What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-15 compared with 2024-11-13 · 203 added, 292 removed, 90 unchanged (85% of the section changed)

1 unchanged sentence

of Financial Condition and Results of Operations

You should read the following discussion and

analysis of financial condition and operating results together with our financial statements and the related notes and other financial

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, 2023, as filed on March 29, 2024.

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

You should read the following

discussion and analysis of financial condition and operating results together with our financial statements and the related notes and

other financial 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, 2024, as filed on March 24, 2025.

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.

Throughout this report, the terms “our,”

1 unchanged sentence

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.

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

AlloMek Therapeutics, LLC (“AlloMek” )and Pasithea MacroMEK Pty Ltd.

Pasithea Therapeutics Limited (UK), legally dissolved

as of January 2, 2024, was a private limited Company, registered in the United Kingdom (UK).

Pasithea Clinics Inc.

is incorporated in Delaware.

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.

is incorporated in

Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, is a private limited Company, registered in Portugal.

AlloMek are both Delaware limited liability companies.

Pasithea MacroMEK Pty Ltd is registered in Australia.

The operations of Pasithea

Therapeutics Limited (UK), Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, and Pasithea Clinics Inc.

have been discontinued.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report

on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section

21E of the Securities Exchange Act of 1934, as amended.

This Quarterly Report on Form

10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E

of the Securities Exchange Act of 1934, as amended.

These statements are generally identified by the use of such words as “may,”

4 unchanged sentences

speak only as of the date of filing this Quarterly Report with the SEC, and include, without limitation, statements about the following:

lack of operating history;

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

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

expenditure requirements;

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

plans to develop and commercialize our product candidates involves a lengthy and expensive process, with an uncertain outcome;

initiation, enrollment, timing, progress, results, and cost of our research and development programs and our current and future preclinical

studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related

preparatory work, the period during which the results of the trials will become available;

timing of interim data and final results from our clinical trials for PAS-004;

potential safety and efficacy of our product candidates and the therapeutic implications of clinical and preclinical data;

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

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;

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

our plans to develop and commercialize our product candidates involves a lengthy and expensive process, with an uncertain outcome;

the initiation, enrollment, timing, progress, results, and cost of our research and development programs and our current and future preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the period during which the results of the trials will become available;

the timing of interim data and final results from our clinical trials for PAS-004;

the potential safety and efficacy of our product candidates and the therapeutic implications of clinical and preclinical data;

potential impacts of increased trade tariffs, import quotas or other trade restrictions or measures taken by the United States and other countries, including the recent and potential changes in U.S.

trade policies that may be made by the Trump presidential administration;

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;

success of competing therapies that are or may become available;

beneficial characteristics, safety, efficacy and therapeutic effects of our future product candidates;

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

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

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

dependence on third parties;

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

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;

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

ability to restructure our operations to comply with any potential future changes in government regulation;

● disruptions

to the development of our product candidates due to public health crises, such as epidemics and pandemics, including the COVID-19 global

impact of global economic and market conditions and political developments on our business, including, among others, rising inflation

and capital market disruptions, economic sanctions, bank failures, regional conflicts around the world, and economic slowdowns or recessions

that may result from such developments which could harm our research and development efforts as well as the value of our Common Stock

and our ability to access capital markets;

interruptions resulting from geopolitical actions and global events, including political instability, natural disasters and events of

terrorism and wars such as the war between Ukraine and Russia, and the corresponding tensions created from such conflict between Russia,

the United States and countries in Europe as well as other countries such as China, and the conflict between Hamas and Israel;

reliance on foreign contract research organizations (CROs) and contract manufacturing organizations (CMOs), including WuXi AppTec, that

may be subject to U.S.

legislation, including the proposed BIOSECURE bill, trade restrictions and other foreign regulatory requirements

which could increase the cost or reduce the supply of material available to us, delay the procurement or supply of such material or have

an adverse effect on our ability to secure significant commitments from governments to purchase our potential therapies

Because forward-looking

statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond

our control, you should not rely on these forward-looking statements as predictions of future events.

The events and circumstances reflected

in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the

forward-looking statements.

You should refer to the “ Risk Factors ” section of this Quarterly Report for a discussion

of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.

We operate in an evolving environment and new risk factors and uncertainties may emerge from time to time.

It is not possible for management

to predict all risk factors and uncertainties.

As a result of these factors, we cannot assure you that the forward-looking statements

in this Quarterly Report will prove to be accurate.

Except as required by applicable law, we do not plan to publicly update or revise

any forward-looking statements contained herein, whether because of any new information, future events, changed circumstances or otherwise.

You should review the factors and risks and other information we describe in the reports we will file from time to time with the SEC.

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

the beneficial characteristics, safety, efficacy and therapeutic effects of our future product candidates;

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;

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

our dependence on third parties;

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

our ability to restructure our operations to comply with any potential future changes in government regulation;

the impact of global economic and market conditions and political developments on our business, including, among others, rising inflation and capital market disruptions, economic sanctions, bank failures, regional conflicts around the world, and economic slowdowns or recessions that may result from such developments which could harm our research and development efforts as well as the value of our Common Stock and our ability to access capital markets.

Because forward-looking statements are inherently

subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should

not rely on these forward-looking statements as predictions of future events.

The events and circumstances reflected in our forward-looking

statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

You should refer to the “Risk Factors” section of this Quarterly Report for a discussion of important factors that may cause

our actual results to differ materially from those expressed or implied by our forward-looking statements.

We operate in an evolving environment

and new risk factors and uncertainties may emerge from time to time.

It is not possible for management to predict all risk factors and

uncertainties.

As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove

to be accurate.

Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained

herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should review the factors and

risks and other information we describe in the reports we will file from time to time with the SEC.

Company Summary

1 unchanged sentence

primarily focused on the discovery, research and development of innovative treatments for CNS disorders and other diseases, including

Our primary operations, the Therapeutics segment,

are focused on developing our lead therapeutic candidate, PAS-004, a next-generation macrocyclic mitogen-activated protein kinase, or

MEK inhibitor that we believe may address the limitations and liabilities associated with existing drugs with a similar mechanism of action.

PAS-004 is a small molecule allosteric inhibitor of MEK 1 and MEK 2 for potential use in the treatment of a range of RASopathies, including

neurofibromatosis type 1 (“NF1”)- associated neurofibromas and a number of oncology indications, among others that we acquired

from AlloMek Therapeutics, LLC in October 2022.

In December 2023, the FDA cleared our IND for PAS-004 and we received a study may proceed

letter from the FDA for our 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.

We are currently conducting the Phase 1 clinical

trial at four clinical sites in the United States and plan to open an additional three sites in Eastern Europe in the fourth quarter of

Our clinical development plan for PAS-004 is to begin a Phase 1/2a clinical trial in adult patients with NF1-associated plexiform

and/or cutaneous neurofibromas followed by pediatric patients and ultimately seek FDA marketing approval in these patient populations.

Additionally, we have two programs that are in

the discovery stage, which we believe address limitations in the treatment paradigm of the indications we plan to address with these programs,

which are currently ALS for PAS-003 and schizophrenia for PAS-001.

During the year ended December 31, 2023, we determined to cease further

development of our PAS-002 program for multiple sclerosis due to several factors including the significant capital, resources and time

required to develop the program, and the current and projected availability of effective treatment options for MS patients, among others.

Our ability to generate

product revenue will depend on the successful development, regulatory approval and eventual commercialization of one or more of our product

Until such time we can generate significant revenue from product sales, if ever, we expect to finance our operations through

the sale of equity, debt financings, or other capital sources, including potential collaborations with other companies or other strategic

transactions.

Adequate funding may not be available to us on acceptable terms, or at all.

If we fail to raise capital or enter into such

agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of

our product candidates.

Our primary operations, (the

“Therapeutics” segment) are focused on developing our lead product candidate, PAS-004, a next-generation macrocyclic

mitogen-activated protein kinase, or MEK inhibitor that we believe 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 we received a study may

proceed letter from the FDA for our 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

“FIH Phase 1 Dose Escalation Study”).

We are currently conducting the FIH Phase 1 Dose Escalation Study at four clinical

sites in the United States and three additional sites in Eastern Europe.

Our clinical development plan is to advance PAS-004 into a

Phase 1/1b clinical trial in adult patients with neurofibromatosis type 1 (NF1)-associated plexiform neurofibromas

(“NF1-PN”) followed by pediatric NF1-PN patients and ultimately complete registrational clinical trials in these patient

populations, which are the initial indications that the Company plans to seek marketing approval for PAS-004.

Additionally, we have two programs that are in the discovery stage,

which we believe address limitations in the treatment paradigm of the indications we plan to address with these programs, which are currently

ALS for PAS-003 and schizophrenia for PAS-001.

Our ability to generate product revenue will depend

on the successful development, regulatory approval and eventual commercialization of one or more of our product candidates.

time we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity,

debt financings, or other capital sources, including potential collaborations with other companies or other strategic transactions.

funding may not be available to us on acceptable terms, or at all.

If we fail to raise capital or enter into such agreements as and when

needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our product candidates.

We expect to continue to incur significant expenses

5 unchanged sentences

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

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

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

up external manufacturing capacity with the aim of securing sufficient quantities to meet our capacity requirements for clinical trials

and potential commercialization;

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;

or in-license product candidates and technologies;

clinical, operational, financial and management information systems and personnel, including personnel to support our product development

and planned future commercialization efforts.

establish a sales, marketing and distribution infrastructure to commercialize our drugs, if approved, and for any other product candidates for which we may obtain marketing approval;

maintain, expand and protect our intellectual property portfolio;

hire additional clinical, scientific and commercial personnel;

add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts, as well as to support our transition to a public reporting company;

acquire or in-license or invent other product candidates or technologies.

Recent Developments

Clinical Updates

On September 9, 2024, we announced the successful

completion of long-term chronic toxicity studies for our lead candidate PAS-004.

On September 26, 2024, we announced safety, tolerability,

pharmacokinetic (PK) and preliminary efficacy data from the first two cohorts of patients in our Phase 1 clinical trial of PAS-004.

2024 Offering

On September 26, 2024, we entered into a securities

purchase agreement (the “ September 2024 Offering”) with an institutional investor,

pursuant to which we agreed to sell pre-funded warrants (“Pre-Funded Warrants”) to purchase up to an aggregate of 1,219,513

shares of Common Stock at an exercise price of $0.001 per share, Series A warrants to purchase up to an aggregate of 1,219,513 shares

of Common Stock at an exercise price of $3.85 per share, and Series B warrants (together with the Series A Warrants, the “September

2024 PIPE Warrants”) to purchase up to an aggregate of 1,219,513 shares of Common Stock with an exercise price of $3.85 per share.

The combined purchase price per Pre-Funded Warrant and accompanying September 2024 PIPE Warrants was $4.099.

Aggregate gross proceeds

from the September 2024 Offering were approximately $4.5 million and the September 2024 Offering closed on September 30, 2024.

Scientific Advisory Board

On September 3, 2024, we announced that Rebecca

Brown, M.D., Ph.D., was appointed as a member of our Scientific Advisory Board.

Brown is currently Director of the Neurofibromatosis

Clinic at The Mount Sinai Hospital and Assistant Professor in the Department of Neurology (Division of Neuro-Oncology), Internal Medicine,

and Neurosurgery at the institution.

Reverse Stock Split

On December 28, 2023,

we filed a Certificate of Amendment to our Second Amended and Restated Certificate of Incorporation reflecting a one-for-20 reverse stock

split (the “Reverse Stock Split”) of our issued and outstanding shares of Common Stock which became effective at 12:01 a.m.

Eastern Time on January 2, 2024.

As a result of the Reverse Stock Split, every 20 shares of Common

Stock issued and outstanding were converted into one share of Common Stock, with a corresponding reduction in the number of authorized

shares of Common Stock from 495,000,000 to 100,000,000.

The Reverse Stock Split affected all stockholders uniformly and did not alter

any stockholder’s percentage interest in our equity, except to the extent that the Reverse Stock Split resulted in some stockholders

owning a fractional share.

No fractional shares were issued in connection with the Reverse Stock Split.

Stockholders who were otherwise

entitled to receive a fractional share instead received a cash payment (without interest) equal to such a fraction multiplied by the

average of the closing sales prices of Common Stock on The Nasdaq Capital Market for the five consecutive trading days immediately preceding

the effective date of the Reverse Stock Split (with such average closing sales prices adjusted to give effect to the Reverse Stock Split).

All outstanding securities entitling their holders to purchase shares of Common Stock or acquire shares of Common Stock, including stock

options, convertible debt and warrants, were adjusted as a result of the Reverse Stock Split, as required by the terms of those securities.

The accompanying condensed

consolidated financial statements reflect the Reverse Stock Split.

All share and per share information data herein that relates to

our Common Stock prior to the effective date has been retroactively restated to reflect the Reverse Stock Split.

On April 29, 2025, we announced completion of enrollment and initial dosing of three subjects in cohort 6 with

30mg capsules of PAS-004 from our ongoing FIH Phase 1 Dose Escalation Study.

On May 6, 2025, we announced pharmacodynamics

results demonstrating robust target engagement from our ongoing FIH Phase 1 Dose Escalation Study of PAS-004.

On May 14, 2025, we announced the initiation of our Phase 1/1b clinical trial to assess PAS-004 in adults NF1-PN patients.

May 2025 Offering

On May 7, 2025, we closed a public offering (the

“May 2025 Offering”) of 3,571,428 shares of Common Stock (or pre-funded warrants in lieu thereof) and accompanying Series

C warrants to purchase up to 3,571,428 shares of Common Stock and Series D warrants to purchase up to 3,571,428 shares of Common Stock,

at a combined offering price of $1.40 per share of Common Stock (or per pre-funded warrant) and accompanying warrants.

The Series C warrants

have an exercise price of $1.40 per share, are exercisable upon issuance and will expire five years thereafter.

The Series D warrants

have an exercise price of $1.40 per share, are exercisable upon issuance and will expire 18 months thereafter.

Additionally, in connection

with the closing of the offering, certain investors exercised Series D warrants to purchase an aggregate of 914,286 shares of Common

Stock, resulting in additional gross proceeds of approximately $1.3 million.

Total gross proceeds to the Company from the offering

were $5.0 million, before deducting the placement agent’s fees and other offering expenses payable by the Company.

Aggregate gross

proceeds from the offering and the exercise of the Series D warrants were approximately $6.3 million.

Impact of Inflation

We have recently experienced

higher costs across our business as a result of inflation, including higher costs related to employee compensation and outside services.

We expect inflation to continue to have a negative impact throughout 2024, and it is uncertain whether we will be able to offset the impact

of inflationary pressures in the near term.

We have recently experienced higher costs across

our business as a result of inflation, including higher costs related to employee compensation and outside services.

Although we anticipate

a decline in the rate of inflation throughout 2025, we expect inflation to continue to have a negative impact throughout 2025, and it

is uncertain whether we will be able to offset the impact of inflationary pressures in the near term.

Results of Operations

Comparison of the Three and Nine Months Ended

September 30, 2024 and 2023

Our financial results for the three and nine months

ended September 30, 2024 and 2023 are summarized as follows:

For the Three Months Ended

September 30,

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

$ (2,999,834 )

$ (3,612,590 )

For the Nine Months Ended

September 30,

Comparison of the Three Months Ended March

31, 2025 and 2024

Our financial results for the three months ended

March 31, 2025 and 2024 are summarized as follows:

For the Three Months Ended March 31,

General and administrative

1 unchanged sentence

Loss from operations

(10,990,412 )

(10,830,579 )

Other income, net

Net loss from continuing operations

(10,726,923 )

(10,476,484 )

Net loss from discontinued operations, net of tax

$ (10,726,923 )

$ (10,913,499 )

General and administrative

6 unchanged sentences

services and other expenses, including insurance, public company and corporate communications, information technology, and board fees.

General and administrative expenses decreased

by approximately $741,000, or 34%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

The decrease was primarily driven by decreases in (i) legal expenses of approximately $493,000, (ii) public company and corporate communications

expenses of approximately $217,000, (iii) accounting and business development of approximately $115,000, and (iv) personnel, other income

and gain on payable of approximately $43,000 offset by an increase in (i) consulting costs of approximately $78,000, (ii) non-cash stock

based expense of approximately $28,000, and (iii) other expense and gain on disposal of assets of $21,000.

General and administrative expenses decreased

by approximately $779,000, or 13%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The decrease was primarily driven by decreases in (i) personnel costs of approximately $326,000, (ii) legal expenses of approximately

$322,000, (iii) accounting and business development of approximately $210,000, (iv) public company and corporate communications expenses

of approximately $137,000, (v) other income of approximately $117,000, and (vi) gain on payable of $18,000, offset by an increases in

(i) office expenses, including franchise taxes and insurance of approximately $152,000, (ii) consulting costs of approximately $114,000,

(iii) non-cash amortization and depreciation, stock-based compensation of approximately $80,000, and (iv) other expense of approximately

We expect general and administrative expenses

to continue at lower levels in fiscal year 2024 as compared to fiscal year 2023 due to the non-recurring expenses that were incurred in

2023 related to the unsolicited, non-binding proposal to acquire all our outstanding shares from a third party and the tender offer we

completed in September 2023.

Research and Development

Research and development expenses relate to

activities primarily focused on the development of PAS-004 for the three and nine months ended September 30, 2024, and PAS-004,

PAS-003, and PAS-001 for the three and nine months ended September 30, 2023.

General and administrative expenses decreased by approximately $341,000,

or 15%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The decrease was primarily driven

by decreases in (i) legal expenses of approximately $246,000, (ii) non-cash stock-based expense of approximately $161,000, (iii) public

company expenses of approximately $57,000, (iv) accounting and business development of approximately $8,000 and (v) personnel and other

expense of approximately $8,000.

These decreases were partially offset by an increase in office and other general and administrative expenses

of approximately $139,000.

We expect general and administrative expenses to decrease slightly

in fiscal year 2025 as compared to fiscal year 2024 primarily due to reduced legal and public company and corporate communications expenses.

Research and Development

expenses decreased by approximately $44,000, or 3%, for the three months ended September 30, 2024 compared to the three months ended September

The decrease was primarily driven by decreases in (i) preclinical research and development expenses related to our discovery

programs of approximately $403,000 and (ii) personnel expenses and stock compensation expense of approximately $137,000 related to the

closure of our research laboratory and reduction in related workforce, offset by increases in (i) consulting expenses of approximately

$35,000, (ii) general research and development expenses of approximately $181,000, (iii) manufacturing and CMC expenses of approximately

$160,000 and (iv) clinical trial costs of approximately $120,000 related to the initiation of the Phase 1 clinical trial of PAS-004.

Research and development expenses increased by

approximately $939,000, or 20%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

increase was primarily driven by increases in (i) clinical trial costs of approximately $1,647,000 related to the initiation of the Phase

1 clinical trial of PAS-004, (ii) general research and development expenses of approximately $246,000, (iii) consulting costs of approximately

$137,000, (iv) stock compensation and personnel cost of approximately $182,000 and (v) manufacturing and CMC expenses of approximately

$22,000 offset by (i) preclinical research and development related to our discovery programs of approximately $1,295,000.

We expect research and

development expenses to increase in fiscal year 2024 as compared to fiscal year 2023 primarily due to the clinical development of PAS-004

as well as PAS-004 CMC activities, offset by decreases in preclinical research and development related to the closure of our research

Other income,

For the three months ended September 30, 2024,

other income, net decreased by approximately $172,000, or 97%, compared to the three months ended September 30, 2023.

The decrease in

other income, net is due primarily to a decrease in the fair value of the Public Warrants and the Representative Warrants (as such terms

are defined in “Note 2 – Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed Consolidated

Financial Statements in Part I, Item 1 of this Form 10-Q) that occurred during the three months ended September 30, 2024, compared to

a larger increase in the fair value of the Public Warrants and the Representative Warrants that occurred during the three months ended

September 30, 2023.

For the nine months ended September 30, 2024,

other income, net decreased by approximately $91,000, or 26%, compared to the nine months ended September 30, 2023.

The increase in other

income, net is due primarily to an increase in the fair value of warrant liabilities of approximately $191,000, offset by dividend income

of $343,000 during the nine months ended September 30, 2024 compared to approximately $254,000 of dividend income during the nine months

ended September 30, 2023.

See “Note 2 – Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed

Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for more information on the accounting treatment of the Public Warrants

and the Representative Warrants.

Discontinued Operations

During the year ended December 31, 2023, we discontinued

our support services to anti-depression clinics in the U.K.

and related at-home services in New York, NY.

We also discontinued our clinical

operations in Los Angeles, CA and disposed of the related property.

Accordingly, we discontinued the operations of our Clinics segment

provided by our subsidiaries, and currently have one reportable segment, the Therapeutics segment, related to the research and development

of our therapeutic product candidates.

As of June 30, 2023, all activity related to our discontinued subsidiaries is included in Net loss

from discontinued operations, net of tax in the condensed consolidated statements of operations and comprehensive loss.

Research and development expenses relate to activities primarily focused

on the development of PAS-004 for the three months ended March 31, 2025, and PAS-004, PAS-003, and PAS-001 for the three months ended

March 31, 2024.

Research and development expenses decreased by approximately $19,000,

or 1%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.

The decrease was primarily driven

by decreases in (i) preclinical research and development expenses related to our discovery programs of approximately $475,000, (ii) consulting

expense of approximately $97,000, (iii) stock compensation expense of approximately $87,000, (iv) manufacturing and CMC expenses of approximately

$56,000 and (v) other expense of approximately $30,000.

These decreases were offset by an increase in clinical trials expense of approximately

$726,000 related to the ongoing FIH Phase 1 Dose Escalation Study of PAS-004.

We expect research and development expenses to increase in fiscal year

2025 as compared to fiscal year 2024 primarily due to (i) an increase in clinical research for PAS-004 related to the ongoing FIH Phase

1 Dose Escalation Study and the planned upcoming phase 1/1b clinical trial of PAS-004 in adult NF1-PN patients, and (ii) an increase in

manufacturing costs related to the drug supply for our clinical trials, offset by decreases in pre-clinical research and the reduction

in workforce related to the closure of our research laboratory.

Other income, net

For the three months ended March 31, 2025, other income, net decreased

by approximately $63,000, or 35%, compared to the three months ended March 31, 2024.

The decrease in other income, net is due primarily

to a decrease in interest and dividends, net of approximately $106,000, a realized foreign currency translation loss from dissolution

of subsidiaries of approximately $7,000, partially offset by an increase fair value of the Public Warrants and the Representative Warrants

(as such terms are defined in “Note 2 – Summary of Significant Accounting Policies” in the Notes to Unaudited Condensed

Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q) of approximately $50,000.

Working Capital

September 30,

Current assets

2 unchanged sentences

Working capital decreased by approximately $1.7

million between December 31, 2023 and September 30, 2024 primarily due to cash used to fund operations for the nine months ended September

million between March 31, 2025 and December 31, 2024 primarily due to cash used to fund operations for the three months ended March 31,

Liquidity and Financial Condition

Nine Months Ended

September 30,

Net loss from continuing operations

For the Three Months

$ (3,563,238 )

3 unchanged sentences

$ (4,321,085 )

Net cash provided by investing activities

Net cash provided by (used in) financing activities

Effect of foreign currency translation

Net cash used in discontinued operations

Net cash provided by financing activities

Effect of foreign currency translation on cash

Decrease in cash and cash equivalents

1 unchanged sentence

$ (4,321,705 )

Cash and cash equivalents decreased by approximately

$7.0 million for the nine months ended September 30, 2024 compared to a decrease of approximately $13.5 million for the nine months ended

September 30, 2023, which was primarily attributable to cash used to fund operations and an increase in prepaid expenses.

Cash and cash equivalents decreased by approximately $1.6 million for

the three months ended March 31, 2025 compared to a decrease of approximately $4.3 million for the three months ended March 31, 2024.

The decrease for the three months ended March 31, 2025 was primarily attributable to cash used to fund operations which was partially

offset by at-the-market sales of common stock of approximately $1.7 million.

The decrease for the three months ended March 31, 2024 was

primarily attributable to cash used to fund operations and an increase in prepaid expenses.

Liquidity & Capital Resources Outlook

As of September 30, 2024, we had approximately

As of March 31, 2025, we had approximately

$5.3 million in operating bank accounts and money market funds, with working capital of approximately $4.5 million.

We have incurred significant

operating losses and negative cash flows from operations.

On September 30, 2024, we had an accumulated deficit of approximately $46.4

We have incurred recurring losses, have experienced recurring negative operating cash flows, and require significant cash resources

to execute our business plans.

Historically, our major sources of cash have been comprised of proceeds from various public and private

offerings of our capital stock.

We received aggregate gross proceeds of approximately $4.5 million as a result of the September 2024 Offering.

We are dependent on obtaining additional working capital funding from the sale of equity and/or debt securities to continue to execute

our development plans and continue operations.

Based on the foregoing, management believes that we will not have

sufficient working capital to meet our needs through twelve months from the issuance date of the condensed consolidated financial statements,

without raising additional capital.

Liquidity & Capital Resources Outlook

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

continues to be satisfied through the net proceeds from the Initial Public Offering, the private placements we consummated in

November 2021 and September 2024, the May 2025 Offering described above, the receipt of cash upon the prior exercise of our

outstanding warrants and the sale of Common Stock pursuant to the ATM Agreement.

Based on the foregoing, management believes that we

will not have sufficient working capital to meet our needs through twelve months from the issuance date of the financial statements

included in this Quarterly Report, without raising additional capital.

We are able to sell securities on a shelf registration

statement pursuant to the ATM Agreement with H.C.

Wainwright & Co., LLC.

Under current Securities and Exchange Commission regulations,

if at any time our public float is less than $75.0 million, and for so long as our public float remains less than $75.0 million, the amount

we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements is limited

to an aggregate of one-third of our public float, which is referred to as the baby shelf rules.

As of March 31, 2025, our calculated public

float is below $75.0 million and we will be restricted from selling more than an aggregate of one-third of our public float pursuant to

a shelf registration statement in any twelve-month period, so long as the aggregate market value of our Common Stock held by non-affiliates

is less than $75.0 million.

Our primary use of cash is to fund operating expenses,

6 unchanged sentences

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

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

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

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

costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending

intellectual property-related claims;

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

needed to attract and retain skilled personnel;

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

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;

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

14 unchanged sentences

Financial Statements included in our Form 10-K for the fiscal year ended December 31, 2024, as filed on March 24, 2025.

During the nine

months ended September 30, 2024, there were no material changes to our critical accounting policies and estimates from those described

in our Form 10-K.

During the three

months ended March 31, 2025, there were no material changes to our critical accounting policies and estimates from those described in

our Form 10-K.

Recent Accounting Pronouncements

7 unchanged sentences

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