Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v3.22.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 4 – COMMITMENTS AND CONTINGENCIES

 

Integrated Research and Development Agreement – Aptuit (Verona) Srl, an Evotec Company

 

In February 2022, the Company entered into an integrated research and development agreement with Aptuit (Verona) Srl, an Evotec Company (“Evotec”), with the goal of delivering a treatment for schizophrenia. Evotec will provide integrated drug discovery and development research services for the Company over a period of approximately 39 months. Under the agreement, the Company will incur full-time equivalent employee (FTE)-based costs at a rate of $275,000 per FTE per annum for all services, excluding program specific materials which are estimated to be approximately an additional 10% of the total FTE-based price. In addition to the FTE-based costs, the Company shall make milestone payments of up to $6.25 million subject to the successful progression to the next stage of research as agreed to by a joint steering committee. The dollar amounts in the agreement are also subject to adjustment on an annual basis, starting January 1, 2023, for inflation based on a published consumer price index.

 

Medical Office Lease – West Hollywood, California

 

On March 11, 2022, the Company entered into an agreement to lease a medical office in West Hollywood, California. The lease commencement date will be the later of (i) the first Monday after the landlord completes the tentant improvements as specified in the agreement or (ii) April 1, 2022. The lease has a 60-month term, and the Company has an option to extend the term for one 5-year renewal period at the prevailing market rate that the landlord is then obtaining from tenants for comparable space in the building. The lease has a base monthly rent of $8,336 per month for the first 12 months, with the base monthly rent increasing by 4% on the first anniversary of the lease commencement date and every 12 months thereafter. In addition to the base monthly rent, commencing on the first anniversary of the lease commencement date, the Company will pay its share of certain direct operating and tax expenses incurred by the landlord in maintaining the building.

 

Consulting Agreement – Yassine Bendiabdallah

 

Effective November 1, 2021, the Company entered into a Consulting Agreement with Yassine Bendiabdallah to act as the Head of Pasithea Therapeutic U.K., manage all Pasithea U.K. clinics and aid in E.U. expansion. The Consulting Agreement provides an annual salary of $120,000 to be paid on a monthly basis, includes three weeks of vacation for each year and provides for reimbursement for all reasonable out-of-pocket expenses incurred in connection with the services provided. The Consulting Agreement continues indefinitely until either party decides to terminate the contract.

 

Service Agreement – The University of Texas at Austin

 

On September 21, 2021, the Company entered into a Service Agreement with the University of Texas at Austin (“UTA”), a university of higher education in the State of Texas, to act as the Chair of the Scientific Advisory Board, holding three scientific advisory board meetings per year and providing incidental monthly consults. The Company pays UTA $50,000 annually for services billed on a quarterly basis and any costs incurred by UTA are reimbursed only after prior written consent of the Company. The Service Agreement will terminate on September 21, 2024 unless terminated earlier or extended by mutual agreement.

 

Collaboration Agreement – Zen Baker Street Clinic (U.K.)

 

On August 4, 2021, the Company entered into an Amended and Restated Collaboration Agreement with Portman Health Ltd (“Portman”), whereby both parties have agreed to collaborate on the provision of ketamine infusion treatments and any other treatments agreed to by the parties from time to time (the “Treatments”) at Portman’s London based clinic. The Company has agreed, among other things, market the Treatments to the extent permitted under law, arrange and pay for the fit-out of the consulting room, provide equipment necessary for the Treatments, develop, operate and maintain a booking website for the Treatments, make bookings and take payments, and employ or engage customer services advisers to liaise with clinical staff and pay certain staff costs. Portman has agreed provide consulting and treatment rooms, apply for and maintain CQC registrations, employ or engage licensed and qualified staff, assess patient and, if appropriate, administer the Treatments, maintain equipment and provide all ketamine and other pharmaceuticals necessary for the Treatments. All revenues from such Treatments (less certain staff costs) shall be allocated 30% to the Company and 70% to Portman.

 

Collaboration Agreement – Zen Knightsbridge Clinic (U.K.)

 

On August 4, 2021, the Company entered into an Amended and Restated Collaboration Agreement with Purecare Limited (“Purecare”), whereby both parties have agreed to collaborate on the provision of Treatments at Purecare’s London based clinic. The Company has agreed, among other things, market the Treatments to the extent permitted under law, arrange and pay for the fit-out of the consulting room, provide equipment necessary for the Treatments, develop, operate and maintain a booking website for the Treatments, make bookings and take payments, and employ or engage customer services advisers to liaise with clinical staff and pay certain staff costs. Purecare has agreed provide consulting and treatment rooms, apply for and maintain CQC registrations, employ or engage licensed and qualified staff, assess patient and, if appropriate, administer the Treatments, maintain equipment and provide all ketamine and other pharmaceuticals necessary for the Treatments. All revenues from such Treatments (less certain staff costs) shall be allocated 30% to the Company and 70% to Purecare.

 

Business Support Services Subcontract – The IV Doc

 

On April 9, 2021, Pasithea Clinics, an affiliate of the Company, entered into a Business Support Services Subcontract (the “Subcontract”) with The IV Doc, pursuant to which The IV Doc provides certain non-clinical administrative, back office, and other business support services to one or more professional medical practices in the State of New York. During the term of the Subcontract, which shall be effective for 15 years from the effective date, Pasithea Clinics pays The IV Doc monthly subcontract fees in consideration of the subcontract services rendered by The IV Doc. The subcontract fees, which are equal to $22,500 per month, represents fair market value for the subcontract services and are commensurate with the subcontract services to be provided, and does not constitute an illegal fee-splitting or impermissible profit-sharing arrangement in violation of any applicable laws. In addition to the subcontract fees, Pasithea Clinics reimburses The IV Doc for all reasonable expenses, including travel, meals and lodging expenses, incurred by The IV Doc in connection with the provision of the subcontract services, provided that such expenses are otherwise commercially reasonable and necessary. On January 19, 2022, Pasithea Clinics entered into an Amended Business Support Services Subcontract (the “Amended Subcontract”) with The IV Doc, pursuant to which The IV Doc will provide certain non-clinical administrative, back office, and other business support services to one or more professional medical practices in the State of New York. The Amended Subcontract was modified with the start date effective January 1, 2022. The fees for the first two months of service were waived, resulting in a gain on forgiveness of accounts payable of $45,000 recorded in the unaudited condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2022.

 

Employment Agreement – Dr. Tiago Reis Marques

 

On July 13, 2020, we entered into an employment agreement with Dr. Tiago Reis Marques to serve as our Chief Executive Officer. The initial term of Dr. Marques’ employment commenced on the closing of our initial business combination and ended on the first anniversary of the commencement date. After the initial term, the employment agreement automatically renewed for additional one-year periods, unless the Company or Dr. Marques provided the other party with at least 60 days’ prior written notice of its desire not to renew. Pursuant to the employment agreement, we agreed to pay Dr. Marques an annual base salary of $120,000. Upon the completion of the next qualified financing of over $5,000,000, the terms of the employment agreement was to be renegotiated. Dr. Marques was also eligible to receive equity awards, benefits including but not limited to health insurance, retirement, and fringe benefits of the Company, and 20 vacation days per year. We also agreed to reimburse Dr. Marques for all expenses associated with the Company’s business.

 

In December 2021, we entered into a new executive employment agreement (the “2021 Employment Agreement”) with Dr. Marques to serve as our Chief Executive Officer, effective January 1, 2022. The agreement includes a base salary of $450,000 per year, Sign-on bonus of $100,000, paid in a lump sum after January 1, 2022, and eligibility for an annual discretionary bonus of up to 75% of the base salary. The 2021 Employment Agreement also included an option to purchase 200,000 shares of the Company’s common stock, subject to approval by the Board of Directors, which include a three year vesting schedule, under which 33% of the total shares subject to the Option will vest 12 months after the vesting commencement date (which will be grant date), and the remainder shall vest in equal tranches quarterly thereinafter until either the Option is fully vested or Executive’s Continuous Service (as defined in the Plan) terminates, whichever occurs first.

 

Subject to the approval by the Board of Directors, Dr. Marques was eligible to receive an equity grant of 200,000 Restricted Stock Units (the “RSU”s) of the Company, all in accordance with the terms and conditions set forth in the Plan. The RSU’s shall vest over 3 years with 33 and 1/3% vesting on the employees first anniversary and then quarterly then after over the remaining vesting period. The anticipated RSUs will be governed by the terms and conditions of the Plan and Executive’s grant agreement (the “RSU Agreement”), and will include a three year vesting schedule, under which 33% of the RSUs will vest 12 months after the vesting commencement date (which will be grant date), and the remainder shall vest in equal tranches quarterly thereinafter until either the RSUs are fully vested or Executive’s Continuous Service (as defined in the Plan) terminates, whichever occurs first.

 

On December 20, 2021, the Board of Directors approved the stock option and RSU grants to Dr. Marques as described above. See Note 5 for further information about stock option and RSU awards.