Telomir Pharmaceuticals Inc

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Note 1. Description of business and summary of significant accounting policies:

Overview

Telomir Pharmaceuticals, Inc. (“Telomir” or the “Company”) was formed in August 2021 and is a Florida-based early pre-clinical stage biopharmaceutical company that is developing its product candidate, TELOMIR-1, the first novel small molecule designed to lengthen the DNA’s protective telomere caps. TELOMIR-1 potentially will promote longevity in humans and canine animals by treating age-related conditions. Telomeres, the protective end caps of chromosomes composed of DNA sequences and proteins, naturally shorten as humans age. This shortening is accelerated by metal reactivity, which increases the risk of degenerative and age-related diseases.

As such TELOMIR-1 is undergoing studies to potentially provide a therapeutic intervention against contracting a number of degenerative and age-related diseases. Telomir’s goal is to develop and commercialize TELOMIR-1, proposed to be dosed orally, with the broader aim of promoting longevity and enhancing overall quality of life.

Substantive operations began in late 2022 and the Company’s Investigative New Drug application is anticipated to be filed with the U.S. Food and Drug Administration (“FDA”) in first half of 2025. National phase filings are expected to be made during the first quarter 2025. See Note 3 regarding this patent.

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the periods presented have been included. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for future periods.

As used herein, the Company’s Common Stock, no par value per share, is referred to as the “Common Stock” and the Company’s preferred stock, no par value per share, is referred to as the “Preferred Stock”.

Initial Public Offering

On February 13, 2024, the Company closed its initial public offering consisting of 1,000,000 shares at a price of $7.00 per share for approximately $7.0 million in gross proceeds. After deducting the underwriting commission and other offering expenses totaling $1.2 million, the net proceeds to the Company were $5.8 million (the “IPO”). The common stock began trading on The Nasdaq Capital Market on February 9, 2024 under the symbol “TELO”.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies from those previously disclosed in the Company’s 2023 Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission on March 29, 2024.

Note 2. Liquidity and capital resources

As of June 30, 2024, the Company had cash of approximately $1.9 million. The Company used approximately $3.5 million of cash in operations during the six months ended June 30, 2024.

Historically, the Company has been primarily engaged in developing TELOMIR-1. During these activities, the Company sustained substantial losses. The Company’s ability to fund ongoing operations and future clinical trials required for FDA approval is dependent on the Company’s ability to obtain significant additional external funding in the near term. Since inception, the Company has financed its operations through related party financings and an initial public offering. Additional sources of financing may be sought by the Company. However, there can be no assurance that any fundraising will be achieved on commercially reasonable terms, if at all.

As of the date of filing, the Company will continue to generate losses and have insufficient cash and cash equivalents on hand to support its operations for at least the 12 months following the date the financial statements are issued. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through 12 months after the date the financial statements are issued.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern

Note 3. License agreement, related party:

The Company licenses the U.S. patent rights for the use of TELOMIR-1 in human applications from MIRALOGX, LLC (“MIRALOGX”), an intellectual property development and holding company established by a significant shareholder of the Company.

On August 11, 2023, (the “Effective Date”), the Company and MIRALOGX entered into an Amended and Restated Exclusive License Agreement, under which the Company has the exclusive perpetual right and license under the above-described patent rights to make, have made, use, and sell “Licensed Products” in the U.S. for human uses and preclinical studies and activities of any kind conducted in furtherance of obtaining regulatory approval or commercialization for human uses (the “MIRALOGX License Agreement”). On November 10, 2023, we and MIRALOGX entered into the Amendment No. 1 to the Amended and Restated License Agreement, pursuant to which the field of use relating to the license was amended to include therapeutic treatments and other medical or health uses in animals, in addition to humans, and related preclinical studies and activities conducted in furtherance of obtaining regulatory approval for and commercialization of veterinary, in addition to human, therapeutic treatments and uses (together with the “Initial MIRALOGX License Agreement, the “MIRALOGX License Agreement”). “Licensed Product” is defined in the agreement as a drug product containing as an active agent 2,4,6-tris(3,4-dihydro-2H-pyrrol-2-yl) pyridine or a pharmaceutically acceptable salt, ester, or solvate thereof. We also have the right to grant corresponding sublicenses under the licensed patent rights. The MIRALOGX License Agreement provides for the payment to MIRALOGX of an 8% royalty (payable quarterly) on the Company’s net sales of Licensed Products by the Company or its sublicensees and on non-royalty bearing milestone revenue. There are no up-front, execution, or milestone payments in the license agreement. Further, no payments have been made to date under the agreement.

The term of the license from MIRALOGX will continue through the date of the expiration of the last-to-expire licensed patent or, if later, the date of the expiration of the last strategic partnership/sublicensing agreement covering the licensed products. The patent rights are expected to extend through 2043, and additional patent terms may be awarded, including additional patent terms based on the time taken for regulatory review of drug products.

The agreement also provides that the Company may bring suit in its own name to enforce patent rights. MIRALOGX will control the prosecution of the patent applications for TELOMIR-1. The Company is required to be kept informed by MIRALOGX of patent prosecution activities and may select identified countries for patent protection. The Company is to reimburse MIRALOGX for patent prosecution and maintenance costs.

Note 4. Related party transactions:

Due from related parties- Amounts due from related parties as of both June 30, 2024 and December 31, 2023 totaled $0.13 million. These advances are due on demand and are non-interest bearing.

Due to related parties- During the periods ended June 30, 2024 and December 31, 2023, the Company received working capital advances from companies under common control. These advances are due on demand and are non-interest bearing. During the year ended December 31, 2023, advances in the amount of $1.7 million were converted into 837,841 shares of our common stock at a conversion rate of $2.05 per share resulting in a loss on the conversion of debt of $4.1 million. As of June 30, 2024 and December 31, 2023, $0.14 million and $0.5 million, respectively, advances remained outstanding.

*Shared management-*Historically, the Company has shared management with related parties on an as-needed basis, to collaborate and pool resources efficiently. For the six months ended June 30, 2024, the Company incurred $0.010 million in costs related to this arrangement which is recorded in general and administrative expenses.

Bay Shore Trust Line of Credit

On June 15, 2023, the Company entered into a Promissory Note and Loan Agreement with the Bay Shore Trust, which was established by a significant shareholder of the Company. Under this Promissory Note and Loan Agreement (the “Bay Shore Note”), the Company had the right to borrow up to an aggregate of $5 million from the Bay Shore Trust at any time up to the second anniversary of the issuance of the Bay Shore Note or, if earlier, upon the completion of the Company’s IPO. The Company’s right to borrow funds under the Bay Shore Note was subject to the absence of a material adverse change in its assets, operations, or prospects. The Bay Share Note, together with accrued interest, was to become due and payable on the second anniversary of the issuance of the note, provided prepayment at any time without penalty. The Bay Shore Note accrued interest at a rate equal 7% per annum, simple interest, during the first year that the note is outstanding and 10% per annum, simple interest, thereafter. The Bay Shore Note was unsecured.

In consideration of the loan facility provided by the Bay Shore Trust, the Company issued to the Bay Shore Trust a common stock purchase warrant on June 15, 2023 giving the Bay Shore Trust the right to purchase up to 2,439,025 shares of common stock at an exercise price of $3.73 per share, which warrant will expire five years after the date of grant. Pursuant to a registration rights agreement, the Company has granted to Bay Shore Trust the right to require the Company, at any time after one year following the Company’s IPO, to register for resale the shares issuable upon the exercise of the warrant, with such registration rights being in the form of demand and “piggyback” registration rights that are subject to customary limitations and restrictions. As of June 30, 2024, these shares have not been registered. Upon issuance, the warrant met the criteria to be classified as equity based on an analysis under Accounting Standards Codification (480) ASC 480, “Distinguishing Liabilities from Equity” and was measured at fair value, resulting in an initial fair value of approximately $5.95 million upon issuance of the warrant, using Black-Scholes valuation techniques.

The borrowings from Bay Shore Trust were paid in full during the three months ended March 31, 2024, and the Company has fully amortized the relating financing costs and future borrowings are no longer available due to the terms of the agreement, specifically the closing of the Company’s IPO, which was made effective on February 13, 2024.

License agreement - See Note 3.

Related Party Travel Costs- On April 1, 2023 the Company entered into an Agreement For Shared Lease Costs (the “Shared Agreement”) with MIRALOGX, LLC, a related party. Under the Shared Agreement, the Company agrees to make monthly contributions or payments in accordance with its use of shared aircraft toward rent payments. During the six months ended June 30, 2024 and June 30, 2023, the Company incurred $0.4 million and $0.7 million, respectively, for travel-related expenses to the related party for rental charges and airplane-related expenses.

Related Party Rental Agreement- see Note 5 for Variable Lease

Note 5. Leases:

The Company’s former corporate headquarters was located in Baltimore, Maryland, which included a lease for office space. This lease began in November 2022 and expired in April 2024. The lease was not renewed.

The Company moved all corporate headquarter related activities in April 2024 to the shared space in Tampa, Florida referenced below within variable lease costs.

Variable lease costs

Variable lease costs primarily include utilities, property taxes, and other operating costs that are passed on from the lessor. Variable lease costs related to the aircraft include usage expenses, which includes pilot expenses, jet fuel and general flight expenses.

Beginning August 1, 2023, the Company’s accounting and administrative staff began sharing office space with a related party in Tampa, Florida. As of June 30, 2024, there is no formal agreement, pending a revised lease agreement from the landlord. As such, the Company has agreed to split the cost of the Tampa lease pending an executed lease. During the six months ended June 30, 2024, this variable lease cost related to the Tampa, Florida space totaled $0.012 million which is recorded in general and administrative expenses.

Note 6. Stockholders’ equity:

Capital stock

The Company has the authority to issue 400,000,000 shares of capital stock, consisting of 300,000,000 shares of Common Stock and 100,000,000 shares of undesignated preferred stock, whose rights and privileges will be defined by the Board of Directors when a series of preferred stock is designated.

Warrants

The Company has granted warrants to purchase shares of Common Stock. Warrants may be granted to affiliates in connection with certain agreements.

As of June 30, 2024, a cumulative total of 2,824,057 warrants, with exercise prices ranging from $3.73 to $15.42 remain exercisable and outstanding. There were no warrants exercised during the six months ended June 30, 2024.

Underwriter warrants

In connection with the IPO, the Company issued 50,000 warrants to purchase common stock to the IPO underwriter (or its designees) at an exercise price of $7.00 which expire after a four-and-a-half-year period commencing six months after the commencement of sales in the IPO. The warrants will be exercisable at any time and from time to time, in whole or in part, during the four-and-a-half-year period commencing six months after the commencement of sales in the IPO. The warrants provide for registration rights (including a one-time demand registration right and piggyback registration rights that expire 5 years from the commencement of sales of the offering) and customary anti-dilution provisions

Earnings Per Share

During the three and six months ended June 30, 2024 and 2023, outstanding stock warrants of 2,824,057 and 2,774,057, respectively, were not included in the computation of diluted earnings per share, because to do so would have had an antidilutive effect.

Note 7 –Subsequent events:

Passing of Dr. Christopher Chapman

On August 8, 2024, the Company was made aware of the passing of its Chairman and Chief Executive Officer, Dr. Christopher Chapman.

Restructuring of the Board of Directors

On August 8, 2024, Ms. Talhia Tuck, Mr. Brad Kroenig and Mr. Hugh McColl, each voluntarily resigned from the Board, effective immediately (the “Board Resignations”). Subsequent thereto, the remaining members of the Board appointed new members of the Board, as discussed below. The resignations of Ms. Tuck, Mr. Kroenig, and Mr. McColl were not the result of any disagreement with the Company on any matter relating to its operations, policies or practices.

On August 8, 2024, the remaining members of the Board (Dr. Craig Eagle, M.D. and Michael Jerman) unanimously approved the appointment of Mr. Erez Aminov, Dr. Matthew P. Del Giudice, Mr. Matthew Pratt Whalen and Mr. Ned MacPherson as members of the Board, to fill the vacancies on the Board occasioned by the Board Resignations and the passing of Dr. Chapman, for a term expiring at the Company’s 2024 annual meeting of stockholders.

The following is certain biographical information regarding Dr. Del Giudice and Messrs. Aminov, Whalen and MacPherson:

Erez Aminov, age 46, has served as a director and Chief Executive Officer of MIRA Pharmaceuticals, Inc. (Nasdaq: MIRA), a preclinical-stage pharmaceutical company focused on the development and commercialization of a new molecular synthetic cannabinoid analog for the treatment of adult patients with neuropathic pain as well as anxiety and cognitive decline typically associated with early-stage dementia, since April 2023 and its Chairman since March 2024. In this role, Mr. Aminov leads the development and commercialization of MIRA’s lead candidate. Mr. Aminov’s experience in the biotech consulting sector began in 2021 when he founded Locate Venture Corp. in September 2021. Locate Venture is a strategy and investment consulting firm focused on advancing and supporting early-stage biotech startups. Prior to founding Locate Venture Corp., from February 2015 to September 2020, Mr. Aminov served as the President of Finds4less Inc., a global distributor of electronics and gaming products. In this role, Mr. Aminov provided strategic oversight and direction for all aspects of the company’s operations, while also spearheading new business development initiatives to capitalize on emerging market opportunities. Mr. Aminov’s more than two decades of experience includes experience with the biotech industry’s particular challenges, including creating strategic alliances and guiding startups toward growth and prosperity. Mr. Aminov earned a B.A. in Accounting from Touro University in New York. We believe that Mr. Aminov is qualified to serve as one of our directors based on his finance and investment experience, particularly with early-stage life sciences companies.

Dr. Matthew P. Del Giudice, age 42, has practiced as a radiologist since 2014. He currently serves as a general overnight emergency radiologist at the Cleveland Clinic. Since March 2024, he has also served as a director of MIRA Pharmaceuticals, Inc. (Nasdaq: MIRA). Prior to joining the Cleveland Clinic, from March 2021 to May 2022, Dr. Del Giudice was a general radiologist with Radiology and Imaging Specialists in Phoenix, Arizona. From July 2015 to February 2021, Dr. Del Giudice was a radiologist with Radiology Partners Phoenix, and from July 2014 to June 2015, he practiced as a musculoskeletal radiologist at the University of Arizona Health Sciences Center – Tucson. Dr. Del Giudice received his B.S. from the University of Illinois at Urbana-Champaign, his M.D. from Loyola University Stritch School of Medicine, completed his radiology residency at Loyola University Medical Center, and his musculoskeletal radiology fellowship at the University of Arizona Health Sciences Center – Tucson. Dr. Del Giudice is licensed to practice medicine in Florida and Ohio. We believe that Dr. Del Giudice is qualified to serve as one of our directors based on his extensive experience as a radiologist.

*Matthew Pratt Whalen, CPA,*age 45, is a Certified Public Accountant with over two decades of experience in public accounting and corporate finance. Mr. Whalen currently serves as the Chief Financial Officer of Power Digital Marketing Inc., an industry leading digital marketing agency, where he has driven significant revenue growth and led key financial transactions. Specifically, Mr. Whalen oversees the finance team, manages tax and audit relationships, and handles treasury management. Prior to joining Power Digital, from 2010 to May 2021, Mr. Whalen was the Chief Financial Officer of MRC Smart Technology Solutions, a subsidiary of Xerox Corporation where he played a pivotal role in growing the company’s revenue and managed diverse teams across multiple departments. Mr. Whalen holds a B.A. in Accounting from the University of San Diego and is a Certified Public Accountant in California. Mr. Whalen has also served on the Finance Committee of United Way San Diego. We believe that Mr. Whalen is qualified to serve as one of our directors based on his extensive experience in finance and as a Certified Public Accountant.

Ned MacPherson, age 36, currently serves as Chief Growth Officer for Power Digital, an industry leading digital marketing agency. Since March 2024, he has also served as a director of MIRA Pharmaceuticals, Inc. (Nasdaq: MIRA). Prior to joining Power Digital, from May 2016 to December 2023, he served as CEO and Head of Growth for Endrock Growth & Analytics, a company he founded and sold to Power Digital. Prior to founding Endrock Growth & Analytics, Mr. MacPherson held senior marketing and leadership positions at sunglass maker Prive Revaux (March 2018 to April 2020), curated meal company Menud (October 2014 to April 2018) and Rejuvenetics, LLC, a distributor of health and wellness products (December 2012 to March 2016). Mr. Macpherson holds a BA in Economics from Gettysburg College. We believe that Mr. MacPherson is qualified to serve as one of our directors based on his extensive experience assisting growth for early-stage companies.

On August 9, 2024, to fill the vacancies left by the passing of Dr. Chapman, the new Board unanimously approved the appointment of Mr. Aminov as the Company’s Chief Executive Officer and Chairman of the Board. Additionally, the new Board designated the new members of the Audit, Compensation and Nominating and Corporate Governance Committees in conformance with the rules of the Nasdaq Stock Market. Accordingly, the new (i) Audit Committee shall consist of Mr. Jerman (Chairman), Mr. Whalen and Mr. Macpherson, (ii) Compensation Committee shall consist of Dr. Del Giudice (Chairman) and Mr. Macpherson and (iii) Nominating and Corporate Governance Committee shall consist of Mr. Eagle (Chairman) and Dr. Del Giudice.

Employment Agreement with Erez Aminov

Effective August 12, 2024, we entered into an employment agreement with Mr. Aminov, pursuant to which Mr. Aminov will serve as our Chief Executive Officer and Chairman of our Board. Under his employment agreement, Mr. Aminov has agreed to devote reasonable business time and effort to the business and affairs of the Company. Mr. Aminov’s employment agreement provides that his employment will be on an at-will basis and can be terminated by either Mr. Aminov or our company at any time and for any reason. Under the agreement, Mr. Aminov will receive a base salary of $0.275 million per year. In the event that Mr. Aminov’s employment is terminated by our company without “Cause” or is terminated by Mr. Aminov for “Good Reason”, Mr. Aminov will be entitled to (1) be paid an amount equal to Mr. Aminov’s annual base salary, which payment shall be made seventy-five percent (75%) in a lump sum within thirty (30) days following the effective date of the general release of claims (following any revocation period) and twenty-five percent (25%) as salary continuation payments in substantially equal installments over the six (6) months following the release effective date in accordance with the Company’s customary payroll practices commencing on the first payroll date following the release effective date, and (2) receive twelve (12) months’ accelerated vesting of any stock options that are outstanding and unvested as of such termination, such that any outstanding and unvested stock options that would have vested during the twelve- (12) month period following the termination date had Mr. Aminov remained employed in good standing shall become immediately vested and exercisable for a period of three (3) months post-termination (subject to Mr. Aminov executing and delivering a customary general release in favor of the company). “Cause” is defined in the agreement to include dishonesty, misappropriation, willful misconduct, breach of the agreement, and other customary matters. “Good Reason” is defined to include a material adverse change in Mr. Aminov’s compensation or duties and level of responsibility. The employment agreement also contains customary confidentiality and invention-assignment covenants to which Mr. Aminov is subject.