MIRA PHARMACEUTICALS, INC.

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

Overview

MIRA Pharmaceuticals, Inc. (NASDAQ: MIRA) is a clinical-stage pharmaceutical development company advancing two neuroscience programs targeting neurologic and neuropsychiatric disorders. The company holds exclusive rights in the U.S., Canada, and Mexico for Ketamir-2 and MIRA-55, two novel drug candidates designed to address unmet medical needs in pain management, depression, PTSD and cognitive function.

The U.S. Drug Enforcement Administration (DEA)’s scientific review of Ketamir-2 and MIRA-55 concluded that it would not be considered a controlled substance or listed chemical under the Controlled Substances Act (CSA) and its governing regulations.

As used herein, the Company’s Common Stock, par value $0.0001 per share, is referred to as the “Common Stock” and the Company’s preferred stock, par value $0.0001 per share, is referred to as the “Preferred Stock”.

Initial public offering

On August 7, 2023, the Company closed its initial public offering consisting of 1,275,000 shares at a price of $7.00 per share for approximately $8.9 million in gross proceeds. After deducting the underwriting commission and other deferred offering expenses totaling $1.2 million, the net proceeds to the Company were $7.7 million (the “IPO”).

The shares were offered and sold pursuant to the Company’s Registration Statement on Form S-1, as amended (File No. 333-273024), originally filed with the Securities and Exchange Commission (the “SEC”) on June 29, 2023 (the “Registration Statement”) and the final quarterly report filed with the Commission pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended. The Registration Statement was declared effective by the Commission on August 2, 2023. The common stock began trading on The Nasdaq Capital Market on August 3, 2023 under the symbol “MIRA”. The closing of the IPO occurred on August 7, 2023. (See Note 8 “Common Stock”).

As of the completion of the IPO, among other things, certain of the Company’s then-outstanding convertible debt was converted into shares of common stock. See Note 4 for more information.

Basis of Presentation

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. There is no impact to total cash flows from operations as a result of this reclassification. Specifically, the Company reclassed certain non-cash expenses related to related party line of credit included in “Change in operating assets and liabilities” to “Adjustments to reconcile net loss to net cash from operations”

Revenue recognition

The Company currently has no source of revenue. Miscellaneous income, including interest, is recognized when earned by the Company.

Income taxes

The Company accounts for income taxes pursuant to the provision of Accounting Standards Codification (“ASC”) 740-10, “Accounting for Income Taxes” (“ASC 740-10”), which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

The Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the consolidated financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

Research and development expenses

Research and development costs are expensed in the period in which they are incurred and include the expenses paid to third parties, such as contract research organizations and consultants, who conduct research and development activities on behalf of the Company. Patent-related costs, including registration costs, documentation costs and other legal fees associated with the application, are expensed in the period in which they are incurred.

General and administrative expenses

General and administrative expenses are primarily comprised of personnel costs, marketing expenses, amortization, insurance expenses, professional services fees, travel and office expenses, and stock-based compensation

Leases

The Company has accounted for leases under the provisions of FASB ASC Topic 842, “Leases”, which requires the Company to recognize right-to-use (ROU) assets and lease liabilities for operating leases on the balance sheet.

Use of estimates

The preparation of financial statements in accordance with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results may differ from such estimates and such differences could be material. Significant estimates during the reporting periods include stock-based compensation and the deferred tax asset valuation allowance.

Cash

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at two financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Company’s account at these institutions are insured by the FDIC up to $250,000. On December 31, 2024, the Company had cash in excess of FDIC limits of approximately $2.3 million. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits.

The Company accounts for stock-based compensation under the provisions of FASB ASC 718, “Compensation - Stock Compensation”, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, directors and consultants based on estimated fair values on the grant date. The Company estimates the fair value of stock-based awards on the date of grant using the Black-Scholes model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method. The Company has elected to account for forfeiture of stock-based awards as they occur.

Operating Segments

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s chief operating decision maker (“CODM”) and relied upon when making decisions regarding resource allocation and assessing performance. When evaluating the Company’s financial performance, the CODM reviews total revenues, total expenses, and expenses by functional classification; using this information to make decisions on a company-wide basis.

Fair value of financial instruments

The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company considers the carrying amount of deferred offering costs to approximate fair value due to short-term nature of this instrument. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1 - quoted prices in active markets for identical assets or liabilities.

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions).

Contingencies

In the normal course of business, the Company may be subject to loss contingencies, such as legal proceedings, amounts arising from contractual arrangements and claims arising out of the Company’s business that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and tax matters. In accordance with ASC Topic 450,Accounting for Contingencies, (ASC 450), the Company records accruals for such loss contingencies when it is probable that a liability will be incurred, and the amount of loss can be reasonably estimated. The Company, in accordance with this guidance, does not recognize gain contingencies until realized or realizable.

Earnings per Share

Earnings (loss) per share is computed in accordance with ASC Topic 260, “Earnings per Share” Basic weighted-average number of shares of common stock outstanding for the year ended December 31, 2024 and December 31, 2023 include the shares of the Company issued and outstanding during such period, on a weighted average basis. The basic weighted average number of shares of common stock outstanding excludes common stock equivalents such as stock options and warrants, while diluted weighted average number of shares outstanding includes such stock options and warrants. As of December 31, 2024 there were 1,763,750 stock warrants and 4,235,666 stock options that were not included in the computation of diluted earnings per share, because to do so would have an antidilutive effect. As of December 31, 2023 there was 1,763,750 stock warrants and 1,215,001 stock options that were not included in the computation of diluted earnings per share, because to do so would have an antidilutive effect.

***Recent Accounting Pronouncements ***

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Improvements to Reportable Segment Disclosures (Topic 280)” which is intended to improve reportable segment disclosure requirements, primarily through incremental disclosures of segment information on an annual and interim basis for all public entities. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosures of a reportable segment’s profit or loss and assets. The ASU is to be applied retrospectively to all prior periods presented in the financial statements and is effective for our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and interim periods thereafter. The Company adopted this guidance with no material impact on its consolidated financial statements. See Note 9.

***Recent Accounting Pronouncements Not Yet Adopted ***

In November 2024, the FASB issued ASU 2024-03,Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures(Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard will be effective beginning in fiscal year 2025, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. We are currently evaluating the impact of ASU 2023-09 on the consolidated financial statements and related disclosures. The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.

Management has considered all other recent accounting pronouncements that are issued, but not effective, and it does not believe that they will have a significant impact on the Company’s results of operations or financial position.

Note 2. Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern which contemplates the realization of assets and settlement of liabilities and commitments in the normal course of business.

As of December 31, 2024, the Company had cash of approximately $2.8 million, and historically the Company has had no revenues. The Company raised capital of approximately $3.8 million in 2024 and used approximately $5.6 million of cash in operations during the year ended December 31, 2024, had a net loss of $7.9 million in 2024 and had stockholders’ equity of approximately $2.2 million at December 31, 2024, versus stockholders’ equity of approximately $4.4 million at December 31, 2023.

Historically, the Company has been primarily engaged in developing Ketamir-2 and MIRA-55. 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-see Note 4, and initial public offering – see Note 1. The Company maintains an effective shelf registration statement with the SEC for the issuance of shares of common stock under various types of equity offerings, including the shares of common stock under our ATM equity program (Note 8). The Company expects to be able to fund operations through the third quarter of 2025, with the cash on hand. However, the Company has the ability to issue common stock under its shelf registration statement to assist in liquidity needs.

As of the date of filing this Report, 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 factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity financings to fund our operations in the future. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These financial statements do not include any adjustments related to the recoverability and classification of assets 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:

MIRALOGX

On November 15, 2023, the Company and MIRALOGX, LLC, a Florida limited liability company (“MIRALOGX”), entered into an exclusive license agreement (the “License Agreement”) to develop and commercialize a drug product containing 2-(2- chlorophenyl)-2-(methylamino) cyclopentan-1-one (sometimes referred to by the Parties as “M209” or “KETAMIR-2”) (“the Product”) as an active agent in North America. (the “Territory”). The exclusive license in the License Agreement includes the right of the Company to sublicense the licensed intellectual property. The Company and MIRALOGX have the same founder, who is also our largest shareholder and thus MIRALOGX is considered a related party.

Pursuant to the terms of the License Agreement, and subject to the conditions set forth therein, the Company paid MIRALOGX a one-time, nonrefundable payment of $0.1 million upon the signing of the Agreement and will be obligated to pay quarterly royalty payments on sales of the Product in the Territory of 8% of net sales and 8% of other revenue (such as milestone or sublicense payments) from licensed products.

Also, in consideration of License Agreement, the Company issued to MIRALOGX a Common stock purchase warrant to purchase up to 700,000 shares of the Company’s common stock (the “MIRALOGX Warrants”). The MIRALOGX Warrants are exercisable, in whole or in part, any time prior to November 15, 2028 at a cash exercise price of $2.00 per share.

The Company and MIRALOGX have made customary representations and warranties in the License Agreement and have agreed to certain other customary covenants, including confidentiality, cooperation, and indemnity provisions. Either party may terminate the License Agreement for cause if the other party materially breaches or defaults in the performance of its obligations, and, if curable, such material breach remains uncured for 120 days. Unless earlier terminated, the License Agreement will continue in effect until the last to expire of the patent rights (the “Term”), unless earlier terminated.

Note 4. Debt, related party:

MIRALOGX

On November 15, 2023, the Company entered into a Promissory Note and Loan Agreement (the “Loan Agreement”) with MIRALOGX.

Pursuant to the Loan Agreement, the Company could borrow up to $3.0 million from MIRALOGX to fund the development of licensed products under the License Agreement (the “Loan”).

The Loan Agreement had a one-year term, and all outstanding principal and accrued but unpaid interest had to be repaid in full on November 15, 2024. However, the Company did not borrow any funds from the MIRALOGX loan during the year ended December 31, 2024 or December 31, 2023 and the Loan Agreement expired on November 15, 2024.

Bay Shore Trust

In May 2021, the Company entered into a revolving credit facility which allowed for borrowings of up to $5 million from Starwood Trust, a shareholder of the Company. The facility had an initial term of 24 months (extended to 36 months in March 2023), with a new maturity date of May 10, 2024, at which time all outstanding borrowings and accrued interest, if any, were due in full. Borrowings accrued interest at a rate of 5% per annum.

In April 2023, the Company entered into a Promissory Note and Loan Agreement with the Bay Shore Trust, a trust established by the largest 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 Bay Shore Note replaced the revolving credit facility that the Company entered into with Starwood Trust, and pursuant to which the Company had an outstanding principal balance of $0.2 million as of the date of the Bay Shore Note (which outstanding balance was retired with an advance under the Bay Shore Note).

In consideration of the loan facility provided by the Bay Shore Trust, in April 2023, the Company issued to the Bay Shore Trust a common stock purchase warrant giving the Bay Shore Trust the right to purchase up to 1,000,000 shares of common stock at an exercise price of $5.00 per share, which warrant will expire five years after the date of grant. Pursuant to a registration rights agreement, the Company registered for resale the shares issuable upon the exercise of the warrant in December 2023. See Note 8 for additional details related to these warrants.

On July 20, 2023, the Company entered into a conversion agreement with the Bay Shore Trust under which the Bay Shore Trust had agreed to convert, upon the completion of the IPO, $1.1 million of the outstanding principal balance of the Bay Shore Note into shares of the Company’s common stock at a conversion price equal to the Company’s IPO price, which resulted in the issuance of 157,170 shares to the Bay Shore Trust. On August 14, 2023, the Company paid $1.0 million in full to Bay Shore Trust, which was the amount due. The Company also paid accrued interest of $0.03 million. Both amounts are recorded in the accompanying statement of operations for the year ended December 31, 2023 as interest expense. The remaining amount of $0.01 million in accrued interest due to Bay Shore Trust was paid as of December 31, 2024, as reflected in the accompanying financial statements, and the Note is no longer active.

Note 5. Related party transactions:

Due from Related Party - As of the year ended December 31, 2023, the Company paid $0.07 million to vendors on behalf of a related party. During the year ended December 31, 2024, related parties made payments on behalf of the Company in the amount of $0.03 million for wages of personnel working with the Company which is classified as advances from affiliates in the statement of cash flows and offset against the related party receivable on the balance sheet. As of December 31, 2024, $0.04 million remains outstanding as a related party receivable.

Travel expenses - In April 2021, the Company entered into an airplane lease with an entity under common control that the Company incurred approximately $0.05 million of lease charges per month. The Company terminated the lease March 31, 2023, without any penalties. The Company may continue to incur related party travel-related expenses as they occur, which will be recorded in Related Party Travel Costs, in the statement of operations. During the year ended December 31, 2023, the Company incurred $0.5 million, for travel-related expenses to the related party for monthly rental charges and airplane-related expenses. There wereno such travel-related expenses in 2024.

License agreement - See Note 3.

Line of credit - See Note 4.

Stock settlement agreement- See Note 8

Note 6. Leases:

The Company’s former corporate headquarters were located in Baltimore, Maryland, which included a lease for office space. This lease began in November 2021 and ended April 2024. The lease was not renewed after April 2024. In April 2024, the Company moved to a virtual office model and does not have a physical office space as of December 31, 2024

The Company had leased an office in Tampa, Florida, for its finance and general operations, which began in March 2022 for 37 months. On December 1, 2023, the Company formally terminated the lease with the landlord. There was a remaining deposit due from the landlord to the Company of $0.005 million, which is recorded in accounts receivable in the accompanying balance sheet as of December 31, 2023. As of December 31, 2024, the amount was collected.

The Company also leased a jet (Note 5) from a related party, which terminated on March 31, 2023.

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 in 2023 related to the aircraft include usage expenses, which includes pilot expenses, jet fuel and general flight expenses.

The components of lease expense were as follows:

Supplemental cash flow information related to leases were as follows:

Note 7. Income taxes:

The significant components of the Company’s net deferred tax assets are as follows as of December 31:

Beginning in 2022, in accordance with Internal Revenue Code Section 174, Qualified Research Expenditures are capitalized for tax purposes and amortized over a period of five years. Accordingly, for income tax purposes, and as of December 31, 2024 and December 31, 2023, the Company has recorded a deferred tax asset totaling approximately $1.2 million and $0.5 million, respectively, related to the timing difference between GAAP and Tax recognition of these expenditures.

The components of the provision for income taxes consist of the following:

ASC Topic 740 requires that a deferred tax amount be reduced by a valuation allowance if, based on the weight of available evidence it is more likely than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The Company has recorded a full valuation allowance against its deferred tax assets generated by net operating loss carryforwards as it has determined that such amounts may not be recognizable, given the historical losses of the Company to date. As of December 31, 2024, the Company has a cumulative federal net operating loss carryforward of approximately $18.0 million. The net operating loss carryforwards have no expiration date.

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective income tax rate is as follows:

Note 8. Stockholders’ equity:

Capital stock

The Company has the authority to issue 110,000,000 shares of capital stock, consisting of 100,000,000 shares of Common Stock and 10,000,000 shares of undesignated preferred stock (as amended and restated on June 28, 2023), whose rights and privileges will be defined by the Board of Directors when a series of preferred stock is designated.

Reverse stock-split

Effective June 28, 2023, the Company completed a 1-for-5 reverse stock split of its outstanding common stock upon the filing of the Company’s Third Amended and Restated Articles of Incorporation with the Florida Secretary of State. No fractional shares were issued in connection with the reverse stock split, and all such fractional shares resulting from the reverse stock split were rounded up to the nearest whole number. The shares issuable upon the exercise of our outstanding options and warrants, and the exercise prices of such options and warrants, have been adjusted to reflect the reverse stock split. All share and per share information in the accompanying financial statements have been retrospectively adjusted to reflects the reverse stock split.

Common Stock

At IPO in August 2023,1,275,000 shares of the Company’s common stock were issued at a price of $7.00 per share which resulted in gross proceeds of $8.9 million and net proceeds of $7.7 million to the Company after the underwriter discount but before other IPO related expenses.

Additionally, the Company issued its former investor relations firm $0.25 million worth of restricted common stock upon closing of the IPO, which resulted in issuance of 35,715 shares of stock.

On August 12, 2024, the Company filed a shelf registration statement with the SEC to facilitate the issuance of our common stock and entered into an At The Market Offering Agreement (the “ATM Agreement”) with Rodman & Renshaw LLC (the “Manager”), under which the Company may offer and sell shares of its Common Stock, with an aggregate offering amount sold of up to $19,268,571. On September 24, 2024, the Company filed a prospectus supplement to amend the shelf registration statement to update the maximum amount eligible to be sold under the ATM Agreement to $75 million. As of December 31, 2024, under the ATM Agreement, the Company has sold 1,779,967 shares of Common Stock in 2024 at an average price per share of $1.65 and received net proceeds of approximately $3.6 million, after deducting commissions and other fees of $0.13 million.

Stock settlement agreement

On April 24, 2024 the Company settled a claim submitted by certain shareholders under Section 16 of the Securities Exchange Act involving the Company that claimed illegal profits were earned on stock transactions involving insiders of the Company. After investigation, the Company informed the insider, Bay Shore Trust, of the claim and came to agreement with the shareholders, whereby requiring the disgorgement of profits by the insider back to the Company in the amount of $148,703, which was recorded in additional paid in capital in the accompanying financial statements.

2022 Omnibus Incentive Plan

In June 2022, the Company’s Board of Directors adopted, and its stockholders approved, the Company’s 2022 Omnibus Incentive Plan, as amended and restated in August 2023, (“2022 Omnibus Plan”). The 2022 Omnibus Plan authorizes the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any of its parent and subsidiary corporations’ employees, and for the grant of non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to the Company’s employees, directors, and consultants and any of its future subsidiary corporations’ employees and consultants. On September 12, 2024, the Company held its 2024 Annual Meeting of Stockholders (the “Annual Meeting”) in which it was voted upon to increase the shares provided under the plan from 2,000,000 shares to 5,000,000 shares as summarized below.

The 2022 Omnibus Plan provides that 5,000,000 shares of the Company’s Common Stock are reserved for issuance under the 2022 Omnibus Plan, all of which may be issued pursuant to the exercise of incentive stock options.

The fair value of each option award is estimated on the grant date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected price volatility is based on the historical volatilities of a peer group as the Company does not have a trading history for its shares prior to its IPO. Industry peers consist of several public companies in the biotech industry similar to the Company in size, stage of life cycle and product indications. The Company intends to continue to consistently apply this process using the same or similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own stock price becomes available, or unless circumstances change such that the identified companies are no longer similar to the Company, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

Expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus contract term. The risk-free rate is based on the 5-year U.S. Treasury yield curve in effect at the time of grant. The Company recognizes forfeitures as they occur.

During the year ended December 31, 2024, a total of 3,599,000 options to purchase Common Stock, with an aggregate fair market value of approximately $2.79 million were granted to the Company’s executive officers, management, and consultants of the Company. Options have a term of 10 years from the grant date. These options vest in various terms ranging from immediate vesting upon grant to the second anniversary of the grant date.

As of December 31, 2024 options exercisable totaled 2,348,720. The Company recognized approximately $1.9 million in stock-based compensation in 2024. There was approximately $1.5 million of unrecognized compensation cost related to unvested share-based compensation awards granted. These costs will be expensed through the second quarter of 2026.

The following is option activity during the year ended December 31, 2024 and 2023:

Key assumptions used to value stock options during the year ended December 31, 2024 are as follows:

During the year ended December 31, 2024, a total of 500,000 restricted stock units (“RSU”), with an aggregate fair market value of approximately $0.6 million were granted to the Company’s Chief Executive Officer under the 2022 Omnibus Incentive Plan. These RSU’s vest as follows: (i)50% on February 12, 2025 (ii)50% at 6-month anniversary of date of grant. The awards were fair valued using the closing price of the stock of $1.19 on December 6 th, 2024.

As of December 31, 2024, there was approximately $0.5 million unrecognized compensation cost related to unvested RSU’s awards granted. These costs will be expensed in 2025.

The following is RSU activity during the year ended December 31, 2024:

Warrants

In connection with various transactions and the IPO summarized below, the Company issue stock warrants. Warrant activity for the year ended December 31, 2024 is summarized below:

MIRALOGX warrants

The Company issued to MIRALOGX a common stock purchase warrant on November 15, 2023 giving MIRALOGX the right to purchase up to 700,000 shares of common stock at an exercise price of $2.00 per share. This warrant will expire five years after the date of grant.

The fair value of the warrants were estimated on the grant date using the Black-Scholes valuation model and level 3 inputs based on assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate, which resulted in $1.8 million of warrant value. This cost was recorded in General and Administrative expenses on the accompanying statement of operations and additional paid in capital on the accompanying balance sheet as of December 31, 2023

Key assumptions used to value warrants in November 2023 are as follows

Bay Shore Trust warrants

In consideration of the line of credit provided by the Bay Shore Trust, the Company issued to the Bay Shore Trust a common stock purchase warrant on April 28, 2023 giving the Bay Shore Trust the right to purchase up to 1,000,000 shares of common stock at an exercise price of $5.00 per share. This warrant will expire five years after the date of grant. There are 1,000,000 warrants outstanding at December 31, 2023.

The fair value of the warrants were estimated on the grant date using the Black-Scholes valuation model and level 3 inputs based on assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate, which resulted in $3.5 million of deferred financing costs. This cost was recorded as deferred financing costs and additional paid in capital on the accompanying balance sheet and is amortized straight-line over the term of the line of credit (which is 24 months). Associated amortization of deferred finance costs is recorded to interest expense on the 2023 condensed income statement of operations.

Subsequent to the IPO, the Bay Shore Trust line of credit was paid in full early, resulting in $2.8 million remaining in deferred financing costs. These costs were recorded as interest expense on the accompanying statement of operations with the offsetting entry clearing the balance of amortization in deferred finance costs.

Key assumptions used to value warrants in April 2023 are as follows

Underwriter warrants

In connection with the IPO, the Company issued 63,750 warrants to purchase common stock to the IPO underwriter (or its designees) at an exercise price of $7.00 which will expire in the 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 as permitted under FINRA Rule 5110(g)(8).

Key assumptions used to value underwriter warrants in August 2023 were as follows:

Note 9. Segment Information

The Company operates in one reportable segment related to the development and commercialization of pharmaceuticals targeting neurologic and neuropsychiatric disorders. The CODM for the Company is the Chief Executive Officer (the “CEO”). The Company’s CEO reviews operating results on an aggregate basis and manages the Company’s operations as a whole for the purpose of evaluating financial performance and allocating resources. Accordingly, the Company has determined that it has a single reportable and operating segment structure. The CEO uses aggregate net loss to allocate resources in the annual budgeting and forecasting process and also uses that measure as a basis for evaluating financial performance regularly by comparing actual results with established budgets and forecasts.

The accounting policies of the Company’s single segment are the same as those described in the summary of significant accounting policies within Note 1. The CEO assesses performance for the Company and decides how to allocate resources based on the aggregate net loss that is also reported on the income statement as net loss. The measure of segment assets is reported on the balance sheets as total assets.

The table below provides information about the Company’s revenue, significant segment expenses and other segment expenses.

Note 10. Subsequent Events

Acquisition Letter of Intent

On March 19, 2025, MIRA Pharmaceuticals, Inc. (the “Company”) entered into a binding letter of intent (the “LOI”) with SKNY Pharmaceuticals, Inc. (“SKNY”), a privately held Delaware corporation, to acquire SKNY through a stock exchange transaction (the “Acquisition”). The acquisition will bring SKNY-1, a novel oral drug candidate targeting weight loss and smoking cessation—two of the leading causes of preventable death—into MIRA’s development pipeline. As part of the agreement, SKNY will provide a $5 million capital infusion in cash or cash equivalents, further strengthening MIRA’s financial position and supporting future growth initiatives.

SKNY holds exclusive rights to its compounds in the United States, Canada, and Mexico which is license from Miralogx, a related party of the Company. Under the terms of the LOI, SKNY will merge into the Company through a stock exchange, with each outstanding share of SKNY’s common stock being exchanged for shares of MIRA’s common stock. The exact exchange ratio will be determined by an independent third-party valuation firm (the “Independent Valuator”) based on the relative values of both companies. The completion of the Acquisition is contingent upon the Independent Valuator determining that SKNY’s valuation is at least equal to or greater than that of the Company.

Both parties have agreed to a 90-day mutual due diligence period, during which they will work in good faith to negotiate and execute a definitive stock purchase agreement and any related transaction documents. Upon completion of the Acquisition, all of SKNY’s assets, including its drug candidates, will become wholly owned by MIRA, further expanding the Company’s development pipeline

ATM Offering

From January 1, 2025 through March 28, 2025, under the ATM Agreement, the Company sold and issued 2,802 shares of Common Stock at an average price per share of $1.33, and received net proceeds of approximately $0.003 million, after deducting commissions and other fees of $0.0003 million.