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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2023

 

or

 

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from _________to___________

 

Commission File Number: 001-12555

 

PROTAGENIC THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   06-1390025
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

149 Fifth Avenue, Suite 500, New York, New York 10010

(Address of Principal Executive Office) (Zip Code)

 

(212) 994-8200

Registrant’s Telephone Number Including Area Code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Ticker symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.0001   PTIX   Nasdaq Capital Market
Common Stock Purchase Warrant   PTIXW   Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging Growth Company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-2 of the Exchange Act).

☐ Yes ☒ No

 

As of August 11, 2023 there were 4,330,959 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 

 

 

PROTAGENIC THERAPEUTICS, INC.

Form 10-Q Report

For the Fiscal Quarter Ended June 30, 2023

TABLE OF CONTENTS

 

    Page
Part I. Financial Information  
     
Item 1 Financial Statements:  
     
  Consolidated Balance Sheets at June 30, 2023 (unaudited) and December 31, 2022 3
     
  Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2023 and 2022 (unaudited) 4
     
  Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited) 5
     
  Consolidated Statements of Cash Flows for the six months ended June 30, 2023, and 2022 (unaudited) 6
     
  Notes to Consolidated Financial Statements (unaudited) 7
     
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
     
Item 3 Quantitative and Qualitative Disclosures about Market Risk 17
     
Item 4 Controls and Procedures 17
     
Part II. Other Information  
     
Item 1 Legal Proceedings 18
     
Item 1A Risk Factors 18
     
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 18
     
Item 3 Defaults upon Senior Securities 18
     
Item 4 Mine Safety Disclosures 18
     
Item 5 Other Information 18
     
Item 6 Exhibits 19
     
Signatures 20

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2023   2022 
    (Unaudited)      
ASSETS          
           
CURRENT ASSETS          
           
Cash  $219,435   $215,189 
Marketable securities   5,823,420    7,763,517 
Prepaid expenses   874,671    56,939 
           
TOTAL CURRENT ASSETS   6,917,526    8,035,645 
           
Equipment - net   1,595    1,775 
           
TOTAL ASSETS  $6,919,121   $8,037,420 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
           
CURRENT LIABILITIES          
           
Accounts payable and accrued expenses  $774,744   $669,704 
Accounts payable and accrued expenses - related party   336,337    105,928 
PIK convertible notes payable, net of debt discount   196,956    150,591 
PIK convertible notes payable, net of debt discount - related parties   197,353    193,639 
           
TOTAL CURRENT LIABILITIES   1,505,390    1,119,862 
           
TOTAL LIABILITIES  $1,505,390   $1,119,862 
           
STOCKHOLDERS’ EQUITY          
Preferred stock, $0.000001 par value; 20,000,000 shares authorized; none shares issued and outstanding in the following classes:          
Preferred stock; par value $0.000001; 2,000,000 shares authorized; none issued and outstanding   -    - 
Series B convertible preferred stock, $0.000001 par value; 18,000,000 shares authorized; 0 and 0 shares issued and outstanding at June 30, 2023, and December 31, 2022   -    - 
Common stock, $.0001 par value, 100,000,000 shares authorized, 4,330,959 and 4,321,315 shares issued and outstanding at June 30, 2023, and December 31, 2022   434    434 
Additional paid-in-capital   33,704,820    33,371,406 
Accumulated deficit   (27,705,062)   (25,777,375)
Accumulated other comprehensive loss   (586,461)   (676,907)
           
TOTAL STOCKHOLDERS’ EQUITY   5,413,731    6,917,558 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY  $6,919,121   $8,037,420 

 

See accompanying notes to the unaudited consolidated financial statements

 

3

 

 

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

   2023   2022   2023   2022 
  

For the three months ended

June 30,

  

For the six months ended

June 30,

 
   2023   2022   2023   2022 
OPERATING AND ADMINISTRATIVE EXPENSES                    
Research and development  $836,379   $160,515   $1,184,410   $830,353 
General and administrative   307,363    476,159    698,626    1,147,597 
                     
TOTAL OPERATING AND ADMINISTRATIVE EXPENSES   1,143,742    636,674    1,883,036    1,977,950 
                     
LOSS FROM OPERATIONS   (1,143,742)   (636,674)   (1,883,036)   (1,977,950)
                     
OTHER (EXPENSE) INCOME                    
                     
Interest income   84,708    32,900    141,601    50,867 
Interest expense   (31,610)   (39,697)   (62,873)   (73,541)
Realized loss on marketable securities   (118,947)   (23,246)   (123,379)   (28,202)
                     
TOTAL OTHER INCOME (EXPENSES)   (65,849)   (30,043)   (44,651)   (50,876)
                     
LOSS BEFORE TAX   (1,209,591)   (666,717)   (1,927,687)   (2,028,826)
                     
INCOME TAX EXPENSE   -    -    -    - 
                     
NET LOSS  $(1,209,591)  $(666,717)  $(1,927,687)  $(2,028,826)
                     
COMPREHENSIVE LOSS                    
                     
Other Comprehensive Loss - net of tax                    
Net unrealized gain (loss) on marketable securities   42,289    (43,417)   89,966    (194,587)
Foreign exchange translation income (loss)   13    (6,903)   480    (6,743)
                     
TOTAL COMPREHENSIVE LOSS  $(1,167,289)  $(717,037)  $(1,837,241)  $(2,230,156)
                     
Net loss per common share - Basic and Diluted  $(0.28)  $(0.15)  $(0.45)  $(0.47)
                     
Weighted average common shares - Basic and Diluted   4,330,959    4,320,173    4,326,673    4,314,359 

 

See accompanying notes to the unaudited consolidated financial statements

 

4

 

 

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended June 30, 2023 and 2022

(Unaudited)

 

   Shares   Amount   Shares   Amount   Capital   (Deficit)   Loss   Equity 
   Series B
Convertible
Preferred Stock
   Common Stock   Additional
Paid-in-
   Accumulated   Accumulated
Other
Comprehensive
   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   (Deficit)   Loss   Equity 
                                 
BALANCE - December 31, 2021   -   $-    4,302,403   $432   $32,411,742   $(22,221,870)  $(248,349)  $9,941,955 
                                         
Foreign currency translation gain   -    -    -    -    -    -    160    160 
Unrealized loss on marketable securities   -    -    -    -    -    -    (151,170)   (151,170)
Stock compensation - stock options   -    -    -    -    215,346    -    -    215,346 
Stock compensation - warrants   -    -    -    -    20,433    -    -    20,433 
Conversion of notes and interest   -    -    10,917    1    54,967    -    -    54,968 
                                         
Net loss   -    -    -    -    -    (1,362,109)   -    (1,362,109)
                                         
BALANCE - March 31, 2022   -   $-    4,313,320   $433   $32,702,488   $(23,583,979)  $(399,359)  $8,719,583 
                                         
Foreign currency translation loss   -    -    -    -    -    -    (6,903)   (6,903)
Unrealized loss   on marketable securities   -    -    -    -    -    -    (43,417)   (43,417)
Stock compensation - stock options   -    -    -    -    215,535    -    -    215,535 
Conversion of notes and interest   -    -    7,995    1    40,016    -    -    40,017 
                                         
Net loss   -    -    -    -    -    (666,717)   -    (666,717)
                                         
BALANCE -June 30, 2022   -   $-    4,321,315   $434   $32,958,039   $(24,250,696)  $(449,679)  $8,258,098 
                                         
BALANCE - December 31, 2022   -   $-    4,321,315   $434   $33,371,406   $(25,777,375)  $(676,907)  $6,917,558 
                                         
Foreign currency translation gain   -    -    -    -    -    -    467    467 
Unrealized gain on marketable securities   -    -    -    -    -    -    47,677    47,677 
Stock compensation - stock options   -    -    -    -    166,707    -    -    166,707 
Rounding from reverse split   -    -    9,644    -    -    -    -    - 
                                         
Net loss   -    -    -    -    -    (718,096)   -    (718,096)
                                         
BALANCE - March 31, 2023   -   $-    4,330,959   $434   $33,538,113   $(26,495,471)  $(628,763)  $6,414,313 
                                         
Foreign currency translation gain   -    -    -    -    -    -    13    13 
Unrealized gain on marketable securities   -    -    -    -    -    -    42,289    42,289 
Stock compensation - stock options   -    -    -    -    166,707    -    -    166,707 
                                         
Net loss   -    -    -    -    -    (1,209,591)   -    (1,209,591)
                                         
BALANCE - June 30, 2023   -   $-    4,330,959   $434   $33,704,820   $(27,705,062)  $(586,461)  $5,413,731 

 

See accompanying notes to the unaudited consolidated financial statements

 

5

 

 

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   2023   2022 
   For the six months ended June 30, 
   2023   2022 
         
CASH FLOWS FROM OPERATING ACTIVITIES          
Net Loss  $(1,927,687)  $(2,028,826)
Adjustments to reconcile net loss to net cash used in operating activities          
Depreciation expense   181    - 
Stock-based compensation   333,414    451,314 
Realized loss on sale of marketable securities   123,379    28,202 
Amortization of debt discount   50,079    59,888 
Changes in operating assets and liabilities          
Prepaid expenses   (817,732)   542,441 
Accounts payable and accrued expenses   334,790    (330,664)
           
NET CASH USED IN OPERATING ACTIVITIES   (1,903,576)   (1,277,645)
           
CASH FLOWS FROM INVESTING ACTIVITIES          
           
Proceeds from sale of marketable securities   1,906,684    1,077,679 
           
NET CASH PROVIDED BY INVESTING ACTIVITIES   1,906,684    1,077,679 
           
Effect of exchange rate changes on cash   1,138    (2,539)
           
NET CHANGE IN CASH   4,246    (202,505)
           
CASH, BEGINNING OF THE PERIOD   215,189    541,171 
           
CASH, END OF THE PERIOD  $219,435   $338,666 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          
Cash paid for interest expense  $-   $- 
Cash paid for income taxes  $-   $- 
           
NONCASH FINANCING AND INVESTING TRANSACTIONS          
Shares issued for conversion of notes and interest  $-   $94,985 
Unrealized gain or loss on marketable securities  $89,966   $194,587 

 

See accompanying notes to the unaudited consolidated financial statements

 

6

 

 

PROTAGENIC THERAPEUTICS, INC. & SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2023

 

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

Company Background

 

Protagenic Therapeutics, Inc. (“we,” “our,” “Protagenic” or “the Company”), formerly known as Atrinsic, Inc., is a Delaware corporation with one subsidiary named Protagenic Therapeutics Canada (2006) Inc. (“PTI Canada”), a corporation formed in 2006 under the laws of the Province of Ontario, Canada.

 

We are a biopharmaceutical company specializing in the discovery and development of therapeutics to treat stress-related neuropsychiatric and mood disorders.

 

Reverse Stock Split

 

On March 22, 2023, the Company effectuated a 1 for 4 reverse stock split (the “Reverse Split”). The Company’s stock began trading on a split-adjusted basis effective on the Nasdaq Stock Market on March 22, 2023. There was no change to the number of authorized shares of the Company’s common stock. All share and per share information in these financial statements are adjusted to reflect the Reverse Split.

 

NOTE 2 - LIQUIDITY

 

As shown in the accompanying consolidated financial statements, the Company has incurred significant recurring losses resulting in an accumulated deficit. The Company anticipates further losses in the development of its business. The Company also had negative cash flows used in operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

Based on its cash resources and positive working capital as of June 30, 2023, the Company has sufficient resources to fund its operations at least until the end of the third quarter of 2024. The positive working capital as of June 30, 2023 was due to funds raised by the Company from its equity offering during the year ended December 31, 2021. Absent generation of sufficient revenue from the execution of the Company’s business plan, the Company will need to obtain debt or equity financing by the third quarter of 2024. Because the Company has sufficient resources on hand to fund operations through the next twelve months from the date these consolidated financial statements are available to be issued, the Company believes that this alleviates the substantial doubt in connection with its ability to continue as a going concern.

 

Principles of consolidation

 

The consolidated financial statements include the accounts of Protagenic Therapeutics, Inc., and its wholly owned Canadian subsidiary, PTI Canada. All significant intercompany balances and transactions have been eliminated.

 

Use of estimates

 

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 disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the consolidated financial statements include valuation of stock options and warrants and assessment of deferred tax asset valuation allowance.

 

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Concentrations of Credit Risk

 

The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits. As of June 30, 2023, the Company does not have bank balances that exceed the federally insured limits. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

 

Funds held in the Company’s marketable securities are not insured.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. As of June 30, 2023 and December 31, 2022 the Company did not have any cash equivalents.

 

Marketable Securities

 

The Company accounts for marketable debt securities, the only type of securities it owns, in accordance with the FASB Accounting Standards Codification 320, Investments – Debt and Equity Securities (“ASC 320”).

 

Pursuant to ASC 320-10-35-1, investments in debt securities that are classified as available for sale shall be measured subsequently at fair value in the consolidated balance sheets at each balance sheet date. Unrealized holding gains and losses for available-for-sale securities (including those classified as current assets) shall be excluded from earnings and reported in other comprehensive income until realized.

 

During the six months ended June 30, 2023 the Company purchased $0 and sold $1,906,684 in marketable securities with a realized loss of $123,379 and an unrealized gain of $89,966. As of June 30, 2023 and December 31, 2022, the Company owned marketable securities with a total value of $5,823,420 and $7,763,517, respectively.

 

Equipment

 

Equipment is stated at cost less accumulated depreciation. Cost includes expenditures for computer equipment. Maintenance and repairs are charged to expense as incurred. When assets are sold, retired, or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. The cost of equipment is depreciated using the straight-line method over the estimated useful lives of the related assets which is three years. Depreciation expense was not material for the six months ended June 30, 2023.

 

Fair Value Measurements

 

ASC 820, “Fair Value Measurements and Disclosure,” defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not adjusted for transaction costs. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

 

The three levels are described below:

 

Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities that is accessible by the Company;

 

Level 2 Inputs – Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly;

 

Level 3 Inputs – Unobservable inputs for the asset or liability including significant assumptions of the Company and other market participants.

 

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The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued expenses approximate their fair value because of the short term maturity of those instruments.

 

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

The assets or liability’s fair value measurement within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of June 30, 2023.

  

   Carrying   Fair Value Measurement Using 
   Value   Level 1   Level 2   Level 3   Total 
Marketable securities  $5,823,420   $5,823,420   $   $   $5,823,420 

 

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of December 31, 2022.

 

   Carrying   Fair Value Measurement Using 
   Value   Level 1   Level 2   Level 3   Total 
Marketable securities  $7,763,517   $7,763,517   $   $   $7,763,517 

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation costs under the provisions of ASC 718, “Compensation—Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, non-employees, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported.

 

If any award granted under the Company’s 2016 Equity Compensation Plan (the “2016 Plan”) payable in shares of common stock is forfeited, cancelled, or returned for failure to satisfy vesting requirements, otherwise terminates without payment being made, or if shares of common stock are withheld to cover withholding taxes on options or other awards, the number of shares of common stock as to which such option or award was forfeited, or which were withheld, will be available for future grants under the 2016 Plan. The Company recognizes the impact of forfeitures when they occur.

 

Basic and Diluted Net (Loss) per Common Share

 

Basic (loss) per common share is computed by dividing the net (loss) by the weighted average number of shares of common stock outstanding for each period. Diluted (loss) per share is computed by dividing the net (loss) by the weighted average number of shares of common stock outstanding plus the dilutive effect of shares issuable through the common stock equivalents. The effect of dilution on net loss becomes anti-dilutive and therefore is not reflected on the consolidated statements of operations and comprehensive loss.

 

9

 

 

 

   Potentially Outstanding
Dilutive Common Shares
 
   For the Six Months Ended June 30, 2023   For the Six Months Ended June 30, 2022 
         
Conversion Feature Shares          
           
Stock Options   1,357,466    1,376,215 
           
Warrants   1,055,066    1,537,158 
           
Convertible Notes   86,000    86,000 
           
Total potentially outstanding dilutive common shares   2,498,532    2,999,373 

 

Research and Development

 

Research and development expenses are charged to operations as incurred.

 

Foreign Currency Translation

 

The Company follows ASC 830, Foreign Currency Matters (“ASC 830”) for foreign currency translation to translate the financial statements of the foreign subsidiary from the functional currency, generally the local currency, into U.S. Dollars. ASC 830-10-45 sets out the guidance relating to how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), re-measures the books of record (if necessary), and characterizes transaction gains and losses. Pursuant to ASC 830-10-45, the assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment, or local currency, in which an entity primarily generates and expends cash.

 

The functional currency of each foreign subsidiary is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered. If a subsidiary’s functional currency is deemed to be the local currency, then any gain or loss associated with the translation of that subsidiary’s financial statements is included in accumulated other comprehensive income. However, if the functional currency is deemed to be the U.S. Dollar, then any gain or loss associated with the re-measurement of these financial statements from the local currency to the functional currency would be included in the condensed consolidated statements of operations and comprehensive income (loss). If the Company disposes of foreign subsidiaries, then any cumulative translation gains or losses would be recorded into the condensed consolidated statements of operations and comprehensive income (loss). If the Company determines that there has been a change in the functional currency of a subsidiary to the U.S. Dollar, any translation gains or losses arising after the date of change would be included within the condensed consolidated statements of operations and comprehensive loss.

 

Based on an assessment of the factors discussed above, the management of the Company determined its subsidiary’s local currency (i.e. the Canadian dollar) to be the functional currency for its foreign subsidiary.

 

Recent Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires an entity to utilize a new impairment model known as the current expected credit loss (CECL) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial assets and certain other instruments. ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for all entities except SEC reporting companies that are not smaller reporting companies. ASU 2016-13 became effective for the Company beginning January 1, 2023. The adoption of this ASU did not have a material effect on the Company’s financial statements.

 

In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2022, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. The Company does not intend to early adopt, and continues to evaluate the impact of the provisions of ASU 2020-06 on its consolidated financial statements.

 

10

 

 

NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following at:

 

   June 30, 2023   December 31, 2022 
         
Accounting  $28,750   $36,750 
Research and development   910,127    557,934 
Legal   14,032    25,462 
Other   158,172    155,486 
Total  $1,111,081   $775,632 

 

NOTE 4 – NOTE PAYABLE AND CONVERTIBLE NOTE PAYABLE (PIK NOTES)

 

Convertible Notes Payable

 

During the six months   ended June 30, 2023 and 2022, the Company amortized $46,365   and $56,174 of the debt discount, respectively. At June 30, 2023 and December 31, 2022, the Company had an unamortized debt discount of $33,044 and $79,409, respectively.

 

As of June 30, 2023 and December 31, 2022, the Company owes $230,000 and $230,000 on the outstanding Convertible Notes, respectively. These convertible notes have a maturity date of November 6, 2023.

 

Convertible Notes Payable – Related Parties

 

During the six months ended June 30, 2023 and 2022, the Company amortized $3,714 and $3,714 of the debt discount, respectively. At June 30, 2023 and December 31, 2022, the Company had an unamortized debt discount of $2,647 and $6,361, respectively.

 

As of June 30, 2023 and December 31, 2022, the Company owes $200,000 and $200,000 on the outstanding Convertible Notes, respectively. These convertible notes have a maturity date of November 6, 2023.

 

NOTE 5 - STOCKHOLDERS’ DEFICIT

 

Common Stock

 

During the six months ended June 30, 2023, the Company issued 9,644 shares of common stock for rounding of shares related to the Reverse Split.

 

Stock-Based Compensation

 

The Company adopted an Employee, Director and Consultant Stock Plan on June 17, 2016 (the “2016 Plan”). Pursuant to the 2016 Plan, the Company’s Compensation Committee may grant awards to any employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary. Due to an annual “evergreen” provision in the 2016 Plan, the number of shares reserved for future grants was increased by 184,260 and 142,457 in 2022 and 2021, respectively. As a result of these increases, as of June 30, 2023 and December 31, 2022, the aggregate number of shares of common stock available for awards under the 2016 Plan was 1,543,872 shares and 1,543,872 shares, respectively. Options issued under the 2016 Plan are exercisable for up to ten years from the date of issuance.

 

There were 1,357,466 options outstanding as of June 30, 2023. During the three and six months ended June 30, 2023, the Company issued no options.

 

11

 

 

The following is an analysis of the stock option grant activity under the Plan:

 

       Weighted
Average
   Weighted
Average
 
   Number   Exercise Price   Remaining Life 
Stock Options               
Outstanding December 31, 2022   1,357,466   $7.39    5.41 
Granted   -   $-    - 
Expired   -   $-    - 
Exercised   -   $-    - 
Outstanding June 30, 2023   1,357,466   $7.39    4.99 

 

A summary of the status of the Company’s nonvested options as of June 30, 2023, and changes during the six months ended June 30, 2023, is presented below:

 

Nonvested Options  Options   Weighted-Average
Exercise Price
 
Nonvested at December 31, 2022   118,187   $13.07 
Granted   -   $- 
Vested   41,792   $10.92 
Forfeited   -   $- 
Nonvested at June 30, 2023   76,395   $14.25 

 

As of June 30, 2023, the Company had 1,357,466 shares issuable under options outstanding at a weighted average exercise price of $7.39 and an intrinsic value of $0.

 

The total number of options granted during the six months ended June 30, 2023 and 2022 was 0 and 50,000, respectively. The exercise price for these options was $4.84 per share.

 

The Company recognized compensation expense related to options issued of $166,707 and $215,535 for the three months ended June 30, 2023 and 2022, respectively, in which $51,526 and $195,624 is included in general and administrative expenses and $115,181 and $19,911 in research and development expenses, respectively. For the three months ended June 30, 2023 and 2022, $1,713 and $50,542 of the stock compensation was related to employees and $164,994 and $164,993 was related to non-employees, respectively.

 

The Company recognized compensation expense related to options issued of $333,414 and $430,881 for the six months ended June 30, 2023 and 2022, respectively, in which $103,052 and $372,573 is included in general and administrative expenses and $230,362 and $58,308 in research and development expenses, respectively. For the six months ended June 30, 2023 and 2022, $3,426 and $99,370 of the stock compensation was related to employees and $329,988 and $331,511 was related to non-employees, respectively.

 

As of June 30, 2023, the unamortized stock option expense was $1,009,544 with $5,425 being related to employees and $1,004,119 being related to non-employees. As of June 30, 2023, the weighted average period for the unamortized stock compensation to be recognized is 3.81 years.

 

12

 

 

Warrants:

 

A summary of warrant issuances are as follows:

 

       Weighted
Average
   Weighted
Average
 
   Number   Exercise Price   Remaining Life 
Warrants               
                
Outstanding December 31, 2022   1,537,158   $13.49    2.15 
Granted   -    -    - 
Expired   (482,092)   4.00    - 
Exercised   -    -    - 
Outstanding June 30, 2023   1,055,066   $17.82    2.56 

 

As of June 30, 2023, the Company had 1,055,066 shares issuable under warrants outstanding at a weighted average exercise price of $17.82 and an intrinsic value of $0.

 

The Company recognized compensation expense related to warrants issued of $0 and $20,433 during the three months ended June 30, 2023 and 2022, respectively.

 

The Company recognized compensation expense related to warrants issued of $0 and $20,433 during the six months ended June 30, 2023 and 2022, respectively.

 

NOTE 6 - COLLABORATIVE AGREEMENTS

 

The Company and the University of Toronto (the “University”) entered into an agreement effective April 1, 2014 (the “New Research Agreement”) for the performance of a research project titled “Teneurin C-terminal Associated Peptide (“TCAP”) mediated stress attenuation in vertebrates: Establishing the role of organismal and intracellular energy and glucose regulation and metabolism” (the “New Project”). The New Project is to perform research related to work done by Dr. David A. Lovejoy, a professor at the University and stockholder of the Company, in regard to TCAP mediated stress attenuation in vertebrates: Establishing the role of organismal and intracellular energy and glucose regulation and metabolism. In addition to the New Research Agreement, Dr. Lovejoy entered into an agreement with the University in order to commercialize certain technologies. The New Research Agreement expired on March 30, 2016. In February 2017, the New Research Agreement was extended to December 31, 2017. The extension allowed for further development of the technologies and use of their applications. On April 10, 2018, the agreement was amended and the research agreement has been further extended to December 31, 2023.

 

Prior to January 1, 2016, the University has been granted 6,250 stock options which are fully vested at the exercise price of $4.00 exercisable over a ten year period which ended on April 1, 2022. As of June 30, 2023, Dr. David Lovejoy of the University has been granted 138,325 stock options, of which 106,033 are fully vested and 31,250 have expired. These have an exercise price of $4.00, $5.00 or $7.00 and are exercisable over a period ranging from 10 to 13 years.

 

The sponsorship research and development expenses pertaining to the Research Agreements were $0 and $0 for the three and six months ended June 30, 2023 and 2022, respectively.

 

NOTE 7 - COMMITMENTS AND CONTINGENCIES

 

Licensing Agreements

 

On July 31, 2005, the Company had entered into a Technology License Agreement (“License Agreement”) with the University pursuant to which the University agreed to license to the Company patent rights and other intellectual property, among other things (the “Technologies”). The Technology License Agreement was amended on February 18, 2015 and currently does not provide for an expiration date.

 

Pursuant to the License Agreement and its amendment, the Company obtained an exclusive worldwide license to make, have made, use, sell and import products based upon the Technologies, or to sublicense the Technologies in accordance with the terms of the License Agreement and amendment. In consideration, the Company agreed to pay to the University a royalty payment of 2.5% of net sales of any product based on the Technologies. If the Company elects to sublicense any rights under the License Agreement and amendment, the Company agrees to pay to the University 10% of any up-front sub-license fees for any sub-licenses that occurred on or after September 9, 2006, and, on behalf of the sub-licensee, 2.5% of net sales by the sub-licensee of all products based on the Technologies. The Company had no sales revenue for the three and six months ended June 30, 2023 and 2022 and therefore was not subject to paying any royalties.

 

13

 

 

In the event the Company fails to provide the University with semi-annual reports on the progress or fails to continue to make reasonable commercial efforts towards obtaining regulatory approval for products based on the Technologies, the University may convert our exclusive license into a non-exclusive arrangement. Interest on any amounts owed under the License Agreement and amendment will be at 3% per annum. All intellectual property rights resulting from the Technologies or improvements thereon will remain the property of the other inventors and/or Dr. Lovejoy, and/or the University, as the case may be. The Company has agreed to pay all out-of-pocket filing, prosecution and maintenance expenses in connection with any patents relating to the Technologies. In the case of infringement upon any patents relating to the Technologies, the Company may elect, at its own expense, to bring a cause of action asserting such infringement. In such a case, after deducting any legal expenses the Company may incur, any settlement proceeds will be subject to the 2.5% royalty payment owed to the University under the License Agreement and amendment.

 

The patent applications were made in the name of Dr. Lovejoy and other inventors, but the Company’s exclusive, worldwide rights to such patent applications are included in the License Agreement and its amendment with the University. The Company maintains exclusive licensing agreements and it currently controls the five intellectual patent properties.

 

Legal Proceedings

 

From time to time we may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government actions, administrative actions, investigations or claims are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business and financial condition.

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

The Company is provided free office space consisting of a conference room by the Company Executive Chairman, Dr. Armen. The Company does not pay any rent for the use of this space. This space is used for quarterly board meetings and our annual shareholder meeting.

 

During the year ended December 31, 2021, the Company engaged Agenus Inc., a related party, to perform research and development services. Agenus Inc. is a related party due to the Company’s Director and Chairman of the Board being the CEO and Chairman of the Board for Agenus Inc. As of June 30, 2023 and December 31, 2022, the outstanding balance owed to Agenus Inc. is $255,928 and $105,928, respectively.

 

During the year ended December 31, 2022, the Company engaged CTC North, GmbH (“CTC”) to perform research and development services. CTC is a related party due to the Company’s Director and Chairman of the Board being the CEO and Chairman of the Board for Agenus Inc, CTC’s parent company. The total commitment for this agreement is $1.3 million. The Company incurred $106,754   and $98,801 in expenses related to these services during the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, there is $80,409   and $0 owed to CTC in connection with this agreement, respectively.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q and other written and oral statements we make from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). You can identify these forward-looking statements by the fact they use words such as “could,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe,” “will,” “potential,” “opportunity,” “future” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements relate to, among other things, our business strategy, our research and development, our product development efforts, our ability to commercialize our product candidates, the activities of our licensees, our prospects for initiating partnerships or collaborations, the timing of the introduction of products, the effect of new accounting pronouncements, uncertainty regarding our future operating results and our profitability, anticipated sources of funds as well as our plans, objectives, expectations, and intentions.

 

We have included more detailed descriptions of these risks and uncertainties and other risks and uncertainties applicable to our business that we believe could cause actual results to differ materially from any forward-looking statements in Part II-Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q. We encourage you to read those descriptions carefully. Although we believe we have been prudent in our plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved. We caution investors not to place significant reliance on forward-looking statements contained in this document; such statements need to be evaluated in light of all the information contained in this document. Furthermore, the statements speak only as of the date of this document, and we undertake no obligation to update or revise these statements.

 

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us 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, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described in greater detail below. We base these estimates on historical experience and on various other factors that we believe 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.

 

We expect to continue to incur significant expenses and minimal positive net cash flows from operations or negative net cash flows from operations for the foreseeable future, and those expenses and losses may fluctuate significantly from quarter-to-quarter and year-to-year. We anticipate that our expenses will fluctuate substantially as we:

 

  continue our ongoing preclinical studies, clinical trials and our product development activities for our pipeline of product candidates;
     
  seek regulatory approvals for any product candidates that successfully complete clinical trials;
     
  continue research and preclinical development and initiate clinical trials of our other product candidates;
     
  seek to discover and develop additional product candidates either internally or in partnership with other pharmaceutical companies;
     
  adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;
     
  maintain, expand and protect our intellectual property portfolio; and
     
  incur additional legal, accounting and other expenses in operating as a public company.

 

15

 

 

Overview

 

Our proprietary, patent-protected, first-in-class lead compound, PT00114, is a synthetic form of Teneurin Carboxy-terminal Associated Peptide (“TCAP”), an endogenous brain signaling peptide that can dampen overactive stress responses. Our preclinical models have demonstrated efficacy of PT00114 in animal models of depression, anxiety, substance abuse & addiction, and PTSD.

 

PT00114 leverages a completely novel mechanism of action. Protagenic owns exclusive, worldwide rights to PT00114 through its license agreement with the University of Toronto and has an exclusive right to license additional intellectual property generated by Dr. David Lovejoy’s lab at University of Toronto. Additionally, the company is engaged in the research & development of follow-on compounds in the TCAP family. Extensive publications in peer-reviewed scientific journals underline the central role stress plays in the onset and proliferation of neuropsychiatric disorders like depression, anxiety, substance abuse & addiction, and PTSD. The mechanism of action of TCAP suggests that it counterbalances stress overdrive at the cellular level within the brain’s stress response cascade. TCAP works to alleviate the harmful behavioral, biochemical, and physiological effects of these disorders, while simultaneously restoring brain health. This mechanism has been corroborated in preclinical animal models of the psychiatric disorders listed above. Preclinical experiments required for IND filing have been completed. The Company is in the process of answering regulatory questions in the US and Germany. Based on its interactions to date, consistent with the Company’s disclosures in its recently-filed Form 10-K, the Company anticipates commencing a Phase I/IIa trial in either one or more sites in the US or at a major CRO site in Germany in the third quarter of 2023.

 

Results of Operations

 

We are a development stage company currently performing clinical trials to obtain Food and Drug Administration (“FDA”) approval and commercialization of our product.

 

During the three months ended June 30, 2023, we incurred a loss from operations of $1,143,742 as compared to $636,674 for the three months ended June 30, 2022. The increase in the loss is from an increase in research and development expense of $675,864 from $160,515 for the three months ended June 30, 2022 to $836,379 for the three months ended June 30, 2023 offset by a decrease in general and administrative expenses of $168,796 from $476,159 for the three months ended June 30, 2022 to $307,363 for the three months ended June 30, 2023.

 

During the six months ended June 30, 2023, we incurred a loss from operations of $1,883,036 as compared to $1,977,950 for the six months ended June 30, 2022. The increase in the loss is from an increase in research and development expense of $354,057 from $830,353 for the six months ended June 30, 2022 to $1,184,410 for the six months ended June 30, 2023 offset by a decrease in general and administrative expenses of $448,971 from $1,147,597 for the six months ended June 30, 2022 to $698,626 for the six months ended June 30, 2023.

 

Liquidity and Going Concern

 

We continually project anticipated cash requirements, predominantly from the ongoing funding requirements of our neuropeptide drug development program. The majority of these costs relate to paying external vendors such as Contract Research Organizations, peptide synthesizer companies, and new drug development. As of June 30, 2023, we had cash of $219,435 and working capital of $5,412,136. We anticipate further losses from the development of our business. Based on its cash resources as of June 30, 2023, the Company has sufficient resources to fund its operations at least until the end of the third quarter of 2024. Absent generation of sufficient revenue from the execution of the Company’s business plan, the Company will need to obtain debt or equity financing by the third quarter of 2024. Because of these factors, the Company believes that this alleviates the substantial doubt in connection with the Company’s ability to continue as a going concern.

 

Operating activities used $1,903,576 and $1,277,645 in cash for the six months ended June 30, 2023 and 2022, respectively. The use of cash in operating activities during the six months ended June 30, 2023, primarily comprised of $1,927,687 net loss, $333,414 in stock compensation expense, an increase in prepaid expenses of $817,732, and a $334,790 increase of accounts payable and accrued expenses, which included payments to legal and accounting professionals, payments to consultants, and other administrative expenses.

 

16

 

 

Investing activities provided $1,906,684 and $1,077,679 in cash during the six months ended June 30, 2023 and 2022, respectively. The cash provided by investing activities was from the sale of marketable securities during the six months ended June 30, 2023 and 2022.

 

There was no cash used in or provided by financing activities for the six months ended June 30, 2023 and 2022.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

Evaluation of disclosure controls and procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act), as of June 30, 2023. Based on this evaluation, we have identified material weaknesses in our internal control over financial reporting. Due to material weaknesses, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, including this Quarterly Report on Form 10-Q, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure and controls are not designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Material Weakness in Internal Control Over Financial Reporting

 

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

The material weaknesses we identified are described below:

 

  1) We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
     
  2) Limited level of multiple reviews among those tasked with preparing the financial statements.

 

These material weaknesses could result in a material misstatement to the annual or interim condensed consolidated financial statements that would not be prevented or detected.

 

17

 

 

Remediation Plan

 

To address the material weakness described above the Company has engaged an independent third party to enhance our segregation of duties.

 

Since we remain a small Company, with limited segregation of duties, the third party has identified certain areas where we can layer in added controls and procedures. Management intends to implement such controls and procedures in the future.

 

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met. The design of any system of controls is also based in part on certain assumptions regarding the likelihood of certain events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Given these and other inherent limitations of control systems, these are only reasonable assurances that our controls will succeed in achieving their stated goals under all potential future conditions.

 

Changes in Internal Control over Financial Reporting

 

Other than as discussed above, there were no changes in our internal controls over financial reporting that occurred during the quarter covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Part II: Other Information

 

Item 1. Legal Proceedings

 

From time to time we may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government actions, administrative actions, investigations or claims are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business and financial condition.

 

Item 1A. Risk Factors

 

This Quarterly Report on Form 10-Q contains forward-looking information based on our current expectations. Because our actual results may differ materially from any forward-looking statements made by or on behalf of us, this section includes a discussion of important factors that could affect our actual future results, including our revenues, expenses, operating results, cash flows and net loss per share. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. You should carefully consider these risk factors, together with all of the other information included in this Quarterly Report on Form 10-Q as well as our other publicly available filings with the U.S. Securities and Exchange Commission, or SEC.

 

There have been no material changes to our risk factors from those disclosed under “Risk Factors” in Part I, Item 1A of the 2022 Form 10-K. The risks and uncertainties described in the 2022 Form 10-K are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition, or results of operations.

 

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

18

 

 

Item 6. Exhibits

 

The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

 

Exhibit   Description
     
31.1   Chief Executive Officer Certification as required under section 302 of the Sarbanes Oxley Act (€)
     
31.2   Chief Financial Officer Certification as required under section 302 of the Sarbanes Oxley Act (€)
     
32.1   Chief Executive Officer and Chief Financial Officer Certification pursuant to 18 U.S.C. section 1350 as adopted pursuant to section 906 of the Sarbanes Oxley Act *
     
101.INS   Inline XBRL Instance Document (€)
     
101.CAL   Inline XBRL Taxonomy Extension Schema Document (€)
     
101.SCH   Inline XBRL Taxonomy Extension Calculation Linkbase Document (€)
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document (€)
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document (€)
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document (€)
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

(€) - Filed herewith.

(*) -Furnished, not filed, in accordance with item 601(32)(ii) of Regulation S-K.

 

19

 

 

SIGNATURES

 

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

August 14, 2023 Protagenic Therapeutics, Inc.
     
  By: /s/ Alexander K. Arrow
    Chief Financial Officer

 

20

 

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

I, Garo H. Armen, PhD, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Protagenic Therapeutics, Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

August 14, 2023   /s/ Garo H. Armen
  Name: Garo H. Armen, Ph.D.
  Title: Executive Chairman

 

 

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO RULE 13a-14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

I, Alexander K. Arrow, MD, certify that:

 

  1. I have reviewed this quarterly report on Form 10-Q of Protagenic Therapeutics, Inc.;
     
  2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
  3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
  4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

  5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

August 14, 2023   /s/ Alexander K. Arrow
  Name: Alexander K. Arrow, MD
  Title: Chief Financial Officer

 

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Protagenic Therapeutics, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Garo H. Armen, Executive Chairman, and Alexander K. Arrow, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
   
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

August 14, 2023 By:

/s/ Garo H. Armen

    Garo H. Armen, PhD
    Executive Chairman
    (Principal Executive Officer)

 

August 14, 2023 By:

/s/ Alexander K. Arrow

    Alexander K. Arrow, MD, CFA
    Chief Financial Officer
    (Principal Financial Officer)

 

 
v3.23.2
Cover - shares
6 Months Ended
Jun. 30, 2023
Aug. 11, 2023
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2023  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2023  
Current Fiscal Year End Date --12-31  
Entity File Number 001-12555  
Entity Registrant Name Protagenic Therapeutics, Inc.new  
Entity Central Index Key 0001022899  
Entity Tax Identification Number 06-1390025  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 149 Fifth Avenue  
Entity Address, Address Line Two Suite 500  
Entity Address, City or Town New York  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10010  
City Area Code (212)  
Local Phone Number 994-8200  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   4,330,959
Common Stock [Member]    
Title of 12(b) Security Common Stock, par value $0.0001  
Trading Symbol PTIX  
Security Exchange Name NASDAQ  
Common Stock Purchase Warrant [Member]    
Title of 12(b) Security Common Stock Purchase Warrant  
Trading Symbol PTIXW  
Security Exchange Name NASDAQ  
v3.23.2
Consolidated Balance Sheets - USD ($)
Jun. 30, 2023
Dec. 31, 2022
CURRENT ASSETS    
Cash $ 219,435 $ 215,189
Marketable securities 5,823,420 7,763,517
Prepaid expenses 874,671 56,939
TOTAL CURRENT ASSETS 6,917,526 8,035,645
Equipment - net 1,595 1,775
TOTAL ASSETS 6,919,121 8,037,420
CURRENT LIABILITIES    
TOTAL CURRENT LIABILITIES 1,505,390 1,119,862
TOTAL LIABILITIES 1,505,390 1,119,862
STOCKHOLDERS’ EQUITY    
Common stock, $.0001 par value, 100,000,000 shares authorized, 4,330,959 and 4,321,315 shares issued and outstanding at June 30, 2023, and December 31, 2022 434 434
Additional paid-in-capital 33,704,820 33,371,406
Accumulated deficit (27,705,062) (25,777,375)
Accumulated other comprehensive loss (586,461) (676,907)
TOTAL STOCKHOLDERS’ EQUITY 5,413,731 6,917,558
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 6,919,121 8,037,420
Preferred Stock [Member]    
STOCKHOLDERS’ EQUITY    
Preferred stock, value
Series B Convertible Preferred Stock [Member]    
STOCKHOLDERS’ EQUITY    
Preferred stock, value
Nonrelated Party [Member]    
CURRENT LIABILITIES    
Accounts payable and accrued expenses 774,744 669,704
PIK convertible notes payable, net of debt discount 196,956 150,591
Related Party [Member]    
CURRENT LIABILITIES    
Accounts payable and accrued expenses 336,337 105,928
PIK convertible notes payable, net of debt discount $ 197,353 $ 193,639
v3.23.2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2023
Dec. 31, 2022
Preferred stock, par value $ 0.000001 $ 0.000001
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 4,330,959 4,321,315
Common stock, shares outstanding 4,330,959 4,321,315
Series B Convertible Preferred Stock [Member]    
Preferred stock, par value $ 0.000001 $ 0.000001
Preferred stock, shares authorized 18,000,000 18,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Preferred Stock [Member]    
Preferred stock, par value $ 0.000001 $ 0.000001
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
v3.23.2
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
Jun. 30, 2023
Jun. 30, 2022
OPERATING AND ADMINISTRATIVE EXPENSES        
Research and development $ 836,379 $ 160,515 $ 1,184,410 $ 830,353
General and administrative 307,363 476,159 698,626 1,147,597
TOTAL OPERATING AND ADMINISTRATIVE EXPENSES 1,143,742 636,674 1,883,036 1,977,950
LOSS FROM OPERATIONS (1,143,742) (636,674) (1,883,036) (1,977,950)
OTHER (EXPENSE) INCOME        
Interest income 84,708 32,900 141,601 50,867
Interest expense (31,610) (39,697) (62,873) (73,541)
Realized loss on marketable securities (118,947) (23,246) (123,379) (28,202)
TOTAL OTHER INCOME (EXPENSES) (65,849) (30,043) (44,651) (50,876)
LOSS BEFORE TAX (1,209,591) (666,717) (1,927,687) (2,028,826)
INCOME TAX EXPENSE
NET LOSS (1,209,591) (666,717) (1,927,687) (2,028,826)
Other Comprehensive Loss - net of tax        
Net unrealized gain (loss) on marketable securities 42,289 (43,417) 89,966 (194,587)
Foreign exchange translation income (loss) 13 (6,903) 480 (6,743)
TOTAL COMPREHENSIVE LOSS $ (1,167,289) $ (717,037) $ (1,837,241) $ (2,230,156)
Net loss per common share - Basic $ (0.28) $ (0.15) $ (0.45) $ (0.47)
Net loss per common share - Diluted $ (0.28) $ (0.15) $ (0.45) $ (0.47)
Weighted average common shares - Basic 4,330,959 4,320,173 4,326,673 4,314,359
Weighted average common shares - Diluted 4,330,959 4,320,173 4,326,673 4,314,359
v3.23.2
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
Series B Convertible Preferred Stock [Member]
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Total
Balance at Dec. 31, 2021 $ 432 $ 32,411,742 $ (22,221,870) $ (248,349) $ 9,941,955
Balance, shares at Dec. 31, 2021 4,302,403        
Foreign currency translation gain (loss) 160 160
Unrealized gain on marketable securities (151,170) (151,170)
Stock compensation - stock options 215,346 215,346
Stock compensation - warrants 20,433 20,433
Conversion of notes and interest $ 1 54,967 54,968
Conversion of notes and interest, shares   10,917        
Net loss (1,362,109) (1,362,109)
Balance at Mar. 31, 2022 $ 433 32,702,488 (23,583,979) (399,359) 8,719,583
Balance, shares at Mar. 31, 2022 4,313,320        
Balance at Dec. 31, 2021 $ 432 32,411,742 (22,221,870) (248,349) 9,941,955
Balance, shares at Dec. 31, 2021 4,302,403        
Net loss           (2,028,826)
Balance at Jun. 30, 2022 $ 434 32,958,039 (24,250,696) (449,679) 8,258,098
Balance, shares at Jun. 30, 2022 4,321,315        
Balance at Mar. 31, 2022 $ 433 32,702,488 (23,583,979) (399,359) 8,719,583
Balance, shares at Mar. 31, 2022 4,313,320        
Foreign currency translation gain (loss) (6,903) (6,903)
Unrealized gain on marketable securities (43,417) (43,417)
Stock compensation - stock options 215,535 215,535
Conversion of notes and interest $ 1 40,016 40,017
Conversion of notes and interest, shares   7,995        
Net loss (666,717) (666,717)
Balance at Jun. 30, 2022 $ 434 32,958,039 (24,250,696) (449,679) 8,258,098
Balance, shares at Jun. 30, 2022 4,321,315        
Balance at Dec. 31, 2022 $ 434 33,371,406 (25,777,375) (676,907) 6,917,558
Balance, shares at Dec. 31, 2022   4,321,315        
Foreign currency translation gain (loss) 467 467
Unrealized gain on marketable securities 47,677 47,677
Stock compensation - stock options 166,707 166,707
Net loss (718,096) (718,096)
Rounding from reverse split
Rounding from reverse split, shares   9,644        
Balance at Mar. 31, 2023 $ 434 33,538,113 (26,495,471) (628,763) 6,414,313
Balance, shares at Mar. 31, 2023 4,330,959        
Balance at Dec. 31, 2022 $ 434 33,371,406 (25,777,375) (676,907) 6,917,558
Balance, shares at Dec. 31, 2022   4,321,315        
Net loss           (1,927,687)
Rounding from reverse split, shares   9,644        
Balance at Jun. 30, 2023 $ 434 33,704,820 (27,705,062) (586,461) 5,413,731
Balance, shares at Jun. 30, 2023 4,330,959        
Balance at Mar. 31, 2023 $ 434 33,538,113 (26,495,471) (628,763) 6,414,313
Balance, shares at Mar. 31, 2023 4,330,959        
Foreign currency translation gain (loss) 13 13
Unrealized gain on marketable securities 42,289 42,289
Stock compensation - stock options 166,707 166,707
Net loss (1,209,591) (1,209,591)
Balance at Jun. 30, 2023 $ 434 $ 33,704,820 $ (27,705,062) $ (586,461) $ 5,413,731
Balance, shares at Jun. 30, 2023 4,330,959        
v3.23.2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2023
Jun. 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES    
Net Loss $ (1,927,687) $ (2,028,826)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation expense 181
Stock-based compensation 333,414 451,314
Realized loss on sale of marketable securities 123,379 28,202
Amortization of debt discount 50,079 59,888
Changes in operating assets and liabilities    
Prepaid expenses (817,732) 542,441
Accounts payable and accrued expenses 334,790 (330,664)
NET CASH USED IN OPERATING ACTIVITIES (1,903,576) (1,277,645)
CASH FLOWS FROM INVESTING ACTIVITIES    
Proceeds from sale of marketable securities 1,906,684 1,077,679
NET CASH PROVIDED BY INVESTING ACTIVITIES 1,906,684 1,077,679
Effect of exchange rate changes on cash 1,138 (2,539)
NET CHANGE IN CASH 4,246 (202,505)
CASH, BEGINNING OF THE PERIOD 215,189 541,171
CASH, END OF THE PERIOD 219,435 338,666
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION    
Cash paid for interest expense
Cash paid for income taxes
NONCASH FINANCING AND INVESTING TRANSACTIONS    
Shares issued for conversion of notes and interest 94,985
Unrealized gain or loss on marketable securities $ 89,966 $ 194,587