Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The
information set forth in this section contains certain “forward-looking statements”, including, among others (i) expected
changes in our revenue and profitability, (ii) prospective business opportunities and (iii) our strategy for financing our business.
Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking
statements may be identified by use of terms such as “believes”, “anticipates”, “intends” or “expects”.
These forward-looking statements relate to our plans, liquidity, ability to complete financing and purchase capital expenditures, growth
of our business including entering into future agreements with companies, and plans to successfully develop and obtain approval to market
our product. We have based these forward-looking statements largely on our current expectations and projections about future events and
financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
Although
we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds
of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion
of forward-looking statements in this Annual Report should not be regarded as a representation by us or any other person that our objectives
or plans will be achieved.
We
assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting
forward-looking statements.
Our
revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous
factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of our company to insure
against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations
domestically and internationally affecting our products and businesses.
You
should read the following discussion and analysis in conjunction with the Financial Statements and Notes attached hereto, and the other
financial data appearing elsewhere in this Annual Report.
US
Dollars are denoted herein by “USD”, “$” and “dollars”.
Organization
and Overview of Operations
On
December 31, 2024, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with an unrelated
third party, pursuant to which it was agreed to sell the skincare business. The sale of the skincare business closed on January 16, 2025.
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Prior
to entering into the Asset Purchase Agreement, the Company’s principal business was operating a skincare development company engaged
in the design, manufacture, and marketing of skincare products in the skincare industry. With the sale of the skincare business, the
Company changed its principal business. PMGC Holdings Inc. is a diversified holding company that manages and grows its portfolio through
strategic acquisitions, investments, and development across various industries. The Company currently manages and operates a diverse
portfolio of three wholly owned subsidiaries:
● NorthStrive
BioSciences Inc. – is a biopharmaceutical company focusing on the development and acquisition
of cutting-edge aesthetic medicines and therapeutic products. Our lead asset, EL-22, is leveraging a first-in-class engineered probiotic
approach to address obesity’s pressing issue of preserving muscle while on weight loss treatments, including GLP-1 receptor agonists.
For more information, please visit www.northstrivebio.com.
● PMGC
Research Inc. – based in Canada, is currently dedicated to medical scientific research and development efforts, utilizing
Canadian research grants and partnering with leading Canadian Universities to push the boundaries of innovation.
● PMGC
Capital LLC – is a multi-strategy investment firm focused on direct investments, strategic lending, and acquiring undervalued
companies and assets across diverse markets. Our mission is to identify and seize high-potential opportunities, delivering sustainable
growth and maximizing returns on capital.
Outlook
Management’s
Plans
Over
the next twelve months, we intend to focus on:
● Growing
revenue by achieving successful returns on capital through PMGC Capital LLC, our multi-strategy
investment vehicle, by acquiring and managing undervalued assets, public and private investments,
and structured financing opportunities.
● Establishing
new wholly owned subsidiaries to develop and commercialize newly acquired or licensed biotechnology
assets across various unrelated pharmaceutical indications.
● Utilizing
clinical validation studies to strengthen the commercial potential and scientific credibility
of our portfolio companies’ technologies.
● Advancing
clinical development to progress NorthStrive Biosciences, Inc.’s clinical assets toward
Investigational New Drug (IND) applications.
● Pursuing
additional acquisitions of operating companies and biotechnology assets to expand and diversify
our portfolio.
● Evaluating
potential spin-offs of wholly owned subsidiaries, creating new publicly traded companies
to unlock shareholder value.
Results
of Operations
Comparison
of the Years Ended December 31, 2024 and 2023.
The
following table provides certain selected financial information for continuing operations for the periods presented:
Year Ended December 31, 2024
Year Ended December 31, 2023
Change
Marketing and Promotion
$ 292,522
256,450
36,072
Consulting Fees
$ 1,367,273
279,767
1,087,506
Office and Administration
$ 1,092,576
347,653
744,923
Professional Fees
$ 563,242
132,600
430,642
Investor Relations
$ 208,326
91,009
117,317
Research and Development
$ 104,654
7,410
97,244
Total operating expenses
$ 3,663,566
1,140,958
2,522,608
Other income (expense) 1
$ (353,148 )
(515,781 )
162,633
Net loss from continuing operations
$ (4,016,714 )
(1,656,739 )
(2,359,975 )
Basic and dilutive loss per common share – continuing operations
$ (50.473 )
(215.834 )
165.361
Weighted average number of shares outstanding – basic and diluted
79,582
7,676
1 Other
expenses relate to interest income, interest expense, listing expense and fair value gain/loss on derivative liability.
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Research
and Development Expenses
Research
and development expenses for the year ended December 31, 2024, were $104,654 compared to $7,410 for the year ended December 31, 2023,
an increase of $97,244. Research and Development related to the development of the Company’s intangible assets. The increase in
R&D is due to the intangible assets acquired during fiscal 2024 and includes amortization of intangible assets of $82,556 during
the year ended December 31, 2024 compared to Nil during the year ended December 31, 2023.
Marketing
and Promotion
Marketing
and promotion expenses for the year ended December 31, 2024, were $292,522 compared to $256,450 for the year ended December 31, 2023,
an increase of $36,072. The Company’s marketing and promotional efforts were consistent year of year.
Office
and Administrative Expenses
Office
and administrative expenses for the year ended December 31, 2024, were $1,092,576, compared to $347,653 for year ended December 31, 2023,
an increase of $744,923. Approximately $400,000 of the increase is the result of directors’ and officers’ insurance for the
full 12 months of 2024 compared to only one month post IPO in 2023. In addition, during 2024 the Company paid directors fees of $165,000
($55,000 each to its three independent directors) compared to Nil in 2023.
Consulting
Fees
Consulting fees for the year ended December 31,
2024, were $1,367,273, compared to $279,767 for the year ended December 31, 2023, an increase of $1,087,506. The Company’s CEO,
CFO and Chairman provide services in a consulting capacity. During 2024, consulting fees to key management (excluding 2024 year-end bonuses)
increased by $177,233 to bring compensation in line with market rates for similar public companies. In addition, the Company accrued
$350,000 in bonuses payable to key management following the successful recapitalization and restructuring of the business during Q3-Q4
2024. The remaining increase in consulting fees relates to business advisory and strategy services acquired during 2024 that were not
present in 2023.
Professional
Fees
Professional fees for the year ended December
31, 2024, was $563,242, compared to $132,600 for the year ended December 31, 2023, an increase of $430,642. Professional fees comprise
of legal, audit and accounting services. The increase during 2024, is primarily due to an increase in audit, legal and accounting services
as the company is now listed on the NASDAQ exchange.
Investor
Relations
Investor
relations for the year ended December 31, 2024, was $208,326, compared to $91,009 for the year ended December 31, 2023. The increase
in investor relations spending is consistent with the Company’s growth strategy, which includes promotion to current and potential
investors as the company is now listed on the NASDAQ exchange.
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Liquidity
and Capital Resources
The
accompanying consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to
realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern
is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing
to continue operations, and ultimately the attainment of profitable operations.
As of December 31, 2024 and 2023, the Company
had a net working capital of $4,251,867 and $3,622,091, respectively, and has an accumulated deficit of $13,269,627 and $7,023,890, respectively.
Furthermore, for the years ended December 31, 2024 and 2023, the Company incurred a net loss of $6,245,737 and $4,301,517, respectively
and used $5,486,980 and $4,556,811, respectively of cash flows for operating activities. These factors raise substantial doubt regarding
the Company’s ability to continue as a going concern. These Company’s consolidated financial statements do not include any
adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
Our
principal liquidity requirements are for working capital, capital expenditure and research and development. We fund our liquidity requirements
primarily through cash on hand, cash flows from operations, the issuance of common, warrants and preferred stock, and the issuance of
Notes. As of December 31, 2024, we had cash of $3,984,453, with $3,326,851 as of December 31, 2023.
The Company expects an improvement in liquidity
and capital resources, including cash used in operations following the sale of the loss-making skincare business on January 16, 2025.
Cash flows used in discontinued operating and investing activities and assets and liabilities held for sale have been excluded from our
analysis.
The
following table provides selected financial data as of December 31, 2024, and December 31, 2023, respectively (excluding assets and liabilities
held for sale).
December 31, 2024
December 31, 2023
Change
Current assets
$ 4,858,193
$ 4,231,976
$ 626,217
Current liabilities
$ 1,250,218
$ 580,299
$ 669,919
Working capital
$ 3,607,975
$ 3,651,677
$ (43,702 )
The
following table summarizes our cash flows from operating, investing and financing activities from continuing operations:
Year Ended December 31, 2024
Year Ended December 31, 2023
Change
Cash used in operating activities
$ (2,800,601 )
$ (2,114,871 )
$ (685,730 )
Cash used in investing activities
$ (601,404 )
$ -
$ (601,404 )
Cash provided by financing activities
$ 6,757,500
$ 6,738,890
$ 18,610
Cash
Flow from Operating Activities
For
the year ended December 31, 2024, net cash flows used in operating activities for continuing operations was $2,800,601 compared to $2,114,871
used during the year ended December 31, 2024, respectively, primarily due to net loss and timing of settlement of assets and liabilities.
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Cash
Flows from Investing Activities
During
the year ended December 31, 2024, and 2023, we used $601,404 and $nil, respectively, in investing activities primarily related to the
acquisition of intangible assets of $462,320. In addition, the Company participated in a private placement of a company in the U.S. uranium
energy market with an investment of 139,084.
Cash
Flows from Financing Activities
During
the year ended December 31, 2024, we had net cash flow provided by financing activities of $6,757,500 compared to cash flow provided
by financing activities of $6,738,890 in 2023. During 2024, and 2023, the Company raised $6,993,058 and $1,463,586, respectively, through
the issuance of common stock and common stock purchase warrants; $914,442 and $Nil, respectively, through the issuance of Notes; and
$Nil and $37,500, respectively, upon the exercise of stock options in exchange for common stock. The cash provided by financing activities
during the year ended December 31, 2024, was partially offset by the repayment of Notes of $1,150,000. In addition, during 2023 the Company
completed its IPO financing and raised net proceeds of $5,237,805.
Critical
Accounting Policies and Significant Judgments and Estimates
This
discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation
of the consolidated financial statements in conformity with U.S. GAAP requires 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 revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions
related to revenue recognition, the collectability of receivables, valuation of inventory, fair value of derivative liabilities and stock
options, useful lives and recoverability of long-lived assets, and deferred income tax asset valuation allowances. The Company bases
its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under
the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities and the
accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ
materially and adversely from those estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are
reflected in the consolidated financial statements in the period they are determined.
The
Company’s policy for intangible assets require judgement in determining whether the present value of future expected economic benefits
exceeds capitalized costs. The policy requires management to make certain estimates and assumptions about future economic benefits related
to its operations. Estimates and assumptions may change if new information becomes available. If information becomes available suggesting
that the recovery of capitalized cost is unlikely, the capitalized cost is written off/impaired to the consolidated statement of operations.
The
assessment of whether the going concern assumption is appropriate requires management to take into account all available information
about the future, which is at least, but not limited to, 12 months from the date the financial statements are issued. The Company is
aware that material uncertainties related to events or conditions may cast substantial doubt upon the Company’s ability to continue
as a going concern.
Foreign
Currency Translation
The
Company’s functional and reporting currency is the U.S. dollar. The functional currency of the Company’s Canadian subsidiary,
PMGC Research Inc. (“PMGC Research”) is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies
are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded in
income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction.
Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination
of income.
The
accounts of PMGC Research are translated to U.S. dollars using the current rate method. Accordingly, assets and liabilities are translated
into U.S. dollars at the period-end exchange rate while revenues and expenses are translated at the average exchange rates during the
period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive
income (loss).
Share-Based Compensation
Employees
- The Company accounts for share-based compensation under the fair value method which requires all such compensation to employees,
including the grant of employee stock options, to be calculated based on its fair value at the measurement date (generally the grant
date), and recognized in the consolidated statement of operations over the requisite service period.
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Nonemployees
- During June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”)
to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees.
Under the requirements of ASU 2018-07, the Company accounts for share-based compensation to non-employees under the fair value method
which requires all such compensation to be calculated based on the fair value at the measurement date (generally the grant date) and
recognized in the statement of operations over the requisite service period.
During
the years ended December 31, 2024 and 2023, the Company recorded $97,167 and $487,738, respectively, in share-based compensation expense,
of which $93,449 and $3,718, and $250,067 and $237,671, respectively is included in office and administration and discontinued operations,
respectively. Within discontinued operations for the years ended December 31, 2024 and 2023, ($599) and $4,317, and $226,838 and $10,833,
respectively is included in office and administration and research and development, respectively.
Determining
the appropriate fair value model and the related assumptions requires judgment. During the years ended December 31, 2024 and 2023, the
fair value of each option grant was estimated using a Black-Scholes option-pricing model.
The
expected volatility represents the historical volatility of comparable publicly traded companies in similar industries, adjusted for
variables such as stock price, market capitalization and life cycle. Due to limited historical data, the expected term for options granted
is equal to the contractual life. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected
life of stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore,
the expected dividend yield is assumed to be zero.
Off-Balance Sheet
Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditure or capital resources
that is material to investors.
JOBS
Act
On
April 5, 2012, the Jumpstart Our Business Startups Act (the “JOBS Act”) was signed into law. The JOBS Act contains provisions
that, among other things, eases certain reporting requirements for qualifying public companies. We will qualify as an “emerging
growth company” and under the JOBS Act will be allowed to comply with new or revised accounting pronouncements based on the effective
date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as
a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised
accounting pronouncements as of public company effective dates.
Future
Related Party Transactions
The
Corporate Governance Committee of our Board of Directors is required to approve all related party transactions. All related party transactions
are made or entered into on terms that are no less favorable to use than can be obtained from unaffiliated third parties.
Impact
of Inflation
We
do not believe the impact of inflation on our Company is material.
Inflation
Risk
We
are also exposed to inflation risk. Inflationary factors, such as increases in labor costs, could impair our operating results. Although
we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of
inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and operating expenses.
Market
Risk
Market
risk is the risk of loss arising from adverse changes in market rates and prices. Our market risk exposure is generally limited to those
risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions, nor do we
utilize financial instruments or derivative instruments for trading purposes.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk.
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required
under this item.
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