Pasithea Therapeutics Corp. 10-Q

Item 1. Financial Statements PASITHEA THERAPEUTICS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, 2023 December 31, 2022 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 29,914,063 $ 33,087,864 Due from related party 15,782 - Prepaid expenses 835,777 562,375 Other current assets 262,992 262,992 Current assets of discontinued operations 84,703 163,463 Total current assets 31,113,317 34,076,693 Property and equipment, net 174,906 125,197 Right of use asset- operating lease 460,539 500,428 Intangibles, net 8,413,937 8,571,478 Goodwill 1,262,911 1,262,911 Non-current assets of discontinued operations 619,287 643,382 Total assets $ 42,044,897 $ 45,180,089 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable and accrued liabilities $ 1,447,539 $ 1,481,393 Note payable 264,103 - Lease liability- short term portion 164,974 160,362 Current liabilities of discontinued operations 245,544 235,879 Total current liabilities 2,122,160 1,877,634 Non-current liabilities Lease liability 300,480 344,021 Warrant liabilities 187,481 140,611 Non-current liabilities of discontinued operations 299,669 319,575 Total non-current liabilities 787,630 804,207 Total liabilities 2,909,790 2,681,841 Stockholders’ equity: Preferred stock, par value $ 0.0001 , 5,000,000 shares authorized; 0 issued and outstanding - - Common stock, par value $ 0.0001 , 495,000,000 shares authorized; 26,126,740 and 26,043,406 shares issued and outstanding as of March 31, 2023, and December 31, 2022, respectively 17,995 17,987 Additional paid-in capital 62,014,815 61,837,802 Accumulated other comprehensive loss ( 3,144 ) ( 661 ) Accumulated deficit ( 22,894,559 ) ( 19,356,880 ) Total stockholders’ equity 39,135,107 42,498,248 Total liabilities and stockholders’ equity $ 42,044,897 $ 45,180,089 The accompanying notes are in integral part of these unaudited condensed consolidated financial statements. 1 PASITHEA THERAPEUTICS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) For the Three Months Ended March 31, 2023 2022 Operating expenses: Selling, general and administrative $ 2,116,266 $ 2,078,878 Research and development 1,096,286 - Loss from operations ( 3,212,552 ) ( 2,078,878 ) Other income (expense): Change in fair value of warrant liabilities ( 46,870 ) 785,297 Interest expense, net ( 6,388 ) - Other (expense) income, net ( 53,258 ) 785,297 Loss before income taxes ( 3,265,810 ) ( 1,293,581 ) Provision for income taxes - - Net loss from continuing operations $ ( 3,265,810 ) $ ( 1,293,581 ) Net loss from discontinued operations $ ( 271,869 ) $ ( 280,659 ) Net loss $ ( 3,537,679 ) $ ( 1,574,240 ) Weighted-average common shares outstanding, basic and diluted 26,073,036 23,008,371 Basic and diluated loss per share from continuing operations $ ( 0.13 ) $ ( 0.06 ) Basic and diluted loss per share from discontinuing operations $ ( 0.01 ) $ ( 0.01 ) Comprehensive loss: Net loss $ ( 3,537,679 ) $ ( 1,574,240 ) Foreign currency translation ( 2,483 ) ( 1,574,240 ) Comprehensive loss $ ( 3,540,162 ) $ ( 3,148,480 ) The accompanying notes are in integral part of these unaudited condensed consolidated financial statements. 2 PASITHEA THERAPEUTICS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Loss Deficit Equity Balance at January 1, 2022 23,008,371 $ 17,684 $ 53,627,883 $ ( 10,561 ) $ ( 2,214,505 ) $ 51,420,501 Stock-based compensation expense -restricted share units 26,540 26,540 -options 94,295 94,295 -restricted stock 14,795 14,795 Foreign currency translation - - - ( 4,513 ) - ( 4,513 ) Net loss - - - - ( 1,574,240 ) ( 1,574,240 ) Balance at March 31, 2022 23,008,371 $ 17,684 $ 53,763,513 $ ( 15,074 ) $ ( 3,788,745 ) $ 49,977,378 Balance at January 1, 2023 26,043,406 $ 17,987 $ 61,837,802 $ ( 661 ) $ ( 19,356,880 ) $ 42,498,248 Stock-based compensation: -restricted share units 83,334 8 23,641 - - 23,650 -options 153,372 - - 153,371 Foreign currency translation - - - ( 2,483 ) - ( 2,483 ) Net loss - - - - ( 3,537,679 ) ( 3,537,679 ) Balance at March 31, 2023 26,126,740 17,995 62,014,815 ( 3,144 ) ( 22,894,559 ) 39,135,107 The accompanying notes are in integral part of these unaudited condensed consolidated financial statements. 3 PASITHEA THERAPEUTICS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 3,265,810 ) $ ( 1,293,581 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 4,179 - Amortization expense 157,541 - Stock-based compensation 177,021 135,630 Change in fair value of warrant liabilities 46,870 ( 785,297 ) Lease cost 960 - Changes in operating assets and liabilities: Due from related party ( 15,782 ) - Prepaid expenses ( 273,402 ) ( 238,462 ) Accounts payable and accrued liabilities ( 33,855 ) 29,553 Net cash used in operating activities ( 3,202,278 ) ( 2,152,158 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 53,888 ) ( 1,951 ) Net cash used in investing activities ( 53,888 ) ( 1,951 ) CASH FLOWS FROM FINANCING ACTIVITIES: Note payable proceeds 392,354 Principal payments on note payable ( 128,251 ) Net cash provided by financing activities 264,103 - Effect of foreign currency translation on cash ( 2,483 ) ( 4,513 ) Net cash used in operating activities of discontinued operations ( 183,444 ) ( 411,252 ) Net cash used in investing activities of discontinued operations 4,189 ( 106,544 ) Net cash used in financing activities of discontinued operations - - NET CHANGE IN CASH $ ( 3,173,801 ) $ ( 2,676,419 ) Cash - Beginning of period 33,087,864 52,901,962 Cash - End of period $ 29,914,063 $ 50,225,544 The accompanying notes are in integral part of these unaudited condensed consolidated financial statements. 4 PASITHEA THERAPEUTICS CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022 NOTE 1 – NATURE OF THE ORGANIZATION AND BUSINESS Pasithea Therapeutics Corp. (“Pasithea” or the “Company”) was incorporated in the State of Delaware on May 12, 2020 and completed an Initial Public Offering (the “Initial Public Offering”) on September 17, 2021. The Company is a biotechnology company focused on the discovery, research and development of innovative treatments for central nervous system (CNS) disorders and other diseases. The Company is leveraging its expertise in the fields of neuroscience, translational medicine, and drug development to advance new molecular entities that target the pathophysiology underlying such diseases with the goal of bringing life-changing therapies to patients. The Company’s therapeutic pipeline currently consists of four programs. The Company’s lead product candidate, PAS-004, is a next-generation macrocyclic mitogen-activated protein kinase, or MEK inhibitor that the Company believes may address the limitations and liabilities associated with existing drugs targeting a similar mechanism of action. The remaining three programs are in the discovery stage, which the Company believes address limitations in the treatment paradigm of the indications the Company plans to address with these programs, which are currently amyotrophic lateral sclerosis (“ALS”), multiple sclerosis (“MS”) and schizophrenia. Through December 31, 2022, the Company operated a Clinics business that was focused on providing business support services to anti-depression clinics in the U.K. and in the United States. Its operations in the U.K. involved providing business support services to registered healthcare providers who assess patients and, if appropriate, administer intravenous infusions of ketamine. Its operations in the United States involved providing business support services to entities that furnish similar services to patients who personally pay for those services. Operations in the U.K. and the United States were conducted through partnerships with healthcare providers and the Company did not provide professional medical services or psychiatric assessments. During the first quarter of 2023, we discontinued our at-home services in New York, NY as well as our services in the U.K. In addition, we discontinued our clinical operations in Los Angeles, CA and are actively exploring options for the disposal of related property. Accordingly, as of the date of this Quarterly Report on Form 10-Q, we have discontinued the operations of our Clinics segment. Throughout this report, the terms “our,” “we,” “us,” and the “Company” refer to Pasithea Therapeutics Corp. and its subsidiaries, Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, Pasithea Clinics Corp, Alpha-5 Integrin, LLC, and AlloMek Therapeutics, LLC. Pasithea Therapeutics Limited (U.K.) is a private limited Company, registered in the United Kingdom (U.K.). Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda is a private limited Company, registered in Portugal. Pasithea Clinics Corp. is incorporated in Delaware. Alpha-5 Integrin, LLC is Delaware limited liability company. AlloMek Therapeutics, LLC is Delaware limited liability company. Basis of Presentation 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 (“U.S. GAAP”). 5 Emerging Growth Company The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and approval of any golden parachute payments not previously approved. Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used. Liquidity and Capital Resources As of March 31, 2023, the Company had approximately $ 29.9 million of cash and cash equivalents and working capital of approximately $ 29.2 million. The Company’s major sources of cash have been comprised of proceeds from various private offerings, the Initial Public Offering and exercise of warrants. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities to continue to execute its development plans and continue operations. Based on the foregoing, management believes that the Company will have sufficient working capital to meet its needs through twelve months from the date of these condensed consolidated financial statements. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The Company evaluates the need to consolidate affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810, “Consolidation,” (“ASC 810”). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Pasithea Therapeutics Limited (U.K.) and Pasithea Clinics Corp. (“Pasithea Clinics”). All significant intercompany transactions and balances have been eliminated in consolidation. These condensed consolidated financial statements are presented in U.S. Dollars. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires the Company’s 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 statement 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 confirming events. Management regularly makes estimates related to the fair value of warrant liabilities; the recoverability of long-lived assets; the fair values and useful lives of intangible assets acquired in business combinations; the potential impairment of goodwill; and income taxes. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable, the results of which form the basis for the amounts recorded in the condensed consolidated financial statements. As appropriate, the Company obtains reports from third-party valuation experts to inform and support estimates related to fair value measurements. 6 Research and Development Research and development costs are charged to operations when incurred and are included in operating expense, except for goodwill related to intellectual property & patents. Research and development costs consist principally of compensation of employees and consultants that perform the Company’s research activities, payments to third parties for preclinical and non-clinical activities, costs to acquire drug product from contract development and manufacturing organizations and third-party contractors relating to chemistry, manufacturing and controls (“CMC”) efforts, the fees paid for and to maintain the Company’s intellectual property, and research and development costs related to our discovery programs. Depending upon the timing of payments to the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid expenses are based on management’s estimates of the work performed under service agreements, milestones achieved and experience with similar contracts. The Company monitors each of these factors and adjusts estimates accordingly. Cash and cash equivalents The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $ 10.0 million of cash equivalents consisting of marketable securities in U.S. government money market funds as of March 31, 2023, and did not have any cash equivalents as of December 31, 2022. Property and Equipment Property and equipment is recorded at cost. Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the related assets. Expenditures that enhance the useful lives of the assets are capitalized and depreciated. Maintenance and repairs are expensed as incurred. When properties are retired or otherwise disposed of, related costs and related accumulated depreciation are removed from the accounts. Warrant Liability The Company accounts for its Public and Representative Warrants (each, the “Public Warrants” and “Representative Warrants” and, collectively, the “IPO Warrants”) in accordance with the guidance contained in ASC 815, “Derivatives and Hedging,” under which the IPO Warrants do not meet the criteria for equity treatment and must be recorded as derivative liabilities. Accordingly, the Company classifies the IPO Warrants as liabilities at their fair value and adjusts the IPO Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until the IPO Warrants are exercised or expire, and any change in fair value is recognized in the Company’s condensed consolidated statement of operations and comprehensive loss. The fair value of the Public and Representative Warrants was initially measured at the end of each reporting period, using a Black-Scholes option pricing model. As of March 31, 2023, the fair value of the Public Warrants was measured using quoted market prices, and the fair value of the Representative Warrants was based on an estimate of the relative fair value to the Public Warrants, accounting for a small difference in the exercise price. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $ 250,000 . As of March 31, 2023, the Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account. Fair Value of Financial Instruments Except for liabilities related to the IPO Warrants, described in the table below, the fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying condensed consolidated balance sheets, primarily due to their short-term nature. 7 Fair Value Measurements Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: ● Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; ● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and ● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value: Fair value Quoted prices in active markets for identical liabilities (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Assets: Cash equivalents $ 10,001,263 $ 10,001,263 $ - $ - Liabilities: Public warrant liabilities, March 31, 2023 $ 176,000 $ 176,000 $ - $ - Representative warrant liabilities, March 31, 2023 $ 11,481 $ - $ - $ 11,481 Liabilities: Public warrant liabilities, December 31, 2022 $ 132,000 $ 132,000 $ - $ - Representative warrant liabilities, December 31, 2022 $ 8,611 $ - $ - $ 8,611 The following table presents a reconciliation of the Level 3 representative warrant liabilities for December 31, 2021 through March 31, 2022: Representative warrant liabilities, December 31, 2021 $ 91,200 Issuances - Exercises - Change in fair value ( 49,297 ) Representative warrant liabilities, March 31, 2022 $ 41,903 The following table presents a reconciliation of the Level 3 representative warrant liabilities for December 31, 2022 through March 31, 2023: Representative warrant liabilities, December 31, 2022 $ 8,611 Issuances - Exercises - Change in fair value 2,870 Representative warrant liabilities, March 31, 2023 $ 11,482 The change in fair value of the representative warrant liabilities is recorded in change in fair value of warrant liabilities on the condensed consolidated statement of operations and comprehensive loss. The fair value of the cash equivalents is based on the fair value of marketable securities invested in U.S. government money market funds. The fair value of the liability associated with the Public Warrants as of March 31, 2023 was based on the quoted closing price on The Nasdaq Capital Market and is classified as Level 1. The fair value of the liability associated with the Representative Warrants as of March 31, 2023 was based on an estimate of the relative fair value to the Public Warrants, accounting for a small difference in the exercise price, and is classified as Level 3. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. 8 Net Loss Per Share Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share, except the weighted average number of common shares outstanding are increased to include additional shares from the assumed exercise of share options, if dilutive. The following outstanding shares issuable upon exercise of stock options and warrants and vesting of restricted stock units were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect: Three months ended March 31, 2023 2022 Stock options 2,180,000 600,000 Warrants 15,356,000 12,600,000 Restricted stock units 116,666 200,000 Foreign Currency Translations The Company’s functional and reporting currency is the U.S. dollar. All transactions initiated in other currencies are translated into U.S. dollars using the exchange rate prevailing on the date of transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the U.S. dollar at the rate of exchange in effect at the balance sheet date. Unrealized exchange gains and losses arising from such transactions are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or loss. Upon realization, the amount deferred is recognized in income in the period when it is realized. Translation of Foreign Operations The financial results and position of foreign operations whose functional currency is different from the Company’s presentation currency are translated as follows: ● assets and liabilities are translated at period-end exchange rates prevailing at that reporting date; ● equity is translated at historical exchange rates; and ● income and expenses are translated at average exchange rates for the period. Exchange differences arising on translation of foreign operations are transferred directly to the Company’s accumulated other comprehensive loss in the condensed consolidated financial statements. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the condensed consolidated statements of operations and comprehensive loss. The relevant translation rates are as follows: 3/31/2023 12/31/2022 Closing rate, British Pound (GBP) to $USD at period end 1.2364 1.2039 Average rate, GBP to $USD for the period ended 1.2152 1.2362 Closing rate, Euro (EUR) to $USD at period end 0.9200 0.9367 Average rate, EUR to $USD for the period ended 0.9320 0.9517 Comprehensive Income (Loss) ASC 220, “Comprehensive Income,” establishes standards for reporting and display of comprehensive income (loss) and its components in a full set of general-purpose financial statements. As of March 31, 2023 and December 31, 2022, the Company had no material items of other comprehensive income (loss) except for the foreign currency translation adjustment. 9 Recent Accounting Pronouncements Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements. Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which requires entities to estimate all expected credit losses for financial assets measured at amortized cost basis, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company adopted this guidance on March 31, 2023. The adoption of this accounting standard did not have a material impact to the Company’s condensed consolidated financial statements. NOTE 3 – PROPERTY AND EQUIPMENT, NET Property and equipment, net consists of the following: As of March 31, 2023 As of December 31, 2022 Leasehold improvements $ 3,193 $ 3,193 Medical equipment 155,363 99,220 Office equipment 25,691 26,343 Property and equipment, gross 184,247 128,756 Less: accumulated depreciation ( 9,341 ) ( 3,559 ) Property and equipment, net $ 174,906 $ 125,197 NOTE 4 – LEASES Laboratory Lease – South San Francisco, California In August 2022, the Company, as a lessee, entered into an amended sublease agreement to sublease laboratory and office space in South San Francisco, California. The lease commenced on August 15, 2022. The term of this sublease is for a period of thirty-nine and one-fourth (39.25) months commencing on the effective date, until May 15, 2024. The lease has a gross monthly rent of $ 16,171 per month, which will increase to $ 16,656 beginning January 1, 2024. This lease was accounted for as an operating lease under ASC 842, Leases, which resulted in the recognition of a right of use asset (“ROU asset”) and liability of approximately $ 569,000 at inception. The ROU asset is recorded as a component of non-current assets and the liability a component of current and non-current liabilities on the Company’s condensed consolidated balance sheets. The Company discounted the future lease payments of this lease using the prevailing collateralized lending rate which would be extended to the Company based on its credit profile relative to the period of inception, and the duration of the lease from inception. The interest rate used in calculating the fair value listed above was 7.8 %. Medical Office Lease – West Hollywood, California In March 2022, the Company entered into an agreement to lease a medical office in West Hollywood, California. The lease commenced on April 1, 2022. This lease is attributable to the Clinics segments which was discontinued as of March 31, 2023. See Note 10, Discontinued Operations for more information related. 10 As of March 31, 2023, the Company recognized total ROU assets and lease liabilities as follows: As of March 31, 2023 As of December 31, 2022 Non-current leases - right of use assets $ 460,539 $ 500,428 Current liabilities - operating lease liabilities $ 164,974 $ 160,362 Non-current liabilities - operating lease liabilities $ 300,480 $ 344,021 Operating lease expense $ 55,242 $ 168,812 Cash paid for amounts included in the measurement of operating lease liabilities $ - $ 169,695 The following table summarizes the maturity of the Company’s operating lease payments as of March 31, 2023: 2023 (remaining) $ 146,024 2024 199,872 2025 183,216 Total future minimum lease payments $ 529,112 Amount representing interest ( 63,658 ) Present value of net future minimum lease payments $ 465,454 NOTE 5 – INTANGIBLE ASSETS AND GOODWILL Intangible assets, net consists of the following: March 31, 2023 December 31, 2022 Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net In-process research and development $ 2,900,000 $ - $ 2,900,000 $ 2,900,000 $ - $ 2,900,000 Patents and intellectual property 5,671,478 ( 157,541 ) 5,513,937 5,671,478 - 5,671,478 Intangible assets, net $ 8,571,478 $ ( 157,541 ) $ 8,413,937 $ 8,571,478 $ - $ 8,571,478 As of March 31, 2023, future expected amortization expense of Intangible assets was as follows: 2023 $ 472,623 2024 630,164 2025 630,164 2026 630,164 2027 630,164 Thereafter 5,420,657 Remaining future amortization expense $ 8,413,937 There were no changes to goodwill for the three months ended March 31, 2023. NOTE 6 – STOCKHOLDERS’ EQUITY Common Stock The Company had 26,126,740 and 26,043,406 shares of its Common Stock issued and outstanding at March 31, 2023 and 2022, respectively. 11 Common Stock Issuances for the Three Months Ended March 31, 2023 During the three months ended March 31, 2023, the Company issued 83,334 shares of common stock due to the vesting of restricted stock units, and recognized approximately $ 24,000 of stock-based compensation expense related to its outstanding restricted stock units. Stock-based compensation expense related to the Company’s restricted stock units is recognized within selling, general and administrative expense. As of March 31, 2023, remaining unamortized RSU stock-based compensation expense was approximately $ 165,500 . The Company did not grant any restricted stock units or restricted stock during the three months ended March 31, 2023. NOTE 7 – STOCK OPTIONS During the three months ended March 31, 2023, the Company issued stock options under the 2021 Plan to employees, to purchase an aggregate of 880,000 shares of Common Stock with a strike price equal to $ 0.491 per share and a term of ten years . One-third of these options vest on the one-year anniversary of the employee hire date and then the remaining stock options vest in equal quarterly installments over the remaining two years . These options had a total fair value of approximately $ 288,000 , as calculated using the Black-Scholes model with a volatility assumption of 68.64 %. During the three months ended March 31, 2023, stock options to purchase an aggregate of 16,667 shares of Common Stock, subject to time-based milestone vesting conditions, vested. For the three months ended March 31, 2023 and 2022, total stock-based compensation expense related to the Company’s stock options was approximately $ 153,000 and approximately $ 95,000 , respectively. For the three months ended March 31, 2023, the Company recognized approximately $ 131,000 of stock-based compensation related to its options within Selling, general and administrative expense, and approximately $ 22,000 within Research and development expense. For the three months ended March 31, 2022, all stock-based compensation expense was recorded within Selling, general and administrative expense. The following table summarizes the activity related to the Company’s stock options for the three months ended March 31, 2023: Number of Options Weighted average exercise price per share Weighted average remaining contractual term (years) Aggregate intrinsic value (in thousands) Outstanding, January 1, 2023 1,300,000 $ 2.28 9.12 $ - Granted 880,000 0.49 9.91 - Expired/Cancelled - - - - Exercised - - - - Outstanding, March 31, 2023 2,180,000 $ 1.56 9.29 - Exercisable, March 31, 2023 233,334 $ 4.37 8.48 $ - As of March 31, 2023, remaining unamortized stock-based compensation expense related to the stock options was approximately $ 776,000 . NOTE 8 – WARRANTS As of March 31, 2023, the fair value of the Public Warrants was approximately $ 0.04 per Public Warrant based on the closing price of the warrants on The Nasdaq Capital Market. The fair value of the Representative Warrants was approximately $ 0.042 per Representative Warrant which was based on the relative fair value to the Public Warrants. 12 The following table summarizes the Company’s outstanding warrants: Exercise Price Number of warrants Weighted- average remaining contractual term (years) Weighted average exercise price $ 1.88 2,000,000 4.38 $ 3.50 8,680,000 3.65 $ 6.00 276,000 3.47 $ 6.25 4,400,000 3.47 15,356,000 3.69 $ 4.12 No warrants were granted during the three months ended March 31, 2023. NOTE 9 – COMMITMENTS AND CONTINGENCIES Legal and Regulatory Environment The healthcare industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not limited to, matters such as licensure, accreditation, government healthcare program participation requirement, reimbursement for patient services and Medicare and Medicaid fraud and abuse. Government activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers. Violations of these laws and regulations could result in expulsion from government healthcare programs, together with the imposition of significant fines and penalties, as well as significant repayments for patient services previously billed. Management believes that the Company is in compliance with fraud and abuse regulations, as well as other applicable government laws and regulations. While no material regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as regulatory actions unknown or unasserted at this time. NOTE 10 – DISCONTINUED OPERATIONS During the three months ended March 31, 2023, we discontinued our at-home services in New York, NY as well as our services in the U.K. In addition, we discontinued our clinical operations in Los Angeles, CA and are actively exploring options for the disposal of related property. Accordingly, as of the date of this Quarterly Report on Form 10-Q, we have discontinued the operations of our Clinics segment. 13 We have separately reported the assets and liabilities of the discontinued operations in the condensed consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the condensed consolidated balance sheets as of March 31, 2023, and consist of the following: As of March 31, 2023 Current assets of discontinued operations: Cash and cash equivalents $ 16,634 Due from related party - Prepaid expenses 28,887 Other current assets 39,182 Total current assets of discontinued operations 84,703 Non-current assets of discontinued operations Property and equipment, net 248,597 Right of use asset- operating lease 355,356 Intangibles, net 15,334 Total non-current assets of discontinued operations $ 619,287 Total assets $ 703,990 LIABILITIES Current liabilities of discontinued operations: Accounts payable and accrued liabilities $ 141,790 Lease liability- short term portion 103,754 Total current liabilities of discontinued operations 245,544 Non-current liabilities of discontinued operations: Lease liability 299,669 Warrant liabilities - Total non-current liabilities of discontinued operations $ 299,669 Total liabilities of discontinued operations $ 545,213 The results of operations from discontinued operations for the three months ended March 31, 2023 and 2022, have been reflected as discontinued operations in the condensed consolidated statements of operations and consist of the following: Three Months Ended March 31, 2023 2022 Revenues $ - $ 13,658 Cost of services - 12,937 Gross margin - 721 Selling, general and administrative 271,869 326,380 Loss from discontinued operations $ ( 271,869 ) $ ( 325,659 ) Weighted-average common shares outstanding, basic and diluted 26,073,036 23,008,371 Basic and diluated loss per share from discontinued operations $ ( 0.01 ) $ ( 0.01 ) In accordance with accounting principles generally accepted in the United States (“GAAP”), only expenses specifically identifiable and related to a business to be disposed may be allocated to discontinued operations. As such, the selling, general and administrative and research and development expenses recorded in discontinued operations include corporate costs incurred directly in support of the Clinics business. NOTE 11 – Note Payable Directors and Officer ’ s Liability Insurance On January 9, 2023, the Company entered into a 9-month financing agreement for its directors and officer’s liability insurance in the amount of approximately $ 392,000 that bears interest at an annual rate of 7.8 %. Monthly payments, including principal and interest, are approximately $ 45,000 per month. The balance due under this financing agreement was approximately $ 264,000 and $ 0 at March 31, 2023 and December 31, 2022, respectively. 14