What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-26 compared with 2025-11-12 · 167 added, 284 removed, 17 unchanged (96% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

References in this report (the “Quarterly

Report”) to “we,” “us” or the “Company” refer to Apimeds Pharmaceuticals US, Inc.

to our “management” or our “management team” refer to our officers and directors.

The following discussion and

analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed financial statements

and the notes thereto contained elsewhere in this Quarterly Report.

Certain information contained in the discussion and analysis set forth

below includes forward-looking statements that involve risks and uncertainties.

Our actual results may differ significantly from the results,

expectations and plans discussed in these forward-looking statements.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking

statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical

facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.

statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position,

business strategy and the plans and objectives of management for future operations, are forward-looking statements.

Words such as “anticipate,”

“believe,” “continue,” “could,” “estimate,” “expect,” “intends,”

“may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,”

“should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking

Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs,

based on information currently available.

A number of factors could cause actual events, performance or results to differ materially from

the events, performance and results discussed in the forward-looking statements.

For information identifying important factors that could

cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section

of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 15, 2025 (the “Annual Report”)

and the “Risk Factors” section of this report.

Our securities filings can be accessed on the EDGAR section of the SEC’s

website at www.sec.gov.

Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or

revise any forward-looking statements whether as a result of new information, future events or otherwise.

The following discussion and analysis of our financial

condition and results of operations should be read in conjunction with the unaudited condensed financial statements and the notes thereto

contained elsewhere in this Quarterly Report.

Certain information contained in the discussion and analysis set forth below includes forward-looking

statements that involve risks and uncertainties.

Apimeds Pharmaceuticals

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.

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.

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 South Korea as 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.

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

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 three and nine months ended September 30, 2025 and 2024, Apimeds Pharmaceuticals US, Inc.

net loss was $1,781,255

and $4,845,845 and $332,521 and $1,078,357, respectively.

As of September 30, 2025, the Company had accumulated

deficit amount to $9,237,769 The Company incurred net losses of $1,781,255 and $4,845,845 for the three and nine months ended September

30, 2025, respectively, and expects to continue to incur substantial losses in the future.

On May 12, 2025, the Company consummated its

initial public offering (the “IPO”) of 3,375,000 shares of its common stock at a price of $4.00 per share, generating net

proceeds to the Company of $11.9 million.

Based on cash that is available for Company operations, together with the proceeds from the

IPO, and projections of future Company operations, the Company believes that its cash will be sufficient to fund the Company’s current

Management’s Discussion and Analysis of Financial Condition and Results of Operations

in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Apimeds

Pharmaceuticals US, Inc.

References to our “management” or our “management team” refer to our officers and directors.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited

condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Certain information contained in the

discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Our actual results

may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

Note Regarding Forward-Looking Statements

Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E

of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially

from those expected and projected.

All statements, other than statements of historical fact included in this Form 10-Q including,

without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking

Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,”

“expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,”

“predict,” “project,” “should,” “would” and variations thereof and similar words and

expressions are intended to identify such forward-looking statements.

Such forward-looking statements relate to future events or future

performance, but reflect management’s current beliefs, based on information currently available.

A number of factors could cause

actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking

For information identifying important factors that could cause actual results to differ materially from those anticipated

in the forward-looking statements, please refer to the Risk Factors section of our Annual Report on Form 10-K for the year ended December

31, 2024, filed with the SEC on April 15, 2025 (the “Annual Report”) and the “Risk Factors” section of this report.

Our securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov.

Except as expressly required by

applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result

of new information, future events or otherwise.

following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited

condensed financial statements and the notes thereto contained elsewhere in this Quarterly Report.

Certain information contained in the

discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Pharmaceuticals US, Inc.

is a development-stage biopharmaceutical company incorporated in the State of Delaware.

Our primary focus is

the clinical development of Apitox, a purified honeybee venom-based drug candidate being evaluated for the treatment of acute pain and

inflammation associated with knee osteoarthritis.

We operate our biopharmaceutical business through our wholly owned subsidiary, Lokahi

Therapeutics Inc.

Through MindWave Innovations, the Company holds

Bitcoin (“BTC”), Tether (“USDT”), and MindWaveDAO NILA tokens (“NILA”), and participates in the MindWaveDAO

blockchain ecosystem through the continued sale of NILA.

The Digital Asset segment’s performance is subject to the volatility inherent

in cryptocurrency markets.

A more detailed discussion of the Digital Asset segment, including the MindWave Merger and the Company’s

related accounting policies, is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Product Candidate

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.

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 South Korea as 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.

success of the Company is dependent on obtaining the necessary regulatory approvals of its product candidates, as well as the continued

advancement of it’s Digital Asset segment, which includes the appreciation of its cryptocurrency holdings consisting of Bitcoin

(“BTC”), Tether (“USDT”), and NILA tokens (“NILA”), and the advancement and continued sale of NILA

on the MindWaveDAO blockchain.

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 cryptocurrency market sentiment or the advancement of the MindWaveDAO blockchain.

inception, Apimeds has incurred significant operating losses.

For the three months ended March 31, 2026 and 2025, Apimeds Pharmaceuticals

net loss was $35,059,852, and $402,397, respectively.

and Capital Resources

of March 31, 2026, the Company had accumulated deficit amount of $45,452,914.

The Company incurred net losses of $35,059,852 for the

three months ended March 31, 2026, and expects to continue to incur substantial losses in the future.

On December 8, 2025, the Company

completed a PIPE financing (the “PIPE”) with an aggregate maximum amount of $120,900,000 drawn in tranches at the Company’s

discretion, given the market conditions allow.

As of March 31, 2026, the Company has drawn a total amount of $10,900,000 from the PIPE

(see note 6) wherein $8,000,000 in proceeds have been recorded as restricted cash.

Based on cash that is available and cash that is predicted

to become unrestricted for Company operations, together with continued Tether (“USDT”) proceeds from the digital assets segment,

and projections of future Company operations, the Company believes that its cash will be sufficient to fund the Company’s current

operating plan through at least the next twelve months from the date of issuance of the accompanying condensed financial statements.

Results of operations for the three months ended September 30, 2025

Operating Expense

The following table sets forth the Company’s

selected statements of operations data for the following periods:

Proceeds in the form of USDT have been included in evaluation of liquidity concerns given the fact that the Company uses these proceeds

to satisfy select operating expenses that pertain directly to the maintenance and management of the Digital Asset segment.

of operations for the three months ended March 31, 2026, and 2025

following table sets forth the Company’s selected statements of operations data for the following periods:

Three Months Ended

September 30,

Operating expenses

1 unchanged sentence

General and administrative expenses

Loss from operations

Other expenses

Interest income

Change in fair value of warrant liability

Interest expense

$ (1,781,255 )

Total operating expenses

Total other income (expense)

(22,874,158 )

For the three months ended September 30, 2025 and 2024, the Company

had no revenue.

Operating expenses

Research and development expense

The following table summarizes the year-over-year

changes in research and development expenses for the three months ended September 30, 2025:

Three Months Ended

September 30,

Payroll expenses

Clinical trials

Compensation - stock and stock options

Research and development expenses totaled $619,693 for

the three months ended September 30, 2025, compared to no such expenses for the same period in 2024, reflecting an increase

This increase was primarily driven by the availability of funding, which supported higher overall research and development

The increase was mainly attributable to stock-based compensation of approximately $14,000, clinical trial costs of approximately $557,000,

and other research and development expenses totaling approximately $40,000.

General and administrative expenses

The following table summarizes the year-over-year

changes in general and administrative expenses for the three months ended September 30, 2025:

Three Months Ended

September 30,

Payroll expenses

Professional services

Compensation - stock and stock options

Office expenses

Other general and administrative

General and administrative expenses totaled $1,224,546

for the three months ended September 30, 2025, compared to $299,999 for the same period in 2024, representing an increase of $924,547.

The increase was primarily driven by higher stock compensation costs and expanded operational activities.

Specifically, the change included

an increase in professional services of approximately $347,000, stock-based compensation of approximately $29,000, insurance expenses

of approximately $54,000, office expenses of approximately $102,000, and other general and administrative costs of approximately $99,000.

Other Income (expense)

The following table summarizes the year-over-year

changes in other income (expense) for the periods presented:

Three Months Ended

September 30,

Interest income

Change in fair value of warrant liability

Interest expense

Other income was $62,984 for the three months

ended September 30, 2025, compared to other expense of $32,522 for the same period in 2024, representing an increase in income of $95,506.

The increase was mainly due to an increase in interest income of approximately $56,000 and a decrease in interest expense of approximately

Net loss was $1,781,255 for the three months ended

September 30, 2025, compared to net loss of $332,521 in the same period of 2024, representing an increased loss of $1,448,734.

was mainly due to the increase in both general and administrative expenses and research and development expenses due to higher payroll

expenses, professional services and expanded operational and research and development activities.

Results of operations for the nine months ended September 30, 2025

Operating Expense

The following table sets forth the Company’s selected statements

of operations data for the following periods:

Nine Months Ended

September 30,

Operating expenses

Research and development expenses

General and administrative expenses

Loss from operations

Other expenses

Interest income

Change in fair value of warrant liability

Interest expense

(22,836,129 )

1 unchanged sentence

$ (34,657,455 )

For the nine months ended September 30, 2025 and 2024, the Company

had no revenue.

Operating expenses

Research and development expenses

The following table summarizes the year-over-year

changes in research and development expenses for the nine months ended September 30, 2025:

Nine Months Ended

September 30,

Payroll expenses

Clinical trials

Compensation - stock and stock options

Total research and development expenses

Research and development expenses totaled $1,271,477 for

the nine months ended September 30, 2025, compared to no such expenses for the same period in 2024, reflecting an increase of $1,271,477.

This increase was primarily driven by the availability of funding, which supported higher overall research and development spending.

increase was mainly attributable to payroll expenses of approximately $81,000, stock-based compensation of approximately $452,000,

clinical trial costs of approximately $675,000, and other research and development expenses totaling approximately $63,000.

the three months ended March 31, 2026, and 2025, the Company had no revenue.

General and Administrative Expenses

The following table summarizes the year-over-year

changes in general and administrative expenses for the nine months ended September 30, 2025:

Nine Months Ended

September 30,

Payroll expenses

Professional services

Compensation - stock and stock options

Office expenses

Other general and administrative

Total general and administrative expenses

General and administrative expenses totaled $3,601,034

for the nine months ended September 30, 2025, compared to $999,482 for the same period in 2024, representing an increase of $2,601,552.

The increase was primarily driven by higher stock compensation costs and expanded operational activities.

Specifically, the change included

the increases in professional services of approximately $469,000, stock-based compensation of approximately $1,482,000, payroll expenses

of approximately $298,000, insurance expenses of approximately $86,000 and office expenses of approximately $162,000.

Other Expense

The following table summarizes the year-over-year

changes in other expenses for the periods presented:

Nine Months Ended

September 30,

Interest income

Change in fair value of warrant liability

Interest expense

Other income was $26,666 for the nine months ended

September 30, 2025, compared to other expense of $78,875 for the same period in 2024, representing an increase in other income of $105,541.

The increase was mainly due to an increase in interest income of approximately $69,000 corresponding with the decrease in interest expense

of approximately $14,000 due to conversion of the notes, as well as gain as a result of the change in fair value of warrant liability

for approximately $22,000.

Net loss was $4,845,845 for the nine months ended

September 30, 2025, compared to net loss of $1,078,357 in the same period of 2024, representing an increase in loss of $3,767,488.

increase was mainly due to the increase in both general and administrative expenses and research and development expenses due to higher

stock compensation costs and expanded operational and research and development activities.

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

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.

The following table presents selected financial information and statistics

for each of the periods shown below:

Nine Months Ended

September 30,

For the three months ended March 31, 2026, included in General and

administrative expense is $8,113,318 non-cash charge for stock issued to our financial advisor.

This charge is not expected to be recur.

Other income expense

The $22,836,129 increase in other expense for the three months ended

March 31, 2026 compared to March 31, 2025 was principally the result of $22,078,601 of unrealized losses on the Company digital asset

The Company did not hold any digital assets during the three months ended March 31, 2025.

Digital asset market volatility can

be expected to be significant in future periods.

loss was $35,059,852 for the three months ended March 31, 2026, compared to net loss of $402,397 in the same period of 2025, representing

an increase in loss of $34,657,455.

The increase was mainly due to the loss on fair value of cryptocurrency holdings and stock compensation

expenses (see Cash Flows).

following table presents selected financial information and statistics for each of the periods shown below:

Three Months Ended

Net cash used in operating activities

1 unchanged sentence

$ (2,047,414 )

Net cash used in investing activities

Net cash provided by investing activities

Net cash provided by financing activities

Net increase (decrease) in cash

During the nine months ended September 30, 2025,

operating activities used approximately $5,108,000 of cash, primarily resulting from a net loss of $4,859,332, partially offset by

non-cash stock-based compensation for stock and stock options grants in the approximate amount of $1,700,000 and $235,000, respectively,

accretion expense of approximately $40,000, and changes in operating assets and liabilities of approximate decrease of $2,243,000, mainly

due to increase in prepaid research costs and prepaid insurance and decrease in accounts payable and accrued expenses.

During the nine months ended September 30, 2025,

operating activities used approximately $634,000 of cash, primarily resulting from a net loss of $1,078,357, partially offset by non-cash

interest expense-related parties of approximately $27,000, accretion expense of approximately $55,000, and positive changes in operating

assets and liabilities of approximately $363,000.

Investing activities

During the nine months ended September 30, 2025

and 2024 investing activities used approximately $36,000 and $0, respectively, resulting from acquired furniture and equipment.

Financing activities

During the nine months ended September 30, 2025,

financing activities provided approximately $12,126,600 of cash.

This was primarily attributable to net proceeds from the issuance of

common stock in the IPO of $11,953,046, proceeds from notes payable from related parties of $250,000, and cash advances from related parties

of $17,400, partially offset by cash advances paid to related parties in the amount of $93,800.

During the nine months ended September 30, 2024,

financing activities provided $250,000 of cash, consisting entirely of proceeds from notes payable from related parties.

Contractual Obligations and Commitments

See Note 6 – Debt, and Note 8 – Commitments

and Contingencies, of the notes to the Company’s financial statements as of and for the three months ended September 30, 2025 included

elsewhere in this Quarterly 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

The preparation of these unaudited condensed 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.

the three months ended March 31, 2026, operating activities used approximately $2,067,727 of cash, differing drastically from a reported

net loss of $35,059,852 due in large part to noncash additions of $22,061,472 of changes in fair value of cryptocurrency and stock

compensation expenses of $8,113,318, respectively.

Other material noncash additions include accretion expense of approximately $851,018,

and changes in operating assets and liabilities of approximate increase of $1,839,261, due to the netting of an increase in prepaid research

costs and increases in accounts payable and accrued expenses.

Comparatively,

during the three months ended March 31, 2025, operating activities used $20,313 of cash, primarily resulting from a net loss of $402,397,

partially offset by non-cash interest expense-related parties of $11,256, accretion expense of $26,776, and changes in operating assets

and liabilities of $344,051.

the three months ended March 31, 2026, and 2025, investing activities used approximately $490,606 and $0, respectively.

For the period

ended 2026, this value consists of $500,000 received as a transfer from short term investments and a decrease of $9,394 incurred due

to purchases of furniture and fixtures.

the three months ended March 31, 2026, financing activities provided approximately $920,000 of cash.

This was primarily attributable

to net proceeds from the issuance of notes payable, partially offset by issuance costs paid upon closing of the debt offering of $75,000.

Comparatively,

during the three months ended March 31, 2025, financing activities provided $267,200 of cash resulting from $250,000 in proceeds from

notes payable from related parties and cash advances from related parties of $17,200.

Obligations and Commitments

Note 6 – Debt, and Note 8 – Commitments and Contingencies, of the notes to the Company’s financial statements as of

and for the three months ended March 31, 2026, included elsewhere in this Quarterly Report for further discussion of the Company’s

commitments and contingencies.

Sheet Arrangements

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.

Accounting Policies and Significant Judgments and Estimates

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 U.S.

The preparation of these unaudited condensed 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 U.S.

GAAP, Apimeds

Pharmaceuticals US, Inc.

evaluates its estimates and judgments on an ongoing basis.

The most significant estimates relate to convertible

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 unaudited condensed financial statements that

require significant estimates and judgments.

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:

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.

Quantitative and Qualitative Disclosures

About Market Risk

As a smaller reporting company, we have elected

not to provide the disclosure required by this item.

bases its estimates

and assumptions on current facts, historical experiences, and various other factors that Apimeds Pharmaceuticals US, Inc.

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.

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 unaudited condensed financial statements that require significant estimates and judgments.

Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives

and Hedging Activities”.

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.

Quantitative and Qualitative Disclosures About Market Risk

a smaller reporting company, we have elected not to provide the disclosure required by this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis