Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations
You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with our financial statements and related notes and other
financial information included elsewhere in this Annual Report. This discussion and analysis and other parts of this prospectus contain
forward-looking statements based upon our current plans and expectations that involve risks, uncertainties and assumptions, such as statements
regarding our plans, objectives, expectations, intentions and beliefs. Our actual results and the timing of events could differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section
entitled “Risk Factors” and elsewhere in this Annual Report. Please also see the section entitled “Special Note Regarding
Forward-Looking Statements. ”
Overview
Apimeds Pharmaceuticals US, Inc. is a clinical
stage biopharmaceutical company that is in the process of developing Apitox, a proprietary intradermally administered bee venom-based
toxin. Our primary focus is to advance Apitox in the treatment of inflammatory conditions in the United States, specifically osteoarthritis
(“OA”) and, eventually, multiple sclerosis (“MS”).
Apitox, is currently marketed and sold by Apimeds,
Inc. in South Korea (“Apimeds Korea”) as “Apitoxin” for the treatment of inflammation and pain management symptoms
associated with OA. There is an extensive history of use of bee venom, both in the United States and around the world, to assist with
pain management. We believe that, in addition to knee OA and MS, Apitox has the potential to help manage difficult to control pain and
inflammation issues, which we will explore in the future.
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Our Product Candidate
Our product candidate Apitox is a purified, pharmaceutical
grade venom of the Apis mellifera, or honeybee, which is classified by the U.S Food and Drug Administration (“FDA”) as an
active pharmaceutical ingredient (“API”). Apimeds Korea has developed a proprietary method and process of turning extracted
bee venom into a lyophilized powder for reconstitution prior to intradermal dose injections, which they sell in Korea as South Apitoxin.
Apimeds Korea has exclusively licensed to us all rights to develop, commercialize, market and sell Apitoxin as “Apitox” in
the United States in exchange for a sales royalty. See “ Item 13. Certain Relationships and Related Transactions, and Director
Independence — Certain Relationships and Related Transactions — Business Agreement .”
The success of the Company is dependent on obtaining
the necessary regulatory approvals of its product candidates, marketing its products and achieving profitable operations. The continuation
of the research and development activities and the commercialization of its products, if approved, are dependent on the Company’s
ability to successfully complete these activities and to obtain additional financing through a combination of financing activities and
operations. It is not possible to predict either the outcome of future research and development or commercialization programs, or the
Company’s ability to fund these programs.
Financial Results
Since inception, Apimeds has incurred significant
operating losses. For the years ended December 31, 2024 and 2023, Apimeds Pharmaceuticals US, Inc. net loss was $1,389,990 and $777,694,
respectively. As of December 31, 2024, Apimeds Pharmaceuticals US, Inc. had an accumulated deficit of $4,391,924, a stockholders’
deficit of $1,358,121 and a working capital deficit of $1,011,277.
Going Concern
The Company has evaluated whether there are any conditions and events,
considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the
issuance date of these financial statements. As of December 31, 2024, the Company had accumulated deficit amount to $4,391,924. The Company
incurred net losses of $1,389,990 for the year ended December 31, 2024, and expects to continue to incur substantial losses in the future.
Based on such conditions and the Company’s current plans, which are subject to change, management believes that the Company’s
existing cash as of December 31, 2024, is not sufficient to satisfy its operating cash needs for 12 months from the issuance date of the
report.
The accompanying financial statements have been
prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement
of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability
to continue as a going concern.
The success of the Company is dependent on obtaining
the necessary regulatory approvals of its product candidates, marketing its products and achieving profitable operations. The continuation
of the research and development activities and the commercialization of its products, if approved, are dependent on the Company’s
ability to successfully complete these activities and to obtain additional financing through a combination of financing activities and
operations. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations
will be materially and adversely affected. This could affect future development and business activities and potential future clinical
studies and/or other future ventures. There can be no assurance that the Company will be able to obtain the needed financing on acceptable
terms or at all.
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Results of operations for the years ended December 31, 2024 and
2023
Operating Expense
The following table sets forth the Company’s selected statements
of operations data for the following periods:
Years Ended December 31,
2024
2023
Change
Operating expenses
Research and development expenses
$ -
$ 98,544
$ (98,544 )
General and administrative expenses
1,275,095
648,892
626,203
Loss from operations
(1,275,095 )
(747,436 )
(527,659 )
Other expenses
Interest income
2,824
7,811
(4,987 )
Interest expense
(117,719 )
(38,069 )
(79,650 )
Net loss
$ (1,389,990 )
$ (777,694 )
$ (612,296 )
Revenues
For the years ended December 31, 2024 and 2023, the Company had
no revenue.
Research and Development Expenses
The following table summarizes the year-over-year
changes in research and development expenses for the periods presented:
Years Ended December 31,
2024
2023
Change
Research and development expenses
$ -
$ 98,544
$ (98,544 )
Total research and development expenses
$ -
$ 98,544
$ (98,544 )
Research and development expenses were $0 for
the year ended December 31, 2024, compared to $98,544 for the same period in 2023, representing a decrease of $98,544. The decrease in
research and development expenses was primarily attributed to a decrease as the Company was not performing any R&D activities currently
in 2024.
General and administrative expenses
The following table summarizes the year-over-year
changes in general and administrative expenses for the years presented:
Years Ended December 31,
2024
2023
Change
Payroll expenses
$ 413,404
$ 114,000
$ 299,404
Professional services
815,271
485,949
329,322
Office expenses
16,257
33,539
(17,282 )
General administrative
30,163
15,404
14,759
$ 1,275,095
$ 648,892
$ 626,203
General and administrative expenses were $1,2750,95
for the year ended December 31, 2024, compared to $648,892 for the same period in 2023, representing an increase of $626,203. The
increase was mostly attributable to an increase in professional expenses for a total of approximately $329,000 and an increase in payroll
expenses for the officers of the Company for a total of approximately $299,000.
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Other Expense
The following table summarizes the year-over-year
changes in general and administrative expenses for the years presented:
Years Ended December 31,
2024
2023
Change
Interest income
$ 2,824
$ 7,811
$ (4,987 )
Interest expense
(117,719 )
(38,069 )
(79,650 )
$ (114,895 )
$ (30,258 )
$ (84,637 )
Other expense was $114,895 for the year ended
December 31, 2024, compared to $30,258 for the same period in 2023. Representing an increase of $84,637. The increase was mainly due to
an increase in interest expense for a total of approximately $80,000.
Net Loss
Net loss was $1,389,990 for the year ended December 31, 2024, compared
to $777,694 in the same period of 2023, representing an increase of $612,296. The increase was mainly due to the increase in general and
administrative expenses, specifically professional fees associated with the filing of the registration statement on Form S-1 with the
U.S. Securities and Exchange Commission (the “SEC”) and pre-IPO expenses as well as an increase in payroll expenses.
Liquidity and Capital Resources
The Company has generated no revenue, has incurred
operating losses since inception, expects to continue to incur significant operating losses for the foreseeable future and may never become
profitable. Until such time as the Company is able to establish a revenue stream, it is dependent upon obtaining necessary equity and/or
debt financing to continue operations. The Company cannot make any assurances that sales will commence in the near term or that additional
financing will be available to it on acceptable terms or at all. This could negatively impact our business and operations and could also
lead to the reduction of our operations.
Cash Flows
The following table presents selected financial information and statistics
for each of the periods shown below:
2024
2023
Change
Net cash used in operating activities
$ (733,526 )
$ (627,790 )
$ (105,736 )
Net cash used in investing activities
-
-
-
Net cash provided by financing activities
326,500
1,032,100
(705,600 )
Net (decrease) increase in cash
$ (407,026 )
$ 404,310
$ (811,336 )
During the year ended December 31, 2024, operating activities used
approximately $734,000 of cash, primarily resulting from a net loss of $1,389,990, partially offset by non-cash interest expense-related
parties of $37,766, accretion expense of $79,953, and changes in operating assets and liabilities of $538,745.
During the year ended December 31, 2023, operating activities used
approximately $628,000 of cash, primarily resulting from a net loss of $777,694, partially offset by stock compensation expense of
$69,993, non-cash interest expense-related parties of $33,000, accretion expense of $5,069, and changes in operating assets and liabilities
of $41,842.
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Investing
activities
During the years ended December 31, 2024 and 2023 investing activities
used $0.
Financing activities
During the year ended December 31, 2024, financing
activities provided $326,500 of cash resulting from $250,000 in proceeds from notes payable from related parties and cash advances
from related parties of $76,500.
During the year ended December 31, 2023, financing
activities provided $1,032,100 of cash resulting from $1,055,000 in proceeds from issuance of shares, cash advances from related
parties of $9,000, offset by repayments to cash advances from related parties of $31,900.
Contractual Obligations and Commitments
See Note 4 – Debt, and Note 6 – Commitments and Contingencies,
of the notes to the Company’s financial statements as of and for the year ended December 31, 2024 included elsewhere in this Annual
Report for further discussion of the Company’s commitments and contingencies.
Off-Balance Sheet Arrangements
The Company is not party to any off-balance sheet
transactions. The Company has no guarantees or obligations other than those which arise out of normal business operations.
Critical Accounting Policies and Significant Judgments and Estimates
The Company’s management’s discussion and
analysis of its financial condition and results of operations is based on its financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of these financial
statements requires Apimeds Pharmaceuticals US, Inc. to make estimates, judgments and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of
expenses during the reporting period. In accordance with GAAP, Apimeds Pharmaceuticals US, Inc. evaluates its estimates and judgments
on an ongoing basis. The most significant estimates relate to convertible instruments. Apimeds Pharmaceuticals US, Inc. bases its estimates
and assumptions on current facts, historical experiences, and various other factors that Apimeds Pharmaceuticals US, Inc. believes are
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The Company defines its critical accounting policies
as those accounting principles that require it to make subjective estimates and judgments about matters that are uncertain and are likely
to have a material impact on its financial condition and results of operations, as well as the specific manner in which the Company applies
those principles. While its significant accounting policies are more fully described in Note 2 to its financial statements, the Company
believes the following are the critical accounting policies used in the preparation of its financial statements that require significant
estimates and judgments.
Convertible
Instruments
The Company evaluates and accounts for conversion
options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
The Company accounts for convertible instruments
(when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company
records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based
upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective
conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their
stated date of redemption.
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Item 7A. Quantitative and Qualitative Disclosures
about Market Risk
As a smaller reporting company, we are not required
to provide the information required by this Item.
Item 8. Financial Statements and Supplementary Data
The financial statements required pursuant to
this item are included in Part IV, Item 15 of this Annual Report, beginning on page F-1.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure
Not applicable.