Silo Pharma, Inc.: Form 10-Q for the period ended Mar 31, 2025

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, 2024 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or 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 developing novel therapeutics that address underserved conditions including PTSD, stress-induced anxiety disorders, fibromyalgia, and central nervous system (CNS) diseases. We are focused on developing novel therapies that include conventional drugs and psychedelic formulations. The Company’s lead program, SPC-15, is an intranasal drug targeting PTSD and stress-induced anxiety disorders. SP-26 is a time-release ketamine-based loaded implant for fibromyalgia and chronic pain relief. Silo’s two preclinical programs are SPC-14, an intranasal compound for the treatment of Alzheimer’s disease, and SPU-16, a CNS-homing peptide targeting the central nervous system with initial research indication in multiple sclerosis (MS).

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, ketamine, and the potential benefits they may have in certain cases involving depression, mental health issues and neurological disorders. We are focused on developing traditional therapeutics and psychedelic medicine. The company concentrates on the development and commercialization of therapies for unmet needs from indications such as depression, post-traumatic stress disorder (“PTSD”), 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 may have 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 Maryland, Baltimore, and developing a Ketamine polymer implant. In addition, we into a sponsored research agreement with Columbia University for the study of ketamine in combination with other drugs for treatment of Alzheimer’s and depression disorders and we have also entered into an exclusive license agreement with Columbia under which we have rights to 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.

Product Candidates

We are currently focusing on four product candidates:

1. SPC-15 for stress-induced psychiatric disorders, including PTSD and anxiety;

2. SP-26 for treatments of fibromyalgia and chronic pain;

3. SPC-14 for treatment of Alzheimer’s disease; and

4. SPU-16 for CNS disorders, initially targeting multiple sclerosis.

SPC-15: Intranasal Treatment for PTSD and Anxiety Disorders

Our lead product candidate, SPC-15, is designed as a novel serotonin 4 (5-HT4) receptor agonist that utilizes biomarkers for treatment of stress-induced psychiatric disorders such as PTSD and anxiety disorders. This innovative treatment is administered via an intranasal formulation, potentially qualifying for the FDA’s streamlined 505(b)(2) regulatory pathway, which could expedite its approval process. We are actively collaborating with Columbia University, holding exclusive global rights to develop and commercialize SPC-15, pursuant to and the exclusive license agreement entered into with Columbia on July 1, 2024. See “Item 1 Business --License Agreements between the Company and Vendor—Exclusive License Agreement with Columbia University.”

On November 15, 2023, we entered into an exclusive license agreement with Medspray Pharma BV for its proprietary patented soft mist nasal spray technology, as the delivery mechanism for SPC-15, which agreement has an effective date of October 31, 2023. Preclinical and formulation studies were completed in the first half of 2024 and on June 4, 2024 the Company submitted a pre-Investigational New Drug (pre-IND) briefing package and meeting request to the U.S. Food and Drug Administration (FDA) for SPC-15, Silo’s intranasal prophylactic treatment for post-traumatic stress disorder (PTSD) and stress-induced anxiety disorder. In September 2024, we had a pre-IND meeting with the FDA to align on the 505(b)(2) regulatory pathway for approval of SPC-15 and review our proposed plan to support opening an IND.

Currently, we are conducting GLP-compliant pharmacokinetic and pharmacodynamic studies and in early March 2025 we completed first dosing in an IND-enabling GLP-compliant toxicology and toxicokinetics, and we are aiming for an IND submission in 2025. The preclinical data suggests additional applications for eating disorders and anorexia, as well as enhanced efficacy when combined with an NMDA receptor antagonist for major depressive disorder and other severe stress-related conditions.

We believe our patented intranasal nose-to-brain drug dispersion technology provides a competitive advantage by increasing brain drug concentration, ensuring a faster onset of therapeutic effects with optimized safety.

SP-26: Ketamine Implant for Fibromyalgia

SP-26 represents a novel approach to treating chronic pain and fibromyalgia through a ketamine-based injectable dissolvable polymer implant. Designed for subcutaneous insertion, SP-26 focuses on regulating dosage and time release to provide sustained relief from chronic pain, offering a potentially safer alternative to opioids. Presently, our SP-26 product is in preclinical research. Initial animal studies, which began in early 2025, are evaluating the implant’s dosage, time release, and absorption.

In March 2023, we filed a provisional patent application with the USPTO to use SP-26 for treatment of chronic pain, including fibromyalgia. We intend to develop SP-26 following the Section 505(b)(2) regulatory pathway of the FDA rules. Section 505(b)(2) of the FDCA was enacted to enable sponsors to seek NDA approval for novel repurposed drugs without the need for such sponsors to undertake time consuming and expensive pre-clinical safety studies and Phase 1 safety studies. Proceeding under this regulatory pathway, we will be able to rely upon publicly available data with respect to our active ingredient in our NDA submission to the FDA for marketing approval.

Fibromyalgia affects approximately 4 million U.S. adults (2% of the population). We believe SP-26’s implant design provides a compelling non-opioid alternative to traditional pain management, improving dosage control compared to intravenous delivery.

SPC-14: Treatment for Alzheimer’s Disease

SPC-14 targets glutamate receptor NDMAR and serotonin 5-HT4 to address cognitive and neuropsychiatric symptoms in Alzheimer’s disease. Given the global Alzheimer’s therapeutics market is projected to exceed $30.8 billion by 2033, SPC-14 presents a promising opportunity. SPC-14 was developed under a sponsored research agreement with Columbia University See “Item 1 Business--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,” and we have exclusive global rights to develop and commercialize SPC-14, pursuant to and that certain exclusive license agreement entered into with Columbia on July 1, 2024. See “Item 1 Business--License Agreements between the Company and Vendor—Exclusive License Agreement with Columbia University.”. On October 13, 2022, we extended the term of the sponsored research agreement with Columbia to conduct further research studies into the mechanism of action of SPC-14 in the treatment of Alzheimer’s disease. In addition, we have been granted an option to license certain assets currently under development, including SPC-14 for the treatment of Alzheimer’s disease.

We believe our SPC-14 product has shown efficacy against luteinizing hormone (LH) in attenuating learned helplessness, preservative behavior and hyponeophagia (a measure of anxiety).

SPU-16: Treatment for CNS Disorders, Initial Indication for Multiple Sclerosis

SPU-16 is a promising candidate targeting central nervous system (CNS) disorders, with an initial indication for multiple sclerosis. 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,” or SPU-16. See “License Agreements between the Company and Vendors--Vendor License Agreement with the University of Maryland, Baltimore for CNS Homing Peptide” for additional details.

On April 11, 2023 certain intellectual property under the UMB License Agreement described above were issued a patent from the U.S. Patent & Trademark Office (USPTO) for “Peptide-Targeted Liposomal Delivery For Treatment, Diagnosis, and Imaging of Diseases and Disorders” (US 11,766,403, B2).

We believe SPU-16 provides a competitive advantage by using homing peptides to reduce toxicity while enhancing therapeutic payload delivery.

Results of Operations

Comparison of Our Results of Operations for the Three Months Ended March 31, 2025 and 2024

The following table summarizes the results of operations for the three months ending March 31, 2025 and 2024 and were based primarily on the comparative unaudited consolidated financial statements, footnotes and related information for the periods identified and should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report.

Revenues

During the three months ended March 31, 2025 and 2024, we generated minimal revenues from operations. For the three months ended March 31, 2025 and 2024, revenues amounted to $18,026 and $18,026, respectively. Such revenues are related to the Aikido License and Sublicense Agreement and are recognized over the estimated 15-year term of the UMB license agreement.

Cost of Revenues

During the three months ended March 31, 2025 and 2024, cost of revenues amounted to $1,460 and $1,460, respectively, and consisted of license fees related to the UMB License and Sublicense Agreement, which are being amortized into cost of revenues over the estimated 15-year terms of their respective agreements with Akido and UMB.

Operating Expenses

For the three months ended March 31, 2025 and 2024, total operating expenses consisted of the following:

• Compensation Expense:

For the three months ended March 31, 2025 and 2024, compensation expense was $178,469 and $173,346, respectively, an increase of $5,123, or 3.01%. This increase solely resulted from an increase in payroll expense and related benefits.

• Professional Fees:

For the three months ended March 31, 2025 and 2024, professional fees were $273,824 and $318,427, respectively, a decrease of $44,603, or 14.0%. The decrease was primarily attributable to a decrease in consulting fees of $77,574, and a decrease in legal fees of $18,949, offset by an increase in investor relations of $47,245, and an increase in accounting and auditing fees of $4,675.

• Research and Development:

For the three months ended March 31, 2025 and 2024, we incurred research and development expense of $593,962 and $318,240, respectively, an increase of $275,722, or 86.6%. The increase was a result of an increase in research and development costs in connection with our key Investigator-sponsored Study Agreements and other research projects with third party vendors and universities. We expect our research and development activities to increase as we develop our existing product candidates and potentially acquire new product candidates, reflecting increasing costs associated with the following:

• fees related to in-licensed products and technology;
• expenses incurred under agreements with CROs, investigative sites and consultants that conduct our clinical trials and a substantial portion of our pre-clinical activities;
• the cost of acquiring and manufacturing clinical trial materials; and
• costs associated with non-clinical activities and regulatory approvals.
• Other Selling, General and Administrative Expenses:

Other selling, general and administrative expenses include advertising and promotion, insurance expenses, patent related expenses, public company expenses, custodian fees, bank service charges, travel, and other office expenses.

For the three months ended March 31, 2025 and 2024, selling, general and administrative expenses were $64,432 and $86,066, respectively, a decrease of $21,634, or 25.1%. The decrease was primarily attributed to a decrease in proxy meeting fees of $19,000, and filing fees of $7,837, offset by a net increase in other general and administrative expenses of $5,203.

Loss from Operations

For the three months ended March 31, 2025 and 2024, loss from continuing operations amounted to $1,094,121 and $879,513, respectively, an increase of $214,608, or 24.4%. The increase was primarily a result of the changes in operating expenses discussed above.

Other Income

For the three months ended March 31, 2025 and 2024, other income amounted to $62,684 and $77,846, respectively, a decrease of $15,162, or 19.5%. The decrease in other income was primarily due to a decrease in interest and dividend income of $26,349, and a decrease in interest expense of $196, offset by an increase in foreign currency transaction loss of $8,695, and an increase in net realized gain on short-term investments of $2,688.

Net Loss

For the three months ended March 31, 2025, net loss amounted to $1,031,437 or $0.23 per common share (basic and diluted), as compared to net loss of $801,667 or $0.28 per common share (basic and diluted) for the three months ended March 31, 2024, an increase of $229,770, or 28.7%. 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 working capital of $4,418,858, $2,314,550 in short-term investments, and $3,136,880 in cash and cash equivalents as of March 31, 2025, and working capital of $5,455,483, $3,174,724 in short-term investments and $3,905,799 in cash and cash equivalents as of December 31, 2024, respectively.

The decrease in working capital of $1,036,625 was primarily attributable to a decrease in current assets of $1,507,319 primarily due to a decrease in cash of $769,919 and a decrease in short-term investments of $860,174, offset by an increase in prepaid expenses and other current assets of $121,774, and a decrease in current liabilities of $470,694.

Cash Flows

A summary of cash flow activities is summarized as follows:

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2025 and 2024 were $1,640,300 and $838,179, respectively, an increase of $802,121, or 95.7%.

• Net cash used in operating activities for the three months ended March 31, 2025 primarily reflected a net loss of $1,031,437, adjusted for the add-back of non-cash items such as amortization expense of $3,092, and net realized gain on short-term investments of $2,922, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $120,314, a decrease in accounts payable and accrued expenses of $470,693, and a decrease in deferred revenue of $18,026.
• Net cash used in operating activities for the three months ended March 31, 2024 primarily reflected a net loss of $801,667, adjusted for the add-back of non-cash items such as net realized gain on short-term investments of $234, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $116,334, an increase in accounts payable and accrued expenses of $98,082, and a decrease in deferred revenue of $18,026.

Net Cash Provided by Investing Activities

Net cash provided by investing activities for the three months ended March 31, 2025 and 2024 were $871,381 and $97,596, respectively, an increase of $773,785, or 792.8%.

• Net cash provided by investing activities for the three months ended March 31, 2025 was $871,381 which consisted of proceeds from sale of short-term investments of $905,353, offset by aggregate payments for the purchase of short-term investments of $33,972.
• Net cash provided by investing activities for the three months ended March 31, 2024 was $97,596 which consisted of proceeds from sale of short-term investments of $150,389, offset by aggregate payments for the purchase of short-term investments of $52,793.

Net cash Used in Financing Activities

Net cash used in financing activities for the three months ended March 31, 2024 was $115,452 which solely consisted of the repurchase of shares of our common stock under our stock repurchase plan. We did not have any cash provided by or used in financing activities for the three months ended March 31, 2025.

Cash Requirements

We believe that our current cash and cash equivalent amount and short-term investment amount will provide sufficient cash required to meet our obligations for a minimum of twelve months from the date of this filing.

Other than cash requirements pursuant to research and development agreements, we currently have no other material commitments for any capital expenditures.

Liquidity

As reflected in the accompanying unaudited consolidated financial statements, we generated a net loss of $1,031,437 and used cash in operations of $1,640,300 during the three months ended March 31, 2025. Additionally, we have an accumulated deficit of $16,296,128 on March 31, 2025. As of March 31, 2025, we had working capital of $4,418,858, $2,314,550 in short-term investments, and $3,136,880 in cash and cash equivalents.

The positive working capital serves to mitigate the conditions that historically raised substantial doubt about our ability to continue as a going concern. We believe that the Company has sufficient cash to meet its obligations for a minimum of twelve months from the date of this filing.

Off-Balance Sheet Arrangements

None.

Critical Accounting Estimates

Research and Development

In accordance with ASC 730-10, “Research and Development-Overall,” research and development costs are expensed when incurred. Significant estimates during the three months ended March 31, 2025 and 2024 include the percentage of completion of certain research and development projects.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We do not expect the adoption of this new guidance to have a material impact on our 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 unaudited consolidated financial statements.

We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer evaluated the effectiveness of our “disclosure controls and procedures” as of March 31, 2025, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Based on the evaluation of our disclosure controls and procedures as of March 31, 2025, our Chief Executive Officer and our Chief Financial Officer determined that we maintained effective internal control over financial reporting as of March 31, 2025.

Changes in Internal Control Over Financial Reporting

During the three months ended March 31, 2025, we continued implementing the remedial actions disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, to address previously identified material weaknesses. These actions included enhancements to segregation of duties, monitoring controls, and bank reconciliation processes. In addition, we are taking steps to review and enhance business policies, procedures, and related internal controls to standardize business processes. Other than these ongoing remediation efforts, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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, 2024 as filed with the SEC on March 28, 2025 (“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.