11, 2022, the Company stockholders approved granting discretionary authority to the Company’s Board of Directors to amend the Company’s Certificate of Incorporation to effect one or more consolidations of the Company’s issued and outstanding shares of common stock, pursuant to which the shares of common stock would be combined and reclassified into one share of common stock at a ratio within the range from 1-for-5 up to 1-for-50 (the “Reverse Stock Split”), provided that, (X) that the Company shall not effect Reverse Stock Splits that, in the aggregate, exceeds 1-for-50, and (Y) any Reverse Stock Split is completed no later than February 8, 2023.
On September 14, 2022, the Company filed a Certificate of Amendment to the Amended and Restated Articles of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect a 1-for-50 reverse stock split (the “Reverse Stock Split”) with respect to the outstanding shares of the Company’s common stock. The Certificate of Amendment became effective on September 14, 2022. The Reverse Stock Split was previously approved by the sole director and the majority of stockholders of the Company. The Reverse Stock Split was deemed effective at the open of business on September 15, 2022. All share and per share data in the accompanying consolidated financial statements have been retroactively adjusted to reflect the effect of the reverse stock split.
5
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s unaudited condensed consolidated financial statements include financial statements for Silo Pharma, Inc and its inactive wholly-owned subsidiary with the same name as the parent entity, Silo Pharma, Inc, as of September 30, 2022 and during the three and nine months ended September 30, 2022. All intercompany balances and transactions have been eliminated in consolidation. Management acknowledges its responsibility for the preparation of the accompanying unaudited condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring and non-recurring adjustments, considered necessary in its opinion for a fair statement of its consolidated financial position and the consolidated results of its operations for the periods presented.
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 28, 2022.
In accordance with, ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the NFID, LLC component’s results of operations have been classified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the results of operations of this component, for all periods, are separately reported as “discontinued operations” on the condensed consolidated statements of operations.
Liquidity
As reflected in the accompanying condensed consolidated
financial statements, the Company generated a net loss of $
The positive worthy capital serves to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern. The Company believes that the Company has sufficient cash to meet its obligations for a minimum of twelve months from the date of this filing.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from estimates. Significant estimates during the nine months ended September 30, 2022 and year ended December 31, 2021 include the collectability of notes receivable, valuation of equity investments, estimates for obsolete and slow-moving inventory, estimates of the deemed dividend, valuation allowances for deferred tax assets, the fair value of warrants issued with debt and for services, and the fair value of shares and stock options issued for services and in settlements.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with high credit quality financial
institutions. The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $
6
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Notes Receivable
The Company recognizes an allowance for losses on notes receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current note receivable aging, and expected future write-offs, as well as an assessment of specific identifiable accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as general and administrative expense.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets - current
of $
Equity Investments, at Fair Value
Realized gain or loss is recognized when an investment is disposed of and is computed as the difference between the Company’s carrying value and the net proceeds received from such disposition. Realized gains and losses on investment transactions are determined by specific identification. Net unrealized appreciation or depreciation is computed as the difference between the fair value of the investment and the cost basis of such investment. Net unrealized gains or losses for equity investments are recognized in operations as the difference between the carrying value at the beginning of the period and the fair value at the end of the period.
Equity Investments, at Cost
Equity investments, at cost are comprised mainly of non-marketable capital stock and stock warrants, are recorded at cost, as adjusted for other than temporary impairment write-downs and are evaluated for impairment periodically.
Revenue Recognition
The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.
The Company records interest and dividend income on an accrual basis to the extent that the Company expects to collect such amounts.
For the license and royalty income, revenue is recognized when the Company satisfies the performance obligation based on the related license agreement. Payments received from the licensee that are related to future periods are recorded as deferred revenue to be recognized as revenues over the term of the related license agreement (see Note 8).
Product sales were recognized when the NFID products were shipped to the customer and title was transferred and were recorded net of any discounts or allowances which are separately reported as “discontinued operations” on the condensed consolidated statements of operations.
Cost of Revenues
The primary components of cost of revenues on license fees included the cost of the license fees. Payments made to the licensor that are related to future periods are recorded as prepaid expense to be amortized over the term of the related license agreement (see Note 8).
The primary components of cost of revenues on NFID apparel include the cost of the product, production costs, warehouse storage costs and shipping fees which are separately reported as “discontinued operations” on the condensed consolidated statements of operations.
7
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
Income Taxes
Deferred income tax assets and liabilities arise from temporary differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company follows the provisions of Financial Accounting Standards Board (“FASB”) ASC 740-10, “Uncertainty in Income Taxes”. Certain recognition thresholds must be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not” threshold. The Company does not believe it has any uncertain tax positions as of September 30, 2022 and December 31, 2021 that would require either recognition or disclosure in the accompanying condensed consolidated financial statements.
The Company did not recognize income tax expense for the nine months ended September 30, 2022.
Research and Development
In accordance with ASC 730-10, “Research
and Development-Overall,” research and development costs are expensed when incurred. During the three months ended September 30,
2022 and 2021, research and development costs were $
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”. ASU 2016-02 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to recognize a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The pronouncement requires a modified retrospective method of adoption and is effective on January 1, 2019, with early adoption permitted. As of September 30, 2022, the Company has no leases. The Company will analyze any lease to determine if it would be required to record a lease liability and a right of use asset on its consolidated balance sheets at fair value upon adoption of ASU 2016-02. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a term of 12 months or less.
Net Loss per Common Share
Basic loss per share is computed by dividing net loss allocable to common shareholders by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income available to common shareholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period using the as-if converted method. Potentially dilutive securities which included convertible preferred shares and stock options are excluded from the computation of diluted shares outstanding if they would have an anti-dilutive impact on the Company’s net losses.
8
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
The following are the potentially dilutive shares for the nine months ended September 30, 2022 and 2021:
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Series C convertible preferred stock | ||||||||
| Stock options | ||||||||
| Warrants | ||||||||
The following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share (“EPS”) calculations.
| Three months ended September 30, 2022 | Three months ended September 30, 2021 | Nine months ended September 30, 2022 | Nine months ended September 30, 2021 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Denominator: | ||||||||||||||||
| Weighted-average shares of common stock | ||||||||||||||||
| Dilutive effect of convertible instruments | ||||||||||||||||
| Diluted weighted-average of common stock | ||||||||||||||||
| Net (loss) income per common share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company adopted this ASU in the first quarter of 2022 and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2020-06 during the three months ended March 31, 2022 and the adoption did not have material impact on its condensed consolidated financial statements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s consolidated financial statements.
NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on September 30, 2022. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
9
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
| Level 1 - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. | |
| Level 2 - | Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. | |
| Level 3 - | Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
The Company analyzes all financial instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.
Equity Investments at Fair Value
The Company accounted for certain equity investments at fair value using level 1, level 2 and level 3 valuations. Assets and liabilities measured at fair value on a recurring basis are as follows on September 30, 2022 and December 31, 2021:
| On September 30, 2022 | On December 31, 2021 | |||||||||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Equity investments consisting of common stock, at fair value | $ | $ | $ | $ | $ | |||||||||||||||||||
The following table summarizes activity in the Company’s equity investments, at fair value for the periods presented:
| September 30, 2022 | December 31, 2021 | |||||||
| Balance, beginning | $ | $ | ||||||
| Additions | ||||||||
| Sales at original cost | ( | ) | ( | ) | ||||
| Unrealized (loss) gain | ( | ) | ||||||
| Balance as of September 30, 2022 | $ | $ | ||||||
During the nine months ended September 30, 2022,
the Company received
During the nine months ended September 30, 2022,
the Company sold its equity investments in Aikido Pharma, Inc. with cost of $
On December 31, 2021, equity investments, at fair value consisted of common equity securities of two entities, Home Bistro, Inc. and Aikido Pharma, Inc. and at September 30, 2022, the investment consisted of only Home Bistro, Inc. (see Note 8).
Equity investments are carried at fair value with unrealized gains or losses which is recorded as net unrealized gain (loss) on equity investments in the accompanying condensed consolidated statement of operations. Realized gains and losses are determined on a specific identification basis which is recorded as net realized gain (loss) on equity investments in the consolidated statement of operations. The Company reviews equity investments, at fair value for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.
ASC 825-10 “Financial Instruments” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding equity instruments.
10
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Equity Investments at Cost
On September 30, 2022 and December 31, 2021, the Company did not have non-marketable capital stock and stock warrants recorded at cost.
NOTE 4 – DISPOSAL OF THE DISCONTINUED OPERATIONS OF THE NFID BUSINESS
On September 30, 2021, the Company entered into
and closed on an Asset Purchase Agreement (see Note 1) with NFID, LLC, an unrelated party, a Florida limited liability company, whereby
the Company sold certain assets, properties, and rights in connection with its NFID trademark name, logos, domain, and apparel clothing
and accessories for a purchase price of $
ASC 205-20 “Discontinued Operations” establishes that the disposal or abandonment of a component of an entity or a group of components of an entity should be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. As a result, the component’s results of operations have been classified as discontinued operations on a retrospective basis for all periods presented. Accordingly, the results of operations of this component, for all periods, are separately reported as “discontinued operations” on the condensed consolidated statements of operations.
The following table set forth the selected financial data of the Company’s gain from sale of the NFID business on September 30, 2021:
| September 30, 2021 | ||||
| Assets: | ||||
| Current assets: | ||||
| Inventory, net | $ | |||
| Total assets | $ | |||
| Liabilities: | ||||
| Current liabilities: | ||||
| Total liabilities | $ | |||
| Net asset of NFID business disposed | $ | |||
| Consideration in the form of a note receivable | ||||
| Gain from sale of NFID business | $ | |||
The summarized operating result of discontinued operations of the NFID Business included in the Company’s condensed consolidated statements of operations for the nine months ended September 30, 2022 and 2021 is as follows:
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2022 | 2021 | |||||||
| Product sales, net | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit (loss) | ( | ) | ||||||
| Total operating and other non-operating expenses | ( | ) | ( | ) | ||||
| Gain from sale of NFID business | ||||||||
| Loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
11
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
NOTE 5 – NOTES RECEIVABLE
As of September 30, 2022 and December 31, 2021, notes receivable, net, consisted of the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Principal amounts of notes receivable | $ | $ | ||||||
| Additional notes receivable | ||||||||
| Collections on notes receivables | ( | ) | ( | ) | ||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Total Notes receivable, net | ||||||||
| Less: notes receivable, net – current portion | ||||||||
| Notes receivable – non-current | $ | $ | ||||||
On September 28, 2018, the Company and Blind Faith
Concepts Holdings, Inc. (the “Seller”) executed a two-year promissory note receivable agreement with a principal balance of
$
On November 2, 2018, the Company and Seller entered
into a promissory note agreement (“Promissory Note Agreement”) with a principal balance of $
In December 2019, pursuant to claim purchase agreements
(“Claim Purchase Agreements”), the Company sold its notes receivable and related interest receivable balances in the aggregate
amount of $
During the year ended December 31, 2021, the Company
recovered an aggregate of $
On June 7, 2021,
12
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
On September 30, 2021, the Company executed a
note receivable agreement with NFID, LLC in connection with an Asset Purchase Agreement (see Note 4). The promissory note bears
NOTE 6 – STOCKHOLDERS’ EQUITY
Shares Authorized
The Company has
Preferred Stock
In April 2013, the Company designated
Series C Convertible Preferred Stock
On February 9, 2021, the Company filed a Certificate
of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock (the “Certificate of Designations”)
with the Delaware Secretary of State, designating
| ● | Designation. The Company has designated |
| ● | Dividends. Holders of Series C Convertible preferred stock shall be entitled to receive dividends (on an as-if-converted-to-common-stock basis) in the same form as dividends actually paid on shares of the common stock when, as and if such dividends are paid on shares of the common stock. No other dividends shall be paid on shares of the Series C Convertible preferred stock. |
| ● | Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series C Convertible preferred stock shall be entitled to receive the same amount that a holder of common stock would receive if the Series C Convertible preferred stock were fully converted (disregarding any conversion limitations) which amounts shall be paid pari passu with all holders of common stock. |
| ● | Voting Rights. Except as otherwise provided in the Certificate of Designations or as otherwise required by law, the Series C Convertible preferred stock shall have no voting rights. However, as long as any shares of Series C Convertible preferred stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series C Convertible preferred stock, (a) alter or change adversely the powers, preferences or rights given to the Series C Convertible preferred stock or alter or amend the Certificate of Designations, (b) amend its Certificate of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of the Series C Convertible preferred stock, (c) increase the number of authorized shares of Series C Convertible preferred stock, or (d) enter into any agreement with respect to any of the foregoing. |
| ● | Conversion. Each share of Series C Convertible preferred stock is convertible, at any time and from time to time after the issuance date, at the option of the holder, into such number of shares of common stock determined by dividing the Series C Stated Value by the Series C Conversion Price. “Series C Conversion Price” means $ |
| ● | Forced Conversion. Notwithstanding anything herein to the contrary, after the date that the Company’s stockholder approval is obtained and deemed effective, the Company may deliver a written notice to all holders (the “Forced Conversion Notice Date”) to cause each holder to convert all or part of such holder’s Series C Convertible preferred stock pursuant to Section 6 (“Forced Conversion”), it being agreed that the “Conversion Date” shall be deemed to occur no later than the earlier of (i) two (2) trading days and (ii) the number of trading days comprising the standard settlement period following the Forced Conversion Notice Date; provided, however, a holder shall only be required to convert pursuant to a Forced Conversion to the extent that such conversion would not cause a holder to exceed its beneficial ownership limitation. On March 10, 2021, the Company obtained the stockholders’ approval forcing the conversion of all the Series C Convertible preferred stock. On April 12, 2021, the Company notified holders of its Series C Convertible preferred stock of its election to force the conversion to its Series C Convertible preferred stock into shares of the Company’s common stock (see below for additional conversions in 2022). |
13
SILO PHARMA, INC. AND
SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
| ● | Exercisability. |
Series C Convertible Preferred Stock Financing
On February 9, 2021 (the “Effectiveness
Date”), the Company entered into securities purchase agreements (collectively, the “Series C Purchase Agreements”) with
certain institutional and accredited investors for the sale of an aggregate of
The February Warrants are exercisable for a period
of
The Series C Convertible preferred stock and the February Warrants each contain a beneficial ownership limitation that restricts each of the investor’s ability to exercise the February Warrants and convert the Series C Convertible preferred stock such that the number of shares of the Company common stock held by each of them and their affiliates after such conversion or exercise does not exceed 4.99% (or, at the election of the Investor, 9.99%) of the Company’s then issued and outstanding shares of common stock.
The Series C Purchase Agreement also provides
that until the 18 month anniversary of the Effectiveness Date, in the event of a subsequent financing (except for certain exempt issuances
as provided in the Series C Purchase Agreement) by the Company, each investor will have the right to participate in such subsequent financing
up to an amount equal to the investor’s proportionate share of the subsequent financing based on such investor’s participation
in the offering on the same terms, conditions and price provided for in the subsequent financing up to an amount equal to
In connection with the offering, the Company entered
into separate registration rights agreements (“Registration Rights Agreements”) with the investors pursuant to which the Company
agreed to undertake to file a registration statement (the “Registration Statement”) to register the resale of the Registrable
Securities (as defined in the Registration Rights Agreement) within ten calendar days following the Effectiveness Date. The Company agreed
to use its best efforts to cause the Registration Statement covering the Registrable Securities to be declared effective no later than
the 60th calendar day following the Effectiveness Date, or in the event of a full review by the Securities and Exchange
Commission, the 90th calendar day following the Effectiveness Date, and to maintain the effectiveness of the Registration
Statement until all of the Registrable Securities have been sold or are otherwise able to be sold pursuant to Rule 144 under the Securities
Act of 1933, as amended.
14
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
The net proceeds of the offering are expected to be used for working capital purposes and to further execute on the Company’s existing business.
Sale of common stock
On September 26, 2022, the Company entered into
an underwriting agreement (the “Underwriting Agreement”) with Laidlaw & Company (UK) Ltd., as representative of the several
underwriters identified therein (the “Underwriters”), relating to the public offering (the “Offering”) of
Conversion of Series C Convertible Preferred Stock into Common Stock
On March 31, 2022, the Company notified holders
of its Series C Convertible preferred stock of its election to force the conversion to its Series C Convertible preferred stock into shares
of the Company’s common stock pursuant to the Certificate of Designations unless such conversion would cause the holder to exceed
its beneficial ownership limitation pursuant to the Certificate of Designations. On March 31, 2022, the Company converted
Stock Options
On January 18, 2021, the Company’s board
of directors (“Board”) approved the Silo Pharma, Inc. 2020 Omnibus Equity Incentive Plan (the “2020 Plan”) to
incentivize employees, officers, directors and consultants of the Company and its affiliates.
15
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
On December 29, 2021, the Board granted an aggregate
of
On January 27, 2022,
Stock option activities for the nine months ended September 30, 2022 are summarized as follows:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Balance Outstanding, December 31, 2021 | $ | $ | ||||||||||||||
| Granted as incentives | $ | $ | ||||||||||||||
| Granted pursuant to employment agreement (see Note 8) | $ | $ | ||||||||||||||
| Forfeited | ||||||||||||||||
| Balance Outstanding, September 30, 2022 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2022 | $ | $ | ||||||||||||||
Stock Warrants
On January 18, 2021, the Company granted warrants
to purchase up to
On February 9, 2021,
On September 26, 2022,
16
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Warrant activities for the nine months ended September 30, 2022 are summarized as follows:
| Number of Warrants |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value |
|||||||||||||
| Balance Outstanding, December 31, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Balance Outstanding, September 30, 2022 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2022 | $ | $ | ||||||||||||||
NOTE 7 – CONCENTRATIONS
Customer Concentration
For the nine months ended September 30, 2022 and
2021, no customer accounted for over
For the nine months ended September 30, 2022 and
2021, one licensee accounted for
Vendor Concentrations
For the nine months ended September 30, 2022 and
2021, one licensor accounted for
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Employment Agreements
Eric Weisblum
On April 17, 2020, the Company entered into an
employment agreement (“Employment Agreement”) with Eric Weisblum to serve as Chief Executive Officer and Chief Financial Officer
of the Company. The term of the Employment Agreement will continue for a period of one year from the date of execution date thereof and
automatically renews for successive one-year periods at the end of each term until either party delivers written notice of their intent
not to renew at least six months prior to the expiration of the then effective term.
Daniel Ryweck
On September 27, 2022, the Board appointed Daniel
Ryweck as Chief Financial Officer of the Company On September 28, 2022, the Company entered into an employment agreement (the “Ryweck
Employment Agreement”) with Mr. Ryweck. Pursuant to the terms of the Ryweck Employment Agreement, Mr. Ryweck will (i) receive a
base salary at an annual rate of $
17
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Dr. James Kuo
On January 27, 2022, the Company and Dr.
License Agreements between the Company and Vendors
University of Maryland, Baltimore - License Agreement for Development and Use of Central Nervous System-Homing Peptides
Commercial Evaluation License and Option Agreement with the University of Maryland, Baltimore
Effective as of July 15, 2020, the Company, through
its wholly-owned subsidiary, Silo Pharma, Inc. (see Note 1) and University of Maryland, Baltimore (“UMB”) (collectively as
“Parties”), entered into a commercial evaluation license and option agreement (“License Agreement”), granting
the Company an exclusive, non-sublicensable, non-transferable license to with respect to the exploration of the potential use of central
nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory
pathology. The License Agreement also granted the Company an exclusive option to negotiate and obtain an exclusive, sublicensable, royalty-bearing
license (“Exclusive Option”) to with respect to the subject technology. The License Agreement had a term of six months from
the effective date however if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation
period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first. The Company exercised
its Exclusive Option on January 13, 2021 and entered into a Master License Agreement on February 12, 2021. Both parties may terminate
this agreement within thirty days by giving a written notice. In July 2020, the Company paid a license fee of $
University of Maryland, Baltimore - License Agreement for Development and Use of Joint-Homing Peptides
Commercial Evaluation License and Option Agreement with the University of Maryland, Baltimore
Effective as of February 26, 2021, the Company, through its wholly-subsidiary, Silo Pharma, Inc., and University of Maryland, Baltimore (“UMB”) (collectively as “Parties”), entered into a commercial evaluation license and option agreement (“License Agreement”), which granted the Company an exclusive, non-sublicensable, non-transferable license to with respect to the exploration of the potential use of joint-homing peptides for use in the investigation and treatment of arthritogenic processes. The License Agreement also granted the Company an exclusive option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license (“Exclusive Option”) to with respect to the subject technology. The License Agreement had a term of six months from the effective date. Both parties could have terminated the License Agreement within thirty days by giving a written notice.
18
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
On July 6, 2021, the Company entered into a First
Amendment Agreement (“First Amendment”) with UMB to extend the term of the original License Agreement by an additional six
months such that the First Amendment was effective until February 25, 2022 however, if the Company exercises the Exclusive Option, the
License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master
license agreement, whichever occurs first. The Company paid a license fee of $
On January 28, 2022, the Parties entered into a second amendment to the commercial evaluation and license agreement dated February 26, 2021 (“Second Amendment”). The Second Amendment extends the term of the original license agreement until December 31, 2022. However, if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first.
On June 30, 2022, the Parties entered into a third
amendment to the commercial evaluation and license agreement dated February 26, 2021 (“Third Amendment”). The Third Amendment
expands the scope of the license granted in the License Agreement to add additional patent rights with respect to an invention generally
known as Peptide-Targeted Liposomal Delivery for Treatment Diagnosis, and Imaging of Diseases and Disorders. In consideration of
the licenses granted under this Third Amendment, Company agreed to pay a one-time, non-refundable fee of $
Master License Agreement with the University of Maryland, Baltimore
As disclosed above, effective as of February 12, 2021, the Company and University of Maryland, Baltimore (“UMB”), entered into the Master License Agreement (“Master License Agreement”) which grants the Company an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual property: (i) to make, have made, use, sell, offer to sell, and import certain licensed products and: (ii) to use the invention titled, “Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology” and UMB’s confidential information to develop and perform certain licensed processes for the therapeutic treatment of neuroinflammatory disease.
The Master License Agreement will remain in effect
on a Licensed Product-by-Licensed Product basis and country-by-country basis until the later of: (a) the last patent covered under the
Master License Agreement expires, (b) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity,
or other legally enforceable market exclusivity, if applicable, or (c)
The Company may assign, sublicense, grant, or
otherwise convey any rights or obligations under the Master License Agreement to a Company affiliate, without obtaining prior written
consent from UMB provided that it meets the terms defined in the Master License Agreement. The Company may grant sublicenses of some or
all of the rights granted by the Master License Agreement, provided that there is no uncured default or breach of any material term or
condition under the Master License Agreement, by Company, at the time of the grant, and that the grant complies with the terms and conditions
of the Master License Agreement. The Company shall be and shall remain responsible for the performance by each of the Company’s
sublicensee. Any sublicense shall be consistent with and subject to the terms and conditions of the Master License Agreement and shall
incorporate terms and conditions sufficient to enable Company to comply with the Master License Agreement.
19
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Pursuant to the Master License Agreement,
Milestone Payment Terms:
| Milestone | Payment | |||
| $ | ||||
| $ | ||||
| $ | ||||
| $ | ||||
| $ | ||||
Royalty Payments Terms:
| (i) | 3% on sales of licensed products (as defined in the Master License Agreement) during the applicable calendar year for sales less than $50,000,000; and |
| (ii) | 5% on sales of licensed products during the applicable calendar year for sales greater than $50,000,000; and |
| (iii) | minimum annual royalty payments, as follows: |
| Years | Minimum Annual Royalty |
|||
| $ | ||||
| $ | ||||
| $ | ||||
| $ | ||||
| $ | ||||
In April 2021, in connection with the Company’s
Sublicense Agreement with Aikido Pharma Inc. (see below - Patent License Agreement with Aikido Pharma Inc.), the Company paid
License Agreements between the Company and Customer
Customer Patent License Agreement with Aikido Pharma Inc.
On January 5, 2021, the Company and its subsidiary Silo Pharma, Inc., a Florida corporation, entered into a patent license agreement (“License Agreement”) (collectively, the “Licensor”) and Aikido Pharma Inc. (“Aikido” or the “Customer”), as amended on April 12, 2021, pursuant to which the Licensor granted Aikido an exclusive, worldwide (“Territory”), sublicensable, royalty-bearing license to certain intellectual property: (i) to make, have made, use, provide, import, export, lease, distribute, sell, offer for sale, develop and advertise certain licensed products and (ii) to develop and perform certain licensed processes for the treatment of cancer and symptoms caused by cancer (“Field of Use”).
20
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
The License Agreement also provided that, if the
Licensor exercised the option granted to it pursuant to its commercial evaluation license and option agreement with UMB, effective as
of July 15, 2020, it would grant Aikido a non-exclusive sublicense (“Right”) to certain UMB patent rights in the field of
neuroinflammatory diseases occurring in patients diagnosed with cancer (“Field”). Pursuant to the License Agreement, Aikido
agreed to pay the Licensor, among other things, (i) a one-time non-refundable cash payment of $
Pursuant to the License Agreement, the Company
is required to prepare file, prosecute, and maintain the licensed patents. Unless earlier terminated, the term of the license to the licensed
patents will continue until the expiration or abandonment of all issued patents and filed patent applications within the licensed patents.
The Company may terminate the License Agreement upon 30 day written notice if Aikido fails to pay any amounts due and payable to the Company
or if Aikido or any of its affiliates brings a patent challenge against the Company, assists others in bringing a legal or administrative
challenge to the validity, scope, or enforceability of or opposes any of the licensed patents (“Patent Challenge”) against
the Company (except as required under a court order or subpoena). Aikido may terminate the Agreement at any time without cause, and without
incurring any additional penalty, (i) by providing at least 30 days’ prior written notice and paying the Company all amounts due
to it through such termination effective date. Either party may terminate the Agreement for material breaches that have failed to be cured
within 60 days after receiving written notice. The Company collected the non-refundable cash payment of $
With respect to a vote of Aikido’s stockholders
to approve a reverse split of its common stock no later than December 31, 2021 (“Reverse Stock Split Vote”), each share of
the Series M Convertible Preferred Stock shall be entitled to such number of votes equal to
21
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
The Right shall be to the full extent permitted
by and on terms and conditions required by UMB for a term consistent with the term of patent and technology licenses that UMB normally
grants. In the event that the Company exercises its option and executes a license with UMB to the UMB patent rights within 40 days after
the execution of such UMB license, for consideration to be agreed upon and paid by Aikido, which consideration shall in no event exceed
Customer Sublicense Agreement with Aikido Pharma Inc.
On April 6, 2021 (the “Sublicense Agreement Effective Date”), the Company entered into the Sublicense Agreement with Aikido pursuant to which the Company granted Aikido an exclusive worldwide sublicense to (i) make, have made, use, sell, offer to sell and import the Licensed Products (as defined below) and (ii) in connection therewith to (A) use an invention known as “Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology” which was sublicensed to the Company pursuant to the Master License Agreement and (B) practice certain patent rights (“Patent Rights”) for the therapeutic treatment of neuroinflammatory disease in cancer patients. “Licensed Products” means any product, service, or process, the development, making, use, offer for sale, sale, importation, or providing of which: (i) is covered by one or more claims of the Patent Rights; or (ii) contains, comprises, utilizes, incorporates, or is derived from the Invention or any technology disclosed in the Patent Rights.
Pursuant to the Sublicense Agreement, Aikido agreed
to pay the Company (i) an upfront license fee of $
22
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Sponsored Study and Research Agreements between the Company and Vendors
Investigator-Sponsored Study Agreement with University of Maryland, Baltimore
On January 5, 2021, the Company entered into an
investigator-sponsored study agreement (“Sponsored Study Agreement”) with the University of Maryland, Baltimore. The research
project is a clinical study to examine a novel peptide-guided drug delivery approach for the treatment of multiple sclerosis (“MS”).
More specifically, the study is designed to evaluate (1) whether MS-1-displaying liposomes can effectively deliver dexamethasone to the
CNS and (2) whether MS-1-displaying liposomes are superior to plain liposomes, also known as free drug, in inhibiting the relapses and
progression of experimental autoimmune encephalomyelitis. Pursuant to the Sponsored Study Agreement, the research shall commence on March
1, 2021 and will continue until substantial completion, subject to renewal upon mutual written consent of the parties.
Sponsored Research Agreement with The Regents of the University of California
On June 1, 2021 (the “Effective Date”),
the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”) with The Regents of the University
of California, on behalf of its San Francisco Campus (“UCSF”) pursuant to which UCSF shall conduct a study to examine psilocybin’s
effect on inflammatory activity in humans to accelerate its implementation as a potential treatment for Parkinson’s Disease, chronic
pain, and bipolar disorder. Pursuant to the Agreement, the Company shall pay UCSF a total fee of $
Sponsored Research Agreement with University of Maryland, Baltimore
On July 6, 2021, the Company and University of Maryland, Baltimore (“UMB”) entered into a sponsored research agreement (“July 2021 Sponsored Research Agreement”) pursuant to which UMB shall evaluate the pharmacokinetics of dexamethasone delivered to arthritic rats via liposome. The research pursuant to the July 2021 Sponsored Research Agreement shall commence on September 1, 2021 and will continue until the substantial completion thereof, subject to renewal upon written consent of the parties. The July 2021 Sponsored Research Agreement may be terminated by either party upon 30 days’ prior written notice to the other party. In addition, if either party commits any material breach of or defaults with respect to any terms or conditions of the July 2021 Sponsored Research Agreement and fails to remedy such default or breach within 10 business days after written notice from the other party, the party giving notice may terminate the July 2021 Sponsored Research Agreement as of the date of receipt of such notice by the other party. If the Company terminates the July 2021 Sponsored Research Agreement for any reason other than an uncured material breach by UMB, the Company shall relinquish any and all rights it may have in the Results (as defined in the July 2021 Sponsored Research Agreement) to UMB. In addition, if the July 2021 Sponsored Research Agreement is terminated early, the Company, among other things, will pay all costs incurred and accrued by UMB as of the date of termination.
Pursuant to the terms of the July 2021 Sponsored Research Agreement, UMB granted the Company an option (the “Option”) to negotiate and obtain an exclusive license to any UMB Arising IP (as defined in the July 2021 Sponsored Research Agreement) and UMB’s rights in any Joint Arising IP (as defined in the July 2021 Sponsored Research Agreement) (collectively, the “UMB IP”). The Company may exercise the Option by giving UMB written notice within 60 days after it receives notice from UMB of the UMB IP. Pursuant to the July 2021 Sponsored Research Agreement, the Company shall pay UMB the fees below:
| Payment | ||||||
| 1 | $ | |||||
| 2 | $ | |||||
| 3 | $ | |||||
The Company paid the first payment of $
23
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
On June 7, 2022, the Company and UMB amended the July 2021 Sponsored Research Agreement whereby both parties agreed to make changes to the original project work and budget. The amendment had no effect on the consolidated financial statements.
Sponsored Research Agreement with Columbia University
On October 1, 2021, the Company entered into a sponsored
research agreement with Columbia University pursuant to which the Company has been granted an option to license certain assets currently
under development, including Alzheimer’s disease. The term of the option will commence on the effective date of this agreement and
will expire upon the earlier of (i) 90 days after the date of the Company’s receipt of a final research report for each specific
research proposal as defined in the agreement or (ii) termination of the research. If the Company elects to exercise the option, both
parties will commence negotiation of a license agreement and will execute a license agreement no later than 3 months after the dated of
the exercise of the option. Columbia University and the Company will work towards developing a therapeutic treatment for patients suffering
from Alzheimer’s disease to post-traumatic stress disorder. During a one-year period from the date of this agreement, the Company
shall pay a total of $1,436,082 to Columbia University for the support of the research according to the payment schedule as follows: (i)
30% at signing, (ii) 30% at four and half months after the start of the project, (iii) 30% at nine months after the start of the project
and, (iv)10% at completion of the project.
In 2021, the Company amortized $
On September 30, 2022, future amounts due under sponsored study and research agreements between the Company and vendors is as follows:
| Year ended September 30, | Amount | |||
| 2023 | $ | |||
| Total | $ | |||
Joint Venture Agreement with Zylö Therapeutics, Inc.
On April 22, 2021 (“Effective Date”), the Company entered into a Joint Venture Agreement (“JV Agreement”) with Zylö Therapeutics, Inc. (“ZTI”) pursuant to which the parties agreed to form a joint venture entity, to be named Ketamine Joint Venture, LLC (“Joint Venture”), to, among other things, focus on the clinical development of ketamine using ZTI’s Z-pod™ technology (“Venture”). Pursuant to the JV Agreement, the Company shall act as the manager (“Manager”) of the Joint Venture. The Joint Venture shall terminate if the development program does not meet certain specifications and milestones as set forth in the JV Agreement within 30 days of the date set forth in the JV Agreement. Notwithstanding the foregoing, the Manager may, in its sole discretion, terminate the Joint Venture at any time.
Furthermore, pursuant to the terms of the JV Agreement, ZTI shall grant the Joint Venture a sublicense pursuant to its license agreement (the “License Agreement”) with Albert Einstein College of Medicine dated November 27, 2017, in the event that the Company or a third party makes a request indicating that the patented technology (the “Patented Technology”) licensed to ZTI pursuant to the License Agreement is needed to advance the development of the Joint Venture or it is contemplated or determined that the Patented Technology will be sold. Furthermore, pursuant to the JV Agreement, ZTI granted the Company an exclusive option to enter into a separate joint venture for the clinical development of psilocybin using ZTI’s Z-pod™ technology on the same terms and conditions set forth in the JV Agreement, which option shall expire 24 months after the JV Effective Date.
24
SILO PHARMA, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
(UNAUDITED)
Amended Service Agreement
On September 10, 2021 (“Effective Date”),
the Company entered into an Amendment Agreement (“Amended Service Agreement”) to a certain service agreement dated on September
8, 2020 with the University of Texas (“University”) at Austin whereby the University will provide advisory service and assist
the Company on identifying license and sponsored research opportunities for the Company. The Company shall pay the University $
NOTE 9 – SUBSEQUENT EVENTS
On October 12, 2022,
On October 12, 2022,
25
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with the unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the year ended December 31, 2021 included in the form 10-K filed with the SEC. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those factors set forth in the section entitled “Cautionary Note Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part II, Item 1A.
Overview
We are a developmental stage biopharmaceutical company focused on merging traditional therapeutics with psychedelic research. We are committed to developing innovative solutions to address a variety of underserved conditions. In these uncertain times, the mental health of the nation and beyond is being put to the test. More than ever, creative new therapies are needed to address the health challenges of today. Combining our resources with world-class medical research partners, we hope to make significant advances in the medical and psychedelic space.
Rare Disease Therapeutics
We seek to acquire and/or develop intellectual property or technology rights from leading universities and researchers to treat rare diseases, including the use of psychedelic drugs, such as psilocybin, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. We are focused on merging traditional therapeutics with psychedelic research for people suffering from indications such as depression, post-traumatic stress disorder (“PTSD”), Parkinson’s, and other rare neurological disorders. Our mission is to identify assets to license and fund the research which we believe will be transformative to the well-being of patients and the health care industry.
Psilocybin is considered a serotonergic hallucinogen and is an active ingredient in some species of mushrooms. Recent industry studies using psychedelics, such as psilocybin, have been promising, and we believe there is a large unmet need with many people suffering from depression, mental health issues and neurological disorders. While classified as a Schedule I substance under the Controlled Substances Act (“CSA”), there is an accumulating body of evidence that psilocybin may have beneficial effects on depression and other mental health conditions. Therefore, the U.S. Food and Drug Administration (“FDA”) and U.S. Drug Enforcement Agency (“DEA”) have permitted the use of psilocybin in clinical studies for the treatment of a range of psychiatric conditions.
The potential of psilocybin therapy in mental health conditions has been demonstrated in a number of academic-sponsored studies over the last decade. In these early studies, it was observed that psilocybin therapy provided rapid reductions in depression symptoms after a single high dose, with antidepressant effects lasting for up to at least six months for a number of patients. These studies assessed symptoms related to depression and anxiety through a number of widely used and validated scales. The data generated by these studies suggest that psilocybin is generally well-tolerated and has the potential to treat depression when administered with psychological support.
We have engaged in discussions with a number of world-renowned educational institutions and advisors regarding potential opportunities and have formed a scientific advisory board that is intended to help advise management regarding potential acquisition and development of products.
In addition, as more fully described below, we have entered into a license agreement with the University of Baltimore, Maryland, and have entered into a joint venture with Zylo Therapeutics, Inc., with respect to certain intellectual property and technology that may be used for targeted delivery of potential novel treatments. In addition, we have recently entered into a sponsored research agreement with Columbia University pursuant to which we have been granted an option to license certain patents and inventions relating to the treatment of Alzheimer’s disease and stress-induced affective disorders using Ketamine in combination with certain other compounds.
We plan to actively pursue the acquisition and/or development of intellectual property or technology rights to treat rare diseases, and to ultimately expand our business to focus on this new line of business.
26
License Agreements between the Company and a Vendor
Vendor License Agreement with the University of Baltimore, Maryland for CNS Homing Peptide
On February 12, 2021, we entered into a Master License Agreement (the “UMB License Agreement”) with the University of Maryland, Baltimore (“UMB”) pursuant to which UMB granted us an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual property (i) to make, have made, use, sell, offer to sell, and import certain licensed products and (ii) to use the invention titled, “Central nervous system-homing peptides in vivo and their use for the investigation and treatment of multiple sclerosis and other neuroinflammatory pathology” (the “Invention”) and UMB’s confidential information to develop and perform certain licensed processes for the therapeutic treatment of neuroinflammatory disease. The term of the License Agreement shall commence on the UMB Effective Date and shall continue until the latest of (i) ten years from the date of First Commercial Sale (as defined in the Sublicense Agreement) of the Licensed Product in such country and (ii) the date of expiration of the last to expire claim of the Patent Rights (as defined in the UMB License Agreement) covering such Licensed Product in such country, or (iii) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity, if applicable, unless terminated earlier pursuant to the terms of the agreement. Pursuant to the UMB License Agreement, we agreed to pay UMB (i) a license fee of $75,000 (of which $25,000 was paid in 2021 and $50,000 was paid in 2022), (ii) certain event-based milestone payments, (iii) royalty payments, depending on net revenues, (iv) minimum royalty payments, and (v) a tiered percentage of sublicense income. The UMB License Agreement will remain in effect until the later of: (a) the last patent covered under the UMB License Agreement expires, (b) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity, if applicable, or (c) ten years after the first commercial sale of a licensed product in that country, unless earlier terminated in accordance with the provisions of the UMB License Agreement. The term of the UMB License Agreement shall expire 15 years after the effective date in which (a) there were never any patent rights, (b) there was never any data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity, or other legally enforceable market exclusivity or (c) there was never a first commercial sale of a licensed product.
As described below, the Company has entered into an investigator sponsored research agreement with UMB related to a clinical study to examine a novel peptide-guided drug delivery approach for the treatment of Multiple Sclerosis.
Commercial Evaluation License and Option Agreement with UMB for Joint Homing Peptide
Effective as of February 26, 2021, the Company, through its wholly-subsidiary, Silo Pharma, Inc., and University of Maryland, Baltimore (“UMB”), entered into a commercial evaluation license and option agreement (“License Agreement”), which granted the Company an exclusive, non-sublicensable, non-transferable license to with respect to the exploration of the potential use of joint-homing peptides for use in the investigation and treatment of arthritogenic processes. The License Agreement also granted the Company an exclusive option to negotiate and obtain an exclusive, sublicensable, royalty-bearing license (“Exclusive Option”) to with respect to the subject technology. The License Agreement had a term of six months from the effective date. Both parties could have terminated the License Agreement within thirty days by giving a written notice.
On July 6, 2021, the Company entered into a First Amendment Agreement (“Amended License Agreement”) with UMB to extend the term of the original License Agreement by an additional six months such that the Amended License Agreement was effective until February 25, 2022 however, if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first. The Company paid a license fee of $10,000 to UMB in March 2021 pursuant to the License Agreement, which was expensed, since the Company could not conclude that such costs would be recoverable for this early-stage venture.
On January 28, 2022, the Company and University of Maryland, Baltimore (“UMB”) entered into a second amendment to the commercial evaluation and license agreement dated February 26, 2021 (“Second Amendment”). The Second Amendment to extend the term of the original license agreement until December 31, 2022. However, if the Company exercises the Exclusive Option, the License Agreement shall expire at the end of the negotiation period (as defined in the License Agreement) or upon execution of a master license agreement, whichever occurs first.
On June 30, 2022, the Parties entered into a third amendment to the commercial evaluation and license agreement dated February 26, 2021 (“Third Amendment”). The Third Amendment expands the scope of the license granted in the License Agreement to add additional patent rights with respect to an invention generally known as Peptide-Targeted Liposomal Delivery for Treatment Diagnosis, and Imaging of Diseases and Disorders. In consideration of the licenses granted under this Third Amendment, Company agreed to pay a one-time, non-refundable fee of $2,500 which was recorded as research and development expense in the condensed consolidated statement of operations.
27
Joint Venture Agreement with Zylö Therapeutics, Inc. for Z-pod™ Technology
On April 22, 2021, the Company entered into a Joint Venture Agreement with Zylö Therapeutics, Inc. (“ZTI”) pursuant to which the parties agreed to form a joint venture entity, to be named Ketamine Joint Venture, LLC, to, among other things, focus on the clinical development of ketamine using ZTI’s Z-pod™ technology. Pursuant to the Joint Venture Agreement, the Company shall act as the manager of the Joint Venture. The Venture shall terminate if the development program does not meet certain specifications and milestones as set forth in the Joint Venture Agreement within 30 days of the date set forth in the Joint Venture Agreement. Notwithstanding the foregoing, the Manager may, in its sole discretion, terminate the Venture at any time.
Pursuant to the terms of the Joint Venture Agreement, (A) the Company shall contribute (1) $225,000 and (2) its expertise and the expertise of its science advisory board and (B) ZTI shall contribute (1) certain rights to certain of its patented technology as set forth in the JV Agreement, (2) a license to the know-how and trade secrets with respect to its Z-pod™ technology for the loading and release of ketamine, (3) ketamine to be used for clinical purposes, (4) reasonable use of its facilities and permits and (5) its expertise and know-how. Pursuant to the Joint Venture Agreement, 51% of the interest in the Joint Venture shall initially be owned by the Company and 49% of the interest in the Joint Venture shall initially be owned by ZTI, subject to adjustment in the event of additional contributions by either party. Notwithstanding the foregoing, in no event shall either party own more than 60% of the interest in the Joint Venture. As of the current date of this report, the joint venture entity has not been formed yet.
Furthermore, pursuant to the terms of the JV Agreement, ZTI shall grant the Joint Venture a sublicense pursuant to its license agreement (the “License Agreement”) with Albert Einstein College of Medicine dated November 27, 2017, in the event that the Company or a third party makes a request indicating that the patented technology (the “Patented Technology”) licensed to ZTI pursuant to the License Agreement is needed to advance the development of the Joint Venture or it is contemplated or determined that the Patented Technology will be sold. Furthermore, pursuant to the JV Agreement, ZTI granted the Company an exclusive option to enter into a separate joint venture for the clinical development of psilocybin using ZTI’s Z-pod™ technology on the same terms and conditions set forth in the JV Agreement, which option shall expire 24 months after the JV Effective
Investigator-Sponsored Study Agreements between the Company and Vendors
Sponsored Research Agreement with Columbia University for the Study of Ketamine in Combination with Other Drugs for Treatment of Alzheimer’s and Depression Disorders
On October 1, 2021, the Company entered into a sponsored research agreement with Columbia University (“Columbia”) pursuant to which Columbia shall conduct two different studies related to all uses of Ketamine or its metabolites in combination with Prucalopride, one of which is related to Alzheimer’s and the other of which is related to Depression, PTSD and Stress Projects. In addition, Company has been granted an option to license certain assets currently under development, including Alzheimer’s disease. The term of the option will commence on the effective date of this agreement and will expire upon the earlier of (i) 90 days after the date of the Company’s receipt of a final research report for each specific research proposal as defined in the agreement or (ii) termination of the research. If the Company elects to exercise the option, both parties will commence negotiation of a license agreement and will execute a license agreement no later than 3 months after the dated of the exercise of the option. Columbia University and the Company will work towards developing a therapeutic treatment for patients suffering from Alzheimer’s disease to posttraumatic stress disorder. During a one-year period from the date of this agreement, the Company shall pay a total of $1,436,082 to Columbia University for the support of the research according to the payment schedule as follows: (i) 30% at signing, (ii) 30% at four and half months after the start of the project, (iii) 30% at nine months after the start of the project and, (iv)10% at completion of the project. The Company paid the first payment of $430,825 in November 2021 and the second payment of $430,825 in July 2022 which were recorded to prepaid expense and other current assets – current to be amortized over the estimated project timeline of twelve months. On October 13, 2022, the Company entered into an amendment to the Columbia Agreement (the “Columbia Amendment”), pursuant to which the parties agreed to extend the payment schedule, whereby the third payment of $430,825 is due in March 2023 and the remaining payment of $143,607 is due upon completion.
Sponsored Research Agreement with University of Maryland, Baltimore for the Study of Targeted liposomal drug delivery for rheumatoid arthritis
On July 6, 2021, we entered into a sponsored research agreement (the “July 2021 Sponsored Research Agreement”) with UMB pursuant to which UMB shall evaluate the pharmacokinetics of dexamethasone delivered to arthritic rats via liposome. The research pursuant to the July 2021 Sponsored Research Agreement commenced on September 1, 2021 and will continue until the substantial completion thereof, subject to renewal upon written consent of the parties with a project timeline of twelve months. The July 2021 Sponsored Research Agreement may be terminated by either party upon 30 days’ prior written notice to the other party. In addition, if either party commits any material breach of or defaults with respect to any terms or conditions of the July 2021 Sponsored Research Agreement and fails to remedy such default or breach within 10 business days after written notice from the other party, the party giving notice may terminate the July 2021 Sponsored Research Agreement as of the date of receipt of such notice by the other party. If the Company terminates the July 2021 Sponsored Research Agreement for any reason other than an uncured material breach by UMB, we shall relinquish any and all rights it may have in the Results (as defined in the July 2021 Sponsored Research Agreement) to UMB. In addition, if the July 2021 Sponsored Research Agreement is terminated early, we, among other things, will pay all costs incurred and accrued by UMB as of the date of termination. Pursuant to the terms of the July 2021 Sponsored Research Agreement, UMB granted us an option (the “Option”) to negotiate and obtain an exclusive license to any UMB Arising IP (as defined in the July 2021 Sponsored Research Agreement) and UMB’s rights in any Joint Arising IP (as defined in the July 2021 Sponsored Research Agreement) (collectively, the “UMB IP”). We may exercise the Option by giving UMB written notice within 60 days after it receives notice from UMB of the UMB IP. We shall pay total fees of $276,285 as set forth in the July 2021 Sponsored Research Agreement.
28
The Company paid the first payment of $92,095 on September 1, 2021, which was recorded to prepaid expense and other current assets – current and was amortized during the year ended December 31, 2021. On August 31, 2022, the Company paid the second payment of $92,095 and the second payment was made on August 31, 2022, which was recorded to prepaid expense and other current assets – current and was amortized into research and development expense during the nine months ended September 30, 2022.
On June 7, 2022, the Company and UMB amended the July 2021 Sponsored Research Agreement whereby both parties agreed to make changes to the original project work and budget.
Sponsored Research Agreement with The Regents of the University of California for the Effect of Psilocybin on Inflammation in the Blood
On June 1, 2021, the Company entered into a sponsored research agreement (“Sponsored Research Agreement”) with The Regents of the University of California, on behalf of its San Francisco Campus (“UCSF”) pursuant to which UCSF shall conduct a study to examine psilocybin’s effect on inflammatory activity in humans to accelerate its implementation as a potential treatment for Parkinson’s Disease, chronic pain, and bipolar disorder. The purpose of this is to show what effect psilocybin has on inflammation in the blood. The Company believe that this study will help support the UMB homing peptide study. Pursuant to the Agreement, we shall pay UCSF a total fee of $342,850 to conduct the research over the two-year period. The Agreement shall be effective for a period of two years from the effective date, subject to renewal or earlier termination as set forth in the Sponsored Research Agreement. The Company paid the first payment of $40,000 pursuant to the payment schedule on the Sponsored Research Agreement on June 15, 2021, the second payment of $40,000 on September 9, 2021 and $20,570 on November 18, 2021, the third payment of $60,570 on March 1, 2022 and a fourth payment of $60,570 in August 2022, which were recorded to prepaid expense and other current assets – current to be amortized over the two-year period. In 2021, the Company amortized $92,855 of the prepaid expense. During the nine months ended September 30, 2022, the Company amortized $128,855 of the prepaid expense leaving a prepaid asset of $0 on September 30, 2022.
Investigator-Sponsored Study Agreement with UMB for CNS Homing Peptide
On January 5, 2021, we entered into an investigator-sponsored study agreement with UMB. The research project is a clinical study to examine a novel peptide-guided drug delivery approach for the treatment of Multiple Sclerosis (“MS”). More specifically, the study is designed to evaluate (1) whether MS-1-displaying liposomes can effectively deliver dexamethasone to the central nervous system and (2) whether MS-1-displaying liposomes are superior to plain liposomes, also known as free drug, in inhibiting the relapses and progression of Experimental Autoimmune Encephalomyelitis. Pursuant to the agreement, the research commenced on March 1, 2021 and will continue until substantial completion, subject to renewal upon mutual written consent of the parties. The total cost under the investigator-sponsored study agreement shall not exceed $81,474 which is payable in two equal installments of $40,737 upon execution of the Sponsored Study Agreement and $40,737 upon completion of the project with an estimated project timeline of nine months. The Company paid $40,737 on January 13, 2021. Currently, the project has not been completed due to the delays cause by the Covid-19 pandemic and has been put on hold until further notice.
Other License Agreements between the Company and a Customer
Customer Patent License Agreement with Aikido Pharma Inc.
On January 5, 2021, we entered into a Patent License Agreement (the “Aikido License Agreement”) with our wholly-owned subsidiary, Silo Pharma, Inc., and Aikido Pharma Inc. (“Aikido”) pursuant to which we granted Aikido an exclusive, worldwide, sublicensable, royalty-bearing license to certain intellectual property (i) to make, have made, use, provide, import, export, lease, distribute, sell, offer for sale, develop and advertise certain licensed products and (ii) to develop and perform certain licensed processes for the treatment of cancer and symptoms caused by cancer. The Aikido License Agreement relates to the rights which we had obtained under the UMB Option Agreement. Pursuant to the Aikido License Agreement, we agreed that if we exercised the UMB Option, we would grant Aikido a non-exclusive sublicense to certain UMB patent rights in the field of neuroinflammatory diseases occurring in patients diagnosed with cancer. The UMB Option was exercised on January 13, 2021. Accordingly, on April 6, 2021, we entered into a sublicense agreement with Aikido pursuant to which we granted Aikido a worldwide exclusive sublicense to our licensed patents under the UMB License Agreement (see below “Sublicense with Aikido Pharma Inc.”).
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Customer Sublicense Agreement with Aikido Pharma Inc.
On April 6, 2021 (“Effective Date”), we entered into a sublicense agreement (the “Sublicense Agreement”) with Aikido pursuant to which we granted Aikido an exclusive worldwide sublicense to (i) make, have made, use, sell, offer to sell and import the Licensed Products (as defined below) and (ii) in connection therewith to (A) use the Invention that was sublicensed to us pursuant to the UMB License Agreement and (B) practice certain patent rights as set forth in the Sublicense Agreement (the “Patent Rights”) for the therapeutic treatment of neuroinflammatory disease in cancer patients. “Licensed Products” means any product, service, or process, the development, making, use, offer for sale, sale, importation, or providing of which: (i) is covered by one or more claims of the Patent Rights; or (ii) contains, comprises, utilizes, incorporates, or is derived from the Invention or any technology disclosed in the Patent Rights. Pursuant to the Sublicense Agreement, Aikido shall agree to pay the Company (i) an upfront license fee of $50,000, (ii) the same sales-based royalty payments that we are subject to under the UMB License Agreement and (iii) total milestone payments of up to $1.9 million. The Sublicense Agreement shall continue on a Licensed Product-by-Licensed Product and country-by-country basis until the later of (i) the date of expiration of the last to expire claim of the Patent Rights covering such Licensed Product in such country, (ii) the expiration of data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity or other legally enforceable market exclusivity, if applicable and (iii) 10 years after the first commercial sale of a Licensed Product in that country, unless terminated earlier pursuant to the terms of the Sublicense Agreement. Furthermore, the Sublicense Agreement shall expire 15 years after the Effective Date with respect to any country in which (i) there were never any Patent Rights, (ii) there was never any data protection, new chemical entity, orphan drug exclusivity, regulatory exclusivity or other legally enforceable market exclusivity with respect to a Licensed Product and (ii) there was never a commercial sale of a Licensed Product, unless such agreement is earlier terminated pursuant to its terms. The Company collected the upfront license fee of $50,000 in April 2021.
COVID-19
The outbreak of the novel Coronavirus (COVID-19) evolved into a global pandemic. The Coronavirus has spread to many regions of the world. The extent to which the Coronavirus impacts the Company’s business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning the Coronavirus and the actions to contain the Coronavirus or treat its impact, among others.
As a result of the continuing spread of the Coronavirus, certain aspects of the Company’s business operations may be delayed or subject to interruptions. Specifically, as a result of the shelter-in-place orders and other mandated local travel restrictions, among other things, the research and development activities of certain of the Company’s partners may be affected, which may result in delays to the Company’s clinical trials, and the Company can provide no assurance as to when such trials, if delayed, will resume at this time or the revised timeline to complete trials once resumed.
Furthermore, site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis may be delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. If the Coronavirus continues to spread, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and the Company may be unable to conduct its clinical trials.
Infections and deaths related to the pandemic may disrupt the United States’ healthcare and healthcare regulatory systems. Such disruptions could divert healthcare resources away from, or materially delay U.S. Food and Drug Administration review and/or approval with respect to the Company’s clinical trials. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of the Company’s clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of the Company’s product candidates.
The spread of the Coronavirus, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material economic effect on the Company’s business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets, which may negatively impact the Company’s ability to access capital on favorable terms, if at all. In addition, a recession, depression or other sustained adverse market event resulting from the spread of the Coronavirus could materially and adversely affect the Company’s business and the value of its common stock.
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The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, its clinical trials, its research programs, healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s operations, and the Company will continue to monitor the situation closely.
Results of Operations
Comparison of Our Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021
The following table summarizes the results of operations for the three and nine months ended September 30, 2022 and 2021 based primarily on the comparative condensed consolidated financial statements, footnotes and related information for the periods identified, and should be read in conjunction with our condensed consolidated financial statements and the notes to those statements that are included elsewhere in this report.
| For the Three Months | For the Nine Months | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | 18,025 | $ | 18,025 | $ | 54,076 | $ | 53,238 | ||||||||
| Cost of sales | 1,459 | 1,459 | 4,378 | 3,544 | ||||||||||||
| Gross profit | 16,566 | 16,566 | 49,698 | 49,694 | ||||||||||||
| Operating expenses | 965,720 | 480,508 | 2,020,396 | 1,851,621 | ||||||||||||
| Operating loss from continuing operations | (949,154 | ) | (463,942 | ) | (1,970,698 | ) | (1,801,927 | ) | ||||||||
| Other income (expense), net | (34,092 | ) | 6,995,513 | (273,859 | ) | 7,040,956 | ||||||||||
| Provision for income taxes | (19,133 | ) | (19,133 | ) | ||||||||||||
| Loss from discontinued operations, net of tax | — | (87,319 | ) | (1,163 | ) | (227,469 | ) | |||||||||
| Net (loss) income | $ | (983,246 | ) | $ | 6,385,119 | $ | (2,245,720 | ) | $ | 4,992,427 | ||||||
Revenues
During the three months ended September 30, 2022 and 2021, revenues consisted of revenues on licensing fees related to our biopharmaceutical operation of $18,025 and $18,025, respectively. During the nine months ended September 30, 2022 and 2021, revenues consisted of revenues on licensing fees related to our biopharmaceutical operation of $54,076 and $53,238, respectively. Such revenues are primarily related to the Aikido License and Sublicense Agreement.
Cost of Revenues
During the three months ended September 30, 2022 and 2021, cost of revenues on license fees related to our biopharmaceutical operation amounted to $1,459 and $1,459, respectively. During the nine months ended September 30, 2022 and 2021, cost of revenues on license fees related to our biopharmaceutical operation amounted to $4,378 and $3,544, respectively. The primary components of cost of revenues on license fees include the cost of the license fees primarily related to the UMB License and Sublicense Agreement.
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Operating Expenses
During the three and nine months ended September 30, 2022 and 2021, total operating expenses consisted of the following:
| For the Three Months | For the Nine Months | |||||||||||||||
| Ended September 30, | Ended September 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Compensation expense | $ | 96,529 | $ | 54,943 | $ | 323,922 | $ | 222,177 | ||||||||
| Professional fees | 402,190 | 331,419 | 846,617 | 1,273,894 | ||||||||||||
| Research and development | 375,795 | 70,514 | 651,750 | 217,962 | ||||||||||||
| Insurance expense | 30,865 | 29,014 | 95,023 | 79,735 | ||||||||||||
| Bad debt recovery | — | (30,000 | ) | (20,000 | ) | (83,500 | ) | |||||||||
| Selling, general and administrative expenses | 60,341 | 24,618 | 123,084 | 141,353 | ||||||||||||
| Total operating expenses | $ | 965,720 | $ | 480,508 | $ | 2,020,396 | $ | 1,851,621 | ||||||||
| ● | Compensation Expense: | |
| During the three months ended September 30, 2022 and 2021, compensation expense was $96,529 and $54,943, respectively, an increase of $41,586, or 75.7%. This increase resulted from an increase in stock-based compensation of $21,680, an increase in BOD fees of $11,000, an increase payroll expense of $8,100 and an increase in other payroll related expenses of $806. | ||
| During the nine months ended September 30, 2022 and 2021, compensation expense was $323,922 and $222,177, respectively, an increase of $101,745, or 45.8%. This increase resulted from an increase in stock-based compensation of $95,925, an increase in BOD fees of $33,000, an increase payroll expense of $23,500 and an increase in other payroll related expenses of $10,820 offset by a decrease in bonus of $61,500. |
| ● | Professional Fees: | |
| During the three months ended September 30, 2022 and 2021, professional fees were $402,190 and $331,419, respectively, an increase of $70,771, or 21.3%. The increase was attributable to an increase in investor relations fees of $103,231 and an increase in accounting fees of $6,322, offset by a decrease in consulting fees of $31,058 and a decrease of legal fees of $7,724. |
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During the nine months ended September 30, 2022 and 2021, professional fees were $846,617 and $1,273,894, respectively, a decrease of $427,277, or 33.5%. The decrease was attributable to a decrease in stock-based consulting fees of $107,971 related to the issuance of shares to consultants, a decrease in consulting fees of $212,924, a decrease in investor relation fees of $1,266 and a decrease of legal fees of $112,643, offset by increase in accounting fees of $7,527.
| ● | Research and Development: | |
| During the three months ended September 30, 2022 and 2021, research and development expense amounted to $375,795 and $70,514, respectively, an increase of $305,281, or 433.0%. The increase was primarily attributable to research and development costs in connection with the investigator-sponsored study agreement with University of Columbia, UCSF and UMB. | ||
| During the nine months ended September 30, 2022 and 2021, research and development expense amounted to $651,750 and $217,962, respectively, an increase of $433,788, or 199.0%. The increase was primarily attributable to research and development costs in connection with the investigator-sponsored study agreement with University of Columbia, UCSF and UMB. |
| ● | Insurance Expense: | |
| During the three months ended September 30, 2022 and 2021, insurance expense amounted to $30,865 and $29,014, respectively, an increase of $1,851 or 6.4%. This increase was a result of increase in the cost of renewal of D&O insurance policy. | ||
| During the nine months ended September 30, 2022 and 2021, insurance expense amounted to $95,023 and $79,735, respectively, an increase of $15,288, or 19.2%. This increase was a result of increase in the cost of renewal of D&O insurance policy. |
| ● | Bad Debt Recovery: | |
| During the three months ended September 30, 2022 and 2021, bad debt recovery amounted to $0 and $30,000, respectively, a decrease of $30,000 or 100%. We recorded bad debt recovery from the collection of a previously written off note receivable deemed uncollectible. | ||
| During the nine months ended September 30, 2022 and 2021, bad debt recovery amounted to $20,000 and $83,500, respectively, a decrease of $63,500, or 76.0%. We recorded bad debt recovery from the collection of a previously written off note receivable deemed uncollectible. |
| ● | Selling, General and Administrative Expenses: | |
| Selling, general and administrative expenses consist of advertising and promotion, patent related expenses, transfer agent fees, custodian fees, bank service charges, travel, and other fees and expenses. | ||
| During the three months ended September 30, 2022 and 2021, selling, general and administrative expenses were $60,341 and $24,618, respectively, an increase of $35,723, or 145.1%. The increase was primarily attributable to an increase in filing fees of $12,366, an increase in state annual fees paid of $20,269, and an increase in listing fees of $6,930, offset by a decrease in other administrative expenses of $3,842. | ||
| During the nine months ended September 30, 2022 and 2021, selling, general and administrative expenses amounted to $123,084 and $141,353, respectively, a decrease of $18,269, or 12.9%. The decrease was primarily attributable to a decrease in filing fees of $10,474, a decrease in patent expense of $19,794 and a decrease in proxy meeting expense of $19,863, offset by an increase in insurance expense of $15,288, and an increase in other administrative expenses of $16,574. |
Operating Loss from Continuing Operations
During the three months ended September 30, 2022 and 2021, loss from continuing operations amounted to $949,154 and $463,942, respectively, an increase of $485,212, or 104.6%. The increase was primarily a result of the changes in operating expenses discussed above.
During the nine months ended September 30, 2022 and 2021, loss from continuing operations amounted to $1,970,698 and $1,801,927, respectively, an increase of $168,771, or 9.4%. The increase was primarily a result of the changes in operating expenses discussed above.
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Other Income (Expenses), net
During the three months ended September 30, 2022 and 2021, other (expense), net amounted to $(34,092) and other income, net amounted to $6,955,513, respectively, a change in other (expense), net of $(6,989,605), or 100.5%. The increase in other income (expense), net was primarily due to an increase in net unrealized (loss) on equity investment of $(335,949), a decrease in net realized gain on equity investment of $(6,655,120) from the sale of equity investment, offset by an increase in net interest income of $1,464 resulting from the interest on note receivable.
During the nine months ended September 30, 2022 and 2021, other (expense), net amounted to $(273,859) and other income, net amounted to $7,040,956, respectively, a change in other (expense), net of $(7,314,815), or 103.9%. The increase in other income (expense), net was primarily due to an increase in net unrealized (loss) on equity investment of $(626,008), an decrease in net realized gain on equity investment of $(6,759,820) from the sale of equity investment, increase in net interest income of $4,645 resulting from the interest on note receivable, and an increase in other income of $85,733 resulting from the grant date fair value of Home Bistro, Inc common stock received in exchange for entering into a lock up agreement with Home Bistro, Inc, and a decrease in gain on forgiveness of PPP notes payable from 2021 of $19,082.
Loss from Discontinued Operations
During the three months ended September 30, 2022 and 2021, loss from discontinued operations amounted to $0 and $87,319, respectively, a decrease of $87,319, or 100%. The decrease was primarily due to a sale of the Company’s NFID business in September 2021.
During the nine months ended September 30, 2022 and 2021, loss from discontinued operations amounted to $1,163 and $227,469, respectively, a decrease of $226,306, or 99.5%. The decrease was primarily due to a sale of the Company’s NFID business in September 2021.
Preferred Stock Dividend
During the three months ended September 30, 2022 and 2021, there were no deemed dividends.
During the nine months ended September 30, 2022 and 2021, dividends amounted to $0 and $1,403,997 respectively, a decrease of $1,403,997 or 100%. In 2021, the Company recorded $1,403,997 of deemed dividends resulting from the beneficial conversion feature in connection with the issuance of Series C Convertible Preferred Stock.
Net Income (Loss) and Net Income (Loss) Available to Common Stockholders
During the three months ended September 30, 2022, net loss and net loss available to common stockholders amounted to $(983,246) or $(0.49) per common share (basic and diluted), as compared to net income and net income available to common stockholders of $6,385,119, or $3.20 per common share (basic) and $3.16 per share (diluted) for the three months ended September 30, 2021, a negative change of $7,368,365, or 115.4%. The change was primarily a result of the changes discussed above.
During the nine months ended September 30, 2022, net loss and net loss available to common stockholders amounted to $(2,245,720) or $(1.13) per common share (basic and diluted), as compared to net income of $4,992,427 and net income available to common stockholders of $3,588,430, or $1.80 per common share (basic) and $1.78 per common share (diluted) for the nine months ended September 30, 2021, a negative change of $5,834,150, or 162.6%. The change was primarily a result of the changes discussed above.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital of $12,600,141 and $12,253,023 in cash and cash equivalents as of September 30, 2022 and working capital of $9,912,281 and $9,837,001 in cash and cash equivalents as of December 31, 2021.
| September 30, 2022 | December 31, 2021 | Working Capital Change | Percentage Change | |||||||||||||
| Working capital: | ||||||||||||||||
| Total current assets | $ | 12,912,335 | $ | 10,402,320 | $ | 2,510,015 | 24 | % | ||||||||
| Total current liabilities | (312,194 | ) | (490,039 | ) | 177,845 | 36 | % | |||||||||
| Working capital: | $ | 12,600,141 | $ | 9,912,281 | $ | 2,687,860 | 27 | % | ||||||||
The increase in working capital of $2,687,860 was primarily attributable to an increase in current assets of $2,510,015 primarily due to an increase in cash of approximately $2,416,022, an increase in prepaid expenses of $436,049 related to research projects, and a decrease in equity investments of $342,056, and a decrease in current liabilities primarily attributable to a decrease in accounts payable.
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On September 26, 2022, we entered into an underwriting agreement (the “Underwriting Agreement”) with Laidlaw & Company (UK) Ltd., as representative of the several underwriters identified therein (the “Underwriters”), relating to the public offering (the “Offering”) of 1,000,000 shares of the Company’s common stock (the “Firm Shares”), at public offering price of $5.00 per share. Under the terms of the Underwriting Agreement, we granted the Underwriters an option, exercisable for 45 days following the closing of the Offering, to purchase up to an additional 150,000 shares of common stock at the public offering price to cover over-allotments, if any. On September 28, 2022, the Underwriters fully exercised their over-allotment option and purchased an additional 150,000 shares (the “Option Shares,” together with the Firm Shares, the “Shares”). On September 29, 2022 we closed the Offering and issued the Shares for aggregate net proceeds of $4,940,948, after deducting underwriting discounts and commissions and offering expenses. We intend to use the net proceeds from the offering for research and development activities, sales and marketing, general working capital purposes, potential acquisitions of other companies, products or technologies, and to repay certain indebtedness. Concurrently with the closing of the Offering, we also issued warrants to purchase an aggregate of up to 57,500 shares of our common stock to the representative of the Underwriters or its designees, at an exercise price of $6.25 per share (the “Representative’s Warrants”). The Representative’s Warrants are exercisable beginning on March 25, 2023, and expire on September 26, 2027, pursuant to the terms and conditions of the Representative’s Warrants.
Cash Flows
A summary of cash flow activities is summarized as follows:
| Nine Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (2,611,633 | ) | $ | (1,504,145 | ) | ||
| Net cash provided by investing activities | 86,707 | 6,843,070 | ||||||
| Net cash provided by financing activities | 4,940,948 | 3,794,102 | ||||||
| Net increase in cash | $ | 2,416,022 | $ | 9,133,027 | ||||
Net Cash Used in Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2022 and 2021 were $2,611,633 and $1,504,145, respectively, an increase of $1,107,488 or 74%.
| ● | Net cash used in operating activities for the nine months ended September 30, 2022 primarily reflected a net loss of $2,245,720 adjusted for the add-back of non-cash items such as bad debt recovery of $20,000, stock-based compensation and professional fees of $95,925, net realized loss on equity investments of $104,700, net unrealized loss on equity investments of $256,382, non-cash income from equity investment of $85,733 and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses of $481,675, an increase in interest receivable of $3,590, a decrease in accounts payable and accrued expenses of $194,292 and a decrease in deferred revenues of $54,077, offset by an increase in insurance payable of $16,447. |
| ● | Net cash flow used in operating activities for the nine months ended September 30, 2021 primarily reflected a net income of $4,992,427 adjusted for the add-back of non-cash items such as total stock-based compensation of $191,698, bad debt recovery of $83,500, changes in operating asset and liabilities primarily consisting of an increase in assets of discontinued operations of $24,963, increase in total prepaid expenses and other current assets (current and non-current) of $115,587, an increase in accounts payable and accrued expenses of $84,399, and an increase in total deferred revenue of $496,762 offset by net unrealized gain on equity investments of $396,626 net realized gain on equity investments of $6,665,120, loss from disposal of assets of discontinued operations of $1,553 and gain on forgiveness of note payable and accrued interest of $19,082. |
Net Cash Provided by Investing Activities
Net cash provided by investing activities for the nine months ended September 30, 2022 and 2021 were $86,707 and $6,843,070, respectively, a decrease of $6,756,363, or 99%.
| ● | Net cash provided by investing activities for the nine months ended September 30, 2022 was $20,000 from proceeds from notes receivable collection and $66,707 net proceeds from sale of equity investment. |
| ● | Net cash provided by investing activities for the nine months ended September 30, 2021 was $6,843,070 which primarily consisted of proceeds from sale of our equity investments in Aikido and DatChat, Inc. for $6,736,070 and collection on notes receivable of $7,500 and $99,500. |
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Net Cash Provided by Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2022 and 2021 were $4,957,500 and $3,794,102, respectively, an increase of $1,163,398, or 31%.
| ● | Net cash provided by financing activities for the nine months ended September 30, 2022 was $4,940,948 which consisted of net proceeds from sale of our common stock of $4,940,948. | |
| ● | Net cash provided by financing activities for the nine months ended September 30, 2021 was $3,794,102 which consisted of net proceeds from sale of preferred stock of $3,794,102, proceeds from a related party advance of $2,366 offset by a related party advance repayment of $2,366. |
Cash Requirements
The Company believes that current cash and cash equivalents balance as of September 30, 2022 of $12,253,023 will provide sufficient cash required to meet our obligations for a minimum of twelve months from the date of this filing.
We currently have no material commitments for any capital expenditures.
Liquidity
As reflected in the accompanying condensed consolidated financial statements, the Company generated a net loss of $2,245,720 and used cash in operations of $2,611,633 during the nine months ended September 30, 2022. Additionally, the Company has an accumulated deficit of $5,508,297 on September 30, 2022. However, as of September 30, 2022, the Company had working capital of $12,600,141.
The positive working capital serves to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern. The Company believes that the Company has sufficient cash to meet its obligations for a minimum of twelve months from the date of this filing.
Critical Accounting Policies
Revenue Recognition
The Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.
The Company records interest and dividend income on an accrual basis to the extent that the Company expects to collect such amounts.
For the license and royalty income, revenue is recognized when the Company satisfies the performance obligation based on the related license agreement. Payments received from the licensee that are related to future periods are recorded as deferred revenue to be recognized as revenues over the term of the related license agreement.
Product sales were recognized when the NFID products were shipped to the customer and title was transferred and were recorded net of any discounts or allowances which are separately reported as “discontinued operations” on the condensed consolidated statements of operations.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation – Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
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Fair Value of Financial Instruments and Fair Value Measurements
FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on September 30, 2022. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
| Level 1 - | Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. | |
| Level 2 - | Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. | |
| Level 3 - | Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
The Company analyzes all financial instruments with features of both liabilities and equity under the FASB’s accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The carrying amounts reported in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.
New Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company has elected to early adopt this ASU in the first quarter of 2022 and the adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The new ASU addresses issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options. This amendment is effective for all entities, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2020-06 during the three months ended March 31, 2022 and did not have material impact on its condensed consolidated financial statements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were not effective as of September 30, 2022.
The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which we identified in our internal control over financial reporting:
| ● | We lack segregation of duties within accounting functions duties as a result of our limited financial resources to support hiring of personnel. | |
| ● | We have not implemented adequate system and manual controls. |
A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
ITEM 1A. RISK FACTORS
Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on March 28, 2022 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report 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 risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| * | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SILO PHARMA, INC. | ||
| Dated: November 10, 2022 | By: | /s/ Eric Weisblum |
| Name: | Eric Weisblum | |
| Title: | Chairman and Chief Executive Officer (Principal Executive Officer) | |
| Dated: November 10, 2022 | By: | /s/ Daniel Ryweck |
| Name: | Daniel Ryweck | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER OF SILO PHARMA, INC.
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
| I, | Eric Weisblum, certify that: |
| 1. | I have reviewed this quarterly report on Form 10-Q of Silo Pharma, Inc. (the “registrant”) for the period ended September 30, 2022; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer, and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer, and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| SILO PHARMA, INC. | ||
| Dated: November 10, 2022 | By: | /s/ Eric Weisblum |
| Name: | Eric Weisblum | |
| Title: | Chairman and Chief Executive Officer (Principal Executive Officer) | |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER OF SILO PHARMA, INC.
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
| I, | Daniel Ryweck, certify that: |
| 1. | I have reviewed this quarterly report on Form 10-Q of Silo Pharma, Inc. (the “registrant”) for the period ended September 30, 2022; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer, and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer, and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| SILO PHARMA, INC. | ||
| Dated: November 10, 2022 | By: | /s/ Daniel Ryweck |
| Name: | Daniel Ryweck | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report on Form 10-Q of Silo Pharma, Inc. (the “Company”) for the period ended September 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Eric Weisblum, Chief Executive Officer of the Company, certify, pursuant to Section 1350 of Title 18 of the United States Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| SILO PHARMA, INC. | ||
| Dated: November 10, 2022 | By: | /s/ Eric Weisblum |
| Name: | Eric Weisblum | |
| Title: | Chairman and Chief Executive Officer (Principal Executive Officer) | |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report on Form 10-Q of Silo Pharma, Inc. (the “Company”) for the period ended September 30, 2022 as filed with the Securities and Exchange Commission (the “Report”), I, Daniel Ryweck, Chief Financial Officer of the Company, certify, pursuant to Section 1350 of Title 18 of the United States Code as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| SILO PHARMA, INC. | ||
| Dated: November 10, 2022 | By: | /s/ Daniel Ryweck |
| Name: | Daniel Ryweck | |
| Title: | Chief Financial Officer (Principal Financial Officer) | |
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.