Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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 thereto 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 thereto as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed on March 30, 2026. 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 Portugal, Sociedade Unipessoal Lda, Pasithea Clinics Inc., Alpha-5 Integrin, LLC, AlloMek Therapeutics, LLC and Pasithea MacroMEK Pty Ltd. 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 Integrin, LLC and AlloMek Therapeutics, LLC are both Delaware limited liability companies. Pasithea MacroMEK Pty Ltd is registered in Australia. The operations of 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;

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our ability to regain and maintain compliance with the listing standards of The Nasdaq Capital Market;

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

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

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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;

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

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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;

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

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

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

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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;

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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;

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

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

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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 file from time to time with the SEC.

Company Summary

We are a clinical-stage biotechnology company focused on the discovery, research and development of innovative treatments for RASopathies, MAPK pathway-driven tumors and other diseases, including central nervous system (CNS) disorders.

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 Advanced Cancer Study"). We are currently conducting the FIH Phase 1 Advanced Cancer Study at four clinical sites in the United States and three additional sites in Eastern Europe. We have completed the initial eight cohorts through 45 mg capsule and have not reached the maximum tolerated dose. We have filed a protocol amendment to continue dose escalation in the FIH Phase 1 Advanced Cancer Study using our tablet formulation of PAS-004 in an effort to continue to explore the safety, PK, and early signals of efficacy at higher dose levels of PAS-004. Simultaneously, a pilot food effect assessment is planned in a subset of patients who agree to participate in this optional component of the study. As such, we expect to complete the trial in 2028.

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 the United States, Australia, and South Korea.

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 one program, PAS-001, in the discovery stage, which we believe addresses limitations in the treatment paradigm for schizophrenia. During the year ended December 31, 2025, we determined to cease further development of our PAS-003 program for ALS due to several factors including the significant capital, resources and time required to develop the program.

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:

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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;

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maintain, expand and protect our intellectual property portfolio;

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hire additional clinical, scientific and commercial personnel;

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

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

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 2026, 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 Months Ended March 31, 2026, and 2025

Our financial results for the three months ended March 31, 2026, and 2025 are summarized as follows:

		For the Three Months Ended March 31,
		2026				2025				Change				% Change
General and administrative		$	1,934,324			$	1,950,328			$	(16,004	)			(0.8	)%
Research and development			2,942,320				1,729,851				1,212,469				70.1	%
Loss from operations			(4,876,644	)			(3,680,179	)			(1,196,465	)			32.5	%
Other income, net			2,007,162				116,941				1,890,221				1,616.4	%
Net loss		$	(2,869,482	)		$	(3,563,238	)		$	693,756				(19.5	)%

General and Administrative

General and administrative expenses decreased by approximately $16,000, or 0.8%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease was primarily driven by (i) a decrease in income tax expenses and tax credits of approximately $165,000, (ii) a decrease in accounting and business development expenses of approximately $24,000, (iii) a decrease in legal expenses of approximately $154,000, (iv) a decrease in insurance costs of approximately $22,000 and (v) a decrease in board fees of approximately $40,000, offset by (vi) an increase of approximately $240,000 in personnel costs, (vii) an increase in office expenses of approximately $49,000, (viii) an increase in stock-based compensation expense for employees and consultants of approximately $42,000, and (ix) an increase in public company and corporate communication costs of approximately $62,000.

We expect general and administrative expenses to continue to decrease in fiscal year 2026 as compared to fiscal year 2025 primarily due to a decrease in impairment expenses offset by a ramp up in operational activity, public company and corporate communications expenses, and non-cash stock-based compensation.

Research and Development

Research and development expenses relate to activities primarily focused on the development of PAS-004 for the three months ended March 31, 2026 and 2025.

Research and development expenses increased by approximately $1,212,000, or 70.1%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase was primarily due to (i) an increase in clinical trial and regulatory expenses of approximately $472,000, (ii) an increase in chemistry, manufacturing and controls ("CMC") expenses of approximately $507,000, (iii) an increase in preclinical research expense of approximately $130,000, and (iv) an increase in non-clinical research and development expense of approximately $109,000, offset by (vi) a decrease in other expenses of approximately $5,000.

We expect research and development expenses to continue to increase in fiscal year 2026 as compared to fiscal year 2025 primarily due to (i) an increase in clinical trial and regulatory expenses related to our ongoing clinical trials for PAS-004, (ii) an increase in CMC costs related to PAS-004 drug product and drug supply for our clinical trials, as well as the development of a liquid formation of PAS-004, (iii) the initiation of non-clinical absorption, distribution, metabolism and excretion ("ADME") studies, non-clinical developmental and reproductive toxicology studies, and clinical human ADME studies, (iv) an increase in preclinical research for PAS-004, and (v) an increase in personnel costs related to anticipated new workforce hires to support our research and development activities.

Other Income, Net

For the three months ended March 31, 2026, other income, net increased by approximately $1,890,000, or 1,616.4%, as compared to the three months ended March 31, 2025. The increase during the three months ended March 31, 2026, was primarily driven by (i) an approximate $1,465,000 increase in the change of the fair value of warrant liabilities during the three months ended March 31, 2026, (ii) an increase in interest and dividends, net of approximately $403,000, (iii) a decrease in foreign currency gain of approximately $9,000, (iv) an increase in other income of approximately $24,000, and (v) an increase in realized foreign currency translation loss from dissolution of subsidiaries of approximately $7,000 due to the fact that it did not exist this quarter.

Working Capital

		As of March 31,				As of December 31,
		2026				2025
Current assets		$	52,731,456			$	56,459,084
Current liabilities			1,489,485				4,973,961
Working capital		$	51,241,971			$	51,485,123

Working capital decreased by approximately $245,000 from December 31, 2025, to March 31, 2026, due primarily to net cash used to fund operations for the three months ended March 31, 2026, offset by the December 2025 Placement Agents Warrant liabilities reclassified to equity.

Liquidity and Capital Resources

		For the Three Months Ended March 31,
		2026				2025
Net loss		$	(2,869,482	)		$	(3,563,238	)
Net cash used in operating activities		$	(4,787,220	)		$	(3,055,757	)
Net cash provided by financing activities			750				1,474,306
Effect of foreign currency translation on cash			28,132				-
Decrease in cash, cash equivalents and restricted cash		$	(4,758,338	)		$	(1,581,451	)

Cash, cash equivalents and restricted cash decreased by approximately $4.8 million for the three months ended March 31, 2026, compared to a decrease of approximately $1.6 million for the three months ended March 31, 2025. The decrease for the three months ended March 31, 2026, was primarily attributable to cash used to fund operations and an increase in prepaid expenses. 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.

Liquidity & Capital Resources Outlook

As of March 31, 2026, we had approximately $50.4 million in operating bank accounts and money market funds, with working capital of approximately $51.2 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.

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:

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

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

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

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

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

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expenses needed to attract and retain skilled personnel;

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

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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

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

We believe that our current available cash and cash equivalents will be sufficient to meet our working capital needs for at least the next twelve months and beyond. However, 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.

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

We did not have any off-balance sheet arrangements as of March 31, 2026, 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as filed on March 30, 2026. During the three months ended March 31, 2026, there were no material changes to our critical accounting policies and estimates from those described in our most recent Annual Report on 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.