6. Share capital

Authorized

The Company has authorized an unlimited number of common shares participating, voting and without par value. Each holder of common shares is entitled to one vote for each share owned on all matters voted upon by shareholders.

Conversion of preferred shares

Prior to the RTO, the Company had 13,491,174 of Series A and Series A-1 preferred shares issued and outstanding with no par value. The preferred shares were convertible at any time at the option of the holder into common shares at the series conversion rate unless there is a recapitalization event, in which case an anti-dilutive effect is triggered. As a result, the preferred shares were classified as a financial liability. Each share entitled the holder to the number of votes per share equal to the common shares into which the preferred shares convert. Preferred shares had several liquidity event triggers that required conversion to common shares and have liquidation preference over any other classes of shares.

Holders of preferred shares were entitled to accrue dividends at a dividend rate of 8% of the original issue price per annum, and participate in any dividend declared on common shares, whether or not declared by the Board of Directors. Dividends were payable only when and if declared by the Board of Directors, out of funds, common shares or other property.

The preferred shares were redeemable as of March 30, 2022, at the option of holders that together hold at least 75% of the issued and outstanding preferred shares. The redemption price is equal to the original issue price plus any unpaid dividends accrued at the redemption request date.

To facilitate the closing of the RTO, the preferred shares outstanding were converted into 7,904,731 common shares on a 1.706721-to-1 basis. On October 28, 2024, the Company completed a reverse share split at the ratio of 1-for-2, resulting in 3,952,366 common shares after conversion.

Conversion of promissory notes

From July 2021 to May 2023, the Company issued convertible promissory notes in the principal amount of $2,500,000. The convertible promissory notes accrued interest at the rate of 8% per annum and had a maturity date of December 31, 2023. At maturity the notes were payable in full, including unpaid accrued interest, or the convertible note holder could elect to convert to preferred shares. $1,500,000 of the convertible promissory notes could be converted into preferred shares at a price of $2.64122, and $1,000,000 could be converted at a price determined by dividing $25,000,000 by the fully diluted outstanding shares at the time of conversion, excluding other dilutive instruments.

In the event of a financing greater than $3,000,000 prior to maturity, the outstanding principal of the convertible debentures of $2,500,000 and any unpaid accrued interest automatically converted into preferred shares at the lesser of 80% of the price per share paid by other purchasers or the base conversion rate. The Company determined that the conversion options did not meet the criteria for separation and the convertible promissory notes would be accounted for as a single, hybrid instrument.

The promissory notes were converted immediately prior to the RTO transaction for 1,294,447 common shares of SkinJect. On October 28, 2024, the Company completed a reverse share split at the ratio of 1-for-2, resulting in 647,224 common shares after conversion.

On May 3, 2024, the Company issued convertible notes in the principal amount of $5,172,500. The convertible notes accrued interest at the rate of 10% per annum, payable in-kind semi-annually in arrears in the form of either cash or common shares of the Company, at the election of the holder, and had a maturity date of December 31, 2025.

Prior to January 1, 2025, the convertible notes would automatically convert to common shares in the event that the Company completed an initial public offering in the United States, at a conversion price equal to the greater of (i) a 20% discount to the initial public offering price and (ii) $4.00; or if there had been a change of control, at a conversion price of $4.00 per common share. On or after January 1, 2025, conversion would be at the option of the holder at a conversion price of $4.00 per common share. The Company had the option to redeem all or any portion of the convertible notes at a price equal to 100% of the outstanding principal plus accrued and unpaid interest up to but not including the date of redemption. In the event of a change of control, the Company would offer to repurchase the convertible notes at a price equal to 101% of the principal plus accrued and unpaid interest up to but not including the date of repurchase. The Company elected to account for the convertible notes in their entirety at fair value through profit and loss.

Subsequently, the note holders were given the option to convert at a conversion price of $4.00 per share prior to July 31, 2024. On June 28, 2024, all of the holders of the convertible notes elected to convert to common shares. The Company paid cash interest of $40,563 and accrued interest of $38,462 was converted, along with the principal amount of $5,172,500, into 1,308,798 common shares.

Conversion of notes payable

On December 6, 2022, SkinJect issued a simple agreement for future equity ("SAFE") to a related party for proceeds of $150,000. In the event of an equity financing greater than $3 million, the SAFE is convertible to preferred shares at the lower of the SAFE valuation cap divided by the capitalization of the Company immediately prior to the equity financing and the lowest price per share sold in the equity financing. The SAFE was redeemed immediately prior to the RTO transaction for 54,571 common shares of SkinJect. On October 28, 2024, the Company completed a reverse share split at the ratio of 1-for-2, resulting in 27,286 common shares after conversion.

Private placement

On June 28, 2024, the Company issued 1,461,250 common shares as part of a private placement for total proceeds of $5,845,000 at $4.00 per common share. The company incurred finders' fees of $375,000, which were recognized in equity as deduction from the gross proceeds received.

Initial Public Offering

On November 14, 2024, the Company completed the sale of 970,000 Units, with each Unit consisting of one common share and one warrant to purchase one common share (the "Unit") at the price of $4.125 per Unit. In addition, the underwriters exercised an option to purchase 145,500 warrants (the 'Overallotment Warrants") at a price of $0.01 per warrant.

Total gross proceeds from the IPO were $4,002,705, including the proceeds from the Overallotment Warrants. The Company incurred total issuance costs of $2,218,014, including underwriter fees, and legal and other professional fees incurred directly related to the issuance.

The incremental costs directly associated with the issuance were recognized as a deduction in equity and allocated based on the relative fair values of the warrants and common shares on a standalone basis.

The fair value of the common shares was based on the Company's stock price on the day of issuance of $2.65 and the fair value of the warrants was $1.7419 per warrant. The warrants were recognized in additional paid-in capital as they met the criteria for equity classification.

The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following inputs:

		2024
Valuation date share price	$	2.65
Exercise price	$	4.64
Expected dividend yield		-
Risk-free interest rate		4.32%
Expected term (in years)		5 years
Expected volatility		95%

The number of warrants outstanding during the year ended December 31, 2024:

Warrants outstanding
Expiry date	Exercise price	Number outstanding
November 15, 2029	$ 4.64	1,115,500