Pasithea Therapeutics Corp. 10-Q

Item 2. Management’s Discussion and Analysis 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, 2024, as filed on March 24, 2025. 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 most recent 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,” “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”), AlloMek Therapeutics, LLC (“AlloMek”) and Pasithea MacroMEK Pty Ltd. 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 Clinics Inc., legally dissolved as of September 3, 2025, was incorporated in Delaware. Pasithea Therapeutics Portugal, Sociedade Unipessoal Lda, is a private limited company, registered in Portugal. Alpha-5 and AlloMek are both Delaware limited liability companies. Pasithea MacroMEK Pty Ltd is registered in Australia. The operations of Pasithea Therapeutics Limited (U.K.), 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 (the “Exchange Act”). These statements are generally identified by the use of such words as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “forecast,” “estimate,” “expect,” “intend,” “plan,” “continue,” “outlook,” “will,” “potential” and similar statements of a future or forward-looking nature. These forward-looking statements speak only as of the date of filing this Quarterly Report with the SEC, and include, without limitation, statements about the following: ● 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 ability to regain and maintain compliance with the listing standards of The Nasdaq Capital Market; ● our plans to develop and commercialize our product candidates involve 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; 23 ● 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 have been and 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; ● 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 Public Warrants; ● our ability to restructure our operations to comply with any potential future changes in government regulation; and ● 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 as well as the section titled “Risk Factors” included in our most recent Annual Report on Form 10-K 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. 24 Company Summary We are a clinical-stage biotechnology company primarily focused on the discovery, research and development of innovative treatments for CNS disorders, RASopathies, MAPK pathway-driven tumors and other diseases. 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 and expect to complete the FIH Phase 1 Dose Escalation Study in 2026. In May 2025, we initiated our Phase 1/1b multicenter, open-label, dose escalation trial of PAS-004 in adult patients with neurofibromatosis type 1 (“NF1”) with symptomatic and inoperable, incompletely resected, or recurrent plexiform neurofibromas (“PN”). We are currently conducting the trial at a total of five sites in Australia, South Korea and the United States in up to 24 patients in a dose escalation phase followed by approximately 24 patients in an expansion phase. The initial indication we plan to seek FDA marketing approval for PAS-004 is the treatment of symptomatic PNs in both adult and pediatric patients with NF1. As such, we aim to conduct a Phase 1 trial for pediatric NF1-PN patients and ultimately complete registrational clinical trials in both adult and pediatric NF1-PN 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 amyotrophic lateral sclerosis (“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. 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. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we: ● 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; and ● acquire or in-license or invent other product candidates or technologies. 25 Recent Developments Clinical Updates 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 adult NF1-PN patients. On July 31, 2025, we announced the completion of enrollment and initial dosing of the first cohort of three patients from our Phase 1/1b clinical trial in adult NF1-PN patients. On September 16, 2025, we announced the activation of two clinical trial sites in South Korea—Asan Medical Centre and Severance Hospital Yonsei University Health System—in connection with the Phase 1/1b clinical trial of PAS-004 in adult NF1-PN patients. On November 4, 2025, we announced the activation of a new U.S. clinical trial site at the University of Alabama at Birmingham in connection with the Phase 1/1b clinical trial of PAS-004 in adult NF1-PN patients. Amendment to the 2023 Stock Incentive Plan On September 3, 2025, at our 2025 Annual Meeting of Stockholders, our stockholders approved an amendment (the “Plan Amendment”) to our 2023 Stock Incentive Plan (the “2023 Incentive Plan”) increasing the number of shares of Common Stock authorized for issuance under the 2023 Incentive Plan by 1,750,000 shares to 2,014,221 shares. The Plan Amendment became effective following its approval by our stockholders. 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. 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. 26 Results of Operations Comparison of the Three and Nine Months Ended September 30, 2025 and 2024 Our financial results for the three and nine months ended September 30, 2025 and 2024 are summarized as follows: For the Three Months Ended September 30, 2025 2024 Change % Change General and administrative $ 1,752,262 $ 1,423,228 $ 329,034 23.1 % Research and development 1,357,793 1,581,376 (223,583 ) (14.1 )% Loss from operations (3,110,055 ) (3,004,604 ) (105,451 ) 3.5 % Other income, net 72,635 4,770 67,865 1,422.7 % Net loss $ (3,037,420 ) $ (2,999,834 ) $ (37,586 ) 1.3 % For the Nine Months Ended September 30, 2025 2024 Change % Change General and administrative $ 5,364,813 $ 5,301,934 $ 62,879 1.2 % Research and development 5,236,320 5,688,478 (452,158 ) (7.9 )% Loss from operations (10,601,133 ) (10,990,412 ) 389,279 (3.5 )% Other income, net 284,318 263,489 20,829 7.9 % Net loss $ (10,316,815 ) $ (10,726,923 ) $ 410,108 (3.8 )% General and administrative General and administrative expenses increased by approximately $329,000, or 23%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily driven by increases in (i) legal expenses of approximately $157,000, (ii) corporate expenses including asset write-off of approximately $114,000, (iii) public company expenses of approximately $46,000, (iv) accounting and business development expenses of approximately $43,000, (v) other income of approximately $41,000, (vi) personnel and other expense of approximately $14,000 and (vii) consulting costs of approximately $10,000. These increases were partially offset by decreases in (i) non-cash stock-based expense of approximately $87,000 and (ii) gain on asset disposal of approximately $9,000. General and administrative expenses increased by approximately $63,000, or 1%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily driven by increases in (i) accounting and business development expenses of approximately $160,000, (ii) other income of approximately $135,000, (iii) personnel and other expense of approximately $108,000, (iv) corporate expenses including asset write-off of approximately $77,000 and (v) consulting expenses of approximately $19,000. These increases were partially offset by decreases in (i) non-cash stock-based expense of approximately $297,000, (ii) legal expenses of approximately $88,000 and (iii) public company expenses of approximately $51,000. We expect general and administrative expenses to increase throughout fiscal year 2025 as compared to fiscal year 2024 primarily due to increased non-cash stock-based compensation expenses. 27 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, 2025, and PAS-004, PAS-003, and PAS-001 for the three and nine months ended September 30, 2024. Research and development expenses decreased by approximately $224,000, or 14%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily driven by decreases in (i) preclinical research and development expenses related to de-prioritization of our discovery programs of approximately $365,000, (ii) consulting expense of approximately $61,000 and (iii) other expense of approximately $216,000. These decreases were partially offset by an increase in clinical trials expense of approximately $419,000 related to the ongoing FIH Phase 1 Dose Escalation Study of PAS-004 and the initiation of the Phase 1/1b clinical trial of PAS-004 in adult NF1-PN patients. Research and development expenses decreased by approximately $452,000, or 8%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The decrease was primarily driven by decreases in (i) preclinical research and development expenses related to our discovery programs of approximately $1,690,000, (ii) manufacturing and CMC expenses of approximately $347,000, (iii) other expense of approximately $338,000, (iv) consulting expense of approximately $190,000 and (v) stock compensation expense of approximately $135,000. These decreases were partially offset by an increase in clinical trials expense of approximately $2,248,000 related to the ongoing FIH Phase 1 Dose Escalation Study of PAS-004 and the initiation of the Phase 1/1b clinical trial of PAS-004 in adult NF1-PN patients. We expect research and development expenses to increase throughout 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 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 September 30, 2025, other income, net increased by approximately $68,000, or 1,423%, compared to the three months ended September 30, 2024. The increase in other income, net is primarily due to (i) increases in 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 $117,000 and (ii) other income of approximately $9,000, partially offset by (i) a decrease in interest and dividends, net of approximately $32,000 and (ii) foreign currency transactions gain of approximately $26,000. For the nine months ended September 30, 2025, other income, net increased by approximately $21,000, or 8%, compared to the nine months ended September 30, 2024. The increase in other income, net is due primarily to increases in (i) fair value of the Public Warrants and the Representative Warrants of approximately $195,000, (ii) other income of approximately $28,000 and (iii) foreign currency transactions gain of approximately $3,000. These increases were partially offset by decreases in (i) interest and dividends, net of approximately $198,000 and (ii) a realized foreign currency translation loss from dissolution of subsidiaries of approximately $7,000. 28 Working Capital As of September 30, As of December 31, 2025 2024 Current assets $ 5,529,226 $ 7,368,315 Current liabilities 1,377,111 1,119,871 Working capital $ 4,152,115 $ 6,248,444 Working capital decreased by approximately $2.1 million between September 30, 2025 and December 31, 2024 primarily due to cash flow used to fund operations, partially offset by cash received from the May 2025 Public Offering. Liquidity and Financial Condition For the Nine Months Ended September 30, 2025 2024 Net loss $ (10,316,815 ) $ (10,726,923 ) Net cash used in operating activities $ (9,814,668 ) $ (11,480,402 ) Net cash provided by financing activities 7,097,190 4,541,184 Effect of foreign currency translation on cash 18,301 (30,665 ) Decrease in cash, cash equivalents and restricted cash $ (2,699,177 ) $ (6,969,883 ) Cash, cash equivalents and restricted cash decreased by approximately $2.7 million for the nine months ended September 30, 2025 compared to a decrease of approximately $7.0 million for the nine months ended September 30, 2024. The decrease in cash, cash equivalents and restricted cash for the nine months ended September 30, 2025 was primarily attributable to cash provided by financing activities related to net loss of approximately $10.3 million, which was partially offset by proceeds from at-the-market sales of Common Stock of $2.0 million, proceeds from the issuance of Common Stock through a May 2025 Public Offering of $4.2 million and proceeds from the exercise of warrants of $1.3 million. The decrease in cash, cash equivalents and restricted cash of approximately $7.0 million for the nine months ended September 30, 2024 was primarily attributable to cash used to fund operations of approximately $11.5 million, which was partially offset by net proceeds from the sale of warrants for the September 2024 Offering of approximately $4.5 million. Liquidity & Capital Resources Outlook As of September 30, 2025, we had approximately $4.1 million in operating bank accounts and money market funds, with working capital of approximately $4.2 million. We are dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute our development plans and continue operations. Subsequent to the consummation of the Initial Public Offering, our liquidity was and 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 public offering we consummated in May 2025, 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. 29 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 September 30, 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, primarily general and administrative and research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to: ● the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our product candidates; ● the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization; ● the extent to which we enter into collaborations or other arrangements with third parties in order to further develop our product candidates; ● the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; ● the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies; ● expenses needed to attract and retain skilled 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; and ● 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 operational needs and capital requirements for clinical trials, other research and development expenditures, and business development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies. 30 Contractual Obligations See Note 9 – Commitments and Contingencies in the Notes to Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a summary of our contractual obligations. Off-Balance Sheet Arrangements During the periods presented, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated under the Exchange Act. Critical Accounting Estimates Our critical accounting estimates, which include (1) stock-based compensation and (2) fair value measurements, are more fully described in the Notes to our Consolidated Financial Statements included in our Form 10-K for the fiscal year ended December 31, 2024, as filed on March 24, 2025. During the three months ended September 30, 2025, there were no material changes to our critical accounting policies and estimates from those described in our Form 10-K. Recent Accounting Pronouncements See Note 2 – Summary of Significant Accounting Policies in the Notes to our Unaudited Condensed Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not Applicable. As a smaller reporting company, we are not required to provide the information required by this Item.