What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-11 compared with 2023-05-12 · 152 added, 127 removed, 136 unchanged (67% of the section changed)

Management’s Discussion and

Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

You should read the following discussion and

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information included elsewhere in this quarterly report on Form 10-Q, as well as our audited consolidated financial statements and related

notes as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, as amended.

This discussion contains forward-looking

statements that involve risks and uncertainties.

As a result of many factors, such as those set forth in the section of this report captioned

“Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q as well as the risk factors set forth in the section titled

“Risk Factors” included in our Annual Report on Form 10-K, our actual results may differ materially from those anticipated

in these forward-looking statements.

For convenience of presentation some of the numbers have been rounded in the text below.

notes as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, as amended on April 4, 2023.

This discussion

contains forward-looking statements that involve risks and uncertainties.

As a result of many factors, such as those set forth in the

section of this report captioned “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q as well as the risk factors

set forth in the section titled “Risk Factors” included in our Annual Report on Form 10-K, our actual results may differ materially

from those anticipated in these forward-looking statements.

For convenience of presentation some of the numbers have been rounded in the

Throughout this report, the terms “our,”

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our lack of operating history;

● the expectation that we will incur significant operating losses for the foreseeable future and will need

significant additional capital;

● the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our

future operating expenses and capital expenditure requirements;

the expectation that we will incur significant operating losses for the foreseeable future and will need significant additional capital;

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

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

our plans to develop and commercialize our product candidates;

● the timing of our IND submission for PAS-004;

the timing of our Investigational New Drug (“IND”) submission with the U.S.

Food and Drug Administration or other regulatory submissions

with foreign regulatory agencies for PAS-004;

the timing of our planned clinical trials for PAS-004;

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

and other positive results;

● disruptions to the development of our product candidates due to the continued spread of COVID-19 and the

resulting global pandemic;

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

from those studies and trials;

● the size of the market opportunity for our future product candidates, including our estimates of the number

of patients who suffer from the diseases we are targeting;

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

disruptions to the development of our product candidates due to the continued spread of COVID-19 and the resulting global pandemic;

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

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

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

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

● our plans relating to the further development of our future product candidates, including additional disease

states or indications we may pursue;

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

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

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

● our plans and ability to obtain or protect intellectual property rights, including extensions of patent

terms where available and our ability to avoid infringing the intellectual property rights of others;

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

our financial performance and sustaining an active trading market for our Common Stock and Warrants;

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Company Summary

We are a biotechnology company primarily focused on the discovery, research

and development of innovative treatments for central nervous system (CNS) disorders and RASopathies.

Our primary operations (the “Therapeutics”

segment) are focused on developing our lead therapeutic candidate, PAS-004 , a macrocyclic MEK inhibitor for potential use in a range

of CNS-related indications, including neurofibromatosis type 1 and Noonan syndrome as well as lamin A/C cardiomyopathy and certain oncology

indications that we acquired from AlloMek Therapeutics, LLC (“AlloMek”) in October 2022.

PAS-004 has completed pre-clinical

testing and animal toxicology studies to support an Investigational New Drug application (an “IND”) with the U.S.

Drug Administration (“FDA”) that we plan to file in the second half of 2023 following completion of cGMP manufacturing and

finalization of our toxicology program.

We are also focused on the development of our discovery programs through lead identification of

drug candidates, including PAS-003, a monoclonal antibody targeting a5b1 integrin for the treatment of ALS, PAS-002, a DNA vaccine targeting

GlialCAM for the treatment of MS, and PAS-001, a small molecule targeting the compliment component 4A for the treatment of schizophrenia.

biotechnology company primarily focused on the discovery, research and development of innovative treatments for central nervous

system (CNS) disorders and RASopathies.

Our primary operations (the “Therapeutics” segment) are focused on developing

our lead therapeutic candidate, PAS-004, a macrocyclic MEK inhibitor for potential use in a range of CNS-related indications,

including neurofibromatosis type 1 (NF1) as well as Noonan syndrome, lamin A/C cardiomyopathy and certain oncology indications that

we acquired from AlloMek Therapeutics, LLC in October 2022.

PAS-004 has completed pre-clinical testing and animal toxicology studies

to support a regulatory application to study PAS-004 for the treatment of NF1.

We anticipate initiating our first-in-human Phase 1

clinical trial as soon as possible after the acceptance of our regulatory submission by the regulatory agencies.

We are also focused

on the development of our discovery programs through lead identification of drug candidates, including PAS-003, a monoclonal

antibody targeting a5b1 integrin for the treatment of amyotrophic lateral sclerosis (ALS), PAS-002, a DNA vaccine targeting GlialCAM

for the treatment of multiple sclerosis (MS), and PAS-001, a small molecule targeting the compliment component 4 (C4) gene for the

treatment of schizophrenia.

Our ability to generate

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and capital requirements will increase significantly in connection with our ongoing activities as we:

● continue our ongoing and planned research and

development of our product candidates;

● initiate nonclinical studies and clinical trials

for any additional product candidates that we may pursue;

● scale up external manufacturing capacity with

the aim of securing sufficient quantities to meet our capacity requirements for clinical trials and potential commercialization;

● establish a sales, marketing and distribution

infrastructure to commercialize any approved product candidates and related additional commercial manufacturing costs;

● develop, maintain, expand, protect and enforce

our intellectual property portfolio;

● acquire or in-license product candidates and

technologies;

● add clinical, operational, financial and management

information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

continue our ongoing and planned research and development of our product candidates;

initiate nonclinical studies and clinical trials for any additional product candidates that we may pursue;

scale up external manufacturing capacity with the aim of securing sufficient quantities to meet our capacity requirements for clinical trials and potential commercialization;

establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates and related additional commercial manufacturing costs;

develop, maintain, expand, protect and enforce our intellectual property portfolio;

acquire or in-license product candidates and technologies;

add clinical, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

Recent Developments

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.

Clinics Segment

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.

During the second quarter of 2023, we sold our assets associated

with the Clinics operations in Los Angeles, CA, and the lease associated with the related property was assumed by the buyer in the transaction.

Accordingly, as of the date of this Quarterly Report on Form 10-Q, the previously discontinued operations of our Clinics segment have

been disposed of.

Completion of GMP-Compliant Manufacturing

On June 29, 2023, we announced the successful

completion of manufacturing the GMP-compliant Phase 1 clinical supplies of the active pharmaceutical ingredient (“API”) of

our lead product candidate PAS-004.

We intend to utilize this supply of PAS-004 for our upcoming Phase I clinical trial following acceptance

of our regulatory application.

Tender Offer to Repurchase Shares of Common

On July 20, 2023, we announced that our Board

of Directors authorized the repurchase, through a $4.0 million tender offer, of up to approximately 5.7 million shares of our outstanding

common stock at a cash purchase price of $0.70 per share (the “Tender Offer”).

We launched the Tender Offer on August

9, 2023, which is expected to expire on September 8, 2023, subject to the terms and conditions of the Tender Offer.

Impact of Inflation

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Results of Operations

Three Months Ended March 31, 2023 and 2022

Our financial results for the three months ended

March 31, 2023 and 2022 are summarized as follows:

For the Three Months Ended

Comparison of the Three and Six Months Ended

June 30 , 2023 and 2022

Our financial results for the three and six months

ended June 30 , 2023 and 2022 are summarized as follows:

For the Three

Selling, general and administrative

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Loss from operations

Other (expense) income, net

Other income, net

Net loss from continuing operations

Net loss from discontinued operations, net of tax

$ (3,763,230 )

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Selling, general and administrative

Research and development

Loss from operations

Other income, net

Net loss from continuing operations

Net loss from discontinued operations, net of tax

$ (7,300,909 )

$ (4,232,634 )

$ (3,068,275 )

Selling, general and administrative

Selling, general and administrative expenses consist

primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for employees and consultants in executive,

finance and accounting, legal, operations support, information technology and human resource functions.

primarily of personnel expenses, including salaries, benefits, and stock-based compensation expense, for employees and consultants in

executive, finance and accounting, legal, operations support, information technology and human resource functions.

Selling, general and

administrative expense also includes corporate facility costs not otherwise included in research and development expense, including rent,

utilities, depreciation, amortization and maintenance, as well as legal fees related to intellectual property and corporate matters and

fees for accounting and consulting services.

For the three and six months ended June 30, 2023,

selling, general and administrative expenses were approximately $1.8 million and $3.9 million, respectively.

Selling, general and administrative

expense also includes corporate facility costs not otherwise included in research and development expense, including rent, utilities,

depreciation, amortization and maintenance, as well as legal fees related to intellectual property and corporate matters and fees for

accounting and consulting services.

Selling, general and administrative expenses remained

relatively flat for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

expenses decreased for the three and six months ended June 30, 2023 compared to the three and six months ended June 30, 2022 primarily

due to the discontinued Clinics operations in 2023.

We expect selling, general and administrative

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Research and Development

For the three months

ended March 31, 2023, research and development expenses were approximately $1.1 million.

There were no research and development expenses

for the three months ended March 31, 2022.

Research and development

expenses relate to our activities performed by our Therapeutics segment, which are primarily focused on the development of PAS-004, our

lead product candidate, and PAS-003, our most advanced discovery candidate.

For the three and six

months ended June 30, 2023, research and development expenses were approximately $2.0 million and $3.1 million, respectively.

no research and development expenses for the three and six months ended June 30, 2022.

The increase is due to the commencement and expansion

of our drug development activities primarily related to PAS-004, our lead product candidate, and PAS-003, our discovery candidate.

of our drug development activities primarily related to PAS-004 and PAS-003.

We expect research and

development expenses to increase throughout 2023 primarily related to manufacturing, regulatory and clinical development of PAS-004.

Other (expense) income,

Other income, net

For the three months

ended March 31, 2023, Other (expense) income, net decreased by approximately $0.8 million compared to the three months ended March 31,

The decrease is primarily due to the $0.8 million decrease in the fair value of our Public and Representative Warrants that occurred

during the three months ended March 31, 2022, compared to the slight increase that occurred during the three months ended March 31, 2023.

ended June 30, 2023, other income, net decreased by approximately $191,000 compared to the three months ended June 30, 2022.

is primarily due to the larger decrease in the fair value of the publicly traded warrants issued in our Initial Public Offering (the “Public

Warrants”) and the warrants issued as compensation to the underwriters in our Initial Public Offering (the “Representative

Warrants”) that occurred during the three months ended June 30, 2022, compared to the decrease that occurred during the three months

ended June 30, 2023.

For the six months ended

June 30, 2023, other income, net decreased by approximately $1.0 million compared to the six months ended June 30, 2022.

is primarily due to the $1.4 million decrease in the fair value of our Public Warrants and Representative Warrants that occurred during

the six months ended June 30, 2022, compared to a decrease of approximately $67,000 that occurred during the six months ended June 30,

Working Capital

The table below presents working capital net of current assets and

liabilities attributable to discontinued operations:

Current assets

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Working capital

Working capital decreased by approximately $3.1 million between December

31, 2022 and March 31, 2023 due primarily to cash used to fund our loss from operations for the three months ended March 31, 2023.

Working capital decreased by approximately $6.5

million between December 31, 2022 and June 30, 2023 due primarily to cash used to fund operations for the six months ended June 30, 2023.

Liquidity and Financial Condition

Three Months Ended

Six Months Ended

Net loss from continuing operations

$ (6,863,894 )

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$ (4,087,585 )

Net cash used in investing activities

Net cash used in (provided by) investing activities

Net cash provided by financing activities

Effect of foreign currency translation

Net cash used in discontinued operations

Decrease in cash and cash equivalents

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$ (5,005,810 )

Cash and cash equivalents decreased by approximately $3.2 million for the

three months ended March 31, 2023, which was primarily attributable to cash used to fund our loss from operations and make equipment purchases

during the period.

Cash and cash equivalents decreased by approximately

$6.4 million for the six months ended June 30, 2023, which was primarily attributable to cash used to fund operations and make equipment

purchases during the period.

Liquidity & Capital Resources Outlook

As of March 31, 2023, we had approximately $29.9 million in operating bank

accounts and money market funds, with working capital of approximately $29.2 million.

Our liquidity needs prior to the consummation of

the Initial Public Offering had been satisfied through proceeds from the issuance of common stock in private placements.

Subsequent to

the consummation of the Initial Public Offering and the November 2021 Private Placement, our liquidity was and will continue to be satisfied

through the net proceeds from the consummation of the Initial Public Offering and the November 2021 Private Placement.

Based on the foregoing,

management believes that we will have sufficient working capital to meet our needs through twelve months from the issuance date of the

financial statements included in this Quarterly Report.

Funding Requirements

As of June 30, 2023, we had approximately $26.6

million in operating bank accounts and money market funds, with working capital of approximately $25.8 million.

We are dependent on obtaining

additional working capital funding from the sale of equity and/or debt securities in order to continue to execute our development plans

and continue operations.

Subsequent to the consummation of the Initial Public Offering, our liquidity was and will continue to be satisfied

through the net proceeds from the Initial Public Offering, a private placement in November 2021 and the receipt of cash upon the prior

exercise of our outstanding warrants.

Based on the foregoing, management believes that we will have sufficient working capital to meet

our needs through twelve months from the issuance date of the financial statements included in this quarterly report.

Liquidity & Capital Resources Outlook

Our primary use of cash is to fund operating expenses,

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Our future funding requirements will depend on many factors, including, but not limited to:

● the scope, timing, progress and results of discovery,

preclinical development, laboratory testing and clinical trials for our product candidates;

● the costs of manufacturing our product candidates

for clinical trials and in preparation for marketing approval and commercialization;

● the extent to which we enter into collaborations

or other arrangements with third parties in order to further develop our product candidates;

● the costs of preparing, filing and prosecuting

patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

● the costs and fees associated with the discovery,

acquisition or in-license of additional product candidates or technologies;

● expenses needed to attract and retain skilled

● the costs required to scale up our clinical,

regulatory and manufacturing capabilities;

● the costs of future commercialization activities,

if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which

we receive marketing approval;

● revenue, if any, received from commercial sales

of our product candidates, should any of our product candidates receive marketing approval.

the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;

the extent to which we enter into collaborations or other arrangements with third parties in order to further develop our product candidates;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;

expenses needed to attract and retain skilled personnel;

the costs required to scale up our clinical, regulatory and manufacturing capabilities;

the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval;

revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval.

We will need significant additional funds to meet

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and operating expenditures associated with our current and anticipated clinical studies.

Tender Offer to Repurchase Shares of Common Stock

On July 20, 2023, we announced that our Board of Directors authorized

the Tender Offer to repurchase approximately 5.7 million shares of our outstanding common stock at a cash purchase price of $0.70 per

share, totaling $4.0 million.

We launched the Tender Offer on August 9, 2023, which is expected to expire on September 8, 2023, subject

to the terms and conditions of the Tender Offer.

On a proforma basis giving effect to the Tender Offer, management believes that we will

have sufficient working capital to meet our needs through twelve months from the issuance date of the financial statements included in

this quarterly report.

Contractual Obligations

See Note 9 – Commitments and Contingencies

in the Notes to our Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a summary of our contractual

in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a summary of our contractual

Off-Balance Sheet Arrangements

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Our critical accounting policies and estimates,

which include (1) stock-based compensation and (2) fair value measurements, are more fully described in the Notes to our Consolidated

Financial Statements included in our Form 10-K for the fiscal year ended December 31, 2022, as amended.

During the three months ended

March 31, 2023, there were no material changes to our critical accounting policies and estimates from those described in our Form 10-K.

which include (1) revenue recognition, (2) stock-based compensation and (3) fair value measurements, are more fully described in the Notes

to our Consolidated Financial Statements included in our Form 10-K for the fiscal year ended December 31, 2022, as amended on April 4,

During the three and six months ended June 30, 2023, there were no material changes to our critical accounting policies and estimates

from those described in our Form 10-K.

We believe that the following critical accounting

estimates are particularly subject to management’s judgment and could materially affect our financial condition and results of operations.

● Assumptions used in the Black-Scholes pricing model for valuation

of stock option awards, such as expected volatility, risk-free interest rate, expected term and expected dividends.

Assumptions used in the Black-Scholes pricing model for valuation of stock option awards, such as expected volatility, risk-free interest rate, expected term and expected dividends.

Valuation of the liability for Representative Warrants, for which there is no active market, based on the relative fair value to the quoted market price of the Public Warrants, accounting for a small difference in the exercise price.

Recent Accounting Pronouncements

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of recent accounting pronouncements applicable to our financial statements.

Quantitative and Qualitative Disclosures about Market

Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis