0001493152-21-011799.txt : 20210517 0001493152-21-011799.hdr.sgml : 20210517 20210517153324 ACCESSION NUMBER: 0001493152-21-011799 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20210331 FILED AS OF DATE: 20210517 DATE AS OF CHANGE: 20210517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Protagenic Therapeutics, Inc.\new CENTRAL INDEX KEY: 0001022899 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 061390025 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12555 FILM NUMBER: 21929895 BUSINESS ADDRESS: STREET 1: 149 FIFTH AVENUE STREET 2: SUITE 500 CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: (212) 994-8200 MAIL ADDRESS: STREET 1: 149 FIFTH AVENUE STREET 2: SUITE 500 CITY: NEW YORK STATE: NY ZIP: 10010 FORMER COMPANY: FORMER CONFORMED NAME: Atrinsic, Inc. DATE OF NAME CHANGE: 20090630 FORMER COMPANY: FORMER CONFORMED NAME: NEW MOTION, INC. DATE OF NAME CHANGE: 20070504 FORMER COMPANY: FORMER CONFORMED NAME: MPLC, Inc. DATE OF NAME CHANGE: 20050608 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2021

 

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: 000-51353

 

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 [X] 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 [X] 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 [X] Smaller reporting company [X]
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 [X] No

 

As of May 14, 2021 there were 14,643,780 shares of common stock outstanding.

 

 

 

 

 

 

PROTAGENIC THERAPEUTICS, INC.

Form 10-Q Report

For the Fiscal Quarter Ended March 31, 2021

TABLE OF CONTENTS

 

    Page
Part I. Financial Information  
     
Item 1 Financial Statements:  
     
  Consolidated Balance Sheets at March 31, 2021 (unaudited) and December 31, 2020 3
     
  Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020 (unaudited) 4
     
  Consolidated Statements of Changes in Stockholders’ Deficit for the three months ended March 31, 2021 and 2020 (unaudited) 5
     
  Consolidated Statements of Cash Flows for three months ended March 31, 2021 and 2020 (unaudited) 6
     
  Notes to Consolidated Financial Statements (unaudited) 7
     
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
     
Item 3 Quantitative and Qualitative Disclosures about Market Risk 19
     
Item 4 Controls and Procedures 19
     
Part II. Other Information  
     
Item 1 Legal Proceedings 20
     
Item 1A Risk Factors 20
     
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 20
     
Item 3 Defaults upon Senior Securities 21
     
Item 4 Mine Safety Disclosures 21
     
Item 5 Other Information 21
     
Item 6 Exhibits 21
     
Signatures 22

 

2 

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   March 31,   December 31, 
   2021   2020 
ASSETS          
           
CURRENT ASSETS          
           
Cash  $191,674   $671,091 
Prepaid expenses   4,468    208,156 
           
TOTAL CURRENT ASSETS   196,142    879,247 
           
TOTAL ASSETS  $196,142   $879,247 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
CURRENT LIABILITIES          
           
Accounts payable and accrued expenses  $650,968   $571,517 
Derivative liability   -    83,670 
           
TOTAL CURRENT LIABILITIES   650,968    655,187 
           
Note Payable   100,000    - 
PIK convertible notes payable, net of debt discount   1,126,048    1,081,384 
PIK convertible notes payable, net of debt discount - related parties   301,723    292,412 
           
TOTAL LIABILITIES   2,178,739    2,028,983 
           
STOCKHOLDERS’ DEFICIT          
Preferred stock, $0.000001 par value; 20,000,000 shares authorized; 872,766 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;          
872,766 shares issued and outstanding at March 31, 2021, and December 31, 2020   1    1 
Common stock, $.0001 par value, 100,000,000 shares authorized, 10,610,603 and 10,360,480 shares issued and outstanding at March 31, 2021, and December 31, 2020   1,061    1,036 
Additional paid-in-capital   17,092,824    16,719,749 
Accumulated deficit   (18,905,388)   (17,698,936)
Accumulated other comprehensive loss   (171,095)   (171,586)
           
TOTAL STOCKHOLDERS’ DEFICIT   (1,982,597)   (1,149,736)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $196,142   $879,247 

 

See accompanying notes to the unaudited consolidated financial statements

 

3 

 

 

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

   For the three months ended March 31, 
   2021   2020 
OPERATING AND ADMINISTRATIVE EXPENSES          
Research and development   592,351    65,959 
General and administrative   613,839    454,777 
           
TOTAL OPERATING AND ADMINISTRATIVE EXPENSES   1,206,190    520,736 
           
LOSS FROM OPERATIONS   (1,206,190)   (520,736)
           
OTHER (EXPENSE) INCOME          
           
Interest income   5    384 
Interest expense   (83,937)   (38,986)
Change in fair value of derivative liability   83,670    60,749 
           
TOTAL OTHER INCOME (EXPENSES)   (262)   22,147 
           
LOSS BEFORE INCOME TAX   (1,206,452)   (498,589)
           
INCOME TAX EXPENSE   -    - 
           
NET LOSS  $(1,206,452)  $(498,589)
           
COMPREHENSIVE LOSS          
           
Other Comprehensive Loss - net of tax          
Foreign exchange translation gain (loss)   491    (2,419)
           
TOTAL COMPREHENSIVE LOSS  $(1,205,961)  $(501,008)
           
Net loss per common share - Basic and Diluted  $(0.11)  $(0.05)
           
Weighted average common shares - Basic and Diluted   10,520,484    10,261,419 

 

See accompanying notes to the unaudited consolidated financial statements

 

4 

 

  

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three Months Ended March 31, 2021 and 2020

(Unaudited)

  

   Series B Convertible           Additional       Accumulated Other     
   Preferred Stock   Common Stock   Paid-in-   Accumulated   Comprehensive   Stockholders’ 
   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Deficit 
                                 
For the three months ended March 31, 2020                                        
                                         
BALANCE -December 31, 2019   872,766   $1    10,261,419   $1,026   $14,687,172   $(15,150,201)  $(172,364)  $(634,366)
                                         
Foreign currency translation loss   -    -    -    -    -    -    (2,419)   (2,419)
Stock compensation - stock options   -    -    -    -    360,436    -    -    360,436 
Debt discount from beneficial conversion feature   -    -    -    -    89,204    -    -    89,204 
Issuance of options for settlement of accrued payroll   -    -    -    -    93,950    -    -    93,950 
Modification of warrants   -    -    -    -    5,861    -    -    5,861 
                                         
Net loss   -    -    -    -    -    (498,589)   -    (498,589)
                                         
BALANCE -March 31, 2020   872,766   $1    10,261,419   $1,026   $15,236,623   $(15,648,790)  $(174,783)  $(585,923)
                                         
For the three months ended March 31, 2021                                        
                                         
BALANCE -December 31, 2020   872,766   $1    10,360,480   $1,036   $16,719,749   $(17,698,936)  $(171,586)  $(1,149,736)
                                         
Foreign currency translation loss   -    -    -    -    -    -    491    491 
Stock compensation - stock options   -    -    -    -    345,975    -    -    345,975 
Exercise of options   -    -    10,000    1    (1)   -    -    - 
Exercise of warrants   -    -    240,123    24    27,101    -    -    27,125 
                                         
Net loss   -    -    -    -    -    (1,206,452)   -    (1,206,452)
                                         
BALANCE -March 31, 2021   872,766   $1    10,610,603   $1,061   $17,092,824   $(18,905,388)  $(171,095)  $(1,982,597)

 

See accompanying notes to the unaudited consolidated financial statements

 

5 

 

 

PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   For the three months ended March 31, 
   2021   2020 
         
CASH FLOWS FROM OPERATING ACTIVITIES          
Net Loss  $(1,206,452)  $(498,589)
Adjustments to reconcile net loss to net cash used in operating activities          
Depreciation expense   -    84 
Stock based compensation   345,975    360,436 
Change in fair value of the derivative liability   (83,670)   (60,749)
Amortization of debt discount   53,975    27,357 
Loss on settlement of accounts payable   -    5,861 
Changes in operating assets and liabilities          
Prepaid expenses   203,688    11,669 
Accounts payable and accrued expenses   78,777    (210,475)
           
NET CASH USED IN OPERATING ACTIVITIES   (607,707)   (364,406)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
           
Exercise of warrants for cash   27,125    - 
Proceeds from notes payable   100,000    - 
Proceeds from convertible notes   -    330,000 
           
NET CASH PROVIDED BY FINANCING ACTIVITIES   127,125    330,000 
           
Effect of exchange rate on cash   1,165    (10,245)
           
NET DECREASE IN CASH   (479,417)   (44,651)
           
CASH, BEGINNING OF YEAR   671,091    798,623 
           
CASH, END OF YEAR  $191,674   $753,972 
           
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION          
Cash paid for interest expense  $-   $- 
Cash paid for income taxes  $-   $- 
           
NONCASH FINANCING AND INVESTING TRANSACTIONS          
Debt discount from beneficial conversion feature  $-   $89,204 
Issuance of options for settlement of accounts payable  $-   $93,950 

 

See accompanying notes to the unaudited consolidated financial statements


 

6 

 

 

PROTAGENIC THERAPEUTICS, INC & SUBSIDIARY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2021

 

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

Company Background

 

Protagenic Therapeutics, Inc. (“we,” “our,” “Protagenic” or “the Company”), 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.

 

The Company was previously known as Atrinsic, Inc., a company that was once a reporting company under the Securities Exchange Act of 1934, but that, in 2012 and 2013, reorganized under Chapter 11 of the United States Bankruptcy Code and emerged from bankruptcy. On February 12, 2016, the Company acquired Protagenic Therapeutics, Inc. (“Prior Protagenic”) through a reverse merger.

 

On February 12, 2016, Protagenic Acquisition Corp., a wholly-owned subsidiary of the Company, merged (the “Merger”) with and into Prior Protagenic. Prior Protagenic was the surviving corporation of the Merger. As a result of the Merger, the Company acquired the business of Prior Protagenic and has continued the existing business operations of Prior Protagenic as a wholly-owned subsidiary. On June 17, 2016, Prior Protagenic merged with and into the Company with the Company as the surviving corporation in the merger. Immediately thereafter, the Company changed its name from Atrinsic, Inc. to Protagenic Therapeutics, Inc.

 

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 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 as of March 31, 2021, the Company has sufficient resources to fund its operations only through May 2021. However, based on cash resources that it received in April 2021 as a consequence of an equity offering, together with its current forecast and budget, management believes that its cash resources will be sufficient to fund its operations at least until the end of the third quarter of 2023. Absent generation of sufficient revenue from the execution of the Company’s business plan and sales revenue is not anticipated before 2024, the Company will need to obtain debt or equity financing by the third quarter of 2023. 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.

 

NOTE 3 - SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC” for interim financial information. In the opinion of the Company’s management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended March 31, 2021 and 2020. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

 

7 

 

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2020, which contain the audited financial statements and notes thereto, for the years ended December 31, 2020 and 2019 included within the Company’s Form 10-K filed with the SEC on March 25, 2021. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

 

Principles of consolidation

 

The condensed 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 in the condensed consolidated financial statements.

 

Reclassifications:

 

Reclassifications of prior periods have been made to conform with current year presentation

 

Use of estimates

 

The preparation of condensed 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 condensed consolidated financial statements include income tax provisions, valuation of stock options and warrants and assessment of deferred tax asset valuation allowance.

 

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. 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.

 

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 March 31, 2021 and December 31, 2020, the Company did not have any cash equivalents.

 

8 

 

 

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.

 

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. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.

 

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 March 31, 2021.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $     $     $     $     $  

 

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of December 31, 2020.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $ 83,670     $     $     $ 83,670     $ 83,670  

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2021 and the year ended December 31, 2020:

 

   

Fair Value Measurement

Using Level 3

 
    Inputs Total  
Balance, December 31, 2020   $ 83,670  
Change in fair value of derivative warrants liabilities     (83,670 )
Balance, March 31, 2021   $ -  

 

9 

 

 

The fair value of the derivative feature of the 127,346 and 295,945 warrants issued to the placement agent of the Company’s 2016 private offering (the “2016 Offering”) and to a holder of its debt for debt cancellation in connection with the Merger, respectively on the issuance dates and at the balance sheet dates were calculated using a Black-Scholes option model valued with the following assumptions:

 

   December 31, 2020 
Exercise price   1.25 
Risk free interest rate   0.09%
Dividend yield   0.00%
Expected volatility   169%
Contractual term   0.14 Years 

 

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar expected term on the date of measurement.

 

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

 

Volatility: The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the warrants’ expected term.

 

Expected term: The Company’s expected term is based on the remaining contractual maturity of the warrants.

 

During the three months ended March 31, 2021 and 2020, the Company marked the derivative feature of the warrants to fair value and recorded a gain of $83,670 and a gain of $60,749 relating to the change in fair value, respectively. The warrants expired on February 21, 2021, resulting in the elimination of the derivative liability.

 

Derivative Liability

 

The Company evaluates its options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4 and 815-40-25. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the condensed consolidated statements of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 

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 canceled during the periods reported.

 

10 

 

 

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 condensed consolidated statements of operations.

 

   Potentially Outstanding
Dilutive Common Shares
 
   For the Three Months Ended March 31, 2021   For the Three Months Ended March 31, 2020 
         
Conversion Feature Shares          
           
Common shares issuable under the conversion feature of preferred shares   872,766    872,766 
           
Stock Options   5,673,861    3,925,682 
           
Warrants   3,483,767    3,826,658 
           
Convertible Notes   1,598,000    800,000 
           
Total potentially outstanding dilutive common shares   11,628,394    9,425,106 

 

Research and Development

 

Research and development expenses are charged to operations as incurred.

 

Foreign Currency Translation

 

The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) 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. Section 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 Section 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.

 

11 

 

 

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 income (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

 

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

 

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following at:

 

   March 31, 2021   December 31, 2020 
         
Accounting  $36,161   $36,161 
Research and development   381,062    393,496 
Other   233,745    141,860 
           
Total  $650,968   $571,517 

 

On October 1, 2019, the Company entered into an agreement with a consultant for toxicology studies. The consultant quoted a commitment of approximately $988,000 as an estimate for the study. 50% of the total price was paid upon the signing of the agreement, 35% of the total price is to be paid upon completion of the in-life study, and the remaining 15% of the total price is to be paid upon the issuance of the report. If the Company cancels the study the Company will be required to pay a cancelation fee. If the cancelation happens prior to the arrival of the test animals then the Company will need to pay between 20% and 50% of the animal fees depending on when the cancellation happens. If the cancellation occurs after the animals arrive but before the study begins then the Company will be responsible for paying 50% of the protocol price plus a fee of $7,000 per room/week for animal husbandry until the animals can be relocated or disposed of. If the Company cancels the study after it has begun then the Company will need to pay any fees for procured items for the study and any nonrecoverable expenses incurred by the consultant. As of March 31, 2021 and December 31, 2020, the Company has paid $174,106 and $174,106 to the consultant and there is a balance of $319,799 and $319,799 due, respectively.

 

12 

 

 

NOTE 5 – NOTE PAYABLE AND CONVERTIBLE NOTE PAYABLE (PIK NOTES)

 

Note Payable

 

On March 1, 2021, the Company entered into a $100,000 promissory note. This note is due on February 28, 2026 and accrues interest at a rate of 5% per annum or 7.5% per annum in the case of default. In the event that the Company completes a financing of no less than $7.5 million, then the note holder will be issued warrants valued at $25,000 with an exercise price equal to 110% of the offering cost of the common stock in the financing. These warrants will have a term of five years.

 

As of March 31, 2021 and December 31, 2020, the Company owes $100,000 and $0 on the outstanding Note, respectively.

 

Convertible Notes Payable

 

During the three months ended March 31, 2021 and 2020, the Company amortized $44,664 and $17,943 of the debt discount, respectively. At March 31, 2021 and December 31, 2020, the Company had an unamortized debt discount of $471,452 and $516,116, respectively.

 

As of March 31, 2021 and December 31, 2020, the Company owes $1,597,500 and $1,597,500 on the outstanding Convertible Notes, respectively.

 

Maturity Date of Notes for Twelve Months Ending March 31, 2021,  Amount due 
2022  $- 
2023   - 
2024   1,597,500 
2025   - 
2026   100,000 
Total  $1,697,500 

 

Convertible Notes Payable – Related Parties

 

During the three months ended March 31, 2021 and 2020, the Company amortized $9,311 and $9,414 of the debt discount, respectively. At March 31, 2021 and December 31, 2020, the Company had an unamortized debt discount of $98,277 and $107,588, respectively.

 

As of March 31, 2021 and December 31, 2020, the Company owes $400,000 and $400,000 on the outstanding Convertible Notes, respectively.

 

13 

 

 

Maturity Date of Notes for Twelve Months Ending March 31, 2021,  Amount due 
2022  $- 
2023   - 
2024   400,000 
2025   - 
2026   - 
Total  $400,000 

 

NOTE 6 - STOCKHOLDERS’ DEFICIT

 

Stock-Based Compensation

 

In connection with the consummation of the Merger completed on February 12, 2016, we adopted Prior Protagenic’s 2006 Employee, Director and Consultant Stock Plan (the “2006 Plan”). On June 17, 2016, our stockholders adopted the 2016 Plan and, as a result, we terminated the 2006 Plan. We will not grant any further awards under the 2006 Plan. All outstanding grants under the 2006 Plan will continue in effect in accordance with the terms of the particular grant and the 2006 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. On each of January 1, 2017, January 1, 2019 and January 1, 2020, pursuant to an annual “evergreen” provision contained in the 2016 Plan, the number of shares reserved for future grants was increased by 564,378 shares, or a total of 1,693,134 shares. As a result of these increases, as of March 31, 2021 and December 31, 2020, the aggregate number of shares of common stock available for awards under the 2016 Plan was 4,868,623 shares and 4,868,623 shares, respectively. Options issued under the 2016 Plan are exercisable for up to ten years from the date of issuance.

 

There were 5,673,861 options outstanding as of March 31, 2021. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 

Exercise price  $5.60 
Expected dividend yield   0%
Risk free interest rate   0.81%-1.54 % 
Expected life in years   5-10 
Expected volatility   149%-158 % 

 

There were 5,597,861 options outstanding as of December 31, 2020. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 

Exercise price  $1.75 
Expected dividend yield   0%
Risk free interest rate   0.64%-1.61 % 
Expected life in years   10 
Expected volatility   140%-146 % 

 

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, 2020   5,597,861   $1.47    6.48 
Granted   366,000   $5.60    9.69 
Expired   (280,000)  $1.00    - 
Exercised   (10,000)  $1.00    - 
Outstanding March 31, 2021   5,673,861   $1.76    6.78 

 

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A summary of the status of the Company’s nonvested options as of March 31, 2021, and changes during the three months ended March 31, 2021, is presented below:

 

Nonvested Options  Options  

Weighted-

Average
Exercise Price

 
Nonvested at December 31, 2020   862,833   $1.75 
Granted   366,000   $5.60 
Vested   (106,291)  $4.70 
Forfeited   -   $- 
Nonvested at March 31, 2021   1,122,542   $2.93 

 

As of March 31, 2021, the Company had 5,673,861 shares issuable under options outstanding at a weighted average exercise price of $1.76 and an intrinsic value of $23,025,089.

 

The total number of options granted during the three months ended March 31, 2021 and 2020 was 366,000 and 1,387,497, respectively. The exercise price for these options was $5.60 per share.

 

The Company recognized compensation expense related to options issued of $345,975 and $360,436 during the three months ended March 31, 2021 and 2020, respectively, in which $344,499 and $325,794 is included in general and administrative expenses and $1,476 and $34,641 in research and development expenses, respectively. For the three months ended March 31, 2021, $136,203 of the stock compensation was related to employees and $209,772 was related to non-employees.

 

As of March 31, 2021, the unamortized stock option expense was $2,778,726 with $397,760 being related to employees and $2,380,966 being related to non-employees. As of March 31, 2021, the weighted average period for the unamortized stock compensation to be recognized is 3.50 years.

 

On February 25, 2021, the Company issued a total of 366,000 options to purchase shares of the Company’s common stock to five individuals, with 350,000 of these options being issued to related parties. These options had a grant date fair value of $2,009,063. These options have an exercise price of $5.60. 16,000 of the options vest immediately and 350,000 of the options vest monthly over 48 months. These options were approved by the board of directors on February 25, 2021.

 

During the three months ended March 31, 2021, 10,000 options were exercised for 10,000 shares of the Company’s common stock. These options had an exercise price of $1.00.

 

15 

 

  

Warrants:

 

A summary of warrant issuances are as follows:

 

      

Weighted

Average

  

Weighted

Average

 
   Number   Exercise Price   Remaining Life 
Warrants               
                
Outstanding December 31, 2020   4,007,058   $1.06    1.86 
Expired   (150,249)   1.25    - 
Exercised   (373,042)   1.25    - 
Outstanding March 31, 2021   3,483,767   $1.03    1.85 

 

As of March 31, 2021, the Company had 3,483,767 shares issuable under warrants outstanding at a weighted average exercise price of $1.03 and an intrinsic value of $16,684,157.

 

During the three months ended March 31, 2021, 373,042 warrants were exercised for 240,123 shares of the Company’s common stock. The Company received $27,125 from these exercises.

 

NOTE 7 - 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 25,000 stock options which are fully vested at the exercise price of $1.00 exercisable over a ten year period which ends on April 1, 2022. As of March 31, 2021, Dr. David Lovejoy of the University has been granted 553,299 stock options, of which 431,112 are fully vested and 100,000 have expired. These have an exercise price of $1.00, $1.25 or 1.75 and are exercisable over ten or thirteen year periods which end either on March 30, 2021, December 1, 2022, April 15, 2026, March 1, 2027, October 16, 2027 or on February 13, 2030.

 

The sponsorship research and development expenses pertaining to the Research Agreements were $0 and $0 for the three months ended March 31, 2021 and 2020, respectively.

 

NOTE 8 - 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 months ended March 31, 2021 and 2020 and therefore was not subject to paying any royalties.

 

16 

 

 

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 9 – 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.

 

On February 25, 2021, the Company issued 366,000 options to purchase common stock to 5 individuals, with 350,000 of those options going to related parties. These options had an exercise price of $5.60 and a term of 5 or 10 years. (See Note 6)

 

NOTE 10- SUBSEQUENT EVENTS

 

Subsequent to the period, the Company issued 493,177 shares of the Company’s common stock for the net exercise of 695,137 warrants. 231,277 of these shares of common stock were issued to a related party.

 

Subsequent to the period, the Company issued 360,000 shares of the Company’s common stock for the exercise of 360,000 options. The Company received proceeds of $532,500 from the exercise.

 

On April, 29, 2021, the Company completed a public offering (“the Offering”) to sell aggregate of 3,180,000 shares of the Company’s common stock together with warrants to purchase an aggregate of 3,180,000 shares of common stock. The Company also granted the underwriters a 45-day option to purchase up to an additional 477,000 shares of Common Stock (the “Option Shares”) and/or warrants to purchase an aggregate of 477,000 shares of Common Stock at the same price. Net proceeds from the Offering were approximately $11.4 million (excluding any sale of the Option Shares), after deducting underwriting discounts and commissions and public offering expenses payable by the Company.

 

17 

 

 

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.

 

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 March 31, 2021, we incurred a loss from operations of $1,206,190 as compared to $520,736 for the three months ended March 31, 2020. The increase in the loss is due to an increase in research and development expense of $526,392 from $65,959 for the three months ended March 31, 2020 to $592,351 for the three months ended March 31 2021, and by an increase in general and administrative expenses of $159,062 from $454,777 for the three months ended March 31, 2020 to $613,839 for the three months ended March 31, 2021.

 

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 expenses relate to paying external vendors such as Contract Research Organizations and peptide synthesizer companies. These expenses could also include business combinations, capital expenditures, and new drug development working capital requirements. As of March 31, 2021, we had cash of $191,674 and working capital of $454,826. We anticipate further losses from the development of our business. Based on its cash resources as of March 31, 2021, the Company has sufficient resources to fund its operations only through May 2021. However, based on cash resources that it received in April 2021 as a consequence of an equity offering, together with its current forecast and budget, management believes that the Company’s cash resources will be sufficient to fund its operations at least until the end of the third quarter of 2023. 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 2023. Because of these factors, the Company believes that this alleviates substantial doubt in connection with the Company’s ability to continue as a going concern.

 

18 

 

 

Operating activities used $607,707 and $364,406 in cash for the three months ended March 31, 2021 and 2020, respectively. The use of cash in operating activities during the three months ended March 31, 2021, primarily comprised of $1,206,452 net loss, $345,975 in stock compensation expense, $83,670 of change in the fair value of the derivative liability since December 31, 2020, a decrease in prepaid expenses of $203,688, and a $78,777 increase of accounts payable and accrued expenses, which included payments to tax penalties, legal and accounting professionals, payments to consultants, and other administrative expenses.

 

Investing activities provided $0 and $0 in cash for the three months ended March 31, 2021 and 2020, respectively.

 

Financing activities provided $127,125 and $330,000 in cash the three months ended March 31, 2021 and 2020. The cash provided by operations came from proceeds from notes payable of $100,000 and exercise of warrants of $27,125.

 

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 March 31 2021. Based on this evaluation, we have identified a material weakness in our internal control over financial reporting. Due to this material weakness, 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 weakness we identified is 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.

 

19 

 

 

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

 

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 2020 Form 10-K. The risks and uncertainties described below and in the 2020 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

 

During the three months ended March 31, 2021, 10,000 options were exercised for 10,000 shares of the Company’s common stock.

 

During the three months ended March 31, 2021, 373,042 warrants were exercised for 240,123 shares of the Company’s common stock. The Company received $27,125 from these exercises.

 

20 

 

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

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
     

10.1

 

5.00% Promissory Note

     
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   XBRL Instance Document (€)
     
101.CAL   XBRL Taxonomy Extension Schema Document (€)
     
101.SCH   XBRL Taxonomy Extension Calculation Linkbase Document (€)
     
101.LAB   XBRL Taxonomy Extension Label Linkbase Document (€)
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document (€)
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document (€)

 

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

 

21 

 

 

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.

 

May 17, 2021 Protagenic Therapeutics, Inc.
   
  By: /s/ Alexander K. Arrow
    Chief Financial Officer

 

22 

 

EX-10.1 2 ex10-1.htm

 

Exhibit 10.1

 

PROMISSORY NOTE

 

$100,000.00 March 1, 2021

 

For value received, PROTAGENIC THERAPEUTICS, INC., a Delaware corporation (the “Borrower”), promises to pay to PATRICE MCNICOLL, an individual, or his assigns (the “Holder”), the principal sum of $100,000.00 (U.S. Dollars), together with all accrued and unpaid interest thereon as set forth below. Except as otherwise set forth herein, the principal and all accrued (and unpaid) interest of this promissory note (the “Note”) shall be due and payable by the Borrower on February 28, 2026 (the “Maturity Date”).

 

1. Payments. All payments will be made in lawful money of the United States of America at the principal office of the Borrower, or at such other place as the Holder may from time to time designate in writing to the Borrower. Payment will be credited first to accrued interest due and payable, with any remainder applied to principal. Prepayment of principal and interest, either in whole or in part, may be made by the Borrower, without penalty or premium, at any time prior to the Maturity Date; provided, however, that the Borrower shall give notice to the Holder of any such prepayment; and provided, further, that any partial prepayment of the Loan shall be in an amount not less than $25,000.

 

2. Security. This Note is a general unsecured obligation of the Company.

 

3. Interest Rate. Simple interest on the unpaid principal balance of this Note shall accrue at the lesser of five percent (5%) per annum and the highest rate permitted by law. If an Event of Default (as defined below) shall occur under this Note, interest shall immediately commence accruing at a default rate of twelve percent (7.5%) per annum.

 

4. Default. The occurrence of any of the following events of default (each, an “Event of Default”) shall, at the option of the Holder hereof, make all principal and interest (to the extent accrued) then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon written demand, without presentment, or grace period, all of which hereby are expressly waived, except as set forth below:

 

(a) Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors, or applies for or consents to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed without the consent of the Borrower, which shall constitute an automatic Event of Default and shall result in all remaining unpaid principal and interest due hereon immediately due and payable without the written demand from the Holder.

 

(b) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower, which shall constitute an automatic Event of Default and shall result in all remaining unpaid principal and interest due hereon immediately due and payable without the written demand from the Holder.

 

 
 

 

5. Termination. Upon payment of all cash amounts due to the Holder as provided in this Note, the Borrower will forever be released from all of its payment obligations and liabilities under this Note and the Holder agrees to promptly return to the Borrower the Note marked “paid in full.”

 

6. Other Agreements Upon the successful completion of a Qualified Financing, Borrower shall grant to Holder $25,000 in cash warrants, rounded to the nearest whole-number of warrants, to purchase the common stock of the Borrower. The warrants shall have (a) a 5-year term commencing with the date of the Qualified Financing and (b) a strike price equal to 110% of the offering price of the common stock in such Qualified Financing. For purposes of this Section 6, a “Qualified Financing” shall mean (i) a registered public offering of the common stock of the Borrower with gross proceeds of no less than $7.5 million and (ii) following the completion of such public offering, the common stock of the Borrower is listed on a national securities exchange. For example, if the qualified financing occurs at $5.00 per share, then Borrower shall grant 4,545 warrants, with a strike price of $5.50 per share, to Holder.

 

7. Miscellaneous.

 

(a) Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Note will inure to the benefit of, and be binding upon, the respective successors and assigns of the parties; provided, however, that the Borrower may not assign its obligations under this Note without the written consent of the Holder. This Note is for the sole benefit of the parties hereto and their respective successors and permitted assigns, and nothing herein, express or implied, is intended to or will confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Note.

 

(b) Severability. If one or more provisions of this Note are held to be unenforceable under applicable law, such provisions will be excluded from this Note and the balance of the Note will be interpreted as if such provisions were so excluded and this Note will be enforceable in accordance with its terms.

 

(c) Notice. Any notice or communication required to be given hereunder may be delivered by hand or deposited with an overnight courier (with overnight delivery instructions), if to the Borrower, to the address of the Borrower’s corporate headquarters, and if to the Holder, to the last address of the Holder set forth in the Borrower’s books and records. Notice shall be deemed given and received on the date sent if sent by personal delivery; and one (1) day after the date sent if sent by overnight courier.

 

(d) Counterparts. This Note may be executed in counterparts, each of which will be deemed an original, but all of which together will be deemed to be one and the same agreement. Counterparts may be delivered via facsimile, electronic mail (including PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method, and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

 
 

 

(e) Expenses. Each party will pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Note.

 

(f) Entire Agreement; Amendments and Waivers. This Note constitutes the full and entire understanding and agreement between the parties with regard to the subject hereof. Any term of this Note may be amended and the observance of any term may be waived (either generally or in a particular instance and either retroactively or prospectively) with the written consent of the Borrower and the Holder. Any waiver or amendment effected in accordance with this Section 7(f) will be binding upon each future holder of this Note and the Borrower.

 

(g) Governing Law; Attorneys’ Fees. THIS NOTE WAS NEGOTIATED IN THE STATE OF NEW YORK, ANDMADE BY BORROWER AND ACCEPTED BY HOLDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THIS NOTE WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS NOTE AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS NOTE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW. ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST HOLDER OR BORROWER ARISING OUT OF OR RELATING TO THIS NOTE MAY AT HOLDER’S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.

 

(i) Subordination. By its acceptance hereof, the Holder agrees that the indebtedness evidenced by this Note, including the principal of and interest thereon, shall be subordinate to and subject in right of payment, to the extent hereinafter set forth, to the prior payment in full of all principal, interest and any other sums then due on all existing or future Senior Indebtedness of the Borrower. The term “Senior Indebtedness” shall mean secured and unsecured indebtedness of the Borrower, or with respect to which the Borrower is a guarantor, for money borrowed by the Borrower from any financial institution.

 

 
 

 

IN WITNESS WHEREOF, the Borrower has executed this Note as of the date set forth above.

 

  PROTAGENIC THERAPEUTICS, INC.,
  a Delaware corporation
   
  By:  
    Garo Armen, Executive Chairman

 

 

 

EX-31.1 3 ex31-1.htm

 

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.

 

May 17, 2021   /s/ Garo H. Armen
  Name: Garo H. Armen, Ph.D.
  Title: Executive Chairman

 

 

 

EX-31.2 4 ex31-2.htm

 

Exhibit 31.2

 

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.

 

May 17, 2021   /s/ Garo H. Armen
  Name: Garo H. Armen, Ph.D.
  Title: Executive Chairman

 

 

 

EX-32.1 5 ex32-1.htm

 

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 March 31, 2021, 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.

 

May 17, 2021 By: /s/ Garo H. Armen
    Garo H. Armen, PhD
    Executive Chairman
    (Principal Executive Officer)

 

May 17, 2021 By: /s/ Alexander K. Arrow
    Alexander K. Arrow, MD, CFA
    Chief Financial Officer
    (Principal Financial Officer)

 

 

 

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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2021
May 14, 2021
Cover [Abstract]    
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Entity Central Index Key 0001022899  
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Document Period End Date Mar. 31, 2021  
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Current Fiscal Year End Date --12-31  
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Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company false  
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Entity Common Stock, Shares Outstanding   14,643,780
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Consolidated Balance Sheets (Unaudited) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
CURRENT ASSETS    
Cash $ 191,674 $ 671,091
Prepaid expenses 4,468 208,156
TOTAL CURRENT ASSETS 196,142 879,247
TOTAL ASSETS 196,142 879,247
CURRENT LIABILITIES    
Accounts payable and accrued expenses 650,968 571,517
Derivative liability 83,670
TOTAL CURRENT LIABILITIES 650,968 655,187
Note Payable 100,000
PIK convertible notes payable, net of debt discount 1,126,048 1,081,384
PIK convertible notes payable, net of debt discount - related parties 301,723 292,412
TOTAL LIABILITIES 2,178,739 2,028,983
STOCKHOLDERS' DEFICIT    
Common stock, $.0001 par value, 100,000,000 shares authorized, 10,610,603 and 10,360,480 shares issued and outstanding at March 31, 2021, and December 31, 2020 1,061 1,036
Additional paid-in-capital 17,092,824 16,719,749
Accumulated deficit (18,905,388) (17,698,936)
Accumulated other comprehensive loss (171,095) (171,586)
TOTAL STOCKHOLDERS' DEFICIT (1,982,597) (1,149,736)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT 196,142 879,247
Series B Convertible Preferred Stock [Member]    
STOCKHOLDERS' DEFICIT    
Preferred stock, $0.000001 par value; 20,000,000 shares authorized; 872,766 shares issued and outstanding in the following classes: $ 1 $ 1
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.21.1
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2021
Dec. 31, 2020
Preferred stock, par value $ 0.000001 $ 0.000001
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares issued 872,766
Preferred stock, shares outstanding 872,766
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 10,610,603 10,360,480
Common stock, shares outstanding 10,610,603 10,360,480
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 872,766 872,766
Preferred stock, shares outstanding 872,766 872,766
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.21.1
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
OPERATING AND ADMINISTRATIVE EXPENSES    
Research and development $ 592,351 $ 65,959
General and administrative 613,839 454,777
TOTAL OPERATING AND ADMINISTRATIVE EXPENSES 1,206,190 520,736
LOSS FROM OPERATIONS (1,206,190) (520,736)
OTHER (EXPENSE) INCOME    
Interest income 5 384
Interest expense (83,937) (38,986)
Change in fair value of derivative liability 83,670 60,749
TOTAL OTHER INCOME (EXPENSES) (262) 22,147
LOSS BEFORE INCOME TAX (1,206,452) (498,589)
INCOME TAX EXPENSE
NET LOSS (1,206,452) (498,589)
Other Comprehensive Loss - net of tax    
Foreign exchange translation gain (loss) 491 (2,419)
TOTAL COMPREHENSIVE LOSS $ (1,205,961) $ (501,008)
Net loss per common share - Basic and Diluted $ (0.11) $ (0.05)
Weighted average common shares - Basic and Diluted 10,520,484 10,261,419
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.21.1
Consolidated Statements of Changes In Stockholders' Deficit (Unaudited) - USD ($)
Series B Convertible Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Loss [Member]
Total
Balance at Dec. 31, 2019 $ 1 $ 1,026 $ 14,687,172 $ (15,150,201) $ (172,364) $ (634,366)
Balance, shares at Dec. 31, 2019 872,766 10,261,419        
Foreign currency translation loss (2,419) (2,419)
Stock compensation - stock options     360,436   360,436
Debt discount from beneficial conversion feature     89,204     89,204
Issuance of options for settlement of accrued payroll     93,950     93,950
Modification of warrants     5,861     5,861
Net loss       (498,589)   (498,589)
Balance at Mar. 31, 2020 $ 1 $ 1,026 15,236,623 (15,648,790) (174,783) (585,923)
Balance, shares at Mar. 31, 2020 872,766 10,261,419        
Balance at Dec. 31, 2020 $ 1 $ 1,036 16,719,749 (17,698,936) (171,586) (1,149,736)
Balance, shares at Dec. 31, 2020 872,766 10,360,480        
Foreign currency translation loss         491 491
Stock compensation - stock options     345,975     345,975
Exercise of options   $ 1 (1)
Exercise of options, shares   10,000       10,000
Exercise of warrants   $ 24 27,101     $ 27,125
Exercise of warrants, shares   240,123        
Net loss       (1,206,452)   (1,206,452)
Balance at Mar. 31, 2021 $ 1 $ 1,061 $ 17,092,824 $ (18,905,388) $ (171,095) $ (1,982,597)
Balance, shares at Mar. 31, 2021 872,766 10,610,603        
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.21.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES    
Net Loss $ (1,206,452) $ (498,589)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation expense 84
Stock based compensation 345,975 360,436
Change in fair value of the derivative liability (83,670) (60,749)
Amortization of debt discount 53,975 27,357
Loss on settlement of accounts payable 5,861
Changes in operating assets and liabilities    
Prepaid expenses 203,688 11,669
Accounts payable and accrued expenses 78,777 (210,475)
NET CASH USED IN OPERATING ACTIVITIES (607,707) (364,406)
CASH FLOWS FROM FINANCING ACTIVITIES    
Exercise of warrants for cash 27,125
Proceeds from notes payable 100,000
Proceeds from convertible notes 330,000
NET CASH PROVIDED BY FINANCING ACTIVITIES 127,125 330,000
Effect of exchange rate on cash 1,165 (10,245)
NET DECREASE IN CASH (479,417) (44,651)
CASH, BEGINNING OF YEAR 671,091 753,972
CASH, END OF YEAR 191,674 753,972
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION    
Cash paid for interest expense
Cash paid for income taxes
NONCASH FINANCING AND INVESTING TRANSACTIONS    
Debt discount from beneficial conversion feature 89,204
Issuance of options for settlement of accounts payable $ 93,950
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.21.1
Organization and Nature of Business
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Nature of Business

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

 

Company Background

 

Protagenic Therapeutics, Inc. (“we,” “our,” “Protagenic” or “the Company”), 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.

 

The Company was previously known as Atrinsic, Inc., a company that was once a reporting company under the Securities Exchange Act of 1934, but that, in 2012 and 2013, reorganized under Chapter 11 of the United States Bankruptcy Code and emerged from bankruptcy. On February 12, 2016, the Company acquired Protagenic Therapeutics, Inc. (“Prior Protagenic”) through a reverse merger.

 

On February 12, 2016, Protagenic Acquisition Corp., a wholly-owned subsidiary of the Company, merged (the “Merger”) with and into Prior Protagenic. Prior Protagenic was the surviving corporation of the Merger. As a result of the Merger, the Company acquired the business of Prior Protagenic and has continued the existing business operations of Prior Protagenic as a wholly-owned subsidiary. On June 17, 2016, Prior Protagenic merged with and into the Company with the Company as the surviving corporation in the merger. Immediately thereafter, the Company changed its name from Atrinsic, Inc. to Protagenic Therapeutics, Inc.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.21.1
Liquidity
3 Months Ended
Mar. 31, 2021
Liquidity  
Liquidity

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 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 as of March 31, 2021, the Company has sufficient resources to fund its operations only through May 2021. However, based on cash resources that it received in April 2021 as a consequence of an equity offering, together with its current forecast and budget, management believes that its cash resources will be sufficient to fund its operations at least until the end of the third quarter of 2023. Absent generation of sufficient revenue from the execution of the Company’s business plan and sales revenue is not anticipated before 2024, the Company will need to obtain debt or equity financing by the third quarter of 2023. 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.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 3 - SUMMARY OF SIGNFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC” for interim financial information. In the opinion of the Company’s management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended March 31, 2021 and 2020. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2020, which contain the audited financial statements and notes thereto, for the years ended December 31, 2020 and 2019 included within the Company’s Form 10-K filed with the SEC on March 25, 2021. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

 

Principles of consolidation

 

The condensed 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 in the condensed consolidated financial statements.

 

Reclassifications:

 

Reclassifications of prior periods have been made to conform with current year presentation

 

Use of estimates

 

The preparation of condensed 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 condensed consolidated financial statements include income tax provisions, valuation of stock options and warrants and assessment of deferred tax asset valuation allowance.

 

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. 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.

 

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 March 31, 2021 and December 31, 2020, the Company did not have any cash equivalents.

 

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.

 

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. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.

 

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 March 31, 2021.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $     $     $     $     $  

 

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of December 31, 2020.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $ 83,670     $     $     $ 83,670     $ 83,670  

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2021 and the year ended December 31, 2020:

 

   

Fair Value Measurement

Using Level 3

 
    Inputs Total  
Balance, December 31, 2020   $ 83,670  
Change in fair value of derivative warrants liabilities     (83,670 )
Balance, March 31, 2021   $ -  

 

The fair value of the derivative feature of the 127,346 and 295,945 warrants issued to the placement agent of the Company’s 2016 private offering (the “2016 Offering”) and to a holder of its debt for debt cancellation in connection with the Merger, respectively on the issuance dates and at the balance sheet dates were calculated using a Black-Scholes option model valued with the following assumptions:

 

    December 31, 2020  
Exercise price     1.25  
Risk free interest rate     0.09 %
Dividend yield     0.00 %
Expected volatility     169 %
Contractual term     0.14 Years  

 

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar expected term on the date of measurement.

 

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

 

Volatility: The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the warrants’ expected term.

 

Expected term: The Company’s expected term is based on the remaining contractual maturity of the warrants.

 

During the three months ended March 31, 2021 and 2020, the Company marked the derivative feature of the warrants to fair value and recorded a gain of $83,670 and a gain of $60,749 relating to the change in fair value, respectively. The warrants expired on February 21, 2021, resulting in the elimination of the derivative liability.

 

Derivative Liability

 

The Company evaluates its options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4 and 815-40-25. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the condensed consolidated statements of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 

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 canceled 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 condensed consolidated statements of operations.

 

    Potentially Outstanding
Dilutive Common Shares
 
    For the Three Months Ended March 31, 2021     For the Three Months Ended March 31, 2020  
             
Conversion Feature Shares                
                 
Common shares issuable under the conversion feature of preferred shares     872,766       872,766  
                 
Stock Options     5,673,861       3,925,682  
                 
Warrants     3,483,767       3,826,658  
                 
Convertible Notes     1,598,000       800,000  
                 
Total potentially outstanding dilutive common shares     11,628,394       9,425,106  

 

Research and Development

 

Research and development expenses are charged to operations as incurred.

 

Foreign Currency Translation

 

The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) 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. Section 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 Section 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 income (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

 

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.21.1
Accounts Payable and Accrued Expenses
3 Months Ended
Mar. 31, 2021
Payables and Accruals [Abstract]  
Accounts Payable and Accrued Expenses

NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consist of the following at:

 

    March 31, 2021     December 31, 2020  
             
Accounting   $ 36,161     $ 36,161  
Research and development     381,062       393,496  
Other     233,745       141,860  
                 
Total   $ 650,968     $ 571,517  

 

On October 1, 2019, the Company entered into an agreement with a consultant for toxicology studies. The consultant quoted a commitment of approximately $988,000 as an estimate for the study. 50% of the total price was paid upon the signing of the agreement, 35% of the total price is to be paid upon completion of the in-life study, and the remaining 15% of the total price is to be paid upon the issuance of the report. If the Company cancels the study the Company will be required to pay a cancelation fee. If the cancelation happens prior to the arrival of the test animals then the Company will need to pay between 20% and 50% of the animal fees depending on when the cancellation happens. If the cancellation occurs after the animals arrive but before the study begins then the Company will be responsible for paying 50% of the protocol price plus a fee of $7,000 per room/week for animal husbandry until the animals can be relocated or disposed of. If the Company cancels the study after it has begun then the Company will need to pay any fees for procured items for the study and any nonrecoverable expenses incurred by the consultant. As of March 31, 2021 and December 31, 2020, the Company has paid $174,106 and $174,106 to the consultant and there is a balance of $319,799 and $319,799 due, respectively.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable And Convertible Note Payable (PIK Notes)
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Notes Payable And Convertible Note Payable (PIK Notes)

NOTE 5 – NOTE PAYABLE AND CONVERTIBLE NOTE PAYABLE (PIK NOTES)

 

Note Payable

 

On March 1, 2021, the Company entered into a $100,000 promissory note. This note is due on February 28, 2026 and accrues interest at a rate of 5% per annum or 7.5% per annum in the case of default. In the event that the Company completes a financing of no less than $7.5 million, then the note holder will be issued warrants valued at $25,000 with an exercise price equal to 110% of the offering cost of the common stock in the financing. These warrants will have a term of five years.

 

As of March 31, 2021 and December 31, 2020, the Company owes $100,000 and $0 on the outstanding Note, respectively.

 

Convertible Notes Payable

 

During the three months ended March 31, 2021 and 2020, the Company amortized $44,664 and $17,943 of the debt discount, respectively. At March 31, 2021 and December 31, 2020, the Company had an unamortized debt discount of $471,452 and $516,116, respectively.

 

As of March 31, 2021 and December 31, 2020, the Company owes $1,597,500 and $1,597,500 on the outstanding Convertible Notes, respectively.

 

Maturity Date of Notes for Twelve Months Ending March 31, 2021,   Amount due  
2022   $ -  
2023     -  
2024     1,597,500  
2025     -  
2026     100,000  
Total   $ 1,697,500  

 

Convertible Notes Payable – Related Parties

 

During the three months ended March 31, 2021 and 2020, the Company amortized $9,311 and $9,414 of the debt discount, respectively. At March 31, 2021 and December 31, 2020, the Company had an unamortized debt discount of $98,277 and $107,588, respectively.

 

As of March 31, 2021 and December 31, 2020, the Company owes $400,000 and $400,000 on the outstanding Convertible Notes, respectively.

 

 

Maturity Date of Notes for Twelve Months Ending March 31, 2021,   Amount due  
2022   $ -  
2023     -  
2024     400,000  
2025     -  
2026     -  
Total   $ 400,000  
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.21.1
Stockholders' Deficit
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Stockholders' Deficit

NOTE 6 - STOCKHOLDERS’ DEFICIT

 

Stock-Based Compensation

 

In connection with the consummation of the Merger completed on February 12, 2016, we adopted Prior Protagenic’s 2006 Employee, Director and Consultant Stock Plan (the “2006 Plan”). On June 17, 2016, our stockholders adopted the 2016 Plan and, as a result, we terminated the 2006 Plan. We will not grant any further awards under the 2006 Plan. All outstanding grants under the 2006 Plan will continue in effect in accordance with the terms of the particular grant and the 2006 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. On each of January 1, 2017, January 1, 2019 and January 1, 2020, pursuant to an annual “evergreen” provision contained in the 2016 Plan, the number of shares reserved for future grants was increased by 564,378 shares, or a total of 1,693,134 shares. As a result of these increases, as of March 31, 2021 and December 31, 2020, the aggregate number of shares of common stock available for awards under the 2016 Plan was 4,868,623 shares and 4,868,623 shares, respectively. Options issued under the 2016 Plan are exercisable for up to ten years from the date of issuance.

 

There were 5,673,861 options outstanding as of March 31, 2021. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 

Exercise price   $ 5.60  
Expected dividend yield     0 %
Risk free interest rate     0.81%-1.54 %  
Expected life in years     5-10  
Expected volatility     149%-158 %  

 

There were 5,597,861 options outstanding as of December 31, 2020. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 

Exercise price   $ 1.75  
Expected dividend yield     0 %
Risk free interest rate     0.64%-1.61 %  
Expected life in years     10  
Expected volatility     140%-146 %  

 

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, 2020     5,597,861     $ 1.47       6.48  
Granted     366,000     $ 5.60       9.69  
Expired     (280,000 )   $ 1.00       -  
Exercised     (10,000 )   $ 1.00       -  
Outstanding March 31, 2021     5,673,861     $ 1.76       6.78  

 

A summary of the status of the Company’s nonvested options as of March 31, 2021, and changes during the three months ended March 31, 2021, is presented below:

 

Nonvested Options   Options    

Weighted-

Average
Exercise Price

 
Nonvested at December 31, 2020     862,833     $ 1.75  
Granted     366,000     $ 5.60  
Vested     (106,291 )   $ 4.70  
Forfeited     -     $ -  
Nonvested at March 31, 2021     1,122,542     $ 2.93  

 

As of March 31, 2021, the Company had 5,673,861 shares issuable under options outstanding at a weighted average exercise price of $1.76 and an intrinsic value of $23,025,089.

 

The total number of options granted during the three months ended March 31, 2021 and 2020 was 366,000 and 1,387,497, respectively. The exercise price for these options was $5.60 per share.

 

The Company recognized compensation expense related to options issued of $345,975 and $360,436 during the three months ended March 31, 2021 and 2020, respectively, in which $344,499 and $325,794 is included in general and administrative expenses and $1,476 and $34,641 in research and development expenses, respectively. For the three months ended March 31, 2021, $136,203 of the stock compensation was related to employees and $209,772 was related to non-employees.

 

As of March 31, 2021, the unamortized stock option expense was $2,778,726 with $397,760 being related to employees and $2,380,966 being related to non-employees. As of March 31, 2021, the weighted average period for the unamortized stock compensation to be recognized is 3.50 years.

 

On February 25, 2021, the Company issued a total of 366,000 options to purchase shares of the Company’s common stock to five individuals, with 350,000 of these options being issued to related parties. These options had a grant date fair value of $2,009,063. These options have an exercise price of $5.60. 16,000 of the options vest immediately and 350,000 of the options vest monthly over 48 months. These options were approved by the board of directors on February 25, 2021.

 

During the three months ended March 31, 2021, 10,000 options were exercised for 10,000 shares of the Company’s common stock. These options had an exercise price of $1.00.

 

Warrants:

 

A summary of warrant issuances are as follows:

 

         

Weighted

Average

   

Weighted

Average

 
    Number     Exercise Price     Remaining Life  
Warrants                        
                         
Outstanding December 31, 2020     4,007,058     $ 1.06       1.86  
Expired     (150,249 )     1.25       -  
Exercised     (373,042 )     1.25       -  
Outstanding March 31, 2021     3,483,767     $ 1.03       1.85  

 

As of March 31, 2021, the Company had 3,483,767 shares issuable under warrants outstanding at a weighted average exercise price of $1.03 and an intrinsic value of $16,684,157.

 

During the three months ended March 31, 2021, 373,042 warrants were exercised for 240,123 shares of the Company’s common stock. The Company received $27,125 from these exercises.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.21.1
Collaborative Agreements
3 Months Ended
Mar. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Collaborative Agreements

NOTE 7 - 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 25,000 stock options which are fully vested at the exercise price of $1.00 exercisable over a ten year period which ends on April 1, 2022. As of March 31, 2021, Dr. David Lovejoy of the University has been granted 553,299 stock options, of which 431,112 are fully vested and 100,000 have expired. These have an exercise price of $1.00, $1.25 or 1.75 and are exercisable over ten or thirteen year periods which end either on March 30, 2021, December 1, 2022, April 15, 2026, March 1, 2027, October 16, 2027 or on February 13, 2030.

 

The sponsorship research and development expenses pertaining to the Research Agreements were $0 and $0 for the three months ended March 31, 2021 and 2020, respectively.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.21.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Commitments and Contingencies

NOTE 8 - 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 months ended March 31, 2021 and 2020 and therefore was not subject to paying any royalties.

 

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.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.21.1
Related Party Transactions
3 Months Ended
Mar. 31, 2021
Related Party Transactions [Abstract]  
Related Party Transactions

NOTE 9 – 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.

 

On February 25, 2021, the Company issued 366,000 options to purchase common stock to 5 individuals, with 350,000 of those options going to related parties. These options had an exercise price of $5.60 and a term of 5 or 10 years. (See Note 6)

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.21.1
Subsequent Events
3 Months Ended
Mar. 31, 2021
Subsequent Events [Abstract]  
Subsequent Events

NOTE 10- SUBSEQUENT EVENTS

 

Subsequent to the period, the Company issued 493,177 shares of the Company’s common stock for the net exercise of 695,137 warrants. 231,277 of these shares of common stock were issued to a related party.

 

Subsequent to the period, the Company issued 360,000 shares of the Company’s common stock for the exercise of 360,000 options. The Company received proceeds of $532,500 from the exercise.

 

On April, 29, 2021, the Company completed a public offering (“the Offering”) to sell aggregate of 3,180,000 shares of the Company’s common stock together with warrants to purchase an aggregate of 3,180,000 shares of common stock. The Company also granted the underwriters a 45-day option to purchase up to an additional 477,000 shares of Common Stock (the “Option Shares”) and/or warrants to purchase an aggregate of 477,000 shares of Common Stock at the same price. Net proceeds from the Offering were approximately $11.4 million (excluding any sale of the Option Shares), after deducting underwriting discounts and commissions and public offering expenses payable by the Company.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Basis of Presentation

Basis of presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (“SEC” for interim financial information. In the opinion of the Company’s management, the accompanying consolidated financial statements reflect all adjustments, consisting of normal, recurring adjustments, considered necessary for a fair presentation of the results for the interim periods ended March 31, 2021 and 2020. Although management believes that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

 

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s financial statements for the year ended December 31, 2020, which contain the audited financial statements and notes thereto, for the years ended December 31, 2020 and 2019 included within the Company’s Form 10-K filed with the SEC on March 25, 2021. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

Principles of Consolidation

Principles of consolidation

 

The condensed 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 in the condensed consolidated financial statements.

Reclassifications

Reclassifications:

 

Reclassifications of prior periods have been made to conform with current year presentation

Use of Estimates

Use of estimates

 

The preparation of condensed 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 condensed consolidated financial statements include income tax provisions, valuation of stock options and warrants and assessment of deferred tax asset valuation allowance.

Concentrations of Credit Risk

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. 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.

Cash and Cash Equivalents

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 March 31, 2021 and December 31, 2020, the Company did not have any cash equivalents.

Fair Value Measurements

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.

 

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. The carrying value of long-term debt approximates fair value since the related rates of interest approximate current market rates.

 

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 March 31, 2021.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $     $     $     $     $  

 

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of December 31, 2020.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $ 83,670     $     $     $ 83,670     $ 83,670  

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2021 and the year ended December 31, 2020:

 

   

Fair Value Measurement

Using Level 3

 
    Inputs Total  
Balance, December 31, 2020   $ 83,670  
Change in fair value of derivative warrants liabilities     (83,670 )
Balance, March 31, 2021   $ -  

 

The fair value of the derivative feature of the 127,346 and 295,945 warrants issued to the placement agent of the Company’s 2016 private offering (the “2016 Offering”) and to a holder of its debt for debt cancellation in connection with the Merger, respectively on the issuance dates and at the balance sheet dates were calculated using a Black-Scholes option model valued with the following assumptions:

 

    December 31, 2020  
Exercise price     1.25  
Risk free interest rate     0.09 %
Dividend yield     0.00 %
Expected volatility     169 %
Contractual term     0.14 Years  

 

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar expected term on the date of measurement.

 

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

 

Volatility: The Company calculates the expected volatility of the stock price based on the corresponding volatility of the Company’s peer group stock price for a period consistent with the warrants’ expected term.

 

Expected term: The Company’s expected term is based on the remaining contractual maturity of the warrants.

 

During the three months ended March 31, 2021 and 2020, the Company marked the derivative feature of the warrants to fair value and recorded a gain of $83,670 and a gain of $60,749 relating to the change in fair value, respectively. The warrants expired on February 21, 2021, resulting in the elimination of the derivative liability.

Derivative Liability

Derivative Liability

 

The Company evaluates its options, warrants or other contracts, if any, to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4 and 815-40-25. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the condensed consolidated statements of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

Stock-Based Compensation

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 canceled 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 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 condensed consolidated statements of operations.

 

    Potentially Outstanding
Dilutive Common Shares
 
    For the Three Months Ended March 31, 2021     For the Three Months Ended March 31, 2020  
             
Conversion Feature Shares                
                 
Common shares issuable under the conversion feature of preferred shares     872,766       872,766  
                 
Stock Options     5,673,861       3,925,682  
                 
Warrants     3,483,767       3,826,658  
                 
Convertible Notes     1,598,000       800,000  
                 
Total potentially outstanding dilutive common shares     11,628,394       9,425,106  
Research and Development

Research and Development

 

Research and development expenses are charged to operations as incurred.

Foreign Currency Translation

Foreign Currency Translation

 

The Company follows Section 830-10-45 of the FASB Accounting Standards Codification (“Section 830-10-45”) 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. Section 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 Section 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 income (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

Recent Accounting Pronouncements

 

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of March 31, 2021.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $     $     $     $     $  

 

The following table provides a summary of financial instruments that are measured at fair value on a recurring basis as of December 31, 2020.

 

    Carrying     Fair Value Measurement Using  
    Value     Level 1     Level 2     Level 3     Total  
                                         
Derivative warrants liabilities   $ 83,670     $     $     $ 83,670     $ 83,670  
Schedule of Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2021 and the year ended December 31, 2020:

 

   

Fair Value Measurement

Using Level 3

 
    Inputs Total  
Balance, December 31, 2020   $ 83,670  
Change in fair value of derivative warrants liabilities     (83,670 )
Balance, March 31, 2021   $ -  
Schedule of Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

The fair value of the derivative feature of the 127,346 and 295,945 warrants issued to the placement agent of the Company’s 2016 private offering (the “2016 Offering”) and to a holder of its debt for debt cancellation in connection with the Merger, respectively on the issuance dates and at the balance sheet dates were calculated using a Black-Scholes option model valued with the following assumptions:

 

    December 31, 2020  
Exercise price     1.25  
Risk free interest rate     0.09 %
Dividend yield     0.00 %
Expected volatility     169 %
Contractual term     0.14 Years  
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The effect of dilution on net loss becomes anti-dilutive and therefore is not reflected on the condensed consolidated statements of operations.

 

    Potentially Outstanding
Dilutive Common Shares
 
    For the Three Months Ended March 31, 2021     For the Three Months Ended March 31, 2020  
             
Conversion Feature Shares                
                 
Common shares issuable under the conversion feature of preferred shares     872,766       872,766  
                 
Stock Options     5,673,861       3,925,682  
                 
Warrants     3,483,767       3,826,658  
                 
Convertible Notes     1,598,000       800,000  
                 
Total potentially outstanding dilutive common shares     11,628,394       9,425,106  
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.21.1
Accounts Payable and Accrued Expenses (Tables)
3 Months Ended
Mar. 31, 2021
Payables and Accruals [Abstract]  
Schedule of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following at:

 

    March 31, 2021     December 31, 2020  
             
Accounting   $ 36,161     $ 36,161  
Research and development     381,062       393,496  
Other     233,745       141,860  
                 
Total   $ 650,968     $ 571,517  
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable And Convertible Note Payable (PIK Notes) (Tables)
3 Months Ended
Mar. 31, 2021
Convertible Notes Payable [Member]  
Schedule of Maturity Date of Notes
Maturity Date of Notes for Twelve Months Ending March 31, 2021,   Amount due  
2022   $ -  
2023     -  
2024     1,597,500  
2025     -  
2026     100,000  
Total   $ 1,697,500  
Convertible Notes Payable - Related Party [Member]  
Schedule of Maturity Date of Notes
Maturity Date of Notes for Twelve Months Ending March 31, 2021,   Amount due  
2022   $ -  
2023     -  
2024     400,000  
2025     -  
2026     -  
Total   $ 400,000  
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.21.1
Stockholders' Deficit (Tables)
3 Months Ended
Mar. 31, 2021
Equity [Abstract]  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

There were 5,673,861 options outstanding as of March 31, 2021. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 

Exercise price   $ 5.60  
Expected dividend yield     0 %
Risk free interest rate     0.81%-1.54 %  
Expected life in years     5-10  
Expected volatility     149%-158 %  

 

There were 5,597,861 options outstanding as of December 31, 2020. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 

Exercise price   $ 1.75  
Expected dividend yield     0 %
Risk free interest rate     0.64%-1.61 %  
Expected life in years     10  
Expected volatility     140%-146 %  
Schedule of Share-based Compensation, Stock Options, Activity

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, 2020     5,597,861     $ 1.47       6.48  
Granted     366,000     $ 5.60       9.69  
Expired     (280,000 )   $ 1.00       -  
Exercised     (10,000 )   $ 1.00       -  
Outstanding March 31, 2021     5,673,861     $ 1.76       6.78  
Schedule of Share-based Compensation Nonvested Shares

A summary of the status of the Company’s nonvested options as of March 31, 2021, and changes during the three months ended March 31, 2021, is presented below:

 

Nonvested Options   Options    

Weighted-

Average
Exercise Price

 
Nonvested at December 31, 2020     862,833     $ 1.75  
Granted     366,000     $ 5.60  
Vested     (106,291 )   $ 4.70  
Forfeited     -     $ -  
Nonvested at March 31, 2021     1,122,542     $ 2.93  
Summary of Warrant Issuances

A summary of warrant issuances are as follows:

 

         

Weighted

Average

   

Weighted

Average

 
    Number     Exercise Price     Remaining Life  
Warrants                        
                         
Outstanding December 31, 2020     4,007,058     $ 1.06       1.86  
Expired     (150,249 )     1.25       -  
Exercised     (373,042 )     1.25       -  
Outstanding March 31, 2021     3,483,767     $ 1.03       1.85  
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies (Details Narrative)
3 Months Ended
Mar. 31, 2021
USD ($)
shares
Mar. 31, 2020
USD ($)
Dec. 31, 2020
USD ($)
Cash equivalents  
Derivative, gain (loss) on derivative, net $ 83,670 $ 60,749  
Warrant expiry date Feb. 21, 2021    
Dividend Yield [Member]      
Derivative liability measurement input 0.00   0.00
Warrant expiry date Feb. 21, 2021    
Private Placement [Member]      
Fair value of derivative feature $ 127,346    
Class of warrant or right, issued | shares 295,945    
Equipment [Member]      
Property, plant and equipment, useful life 3 years    
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Reported Value Measurement [Member]    
Derivative warrants liabilities $ 83,670
Estimate of Fair Value Measurement [Member]    
Derivative warrants liabilities 83,670
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]    
Derivative warrants liabilities
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]    
Derivative warrants liabilities
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]    
Derivative warrants liabilities $ 83,670
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies - Schedule of Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation (Details)
3 Months Ended
Mar. 31, 2021
USD ($)
Accounting Policies [Abstract]  
Balance at beginning $ 83,670
Change in fair value of derivative warrants liabilities (83,670)
Balance at end
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies - Schedule of Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques (Details)
12 Months Ended
Dec. 31, 2020
$ / shares
Mar. 31, 2021
Measurement Input, Exercise Price [Member]    
Share price $ 1.25  
Measurement Input, Risk Free Interest Rate [Member]    
Derivative liability measurement input 0.09  
Dividend Yield [Member]    
Derivative liability measurement input 0.00 0.00
Expected Volatility [Member]    
Derivative liability measurement input 169  
Contractual Term [Member]    
Derivative liability measurement input, contractual term 1 month 20 days  
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.21.1
Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Total potentially outstanding dilutive common shares 11,628,394 9,425,106
Conversion Feature Shares [Member]    
Total potentially outstanding dilutive common shares 872,766 872,766
Stock Options [Member]    
Total potentially outstanding dilutive common shares 5,673,861 3,925,682
Warrants [Member]    
Total potentially outstanding dilutive common shares 3,483,767 3,826,658
Convertible Notes [Member]    
Total potentially outstanding dilutive common shares 1,598,000 800,000
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.21.1
Accounts Payable and Accrued Expenses (Details Narrative) - USD ($)
3 Months Ended
Dec. 31, 2020
Mar. 31, 2021
Oct. 02, 2019
Toxicology Studies [Member]      
Estimate for study description On October 1, 2019, the Company entered into an agreement with a consultant for toxicology studies. The consultant quoted a commitment of approximately $988,000 as an estimate for the study. 50% of the total price was paid upon the signing of the agreement, 35% of the total price is to be paid upon completion of the in-life study, and the remaining 15% of the total price is to be paid upon the issuance of the report. If the Company cancels the study the Company will be required to pay a cancelation fee. If the cancelation happens prior to the arrival of the test animals then the Company will need to pay between 20% and 50% of the animal fees depending on when the cancellation happens. If the cancellation occurs after the animals arrive but before the study begins then the Company will be responsible for paying 50% of the protocol price plus a fee of $7,000 per room/week for animal husbandry until the animals can be relocated or disposed of. If the Company cancels the study after it has begun then the Company will need to pay any fees for procured items for the study and any nonrecoverable expenses incurred by the consultant.    
Commitment cost paid $ 174,106 $ 174,106  
Balance due amount $ 319,799 $ 319,799  
Consultant [Member]      
Estimate commitment amount     $ 988,000
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.21.1
Accounts Payable and Accrued Expenses - Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($)
Mar. 31, 2021
Dec. 31, 2020
Payables and Accruals [Abstract]    
Accounting $ 36,161 $ 36,161
Research and development 381,062 393,496
Other 233,745 141,860
Total $ 650,968 $ 571,517
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable And Convertible Note Payable (PIK Notes) (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Mar. 01, 2021
Dec. 31, 2020
Debt amortized debt discount $ 53,975 $ 27,357    
Promissory Note [Member]        
Promissory note $ 100,000   $ 100,000
Debt interest percentage 110.00%   5.00%  
Maturity date Feb. 28, 2026      
Debt default interest percentage 7.50%      
Fair value of warrants issued $ 25,000      
Promissory Note [Member] | Maximum [Member]        
Promissory note     $ 7,500,000  
Unsecured Convertible Notes [Member]        
Promissory note 400,000     400,000
Debt amortized debt discount 44,664      
Debt unamortized debt discount 471,452     516,116
Convertible notes payable outstanding 1,597,500     1,597,500
Unsecured Convertible Notes with Related Parties [Member]        
Debt amortized debt discount 9,311 $ 9,414    
Debt unamortized debt discount $ 98,277     $ 107,588
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.21.1
Notes Payable And Convertible Note Payable (PIK Notes) - Schedule of Maturity Date of Notes (Details)
Mar. 31, 2021
USD ($)
Convertible Notes Payable [Member]  
2022
2023
2024 1,597,500
2025
2026 100,000
Total 1,697,500
Convertible Notes Payable - Related Party [Member]  
2022
2023
2024 400,000
2025
2026
Total $ 400,000
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.21.1
Stockholders' Deficit (Details Narrative) - USD ($)
3 Months Ended
Feb. 25, 2021
Feb. 25, 2020
Jan. 02, 2020
Jan. 02, 2019
Jan. 02, 2017
Mar. 31, 2021
Mar. 31, 2020
Dec. 31, 2020
Stock options outstanding           5,673,861   5,597,861
Stock options outstanding weighted average exercise price   $ 5.60       $ 1.76    
Stock options intrinsic value           $ 23,025,089   $ 38,328
Number of stock options granted           366,000    
Stock option weighted average exercise price per share           $ 5.60    
Number of stock options vested           106,291    
Stock issued during the period exercised           10,000    
Class of warrant or right, outstanding           3,483,767   4,007,058
Common Stock [Member]                
Stock issued during the period exercised           10,000    
Warrants outstanding           240,123    
Proceeds from warrants exercised           $ 27,125    
Warrants [Member]                
Class of warrant or right, outstanding           3,483,767    
Class of warrant or right, outstanding, weighted average exercise price           $ 1.03    
Class of warrant or right, outstanding, intrinsic value           $ 16,684,157   $ 782,668
Warrants outstanding           373,042    
Options to Related Party [Member]                
Stock options outstanding           10,000    
Stock options outstanding weighted average exercise price           $ 1.00    
Stock issued during the period exercised           10,000    
Employees [Member]                
Compensation expense           $ 136,203    
Unamortized stock option expense           397,760    
Non-Employees [Member]                
Compensation expense           209,772    
Unamortized stock option expense           $ 2,380,966    
Five Individuals [Member]                
Number of stock options granted   366,000            
Stock Options [Member]                
Number of stock options granted           366,000 1,387,497  
Stock option weighted average exercise price per share             $ 5.60  
Compensation expense           $ 345,975 $ 360,436  
Stock Options [Member] | Options Vested Over 48 Months [Member]                
Number of stock options vested 16,000 350,000            
Stock Options [Member] | Settlement of Accrued Compensation [Member]                
Number of stock options granted   2,009,063            
Stock option weighted average exercise price per share   $ 5.60            
Stock Options [Member] | Five Individuals [Member]                
Number of stock options granted 366,000              
Stock Options [Member] | Related Parties [Member]                
Number of stock options granted   350,000            
Stock Options [Member] | General and Administrative Expense [Member]                
Compensation expense           344,499 325,794  
Stock Options [Member] | Research and Development Expenses [Member]                
Compensation expense           1,476 $ 34,641  
Stock Options [Member]                
Unamortized stock option expense           $ 2,778,726    
2016 Plan [Member]                
Number of additional shares grants for issuance     564,378 564,378 564,378      
Number of shares available for grant     1,693,134 1,693,134 1,693,134 4,868,623   4,868,623
Share-based payment award, expiration period           10 years    
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.21.1
Stockholders' Deficit - Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions (Details) - $ / shares
3 Months Ended 12 Months Ended
Mar. 31, 2021
Dec. 31, 2020
Exercise price $ 5.60 $ 1.75
Expected dividend yield 0.00% 0.00%
Expected life in years   10 years
Minimum [Member]    
Risk free interest rate 0.81% 0.64%
Expected life in years 5 years  
Expected volatility 149.00% 140.00%
Maximum [Member]    
Risk free interest rate 1.54% 1.61%
Expected life in years 10 years  
Expected volatility 158.00% 146.00%
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.21.1
Stockholders' Deficit - Schedule of Share-based Compensation, Stock Options, Activity (Details) - $ / shares
3 Months Ended
Feb. 25, 2020
Mar. 31, 2021
Equity [Abstract]    
Stock Options Outstanding, Beginning   5,597,861
Stock Options, Granted   366,000
Stock Options, Expired   (280,000)
Stock Option, Exercised   (10,000)
Stock Options Outstanding, Ending   5,673,861
Weighted Average Exercisable Price, Stock Options Outstanding, Beginning    
Weighted Average Exercisable Price, Stock Options Outstanding, Granted   $ 5.60
Weighted Average Exercisable Price, Stock Options Outstanding, Expired   1.00
Weighted Average Exercisable Price, Stock Options Outstanding, Exercised   1.00
Weighted Average Exercisable Price, Stock Options Outstanding, Ending $ 5.60 $ 1.76
Weighted Average Remaining Life, Stock Options Outstanding, Beginning   6 years 5 months 23 days
Weighted Average Remaining Life, Stock Options Outstanding, Granted   9 years 8 months 9 days
Weighted Average Remaining Life, Stock Options Outstanding, Ending   6 years 9 months 11 days
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.21.1
Stockholders' Deficit - Schedule of Share-based Compensation Nonvested Shares (Details)
3 Months Ended
Mar. 31, 2021
$ / shares
shares
Equity [Abstract]  
Nonvested Options, Beginning Balance | shares 862,833
Nonvested Options, Granted | shares 366,000
Nonvested Options, Vested | shares (106,291)
Nonvested Options, Forfeited | shares
Nonvested Options, Ending Balance | shares 1,122,542
Weighted Average Exercise Price, Beginning Balance | $ / shares $ 1.75
Weighted Average Exercise Price, Granted | $ / shares 5.60
Weighted Average Exercise Price, Vested | $ / shares 4.70
Weighted Average Exercise Price, Forfeited | $ / shares
Weighted Average Exercise Price, Ending Balance | $ / shares $ 2.93
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.21.1
Stockholders' Deficit - Summary of Warrant Issuances (Details)
3 Months Ended
Mar. 31, 2021
$ / shares
shares
Equity [Abstract]  
Number of Warrants Outstanding, Beginning | shares 4,007,058
Number of Warrants Outstanding, Expired | shares (150,249)
Number of Warrants Outstanding, Exercised | shares (373,042)
Number of Warrants Outstanding, Ending | shares 3,483,767
Number of Warrants Outstanding, Weighted Average Exercise Price, Beginning | $ / shares $ 1.06
Number of Warrants Outstanding, Weighted Average Exercise Price, Expired | $ / shares 1.25
Number of Warrants Outstanding, Weighted Average Exercise Price, Exercised | $ / shares 1.25
Number of Warrants Outstanding, Weighted Average Exercise Price, Ending | $ / shares $ 1.03
Number of Warrants Outstanding, Weighted Average Remaining Life 1 year 10 months 10 days
Number of Warrants Outstanding, Weighted Average Remaining Life 1 year 10 months 6 days
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.21.1
Collaborative Agreements (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Dec. 31, 2015
Number of stock options vested 106,291    
Research and development expense $ 592,351 $ 65,959  
Research Agreements [Member]      
Research and development expense $ 0 $ 0  
University of Toronto [Member]      
Share-based compensation stock options, grants     25,000
Share-based compensation weighted average exercise price     $ 1.00
Share-based payment award, expiration period     10 years
Options expiration date, description     Exercisable over a ten year period which ends on April 1, 2022.
Dr. David Lovejoy [Member] | Stock Options [Member]      
Share-based compensation stock options, grants 553,299    
Share-based compensation weighted average exercise price $ 1.00    
Options expiration date, description These have an exercise price of $1.00, $1.25 or 1.75 and are exercisable over ten or thirteen year periods which end either on March 30, 2021, December 1, 2022, April 15, 2026, March 1, 2027, October 16, 2027 or on February 13, 2030.    
Number of stock options vested 431,112    
Number of stock options expired 100,000    
Dr. David Lovejoy [Member] | Stock Options [Member] | Minimum [Member]      
Share-based compensation weighted average exercise price $ 1.25    
Share-based payment award, expiration period 10 years    
Dr. David Lovejoy [Member] | Stock Options [Member] | Maximum [Member]      
Share-based compensation weighted average exercise price $ 1.75    
Share-based payment award, expiration period 13 years    
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.21.1
Commitments and Contingencies (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Royalty payment on behalf of sub-licensee, percentage 2.50%  
Sales revenue
Interest on amounts owed under license agreement, rate 3.00%  
Licensing Agreements [Member]    
Royalty payment, percentage 2.50%  
Up-front sub-license fees, percentage 10.00%  
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.21.1
Related Party Transactions (Details Narrative) - $ / shares
3 Months Ended
Feb. 25, 2020
Mar. 31, 2021
Number of stock options granted   366,000
Stock options outstanding weighted average exercise price $ 5.60 $ 1.76
Option term   6 years 5 months 23 days
Minimum [Member]    
Option term 5 years  
Maximum [Member]    
Option term 10 years  
5 Individuals [Member]    
Number of stock options granted 366,000  
Related Party [Member]    
Number of stock options granted 350,000  
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.21.1
Subsequent Events (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended
Apr. 29, 2021
Feb. 25, 2020
May 15, 2021
Mar. 31, 2021
Option to purchase shares of common stock       366,000
Forecast [Member]        
Proceeds from public offering $ 11,400,000      
Forecast [Member] | Public Offering [Member]        
Stock issued during the period 3,180,000      
Warrants to purchase common stock 3,180,000      
Forecast [Member] | Public Offering [Member] | 45-day Option [Member]        
Stock issued during the period 477,000      
Warrants to purchase common stock 477,000      
Related Party [Member]        
Option to purchase shares of common stock   350,000    
Subsequent Event [Member]        
Stock issued during the period     493,177  
Warrants to purchase common stock     695,137  
Subsequent Event [Member] | Common Stock [Member]        
Stock issued during the period     360,000  
Option to purchase shares of common stock     360,000  
Proceeds from option exercised     $ 532,500  
Subsequent Event [Member] | Related Party [Member]        
Stock issued during the period     231,277  
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