What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-14 compared with 2023-11-13 · 354 added, 338 removed, 365 unchanged (65% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

3 unchanged sentences

Other current assets

Current assets of discontinued operations

Total current assets

2 unchanged sentences

Intangibles, net

Non-current assets of discontinued operations

LIABILITIES AND STOCKHOLDERS’ EQUITY

2 unchanged sentences

Lease liability- short term portion

Current liabilities of discontinued operations

Total current liabilities

Non-current liabilities

Lease liability

Warrant liabilities

Non-current liabilities of discontinued operations

Total non-current liabilities

4 unchanged sentences

Common stock, par value $ 0.0001 , 100,000,000 shares authorized;

20,836,623 and 26,043,406 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

1,043,248 and 1,041,582 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

11 unchanged sentences

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

Operating expenses:

Selling, general and administrative

General and administrative

Research and development

2 unchanged sentences

( 3,212,552 )

( 10,830,579 )

( 8,546,161 )

Other income (expense):

Other income:

Change in fair value of warrant liabilities

4 unchanged sentences

( 3,265,810 )

( 10,476,484 )

( 7,674,481 )

Provision for income taxes

2 unchanged sentences

$ ( 3,265,810 )

$ ( 10,476,484 )

$ ( 7,674,481 )

Net loss from discontinued operations, net of tax

1 unchanged sentence

$ ( 3,537,679 )

$ ( 4,586,130 )

$ ( 10,913,499 )

$ ( 8,818,764 )

Weighted-average common shares outstanding, basic and diluted

4 unchanged sentences

$ ( 3,537,679 )

$ ( 10,913,499 )

$ ( 8,818,764 )

Foreign currency translation

2 unchanged sentences

$ ( 3,540,162 )

$ ( 10,920,555 )

$ ( 8,954,776 )

See accompanying notes to the unaudited condensed

8 unchanged sentences

Stock-based compensation:

-restricted share units

-restricted stock units

-stock options

Foreign currency translation

3 unchanged sentences

$ ( 39,179,378 )

Stock-based compensation:

-restricted share units

Foreign currency translation

( 3,763,230 )

Balance at June 30, 2023

$ ( 26,657,789 )

Stock-based compensation:

-restricted share units

Stock repurchase

( 5,323,451 )

( 3,725,884 )

( 3,726,416 )

Foreign currency translation

( 3,612,590 )

Balance at September 30, 2023

$ ( 30,270,379 )

Balance at January 1, 2023

$ ( 19,356,880 )

Stock-based compensation expense:

-restricted share units

-restricted stock

Stock-based compensation:

-restricted stock units

-stock options

Foreign currency translation

3 unchanged sentences

$ ( 22,894,559 )

Stock-based compensation expense:

-restricted share units

-restricted stock

-common stock

Warrants issued for acquisition

Common shares issued for acquisition

Foreign currency translation

( 2,658,394 )

Balance at June 30, 2022

$ ( 6,447,139 )

Stock-based compensation expense:

-restricted share units

-restricted stock

Warrants issued for acquisition

Common shares issued for acquisition

Foreign currency translation

( 4,586,130 )

Balance at September 30, 2022

$ ( 146,573 )

$ ( 11,033,269 )

See accompanying notes to the unaudited condensed

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

7 unchanged sentences

Non-cash lease expense

Gain on sale of assets

Changes in operating assets and liabilities:

Due from related party

Prepaid expenses

5 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Net cash proceeds from sale of assets

Acquisition of business, net of cash acquired

Net cash provided by investing activities

of property and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Note payable proceeds

Principal payments on note payable

Repurchase of common stock

( 3,726,416 )

Net cash used in financing activities

( 3,726,416 )

payments on note payable

Net cash provided by financing activities

Effect of foreign currency translation on cash

Net cash used in operating activities of discontinued operations

( 1,026,911 )

Net cash provided by (used in) investing activities of discontinued operations

Net cash provided by (used in) financing activities of discontinued operations

NET CHANGE IN CASH

1 unchanged sentence

$ ( 3,173,801 )

Cash and cash equivalents - Beginning of period

Cash and cash equivalents - End of period

Cash - Beginning of period

Cash - End of period

Supplemental disclosure of cash flow information:

Lease liabilities arising from obtaining right-of-use assets

Amount due from sale of assets

3 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER

30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND

NOTE 1 – NATURE OF THE ORGANIZATION AND

3 unchanged sentences

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

As of June 30, 2023, the at home services in New

York, NY as well as in the U.K had been discontinued and we sold and disposed of our assets associated with the Clinics operations in

Los Angeles, CA, and the U.K.

and development of innovative treatments for central nervous system (CNS) disorders and other diseases, including RASopathies.

is leveraging its expertise in the fields of neuroscience, translational medicine, and drug development to bring life-changing therapies

The Company’s primary operations (the “Therapeutics”

segment) are focused on developing the Company’s lead product candidate, PAS-004, 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.

In December 2023, the U.S.

Food and Drug Administration (the “FDA”) cleared our Investigational

New Drug application (the “IND”) for PAS-004 and the Company received a study may proceed letter from the FDA for the Company’s

Phase 1 multicenter, open-label, dose escalation trial of PAS-004 in patients with MAPK pathway-driven advanced tumors with a documented

RAS, NF1 or RAF mutation or patients who have failed BRAF/MEK inhibition.

The Company is currently conducting the Phase 1 clinical trial

at clinical sites in the United States and plans to open additional sites in Eastern Europe in the third quarter of 2024.

The Company’s

clinical development plan for PAS-004 is to begin a Phase 1 clinical trial in adult and pediatric neurofibromatosis type 1 (NF1)-associated

plexiform and/or cutaneous neurofibroma and ultimately seek FDA marketing approval in these patient populations.

Additionally, the Company has two programs that

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”) for PAS-003 and schizophrenia for

During the year ended December 31, 2023, the Company

discontinued providing business support services to anti-depression clinics (the “Clinics” segment) in the U.K.

United States, previously conducted through partnerships with healthcare providers.

During the year ended December 31, 2023, the at home

services in New York, NY as well as in the U.K were discontinued and the Company sold and disposed of the assets associated with the Clinics

operations in Los Angeles, CA.

The lease associated with the related property in Los Angeles was assumed by the buyer in the transaction.

Throughout this report, the terms “our,” “we,”

“us,” and the “Company” refer to Pasithea Therapeutics Corp.

and its subsidiaries, Pasithea Therapeutics Limited

(U.K.), Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, , 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.

Throughout this report, the terms “our,”

“we,” “us,” and the “Company” refer to Pasithea Therapeutics Corp.

and its subsidiaries, Pasithea

Therapeutics Limited (U.K.), Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, Pasithea Clinics Inc., Alpha-5 Integrin, LLC (“Alpha-5”),

and AlloMek Therapeutics, LLC (“AlloMek”).

Pasithea Therapeutics Limited (U.K.), legally dissolved as of January 2, 2024 was

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 Inc.

is incorporated in Delaware.

Alpha-5 Integrin, LLC is

a Delaware limited liability company.

AlloMek Therapeutics, LLC is a Delaware limited liability company.

Alpha-5 and AlloMek are both Delaware limited

liability companies.

The operations of Pasithea Therapeutics Limited (U.K.), Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda,

and Pasithea Clinics Inc.

have been discontinued.

Basis of Presentation

11 unchanged sentences

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.

from being required to comply with new or revised financial accounting standards until private companies 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.

has elected not to opt out of such extended transition period.

Liquidity and Capital Resources

As of September 30, 2023, the Company had approximately $ 19.6 million

of cash and cash equivalents and working capital of approximately $ 18.7 million.

The Company’s major sources of cash have been

comprised of proceeds from various private offerings, the Initial Public Offering, and the prior exercise of warrants.

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 unaudited condensed consolidated financial statements.

As of March 31, 2024, the Company had approximately

$ 12.0 million of cash and cash equivalents and working capital of approximately $ 10.7 million.

The Company’s major sources

of cash have been comprised of proceeds from various private offerings, the Initial Public Offering and the exercise of warrants.

Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue

to execute its development plans and continue operations.

Based on the foregoing, management believes that the Company will not

have sufficient working capital to meet its needs through twelve months from the date of these financial statements if additional funding

cannot be obtained.

Going Concern Uncertainty

The accompanying unaudited condensed consolidated financial statements

have been prepared as if the Company will continue as a going concern.

The Company has incurred significant operating losses and negative

cash flows from operations since inception.

On March 31, 2024, the Company had cash and cash equivalents of approximately $ 12.0 million

and an accumulated deficit of approximately $ 39.2 million.

The Company has incurred recurring losses, has experienced recurring

negative operating cash flows, and requires significant cash resources to execute its business plans.

Historically, the Company’s

major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock.

The Company is dependent

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

plans and continue operations.

Without additional funding, there is substantial doubt about the Company’s ability to continue as

a going concern through twelve months from the date of these financial statements.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING

2 unchanged sentences

affiliates based on standards set forth in Accounting Standards Codification (“ASC”) 810, “Consolidation,” (“ASC

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.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Alpha-5,

AlloMek, Pasithea Therapeutics Limited (U.K.) (was legally dissolved as of January 2, 2024) and Pasithea Clinics Inc.

All significant

intercompany transactions and balances have been eliminated in consolidation.

These condensed consolidated financial statements

22 unchanged sentences

Our 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, non-clinical and regulatory 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.

Selling, General and Administrative

Our selling, general and administrative expenses

primarily consist of personnel and related costs, including stock-based compensation, legal fees relating to both intellectual property

and corporate matters, accounting and audit related costs, insurance, corporate communications and public company expenses, information

technology, office and facility rents and related expenses, including depreciation, amortization and maintenance, and fees for consulting,

business development and other professional services.

and development activities, payments to third parties for preclinical, clinical and regulatory activities, costs to acquire drug supply

and drug product from contract development and manufacturing organizations and third-party contractors relating to chemistry, manufacturing

and controls (“CMC”) efforts, , 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.

General and Administrative

Our general and administrative expenses primarily

consist of personnel and related costs, including stock-based compensation, legal fees relating to both intellectual property and corporate

matters, accounting and audit related costs, insurance, corporate communications and public company expenses, information technology,

office and facility rents and related expenses, including depreciation, amortization and maintenance, and fees for consulting, business

development and other professional services.

connection with the acquisition of Alpha-5, the Company legally assumed rights under a grant agreement with FightMND, which was entered

into by Alpha-5 on September 23, 2021.

FightMND supports pre-clinical research, development and assessment of therapeutics for motor neuron

disease, including ALS.

Under the grant agreement, the Company is entitled to reimbursements for costs incurred for research related to

its monoclonal antibody targeting a5 b 1

integrin as a potential treatment for ALS.

There was no grant income recognized for the three months ended March 31, 2024 and March 31,

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, classified as trading securities.

The Company had cash equivalents of $ 10.3

million as of September 30, 2023, and did not have any cash equivalents as of December 31, 2022.

Property and Equipment

The Company considers all short-term investments

with an original maturity of three months or less when purchased to be cash equivalents, classified as trading securities.

had cash equivalents of $ 10.6 million and $ 13.4 million as of March 31, 2024 and December 31, 2023, respectively.

Property and Equipment and Depreciation

Property and equipment is recorded at cost, net

1 unchanged sentence

Depreciation is computed using straight-line and accelerated methods over the estimated useful lives of the related assets

which range from three to ten years.

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.

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.

Leasehold improvements are amortized over the shorter of the estimated useful life of those leasehold improvements

and the remaining lease term.

Warrant Liability

18 unchanged sentences

Depository Insurance Coverage of $ 250,000 .

As of September 30, 2023, the Company has not experienced losses on this account and management

As of March 31, 2024, 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 balance

sheet, primarily due to their short-term nature.

With the exception of 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

balance sheet, primarily due to their short-term nature.

Fair Value Measurements

19 unchanged sentences

Significant unobservable

Cash equivalents, September 30, 2023

Public warrant liabilities, September 30, 2023

Representative warrant liabilities, September 30, 2023

Cash equivalents, March 31, 2024

Cash equivalents, December 31, 2023

Public warrant liabilities, March 31, 2024

Representative warrant liabilities, March 31, 2024

Public warrant liabilities, December 31, 2023

3 unchanged sentences

Three months ended

September 30,

Representative warrant liabilities, July 1

Change in fair value

Representative warrant liabilities, September 30

Nine months ended

September 30,

Representative warrant liabilities, January 1

Change in fair value

Representative warrant liabilities, September 30

Representative warrant liabilities, March 31

The change in fair value of the Representative

5 unchanged sentences

The fair value of the liability associated with

the Public Warrants as of September 30, 2023 was based on the quoted closing price on The Nasdaq Capital Market and is classified as Level

The fair value of the liability associated with the Representative Warrants as of September 30, 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.

the Public Warrants as of March 31, 2024 was based on the quoted closing price on The Nasdaq Capital Market and is classified as Level

The fair value of the liability associated with the Representative Warrants as of March 31, 2024 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

11 unchanged sentences

because including them would have had an anti-dilutive effect:

Nine months ended

September 30,

Three months ended

Stock options

14 unchanged sentences

operations whose functional currency is different from the Company’s presentation currency are translated as follows:

and liabilities are translated at period-end exchange rates prevailing at that reporting date;

is translated at historical exchange rates;

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

assets and liabilities are translated at period-end exchange rates prevailing at that reporting date;

equity is translated at historical exchange rates;

income and expenses are translated at average exchange rates for the period.

Exchange differences arising from translation

of foreign operations are transferred directly to the Company’s accumulated other comprehensive loss in the condensed consolidated

financial statements.

2 unchanged sentences

The relevant translation rates are as follows:

September 30,

Closing rate, British Pound (GBP) to $USD at period end

5 unchanged sentences

standards for reporting and display of comprehensive income (loss) and its components in a full set of general-purpose financial statements.

As of September 30, 2023 and December 31, 2022, the Company had no material items of other comprehensive income (loss) except for the

foreign currency translation adjustment.

As of March 31, 2024 and December 31, 2023, the Company had no material items of other comprehensive income (loss) except for the foreign

currency translation adjustment.

Impairment of Long-Lived Assets and Goodwill

Long-lived and amortizable intangible assets are

assessed annually for impairment or sooner should impairment indicators exist.

Significant events or changes in business circumstances

indicate that the carrying value of the assets may not be recoverable.

Such circumstances may include a significant decrease in the market

price of an asset, a significant adverse change in the manner in which the asset is being used or in its physical condition or a history

of operating or cash flow losses associated with the use of an asset.

An impairment loss is recognized when the carrying amount of an

asset exceeds the anticipated future undiscounted cash flows expected to result from the use of the asset and its eventual disposition.

The amount of the impairment loss is the excess of the asset’s carrying value over its fair value.

There were no charges related

to impairments of long-lived assets for all periods presented.

Goodwill is assessed for impairment annually during

the fourth quarter, or more frequently if impairment indicators exist.

Impairment exists when the carrying amount of goodwill exceeds

its implied fair value.

The Company may elect to assess goodwill for impairment using a qualitative or a quantitative approach, to determine

whether it is more likely than not that the fair value of goodwill is greater than its carrying value.

There were no charges related to

goodwill impairment for all periods presented.

The Company’s has leases related to office

The Company determines whether a contract is or contains a lease at the time of the contract’s inception based on the presence

of identified assets and the Company’s right to obtain substantially all the economic benefit from or to direct the use of such

When the Company determines a lease exists, it records a right-of-use (“ROU”) asset and corresponding lease liability

on its balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term.

Lease liabilities

represent the Company’s obligation to make lease payments arising from the lease.

ROU assets are recognized at the lease commencement

date at the present value of the remaining future lease payments the Company is obligated for under the terms of the lease.

Lease liabilities

are recognized concurrent with the recognition of the ROU asset and represent the present value of lease payments to be made under the

These ROU assets and liabilities are adjusted for any prepayments, lease incentives received, and initial direct costs incurred.

As the discount rate implicit in the lease is not readily determinable in most of the Company’s leases, the Company uses its incremental

borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

the Company’s lease terms include an option to extend the lease for a set period, the Company evaluates the renewal option and should

it be reasonably certain that the Company will exercise that option, adjusts the ROU asset and liability accordingly.

Stock-Based Compensation

The Company accounts for its stock-based compensation

awards to employees and members of its Board of Directors (the “Board”) in accordance with ASC Topic 718, Compensation—Stock

Compensation (“ASC 718”).

ASC 718 requires all stock-based payments to employees and Board members, including grants of employee

stock options, to be recognized in the statements of operations by measuring the fair value of the award on the date of grant and recognizing

this fair value as stock-based compensation using a straight-line method over the requisite service period, generally the vesting period.

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

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.

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 condensed consolidated financial

NOTE 3 – PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

As of September 30,

As of December 31,

Leasehold improvements

12 unchanged sentences

until May 15, 2024.

The lease has a gross monthly rent of $ 16,171 per month, which will increase to $ 16,656 beginning January

The lease had a gross monthly rent of $ 15,700 per month to December 31, 2022.

Starting January 1, 2023, the monthly

rent increased by 3 % annually, to $ 16,171 per month in 2023.

Starting January 1, 2024, the monthly rent increased to $ 16,656 .

This lease was accounted for as an operating lease

7 unchanged sentences

The interest rate used in calculating the fair value listed above was 7.8 %.

As of September 30, 2023, the Company recognized

total ROU assets and lease liabilities as follows:

As of September 30,

As of December 31,

As of March 31, 2024, the Company recognized total

ROU assets and lease liabilities as follows:

Non-current leases - right of use assets

4 unchanged sentences

The following table summarizes the maturity of

the Company’s operating lease payments as of September 30, 2023:

the Company’s operating lease payments as of March 31, 2024:

2024 (remaining)

4 unchanged sentences

Intangible assets, net consists of the following:

September 30, 2023

March 31, 2024

December 31, 2023

4 unchanged sentences

Intangible assets, net

As of September 30, 2023, future expected amortization expense of

Intangible assets was as follows:

$ ( 787,705 )

$ ( 630,164 )

As of March 31, 2024, future expected amortization expense of Intangible

assets was as follows:

2024 (remaining)

Remaining future amortization expense

There were no changes to goodwill for the nine

months ended September 30, 2023.

There were no changes to goodwill for the three

months ended March 31, 2024.

NOTE 6 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue an aggregate

of 105,000,000 shares.

The authorized capital stock is divided into:

(i) 100,000,000 shares of Common Stock having a par value of $ 0.0001

per share and (ii) 5,000,000 shares of preferred stock having a par value of $ 0.0001 per share.

The Company had 1,043,248 and 1,306,087 shares

of its Common Stock issued and outstanding at September 30 , 2023 and 2022, respectively.

Common Stock Issuances for the Three and Nine

Months Ended September 30 , 2023

During the three and nine months ended September

30 , 2023, the Company issued 16,667 and 116,668 shares of common stock, respectively, due

to the vesting of restricted stock units (“RSUs”), and recognized approximately $ 24,175 and $ 71,736 , respectively, 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 September 30 ,

2023, the remaining unamortized RSU stock-based compensation expense was approximately $ 117,000 .

The Company did no t grant any RSUs or restricted

stock awards during the three and nine months ended September 30 , 2023.

Tender Offer (Common Stock Repurchase)

On July 20, 2023, the Company announced that its

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

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

launched the Tender Offer on August 9, 2023 and it expired on September 8, 2023.

14, 2023, the Company disclosed the results of the Tender Offer.

A total of 5,323,451 shares of the Company’s common stock

(the “Tender Offer Shares”) were validly tendered and not properly withdrawn at a purchase price of $ 0.70 per for an aggregate

purchase price of $ 3,726,416 , including fees and expenses relating to the Tender Offer.

The Company had 20,819,956 shares of common stock

outstanding following payment for the shares of common stock purchased in the Tender Offer.

The Tender Offer Shares were retired and cancelled

following the closing of the Tender Offer.

of its Common Stock issued and outstanding at March 31, 2024 and 2023, respectively.

Each holder of Common Stock is entitled to one vote

for each share of Common Stock held on all matters submitted to a vote of the stockholders.

Our Second Amended and Restated Certificate

of Incorporation and Second Amended and Restated Bylaws do not provide for cumulative voting rights.

In addition, the holders of our Common Stock will

be entitled to receive ratably such dividends, if any, as may be declared by the Board out of legally available funds;

however, the current

policy of our Board is to retain earnings, if any, for operations and growth.

Upon liquidation, dissolution or winding-up, the holders

of our Common Stock will be entitled to share ratably in all assets that are legally available for distribution.

Holders of our Common Stock have no preemptive,

conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock.

preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders

of shares of any series of our preferred stock that we may designate and issue in the future.

Effective January 2, 2024, the Company amended

its Second Amended and Restated Certificate of Incorporation to effect a one-for-twenty ( 1 :

20 ) reverse stock split of our outstanding

shares of Common Stock.

No fractional shares were issued as a result of the reverse stock split.

Any fractional shares resulting from

the reverse stock split were paid in cash.

The reverse stock split did not otherwise affect any of the rights currently accruing to holders

of our Common Stock.

2023 Stock Incentive Plan

The Board and stockholders have adopted and approved

the Company’s 2023 Stock Incentive Plan (the “2023 Plan”) which took effect on December 19, 2023.

The 2023 Plan allows

for the issuance of securities, including stock options, restricted stock, and restricted stock units (“RSUs”) to employees,

Board members and consultants.

The initial number of shares of Common Stock available for issuance under the 2023 Plan was 125,000

shares plus 28,389 unused shares reserved under the Company’s 2021 Stock Incentive Plan, which will, on January 1 of each calendar

year, beginning on January 1, 2024 and ending on and including January 1, 2033, unless the Board decides otherwise, automatically increase

to equal to the lessor of (A) three percent ( 3 %) of the number of shares of Common Stock outstanding on the final day of the immediately

preceding calendar year or (B) such smaller number of Shares as is determined by the Board.

On January 1, 2024, the number of shares of Common

Stock available for issuance under the 2023 Plan automatically increased by 31,254 shares.

As of March 31, 2024, a total of 184,643 shares

of Common Stock were available under the 2023 Plan, of which 104,433 shares were issued and outstanding and 80,210 shares were available

for potential issuances.

Common Stock Issuances for the Three Months

Ended March 31, 2024

During the three months ended March 31, 2024, the Company issued 1,666

shares of Common Stock due to the vesting of restricted stock units (“RSUs”) and recognized approximately $ 48,000 of stock-based

compensation expense related to its outstanding RSUs.

Stock-based compensation expense related to the Company’s RSUs is recognized

within general and administrative expense on the condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2024, the remaining unamortized

RSU stock-based compensation expense was approximately $ 69,000 .

Stock Issuances for the Three Months Ended March 31, 2023

During the three months ended

March 31, 2023, the Company issued 4,166 shares of Common Stock due to the vesting of RSUs and recognized approximately $ 24,000 of

stock-based compensation expense related to its outstanding RSUs.

Stock-based compensation expense related to the Company’s RSUs

is recognized within general and administrative expense on the condensed consolidated statements of operations and comprehensive

31, 2023, remaining unamortized RSU stock-based compensation expense was approximately $ 165,500 .

NOTE 7 – STOCK OPTIONS

Stock Options Issued, Vested and Cancelled

During the three months ended September

30 , 2023, no stock options were issued.

During the three months ended September 30 ,

2023, stock options to purchase an aggregate of 279,167 shares of Common Stock, subject to time-based milestone vesting conditions, vested.

During the nine months ended September 30, 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 pricing model with a volatility assumption of 68.64 %.

During the nine months ended September

During the three months ended March

31, 2024 , the Company issued stock options under the 2023 Plan to employees, to purchase an aggregate of 104,433 shares of Common

Stock with a strike price equal to $ 8.13 per share and a term of ten years .

Of the stock options granted, stock options to purchase an

aggregate of 37,433 shares of Common Stock were fully vested at issuance and the remaining stock options are subject to time-based vesting

over a term ranging between one to three years.

These stock options had a total fair value of approximately $ 657,000 , as calculated using

the Black-Scholes pricing model with the following assumptions:

volatility of 88.41 %, discount rate of 4.20 %, expected term of 6.5 years,

and an exercise price of $ 8.13 .

During the three months ended March

31, 2024 , stock options to purchase an aggregate of 42,767 shares of Common Stock, subject to time-based milestone vesting conditions,

During the nine months ended September 30 , 2023, stock options to purchase an aggregate

of 200,000 shares of Common Stock were cancelled.

Stock-Based Compensation

For the three months ended September

For the three months ended March

31, 2024 and 2023, total stock-based compensation expense related to the Company’s stock options was approximately $ 298,000 and

approximately $ 111,000 , respectively.

For the three months ended September 30, 2023, the Company recognized approximately $ 81,000

of stock-based compensation related to its options within selling, general and administrative expense, and approximately $ 21,000 within

research and development expense.

For the three months ended September 30, 2022, all stock-based compensation expense was recorded within

selling, general and administrative expense.

nine months ended September 30, 2023 and 2022, total stock-based compensation expense related to the Company’s stock options was

approximately $ 451,000 and approximately $ 307,000 , respectively.

For the nine months ended September 30, 2023, the Company recognized

approximately $ 349,000 of stock-based compensation related to its options within selling, general and administrative expense, and approximately

$ 102,000 within research and development expense.

For the nine months ended September 30, 2022, all stock-based compensation expense was

recorded within selling, general and administrative expense.

$ 153,000 , respectively.

For the three months ended March 31, 2024, the Company recognized approximately $ 184,000 of stock-based compensation

related to its stock options within general and administrative expense, and approximately $ 114,000 within research and development expense

on the condensed consolidated statements of operations and comprehensive loss .

For the three

months ended March 31, 2023, all stock-based compensation expense was recorded within general and administrative expense on the

condensed consolidated statements of operations and comprehensive loss .

The following

table summarizes the activity related to the Company’s stock options for the nine months ended September 30, 2023:

table summarizes the activity related to the Company’s stock options for the three months ended March 31, 2024:

Number of Options

Weighted average

exercise price per

Weighted average

contractual term

intrinsic value (in

intrinsic value

(in thousands)

Outstanding, January 1, 2024

Expired/Cancelled

Outstanding, September 30, 2023

Exercisable, September 30, 2023

As of September

Outstanding, March 31, 2024

Exercisable, March 31, 2024

As of March 31, 2024 ,

the remaining unamortized stock-based compensation expense related to the stock options was approximately $ 729,000 .

NOTE 8 – WARRANTS

As of September 30 , 2023,

the fair value of the Public Warrants was approximately $ 0.01 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 $ 0.01 per Representative Warrant, which was based on the

relative fair value to the Public Warrants.

31, 2024 , the fair value of the Public Warrants was approximately $ 0.246 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 $ 0.256 per Representative Warrant, which

was based on the relative fair value to the Public Warrants.

The following table summarizes the Company’s

1 unchanged sentence

Exercise Price

contractual term

average exercise

No warrants were granted, expired/cancelled, or

exercised during the three and nine months ended September 30 , 2023.

Number of Warrants

Weighted-average

remaining contractual

Weighted-average

exercise price

During the three months ended March 31, 2024,

the Company issued warrants to purchase an aggregate of 1,500 shares of Common Stock in exchange for consulting services.

were issued on March 1, 2024 and become exercisable in twelve equal monthly installments commencing on April 1, 2024 at $ 8.13 per share.

The warrants expire ten years from the date of issuance.

For the three months ended March

31, 2024 and 2023, total stock-based compensation expense related to the Company’s warrants was approximately $ 787 and zero , respectively,

and is recognized within general and administrative expense on the condensed consolidated statements of operations and comprehensive

No warrants were expired/cancelled or exercised

during the three months ended March 31, 2024 .

NOTE 9 – COMMITMENTS AND CONTINGENCIES

15 unchanged sentences

NOTE 10 – DISCONTINUED OPERATIONS

of June 30, 2023, we sold and disposed of our assets associated with the Clinics operations in Los Angeles, CA and disposed of our services

The lease associated with the related property in Los Angeles was assumed by the buyer in the transaction.

As of September 30, 2023, the carrying amounts

of the classes of assets and liabilities related to the discontinued operations of the Clinics operations were $ 0 .

During the year ended December 31, 2023, we sold

and disposed of our assets associated with the Clinics operations in Los Angeles, CA and disposed of our services in the U.K.

associated with the related property in Los Angeles was assumed by the buyer in the transaction.

As of March 31, 2024 and December 31, 2023, the

carrying amounts of the classes of assets and liabilities related to the discontinued operations of the Clinics operations were $ 0 .

The results of operations from discontinued operations for

the three and nine months ended September 30 , 2023 and 2022, have been reflected in the condensed

consolidated statements of operations and consist of the following:

the three months ended March 31, 2024 and 2023, have been reflected in the condensed consolidated

statements of operations and consist of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of services

Selling, general and administrative

Research and Development

General and administrative

Loss from discontinued operations

$ ( 271,869 )

Gain on sale of accounts payable

Gain on sale of assets

Gain (loss) from discontinued operations, before income tax

( 1,144,283 )

Income tax expense

Net loss from discontinued operations, net of tax

$ ( 395,089 )

$ ( 437,015 )

$ ( 1,144,283 )

Weighted-average common shares outstanding, basic and diluted

Basic and diluted loss per share from discontinued operations

The following table presents the gain on the sale

of assets in Los Angeles, CA:

September 30,

Cash proceeds

Proceeds to receive in installments

Less transaction costs

Less book value of assets

Gain on sale, before income tax

Income tax expense

Gain on sale, net of tax

The following table presents non-cash items related

to discontinued operations, which are included in the Company’s unaudited condensed consolidated statement of cash flows:

September 30,

Cash Flows From Operating Activities:

Gain on sale of assets

In accordance with U.S.

GAAP, only expenses specifically

identifiable and related to a business to be disposed may be allocated to discontinued operations.

As such, the general and administrative

expenses recorded in discontinued operations include corporate costs incurred directly in support of the Clinics business.

The following table presents non-cash items related to discontinued

operations, which are included in the Company’s condensed consolidated statement of cash flows for the three months ended March

Supplemental disclosure of cash flow information:

Amount due from sale of assets

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 $ 0 at September 30 , 2023 and December 31, 2022, respectively.

NOTE 11 – RELATED PARTY TRANSACTIONS

PsychoGenics, Inc.

In April 2023 we entered into a contract

with PsychoGenics, Inc.

(“PsychoGenics”) for the conduct of one of our preclinical studies.

PsychoGenics is a contract manufacturing

organization with extensive experience running preclinical and clinical.

Pursuant to the contract, we made aggregate payments to PsychoGenics

totaling approximately $ 0.3 million over the term of the contract.

The contract was completed in September 2023.

Emer Leahy, a member of our Board, is

the current Chief Executive Officer and a less than 5 % owner of PsychoGenics.

Consulting Agreement With Prof.

Lawrence Steinman

The Steinman Consulting Agreement memorializes

the compensation arrangements pursuant to which Prof.

Steinman has been compensated for his services to our Company, as previously disclosed

in our public filings.

Pursuant to the Steinman Consulting Agreement, Prof.

Steinman provides a variety of consulting and advisory services

relating principally to the clinical and commercial development of our product candidates, including our research and development strategy

through all phases of discovery and preclinical development, identifying potential partners for our pre-clinical assets, and business

development efforts related to our pre-clinical assets, among other things.

Pursuant to the Steinman Consulting Agreement, Prof.

receives $ 25,000 per quarter for his services.

NOTE 12 – SUBSEQUENT EVENTS

The Company has evaluated events and transactions

subsequent to March 31, 2024 through the date these condensed consolidated financial statements were included on Form 10-Q and filed with

There are no subsequent events identified that would require disclosure.

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 1. Financial Statements