Protagenic Therapeutics, Inc.\new 10-K for FY2026
Protagenic Therapeutics, Inc.\new (PTIX)
About this 10-K
Protagenic Therapeutics, Inc.\new filed this 10-K on August 14, 2026, covering the fiscal year ended March 31, 2026 (FY2026).
Headline figures
Fiscal year ended March 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $0
- compared with $0 a year earlier
- Net income
- $1.37M
- compared with a net loss of $3.59M a year earlier
- Diluted EPS
- $0.59
- compared with -$0.67 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
fiscal year ended:
OR
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________
Commission
file number:
Protagenic Therapeutics, Inc. |
| (Exact name of registrant as specified in its charter) |
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.0001 par value
(Title of class)
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The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on September 30, 2025, based
on a closing price as reported on the Nasdaq Capital Market of $3.43 was approximately $
As of August 14, 2026, there were shares of the registrant’s common stock, par value $, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PROTAGENIC THERAPEUTICS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED MARCH 31, 2026
TABLE OF CONTENTS
| 2 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. As a result, you should not place undue reliance on any forward-looking statements. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Risk Factors Summary
Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K as part of your evaluation of the risks associated with an investment in our securities.
Risks Related to Our Financial Condition and Capital Requirements
| ● | The Company’s financial statements have been prepared on a going concern basis, and do not include adjustments that might be necessary if the Company is unable to continue as a going concern; |
| ● | If we continue to incur operating losses and fail to obtain the capital necessary to fund our operations, we will be unable to advance our development programs, complete our clinical trials, or bring products to market, or may be forced to reduce or cease operations entirely. In addition, any capital obtained by us may be obtained on terms that are unfavorable to us, our investors, or both; and |
| ● | Unstable market and economic conditions may have serious adverse consequences on our ability to raise funds, which may cause us to cease or delay our operations. |
Risks Related to Clinical Development and Regulatory Approval
| ● | Our results to date provide no basis for predicting whether any of our product candidates will be safe or effective, or receive regulatory approval; |
| ● | We may not be able to initiate and complete preclinical studies and clinical trials for our product candidates which could adversely affect our business; |
| ● | If we experience delays or difficulties in the enrollment of subjects to our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented, which could materially affect our financial condition; and |
| ● | If the market opportunities for our current and potential future drug candidates are smaller than we believe they are, our ability to generate product revenues will be adversely affected and our business may suffer. |
Risks Related to Our Reliance on Third Parties
| ● | We have no experience in sales, marketing and distribution and may have to enter into agreements with third parties to perform these functions, which could prevent us from successfully commercializing our product candidates; |
| ● | Data provided by collaborators and other parties upon which we rely have not been independently verified and could turn out to be inaccurate, misleading, or incomplete; and |
| ● | We rely on third parties to conduct our non-clinical studies and our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize our current product candidates or any future products, on a timely basis or at all, and our financial condition will be adversely affected. |
Risks Related to Commercialization of Our Product Candidates
| ● | We have no experience as a company in commercializing any product. If we fail to obtain commercial expertise, upon product approval by regulatory agencies, our product launch and revenues could be delayed; |
| ● | We may not be able to gain market acceptance of our product candidates, which would prevent us from becoming profitable; |
| ● | We may not be able to manufacture our product candidates in clinical or commercial quantities, which would prevent us from commercializing our product candidates; and |
| ● | Disputes under key agreements or conflicts of interest with our scientific advisors or clinical investigators could delay or prevent development or commercialization of our product candidates. |
| 3 |
Risks Related to Our Intellectual Property
| ● | We may not be able to maintain our exclusive worldwide license to use and develop PT00114 which could materially affect our business plan. |
Risks Related to Our Business Operations and Industry
| ● | If we are not able to retain our current senior management team and our scientific advisors or continue to attract and retain qualified scientific, technical and business personnel, our business will suffer; |
| ● | We may encounter difficulties in managing our growth, which could adversely affect our operations; |
| ● | Healthcare reform measures could adversely affect our business; |
| ● | Our business and operations are vulnerable to computer system failures, cyber-attacks or deficiencies in our cyber-security, which could increase our expenses, divert the attention of our management and key personnel away from our business operations and adversely affect our results of operations; |
| ● | Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity and could negatively affect our operating results and business; |
| ● | If we, our CROs or our IT vendors experience security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of personal data, we may face costs, significant liabilities, harm to our brand and business disruption; and |
| ● | If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected. |
Risks Associated to our Common Stock
| ● | Our common stock is a “Penny Stock” subject to specific rules governing its sale to investors that could impact its liquidity; |
| ● | The market price of our common stock may be volatile, which could lead to losses by investors and costly securities litigation; |
| ● | If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock; |
| ● | Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our common stock; |
| ● | Our common stock is controlled by insiders; |
| ● | We do not intend to pay dividends for the foreseeable future and may never pay dividends; and |
| ● | Our certificate of incorporation allows for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock. |
| ● | Our common stock has been delisted from Nasdaq and now trades only in the over-the-counter market, which has substantially reduced liquidity and may adversely affect our stock price. |
| ● | We may be unable to relist on Nasdaq or any other national securities exchange, and any relisting would require us to satisfy more stringent initial listing standards. |
| ● | Our common stock is subject to the “penny stock” rules, which may further limit trading activity and liquidity. |
| ● | Our delisting may reduce analyst coverage and institutional ownership of our common stock. |
| ● | Our delisting impairs our access to the capital markets, including our loss of eligibility to use Form S-3, and may make raising capital more difficult, more expensive, and more dilutive. |
| ● | Our common stock may no longer qualify as a “covered security,” subjecting offers and sales to additional state “blue sky” requirements. |
| ● | Our common stock may be removed from stock market indices, resulting in forced selling. |
| ● | Our common stock may not be eligible for margin borrowing and could be subject to limitations on clearing and settlement through DTC. |
| ● | Our delisting may harm our reputation and our relationships with customers, suppliers, employees, and other stakeholders. |
| ● | The market price of our common stock has been and may continue to be volatile, and the thinner over-the-counter market may make it more susceptible to manipulation. |
| ● | Future sales or issuances of our common stock, including at depressed prices, could result in substantial dilution and further depress our stock price. |
| 4 |
PART I
Item 1. Business.
Overview
Protagenic Therapeutics, Inc. (together with its subsidiary, “Protagenic,” the “Company,” “we,” “our” or “us”) is a biopharmaceutical company focused on discovering and developing therapeutics for stress-related neuropsychiatric and mood disorders. Our proprietary, patent-protected, first-in-class lead compound, PT00114, is a synthetic form of Teneurin Carboxy-terminal Associated Peptide-1 (“TCAP-1”). TCAP-1 is an endogenous brain signaling peptide that can dampen overactive stress responses. In preclinical animal models, PT00114 has demonstrated efficacy in depression, anxiety, substance abuse and addiction, and PTSD, and it works through a novel mechanism of action. We own exclusive, worldwide rights to PT00114 through our license agreement with the University of Toronto, and we hold an exclusive right to license additional intellectual property generated by Dr. David Lovejoy’s laboratory at the University of Toronto. We are also developing follow-on compounds in the TCAP family. Extensive peer-reviewed research underscores the central role that stress plays in the onset and progression of disorders such as depression, anxiety, substance abuse and addiction, and PTSD. The mechanism of action of TCAP-1 suggests that it counterbalances excess stress signaling at the cellular level within the brain’s stress response cascade. In preclinical animal models of these disorders, TCAP-1 has been observed to alleviate the harmful behavioral, biochemical, and physiological effects of stress while supporting brain health. We completed the preclinical work required to begin a clinical trial in the first half of 2023. We began our first human trial, designed to evaluate the safety and efficacy of PT00114, on September 26, 2023. On May 22, 2024, we announced the complete results of the single-dose portion of our Phase I trial. In December 2025, we announced that we had completed the multiple-dose portion of our Phase I study in healthy volunteers. We expect to begin a Phase 2 study in late 2026 to evaluate PT00114 in a targeted population of patients affected by chronic stress-related psychiatric disorders.
As Protagenic transitions into a clinical-stage company, we aim to complete certain key strategic and tactical milestones over the coming two years, including:
| ● | Efficiently advance our lead product candidate, PT00114, through clinical trials in treatment resistant depression, substance use disorder, generalized anxiety disorder, and/or post-traumatic stress disorder; |
| ● | Develop additional product candidates from the TCAP family to build out a broad pipeline of assets with differentiated features using our unique expertise with this mechanism; |
| ● | Explore efficacy in additional stress-related neuropsychiatric, neurodegenerative and mood disorders beyond initially targeted indications; |
| ● | Facilitate long-term growth by leveraging a team of nimble R&D, operational, clinical and commercial experts; and |
| ● | Proactively assess strategic partnership opportunities including in important international markets |
| ● | Continue with our strategy of strengthening our IP position in this important novel field of neuropsychiatry. |
| 5 |
Prior Phytanix Bio Business
During the year ended March 31, 2026, the Company entered into a reverse merger with Phytanix Bio as well as an unwind of this merger. Due to this reverse merger, the Company presents the historical financial information of Phytanix Bio and only includes the financial information for Protagenic for the period after the reverse merger. The financial numbers for Phytanix Bio are consolidated only through the date of the unwind. (See Note 4) This limits comparability of the Company’s number between the years presented.
The prior Phytanix Bio business consisted of the following drug candidate programs:
PHYX-001: Kv7.2/7.3 Agonist for Epilepsy and Mood Disorders
PHYX-001 is an in-licensed Kv7.2/7.3 agonist (non-cannabinoid) epilepsy asset that shares the same mechanism of action as compounds currently in late-stage development, including BVH-7000 and XEN1101. These comparator molecules are in Phase 3 clinical trials for focal onset seizures (FOS), generalized tonic-clonic seizures (GTCS), and major depressive disorder (MDD). XEN1101 (Azetukalner) has demonstrated encouraging efficacy and safety in Phase 2 studies (French et al., 2023). The intellectual property covering PHYX-001 includes two patent families (PHB0001 and PHB0002) related to our platform of potassium channel modulators with coverage in epilepsy. Patent family PHB0001 includes a granted U.S. patent expiring in June 2037. Patent family PHB0002 includes a granted U.S. patent and a pending European application, which, if granted, would cover up to 39 countries and extend until December 2038. These protections provide a substantial runway for development, and additional analogs may be introduced into the pipeline to further expand this franchise.
PHYX-002: Cannabinoid-Based Therapeutics
PHYX-002 is an internally developed cannabinoid asset with the potential to address a wide range of therapeutic areas. The Company anticipates further intellectual property filings as this program advances, with the goal of developing a product with improved potency and lower dosing requirements compared to currently available cannabinoid medicines, including Epidiolex. Potential clinical indications span epilepsy, schizophrenia, autism spectrum disorder, anxiety, depression, and cardiovascular disorders. Because this program involves new proprietary molecules, we anticipate the possibility of restarting the intellectual property “clock,” which could extend the exclusivity horizons if composition-of-matter claims are obtained.
PHYX-003: Anti-Obesity Candidate
PHYX-003 is an internally developed preclinical asset targeting obesity. New intellectual property is being generated around this program, including potential composition-of-matter patents (which, if granted, would establish ownership of the underlying molecule), therapeutic use patents, synthetic route patents, and formulation patents.
The program is designed to potentially enhance weight-loss outcomes compared with current blockbuster therapies such as tirzepatide (Mounjaro/Zepbound) and semaglutide (Ozempic/Wegovy). Given the rapid growth and high level of unmet need in the global obesity market, PHYX-003 could represent a significant opportunity for the Company.
PHYX-004: Cannabis Extract for Bladder Pain Syndrome / Interstitial Cystitis
PHYX-004 is an internally developed cannabis-derived extract in preclinical development for the treatment of bladder pain syndrome / interstitial cystitis. Intellectual property is expected to be generated in several categories, including extraction methodology (process patents), extract composition, formulation, and therapeutic use claims. There is a significant unmet medical need in this indication, particularly due to limitations associated with the current standard of care, Elmiron. As such, PHYX-004 has the potential to address a patient population with few effective therapeutic options.
PHYX-005: Modified Stilbenoid Program for Central Nervous System (CNS) and Inflammatory Indications
PHYX-005 is an internally developed stilbenoid-based asset with potential applications in central nervous system and inflammatory conditions, including treatment-resistant seizures. The intellectual property portfolio supporting this program includes two patent families (PTX0001 and PTX0002). Patent family PTX0001 includes UK patent GB2609814, which provides composition-of-matter and medical use coverage extending until March 2041. Corresponding applications have been filed in Europe, Australia, Brazil, Canada, China, Israel, India, Japan, Republic of Korea, Mexico, the United States, South Africa, and the United Kingdom. Grants are anticipated shortly in the U.S., Europe, Australia, and Canada. The PTX0002 patent family remains pending and is expected to expand coverage through composition-of-matter and medical use filings. Collectively, these protections support a long-term platform around modified stilbenoids, complementing our cannabinoid-based portfolio.
| 6 |
IND Submission
We currently anticipate re-submitting an investigational new drug (IND) application, later in 2026, in advance of initiating the Phase IIa portion of our present clinical study, to ascertain whether this portion of the study may be conducted in the United States. The Phase I/IIa study, to evaluate the safety, tolerability, and early activity of PT00114 (TCAP) in healthy volunteers and patients with psychiatric illnesses, commenced in the third quarter of 2023. The IND enabling studies, including the preclinical efficacy data generated, as well as the GLP toxicology study, and a summary of the Phase I clinical trial plan, were among the components of this regulatory submission.
Clinical Development
The clinical development program will be led by our expert consultant, Dr. Maurizio Fava, MD, PhD, a world-leader in psychiatric disorders, the Psychiatrist-in-Chief of the Massachusetts General Hospital and Slater Family Professor of Psychiatry at Harvard Medical School. Dr. Fava was co-principal investigator of STAR*D, the largest research study ever conducted in depression, has coauthored more than 800 medical journal publications, and is one of the top enrolling psychiatry clinicians in the U.S. Protagenic’s Phase I/II clinical study was designed by Dr. Fava, who will also serve as the trial’s principal investigator.
We will launch our clinical program with atrial designed first to evaluate the safety of TCAP in a small cohort of healthy volunteers, immediately followed by the evaluation of safety, pharmacological and clinical activity in cohorts of patients with stress-related neuropsychiatric disorders. We plan to start with patients diagnosed with Generalized Anxiety Disorder (GAD). Following that trial, we will explore other disorders including, but not limited to depression, addiction, and Post-Traumatic Stress Disorder (PTSD). We will be using this study for both safety and preliminary efficacy to prioritize indications for later phase development that would ultimately support a New Drug Application (NDA) and registration. The four indications were chosen for multiple reasons, including the mechanism of TCAP in reducing biological stress signals, preclinical evidence of efficacy in animal models of these disorders and the high unmet need in these patient populations, which creates significant market opportunity. Healthy volunteers will be the first cohort and subsequent parallel cohorts will include patients with:
| ● | Generalized Anxiety Disorder (GAD) who have suboptimal response to or poorly tolerated two prior SSRIs /SNRIs; |
| ● | Major Depressive Disorder (MDD) who have suboptimal response to or poorly tolerated two prior SSRIs / SNRIs; |
| ● | Substance Use Disorder (SUD) who are on treatment with Suboxone and have suboptimal response; and |
| ● | Post-Traumatic Stress Disorder (PTSD) who have suboptimal response to or intolerance of sertraline and paroxetine. |
Furthermore, although patient populations and their responses to CNS agents can be highly variable in clinical studies, we attempt to mitigate this by stratifying the initial series of cohorts to select for and control for corticosterone levels to enable the broadest window of effect detection. Preclinical studies of TCAP demonstrate that its beneficial actions are most easily observed in stressed animals, which show elevations of plasma corticosterone levels at baseline before TCAP treatment. Anxious or depressed patients have elevated corticosterone levels, providing an opportunity to identify patients more likely to benefit pharmacologically and potentially clinically. This also provides a useful translational bridge between preclinical behavioral models and human clinical studies and enables flexibility in evaluating routes of administration.
Market for Stress-Related Neuropsychiatric Disorders: Depression, Addiction, Anxiety, and PTSD
Humans living in our modern world, in both developed and developing nations, are being exposed to a multitude of life stressors that are progressively taking a toll on our mental health. The recent COVID-19 has exacerbated both near-term and long-term global impacts of stress-induced disorders on modern society. Stress-related mental, mood and behavioral disorders include, but are not limited to: treatment resistant depression (TRD), which is a subgroup of major depressive disorder (MDD); addiction or substance use disorder (SUD); and anxiety, including generalized anxiety disorder (GAD) and post-traumatic stress disorder (PTSD). These disorders are a leading cause of disability worldwide and also a major contributor to suicide. Yet, the majority of these patients are inadequately served by current therapeutic options, which can have limited efficacy, significant side effects and high treatment burden. We believe these stress-related disorders are suitable indications for the use of Protagenic Therapeutics neuropeptide-based drug candidates.
| 7 |
Major depressive disorder (MDD) is highly prevalent and disabling. The lifetime prevalence is approximately 12% with a past year prevalence of 7.8% of adults in the United States in 2019, translating to over 19 million adults each year. The World Health Organization estimates 264 million people globally suffer from depression, which ranks depression as one of the highest causes of disability and mortality in the world. Stress plays a significant role in this illness and affects as many as half of people diagnosed with depression. MDD is characterized by multiple symptoms, potentially including depressed mood, loss of interest or pleasure, change in appetite or weight, sleep disturbance, fatigue or loss of energy, neurocognitive dysfunction, psychomotor agitation or retardation, feelings of worthlessness or excessive guilt, and suicidal ideation and behavior. MDD is highly treatment resistant, with 45-50% of patients who receive initial treatment for MDD not achieving long term remission, generally referred to as Treatment Resistant Depression (TRD). Patients suffering with TRD are at greater risk of hospitalization for their psychiatric illness and are more likely to abuse drugs and alcohol. These patients have a lower long-term quality of life and are at increased risk of attempting suicide. MDD is also highly recurrent and the estimated rate of recurrence over two years is over 40%, which rises to 75% after two episodes within five years.
Treatment guidelines recommend the combination of pharmacotherapy plus psychotherapy, but pharmacotherapy alone and psychotherapy alone are frequently used. For initial pharmacotherapy with antidepressants, selective serotonin reuptake inhibitors (SSRIs) are recommended. However, several classes of antidepressants are available, including serotonin-norepinephrine reuptake inhibitors (SNRIs), atypical antidepressants, and serotonin modulators, with efficacy generally comparable across and within classes. Drug choice is based on multiple factors, including side effect profile, comorbid illnesses, concurrent medications, patient preference, and cost. Physicians typically cycle through multiple generics if the initial response is suboptimal or patients experience AEs. Efficacy of therapy is challenged by non-compliance during the weeks to months required to achieve therapeutic benefit in combination with daily dosing requirements. However, SSRIs can produce significant quality of life side effects that interfere with medication adherence, including sexual dysfunction, gastrointestinal nausea and diarrhea, insomnia and weight gain. As a last resort, this disease is currently managed by invasive treatment, primarily electroconvulsive therapy (ECT). However, the side effects and high cost prevent widespread adoption. Several drugs that have launched in recent years validate the market for branded agents in this field, in spite of their marginal improvements in safety or efficacy.
Generalized anxiety disorder (GAD) is one of the most common mental disorders in both community and clinical settings. In the United States, the estimated lifetime prevalence of GAD is 5.7%, corresponding to 18.9 million individuals, respectively. GAD is characterized by excessive and persistent worrying that causes significant distress or impairment on most days and is hard to control. Other symptoms can include apprehensiveness, irritability, increased fatigue and muscular tension. GAD is also associated with increased rates of substance abuse, posttraumatic stress disorder, and obsessive-compulsive disorder. GAD is a potentially chronic illness, with symptom severity fluctuating over time. A 12-year study of treated patients showed approximately 60% of patients had symptoms resolve, but around one-half of those subsequently relapsed.
Pharmacotherapy for GAD is primarily selective-serotonin reuptake inhibitors (SSRIs) and serotonin-norepinephrine reuptake inhibitors (SNRIs), which are mildly efficacious. Clinical trials for different SSRIs and SNRIs have shown approximately the same effectiveness, with response rates of approximately 60- 70% for the drug and 40% for placebo. However, SSRIs can produce significant quality of life side effects that interfere with medication adherence, including sexual dysfunction, gastrointestinal nausea and diarrhea, insomnia and weight gain. Thus, choice of agent is often dependent on the patient’s side effect profile for individual drugs. Benzodiazepines are efficacious and can reduce emotional and somatic symptoms within hours. However, concerns about dependence risk has contributed to a decline in their use. Buspirone has similar efficacy to benzodiazepines without the risk of dependence but has a time to onset of approximately four weeks. As the majority of these agents are now available as generics, the worldwide market for GAD therapies was expected to reach $1.8 billion in 2023 and with an anticipated forecasted value of $4.3 billion by 2033 (https://www.futuremarketinsights.com/reports/generalized-anxiety-disorder-treatment-market).
| 8 |
Post-traumatic stress disorder (PTSD) is one of the most common psychiatric disorders, with an estimated past-year and lifetime prevalence of 4.7% and 6.1%, translating to 11.5M adults in the US each year. PTSD develops in some patients following exposure to a traumatic event involving actual or threatened injury to themselves or others, such as war, natural disasters, rape or assault. Symptoms can be severe, chronic and disabling, which can include intrusive thoughts, nightmares and flashbacks of past traumatic events, avoidance of reminders of trauma, hypervigilance, and sleep disturbance, all of which lead to significant occupational and social impairment. Currently, PTSD is treated with psychotherapy and/or pharmacotherapy, with psychotherapy as the recommended primary intervention. Logistics and cost often limit access to psychotherapy, which results in many patients needing to rely on pharmacotherapy. Guidelines for pharmacotherapy recommend first-line treatment with sertraline and paroxetine, selective serotonin reuptake inhibitors (SSRI) antidepressants, as these are the only approved medications for PTSD. However, these only treat one aspect of symptomology and efficacy is limited, with fewer than 30% of patients experiencing remission. The side effect profile of these agents results in significant rates of discontinuation, particularly the severe effects such as suicidality and sexual dysfunction. Serotonin-norepinephrine reuptake inhibitors (SNRI) and second-generation antipsychotics are used off-label in some patients, but efficacy is sporadic, and side-effects can make these undesirable therapeutic options. As all these options are currently generic, branded commercial sales for PTSD is almost non-existent. Given the size of the potential addressable population and limited therapeutic options available, a therapy with a superior therapeutic index could achieve significant market penetration and sales.
Substance use disorders (SUDs) are highly prevalent. According to the 2020 National Survey on Drug Use and Health (NSDUH), 40.3 million Americans, aged 12 or older, had a substance use disorder (SUD) in the past year. The majority of SUDs involve alcohol use disorder (14 million), followed by illicit drug use disorder (8 million). Illicit drug use and nonmedical use of medications alone or in combination with alcohol are associated with a substantial proportion of emergency department visits in the United States. Pharmacologic options to treat SUDs typically have limited efficacy, high treatment burden, with suboptimal side-effect profiles, ultimately leading to limited uptake and high remaining unmet medical need. 40- 60% of patients who receive SUD care experience chronic or relapsing disease course.
The incidence of opioid use disorder (OUD) and overdose deaths have reached epidemic proportions. Opioid use disorder is typically a chronic, relapsing illness, associated with significantly increased rates of morbidity and mortality. Opioid use disorder can be related to misuse of pharmaceutical opioids, heroin, or other opioids such as fentanyl and its analogues. In 2021, 3.3% of those 12 or older in the US were estimated to have used heroin at some point in their lives, translating 9.2 million people (https://www.samhsa.gov/data/sites/default/files/reports/rpt39443/2021NSDUHFFRRev010323.pdf)., Worldwide, an estimated 60 million people engaged in non-medical opioid use in 2021 (https://www.unodc.org/res/WDR-2023/WDR23_Exsum_fin_DP.pdf, https://www.unodc.org/res/wdr2022/MS/WDR22_Booklet_3.pdf ). Correspondingly, overdose deaths involving opioids in the US increased from an estimated 70,029 in 2020 to 80,816 in 2021, representing a 15% increase.
Unmet needs are particularly high in OUD. First-line treatment for most patients is medication-assisted treatment, consisting of pharmacotherapy with an opioid agonist or antagonist in combination with psychotherapy. Pharmacotherapy can include an opioid agonist (methadone or buprenorphine) and/or an opioid antagonist (e.g. naltrexone). Guidelines for mild opioid use disorder suggest first-line treatment with long-acting injectable naltrexone (e.g. Vivitrol) administered monthly. Guidelines for moderate to severe opioid use disorder suggest initial use of buprenorphine (e.g. Suboxone) due to the higher risk of lethal overdose with methadone. Treatment can allow patients to return to a productive lifestyle but has low success rates and can be extremely burdensome. These therapies require patients remain on maintenance treatment with an opioid agonist for many years as they are physically dependent upon the medications. A minority may be tapered off after a few years, with the taper itself taking several months to years.
The global OUD market was estimated at USD 5.29 billion in 2024 and is projected to reach USD 10.25 billion by 2030, growing at a CAGR of 11.7% from 2025 to 2030.( https://www.grandviewresearch.com/industry-analysis/opioid-use-disorder-market) The treatment burden and side effect profile of these therapies is substantial. Buprenorphine is classified as a schedule III controlled substance in the United States, with use limited to certified and specially trained physicians. Side effects include sedation, headache, nausea, constipation, insomnia, and sweating. Death is possible if buprenorphine is taken in combination with other substances, especially benzodiazepines and alcohol. Methadone is highly regulated in the United States, where it is classified as a schedule II drug. Only licensed opioid treatment programs or inpatient hospital units are permitted to dispense. Typical side effects of methadone include constipation, drowsiness, sweating, peripheral edema, reduced libido, and erectile dysfunction, with some patients experiencing severe adverse effects including cardiac arrhythmias, hyperalgesia, and overdose.
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Alcohol use disorder (AUD) is extraordinarily prevalent. Approximately 30% of adults in the United States use alcohol in an unhealthy manner and may need some form of intervention. The 2019 United States National Survey on Drug Use and Health estimated that of Americans over the age of 12 in the past 30 days, 24% reported binge drinking (five or more drinks on one occasion) and 6% reported heavy drinking (five or more drinks on each of five or more days). The National Institute on Alcohol Abuse and Alcoholism (NIAAA) reports 28% of US adults exceed thresholds for risky use alcohol consumption, with 19% exceeding the daily limit and 9% exceeding both the daily and weekly limits. Rates of diagnosable AUD by DSM-5 criteria from the third National Epidemiologic Survey on Alcohol and Related Conditions showed that 29% had met criteria for an alcohol use disorder in their lifetime and 14% met criteria for a current alcohol use disorder. Worldwide, the World Health Organization estimates that 5% of adults (>283 million people) had alcohol use disorder within the prior 12 months.
AUD is responsible for significant mortality and morbidity. Excessive alcohol consumption is the third leading preventable cause of death in the United States directly causing approximately 85,000 deaths per year, roughly 10% of deaths among working age adults. Nearly 5% of all deaths worldwide (approximately three million each year) have been attributed to alcohol use with 5% of those specifically due to AUD. The economic cost of excessive alcohol use in the United States is estimated to be $249 billion in 20101 by the CDC. Therapeutic unmet needs are significant for AUD and the condition is frequently untreated. Psychosocial interventions can be effective for treatment, but up to 70% of individuals return to heavy drinking. For patients who met DSM-IV criteria for alcohol abuse, 46% were in remission, 24% continued to meet abuse criteria, and 30% met criteria for alcohol dependence in the future. For patients who met DSM-IV criteria for alcohol dependence, 39% were in remission, 15% met criteria for abuse only, and 46% continued to meet dependence criteria.
Several medications can be used to treat AUD, which can lead to reduced heavy drinking and increased days of abstinence. For most patients treated with moderate to severe alcohol use disorder, guidelines recommend first-line treatment with naltrexone (e.g., Vivitrol), an opioid antagonist. Vivitrol is an extended-release injectable naltrexone that allows for once monthly dosing that was approved in 2006. Vivitrol is priced at $~1,738/month (https://www.drugs.com/price-guide/vivitrol ) and 2023 worldwide sales have grown to $400.4 million (https://investor.alkermes.com/news-releases/news-release-details/alkermes-plc-reports-financial-results-fourth-quarter-and-year-3). The manufacturer projects Vivitrol net sales to be between $460 million and $480 million for the full year 2026. (https://investor.alkermes.com/static-files/5f9eb70d-a7bd-42a7-8617-42c30f63e5b4), with patent expiry in 2029 (https://www.fdanews.com/articles/192221-alkermes-grants-amneal-generic-rights-for-vivitrol). Acamprosate (e.g., Campral) is recommended for those in whom naltrexone is contraindicated, such as those taking opioids or with acute hepatitis. Campral (Acamprosate) was approved by the FDA in 2004 and reached peak worldwide sales of $87M in 2008. Acamprosate is currently only available as generic in the U.S but is still sold as branded Campral ex-US. Given the overall prevalence of AUD, these relatively low sales numbers indicate the vast majority of patients with AUD are not treated with pharmacotherapy.
Teneurin Carboxy-terminal Associated Peptide (TCAP) as a Therapy
Our approach to treating stress-related neuropsychiatric and mood disorders is based on research into brain mechanisms conducted over the last 15 years in the laboratory of the company’s scientific founder, Dr. David Lovejoy, from the University of Toronto. TCAP was discovered in a genome-wide search for proteins related to corticotropin releasing factor (CRF), an endogenous brain peptide known to be the central mechanism coupling external stress to psychological, behavioral, and endocrine responses. Dr. Lovejoy and his colleagues discovered and characterized Teneurin Carboxy-terminal Associated Peptide (TCAP); their further work revealed that TCAP is of ancient evolutionary origin and plays a central role in maintaining healthy brain structure and function in the face of the negative effects of stress. Although four TCAP peptides were discovered, only TCAP-1 is expressed independent of a larger Teneurin protein and is the primary focus of our development (PT00114).1 As of March 2023, these are the most recent data released by the CDC.
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TCAP reverses the impact of stress on the Hypothalamic-Pituitary-Adrenal (HPA) axis, the endocrine and behavioral control system which connects environmental stress to behavioral responses via brain levels of Corticotropin Releasing Factor (CRF) and blood levels of the stress hormone cortisol. Stress elevates CRF, which in turn elevates cortisol levels. Studies have demonstrated that TCAP counteracts the effects of either endogenous or pharmacologically-administered CRF via a non-CRF receptor pathway in the brain, that is believed to be evolved over millions of years as a homeostasis-related pathway. There has been strong interest in the pharmaceutical industry for decades to develop drug candidates that block the negative effects of CRF by attempting to directly antagonize the CRF receptor, however clinical results to date with prior CRF receptor antagonists have been disappointing. Because TCAP counteracts the action of CRF by activating separate receptors instead of directly blocking CRF receptors, we believe it is a superior approach to alleviating stress-related neuropsychiatric disorders; TCAP-1 acts by binding to Latrophilin-1 and Latrophilin-3, G-protein-coupled receptors (GPCRs) expressed on nerve cells in the extended amygdala, the region of the brain involved in memory, emotion, and fear. TCAP acts through these receptors to block the effects of CRF and potentially other stress mediators such as Arginine-Vasopressin (AVP). Due to differences in the mechanism of action, TCAP is expected to be efficacious in clinical settings in which earlier studies with CRF receptor antagonists were not. We believe this novel mechanism of action can provide an attractive therapeutic profile for patients who are not fully responsive to currently available therapies.
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Two key effects of TCAP may contribute to its pharmacological activity in reversing or preventing stress-induced behavioral distortions. In settings of stress and depression, the activity of specific neural circuits can be diminished compared to the levels of activity observed in healthy brain tissue. After administration, TCAP crosses the blood brain barrier and concentrates in regions of the brain associated with the regulation of mood disorders. Administered TCAP can lead to increases in activity in some of the neuronal circuitry implicated in depression, demonstrated by increases in the utilization of glucose, a surrogate for cell activity. The fact that the pharmacological effects of TCAP persist after the drug has been cleared aligns with findings that TCAP applied to neurons in culture stabilizes dendritic spines, structures that sprout from the surface of neurons and can form synapses with other neurons to create functional circuitry. Stress and the associated rise in CRF have been reported to cause loss of synapses in animal models. The fact that the pharmacological actions of TCAP persist for weeks are consistent with its producing lasting changes in neuronal function by changing patterns of gene expression and thus creating relatively stable changes in neuronal function. In a number of these models, a single subcutaneous dose of TCAP will prevent the behavioral consequences of stress encountered three weeks later. This is especially notable since the administered dose of TCAP is eliminated from the plasma within hours of administration.
Our lead compound is a 41-residue peptide synthetic TCAP-1, which we have designated PT00114. In addition, we have a portfolio of earlier stage neuropeptides targeting the TCAP pathway that are in preclinical evaluation. The initial dosage form is intended as a subcutaneous injection but is also amenable to other routes of administration including sublingually or intra-nasally. This affords a range of target product profiles and opportunities for lifecycle management.
While many of the initial studies of TCAP had been generated in the lab of Dr. David Lovejoy, we have designed several preclinical studies over the last four years to validate the safety and efficacy of PT00114, for which we hired multiple independent contract research organizations (CROs) to conduct these studies. In preclinical rodent models, administration of PT00114 results in reproducible, dose-dependent reversal of a range of stress-induced behavioral distortions, including depression, stress-exacerbated anxiety, excessive startle, drug seeking, and opioid withdrawal. Stress-induced anxiety was measured by an elevated plus maze, an open field with stressed animals, and acoustic startle in CRF-treated animals. Depression was measured by tail suspension and forced swim. Stress-induced changes in tube-restrained rodents were used as a well-validated model for sub-acute stress. Notably, PT00114 was found to be pharmacologically active in stressed rodents but relatively inactive in non-stressed rodents.
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In studies conducted with Charles River Laboratories in Kuopio, Finland, PT00114 showed beneficial effects in Chronic Social Defeat, a murine model of stress-induced behavioral dysfunction that has features of depression. In this model, male mice are placed in cages along with older, dominant male mice. This results in progressively more “resigned” behaviors in the mice experiencing this domineering exposure. This results in a series of behaviors in the cowed mice, termed Chronic Social Defeat. PT00114 reverses many of the component behaviors typically measured in this model, suggesting that it reverses the negative effects of stress in the “defeated” animals.
PT00114 demonstrated efficacy in a variable chronic stress model that has features of anxiety and PTSD. In an open field assessment, mice or rats are stressed by being placed in a tube for several hours, then placed in an open box where their movement is observed for 20 minutes. Control animals exhibit stress response behavior by not moving around much and staying near the edges of the box. Animal receiving PT00114 at the end of the stress condition moved around the open field. Animals receiving multiple administrations of a control small molecule CRH antagonist did not venture into the open field, indicating they were stressed. These results are also reflected in blood cortisol levels, where control mice had increased cortisol levels, which were reduced by treatment with PT00114, but not by the small molecule CRF antagonist.
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Stress plays a central role in a broad range of addictions, including alcohol and opioids. The ability of PT00114 to blunt excessive stress may be able to provide non-dependence forming treatment of addictions. A series of studies conducted at Porsolt Laboratories in Lavel, France support the potential utility of PT00114 as a treatment to help people defeat opioid addiction. In rats addicted to opioids, administering CRF models environmental stress, causing them to frantically seek opioids. PT00114 reduces opioid seeking behavior in response to CRF administration. Further studies conducted by Porsolt following EMEA guidelines demonstrated that on its own, PT00114 was not addictive and rats did not develop dependence on the peptide after chronic administration.
PT00114 has also demonstrated pre-clinical efficacy in a murine model of Naloxone-precipitated opioid withdrawal (Saelens test).). In this test, mice are addicted to opioids and the animals are then administered the opioid antagonist naloxone, which immediately blocks opioid action and triggers profound stress and opioid withdrawal. This manifests as a behavioral stress response with the mice jumping up to six inches into the air over 70 times in a 20-minute observation period. Administering PT00114 at three different time points within the experiment – before the naloxone-driven withdrawal, before the period of opioid addiction, or up to three weeks before the induced withdrawal – results in a reproducible, dose-dependent restoration to non-stressed behavior and reduced jumping. Significantly, this is not accompanied by any evidence of sedation or reduced activity. This effect appears independent of the opioid used as PT00114 ameliorates this withdrawal-triggered jumping stress behavior in mice experiencing withdrawal from both fentanyl and morphine.
Preclinical Safety and Toxicology
Preclinical safety data for PT00114 demonstrates a robust profile in both rats and non-human primates. As the mechanism is unique and TCAP is a part of healthy brain signaling, we believe PT00114 will have a differentiated side effect profile relative to existing antidepressant and antipsychotic agents. A key aspect of the TCAP mechanism is that it does not completely block the perception of and responses to stress; it rather protects against stress overload. Some perception of environmental stress and a proportionate response to that stress is adaptive behavior and it is not desirable to completely block stress responses. Unlike benzodiazepines that can cause sedation and are prone to dependence, TCAP prevents the maladaptive response to environmental stress without sedation and without developing dependence.
We have completed non-GLP Dose-Range-Finding (DRF) toxicology studies of PT00114 administered subcutaneously daily for five days in rats and non-human primates. The doses tested were substantially above the anticipated clinical doses and were well tolerated and safe, with no dose-limiting toxicities observed at doses at least 50-fold higher than anticipated clinical exposures. No major changes in hematology or clinical chemistries were seen, including prolactin levels or testosterone levels, changes in which may impact libido. Distinct from SSRI’s, there was no impact on ambulation, sedation or weight gain. Importantly, further studies conducted following EMEA guidelines, demonstrated that on its own PT00114 was not addictive and rats did not develop dependence to the peptide after chronic administration. The in life 28-day GLP toxicology testing in both the rats and non-human primate have been completed. There have been no changes in clinical chemistries or pathology that would prompt a stop in the program and the therapeutic margin is large. The final audited reports are currently being compiled.
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Process Development and Manufacturing
We currently do not own any manufacturing facilities and rely on 3rd party contract manufacturers for synthesis of PT00114. We manufactured sufficient PT00114 synthesized under the Good Manufacturing Practices (cGMP) conditions for our Ph1 study that was completed in 2025. PT00114 is highly soluble and has shown excellent preliminary stability in several storage conditions, with the material being stable for at least 12 months.
The initial dosage form developed will be a subcutaneous injection. Because PT00114 is also amenable to other routes of administration including sublingually or intra-nasally, we will be doing preliminary process work to develop these formulations, and anticipate using one of these dosage forms in later stage clinical studies.
Technology License Agreement
On July 31, 2005, the Company had entered into a Technology License Agreement (“License Agreement”) with the University of Toronto (the “University” or “UT”) 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. Unless earlier terminated, the term of this License Agreement shall terminate on the expiration or invalidity of the last issued Patent in the License Agreement
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 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 year ended March 31, 2026 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. David Lovejoy at the University, 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 six intellectual patent properties.
Sales and Marketing
We currently have no sales, marketing, or distribution capabilities. To commercially market PT00114 and any product candidates we develop in the future, we would either need to develop an internal sales team and marketing department or collaborate with third parties who have sales and marketing capabilities. As we commenced clinical trials in the third quarter of 2023, we expect to seek a Market Access expert or consultancy to better understand clinician and payor dynamics in the therapeutic areas we are focused on, so that, as we begin later stage studies, we are working on a deeper commercial assessment in parallel.
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Competition
The pharmaceutical and biotechnology industries are highly competitive and characterized by rapidly evolving technology and intense research and development efforts. We expect to compete with companies, including major international pharmaceutical companies and other institutions that have substantially greater financial, research and development, marketing and sales capabilities and have substantially greater experience in undertaking preclinical and clinical testing of products, obtaining regulatory approvals and marketing and selling biopharmaceutical products. We will face competition based on, among other things, product efficacy and safety, the timing and scope of regulatory approvals, product ease of use and price.
Despite a large patient population and current treatments that leave much room for improvement, industry-wide developmental pipelines are sparse and few novel candidates are in development. The serendipitous discoveries of current drug classes, side effects, and lack of efficacy have led to shrinkage or extinction of many pharma or small biotech neuroscience research programs.
Set forth below is a discussion of competitive factors for each of the current drug classes commercially available for TRD, and the competitive advantages that we believe PT00114 may offer. The basis for our beliefs regarding the competitive advantages that PT00114 may offer over its competitors is our own pre-clinical animal studies. We acknowledge that these beliefs and conclusions about competitive advantages must be regarded as theoretical until such time as we have human clinical data that supports and re-affirms the results seen in pre-clinical animal studies.
Opioid receptor modulators
Opioid receptor modulators have the potential to be therapeutic drugs for TRD but have a high likelihood of abuse and thus regulatory restrictions. We believe that our competitive advantage is that PT00114 targets a different receptor system, therefore it is not likely to have a clinical overlap with opioid receptor modulators.
Atypical Antipsychotics with antidepressant effects (dopamine receptor modulators)
Brexpiprazole (Rexulti from Otsuka) is a dopamine (D2 receptor) partial stimulator (agonist) approved as an oral adjunctive TRD therapy. Its side effects include suicidal risk, weight gain, and restlessness. Cariprazine (Vraylar from AbbVie) is an oral dopamine D2 and D3 receptor antagonist approved for schizophrenia and bipolar disorder in development for TRD. The most common side effects reported were extrapyramidal symptoms, the urge to move (akathisia), indigestion (dyspepsia), vomiting, drowsiness (somnolence), and restlessness. We believe that our competitive advantage is that PT00114, due to its low toxicity profile, will be clinically preferable to these antipsychotic drugs.
Ketamine and Esketamine
Ketamine and Esketamine (Spravato nasal spray from Johnson & Johnson) the S(+) enantiomer of the drug ketamine act primarily as a non-competitive NMDA receptor antagonist but is also a dopamine reuptake inhibitor. Although ketamine is used off-label and Esketamine was recently approved for TRD, limitations and concerns around use limit uptake in a broader population. We believe that our competitive advantage is that the toxicity profile is likely to be less favorable when compared with PT00114.
GABA receptor modulators
GABA receptors, when bound by inhibitory neurotransmitters found throughout the brain, act as a brake on nerve activity. Sage Therapeutics is developing multiple compounds that target this mechanism and more candidates are expected to come from this therapeutic class that may present a competitive challenge for PT00114.
NMDA receptor modulators
The N-methyl-D-aspartate (or NMDA) receptor is a molecule that appears on the surface of neurons. When “activated” by a drug that binds with it, the NMDA receptor is a potential natural way to counteract TRD. More candidates are expected to come from this therapeutic class that may present a competitive challenge for PT00114.
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PT00114’s Competitive Advantages
Our preclinical data and the corroborated mechanism of action of PT00114 indicates its advantages as compared to current approved therapies:
| ● | PT00114 has a rapid onset of action in animal anxiety and depression models as compared with other TRD drugs; |
| ● | PT00114’s effects are long-lasting and potent (single 1-10 nmole/kg dose lasts up to one week for glucose/insulin blood-based biomarkers); |
| ● | PT00114 is rapidly cleared (its “half-life” is 5-10min if given intravenously (IV), 20-30 minutes if given subcutaneously (SC); |
| ● | PT00114 naturally crosses the blood brain barrier; |
| ● | PT00114 is an L-isomer, a naturally modified peptide, therefore liver toxicities typically associated with other psychiatric therapies are not anticipated; |
| ● | PT00114 is stable when lyophilized form, making it delivery in an oral or nasal formulation feasible; |
| ● | PT00114 will be manufactured by standard solid phase chemistry, which is less expensive than manufacturing processes required by other TRD drugs; and |
| ● | Studies have demonstrated that the compound does not caused dependency following multiple administrations. |
Intellectual Property
We believe that patents, trademarks, copyrights and other proprietary rights are important to our business. We also rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We seek to protect our intellectual property rights by a variety of means, including obtaining patents, maintaining trade secrets and proprietary know-how, and technological innovation to operate without infringing on the proprietary rights of others and to prevent others from infringing on our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, actively seeking patent protection in the United States and foreign countries.
As of March 31, 2026, we have five patents issued by the Governments of the United States, Canada, Great Britian, Hong Kong, and European Union on our original platform technology, all of which have expired. The patent applications were made in the name of Dr. David A. Lovejoy and inventors, but the Company’s exclusive, worldwide rights to such patent applications are included in the License Agreement with UT. We have five further patent families which the Company has rights in or owns, as noted in the table below and include: five issued/registered patents in Canada, U.S., GB, EP, and HK, six pending patent applications in Canada, U.S., EP and HK and one allowed patent application in Canada. Our success will depend in part on our ability to maintain our proprietary position through effective patent claims and their enforcement against our competitors. Although we believe our patent applications provide a competitive advantage, the patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. We do not know whether any of our patent applications will result in the issuance of any patents. Those patents that may be issued in the future or those acquired by us may be challenged, invalidated or circumvented, and the rights granted under any issued patent may not provide us with proprietary protection or competitive advantages against competitors with similar technology. In particular, we do not know if competitors will be able to design variations on our treatment methods to circumvent our current and anticipated patent claims. Furthermore, competitors may independently develop similar technologies or duplicate any technology developed by us. Because of the extensive time required for the development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized or marketed, any related patent claim may expire or remain in force for only a short period following commercialization, thereby reducing the advantage of the patent.
We also rely upon trade secrets, confidentiality agreements, proprietary know-how and continuing technological innovation to remain competitive, especially where we do not believe patent protection is appropriate or obtainable. We continue to seek ways to protect our proprietary technology and trade secrets, including entering into confidentiality or license agreements with our employees and consultants, and controlling access to and distribution of our technologies and other proprietary information. While we use these and other reasonable security measures to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our proprietary information to competitors.
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Our commercial success will depend in part on our ability to operate without infringing upon the patents and proprietary rights of third parties. It is uncertain whether the issuance of any third-party patents would require us to alter our products or technology, obtain licenses or cease certain activities. Our failure to obtain a license to technology that we may require to discover, develop or commercialize our future products may have a material adverse impact on us. One or more third-party patents or patent applications may conflict with patent applications to which we have rights. Any such conflict may substantially reduce the coverage of any rights that may issue from the patent applications to which we have rights. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference proceedings in the USPTO to determine priority of invention.
We may collaborate in the future with other entities on research, development, and commercialization activities. Disputes may arise about inventorship and corresponding rights in know-how and inventions resulting from the joint creation or use of intellectual property by us and our subsidiaries, collaborators, partners, licensors and consultants. As a result, we may not be able to maintain our proprietary position.
As of March 31, 2026, we own or have rights in the following intellectual property:
| A METHOD FOR MODULATING INSULIN-INDEPENDENT GLUCOSE TRANSPORT USING TENEURIN C-TERMINAL ASSOCIATED PEPTIDE (TCAP)* | ||||||||||||||||||||
| COUNTRY | FILED | SERIAL# | ISSUED | PATENT# | STATUS | |||||||||||||||
| CANADA | 07/21/2015 | 2,955,410 | 02/20/2024 | 2,955,410 | ISSUED | |||||||||||||||
| GREAT BRITAIN | 07/21/2015 | 1702638.6 | 07/21/2020 | 2543996 | ISSUED | |||||||||||||||
| UNITED STATES | 07/21/2015 (PCT)/ 01/17/2017(371c) | 15/326,735 | 04/14/2020 | 10,617,736 | ISSUED | |||||||||||||||
| COMPOSITIONS, METHODS AND USES FOR ENHANCING MUSCLE FUNCTION* | ||||||||||||||||||||
| COUNTRY | FILED | SERIAL# | ISSUED | PATENT# | STATUS | |||||||||||||||
| US | 09/26/2017(PCT) / 03/25/2019(371c) | 16/336,334 | 09/20/2022 | 11,446,355 | ISSUED | |||||||||||||||
| CA | 09/26/2017 | 3,038,169 | 3,038,169 | ISSUED | ||||||||||||||||
| COMPOSITIONS, METHODS AND USES FOR TREATING POST-TRAUMATIC STRESS DISORDER * | ||||||||||||||||||||
| COUNTRY | FILED | SERIAL# | ISSUED | PATENT# | STATUS | |||||||||||||||
| UNITED STATES | 10/12/2018(PCT) /04/10/2020(371c) | 11,426,444 | 08/30/2022 | 11,426,444 | ISSUED | |||||||||||||||
| CANADA | 04/14/2020 | 3,079,724 | ALLOWED | |||||||||||||||||
COMPOSITIONS, METHODS AND USES OF A TENEURIN C-TERMINAL ASSOCIATED PEPTIDE-1 (TCAP-1) FOR TREATING OPIOID ADDICTION | ||||||||||||||||||||
| COUNTRY | FILED | SERIAL# | ISSUED | PATENT# | STATUS | |||||||||||||||
| CANADA | 3/13/2019 | 3,093,841 | PENDING | |||||||||||||||||
| UNITED STATES | 3/13/2019(PCT) / 9/11/2010 (371c) | 16/980,176 | PENDING | |||||||||||||||||
| EUROPE(UPC + Switzerland, Spain, Great Britain and Ireland) | 3/13/2019 | 19712494.4 | 02-08-2023 | 3765056 | ISSUED | |||||||||||||||
| HONG KONG (Extended EP Application. Registration for Grant filed Feb. 1, 2024)) | 3/13/2019 | 62021035260.0 | 40046105 | Registered | ||||||||||||||||
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COMPOSITIONS, METHODS AND USES OF A TENEURIN C-TERMINAL ASSOCIATED PEPTIDE AS A PEPTIDE ANTAGONIST OF CRF | ||||||||||||||||||
| COUNTRY | FILED | SERIAL# | ISSUED | PATENT# | STATUS | |||||||||||||
| CANADA | 11/27/2023 | 3,27,4255 | PENDING | |||||||||||||||
| UNITED STATES | 11/27/2023(PCT) / ,,,,,(371c) | 19/132593 | PENDING | |||||||||||||||
| EUROPE(UPC + Switzerland, Spain, Great Britain and Ireland) | 11/27/2023 | 23892848.5 | PENDING | |||||||||||||||
| HONG KONG (Extended EP Application. Registration for Grant filed Feb. 1, 2024)) | 11/27/2023 (from EP APPLICATION | 62026120978.2 | PENDING | |||||||||||||||
In the future, we may file additional patent applications based on proprietary formulations, indications, and novel compounds in the TCAP family.
Properties
The Company does not currently own any real property. Our principal offices are located at 149 Fifth Avenue, Suite 500, New York, New York 10010, in a conference room of Agenus, Inc. We utilize our principal office for quarterly board meetings and our annual shareholder meeting at no cost.
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.
Subsidiary
PTI Canada was incorporated in 2006 in the Province on Ontario, Canada. PTI Canada is a wholly-owned subsidiary of Protagenic. It provides operational support and assistance for the implementation of corporate and operational activities conducted in Canada. It also oversees and supports research and development activities conducted under auspices of UTPTI Canada also benefits through tax incentive programs provided by the governments of Canada and the Province of Ontario. We did not earn any Canadian research and development tax credits for the years ended March 31, 2026 and 2025, respectively.
Employees
We currently have two full-time and one part-time employees. We also engage consultants and temporary employees from time to time to provide services that relate to our research and development activities as well as for general administrative and accounting services. We believe that our current personnel are capable of meeting our operating requirements in the near term. We expect that as our business grows we may hire additional personnel to handle the increased demands on our operations, preclinical and clinical activities.
Corporate and Available Information
Our principal offices are located at 149 Fifth Avenue, New York, New York 10010. Our web address is www.protagenic.com.
We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and Exchange Commission, or SEC. In addition, you may read and copy any materials we file with the SEC at its Public Reference Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10:00 am to 3:00 pm. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site, www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically with the SEC. All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.
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Item 1A. Risk Factors.
An investment in our common stock is speculative and illiquid and involves a high degree of risk including the risk of a loss of your entire investment. You should carefully consider the risks and uncertainties described below and the other information contained in this report before purchasing shares of our common stock. The risks set forth below are not the only ones facing us. Additional risks and uncertainties may exist that could also adversely affect our business, operations and prospects. If any of the following risks actually materialize, our business, financial condition, prospects and/or operations could suffer. In such event, the value of our common stock could decline, and you could lose all or a substantial portion of the money that you pay for our common stock.
Risks Related to Our Financial Condition and Capital Requirements
The Company’s financial statements have been prepared on a going concern basis, and do not include adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2026, the Company had incurred significant operating losses since inception, and continues to generate losses from operations, and has an accumulated deficit of $4,029,629. Based on its cash resources as of March 31, 2026, the Company has sufficient resources to fund its operations until the end of the third quarter of 2026. The consolidated financial statements included in this report do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
We have a history of losses and expect that losses may continue in the future.
We have generated net losses since we began operations, including net income of $1,367,977 and net loss of $3,591,858 for the years ended March 31, 2026 and March 31, 2025, respectively. As of March 31, 2026, we had an accumulated deficit of $4,029,629. We have no approved products and have generated no product revenue. We expect that product development, preclinical and clinical programs will increase losses significantly over the next five years. In order to achieve profitability, we will need to generate significant revenue. We cannot be certain that we will generate sufficient revenue to achieve profitability. We anticipate that we will continue to generate operating losses and negative cash flow from operations and our current cash position is sufficient to fund our current business plan until the third quarter of 2026. We cannot be certain that we will ever achieve, or if achieved, maintain profitability. If our revenue grows at a slower rate than we anticipate or if our product development, marketing and operating expenses exceed our expectations or cannot be adjusted accordingly, our business, results of operation and financial condition will be materially adversely affected, and we may be unable to continue operations. We will not be able to generate product revenue unless and until one of our product candidates successfully completes clinical trials and receives regulatory approval. As our most advanced product candidates are at an early proof-of-concept stage, we do not expect to receive revenue from any product candidate for the foreseeable future. We may seek to obtain revenue from collaboration or licensing agreements with third parties. We currently have no such agreements which will provide us with material, ongoing future revenue and we may never enter into any such agreements. Even if we eventually generate revenues, we may never be profitable, and if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
We need to obtain financing to continue our operations.
On a prospective basis, we will require both short-term financing for operations and long-term capital to fund our expected growth. We have no existing bank lines of credit and have not established any definitive sources for additional financing. Additional financing may not be available to us, or if available, then it may not be available upon terms and conditions acceptable to us. If adequate funds are not available, then we may be required to delay, reduce or eliminate product development or clinical programs. Our inability to take advantage of opportunities in the industry because of capital constraints may have a material adverse effect on our business and our prospects. If we fail to obtain the capital necessary to fund our operations, we will be unable to advance our development programs and complete our clinical trials.
In addition, our research and development expenses could exceed our current expectations. This could occur for many reasons, including:
| ● | some or all of our product candidates fail in clinical or preclinical studies and we are forced to seek additional product candidates; |
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| ● | our product candidates require more extensive clinical or preclinical testing than we currently expect; |
| ● | we advance more of our product candidates than expected into costly later stage clinical trials; |
| ● | we advance more preclinical product candidates than expected into early stage clinical trials; |
| ● | we are required, or consider it advisable, to acquire or license rights from one or more third parties; or |
| ● | we determine to acquire or license rights to additional product candidates or new technologies. |
While we expect to seek additional funding through public or private financings, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. These arrangements would generally require us to relinquish rights to some of our technologies, product candidates or products, and we may not be able to enter into such agreements, on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our development programs, including some or all of our product candidates.
If we continue to incur operating losses and fail to obtain the capital necessary to fund our operations, we will be unable to advance our development programs, complete our clinical trials, or bring products to market, or may be forced to reduce or cease operations entirely. In addition, any capital obtained by us may be obtained on terms that are unfavorable to us, our investors, or both.
Developing a new drug and conducting clinical trials and the regulatory review processes involves substantial costs. We have projected cash requirements for the near term based on a variety of assumptions, but some or all of such assumptions are likely to be incorrect and/or incomplete, possibly materially in an adverse direction. Our actual cash needs may deviate materially from those projections, changes in market conditions or other factors may increase our cash requirements, or we may not be successful even in raising the amount of cash we currently project will be required for the near term. We will need to raise additional capital in the future; the amount of additional capital needed will vary as a result of a number of factors, including without limitation the following:
| ● | receiving less funding than we require; |
| ● | higher than expected costs to manufacture our product candidates; |
| ● | higher than expected costs for preclinical testing; |
| ● | an increase in the number, size, duration, and/or complexity of our clinical trials; |
| ● | slower than expected progress in developing PT00114, or other product candidates, including without limitation, additional costs caused by program delays; |
| ● | higher than expected costs associated with attempting to obtain regulatory approvals, including without limitation additional costs caused by additional regulatory requirements or larger clinical trial requirements; |
| ● | higher than expected personnel, consulting or other costs, such as adding personnel or industry expert consultants or pursuing the licensing/acquisition of additional assets; and |
| ● | higher than expected costs to protect our intellectual property portfolio or otherwise pursue our intellectual property strategy. |
| ● | higher than expected costs to manufacture our product candidates; |
| ● | higher than expected costs for preclinical testing; |
| ● | an increase in the number, size, duration, and/or complexity of our clinical trials; |
| ● | slower than expected progress in developing PT00114, or other product candidates, including without limitation, additional costs caused by program delays; |
| ● | higher than expected costs associated with attempting to obtain regulatory approvals, including without limitation additional costs caused by additional regulatory requirements or larger clinical trial requirements; |
| ● | higher than expected personnel, consulting or other costs, such as adding personnel or industry expert consultants or pursuing the licensing/acquisition of additional assets; and |
| ● | higher than expected costs to protect our intellectual property portfolio or otherwise pursue our intellectual property strategy. |
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When we attempt to raise additional financing, there can be no assurance that we will be able to secure such additional financing in sufficient quantities or at all. We may be unable to raise additional capital for reasons including, without limitation, our operational and/or financial performance, investor confidence in us and the biopharmaceutical industry, credit availability from banks and other financial institutions, the status of current projects, and our prospects for obtaining any necessary regulatory approvals. Potential investors’ capital investments may have shifted to other opportunities with perceived greater returns and/or lower risk thereby reducing capital available to us, if available at all.
In addition, any additional financing might not be available, and even if available, may not be available on terms favorable to us or our then-existing investors. We will seek to raise funds through public or private equity offerings, debt financings, corporate collaboration or licensing arrangements, mergers, acquisitions, sales of intellectual property, or other financing vehicles or arrangements. To the extent that we raise additional capital by issuing equity securities or other securities, our then-existing investors will experience dilution. If we raise funds through debt financings or bank loans, we may become subject to restrictive covenants, our assets may be pledged as collateral for the debt, and the interests of our then-existing investors would be subordinated to the debt holders or banks. In addition, our use of and ability to exploit assets pledged as collateral for debt or loans may be restricted or forfeited. To the extent that we raise additional funds through collaboration or licensing arrangements, we may be required to relinquish significant rights (including without limitation intellectual property rights) to our technologies or product candidates, or grant licenses on terms that are not favorable to us. If we are not able to raise needed funding under acceptable terms or at all, then we will have to reduce expenses, including the possible options of curtailing operations, abandoning opportunities, licensing or selling off assets, reducing costs to a point where clinical development or other progress is impaired, or ceasing operations entirely.
We have a limited operating history, expect to incur significant operating losses, and have a high risk of never being profitable.
We commenced operations in February 2016 through a reverse merger and have a limited operating history of less than five years. Therefore, there is limited historical financial or operational information upon which to evaluate our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. Many if not most companies in our industry at our stage of development never become profitable and are acquired or go out of business before successfully developing any product that generates revenue from commercial sales or enables profitability.
As of March 31, 2026, we have incurred an accumulated deficit of $4,029,629. We expect to continue to incur substantial operating losses over the next several years for the clinical development of our current and future licensed or purchased product candidates.
The amount of future losses and when, if ever, we will become profitable are uncertain. We do not have any products that have generated any revenues from commercial sales, and do not expect to generate revenues from the commercial sale of products in the near future, if ever. Our ability to generate revenue and achieve profitability will depend on, among other things, successful completion of the development of our product candidates; obtaining necessary regulatory approvals from the FDA and international regulatory agencies; establishing manufacturing, sales, and marketing arrangements with third parties; obtaining adequate reimbursement by third-party payers; and raising sufficient funds to finance our activities. If we are unsuccessful at some or all of these undertakings, our business, financial condition, and results of operations are expected to be materially and adversely affected.
As a recently established public reporting company, we are subject to SEC reporting and other requirements, which will lead to increased operating costs in order to meet these requirements.
Unstable market and economic conditions may have serious adverse consequences on our ability to raise funds, which may cause us to cease or delay our operations.
From time to time, global and domestic credit and financial markets have experienced extreme disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. Our financing strategy will be adversely affected by any such economic downturn, volatile business environment and continued unpredictable and unstable market conditions. If the equity and credit markets deteriorate, it may make a debt or equity financing more difficult to complete, costlier, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms will have a material adverse effect on our business strategy and financial performance, and could require us to cease or delay our operations.
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Risks Related to Clinical Development and Regulatory Approval
Our results to date provide no basis for predicting whether any of our product candidates will be safe or effective, or receive regulatory approval.
The Company’s proprietary portfolio of five new neuropeptide hormones are in various stages of research and preclinical evaluation and their risk of failure is high. It is impossible to predict when or if any of our neuropeptide hormones will prove effective or safe in humans or will receive regulatory approval. These compounds may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory studies, and they may interact with human biological systems or other drugs in unforeseen, ineffective or harmful ways. If we are unable to discover or successfully develop drugs that are effective and safe in humans, we will not have a viable business.
We may not be able to initiate and complete preclinical studies and clinical trials for our product candidates which could adversely affect our business.
We must successfully initiate and complete extensive preclinical studies and clinical trials for our product candidates before we can receive regulatory approval. Preclinical studies and clinical trials are expensive and will take several years to complete and may not yield results that support further clinical development or product approvals. Conducting clinical studies for any of our drug candidates for approval in the United States requires filing an IND and reaching agreement with the FDA on clinical protocols, finding appropriate clinical sites and clinical investigators, securing approvals for such studies from the independent review board at each such site, manufacturing clinical quantities of drug candidates, supplying drug product to clinical sites and enrolling sufficient numbers of participants. We cannot guarantee that we will be able to successfully accomplish all of the activities necessary to initiate and complete clinical trials.
As a result, our preclinical studies and clinical trials may be extended, delayed or terminated, and we may be unable to obtain regulatory approvals or successfully commercialize our products.
The drug development and approval process is uncertain, time-consuming and expensive.
The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive and uncertain. It also can vary substantially based on the type, complexity, and novelty of the product. We must provide the FDA and foreign regulatory authorities with preclinical and clinical data demonstrating that our products are safe and effective before they can be approved for commercial sale. Clinical development, including preclinical testing, is a long, expensive and uncertain process. It may take us several years to complete our testing, and failure can occur at any stage of testing. Any preclinical or clinical test may fail to produce results satisfactory to the FDA. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results from a preclinical study or clinical trial, adverse medical events during a clinical trial or safety issues resulting from products of the same class of drug could cause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful.
The regulatory approval process is costly and lengthy and we may not be able to successfully obtain all required regulatory approvals.
The preclinical development, clinical trials, manufacturing, marketing and labeling of pharmaceuticals are all subject to extensive regulation by numerous governmental authorities and agencies in the United States and other countries. We must obtain regulatory approval for each of our product candidates before marketing or selling any of them. It is not possible to predict how long the approval processes of the FDA or any other applicable federal or foreign regulatory authority or agency for any of our products will take or whether any such approvals ultimately will be granted. The FDA and foreign regulatory agencies have substantial discretion in the drug approval process, and positive results in preclinical testing or early phases of clinical studies offer no assurance of success in later phases of the approval process. Generally, preclinical and clinical testing of products can take many years and require the expenditure of substantial resources, and the data obtained from these tests and trials can be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. If we encounter significant delays in the regulatory process that result in excessive costs, this may prevent us from continuing to develop our product candidates. Any delay in obtaining, or failure to obtain, approvals could adversely affect the marketing of our products and our ability to generate product revenue. The risks associated with the approval process include:
| ● | failure of our product candidates to meet a regulatory agency’s requirements for safety, efficacy and quality; |
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| ● | limitation on the indicated uses for which a product may be marketed; |
| ● | unforeseen safety issues or side effects; and |
| ● | governmental or regulatory delays and changes in regulatory requirements and guidelines. |
Even if we receive regulatory approvals for marketing our product candidates, if we fail to comply with continuing regulatory requirements, we could lose our regulatory approvals, and our business would be adversely affected.
The FDA continues to review products even after they receive initial approval. If we receive approval to commercialize any product candidates, the manufacturing, marketing and sale of these drugs will be subject to continuing regulation, including compliance with quality systems regulations, good manufacturing practices, adverse event requirements, and prohibitions on promoting a product for unapproved uses. Enforcement actions resulting from our failure to comply with government and regulatory requirements could result in fines, suspension of approvals, withdrawal of approvals, product recalls, product seizures, mandatory operating restrictions, criminal prosecution, civil penalties and other actions that could impair the manufacturing, marketing and sale of our potential products and our ability to conduct our business.
Even if we are able to obtain regulatory approvals for any of our product candidates, if they exhibit harmful side effects after approval, our regulatory approvals could be revoked or otherwise negatively impacted, and we could be subject to costly and damaging product liability claims.
Even if we receive regulatory approval for our product candidates, we will have tested them in only a small number of patients during our clinical trials. If our applications for marketing are approved and more patients begin to use our product, new risks and side effects associated with our products may be discovered. As a result, regulatory authorities may revoke their approvals; we may be required to conduct additional clinical trials, make changes in labeling of our product, reformulate our product or make changes and obtain new approvals for our and our suppliers’ manufacturing facilities. We might have to withdraw or recall our products from the marketplace. We may also experience a significant drop in the potential sales of our product if and when regulatory approvals for such product are obtained, experience harm to our reputation in the marketplace or become subject to lawsuits, including class actions. Any of these results could decrease or prevent any sales of our approved product or substantially increase the costs and expenses of commercializing and marketing our product.
If we experience delays or difficulties in the enrollment of subjects to our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented, which could materially affect our financial condition.
Identifying, screening and enrolling patients to participate in clinical trials of our product candidates is critical to our success, and we may not be able to identify, recruit, enroll and dose a sufficient number of patients with the required or desired characteristics to complete our clinical trials in a timely manner. The timing of our clinical trials depends on our ability to recruit patients to participate as well as to subsequently dose these patients and complete required follow-up periods.
In addition, we may experience enrollment delays related to increased or unforeseen regulatory, legal and logistical requirements at certain clinical trial sites. These delays could be caused by reviews by regulatory authorities and contractual discussions with individual clinical trial sites. Any delays in enrolling and/or dosing patients in our planned clinical trials could result in increased costs, delays in advancing our product candidates, delays in testing the effectiveness of our product candidates or in termination of the clinical trials altogether.
Patient enrollment may be affected if our competitors have ongoing clinical trials with products for the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials instead enroll in our competitors’ clinical trials. Patient enrollment may also be affected by other factors, including:
| ● | coordination with clinical research organizations to enroll and administer the clinical trials; |
| ● | coordination and recruitment of collaborators and investigators at individual sites; |
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| ● | size of the patient population and process for identifying patients; |
| ● | design of the clinical trial protocol; |
| ● | eligibility and exclusion criteria; |
| ● | perceived risks and benefits of the product candidates under study; |
| ● | availability of competing commercially available therapies and other competing products’ clinical trials; |
| ● | time of year in which the trials are initiated or conducted; |
| ● | severity of the diseases under investigation; |
| ● | ability to obtain and maintain subject consents; |
| ● | ability to enroll and treat patients in a timely manner; |
| ● | risk that enrolled subjects will drop out before completion of the trials; |
| ● | proximity and availability of clinical trial sites for prospective patients; |
| ● | ability to monitor subjects adequately during and after treatment; and |
| ● | patient referral practices of physicians. |
Our inability to enroll a sufficient number of patients for clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. Enrollment delays in these clinical trials may result in increased development costs for our product candidates, which could materially affect our financial condition.
New federal laws or regulations on drug importation could make lower cost versions of our future products available, which could adversely affect our revenues, if any.
The prices of some drugs are lower in other countries than in the United States because of government regulation and market conditions. Under current law, importation of drugs into the United States is generally not permitted unless the drugs are approved in the United States and the entity that holds that approval consents to the importation. Various proposals have been advanced to permit the importation of drugs from other countries to provide lower cost alternatives to the products available in the United States. In addition, the MMA requires the Secretary of Health and Human Services to promulgate regulations for drug re-importation from Canada into the United States under some circumstances, including when the drugs are sold at a lower price than in the United States.
If the laws or regulations are changed to permit the importation of drugs into the United States in circumstances that are currently not permitted, such a change could have an adverse effect on our business by making available lower priced alternatives to our future products.
Failure to obtain regulatory and pricing approvals in foreign jurisdictions could delay or prevent commercialization of our products abroad.
If we succeed in developing any products, we intend to market them in the European Union and other foreign jurisdictions. In order to do so, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval abroad may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval and additional risks associated with requirements particular to those foreign jurisdictions where we will seek regulatory approval of our products. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. We and our collaborators may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market outside the United States. The failure to obtain these approvals could materially adversely affect our business, financial condition and results of operations.
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It is uncertain whether product liability insurance will be adequate to address product liability claims, or that insurance against such claims will be affordable or available on acceptable terms in the future.
Clinical research involves the testing of new drugs on human volunteers pursuant to a clinical trial protocol. Such testing involves a risk of liability for personal injury to or death of patients due to, among other causes, adverse side effects, improper administration of the new drug, or improper volunteer behavior. Claims may arise from patients, clinical trial volunteers, consumers, physicians, hospitals, companies, institutions, researchers, or others using, selling, or buying our products, as well as from governmental bodies. In addition, product liability and related risks are likely to increase over time, in particular upon the commercialization or marketing of any products by us or parties with which we enter into development, marketing, or distribution collaborations. Although we are contracting for general liability insurance in connection with our ongoing business, there can be no assurance that the amount and scope of such insurance coverage will be appropriate and sufficient in the event any claims arise, that we will be able to secure additional coverage should we attempt to do so, or that our insurers would not contest or refuse any attempt by us to collect on such insurance policies. Furthermore, there can be no assurance that suitable product liability insurance (at the clinical stage and/or commercial stage) will continue to be available on terms acceptable to us or at all, or that, if obtained, the insurance coverage will be appropriate and sufficient to cover any potential claims or liabilities.
If the market opportunities for our current and potential future drug candidates are smaller than we believe they are, our ability to generate product revenues will be adversely affected and our business may suffer.
Our understanding of the number of people who suffer from stress-related indications, including, but not limited to: treatment resistant depression (“TRD”), which is a subgroup of major depressive disorder (“MDD”); addiction, recidivism, or substance use disorder (“SUD”); anxiety, including generalized anxiety disorder (“GAD”), and post-traumatic stress disorder (“PTSD”) is based upon estimates. These estimates may prove to be incorrect, and new studies may demonstrate or suggest a lower estimated incidence or prevalence of this condition. The number of patients in the U.S. or elsewhere may turn out to be lower than expected, may not be otherwise amenable to PT00114 treatment, or treatment-amenable patients may become increasingly difficult to identify and access, all of which would adversely affect our business prospects and financial condition.
Risks Related to Our Reliance on Third Parties
We may not be able to obtain and maintain the third-party relationships that are necessary to develop, commercialize and manufacture some or all our product candidates.
We expect to depend on collaborators, partners, licensees, clinical research organizations, manufacturers and other third parties to support our discovery efforts, to formulate product candidates, to conduct clinical trials for some or all of our product candidates, to manufacture clinical and commercial scale quantities of our product candidates and products and to market, sell, and distribute any products we successfully develop.
We cannot guarantee that we will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, manufacturers and other third parties on favorable terms, if at all. If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate, manufacture, obtain regulatory approvals for or commercialize our product candidates, which will in turn adversely affect our business.
We expect to expend substantial management time and effort to enter relationships with third parties and, if we successfully enter into such relationships, to manage these relationships. In addition, substantial amounts of our expenditures will be paid to third parties in these relationships. However, we cannot control the amount or timing of resources our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot guarantee that these parties will fulfill their obligations to us under these arrangements in a timely fashion, if at all.
We have no experience in sales, marketing and distribution and may have to enter into agreements with third parties to perform these functions, which could prevent us from successfully commercializing our product candidates.
We currently have no sales, marketing or distribution capabilities. To commercialize our product candidates, we must either develop our own sales, marketing and distribution capabilities, which will be expensive and time-consuming, or make arrangements with third parties to perform these services for us. If we decide to market any of our products on our own, we will have to commit significant resources to developing a marketing and sales force and supporting distribution capabilities. If we decide to enter into arrangements with third parties for performance of these services, we may find that they are not available on terms acceptable to us, or at all. If we are not able to establish and maintain successful arrangements with third parties or build our own sales and marketing infrastructure, we may not be able to commercialize our product candidates which would adversely affect our business and financial condition.
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Data provided by collaborators and other parties upon which we rely, have not been independently verified and could turn out to be inaccurate, misleading, or incomplete.
We rely on third-party vendors, scientists, and collaborators to provide us with significant data and other information related to our projects, clinical trials, and business. We do not independently verify or audit all of such data (including possibly material portions thereof). As a result, such data may be inaccurate, misleading, or incomplete.
In certain cases, we may need to rely on a single supplier for a particular manufacturing material or service, and any interruption in or termination of service by such supplier could delay or disrupt the commercialization of our products.
We rely on third-party suppliers for the materials used to manufacture our compounds. Some of these materials may at times only be available from one supplier. Any interruption in or termination of service by such single source suppliers could result in a delay or disruption in manufacturing until we locate an alternative source of supply. There can be no assurance that we would be successful in locating an alternative source of supply or in negotiating acceptable terms with such prospective supplier.
We rely on third parties to conduct our non-clinical studies and our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain regulatory approval for or commercialize our current product candidates or any future products, on a timely basis or at all, and our financial condition will be adversely affected.
We do not have the ability to independently conduct non-clinical studies and clinical trials. We rely on medical institutions, clinical investigators, contract laboratories, collaborative partners and other third parties, such as contract research organizations or clinical research organizations, to conduct non-clinical studies and clinical trials on our product candidates. The third parties with whom we contract for execution of our non-clinical studies and clinical trials play a significant role in the conduct of these studies and trials and the subsequent collection and analysis of data. However, these third parties are not our employees, and except for contractual duties and obligations, we have limited ability to control the amount or timing of resources that they devote to our programs.
Although we rely on third parties to conduct our non-clinical studies and clinical trials, we remain responsible for ensuring that each of our non-clinical studies and clinical trials is conducted in accordance with its investigational plan and protocol. Moreover, the FDA, EMA and other foreign regulatory authorities require us to comply with regulations and standards, including some regulations commonly referred to as good clinical practices (“GCPs”), for conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trial subjects are adequately informed of the potential risks of participating in clinical trials.
In addition, the execution of non-clinical studies and clinical trials, and the subsequent compilation and analyses of the data produced, requires coordination among various parties. In order for these functions to be carried out effectively and efficiently, it is imperative that these parties communicate and coordinate with one another. Moreover, these third parties may also have relationships with other commercial entities, some of which may compete with us. Under certain circumstances, these third parties may be able to terminate their agreements with us upon short notice. If the third parties conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical trial protocols or GCPs, or for any other reason, we may need to enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated. If any of the foregoing were to occur, we may not be able to obtain, on a timely basis or at all, regulatory approval for or to commercialize the product candidate being tested in such trials, and as a result, our financial condition will be adversely affected.
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Risks Related to Commercialization of Our Product Candidates
We have no experience as a company in commercializing any product. If we fail to obtain commercial expertise, upon product approval by regulatory agencies, our product launch and revenues could be delayed.
As a company, we have never obtained regulatory approval for, or commercialized, any product. Accordingly, we have not yet begun to build out any sales or marketing capabilities. If we are unable to establish, or contract for, effective sales and marketing capabilities, or if we are unable to enter into agreements with third parties to commercialize our product candidates on favorable terms or on any reasonable terms at all, we may not be able to effectively generate product revenues once our product candidates are approved for marketing. If we fail to obtain commercial expertise or capabilities, upon drug approval, our product launch and subsequent revenues could be delayed and /or fail to reach their commercial potential.
We may not be able to gain market acceptance of our product candidates, which would prevent us from becoming profitable.
We cannot be certain that any of our product candidates will gain market acceptance among physicians, patients, healthcare payers, pharmaceutical companies, or others. Demonstrating the safety and efficacy of our product candidates and obtaining regulatory approvals will not guarantee future revenue. Sales of medical products largely depend on the reimbursement of patients’ medical expenses by government healthcare programs and private health insurers. Governments and private insurers closely examine medical products to determine whether they should be covered by reimbursement and if so, the level of reimbursement that will apply. We cannot be certain that third party payers will sufficiently reimburse sales of our products or enable us to sell our products at profitable prices. Similar concerns could also limit the reimbursement amounts that health insurers or government agencies in other countries are prepared to pay for our products. In many countries where we plan to market our products, including Europe and Canada, the pricing of prescription drugs is controlled by the government or regulatory agencies. Regulatory agencies in these countries could determine that the pricing for our products should be based on prices of other commercially available drugs for the same disease, rather than allowing us to market our products at a premium as new drugs. Sales of medical products also depend on physicians’ willingness to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective, and cost-effective. We cannot predict whether physicians, other healthcare providers, government agencies or private insurers will determine that our products are safe, therapeutically effective and cost effective relative to competing treatments.
We may not be able to manufacture our product candidates in clinical or commercial quantities, which would prevent us from commercializing our product candidates.
To date, our product candidates have been manufactured in small quantities by us and third-party manufacturers for preclinical studies. If any of our product candidates is approved by the FDA or other regulatory agencies for commercial sale, we will need to manufacture it in larger quantities and we intend to use third party manufacturers for commercial quantities. Our third-party manufacturers may not be able to successfully increase the manufacturing capacity for any of our product candidates in a timely or efficient manner, or at all. If we are unable to successfully increase the manufacturing capacity for a product candidate, the regulatory approval or commercial launch of that product candidate may be delayed or there may be a shortage in the supply of the product candidate. Our failure or the failure of our third-party manufacturers to comply with the FDA’s good manufacturing practices and to pass inspections of the manufacturing facilities by the FDA or other regulatory agencies could seriously harm our business.
Our products may not be accepted for reimbursement or properly reimbursed by third-party payers.
The successful commercialization of any products we might develop will depend substantially on whether the costs of our products and related treatments are reimbursed at acceptable levels by government authorities, private healthcare insurers, and other third-party payers, such as health maintenance organizations. Reimbursement rates may vary, depending upon the third-party payer, the type of insurance plan, and other similar or dissimilar factors. If our products do not achieve adequate reimbursement, then the number of physician prescriptions of our products may not be sufficient to make our products profitable.
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Comparative effectiveness of research demonstrating benefits of a competitor’s product could adversely affect the sales of our product candidates. If third-party payers do not consider our products to be cost-effective compared to other available therapies, they may not cover our products as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.
Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in the product development of that product. In addition, in the U.S. there is a growing emphasis on comparative effectiveness research, both by private payers and by government agencies. To the extent other drugs or therapies are found to be more effective than our products, payers may elect to cover such therapies in lieu of our products or reimburse our products at a lower rate.
New federal legislation may increase the pressure to reduce prices of pharmaceutical products paid for by Medicare, which could adversely affect our revenues, if any.
The Medicare Prescription Drug Improvement and Modernization Act of 2003, or MMA, expanded Medicare coverage for drug purchases by the elderly and disabled beginning in 2006. The new legislation uses formularies, preferred drug lists and similar mechanisms that may limit the number of drugs that will be covered in any therapeutic class or reduce the reimbursement for some of the drugs in a class. More recently, the Patient Protection and Affordable Care Act of 2010 also contained certain provisions with the potential to affect pricing of pharmaceutical products.
As a result of the expansion of legislation, including recent healthcare insurance legislation, and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives could decrease the coverage and price that we receive for our products in the future and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payers often follow Medicare coverage policy and payment limitations in setting their own reimbursement systems, and any limits on or reductions in reimbursement that occur in the Medicare program may result in similar limits on or reductions in payments from private payers.
Disputes under key agreements or conflicts of interest with our scientific advisors or clinical investigators could delay or prevent development or commercialization of our product candidates.
Any agreements we have or may enter with third parties, such as collaboration, license, formulation supplier, manufacturing, clinical research organization or clinical trial agreements, may give rise to disputes regarding the rights and obligations of the parties. Disagreements could develop over rights to ownership or use of intellectual property, the scope and direction of research and development, the approach for regulatory approvals or commercialization strategy. We intend to conduct research programs in a range of therapeutic areas, but our pursuit of these opportunities could result in conflicts with the other parties to these agreements who may be developing or selling pharmaceuticals or conducting other activities in these same therapeutic areas. Any disputes or commercial conflicts could lead to the termination of our agreements, delay progress of our product development programs, compromise our ability to renew agreements or obtain future agreements, lead to the loss of intellectual property rights or result in costly litigation.
We collaborate with outside scientific advisors and collaborators at academic and other institutions that assist us in our research and development efforts. Our scientific advisors are not our employees and may have other commitments that limit their availability to us. If a conflict of interest between their work for us and their work for another entity arises, we may lose their services.
Our competitors and potential competitors may develop products and technologies that make ours less attractive or obsolete.
Many companies, universities, and research organizations developing competing product candidates have greater resources and significantly greater experience in financial, research and development, manufacturing, marketing, sales, distribution, and technical regulatory matters than we have. In addition, many competitors have greater name recognition and more extensive collaborative relationships. Our competitors could commence and complete clinical testing of their product candidates, obtain regulatory approvals, and begin commercial-scale manufacturing of their products faster than we are able to for our products. They could develop products that would render our product candidates, and those of our collaborators, obsolete and noncompetitive. If we are unable to compete effectively against these companies, then we may not be able to commercialize our product candidates or achieve a competitive position in the market. This would adversely affect our ability to generate revenues.
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Competition in the biotechnology and pharmaceutical industries may result in competing products, superior marketing of other products and lower revenues or profits for us.
There are many companies that are seeking to develop products and therapies for the treatment of mood, anxiety, and neurodegenerative disorders. Many of our competitors have substantially greater financial, technical, human, and other resources than we do and may be better equipped to develop, manufacture and market technologically superior products. In addition, many of these competitors have significantly greater experience than we do in undertaking preclinical testing and human clinical studies of new pharmaceutical products and in obtaining regulatory approvals of human therapeutic products. Accordingly, our competitors may succeed in obtaining FDA approval for superior products.
Other risks and uncertainties include:
| ● | our ability to successfully complete preclinical and clinical development of our products and services |
| ● | our ability to manufacture sufficient amounts of products for development and commercialization activities |
| ● | our ability to obtain, maintain and successfully enforce adequate patent and other proprietary rights protection of our products and services |
| ● | the scope, validity and enforceability of patents and other proprietary rights held by third parties and their impact on our ability to commercialize our products and services |
| ● | the accuracy of our estimates of the size and characteristics of the markets to be addressed by our products and services, including growth projections |
| ● | market acceptance of our products and services |
| ● | our ability to identify new patients for our products and services |
| ● | the accuracy of our information regarding the products and resources of our competitors and potential competitors |
| ● | the content and timing of submissions to and decisions made by the US Food and Drug Administration (FDA) and other regulatory agencies |
| ● | our ability to obtain reimbursement for our products and services from third-party payors, and the extent of such coverage |
| ● | our ability to establish and maintain strategic license, collaboration and distribution arrangements |
| ● | the continued funding of our collaborations and joint ventures, if any are ultimately established |
| ● | the possible disruption of our operations due to terrorist activities and armed conflict, including as a result of the disruption of operation of our subsidiaries and our customers, suppliers, distributors, couriers, collaborative partners, licensees and clinical trial sites.Positive or timely results from preclinical studies and early clinical trials do not ensure positive or timely results in late-stage clinical trials or product approval by the FDA or any other regulatory authority. Product candidates that show positive preclinical or early clinical results often fail in later stage clinical trials. Data obtained from preclinical and clinical activities is susceptible to varying interpretations, which could delay, limit, or prevent regulatory approvals. |
We have limited experience in conducting clinical trials required to obtain regulatory approval. We may not be able to conduct clinical trials at preferred sites, enlist clinical investigators, enroll sufficient numbers of participants, or begin or successfully complete clinical trials in a timely fashion, if at all. Any failure to perform may delay or terminate the trials. Our current clinical trials may be insufficient to demonstrate that our potential products will be active, safe, or effective. Additional clinical trials may be required if clinical trial results are negative or inconclusive, which will require us to incur additional costs and significant delays. If we do not receive the necessary regulatory approvals, we will not be able to generate product revenues and may not become profitable.
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Risks Related to Our Intellectual Property
We may not be able to maintain our exclusive worldwide license to use and develop PT00114 which could materially affect our business plan.
On July 21, 2005, we entered into the License Agreement with University of Toronto, or UT, pursuant to which UT agreed to license to us patent rights and other intellectual property related to PT00114, among other things. The Technology License Agreement was amended on February 18, 2015. Unless earlier terminated, the term of this agreement shall terminate on the expiration or invalidity of the last issued Patent in the Agreement Pursuant to the License Agreement, we 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. In the event we fail to provide UT with semi-annual reports on our progress or fail to continue to make reasonable commercial efforts towards obtaining regulatory approval for products based on the Technologies, UT may convert our exclusive license into a non-exclusive one. In such a case, we would lose our competitive advantage in the development of treatments based on PT00114.
We have to sustain and further build our intellectual property rights.
If we fail to sustain and further build our intellectual property rights, competitors will be able to take advantage of our research and development efforts to develop competing products. If we are not able to protect our proprietary technology, trade secrets, and know-how, our competitors may use our inventions to develop competing products. Protagenic has obtained worldwide exclusive rights to PT00114 and related technology that was developed at UT. As of March 31, 2026, we have five patents issued by the Governments of the United States, Canada, European Union (validated in Germany, France and Great Britain) and Hong Kong on our original platform technology, all of which have expired aside from the one in the United States. The patent applications were made in the name of Dr. David A. Lovejoy and inventors, but the Company’s exclusive, worldwide rights to such patent applications are included in the License Agreement with UT. We have eight issued patents (Canada, Great Britain, Europe (GPC and additionally validated in Switzerland, Great Britain, Ireland and Spain) and the United States and five pending patent applications in related technology that the company has rights in or own.
However, our patents and patent applications, even if granted, may not protect us against our competitors. Our patent positions, and those of other pharmaceutical and biotechnology companies, are generally uncertain and involve complex legal, scientific and factual questions. The standards which the United States Patent and Trademark Office uses to grant patents, and the standards which courts use to interpret patents, are not always applied predictably or uniformly and can change, particularly as new technologies develop. Consequently, the level of protection, if any, that will be provided by our patents if we attempt to enforce them, and they are challenged, is uncertain. In addition, the type and extent of patent claims that will be issued to us in the future is uncertain. Any patents that are issued may not contain claims that permit us to stop competitors from using similar technology.
In addition to our patentable technology, we also rely on unpatented technology, trade secrets, and confidential information. We may not be able to effectively protect our rights to this technology or information. Other parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We generally require each of our employees, consultants, collaborators, and certain contractors to execute a confidentiality agreement at the commencement of an employment, consulting, collaborative, or contractual relationship with us. However, these agreements may not provide effective protection of our technology or information, or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.
Our patent position is generally uncertain and involves complex legal and factual questions. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and other biotechnology companies have encountered significant problems in protecting and defending their proprietary rights in foreign jurisdictions. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents. In addition, any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing or commercializing competing products. Furthermore, others may independently develop or commercialize similar or alternative technologies or drugs, or design around our patents. Our patents may be challenged, invalidated, or fail to provide us with any competitive advantages. We may not have the funds available to protect our patents or other technology; such protection is costly and can result in further litigation expenses.
If we do not obtain or we are unable to maintain adequate patent or trade secret protection for our products in the United States, competitors could duplicate them without repeating the extensive testing that we will be required to undertake to obtain approval of the products by the FDA. Regardless of any patent protection, under the current statutory framework the FDA is prohibited by law from approving any generic version of any of our products for three years after it has approved our product. Upon the expiration of that period, or if that time period is altered, the FDA could approve a generic version of our product unless we have patent protection sufficient for us to block that generic version. Without sufficient patent protection, the applicant for a generic version of our product would be required only to conduct a relatively inexpensive study to show that its product is bioequivalent to our product and may not have to repeat the studies that we will need to conduct to demonstrate that the product is safe and effective. In the absence of adequate patent protection in other countries, competitors may similarly be able to obtain regulatory approval in those countries of products that duplicate our products.
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We must comply with our obligations in our intellectual property licenses with third parties.
If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business. We are a party to the License Agreement with UT under which we receive the right to practice and use important third-party patent rights. We may enter into additional licenses in the future. Our existing licenses impose, and we expect future licenses will impose, various diligences, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not be able to market any product that is covered by the licensed patents.
We may need to resort to litigation to enforce or defend our intellectual property rights, including any patents issued to us. If a competitor or collaborator files a patent application claiming technology also invented by us, in order to protect our rights, we may have to participate in an expensive and time-consuming interference proceeding before the United States Patent and Trademark Office. We cannot guarantee that our product candidates will be free of claims by third parties alleging that we have infringed their intellectual property rights. Third parties may assert that we are employing their proprietary technologies without authorization and they may resort to litigation to attempt to enforce their rights. Third parties may have or obtain patents in the future and claim that the use of our technology or any of our product candidates infringes their patents. We may not be able to develop or commercialize combination product candidates because of patent protection others have. Our business will be harmed if we cannot obtain a necessary or desirable license, can obtain such a license only on terms we consider to be unattractive or unacceptable, or if we are unable to redesign our product candidates or processes to avoid actual or potential patent or other intellectual property infringement. Obtaining, protecting and defending patent and other intellectual property rights can be expensive and may require us to incur substantial costs, including the diversion of management and technical personnel. An unfavorable ruling in patent or intellectual property litigation could subject us to significant liabilities to third parties, require us to cease developing, manufacturing or selling the affected products or using the affected processes, require us to license the disputed rights from third parties, or result in awards of substantial damages against us.
There can be no assurance that we would prevail in any intellectual property infringement action, will be able to obtain a license to any third-party intellectual property on commercially reasonable terms, successfully develop non-infringing alternatives on a timely basis, or license non-infringing alternatives, if any exist, on commercially reasonable terms. Any significant intellectual property impediment to our ability to develop and commercialize our products could seriously harm our business and prospects.
Patent litigation or other litigation in connection with our intellectual property rights may lead to publicity that may harm our reputation and the value of our common stock may decline.
During the course of any patent litigation, there may be public announcements of the results of hearings, motions, and other interim proceedings or developments in the litigation. If securities analysts or investors regard these announcements as negative, the value of our common stock may decline. General proclamations or statements by key public figures may also have a negative impact on the perceived value of our intellectual property.
Protecting and defending against intellectual property claims may have a material adverse effect on our business.
From time to time, we may receive notice that others have infringed on our proprietary rights or that we have infringed on the intellectual property rights of others. There can be no assurance that infringement or invalidity claims will not materially adversely affect our business, financial condition or results of operations. Regardless of the validity or the success of the assertion of claims, we could incur significant costs and diversion of resources in protecting or defending against claims, which could have a material adverse effect on our business, financial condition or results of operations. We may not have the funds or resources available to protect our intellectual property.
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Intellectual property disputes could require us to spend time and money to address such disputes and could limit our intellectual property rights.
The biopharmaceutical industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies have employed intellectual property litigation and USPTO post-grant proceedings to gain a competitive advantage. We may become subject to infringement claims or litigation arising out of patents and pending applications of our competitors, or additional interference proceedings declared by the USPTO to determine the priority and patentability of inventions. The defense and prosecution of intellectual property suits, USPTO proceedings, and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation may be necessary to enforce our issued patents, to protect our trade secrets and know-how, or to determine the enforceability, scope, and validity of the proprietary rights of others. An adverse determination in litigation or USPTO post-grant and interference proceedings to which we may become a party could subject us to significant liabilities, require us to obtain licenses from third parties, or restrict or prevent us from selling our products in certain markets. Even if a given patent or intellectual property dispute were settled through licensing or similar arrangements, our costs associated with such arrangements may be substantial and could include the payment by us of large fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms or at all. Even where we have meritorious claims or defenses, the costs of litigation may prevent us from pursuing these claims or defenses and/or may require extensive financial and personnel resources to pursue these claims or defenses. In addition, it is possible there may be defects of form in our current and future patents that could result in our inability to defend the intended claims. Intellectual property disputes arising from the aforementioned factors, or other factors, may materially harm our business.
We may not be able to enforce our intellectual property rights throughout the world.
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the U.S. Companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. This could make it difficult for us to stop the infringement of our patents or the misappropriation of our other intellectual property rights. For example, many foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.
Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and attention from other aspects of our business. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market PT00114 or any future products. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the U.S. and foreign countries may affect our ability to obtain and enforce adequate intellectual property protection for our products and technology.
Changes to the patent law in the U.S. and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time consuming and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide ranging patent reform legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents once obtained. Depending on future actions by the U.S. Congress, the federal courts and the United States Patent and Trademark Office (“USPTO”), as well as other jurisdictions around the world, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
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Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.
If we fail to comply with our obligations under any license, collaboration or other intellectual property-related agreements, we may be required to pay damages and could lose intellectual property rights that may be necessary for developing, commercializing and protecting our current or future technologies or drug candidates or we could lose certain rights to grant sublicenses.
Any license, collaboration or other intellectual property-related agreements impose, and any future license, collaboration or other intellectual property-related agreements we enter into are likely to impose, various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement or other obligations on us. If we breach any of these obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages, and the licensor may have the right to terminate the license. In spite of our best efforts, any of our future licensors might conclude that we have materially breached our license agreements and might therefore terminate the license agreements, thereby removing our ability to develop and commercialize products and technologies covered by these license agreements. Any license agreements we enter into may be complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We may seek to obtain licenses from licensors in the future, however, we may be unable to obtain any such licenses at a reasonable cost or on reasonable terms, if at all. In addition, if any of our future licensors terminate any such license agreements, such license termination could result in our inability to develop, manufacture and sell products that are covered by the licensed technology or could enable a competitor to gain access to the licensed technology. Any of these events could have a material adverse effect on our competitive position, business, financial condition, results of operations, and ability to achieve profitability.
Furthermore, we may not have the right to control the preparation, filing, prosecution, maintenance, enforcement and defense of patents and patent applications that we license from third parties. Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our business. If our future licensors fail to prosecute, maintain, enforce and defend patents we may in-license, or lose rights to licensed patents or patent applications, our license rights may be reduced or eliminated. In such circumstances, our right to develop and commercialize any of our products or drug candidates that is the subject of such licensed rights could be materially adversely affected. In certain circumstances, our licensed patent rights are subject to our reimbursing our licensors for their patent prosecution and maintenance costs.
Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing, misappropriating or otherwise violating the licensor’s intellectual property rights and the amount of any damages or future royalty obligations that would result, if any such claims were successful, would depend on the technology and intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize products, due to such obligations, we may be unable to achieve or maintain profitability.
Risks Related to Our Business Operations and Industry
If we are not able to retain our current senior management team and our scientific advisors or continue to attract and retain qualified scientific, technical, and business personnel, our business will suffer.
We are dependent on the members of our management team and our scientific advisors for our business success. An important element of our strategy is to take advantage of the research and development expertise of our current management and to utilize the unique expertise of our scientific advisors. We do not have any employment agreements with our executive officers. The loss of any one of our executive officers or key scientific consultants, including, in particular, Garo Armen, Ph.D., Chairman of the Board, and Dr. David A. Lovejoy, our Chief Scientific Advisor, could result in a significant loss in the knowledge and experience that we, as an organization, possess and could cause significant delays, or outright failure, in the development and further commercialization of our product candidates.
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To grow, we will eventually need to hire a significant number of qualified commercial, scientific, and administrative personnel. However, there is intense competition for human resources, including management in the technical fields in which we operate, and we may not be able to attract and retain qualified personnel necessary for the successful development and commercialization of our product candidates. Our inability to attract new employees or to retain existing employees could limit our growth and harm our business.
We may encounter difficulties in managing our growth, which could adversely affect our operations.
Our ability to manage our operations and growth effectively depends upon the continual improvement of our procedures, reporting systems, and operational, financial, and management controls. We may not be able to implement improvements in an efficient or timely manner and may discover deficiencies in existing systems and controls. If we do not meet these challenges, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures which in turn may slow our growth or give rise to inefficiencies that would increase our losses.
We may acquire additional technology and complementary businesses in the future. Acquisitions involve many risks, any one of which could materially harm our business, including the diversion of management’s attention from core business concerns, failure to exploit acquired technologies, or the loss of key employees from either our business or the acquired business.
Healthcare reform measures could adversely affect our business.
The efforts of governmental and third-party payers to contain or reduce the costs of healthcare may adversely affect the business and financial condition of pharmaceutical companies. In the United States and in foreign jurisdictions there have been, and we expect that there will continue to be, a number of legislative and regulatory proposals aimed at changing the healthcare system. For example, in some countries other than the United States, pricing of prescription drugs is subject to government control, and we expect proposals to implement similar controls in the United States to continue. The pendency or approval of such proposals could result in a decrease in our common stock value or limit our ability to raise capital or to enter into collaborations or license rights to our products.
Our business and operations are vulnerable to computer system failures, cyber-attacks or deficiencies in our cyber-security, which could increase our expenses, divert the attention of our management and key personnel away from our business operations and adversely affect our results of operations.
Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely, are to damage from: computer viruses; malware; natural disasters; terrorism; war; telecommunication and electrical failures; cyber-attacks or cyber-intrusions over the Internet; attachments to emails; persons inside our organization; or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, and damage to our reputation, and the further development of our product candidates could be delayed. We could be forced to expend significant resources in response to a cyber security breach, including repairing system damage, increasing cyber security protection costs by deploying additional personnel and protection technologies, paying regulatory fines and resolving legal claims and regulatory actions, all of which would increase our expenses, divert the attention of our management and key personnel away from our business operations and adversely affect our results of operations.
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Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity and could negatively affect our operating results and business.
We and our current and any of our future collaborators may be subject to federal, state and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security). In the U.S., numerous federal and state laws and regulations, including federal health information privacy laws (e.g., the Health Insurance Portability and Accountability Act (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”)), state data breach notification laws, state health information privacy laws and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA, as amended by HITECH, or other privacy and data security laws. Depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
International data protection laws, including Regulation 2016/679, known as the General Data Protection Regulation (“GDPR”) may also apply to health-related and other personal information obtained outside of the U.S. The GDPR went into effect on May 25, 2018. The GDPR introduced new data protection requirements in the EU, as well as potential fines for non-compliant companies of up to the greater of €20 million or 4% of annual global revenue. The regulation imposes numerous new requirements for the collection, use, storage and disclosure of personal information, including more stringent requirements relating to consent and the information that must be shared with data subjects about how their personal information is used, the obligation to notify regulators and affected individuals of personal data breaches, extensive new internal privacy governance obligations and obligations to honor expanded rights of individuals in relation to their personal information (e.g., the right to access, correct and delete their data). In addition, the GDPR includes restrictions on cross-border data transfers. The GDPR increased our responsibility and liability in relation to personal data that we process where such processing is subject to the GDPR, and we may be required to put in place additional mechanisms to ensure compliance with the GDPR, including as implemented by individual countries. Further, the United Kingdom’s vote in favor of exiting the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom. In particular, it is unclear how data transfers to and from the United Kingdom will be regulated.
In addition, California recently enacted the California Consumer Privacy Act (“CCPA”), which creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA will require covered companies to provide new disclosure to consumers about such companies’ data collection, use and sharing practices, provide such consumers new ways to opt-out of certain sales or transfers of personal information, and provide consumers with additional causes of action. The CCPA goes into effect on January 1, 2020, and the California Attorney General may bring enforcement actions for violations beginning July 1, 2020. The CCPA was amended on September 23, 2018, and it remains unclear what, if any, further modifications will be made to this legislation or how it will be interpreted. As currently written, the CCPA may impact our business activities and exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information.
Compliance with U.S. and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions. Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation or adverse publicity and could negatively affect our operating results and business.
If we, our CROs or our IT vendors experience security or data privacy breaches or other unauthorized or improper access to, use of, or destruction of personal data, we may face costs, significant liabilities, harm to our brand and business disruption.
In connection with our drug research and development efforts, we or our CROs may collect and use a variety of personal data, such as names, mailing addresses, email addresses, phone numbers, and clinical trial information. Although we have extensive measures in place to prevent the sharing and loss of patient data in our clinical trial processes associated with our developed technologies and drug candidates, any failure to prevent or mitigate security breaches or improper access to, use of, or disclosure of our clinical data or patients’ personal data could result in significant liability under state (e.g., state breach notification laws), federal (e.g., HIPAA, as amended by HITECH), and international laws (e.g., the GDPR). Any failure to prevent or mitigate security breaches or improper access to, use of, or disclosure of our clinical data or patients’ personal data may cause a material adverse impact to our reputation, affect our ability to conduct new studies and potentially disrupt our business. We may also rely on third-party IT vendors to host or otherwise process some of our data and that of users, and any failure by such IT vendor to prevent or mitigate security breaches or improper access to or disclosure of such information could have similarly adverse consequences for us. If we are unable to prevent or mitigate the impact of such security or data privacy breaches, we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business.
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If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.
Our research and development and drug candidates and future commercial manufacturing may involve the use of hazardous materials and various chemicals. We currently do not maintain a research laboratory, but we engage third-party research organizations and manufacturers to conduct our preclinical studies, clinical trials, and manufacturing. These third-party laboratories and manufacturers are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We must rely on the third parties’ procedures for storing, handling and disposing of these materials in their facilities to comply with the relevant guidelines of the states in which they operate and the Occupational Safety and Health Administration of the U.S. Department of Labor. Although we believe that their safety procedures for handling and disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, this could result in significant delays in our development. We are also subject to numerous environmental, health, and workplace safety laws and regulations. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees, this insurance may not provide adequate coverage against potential liabilities. Additional federal, state, and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate any of these laws or regulations.
Risks Associated to our Common Stock
If we fail to comply with the continued minimum closing bid requirements of Nasdaq by April 28, 2025 or other requirements for continued listing, including stockholder equity requirements, our common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively impacted.
Our common stock is listed for trading on Nasdaq. We must satisfy Nasdaq’s continued listing requirements, including, among other things, a minimum closing bid price requirement of $1.00 per share for 30 consecutive business days. If a company’s common stock trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice, advising that such company has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements. Thereafter, if such a company does not regain compliance with the bid price requirement, a second 180-day compliance period may be available, provided (i) it meets the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, including stockholder equity requirements, which we may be unable to satisfy (except for the bid price requirement), and (ii) it provides written notice to Nasdaq of its intention to cure this deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event the company does not regain compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, and if it appears to the Staff of the Listing Qualifications Department of The Nasdaq Stock Market LLC (the “Nasdaq Staff”) that the company will not be able to cure the deficiency, or if the company is not otherwise eligible, the Nasdaq Staff will provide the company with written notification that its securities are subject to delisting from Nasdaq. At that time, the company may appeal the delisting determination to a hearings panel.
On July 24, 2024, the Company received a deficiency letter (the “Notification Letter”) from the Nasdaq Listing Qualifications (“Nasdaq”) stating that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Notification Letter states that the Company has 180 calendar days, or until January 20, 2025, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the Company’s closing bid price of the Company’s common stock must have a closing bid price of at least $1.00 for a minimum of ten consecutive business days.
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On January 22, 2025, Nasdaq provided a notice to the Company that the Company had not regained compliance with Rule 5550(a)(2) and is not eligible for a second 180 calendar day compliance period as the Company does not comply with the requirements for initial listing on The Nasdaq Capital Market. This notification is part of the ongoing discussions with the Nasdaq Hearings Panel (the “Panel”) regarding the Company’s listing status, and the Company included this matter in its presentation to the Panel on January 30, 2025.
On February 19, 2025, the Company received a hearing panel decision from Nasdaq (Nasdaq Listing Qualifications Hearings Docket No. NQ 7072C-25) indicating that its provisional plan for regaining compliance with the Nasdaq listing requirements had been accepted. For continued listing on the Nasdaq Capital Market, the Company has until April 28, 2025 to: (1) demonstrate compliance with Nasdaq Rules 5550(a)(2) and 5550(b)(2), (2) file a public disclosure describing any transactions undertaken by the Company to increase its equity and provide and indication of its equity following those transactions, and (3) provide the Panel with an update on its fundraising plans and updated income projections for the next 12 months.
Beginning January 5, 2026, the Company expects its common stock and warrants to be quoted for trading on the over-the-counter market. On December 31, 2025, the Company received a letter from Nasdaq stating that trading of the Company’s securities on Nasdaq would cease at the close of trading on January 2, 2026, and that Nasdaq determined to delist the Company’s securities based on the Company’s failure to satisfy Nasdaq continued listing requirements, including Nasdaq Listing Rule 5550(b)(1) (minimum stockholders’ equity) and Nasdaq Listing Rule 5250(c)(1) (timely filing of periodic reports).
OTC trading is effected through registered broker-dealers, and quotation and trading information is generally available through brokerage platforms and publicly available quotation services. The Company intends to continue to file periodic and current reports with the SEC, which will be available on the SEC’s EDGAR system. The OTC market may have different liquidity and trading characteristics than a national securities exchange.
The Company is evaluating steps to regain compliance with Nasdaq listing requirements and to seek relisting on Nasdaq. The Company also intends to engage with market participants to facilitate the OTC transition and support liquidity in its securities. The Company has withdrawn its request for a hearing before a Nasdaq Hearings Panel and, accordingly, Nasdaq’s determination is final.
Our common stock is a “Penny Stock” subject to specific rules governing its sale to investors that could impact its liquidity.
The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to our common stock, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks; and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person; and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination, and states that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors sell shares of our common stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
The market price of our common stock may be volatile, and you could lose all or part of your investment.
The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.
The market price of our common stock may fluctuate substantially and will depend on a number of factors, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you pay for the shares. Factors that could cause fluctuations in the market price of our common stock include, but are not necessarily limited to, the following:
| ● | price and volume fluctuations in the overall stock market from time to time; |
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| ● | volatility in the market prices and trading volumes of pharmaceutical and biotechnology stocks; |
| ● | changes in operating performance and stock market valuations of other pharmaceutical and biotechnology companies generally, or those in our industry in particular; |
| ● | sales of shares of our common stock by us or our stockholders; |
| ● | failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; |
| ● | the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections; |
| ● | announcements by us or our competitors of new products or services; |
| ● | the public’s reaction to our press releases, other public announcements and filings with the SEC; |
| ● | rumors and market speculation involving us or other companies in our industry; |
| ● | actual or anticipated changes in our operating results or fluctuations in our operating results; |
| ● | actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; |
| ● | litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; |
| ● | developments or disputes concerning our intellectual property or other proprietary rights; |
| ● | announced or completed acquisitions of businesses or technologies by us or our competitors; |
| ● | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; |
| ● | changes in accounting standards, policies, guidelines, interpretations or principles; |
| ● | any significant change in our management; and |
| ● | general economic conditions and slow or negative growth of our markets. |
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
Compliance with the reporting requirements of federal securities laws can be expensive.
We are a public reporting company in the United States, and accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and certain compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders are substantial.
Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of its business and its ability to obtain or retain listing of our common stock.
We may be unable to attract and retain those qualified officers, directors and members of board committees required to provide for effective management because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The enactment of the Sarbanes-Oxley Act has resulted in the issuance of a series of related rules and regulations and the strengthening of existing rules and regulations by the SEC, as well as the adoption of new and more stringent rules by the stock exchanges. The perceived increased personal risk associated with these changes may deter qualified individuals from accepting roles as directors and executive officers.
Further, some of these changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence from the corporation and level of experience in finance and accounting matters. We may have difficulty attracting and retaining directors with the requisite qualifications. If we are unable to attract and retain qualified officers and directors, the management of our business and our ability to obtain or retain listing of our shares of common stock on any stock exchange (assuming we elect to seek and are successful in obtaining such listing) could be adversely affected.
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If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently, investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.
We must maintain effective internal controls to provide reliable financial reports and detect fraud. We have been assessing our internal controls to identify areas that need improvement and will continue to monitor internal controls to improve them. Failure to implement these changes to our internal controls or any others that it identifies as necessary to maintain an effective system of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information. Any such loss of confidence would have a negative effect on the trading price of our stock.
Management has concluded that, during the year-ended March 31, 2026, our internal controls and procedures were not effective to detect the inappropriate application of U.S. GAAP. Management identified the following material weaknesses set forth below in our internal control over financial reporting.
| ● | We lack the necessary corporate accounting resources to maintain adequate segregation of duties; and |
| ● | We did not perform an effective risk assessment or monitor internal controls over financial reporting. |
The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
| ● | actual or anticipated variations in our operating results; |
| ● | announcements of developments by us or our competitors; |
| ● | the timing of IDE and/or NDA approval, the completion and/or results of our clinical trials; |
| ● | regulatory actions regarding our products; |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; |
| ● | adoption of new accounting standards affecting our industry; |
| ● | additions or departures of key personnel; |
| ● | introduction of new products by us or our competitors; |
| ● | sales of our common stock or other securities in the open market; and |
| ● | other events or factors, many of which are beyond our control. |
| ● | The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against such a company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition. |
Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our common stock.
In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for our common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes and some of these issuances may be at a price (or exercise prices) below the price at which shares of our common stock is currently quoted on the NASDAQ Capital Market. The future issuance of any such additional shares of common stock may create downward pressure on the trading price of our common stock.
Our common stock is controlled by insiders
Our officers and directors beneficially own approximately 35% of our outstanding shares of common stock. Such concentrated control of our common stock may adversely affect the price of our common stock. Investors who acquire our common stock may have no effective voice in the management of our operations. Sales by our insiders or affiliates, along with any other market transactions, could affect the market price of our common stock.
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We do not intend to pay dividends for the foreseeable future and may never pay dividends.
We have paid no dividends on our common stock to date and it is not anticipated that any dividends will be paid to holders of our common stock in the foreseeable future. While our future dividend policy will be based on the operating results and capital needs of our business, it is currently anticipated that any earnings will be retained to finance our future expansion and for the implementation of our business plan. As an investor, you should take note of the fact that a lack of a dividend can further affect the market value of our stock, and could significantly affect the value of any investment.
There can be no assurance that we will ever provide liquidity to our investors through a sale of our Company.
While acquisitions of pharmaceutical companies like ours are not uncommon, potential investors are cautioned that no assurances can be given that any form of merger, combination, or sale of our Company will take place or that any merger, combination, or sale, even if consummated, would provide liquidity or a profit for our investors. You should not invest in our Company with the expectation that we will be able to sell the business in order to provide liquidity or a profit for our investors.
Our certificate of incorporation allows our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.
Our board of directors has the authority to issue shares of our preferred stock, with such relative rights and preferences as the board of directors may determine, without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders special and unique rights, including without limitation, a preferred right to our assets upon liquidation, a right to receive dividend payments before dividends are distributed to the holders of common stock and the right to convert into our common stock at a price more favorable then the price at which you acquired our common stock. The issuance of any preferred stock could decrease the value of your common stock and relative voting power of our common stock or result in dilution to our existing stockholders.
In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from engaging in certain business combinations with us for a prescribed period of time.
Our common stock has been delisted from Nasdaq and now trades only in the over-the-counter market, which has substantially reduced the liquidity and may adversely affect the price of our common stock.
Our common stock was delisted from the Nasdaq Capital Market effective January 5, 2026 and is currently quoted on the OTCQB under the symbol “PTIX.” Securities quoted in the over-the-counter market generally have significantly less liquidity than securities traded on a national securities exchange, due to factors such as a reduced number of institutional and other investors that will consider purchasing the securities, fewer market makers, wider bid-ask spreads, and lower trading volumes. As a result, holders of our common stock may find it more difficult to sell their shares, may be unable to sell their shares at all, or may be able to sell only at prices substantially below the prices they might obtain on a national securities exchange. The market price of our common stock may also be more volatile and more susceptible to declines and to manipulative or abusive trading practices than it was while listed on Nasdaq.
There is no assurance that we will be able to relist our common stock on Nasdaq or any other national securities exchange.
We may seek to relist our common stock on a national securities exchange in the future, but our ability to do so depends on satisfying the applicable initial listing standards, which are generally more stringent than the continued listing standards we previously failed to satisfy, and may include minimum bid price, stockholders’ equity, market value, public float, round-lot holder, and corporate governance requirements. We cannot predict when, or whether, we will be able to meet these requirements, and any relisting would also be subject to the discretion and approval of the exchange. There can be no assurance that our common stock will be relisted, and a prolonged period of trading in the over-the-counter market may amplify the other risks described in this section.
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The application of “penny stock” rules to our common stock could further limit trading activity and the liquidity of our common stock.
Our common stock is subject to the “penny stock” rules under the Securities Exchange Act of 1934. These rules impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors, including requirements to deliver a standardized risk disclosure document, to obtain the purchaser’s written agreement to the transaction prior to sale, and to disclose current bid and offer quotations and broker-dealer compensation. Because of these added burdens, many broker-dealers may be unwilling to effect transactions in our common stock. This could further reduce the trading activity and liquidity in our common stock and make it more difficult for stockholders to dispose of their shares.
Delisting may reduce or eliminate analyst coverage and institutional ownership of our common stock.
Securities analysts may discontinue or decline to provide research coverage of our common stock following our delisting, and the absence of analyst coverage may reduce investor interest and make it more difficult to establish a fair market price for our shares. In addition, certain institutional investors, mutual funds, pension funds, and other holders are subject to internal policies, fund mandates, or regulatory restrictions that prohibit or limit their ownership of securities not listed on a national securities exchange. As a result, our delisting may cause some existing holders to sell their shares and may discourage new institutional investment, each of which could depress demand for, and the trading price of, our common stock.
Our delisting impairs our access to the capital markets and could increase the cost and difficulty of raising capital.
We are currently not eligible to use a registration statement on Form S-3 to register primary offerings of our securities, and we may instead be required to use a registration statement on Form S-1, which is more costly, time-consuming, and less flexible and which does not permit the same forward incorporation by reference. Our reduced liquidity, narrower investor base, and lower and more volatile stock price may also make it more difficult and more expensive to raise capital through equity or equity-linked financings, and any such financings, if available at all, may be on terms that are dilutive or otherwise unfavorable to our existing stockholders. There can be no assurance that we will be able to obtain additional financing on acceptable terms, or at all, when needed.
Our common stock may no longer constitute a “covered security,” which could subject offers and sales to additional state securities law requirements.
While our common stock was listed on Nasdaq, it was a “covered security” under the National Securities Markets Improvement Act of 1996, which exempted it from registration and qualification requirements under state “blue sky” securities laws. Following our delisting, our common stock generally no longer qualifies for this exemption. As a result, offers and sales of our common stock, including in connection with future capital-raising transactions and certain secondary market trading, may be subject to registration or qualification under, or the availability of exemptions from, the securities laws of the various states and other U.S. jurisdictions. Compliance with these requirements may increase our costs, limit the jurisdictions in which our securities may be offered or sold, and further reduce the liquidity of our common stock.
Our common stock may be removed or otherwise excluded from stock market indices, resulting in forced selling.
As a result of our delisting, our common stock has been or may be removed from any stock market indices in which it was previously included. Index funds and other investment vehicles that track those indices are generally required to sell securities that are removed from the relevant index, which may result in additional selling pressure on our common stock over a concentrated period and could cause the trading price of our common stock to decline.
Our common stock may not be eligible for margin borrowing and could be subject to limitations on electronic clearing and settlement.
Because of our delisting, our common stock may not be eligible to be used as collateral for margin loans under applicable Federal Reserve Board and broker-dealer requirements, which may reduce demand from certain investors. In addition, the continued eligibility of our common stock for book-entry clearance and settlement through The Depository Trust Company is subject to DTC’s policies and procedures. If DTC were to impose a “chill” or “freeze” on, or otherwise discontinue eligibility for, our common stock, the ability of holders to transfer or trade their shares could be significantly impaired and the liquidity and value of our common stock could be materially adversely affected.
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Our delisting may harm our reputation and our relationships with customers, suppliers, employees, and other stakeholders.
The delisting of our common stock may be perceived negatively by our customers, suppliers, lenders, business partners, current and prospective employees, and others with whom we do business, and may be viewed as an indicator of financial or operational difficulty. This negative perception could impair our ability to attract and retain customers, vendors, and talent, to maintain commercial and financing relationships on favorable terms, and to compete effectively, any of which could have a material adverse effect on our business, financial condition, and results of operations.
The market price of our common stock has been and may continue to be volatile, and the thinner over-the-counter market may make our common stock more susceptible to manipulation.
The trading price of our common stock has been, and is likely to continue to be, highly volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control. The lower trading volumes and reduced number of market makers characteristic of the over-the-counter market can amplify price swings and may make our common stock more vulnerable to manipulative or fraudulent trading schemes, including “pump-and-dump” and short-selling campaigns. Such activity, and the resulting volatility, could cause the price of our common stock to decline rapidly and without regard to our operating performance, and could expose us to securities litigation, which is costly and diverts management attention regardless of outcome.
Future sales or issuances of our common stock, including at depressed market prices, could result in substantial dilution and could further depress our stock price.
To fund our operations and strategic objectives, we may need to raise additional capital through the issuance of equity or equity-linked securities. Because of our delisting, reduced liquidity, and lower stock price, any such issuances may be made at prices below current or historical trading levels and may include warrants or other features that result in substantial dilution to existing stockholders. In addition, sales of a significant number of shares of our common stock in the public market, or the perception that such sales could occur, may further depress the market price of our common stock and impair our ability to raise capital.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
We
have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability
of our critical systems and information. Our cybersecurity risk management program includes a cybersecurity incident response plan. We
design and assess our program based on ISO 27002 standards. This does not imply that we meet any particular technical standards, specifications,
or requirements, only that we use the ISO 27002 as a guide to help us identify, assess, and manage cybersecurity risks relevant to our
business. We engage external resources that contribute to, and provide independent evaluation of, our existing cybersecurity practices
and organizational risk assessment systems. We use established processes designed to identify, assess, and manage
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Our
board of directors administers its cybersecurity risk oversight function through its audit committee.
Item 2. Properties.
The Company does not currently own any real property. The Company leases office space for its principal executive office located at 149 Fifth Avenue, Suite 500, New York, New York 10010.
Item 3. Legal Proceedings.
From time to time we may be named in claims arising in the ordinary course of business. As of March 31, 2026, 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, financial condition, and results of operations.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our common stock is currently available for trading in the over-the-counter market and is quoted on the Nasdaq Capital Market under the symbol “PTIX.” There has been a very limited market for our common stock and trading volume has been negligible. There is no guarantee that an active trading market will develop in our common stock. The following table sets forth, for the periods indicated and as reported on the Nasdaq Capital Market, the high and low bid prices for our common stock. Such quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission and may not necessarily represent actual transactions.
| High | Low | |||||||
| 2025(1) | ||||||||
| First Quarter (1) | $ | 26.18 | $ | 23.73 | ||||
| Second Quarter (1) | $ | 15.54 | $ | 12.32 | ||||
| Third Quarter (1) | $ | 15.26 | $ | 9.24 | ||||
| Fourth Quarter (1) | $ | 8.68 | $ | 7.85 | ||||
| 2026(1) | ||||||||
| First Quarter (1) | $ | 14.28 | $ | 6.40 | ||||
| Second Quarter (1) | $ | 6.20 | $ | 4.28 | ||||
| Third Quarter (1) | $ | 3.77 | $ | 3.42 | ||||
| Fourth Quarter (1) | $ | 1.27 | $ | 0.70 | ||||
| (1) | The high and low bid prices for this quarter were reported by the Nasdaq Capital Market. |
Holders
As of August 14, 2026, there are approximately 276 record holders of our common stock, zero holders of our Series B Preferred Stock, zero holders of our Series C Preferred Stock, zero holders of our Series C-1 Preferred Stock, and zero holders of our Series D Preferred Stock.
Dividend Policy
We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.
Reverse Stock Split
On May 5, 2025, the Company effectuated a 1 for 14 reverse stock split (the “Reverse Split”). The Company’s stock began trading on a split-adjusted basis effective on the Nasdaq Stock Market on May 5, 2025. There was no change to the number of authorized shares of the Company’s common stock. All share and per share information in these financial statements are adjusted to reflect the Reverse Split.
Recent Sales of Unregistered Securities
None
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Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included at the end of this report. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties such as statements of our plans, objectives, expectations, and intentions. As a result of many factors, including those factors set forth in the “Risk factors” section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
The discussion and analysis of our financial condition and results of operations are based on Protagenic’s financial statements, which Protagenic has prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires Protagenic 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, Protagenic evaluates such estimates and judgments, including those described in greater detail below. Protagenic bases its estimates on historical experience and on various other factors that Protagenic believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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 PT00114; |
| ● | seek regulatory approvals for any product candidates that successfully complete clinical trials; |
| ● | continue research and preclinical development and initiate clinical trials of our other potential indications for PT00114; |
| ● | 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. |
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Recent Events
Acquisition of five preclinical drug candidate assets
As a result of the Exchange Agreement with Alterola Biotech Inc., the Company acquired five preclinical drug candidate assets and five new employees, all of whom were working for, or affiliated with, the Alterola subsidiary known as Phytanix Bio, Inc. The drug candidate assets temporarily expanded our pipeline into multiple therapeutic areas beyond the target markets of PT00114, supported by an intellectual property portfolio.
Settlement Agreement
On February 17, 2026, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Alterola Biotech Inc., EMC2 Capital LLC, and the former stockholders of Phytanix Bio (collectively, the “Former Phytanix Stockholders”), in connection with the litigation styled Protagenic Therapeutics, Inc. v. Alterola Biotech Inc., et al., Case No. 2025-1238-KMM, pending in the Court of Chancery of the State of Delaware (the “Litigation”).
The Settlement Agreement provides for, among other things, the dismissal of the Litigation and the execution of an agreement to terminate, and unwind the transactions contemplated by, the Share Exchange Agreement dated May 15, 2025 (the “SEA”). Pursuant to the SEA, the Company had previously reverse merged with Phytanix Bio.
Unwind, Termination and Share Exchange Agreement
On February 17, 2026, the Company entered into an Unwind, Termination, and Share Exchange Agreement (the “Unwind Agreement”) with Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders, and Colin Stott, as Sellers’ Representative. The Company, Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders, and Sellers’ Representative are collectively referred to herein as the “Parties”. The closing of the unwind transactions (the “Closing”) occurred simultaneously with the execution of the Unwind Agreement on February 17, 2026.
Pursuant to the Unwind Agreement:
| ● | The SEA was terminated; |
| ● | The Parties agreed to unwind the transactions contemplated by the SEA; |
| ● | The Former Phytanix Stockholders forfeited and returned to the Company all shares of common stock and preferred stock that had been issued to them as closing consideration under the SEA; |
| ● | The Company transferred back to the Former Phytanix Stockholders 100% of the outstanding capital stock of Phytanix Bio; |
| ● | Upon Closing, the Former Phytanix Stockholders re-acquired full ownership of Phytanix Bio, and the Company relinquished all ownership and related rights in Phytanix Bio; |
| ● | Phytanix Bio will continue to own its pre-merger assets and retain its liabilities as reflected on its balance sheet as of the date of the Unwind Agreement; and |
| ● | The Company agreed to pay Phytanix Bio $300,000 at Closing and an additional $10,000 following receipt of specified financial information, in accordance with the terms of the Unwind Agreement. |
The Unwind Agreement also includes:
| ● | Mutual releases between the Company and the Former Phytanix Stockholders; |
| ● | Termination of related agreements between the Parties; |
| ● | Acknowledgement of resignations of Former Phytanix Stockholders and their affiliates from any positions with the Company; |
| ● | Mutual releases between the Parties; |
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| ● | Indemnification provisions in favor of the Company relating to liabilities associated with the SEA and Phytanix Bio; and |
| ● | Indemnification provisions in favor of Phytanix Bio for any third-party claims relating to any action taken by, or on behalf of, Phytanix Bio outside the ordinary course of business during the period between the closing of the transactions under the SEA and the closing of the transactions under the Unwind Agreement that are not otherwise reflected on the balance sheet of Phytanix Bio as of the date of the Unwind Agreement. |
The foregoing descriptions of the Settlement Agreement and the Unwind Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Settlement Agreement and the Unwind Agreement, copies of which are filed as exhibits 10.1 and 10.2, respectively, to the Current Report on Form 8-K filed by the Company on February 17, 2026 and are incorporated herein by reference.
Notice of Delisting and Related Actions
On July 24, 2024, the Company received a deficiency letter (the “Notification Letter”) from the Nasdaq Listing Qualifications (“Nasdaq”) stating that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Notification Letter states that the Company has 180 calendar days, or until January 20, 2025, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the Company’s closing bid price of the Company’s common stock must have a closing bid price of at least $1.00 for a minimum of ten consecutive business days.
On January 22, 2025, Nasdaq provided a notice to the Company that the Company had not regained compliance with Rule 5550(a)(2) and is not eligible for a second 180 calendar day compliance period as the Company does not comply with the requirements for initial listing on The Nasdaq Capital Market. This notification is part of the ongoing discussions with the Nasdaq Hearings Panel (the “Panel”) regarding the Company’s listing status, and the Company included this matter in its presentation to the Panel on January 30, 2025.On February 19, 2025, the Company received a hearing panel decision from Nasdaq (Nasdaq Listing Qualifications Hearings Docket No. NQ 7072C-25) indicating that its provisional plan for regaining compliance with the Nasdaq listing requirements had been accepted. For continued listing on the Nasdaq Capital Market, the Company has until April 28, 2025 to: (1) demonstrate compliance with Nasdaq Rules 5550(a)(2) and 5550(b)(2), (2) file a public disclosure describing any transactions undertaken by the Company to increase its equity and provide an indication of its equity following those transactions, and (3) provide the Panel with an update on its fundraising plans and updated income projections for the next 12 months.
On April 18, 2025, the Company held a Special Meeting of Shareholders in which the Shareholders voted to authorize a reverse split of a magnitude between 1-for-10 and 1-for-20, for the purpose of increasing the chances of the Company regaining compliance with Nasdaq Listing Rule. 5550(a)(2). The Board determined that the best ratio to use was 1-for-14, because it would be the highest ratio that maintained at least 500,000 shares remaining in the Company’s public float, while maximizing the Company’s likely price per share.
On April 25, 2025, the Company provided an update to Nasdaq on its plans for both minimum bid compliance and capital raising, along with a request for an extension on the April 28, 2025 deadline. The update included that the 1-for-14 reverse split would be effective May 5, 2025, and the company had engaged a syndicate of two underwriters to market and implement an equity financing for the purpose of raising enough capital to comply with Nasdaq Listing Rule 5810(c)(3)(A). On May 1, 2025, Nasdaq provided a response to the Company’s representative that the Panel has approved the Company’s extension request. As a result, the Company believes that it should be able to achieve a minimum bid price for 10 days above $1 by May 16, 2025, and the shareholder equity compliance by May 19, 2025.
On June 17, 2025, the Company received a letter from Nasdaq stating that the Nasdaq Hearings Panel found the Company in compliance with Listing Rules 5550(a)(2), 5550(a)(4), 5550(b)(1), and 5620(a), the Bid Price, Public Float, Equity and Annual Shareholder Meeting Rule, respectively as required by the February 19, 2025, decision. The letter also stated that pursuant to Listing Rule 5815(d)(4)(B), the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of this letter. If, within that one-year monitoring period, Staff finds the Company again out of compliance with the Equity Rule, notwithstanding Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, nor will the company be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Instead, Staff will issue a Delist Determination Letter, and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened Hearings Panel if the initial Panel is unavailable. The Company will have the opportunity to respond/present to the Hearings Panel as provided by Listing Rule 5815(d)(4)(C). The Company’s securities may be at that time delisted from Nasdaq.
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On August 20, 2025, the “Company received a notification letter (the “Notification Letter”) from the Nasdaq Listing Qualifications department (“Nasdaq”) stating that it is not in compliance with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to timely file its Quarterly Report on Form 10-Q for the period ended September 30, 2025 (the “Form 10-Q”) with the Securities and Exchange Commission (the “SEC”). The Notification Letter states that the Company has 60 calendar days to submit a plan to regain compliance and if Nasdaq accepts such plan, they can grant an exception of up to 180 calendar days from the Form 10-Q’s due date (or until February 17, 2026).
As previously reported in the Company’s Notification of Late Filing on Form 12b-25 filed with the SEC on August 14, 2025 (the “Form 12b-25”), the Company was unable to file the Form 10-Q within the prescribed period without unreasonable effort or expense.
The Company’s common stock was delisted from the Nasdaq Capital Market effective January 5, 2026 and is currently quoted on the OTCQB under the symbol “PTIX.”
The Company intends to take the necessary steps to regain compliance with Nasdaq’s listing rules as soon as practicable. However, there can be no assurance that the Company will be able regain compliance and be able to be listed on Nasdaq again.
Change of Fiscal Year
On August 7, 2025, the Board approved a change in the Company’s fiscal year-end from December 31 to March 31, effective immediately. The Company filed a transition report on Form 10-QT with the Securities and Exchange Commission for the transition period beginning April 1, 2025 and ending June 30, 2025.
Corporate Restructuring
On August 8, 2025, the Board of Directors (the “Board”) approved a focused restructuring plan (the “Restructuring Plan”) to transition to a virtual operating model and concentrate capital on the Company’s highest-priority clinical program(s). In approving the Restructuring Plan, the Board determined that a disciplined cost structure and a sharper focus on near-term value inflection are in the best interests of the Company and its stockholders.
Under the Restructuring Plan, the Company (i) temporarily suspended expenditures related to its preclinical programs described above and (ii) initiated a process to evaluate strategic alternatives for those programs, including partnerships and/or out-licensing, with the objective of advancing them with appropriate external funding while preserving cash for the Company’s lead clinical assets. By doing so, the Company reduced operating expenses, overhead, and headcount primarily associated with preclinical activities.
When fully implemented, the Restructuring Plan is expected to reduce annualized operating expenses by approximately $8 million. The Company expects to incur one-time charges in connection with the Restructuring Plan; however, because key actions remain in process, the Company cannot reasonably estimate the total amount or timing of such charges at this time and will provide an update in a subsequent filing once such amounts are estimable.
In connection with the Restructuring Plan, the Board terminated the employment of (i) Barrett Evans as Chief Executive Officer and President and (ii) Colin Stott as Chief Operating Officer, in each case effective immediately. Messrs. Evans and Stott remain members of the Company’s Board of Directors. Any severance or other compensatory agreements, if applicable, will be disclosed when determined. Workforce reductions also included the certain roles primarily associated with preclinical operations, regulatory affairs, and intellectual property functions.
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In total, the Restructuring Plan was designed to accomplish three things:
| 1. | Clinical focus. The Company will allocate available resources to efficiently execute the ongoing Phase 2 clinical trial of PT00114 (peptide analogue), which the Company currently expects to complete in approximately 9 to 12 months, subject to enrollment and other customary factors. |
| 2. | Virtual operating model. The Company is transitioning to a virtual operating model to minimize cash burn while prioritizing its clinical-stage program. |
On February 3, 2026, William (Bill) Nichols, Jr was appointed as the new President of the Company. On April 30, 2026, the Company’s former Chief Financial Officer, Alex Arow, departed the Company.
As part of the unwind, Messrs. Evans and Stott were removed from the board of directors.
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.
Below are the changes in operating expenses between the year ended March 31, 2026 and 2025:
| Year Ended | Year Ended | Percent | ||||||||||||||
| March 31, 2026 | March 31, 2025 | Changes | Changes | |||||||||||||
| Accounting and audit fees | $ | 272,579 | $ | 132,600 | $ | 139,979 | 106 | % | ||||||||
| Research and Development | 901,896 | 376,740 | 525,156 | 139 | % | |||||||||||
| Legal Fees | 874,395 | 183,097 | 691,298 | 378 | % | |||||||||||
| Consulting Fees | 939,210 | 667,584 | 271,626 | 41 | % | |||||||||||
| Salaries and wages | 764,648 | 132,775 | 631,873 | 476 | % | |||||||||||
| Bad debt expense | - | 1,023,235 | (1,023,235 | ) | (100 | )% | ||||||||||
| General and administrative - other | 332,393 | 77,530 | 254,863 | 329 | % | |||||||||||
| Stock compensation | 418,589 | - | 418,589 | 100 | % | |||||||||||
| TOTAL OPERATING EXPENSES | $ | 4,503,710 | $ | 2,593,561 | $ | 1,910,149 | 74 | % | ||||||||
The increase in research and development expense is due to the low year-ago comparable figure of only $376,740, which was driven by the fact that the former Phytanix Bio, Inc., which was acquired by the Company in May 2025 but is being treated as the accounting acquirer and therefore solely responsible for the historical 2025 operating expenses, was conducting little or no drug development work in the year ended March 31, 2025 (as Phytanix Bio had only been incorporated in Nevada in 2024). By contrast, the combined company was conducting a level of R&D spending in the year ended March 31, 2026 that was commensurate with a Phase I clinical trial, which was in progress for the compound known as PT11004.
The increase in general and administrative expenses is due to an increase in stock compensation due to option vesting. The increase in R&D expense is due to lower expenses related to our clinical trials and related expenses due to changes in the Company’s stage of research and development and change to the Company’s outsourced research partners. The increase in transaction fees is from our merger that occurred in May 2025. This increase has been the primary driver of our increased loss from operations for the year ended March 31, 2026 compared to the same period for 2025.
During the year ended March 31, 2026, the Company entered into a reverse merger with Phytanix Bio as well as an unwind of this merger. Due to this reverse merger, the Company presents the historical financial information of Phytanix Bio and only includes the financial information for Protagenic for the period after the reverse merger. The financial numbers for Phytanix Bio are consolidated only through the date of the unwind. (See Note 4) This limits comparability of the Company’s number between the years presented.
Below are the changes in other income and expenses between the year ended March 31, 2026 and 2025:
| Year Ended | Year Ended | Percent | ||||||||||||||
| March 31, 2026 | March 31, 2025 | Changes | Changes | |||||||||||||
| Interest expenses/amortization of discount | $ | (1,495,007 | ) | $ | (1,039,353 | ) | $ | (455,654 | ) | 44 | % | |||||
| Derivative expense | (343,399 | ) | - | (343,399 | ) | (100 | )% | |||||||||
| Change in fair value of derivative liabilities | 1,507,869 | - | 1,507,869 | 100 | % | |||||||||||
| Foreign currency exchange differences | 9,283 | 41,056 | (31,773 | ) | (77 | )% | ||||||||||
| Gain/loss on disposal of subsidiary | 7,310,719 | - | 7,310,719 | 100 | % | |||||||||||
| Gain/loss on extinguishment of debt | (1,117,778 | ) | - | (1,117,778 | ) | (100 | )% | |||||||||
| TOTAL OTHER INCOME (EXPENSE) | $ | 5,871,687 | $ | (998,297 | ) | $ | 6,869,984 | (688 | )% | |||||||
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During the year ended March 31, 2026, the Company entered into a reverse merger with Phytanix Bio as well as an unwind of this merger. Due to this reverse merger, the Company presents the historical financial information of Phytanix Bio and only includes the financial information for Protagenic for the period after the reverse merger. The financial numbers for Phytanix Bio are consolidated only through the date of the unwind. (See Note 4) This limits comparability of the Company’s number between the years presented.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all. To date, we have primarily financed our operations through the public offering of our equity securities and the private placement of our convertible securities.
Below are the changes in cashflow between the years ended March 31, 2026 and 2025:
| Year Ended | Year Ended | Percent | ||||||||||||||
| March 31, 2026 | March 31, 2025 | Changes | Changes | |||||||||||||
| Net cash used in operating activities | $ | (2,806,800 | ) | $ | (1,768,908 | ) | $ | (1,037,892 | ) | 59 | % | |||||
| Net cash provided by investing activities | $ | 629,883 | $ | - | $ | 629,883 | 100 | % | ||||||||
| Net cash provided by financing activities | $ | 3,873,653 | $ | 1,809,265 | $ | 2,064,388 | 114 | % | ||||||||
The use of cash in operating activities during the year ended March 31, 2026, primarily comprised of $1,367,977 net income, $418,589 in stock compensation expense, $1,507,869 from the change in fair value of the derivative liability, $7,310,719 from the gain on disposal of the Phytanix subsidiary, $1,567,479 from amortization of debt discount, a decrease in prepaid expenses and other current assets of $53,393, and a $1,056,323 increase of accounts payable and accrued expenses, which included payments to legal and accounting professionals, payments to consultants, and other administrative expenses.
The use of cash in operating activities during the year ended March 31, 2025, primarily comprised of $3,591,858 net loss, $598,810 from amortization of debt discount, $103,184 from stock compensation expense, $773,234 from bad debt, and a $388,118 increase of accounts payable and accrued expenses, which included payments to legal and accounting professionals, payments to consultants, and other administrative expenses.
The cash provided by investing activities during the year ended March 31, 2026 consisted of $943,180 from the cash revived in the acquisition of Phytanix Bio and partly offset by $310,000 from cash spent in the unwind of the Phytanix Bio acquisition.
The cash provided by financing activities during the year ended March 31, 2026 consisted of $395,474 from the issuance of shares for cash, $533,898 from the increase in note payable for acquisition of Phytanix Bio, and $3,949,730 for proceeds from the exercise of warrants.
The cash provided by financing activities during the year ended March 31, 2025 consisted of $1,622,003 from the proceeds from notes payable and $187,062 for proceeds from related party loans.
During the year ended March 31, 2026, the Company entered into a reverse merger with Phytanix Bio as well as an unwind of this merger. Due to this reverse merger, the Company presents the historical financial information of Phytanix Bio and only includes the financial information for Protagenic for the period after the reverse merger. The financial numbers for Phytanix Bio are consolidated only through the date of the unwind. (See Note 4) This limits comparability of the Company’s number between the years presented.
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 (CROs) and peptide synthesizer companies. They could also include business combinations, capital expenditures, and new drug development working capital requirements. As of March 31, 2026, we had cash of $1,509,178 and working capital of $511,107.
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We anticipate that losses will continue for the foreseeable future. Based on our current operating plans, we believe that our cash resources will be sufficient to fund its operations until approximately the end of the third quarter of 2026. In order to continue our operations beyond our forecasted runway we will need to raise additional capital, and we have no committed sources of additional capital at this time. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be on terms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our product candidates, management may need to curtail its development efforts and planned operations.
Plan of Operations
Business Overview
The Company is in its developmental stage, with encouraging but not conclusive evidence that its lead drug candidate, PT00014, may be effective as an anti-anxiety and/or anti-depression drug. It is focused on confirming the efficacy of this drug candidate, along with performing the other preclinical steps needed to progress along the pathway to bring this drug candidate into human clinical trials and eventually, to the global market to provide a new pharmaceutical for patients suffering from anxiety or treatment-resistant depression.
If we are able to successfully develop our drug, PT00114, and obtain FDA approval, we could then begin marketing and selling it in the United States and generate revenue. FDA approval to begin commercial sales is the singular gating item that will allow us to begin generating sales revenue in the U.S., so it will have an enormous impact on our business plan and our financial condition. It is anticipated that the sale of our drug will allow the Company to generate enough sales revenue to support all of our operations and to generate a profit. However, given the stage of development, even if FDA Approval is obtained, we do not anticipate generating any revenue from sales prior to 2029. On May 22, 2024, we announced the results of the single dose portion of the Phase I study for PT00114. On December 9, 2025 we announced positive topline safety results from its Phase 1 Multiple Dose (MD) study of PT00114.
Development Milestones Currently Anticipated
Recent communications with the U.S. FDA have resulted in following revised guidance for clinical timelines:
| ● | The Company is in the process of refiling its IND application for PT00114 addressing the questions raised by regulators. | |
| ● | Anticipate Q4 2026: Commence multiple dose portion of Phase Ib study for PT00114 | |
| ● | Anticipate Q2 2027: Initiation of Phase IIa study for PT00114 | |
| ● | Anticipate Q3 2027: Public availability of Phase IIa study results for PT00114 |
Human Resources (current state of employees)
The Company has two: two full-time employees: Bill Nichols, Jr, the President of Protagenic Therapeutics and Lauren Mueller, PhD, a Senior Research Scientist. The Company also has three paid consultants: Andrew Slee, PhD, Chief Operating Officer, David Lovejoy, PhD, Scientific Advisor, and Zack Armen, Strategic Advisor.
Off Balance Sheet Arrangements
We have no material off-balance sheet arrangements that are likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital resources, or capital expenditures.
Critical accounting policies and estimates
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The notes to the consolidated financial statements contained in this Annual Report describe our accounting policies used in the preparation of the consolidated financial statements. None of those policies are deemed to be critical accounting policies nor critical accounting estimates. The preparation of these financial statements requires us 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 financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We continually evaluate our critical accounting policies and estimates. Significant estimates underlying the consolidated financial statements include valuation of stock options and warrants, derivative liabilities, and assessment of deferred tax asset valuation allowance. Foreign currency exchange rates, fair value of convertible notes, fair value of derivative liabilities, fair value of the valuation of Protagenic Therapeutics, Inc. and the purchase price allocation.
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Recently Issued Accounting Pronouncements
None
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
See pages F-1 through F-20 following the Exhibit Index of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Assessment of the Effectiveness of Internal Controls over Financial Reporting
Under the supervision and with the participation of our management, including our Chief Executive Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework published in 2013. Based on its evaluation, our management concluded that our internal control over financial reporting was not effective as of the end of the period covered by this Annual Report on Form 10-K.
(a) Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America. Internal control over financial reporting includes those policies and procedures that:
| (i) | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| (ii) | provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of management and/or our Board of Directors; and |
| (iii) | provide reasonable assurance regarding the prevention or timely detection of any unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of March 31, 2026, management has completed a proper evaluation, risk assessment and monitoring of the Company’s internal controls over financial reporting based on the 2013 Committee of Sponsoring Organizations (COSO) framework. Management concluded that, during the period covered by this report, our internal controls and procedures were not effective to detect the inappropriate application of GAAP. Management identified the following material weaknesses and concluded that the internal controls over financial reporting were not effective.
| ● | We lack the necessary corporate accounting resources to maintain adequate segregation of duties. We currently rely heavily on our Executive Chairman, for almost every key financial duty and he has access to materially all our financial information. Such a lack of segregation of duties is typical in a company with limited resources. Although the Company’s Executive Chairman and Board of Directors review the financial statements and would most likely discover any misappropriation of funds, this cannot be assured by the existing system. |
| ● | Limited level of multiple reviews in connection with the financial reporting process. |
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This annual report does not include an attestation report by our independent registered public accounting firm regarding internal control over financial reporting. As we are neither a large accelerated filer nor an accelerated filer, our management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
(b) Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a–15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Board of Directors and the Chief Executive Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a–15(e) under the Exchange Act) as of the end of the period covered by this Report. Based upon that evaluation, the Company’s management concluded that the Company’s disclosure controls and procedures were [not] effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management to allow timely decisions regarding required disclosure due to the following:
| ● | 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. |
During the quarter ended December 31, 2024, the Company analyzed and documented accounting policies and procedures. In addition, management implemented certain policies and procedures but concluded that material weaknesses still exist and that such controls are not effective under the COSO framework. These material weaknesses could result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Remediation Plan
To address the risk of material weakness described above, we have engaged an independent third party to enhance our segregation of duties.
The following mitigating measures have been implemented:
| ● | Onboarding of Bill Nichols, President of Protagenic, has added an additional layer of both financial decision making, as well as payment approval. |
| ● | Partnering with Danforth Health to segregate the duties of AP review, FP&A planning & reporting, and financial statement review. |
| ● | Directed all invoices to a central repository instead of a single employee’s email |
Limitations on the Effectiveness of Controls. Our management, including our Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. 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. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.
(c) Changes in Internal Control over Financial Reporting
Other than as discussed above, there were no changes in our internal controls over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
[Not applicable].
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Executive Officers and Directors
The following sets forth certain information with respect to our executive officers and directors.
| Name | Age | Position(s) | ||
| Garo H. Armen | 73 | Executive Chairman of the Board of Directors | ||
| Bill Nichols, Jr | 51 | President | ||
| Andrew Slee | 76 | Chief Development Officer | ||
| Timothy Wright | 68 | Director | ||
| Brian Corvese | 68 | Director | ||
| Jennifer Buell | 51 | Director |
Garo H. Armen, PhD, Executive Chairman, is one of our founders and joined us in September 2004. Dr. Armen is Chairman and Chief Executive Officer of Agenus Inc., a biotechnology company he co-founded in 1994. From mid-2002 through 2004, he also served as Chairman of the Board of directors of the biopharmaceutical company Elan Corporation, plc, which he successfully restructured. Prior to Agenus Inc., Dr. Armen established Armen Partners, a money management firm specializing in biotechnology and pharmaceutical companies, and was the architect of the widely publicized creation of the Immunex Lederle oncology business in 1993. Earlier, he was a senior vice president of research at Dean Witter Reynolds, having begun his career on Wall Street as an analyst and investment banker at EF Hutton. In 2002, Dr. Armen founded the Children of Armenia Fund, a nonprofit organization dedicated to significantly rebuilding and revitalizing impoverished rural Armenian towns to provide immediate and sustainable benefits to children and youth. He received the Ellis Island Medal of Honor in 2004 for his humanitarian efforts, and received the Sabin Humanitarian Award from the Sabin Vaccine Institute in 2006 for his achievements in biotechnology and progressing medical research. Dr. Armen was also the Ernst & Young 2002 New York City Biotechnology Entrepreneur of the Year, and received a Wings of Hope Award in 2005 from The Melanoma Research Foundation for his ongoing commitment to the melanoma community. Dr. Armen received a PhD in physical chemistry from the Graduate Center, City University of New York, after which he worked as a research fellow at Brookhaven National Laboratories in Long Island, NY.
Bill Nichols, President, was appointed to the newly created role in February 2026 and is responsible for leading the integrated strategy for the company. He has more than 25 years of biopharma experience with a strong record of leading successful multi-billion-dollar commercial franchises. Most recently as SVP Commercial at bluebird bio (now Genetix), he led the successful launches of three first-in-class gene therapies — LYFGENIA™, ZYNTEGLO™, and SKYSONA™. Earlier in his career he held leadership roles in psychiatry, neuroscience, virology, and blood disorders at Bristol-Myers Squibb and Dova (now Sobi). Nichols began his career in neuroscience research at Children’s Hospital of Philadelphia after receiving a Bachelor of Science in Biology from Morehouse College and has completed executive education at the Wharton School’s Aresty Institute.
Andrew Slee, PhD, Chief Development Officer. Dr. Andy Slee joined us in April 2016. During his 37-year pharmaceutical career, Mr. Slee has taken several drugs from inception through all their pre-clinical and early clinical testing. During the past 37 years, he has worked for Preclinical CROs, immune-oncology companies and natural product companies focusing on anti-infectives, cancer, CNS, diabetes and inflammatory diseases. Spreading his influence beyond a single company, he created and ran his own Contract Research Organization (CRO), Vivo Source Laboratories, which for ten years from 2003 to 2013 provided preclinical proof of concept catering to biopharmaceutical companies. For the 18 years before that, Mr. Slee shepherded multiple pharma targets in several therapeutic areas from inception onward at DuPont Pharmaceuticals. He is a graduate of Syracuse University and Leeds University.
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Brian J. Corvese, Director, joined us on July 28, 2017, filling the open board seat vacated by Gregory H. Ekizian. Since 1999, Mr. Corvese has been the President and Founder of Vencor Capital (“Vencor”), a private equity firm with telecommunications and technology investments in the Middle East and Mediterranean regions. Prior to working at Vencor, Mr. Corvese worked on investments in the U.S. and global equity markets as a Managing Director and partner at Soros Fund Management, the largest hedge fund in the world at the time. From 1988 to 1996, Mr. Corvese was a partner at Chancellor Capital Management (“Chancellor”), a $25 billion money management firm. While at Chancellor, Mr. Corvese was a Portfolio Manager with responsibility for investments made in basic industries, restructurings, and special situations, corporate governance investments, as well as founded and managed his own hedge fund. From 1981 to 1988, Mr. Corvese was with Drexel Burnham Lambert (“Drexel”) as an equity analyst following the chemical and specialty chemical industries and participated in a significant number of merger and acquisition activities. While at Drexel, Mr. Corvese was a member of the top chemical and specialty chemical research team, as ranked by Institutional Investor. Mr. Corvese currently serves on the board of directors of Agenus Inc. and the National Telecommunications Corporation, based in Cairo, Egypt. Mr. Corvese earned degrees in finance and political science from The University of Rhode Island and attended New York University Graduate School. With over 30 years of experience in the financial industry, Mr. Corvese brings substantial financial expertise to our Board.
Timothy Wright, Director, joined us on November 23, 2022, filling the open board seat vacated by Joshua Silverman. Mr. Wright was the Chief Executive Officer of MiMedX Group, Inc., a position he held from May 2019 through September 2022. MiMedX is an advanced wound care and emerging therapeutic biologics company. He is currently the senior advisor to the Wake Forest Institute of Regenerative Medicine and a Director of BIORG , a human organoid development company. Mr. Wright also currently serves on the board of directors of Agenus Inc., which he has served on since 2006. Mr. Wright also serves as a Partner at Signal Hill Advisors, LLC, a position he has held since February 2011. In addition, Mr. Wright serves as Chairman of The Ohio State University Comprehensive Cancer Center Drug Development Institute and Director of the Ohio State University Innovation Foundation. Mr. Wright previously held several executive roles at Covidien (now Medtronic), Teva Pharmaceuticals Industries Ltd., DuPont Merck, Elan Bio-Pharmaceuticals, M2Gen Corp. and Curaxis Pharmaceuticals Corporation. As our Lead Director, Mr. Wright brings 32 years of experience on boards of companies in North America, Europe, Asia and Japan.
Jennifer Buell, PhD, Director, joined our board in July 2020. Dr. Buell is the President and Chief Operating Officer of Agenus, Inc., where she has previously served as served as the Head of Global R&D operations, Head of Research, and Chief Communications and External Affairs Officer. She is also the president of Agenus’ cell therapy partially-owned subsidiary MiNK Therapeutics, Inc, (Nasdaq: INKT). With 20 years of biopharmaceutical R&D experience, Dr. Buell has extensive knowledge in advancing discovery candidates through development and experience communicating with external stakeholders including regulators, investors, and collaborators. She has a proven record of success in R&D leadership, most recently at Agenus, where she led high performing teams in advancing candidates into the clinic and delivered on key alliance collaborations. Prior to joining Agenus, Dr. Buell held leadership positions in R&D operations at Bristol-Myers Squibb and later was responsible for Program and Alliance Management at Harvard Clinical Research Institute (Baim), where she was involved in the development strategy and operations for a portfolio of industry and government sponsored clinical programs. Dr. Buell obtained her PhD in Cellular, Biochemical, and Molecular Biochemistry with an MS in Biostatistics from Tufts University in Boston.
Consultants and Advisors
David A. Lovejoy, PhD, Scientific Advisor, is one of our founders and joined us in September 2004. He holds a PhD in Neuroendocrinology from the University of Victoria (Victoria, BC) and spent three years at the Clayton Foundation Laboratories for Peptide Biology at the Salk Institute (San Diego, CA) as a postdoctoral fellow. Dr. Lovejoy took his first academic appointment at the University of Manchester (Manchester, UK), one of the United Kingdom’s top-ranking research universities. He joined the University of Toronto (Toronto, Ontario) in 2000 and is currently Professor of Neuroendocrinology in the Department of Cell and Systems Biology at the University of Toronto. He is the author of more than 210 scientific publications including three books in the field and an Associate Editor for a scientific journal and is inventor or co-inventor on all of our intellectual property.
Zack Armen, Strategic Advisor. Mr. Armen became involved with Protagenic in Fall 2018, and brings experience in strategic finance and life sciences venture investing to the company through roles at Goldman Sachs, Flagship Pioneering, CiBO Technologies, and his current role as Director of Corporate Development at Valo Health.
Director Independence
Each of Messrs. Corvese, Wright, and Buell are “independent” members of our board of directors as “independence” is defined in Nasdaq Marketplace Rule 5605(a)(2).
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Family Relationships
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by our stockholders or us to become directors or executive officers. There is one family relationship between Strategic Advisor Zack Armen and our Executive Chairman, Garo Armen (Garo Armen is Zack Armen’s father).
Involvement in Certain Legal Proceedings
To our knowledge, during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| ● | been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Code of Business Conduct and Ethics
On February 24, 2017, we adopted a written Code of Business Conduct and Ethics. Guidelines on Significant Governance Issues, and Process for Security Holder Communications with Directors, each of which is filed as an exhibit to this annual report.
Board Committees
Our board of directors has established five standing committees: an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, a Science Committee and a Clinical and Regulatory Committee. Each of these committees will operate under a charter that has been approved by our board of directors.
Audit Committee. The Audit Committee will oversee and monitor our financial reporting process and internal control system, review and evaluate the audit performed by our registered independent public accountants and reports to the Board any substantive issues found during the audit. The Audit Committee will be directly responsible for the appointment, compensation, and oversight of the work of our registered independent public accountants. The Audit Committee will review and approve all transactions with affiliated parties. The Audit Committee shall be comprised of two or more independent directors who shall be appointed annually and subject to removal by the Board at any time. Each member of the Audit Committee shall meet the independence requirements of The NASDAQ Stock Market, LLC, and SEC regulations, as well as any other applicable requirements. Messrs. Corvese (Committee Chairperson) and Wright comprise the Audit Committee, each of whom meets the independence requirements. In addition, the Board also designated Brian Corvese as an “audit committee financial expert,” as that term is defined by the NSADAQ Listing Rules and SEC regulations.
Compensation Committee. The Compensation Committee will provide advice and make recommendations to the board in the areas of employee salaries, benefit programs and director compensation. The Compensation Committee will also review the compensation of our President, and other officers and make recommendations in that regard to the board as a whole. The Compensation Committee shall be comprised of three or more directors who shall be appointed annually and subject to removal by the Board at any time. The Compensation Committee must have at least two members, and must consist solely of independent directors. Messrs. Barrage, Corvese, and Wright comprise the Compensation Committee and are all independent.
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Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will nominate individuals to be elected to the full board by our stockholders. The Nominating and Corporate Governance Committee will determine the slate of director nominees for election to the Board, to identify and recommend candidates to fill vacancies occurring between annual stockholder meetings, to review the Company’s policies and programs that relate to matters of corporate responsibility, including public issues of significance to the Company and its stockholders. The Nominating and Corporate Governance Committee shall be comprised on two or more directors who shall be appointed annually and subject to removal by the Board at any time. Each member of the Nominating and Corporate Governance Committee may or may not meet the independence requirements of The NASDAQ Stock Market, LLC and SEC regulations. Messrs. Wright (Committee Chairperson), and Mr. Corvese comprise the Nominating and Corporate Governance Committee.
Science Committee. The Science Committee will meet regularly to review the strategic direction being taken by Management with respect to developing the Company’s scientific assets. A key function of the Science Committee is to ensure that the Company is targeting disease indications for its drug candidates that take full advantage of the drug candidates’ potential, within the constraints of the working capital available to the Company. This process is expected to continually necessitate difficult choices concerning how many disease targets to pursue. The Science Committee will be directly responsible for the appointment, compensation and oversight of the Company’s top scientific staff. The Science Committee will review and approve all major contractual agreements with contract research organizations. Each member of the Science Committee may or may not meet the independence requirements of The NASDAQ Stock Market, LLC and SEC regulations Drs. Buell (Committee Chairperson), and Armen comprise the Science Committee.
Clinical and Regulatory Committee: The Clinical and Regulatory committee will meet at least once per year to review progress of the clinical trial programs of the Company. The Clinical and Regulatory committee was created in July 2020 and Dr. Jennifer Buell was appointed as its chair. Each member of the Clinical and Regulatory Committee may or may not meet the independence requirements of The NASDAQ Stock Market, LLC and SEC regulations. Drs. Buell (Chair), and Armen, comprise the Clinical and Regulatory Committee.
Limitation of Directors Liability and Indemnification
The Delaware General Corporation Law authorizes corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholders for monetary damages for breach of their fiduciary duties. Our certificate of incorporation limits the liability of our directors to the fullest extent permitted by Delaware law.
We have director and officer liability insurance to cover liabilities our directors and officers may incur in connection with their services to us, including matters arising under the Securities Act. Our certificate of incorporation and bylaws also provide that we will indemnify our directors and officers who, by reason of the fact that he or she is one of our officers or directors of our company, is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative related to their board role with the company.
We have entered into indemnification agreements with each of our directors and executive officers. It is anticipated that future directors and officers will enter into an Indemnification Agreement with us in substantially similar form. The Indemnification Agreement provides, among other things, that we will indemnify and hold harmless each person subject to an Indemnification Agreement (each, an “Indemnified Party”) to the fullest extent permitted by applicable law from and against all losses, costs, liabilities, judgments, penalties, fines, expenses and other matters that may result or arise in connection with such Indemnified Party serving in his or her capacity as a director of ours or serving at our direction as a director, officer, employee, fiduciary or agent of another entity. The Indemnification Agreement further provides that, upon an Indemnified Party’s request, we will advance expenses to the Indemnified Party to the fullest extent permitted by applicable law. Pursuant to the Indemnification Agreement, an Indemnified Party is presumed to be entitled to indemnification and we have the burden of proving otherwise. The Indemnification Agreement also requires us to maintain in full force and effect directors’ liability insurance on the terms described in the Indemnification Agreement. If indemnification under the Indemnification Agreement is unavailable to an Indemnified Party for any reason, we, in lieu of indemnifying the Indemnified Party, will contribute to any amounts incurred by the Indemnified Party in connection with any claim relating to an indemnifiable event in such proportion as is deemed fair and reasonable in light of all of the circumstances to reflect the relative benefits received or relative fault of the parties in connection with such event.
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Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. There is no pending litigation or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.
Item 11. Executive Compensation.
The following table sets forth information regarding each element of compensation that we paid or awarded to our named executive officers and for fiscal years ended March 31, 2026 and 2025.
Summary Compensation Table
| Name and Principal Position | Year | Salary | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Non- Qualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total Compensation ($) | |||||||||||||||||||||||||||
| Garo H. Armen, | 2026 | $ | - | $ | - | $ | - | $ | 144,912 | $ | - | $ | - | $ | - | $ | 144,912 | |||||||||||||||||||
| Chairman | 2025 | $ | - | $ | - | $ | - | $ | 144,912 | $ | - | $ | - | $ | - | $ | 144,912 | |||||||||||||||||||
| William Nichols, Jr. | 2026 | $ | 45,769 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 45,769 | |||||||||||||||||||
| President | 2025 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||
| Alexander K. Arrow, | 2026 | $ | 200,000 | $ | - | $ | - | $ | 43,474 | $ | - | $ | - | $ | - | $ | 243,474 | |||||||||||||||||||
| Former Chief Financial Officer | 2025 | $ | 165,385 | $ | - | $ | - | $ | 43,474 | $ | - | $ | - | $ | - | $ | 208,869 | |||||||||||||||||||
| Andrew Slee, | 2026 | $ | - | $ | - | $ | - | $ | 44,520 | $ | - | $ | - | $ | - | $ | 44,520 | |||||||||||||||||||
| Chief Operating Officer | 2025 | $ | - | $ | - | $ | - | $ | 44,607 | $ | - | $ | - | $ | - | $ | 44,607 | |||||||||||||||||||
Employment Arrangements with Officers and Directors
Garo H. Armen, PhD, Executive Chairman, we granted Dr. Armen a total of 512,500 options under the 2016 plan with an exercise price of $3.72. These options were issued between April 15, 2016 and March 25, 2024.
Bill Nichols, President, received 20,426 options under the 2016 plan with an exercise price of $0.56 per share issued on April 14, 2026.
Dr. Alexander Arrow, our Chief Financial Officer, receives base compensation of $200,000 per year for his part-time work for us. Dr Arrow’ salary was increase on December 2, 2024, increasing it from $150,000 to $200,000. Dr. Arrow received 14,912 options under the 2006 Plan and grants totaling 21,239 incentive options in the aggregate under the 2016 plan with an exercise price of $3.72 per share. The terms of Dr. Arrow’s option grants include full vesting acceleration upon a change of control. Dr. Arrow separated from the Company effective April 30, 2026.
Andrew Slee, PhD, Chief Operating Officer. In December 2020, we entered into a consulting agreement with Dr. Slee to act as our Chief Operating Officer. We granted Dr. Slee (i) 1,786 options on April 15, 2016, at an exercise price of $3.72 per option, (ii) 1,340 options on October 16, 2017, at an exercise price of $3.72 per option, (iii) 1,340 options on July 18, 2020, at an exercise price of $3.72 per option, (iv) 2,679 options on February 13, 2020, at an exercise price of $3.72 per option, (v) 893 options on February 25, 2021, at an exercise price of $3.72, (vi) 358 options on January 8, 2024, at an exercise price of $3.72. and (vii) 7,143 options on March 25, 2024, at an exercise price of $3.72.
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Consulting Agreements
Dalia Barsyte PhD, Scientific Advisor. Our subsidiary, Protagenic Therapeutics Canada (2006) Inc., entered into a consulting agreement with Dr. Dalia Barsyte. Dr. Barsyte is responsible for overseeing i) design and development of ELISA assays for measuring TCAP, ii) evaluation of TCAP exposure biomarker assay, iii) development of pipeline peptides, iv) development of clinically compatible formulations for TCAP, as well as all of the bench research and development of formulation and extraction methods. Her consulting agreement is effective through December 2017. She is compensated at the rate of up to $3,000 (Canadian) per month, if she works at least 20 hours on behalf of the Company. As well, we have granted Dr. Barsyte 2,500 shares of our common stock and ten-year options to purchase 2,681 shares of our common stock. Options to purchase 6,250 shares of common stock, at an exercise price of $56.00 per share, have fully vested; the options to purchase the remaining 893 shares of common stock, at an exercise price of $56.00 per share, vested in March 2016. On October 16, 2017, we granted Dr. Barsyte another ten-year option to purchase 358 shares of our common stock at an exercise price of $3.72 per share. On February 13, 2020, we granted Dr. Barsyte ten-year option to purchase 179 shares of our common stock at an exercise price of $3.72 per share.
Robert B. Stein, PhD, MD, Director, Chief Medical Officer. We entered into a consulting agreement with Dr. Stein effective January 2015, and amended and restated this consulting agreement in December 2020 to appoint Dr. Stein as our Chief Medical Officer. Dr. Stein is responsible for providing us with technical and advisory services related to our research and development efforts. On January 23, 2015, we granted Dr. Stein ten-year options to purchase 3,572 shares of our common stock, at an exercise price of $3.72 per share (the “January Options”). The January Options are fully vested. We granted Dr. Stein (i) 715 options on April 15, 2016, at an exercise price of $3.72 per option, (ii) 3,572 options on October 16, 2017, at an exercise price of $3.72 per option, (iii) 2,679 options on February 13, 2020, at an exercise price of $3.72 per option, (iv) 893 options on February 25, 2021, at an exercise price of $3.72 per option, and (v) 5,358 options on March 25, 2024, at an exercise price of $3.72 per option.
Jennifer Buell, PhD, Clinical and Regulatory Development Advisor. We entered into a consulting agreement with Dr. Buell effective February 2021, providing for her to do three things: (1) advise the Company’s clinical and regulatory development plan to support the Company’s lead product candidate, PT00114, in support of an IND application to the U.S. Food and Drug Administration and demonstration of safety and clinical activity in early phase clinical trials, (2) develop a panel of experts to prepare a clinical development plan and operational plan that would enable the evaluation of safety and clinical activity of the companies lead therapeutic, PT00114, and (3) determine the fastest development pathway of PT00114 in four key indications as defined by the Company Management. We granted Dr. Buell 3,572non-statutory stock options (“NSOs”) on February 25, 2021 at an exercise price of $3.72 per share, 2,590 options on July 18, 2020 at an exercise price of $3.72 per share, and 5,358 options on March 25, 2024, at an exercise price of $3.72 per option.
Director Compensation
No additional options shall be granted for serving on a committee without being its chair. All options will be granted at fair market value, as defined in the 2016 Plan, on the date of grant, and will vest over a three-year period in equal monthly installments. Vesting will accelerate in certain circumstances, such as a change of control of the Company, and unvested options will terminate upon the cessation of an individual’s service to us as a director.
Non-employee directors may be reimbursed for their reasonable expenses in attending Board and committee meetings.
We entered into an amended and restated consulting agreement during fiscal year 2020 with Robert B. Stein, PhD, MD, under which we issued 9,823 options on February 13, 2020, at an exercise price of $3.72 per option. During fiscal year 2021 with Robert B. Stein, PhD, MD, under which we issued 893 options on February 20, 2021, at an exercise price of $3.72 per option. During fiscal year 2024 with Robert B. Stein, PhD, MD, under which we issued 5,358 options on March 25, 2024, at an exercise price of $3.72 per option.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plans
| Plan category | (a) No. of securities to be issued upon exercise of outstanding options, warrants and rights | (b) Weighted- average exercise price of outstanding options, warrants and rights | (c) No. of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) | |||||||||
| Equity compensation plans approved by security holders | 134,397 | $ | 3.72 | - | ||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 134,397 | $ | 3.72 | - | ||||||||
2006 Employee, Director and Consultant Stock Plan
On June 17, 2016, our stockholders adopted our 2016 Equity Compensation 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.
The following description of the pertinent terms of the 2006 Plan is a summary and is qualified in its entirety by the full text of the 2006 Plan.
Administration.
The administrator (the “Administrator”) of the 2006 Plan is the Board of Directors, except to the extent the Board of Directors delegates its authority to the Compensation committee (the “Committee”) of the Board, in which case the Committee shall be the Administrator.
Terms and Conditions of Options.
Options granted under the 2006 Plan may be either “incentive stock options” that are intended to meet the requirements of Section 422 of the Code or “nonqualified stock options” that do not meet the requirements of Section 422 of the Code. The Administrator will determine the exercise price of options granted under the 2006 Plan. The exercise price of stock options may not be less than the fair market value per share of our common stock on the date of grant (or 110% of fair market value in the case of incentive stock options granted to a ten-percent stockholder).
If, on the date of grant, the common stock is listed on a stock exchange or national market system, the fair market value will generally be the closing sale price on the date of grant. If the common stock is not traded on a stock exchange or national market system on the date of grant, the fair market value will generally be the mean between the bid and the asked price for the common stock at the close of trading in the over-the-counter market for the trading day on which common stock was traded immediately preceding the applicable date. If no such prices are available, the fair market value shall be determined in good faith by the Administrator.
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No option intended to qualify as an ISO may be exercisable for more than ten years from the date of grant (five years in the case of an incentive stock option granted to a ten-percent stockholder). Options granted under the 2006 Plan will be exercisable at such time or times as the Administrator prescribes at the time of grant. No employee may receive incentive stock options that first become exercisable in any calendar year in an amount exceeding $100,000.Generally, the exercise price of an option may be paid (a) in cash or by certified bank check, (b) at the discretion of the Administrator, through delivery of shares of our common stock held for at least six months having a fair market value equal to the purchase price, (c) at the discretion of the Administrator, by delivery of the grantee’s personal note, for full, partial or no recourse, bearing interest payable not less than annually at market rate on the date of exercise and at no less than 100% of the applicable Federal rate, as defined in Section 1274(d) of the Code, with or without the pledge of such shares as collateral, or (d) at the discretion of the Administrator, in accordance with a cashless exercise program established with a securities brokerage firm, and approved by the Administrator, or (e) at the discretion of the Administrator, by any combination of the above methods.
No option may be transferred other than by will or by the laws of descent and distribution, and during a recipient’s lifetime an option may be exercised only by the recipient. The Administrator will determine the extent to which a holder of a stock option may exercise the option following termination of service with us.
The Administrator will determine the extent to which a holder of a stock option may exercise the option following termination of service with us.
Effect of Certain Corporate Transactions
If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company’s assets other than a transaction to merely change the state of incorporation (a “Corporate Transaction”), the Administrator or the board of directors of any entity assuming the obligations of the Company hereunder (the “Successor Board”), shall, as to outstanding options, either (i) make appropriate provision for the continuation of such options by substituting on an equitable basis for the Shares then subject to such options; or (ii) upon written notice to the participants, provide that all options must be exercised (either to the extent then exercisable or, at the discretion of the Administrator, all options being made fully or partially exercisable), within a specified number of days of the date of such notice, at the end of which period the options shall terminate; or (iii) terminate all options in exchange for a cash payment equal to the excess of the fair market value of the shares of common stock subject to such options (either to the extent then exercisable or, at the discretion of the Administrator, all options being made fully or partially exercisable) over the exercise price thereof.
Tax Withholding
As and when appropriate, we shall have the right to require each optionee purchasing shares of common stock and each grantee receiving an award of shares of common stock under the 2006 Plan to pay any federal, state or local taxes required by law to be withheld.
2016 Equity Compensation Plan
The following description of the principal terms of the 2016 Plan is a summary and is qualified in its entirety by the full text of the 2016 Plan.
Administration
The 2016 Plan is administered by the Compensation Committee of our Board of Directors, provided that the entire Board of Directors may act in lieu of the Compensation Committee on any matter, subject to certain requirements set forth in the 2016 Plan. The Compensation Committee may grant options to purchase shares of our common stock, stock appreciation rights, stock units, restricted shares of our common stock, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards. The Compensation Committee also has broad authority to determine the terms and conditions of each option or other kind of award, and adopt, amend and rescind rules and regulations for the administration of the 2016 Plan. Subject to applicable law, the Compensation Committee may authorize one or more reporting persons (as defined in the 2016 Plan) or other officers to make awards (other than awards to reporting persons, or other officers whom the Compensation Committee has specifically authorized to make awards). No awards may be granted under the 2016 Plan on or after the ten-year anniversary of the adoption of the 2016 Plan by our Board of Directors, but awards granted prior to such tenth anniversary may extend beyond that date.
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Eligibility
Awards may be granted under the 2016 Plan to any person who is an employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary, or any person who is determined by the Compensation Committee to be a prospective employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary.
Shares Subject to the 2016 Plan
The aggregate number of shares of common stock proposed to be available for issuance in connection with options and awards granted under the 2016 Plan is 750,000 shares. Incentive Stock Options may, but need not be, granted with respect to all of the shares available for issuance under the 2016 Plan; provided, however, that the maximum aggregate number of shares of common stock which may be issued in respect of Incentive Stock Options (after giving effect to any increases pursuant to the “evergreen” provisions of the 2016 Plan discussed below) shall not exceed 1,500,000 shares, subject to adjustment in the event of stock, splits and similar transactions. If any award granted under 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.
In addition, the 2016 Plan contains an “evergreen” provision allowing for an annual increase in the number of shares of our common stock available for issuance under the 2016 Plan on January 1 of each year during the period beginning January 1, 2017, and ending on (and including) January 1, 2026. The annual increase in the number of shares shall be equal to (i) five point five percent (5.5%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, or (ii) with respect to shares of common stock which may be issued under the 2016 Plan other than in respect to Incentive Stock Options, the difference between (x) eighteen percent (18%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (y) the total number of shares of common stock reserved under the 2016 Plan on December 31st of such preceding calendar year (including shares subject to outstanding awards, issued pursuant to awards or available for future awards) if such amount is greater than the amount determined in (i) immediately above; provided, however, that our Board may act prior to the first day of any calendar year to provide that there shall be no increase such calendar year, or that the increase shall be a lesser number of shares of common stock than would otherwise occur. On January 1, 2017, 2019, and 2020, each year 10,079 shares of common stock were added to the 2016 Plan pursuant to this evergreen provision. On January 1, 2021, 10,176 shares of common stock were added to the 2016 Plan pursuant to this evergreen provision. On January 1, 2022, 13,162 additional shares of common stock are available for issuance under the 2016 Plan as a result of operation of the evergreen provision: (a) 10,077 shares resulting from operation of the evergreen provision in 2019, which were never previously registered and (b) 3,086 shares resulting from operation of the evergreen provision in 2022. On January 1, 2023, 13,186 additional shares of common stock are available for issuance under the 2016 Plan as a result of operation of the evergreen provision resulting from operation of the evergreen provision in 2022. On January 1, 2024, 14,061 additional shares of common stock are available for issuance under the 2016 Plan as a result of operation of the evergreen provision resulting from operation of the evergreen provision in 2022. On January 1, 2025, 14,835 additional shares of common stock are available for issuance under the 2016 Plan as a result of operation of the evergreen provision resulting from operation of the evergreen provision in 2022. On January 1, 2026, 15,651 additional shares of common stock are available for issuance under the 2016 Plan as a result of operation of the evergreen provision resulting from operation of the evergreen provision in 2022.
Terms and Conditions of Options
Options granted under the 2016 Plan may be either “incentive stock options” that are intended to meet the requirements of Section 422 of the Code or “nonqualified stock options” that do not meet the requirements of Section 422 of the Code. The Compensation Committee will determine the exercise price of options granted under the 2016 Plan. The exercise price of stock options may not be less than the fair market value, on the date of grant, per share of our common stock issuable upon exercise of the option (or 110% of fair market value in the case of incentive options granted to a ten-percent stockholder).
If on the date of grant the common stock is listed on a stock exchange or national market system, the fair market value shall generally be the closing sale price as of such date, or if there were no trades recorded on such date, then the most recent date preceding such date on which trades were recorded. If on the date of grant the common stock is traded in an over-the-counter market, the fair market will generally be the average of the closing bid and asked prices for the shares of common stock as of such date, or, if there are no closing bid and asked prices for the shares of common stock on such date, then the average of the bid and asked prices for the shares of common stock on the most recent date preceding such date on which such closing bid and asked prices are available. If the common stock is not listed on a national securities exchange or national market system or traded in an over-the-counter market, the fair market value shall be determined by the Compensation Committee in a manner consistent with Section 409A of the Code. Notwithstanding the foregoing, if on the date of grant the common stock is listed on a stock exchange or is quoted on a national market system, or is traded in an over-the-counter market, then solely for purposes of determining the exercise price of any grant of a stock option or the base price of any grant of a stock appreciation right, the Compensation Committee may, in its discretion, base fair market value on the last sale before or the first sale after the grant, the closing price on the trading day before or the trading day of the grant, the arithmetic mean of the high and low prices on the trading day before or the trading day of the grant, or any other reasonable method using actual transactions of the common stock as reported by the exchange or market on which the common stock is traded. In addition, the determination of fair market value also may be made using any other method permitted under Treasury Regulation section 1.409A-1(b)(5)(iv).
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No option may be exercisable for more than ten years from the date of grant (five years in the case of an incentive stock option granted to a ten-percent stockholder). Options granted under the 2016 Plan will be exercisable at such time or times as the Compensation Committee prescribes at the time of grant. No employee may receive incentive stock options that first become exercisable in any calendar year in an amount exceeding $100,000. The Compensation Committee may, in its discretion, permit a holder of a non-qualified stock option to exercise the option before it has otherwise become exercisable, in which case the shares of our common stock issued to the recipient will continue to be subject to the vesting requirements that applied to the option before exercise.
Generally, the option price may be paid in cash or by bank check, or such other means as the Compensation Committee may accept. As set forth in an award agreement or otherwise determined by the Compensation Committee, in its sole discretion, at or after grant, payment in full or part of the exercise price of an option may be made (a) in the form of shares of common stock that have been held by the participant for such period as the Compensation Committee may deem appropriate for accounting purposes or otherwise, valued at the fair market value of such shares on the date of exercise; (ii) by surrendering to the Company shares of common stock otherwise receivable on exercise of the option; (iii) by a cashless exercise program implemented by the Compensation Committee in connection with the 2016 Plan; and/or (iv) by such other method as may be approved by the Compensation Committee and set forth in an award agreement.
No option may be transferred other than by will or by the laws of descent and distribution, and during a recipient’s lifetime an option may be exercised only by the recipient or the recipient’s guardian or legal representative. However, the Compensation Committee may permit the transfer of a nonqualified stock option, share-settled stock appreciation right, restricted stock award, performance share or share-settled other stock-based award either (a) by instrument to the participant’s immediate family (as defined in the 2016 Plan), (b) by instrument to an inter vivos or testamentary trust (or other entity) in which the award is to be passed to the participant’s designated beneficiaries, or (c) by gift to charitable institutions. The Compensation Committee will determine the extent to which a holder of a stock option may exercise the option following termination of service.
Stock Appreciation Rights
The Compensation Committee may grant stock appreciation rights independent of or in connection with an option. The Compensation Committee will determine the terms applicable to stock appreciation rights. The base price of a stock appreciation right will be determined by the Compensation Committee but will not be less than 100% of the fair market value of a share of our common stock with respect to the date of grant of such stock appreciation right. The maximum term of any SAR granted under the 2016 Plan is ten years from the date of grant. Generally, each SAR stock appreciation right will entitle a participant upon exercise to an amount equal to:
| ● | the excess of the fair market value of a share of common stock on the date of exercise of the stock appreciation right over the base price of such stock appreciation right, multiplied by | |
| ● | the number of shares as to which such stock appreciation right is exercised. |
Payment may be made in shares of our common stock, in cash, or partly in common stock and partly in cash, all as determined by the Compensation Committee.
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Restricted Stock and Stock Units
The Compensation Committee may award restricted common stock and/or stock units under the 2016 Plan. Restricted stock awards consist of shares of stock that are transferred to a participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. Stock units confer the right to receive shares of our common stock, cash, or a combination of shares and cash, at a future date upon or following the attainment of certain conditions specified by the Compensation Committee. The Compensation Committee will determine the restrictions and conditions applicable to each award of restricted stock or stock units, which may include performance-based conditions. Dividends with respect to restricted stock may be paid to the holder of the shares if and when dividends are paid to stockholders or at the times of vesting or other payment of the restricted stock award. Stock unit awards may be granted with dividend equivalent rights, which may be accumulated and may be deemed reinvested in additional stock units, as determined by the Compensation Committee in its discretion. If any dividend equivalents are paid while a stock unit award is subject to restrictions, the dividend equivalents shall be subject to the same restrictions on transferability as the underlying stock units, unless otherwise set forth in an award agreement. Unless the Compensation Committee determines otherwise, holders of restricted stock will have the right to vote the shares.
Performance Shares and Performance Units
The Compensation Committee may award performance shares and/or performance units under the 2016 Plan. Performance shares and performance units are awards which are earned during a specified performance period subject to the attainment of performance criteria, as established by the Compensation Committee. The Compensation Committee will determine the restrictions and conditions applicable to each award of performance shares and performance units.
Incentive Bonus Awards
The Compensation Committee may award Incentive Bonus Awards under the 2016 Plan. Incentive Bonus Awards may be based upon the attainment of specified levels of Company or subsidiary performance as measured by pre-established, objective performance criteria determined at the discretion of the Compensation Committee. Incentive Bonus Awards will be paid in cash or common stock, as set forth in an award agreement.
Other Stock-Based and Cash-Based Awards
The Compensation Committee may award other types of equity-based or cash-based awards under the 2016 Plan, including the grant or offer for sale of unrestricted shares of our common stock and payment in cash or otherwise of amounts based on the value of shares of common stock.
Section 162(m) Compliance
If stock or cash-based awards are intended to satisfy the conditions for deductibility under Section 162(m) of the Code as “performance-based compensation,” the performance criteria will be selected from among the following, which may be applied to our Company as a whole, any subsidiary or any division or operating unit thereof: (a) pre-tax income; (b) after-tax income; (c) net income; (d) operating income or profit; (e) cash flow, free cash flow, cash flow return on investment, net cash provided by operations, or cash flow in excess of cost of capital; (f) earnings per share; (g) return on equity; (h) return on sales or revenues; (i) return on invested capital or assets; (j) cash, funds or earnings available for distribution; (k) appreciation in the fair market value of the common stock; (l) operating expenses; (m) implementation or completion of critical projects or processes; (n) return on investment; (o) total return to stockholders; (p) dividends paid; (q) net earnings growth; (r) related return ratios; (s) increase in revenues; (t) the Company’s published ranking against its peer group of pharmaceutical companies based on total stockholder return; (u) net earnings; (v) changes (or the absence of changes) in the per share or aggregate market price of the common stock; (w) number of securities sold; (x) earnings before or after any one or more of the following items: interest, taxes, depreciation or amortization, as reflected in the Company’s financial reports for the applicable period; (y) total revenue growth; (z) economic value created; (aa) operating margin or profit margin; (bb) share price or total stockholder return; (cc) cost targets, reductions and savings, productivity and efficiencies; (dd) strategic business criteria, consisting of one or more objectives based on meeting objectively determinable criteria: specified market penetration, geographic business expansion, progress with research and development activities, investor satisfaction, employee satisfaction, human resources management, supervision of litigation, information technology, and goals relating to acquisitions, divestitures, joint ventures and similar transactions, and budget comparisons; (ee) objectively determinable personal or professional objectives, including any of the following performance goals: the implementation of policies and plans, the negotiation of transactions, the development of long term business goals, formation of joint ventures, research or development collaborations, and the completion of other corporate transactions, and (ff) any combination of, or a specified increase or improvement in, any of the foregoing.
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At the end of the performance period established in connection with any award, the Compensation Committee will determine the extent to which the performance goal or goals established for such award have been attained, and shall determine, on that basis, the number of performance shares or performance units included in such award that have been earned and as to which payment will be made. The Compensation Committee will certify in writing the extent to which it has determined that the performance goal or goals established by it for such award have been attained.
With respect to awards intended to be performance-based compensation under Section 162(m) of the Code, no participant of the 2016 Plan may receive in any one fiscal year (a) options or stock appreciation rights relating to more than 250,000 shares of our common stock, and (b) stock units, restricted shares, performance shares, performance units or other stock-based awards that are denominated in shares of common stock relating to more than 250,000 shares of our common stock in the aggregate. The maximum dollar value payable to any participant for a fiscal year of the Company with respect to stock units, performance units or incentive bonus awards or other stock-based awards that may be settled in cash or other property (other than common stock) is $1,500,000.
Effect of Certain Corporate Transactions
The Compensation Committee may, at the time of the grant of an award, provide for the effect of a change in control (as defined in the 2016 Plan) on any award, including (i) accelerating or extending the time periods for exercising, vesting in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, (iii) providing for the cash settlement of an award for an equivalent cash value, as determined by the Compensation Committee, or (iv) such other modification or adjustment to an award as the Compensation Committee deems appropriate to maintain and protect the rights and interests of participants upon or following a change in control. The Compensation Committee may, in its discretion and without the need for the consent of any recipient of an award, also take one or more of the following actions contingent upon the occurrence of a change in control: (a) cause any or all outstanding options and stock appreciation rights to become immediately exercisable, in whole or in part; (b) cause any other awards to become non-forfeitable, in whole or in part; (c) cancel any option or stock appreciation right in exchange for a substitute option; (d) cancel any award of restricted stock, stock units, performance shares or performance units in exchange for a similar award of the capital stock of any successor corporation; (e) redeem any restricted stock, stock unit, performance share or performance unit for cash and/or other substitute consideration with a value equal to the fair market value of an unrestricted share of our common stock on the date of the change in control; (f) cancel any option or stock appreciation right in exchange for cash and/or other substitute consideration based on the value of our common stock on the date of the change in control, and cancel any option or stock appreciation right without any payment if its exercise price exceeds the value of our common stock on the date of the change in control; (g) cancel any stock unit or performance unit held by a participant affected by the change in control in exchange for cash and/or other substitute consideration with a value equal to the fair market value per share of common stock on the date of the change in control, or (h) make such other modifications, adjustments or amendments to outstanding awards as the Compensation Committee deems necessary or appropriate.
Amendment, Termination
The 2016 Plan will remain in effect until March 2026, or, if earlier, when awards have been granted covering all available shares under the 2016 Plan or the 2016 Plan is otherwise terminated by the Board. The Board may amend the terms of awards in any manner not inconsistent with the 2016 Plan, provided that no amendment shall adversely affect the rights of a participant with respect to an outstanding award without the participant’s consent. In addition, our Board of Directors may at any time amend, suspend, or terminate the 2016 Plan, provided that (i) no such amendment, suspension or termination shall materially and adversely affect the rights of any participant under any outstanding award without the consent of such participant and (ii) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the 2016 Plan requires us to obtain stockholder consent. Stockholder approval is required for any plan amendment that increases the number of shares of common stock available for issuance under the 2016 Plan or changes the persons or classes of persons eligible to receive awards.
Tax Withholding
The Company has the power and right to deduct or withhold, or require a participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulations to be withheld.
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Recoupment Policy
Awards granted under the 2016 Plan will be subject to any provisions of applicable law providing for the recoupment or claw back of incentive compensation, such as provisions imposed pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act; the terms of any Company recoupment, claw back or similar policy in effect at the time of grant of the award; and any recoupment, claw back or similar provisions that may be included in the applicable award agreement.
Federal Income Tax Consequences
The following is a brief summary of the U.S. federal income tax consequences applicable to awards granted under the 2016 Plan based on the federal income tax laws in effect on the date of this report. This summary is not intended to be exhaustive and does not address all matters relevant to a particular participant based on his or her specific circumstances. The summary expressly does not discuss the income tax laws of any state, municipality, or non-U.S. taxing jurisdiction, or the gift, estate, excise (including the rules applicable to deferred compensation under Code Section 409A), or other tax laws other than federal income tax law. The following is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Because individual circumstances may vary, the Company advises all participants to consult their own tax advisor concerning the tax implications of awards granted under the 2016 Plan.
A recipient of a stock option or stock appreciation right will not have taxable income upon the grant of the stock option or stock appreciation right. For non-statutory stock options and stock appreciation rights, the participant will recognize ordinary income upon exercise in an amount equal to the difference between the fair market value of the shares and the exercise price on the date of exercise. Any gain or loss recognized upon any later disposition of the shares generally will be a capital gain or loss.
The acquisition of shares upon exercise of an incentive stock option will not result in any taxable income to the participant, except, possibly, for purposes of the alternative minimum tax. The gain or loss recognized by the participant on a later sale or other disposition of such shares will either be long-term capital gain or loss or ordinary income, depending upon whether the participant holds the shares for the legally-required period (two years from the date of grant and one year from the date of exercise). If the shares are not held for the legally-required period, the participant will recognize ordinary income equal to the lesser of (i) the difference between the fair market value of the shares on the date of exercise and the exercise price, or (ii) the difference between the sales price and the exercise price, and the balance of the gain, if any, will be afforded capital gain treatment.
For awards of stock grants, the participant will not have taxable income upon the receipt of the award (unless the participant elects to be taxed at the time of the stock is granted rather than when it becomes vested). The stock grants will generally be subject to tax upon vesting as ordinary income equal to the fair market value of the shares at the time of vesting less the amount paid for such shares (if any).
A participant is not deemed to receive any taxable income at the time an award of restricted stock units is granted. When vested restricted stock units (and dividend equivalents, if any) are settled and distributed, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of shares received less the amount paid for such restricted stock units (if any).
If the participant is an employee or former employee, the amount a participant recognizes as ordinary income in connection with any award is subject to withholding taxes (not applicable to incentive stock options) and the Company is allowed a tax deduction equal to the amount of ordinary income recognized by the participant. In addition, Code Section 162(m) contains special rules regarding the federal income tax deductibility of compensation paid to the Company’s chief executive officer and to certain of the Company’s other executive officers. The general rule is that annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, the Company can preserve the deductibility of certain compensation in excess of $1,000,000 if such compensation qualifies as “performance-based compensation” by complying with certain conditions imposed by the Code Section 162(m) rules (including the establishment of a maximum number of shares with respect to which awards may be granted to any one employee during one fiscal year).
Option Grants and Stock Awards
As of March 31, 2026, we had outstanding stock options to purchase 134,397 shares at an average exercise price of approximately $3.72 per share. During the year ended March 31, 2026, no stock options were issued to our executive officers.
All awards to be made under the 2016 Plan are discretionary, subject to the terms of the 2016 Plan. Therefore, the benefits and amounts that will be received or allocated under the 2016 Plan are generally not determinable at this time. The equity grant program for our non-employee directors is described under the Compensation of Directors section in this proxy statement. The following table summarizes these 2016 awards to our named executive officers, all executive officers and the non-executive officer employees and consultants.
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Outstanding Equity Awards at Fiscal Year End
The following table summarizes the equity awards made to our named executive officers that were outstanding at March 31, 2026.
| Name | No. of Securities Underlying Unexercised Options (#) Exercisable | No. of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price | Option Expiration Date | ||||||||||
| Garo H. Armen (1) | 8,929 | - | $ | 3.72 | April 15, 2026 | |||||||||
| Garo H. Armen (2) | 4,465 | - | $ | 3.72 | October 16, 2027 | |||||||||
| Garo H. Armen (3) | 5,358 | - | $ | 3.72 | February 13, 2030 | |||||||||
| Garo H. Armen (4) | 11,905 | 5,953 | $ | 3.72 | March 25, 2034 | |||||||||
| Andrew Slee (5) | 1,786 | - | $ | 3.72 | April 15, 2026 | |||||||||
| Andrew Slee (6) | 1,340 | - | $ | 3.72 | October 16, 2027 | |||||||||
| Andrew Slee (7) | 2,679 | - | $ | 3.72 | February 13, 2030 | |||||||||
| Andrew Slee (8) | 1,340 | - | $ | 3.72 | July 18, 2030 | |||||||||
| Andrew Slee (9) | 893 | - | $ | 3.72 | February 25, 2031 | |||||||||
| Andrew Slee (10) | 201 | 157 | $ | 3.72 | January 8, 2034 | |||||||||
| Andrew Slee (11) | 3,571 | 3,572 | $ | 3.72 | March 25, 2034 | |||||||||
| Robert B. Stein (12) | 3,572 | - | $ | 3.72 | January 22, 2030 | |||||||||
| Robert B. Stein (13) | 715 | - | $ | 3.72 | April 15, 2026 | |||||||||
| Robert B. Stein (14) | 3,572 | - | $ | 3.72 | October 16, 2027 | |||||||||
| Robert B. Stein (15) | 2,679 | - | $ | 3.72 | February 13, 2030 | |||||||||
| Robert B. Stein (16) | 893 | - | $ | 3.72 | February 25, 2031 | |||||||||
| Robert B. Stein (17) | 2,679 | 2,679 | $ | 3.72 | March 25, 2034 | |||||||||
| (1) | Dr. Armen was granted a 8,929 share option grant on April 15, 2016 |
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| (2) | Dr. Armen was granted a 4,465 share option grant on October 16, 2017. | |
| (3) | Dr. Armen was granted a 5,358 share option grant on February 13, 2020. | |
| (4) | Dr. Armen was granted a 17,858 share option grant on March 25, 2024. | |
| (5) | Dr. Slee was granted a 1,786 shares option grant on April 15, 2016. | |
| (6) | Dr. Slee was granted a 1,340 shares option grant on October 16, 2017. | |
| (7) | Dr. Slee was granted a 2,679 shares option grant on February 13, 2020. | |
| (8) | Dr. Slee was granted a 1,340 shares option grant on July 18, 2020. | |
| (9) | Dr. Slee was granted a 893 shares option grant on February 25, 2021. | |
| (10) | Dr. Slee was granted a 358 shares option grant on January 8, 2024. | |
| (11) | Dr. Slee was granted a 7,143 shares option grant on March 25, 2024. | |
| (12) | Dr. Stein was granted a 3,572 shares option grant on January 22, 2015. | |
| (13) | Dr. Stein was granted a 715 shares option grant on April 15, 2016. | |
| (14) | Dr. Stein was granted a 3,572 shares option grant on October 16, 2017. | |
| (15) | Dr. Stein was granted a 2,679 shares option grant on February 13, 2020. | |
| (16) | Dr. Stein was granted a 893 shares option grant on February 25, 2021. | |
| (17) | Dr. Stein was granted a 5,358 shares option grant on March 25, 2024. |
For Drs. Armen and Arrow, following a qualified Change of Control, a resignation for Good Reason, or an involuntary termination other than For Cause, 100% of the executives’ then-unvested options shall become immediately vested.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the beneficial ownership of the Common Stock as of March 31, 2026, unless otherwise indicated, by (1) each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of common stock, (2) each director of the Company, (3) the Company’s current executive officers, and (4) all current directors and executive officers of the Company as a group. The persons and entities named in the table have sole voting and investment power with respect to all such shares owned by them, unless otherwise indicated.
| Name and address of Beneficial Owner* | Amount and Nature of Beneficial Ownership | Percent of Class | ||||||
| Garo H. Armen(1) | 70,407 | (2) | 4 | % | ||||
| Brian J. Corvese(1) | 6,965 | (3) | - | % | ||||
| Jennifer S. Buell(1) | 10,032 | (4) | 1 | % | ||||
| Timothy Wright | 1,518 | 5 | - | |||||
| All directors and executive officers as a group (4 persons) | 132,798 | (6) | 7 | % | ||||
* Address for each party listed in the above table is c/o Protagenic Therapeutics, Inc., 149 Fifth Avenue, Suite 500, New York, NY 10010.
| (1) | Executive officer and/or director. | |
| (2) | Includes 38,758 shares of common stock. Also includes options to purchase 31,649 shares of common stock at an exercise price of $3.72 per share. Does not include options to purchase 4,961 shares that are not exercisable within 60 days of the date of this report. | |
| (3) | Includes options to purchase 6,965 shares of common stock at an exercise price of $3.72 per share. | |
| (4) | Includes options to purchase 10,032 shares of common stock at an exercise price of $3.72 per share. Does not include options to purchase 1,488 shares of common stock that are not exercisable within 60 days of the date of this report. | |
| (5) | Includes options to purchase 1,518 shares of common stock at an exercise price of $3.72 per share. | |
| (6) | Includes options to purchase 132,798 shares of common stock. |
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Item 13. Certain Relationships and Related Transactions, and Director Independence.
Certain Relationships and Related Party Transactions
Other than compensation arrangements for our named executive officers and directors, we describe below each transaction or series of similar transactions, since January 1, 2016, to which we were a party or will be a party, in which:
| ● | the amounts involved exceeded or will exceed $120,000; and | |
| ● | any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. |
Compensation arrangements for our named executive officers and directors are described in Item 11, Executive Compensation.
Our principal offices are located at 149 Fifth Avenue, Suite 500, New York, New York 10010, in a conference room of Agenus, Inc. We utilize our principal office for quarterly board meetings and our annual shareholder meeting at no cost. Our personnel and consultants all work remotely, the Company’s basic science laboratory work is conducted in the Lovejoy Lab at the University of Toronto, and its preclinical efficacy work is conducted at CROs. Hence the Company does not have the need for a day-to-day physical office location other than a mailing address and conference room facility for meetings. For that reason, the Agenus conference room suits its purposes without imposing any inconveniences upon Agenus. Dr. Armen, our Executive Chairman, is also the Chairman and Chief Executive Officer of Agenus Inc.
2019-2020 Convertible Note Offering
Garo H. Armen and Khalil Barrage each invested $200,000 in the Convertible Note Offering on the same terms as all other Investors. These options were converted as of December 31, 2023.
Zack Armen
During the latter part of 2018 and the first quarter of 2019, Zack Armen, the son of our Executive Chairman, Garo H. Armen, Ph.D., assisted us in the development of slide deck presentations and summaries, video editing, and forecasting and market size projections that were incorporated into presentations to investors and others. We have included these presentations in various Current Reports on Form 8-K which we filed with the Securities and Exchange Commission. On June 17, 2019, the Compensation and Audit Committees of the Board authorized the issuance to Mr. Zack Armen of 447 stock options under the 2016 Plan in consideration for his services. These options vested in their entirety on issuance, have a ten-year term and are exercisable at a price of $3.72 per share. On February 21, 2020 Mr. Zack Armen was also issued an additional 893 stock options that vest over 48 months and are exercisable at a price of $3.72 per share. On July 18, 2020 Mr. Zack Armen was also issued an additional 536 stock options that vest over 48 months and are exercisable at a price of $3.72 per share. On February 25, 2021, 2020 Mr. Zack Armen was also issued an additional 893 stock options that vest over 48 months and are exercisable at a price of $3.72 per share. On March 25, 2024 Mr. Zack Armen was also issued an additional 715 stock options that vest over 48 months and are exercisable at a price of $3.72per share.
| 70 |
Policies and Procedures for Related Party Transactions
We have adopted a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, any members of the immediate family of any of the foregoing persons and any firms, corporations or other entities in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, which we refer to collectively as related parties, are not permitted to enter into a transaction with us without the prior consent of our Board of Directors acting through the audit committee or, in certain circumstances, the chairman of the audit committee. Any request for us to enter into a transaction with a related party, in which the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must first be presented to our audit committee, or in certain circumstances the chairman of our audit committee, for review, consideration and approval. In approving or rejecting any such proposal, our audit committee, or the chairman of our audit committee, is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits to us, the availability of other sources of comparable products or services and the extent of the related party’s interest in the transaction.
Director Independence
We are not currently listed on any national securities exchange or in an inter-dealer quotation system that has a requirement that the Board of Directors be independent. However, in evaluating the independence of our members and the composition of the committees of our Board of Directors, our Board utilizes the definition of “independence” as that term is defined by applicable listing standards of the NASDAQ Stock Market and SEC rules, including the rules relating to the independence standards of an audit committee and the non-employee director definition of Rule 16b-3 promulgated under the Exchange Act.
Our Board of Directors expects to continue to evaluate its independence standards and whether and to what extent the composition of the Board and its committees meets those standards. We ultimately intend to appoint such persons to our Board and committees of our Board as are expected to be required to meet the corporate governance requirements imposed by a national securities exchange. Therefore, we intend that a majority of our directors will be independent directors of which at least one director will qualify as an “audit committee financial expert,” within the meaning of Item 407(d)(5) of Regulation S-K, as promulgated by the SEC.
We believe that Messrs., Corvese and Wright, and Dr. Buell are each an “independent” director as that term is defined by the OTC-QB Marketplace Rules and SEC Regulations. In addition, the Board also designated Brian Corvese as an “audit committee financial expert,” as that term is defined by the OTC-QB Listing Rules and SEC regulations.
With regard to Mr. Wright’s independent status, the Board considered the fact that he is a current CEO of a publicly-traded biopharmaceutical company (MiMedX Group, Inc.) and that he is as a Partner at an investment firm (Signal Hill Advisors, LLC). He also serves on the Board of Directors of Agenus, Inc., a publicly traded company for which Dr. Armen is the Chaiman and CEO.
With regard to Mr. Corvese’s independent status, the Board considered the fact that he has no business relationship with the Company.
With regard to Dr. Buell’s independent status, the Board considered the fact that she has no business relationship with the Company except her consulting role assisting with clinical trial design and that she reports to Dr. Armen in the course of her primary roles, as president of Agenus, Inc and MiNK Therapeutics, Inc, and is therefore not considered “independent”. Dr. Armen, a member of the Science and Clinical & Regulatory Committees, serves as our Executive Chairman, and is therefore not considered “independent.”
Our principal offices are located at 149 Fifth Avenue, Suite 500, New York, New York 10010, in a conference room of Agenus, Inc. We utilize our principal office for quarterly board meetings and our annual shareholder meeting on a month to month basis at a nominal value. Dr. Armen, our Executive Chairman, is also the Chairman and Chief Executive Officer of Agenus Inc.
| 71 |
Item 14. Principal Accounting Fees and Services.
The following table sets forth the fees for services provided and reasonably expected to be billed by GreenGrowth CPAs Inc.. The following is a summary of the fees billed to the Company for professional services rendered for the fiscal years ended March 31, 2026 and 2025.
| Fiscal Year 2026 | Fiscal Year 2025 | |||||||
| Audit fees | $ | 88,000 | $ | - | ||||
| Audit-related fees | - | - | ||||||
| Tax Fees | - | - | ||||||
| All other fees | - | - | ||||||
| Total | $ | 88,000 | $ | - | ||||
Audit Fees: For the fiscal years ended March 31, 2026 and 2025, the aggregate audit fees billed by our independent auditors were for professional services rendered for audits and quarterly reviews of our consolidated financial statements, and assistance with reviews of registration statements and documents filed with the SEC.
Audit-Related Fees: Audit-related fees are for assurance and other activities not explicitly related to the audit of our financial statements.
Tax Fees: For the fiscal years ended March 31, 2026 and 2025, there were no tax fees, respectively.
All Other Fees: For the fiscal years ended March 31, 2026 and 2025, there were no other fees, respectively
Audit Committee Pre-Approval Policies and Procedures.
The Audit Committee oversees and monitors our financial reporting process and internal control system, reviews and evaluates the audit performed by our registered independent public accountants and reports to the Board any substantive issues found during the audit. The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our registered independent public accountants. The Audit Committee convenes on a quarterly basis to approve each quarterly filing, and an annual basis to review the engagement of the Company’s external auditor.
The Audit Committee has considered whether the provision of Audit-Related Fees, Tax Fees, and all other fees as described above is compatible with maintaining GreenGrowth CPAs Inc.’s independence and has determined that such services for fiscal years 2026 and 2025, respectively, were compatible. All such services were approved by the Audit Committee pursuant to Rule 2-01 of Regulation S-X under the Exchange Act to the extent that rule was applicable.
| 72 |
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) List of Documents filed as part of this Report
(1) Consolidated Financial Statements
The F-1 through F-20 following the Exhibit List as required by Part II, Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.
(2) Financial Statement Schedules.
Schedules are omitted because they are either not required, not applicable, or the information is otherwise included.
(3) Exhibits
The Company has filed with this report or incorporated by reference herein certain exhibits as specified below pursuant to Rule 12b-32 under the Exchange Act. See Exhibit Index following the signature page to this report for a complete list of documents filed with this report.
| 73 |
| 74 |
| * | Filed herewith |
| ** | Designates management contracts and compensation plans |
| † | Furnished herewith |
| 75 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| PROTAGENIC THERAPEUTICS, INC. | |||
| Date: | August 14, 2026 | By: | /s/ Garo H. Armen |
| Garo H. Armen | |||
| Chairman (Principal Executive Officer and Duly Authorized Officer) | |||
| 76 |
PROTAGENIC THERAPEUTICS, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
MARCH 31, 2026 AND 2025
| F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Stockholders of Protagenic Therapeutics, Inc.
Opinion on the Financial Statements
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2026, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We have identified the following critical audit matters:
I)Valuation of Acquired In-Process Research and Development in the Reverse Merger with Protagenic Therapeutics, Inc.
As described in Note 4 to the consolidated financial statements, on May 15, 2025, Phytanix Biotherapeutics, Inc. completed a reverse merger with Protagenic Therapeutics, Inc., in which Protagenic Therapeutics, Inc. was the legal acquirer and Phytanix Inc. was determined to be the accounting acquirer in accordance with ASC 805-40, Business Combinations — Reverse Acquisitions. Accordingly, the transaction was accounted for as a reverse acquisition, whereby the net assets of Protagenic Therapeutics, Inc. were recognized at their estimated fair value, with total consideration transferred, as determined for accounting purposes, of $2,342,259. As part of the purchase price allocation, the Company recognized identifiable intangible assets acquired from Protagenic Therapeutics, Inc., consisting primarily of in-process research and development (“IPR&D”) and assembled workforce, totaling $2,093,228, with no goodwill recognized, as the excess of the consideration transferred over the fair value of net identifiable assets acquired was fully allocated to the identified intangible assets.
| F-2 |
Management engaged a third-party valuation specialist to assist in estimating the fair value of the acquired IPR&D using the multi-period excess earnings method (residual method), which required management to make significant estimates and assumptions, including projected revenue by development stage, probability of success (POS) and phase transition rates, projected operating expenses and margins, contributory asset charges, the discount rate applied to the IPR&D cash flows, the applicable tax rate, and terminal/residual value assumptions. These estimates are inherently subjective, involve a high degree of management judgment, and are based on assumptions about future clinical, regulatory, and commercial outcomes that have not yet occurred.
We identified the valuation of acquired IPR&D in the reverse merger with Protagenic Therapeutics, Inc. as a critical audit matter. Auditing management’s estimates of fair value for the acquired IPR&D involved especially subjective auditor judgment due to the significant judgment applied by management and its specialist in developing the underlying assumptions, including the probability of technical and regulatory success, projected revenue by development stage, the discount rate applied to the projected cash flows, and the contributory asset charges. In addition, specialized skills and knowledge were required to evaluate the valuation methodology and related assumptions used by management, as well as management’s determination of the accounting acquirer under ASC 805-40.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of acquired IPR&D in the reverse merger with Protagenic Therapeutics, Inc. included the following, among others:
| ● | We evaluated management’s determination of the accounting acquirer under ASC 805-40, including consideration of the relative voting rights, composition of the governing body, and senior management of the combined company following the transaction. | |
| ● | We engaged our own valuation specialists to assist in evaluating the reasonableness of the valuation methodology applied by management’s specialist and to perform an independent calculation of the fair value of the acquired IPR&D. | |
| ● | We obtained the underlying valuation model, prepared by management’s specialist and independently recalculated the present value of the probability-weighted cash flows used to estimate the fair value of the acquired IPR&D. | |
| ● | We agreed the historical financial inputs used in the valuation model to Protagenic Therapeutics, Inc.’s audited financial statements. | |
| ● | We obtained management’s long-range forecast that was provided to its valuation specialist, compared it to the projections used in the valuation model, and evaluated any differences identified. | |
| ● | For each major development stage probability of success assumption, we obtained management’s supporting documentation, and compared the assumptions to independent, published industry sources for the relevant therapeutic area. | |
| ● | We tested the contributory asset charge calculation, including evaluating whether the required rates of return used were consistent with the weighted average cost of capital build-up applied in the valuation. |
| F-3 |
| ● | We performed independent sensitivity analyses over the significant assumptions, including varying the probability of success rates by +/-15%, the discount rate by +/-5%, and peak revenue by +/-25%, to evaluate the impact of changes in these assumptions on the indicated fair value. | |
| ● | We evaluated whether the tax amortization benefit was appropriately calculated and included in the fair value estimate. | |
| ● | We evaluated management’s use of the residual method (multi-period excess earnings method) as the basis for its fair value estimate and considered whether a higher-of cost or income approach cross-check would be a more appropriate indication of value. | |
| ● | We evaluated and documented our conclusion as to whether the final allocated fair value were reasonable and fell within an acceptable range of estimation uncertainty, based on the results of the procedures performed above. |
II)Accounting for the Deconsolidation of Phytanix Therapeutics, Inc. and subsidiaries and the related gain on disposal
As described in Note 4 to the consolidated financial statements, on February 17, 2026 (the “Unwind Date”), the Company entered into a Settlement Agreement, Unwind, Termination and Share Exchange Agreement (the “Unwind Agreement”) with Phytanix Therapeutics, Inc. (“Phytanix”) and its former owners, pursuant to which the parties agreed to unwind the reverse acquisition transaction previously consummated in May 2025. As a result of the Unwind Agreement, the Company lost control of Phytanix and its subsidiaries and deconsolidated their assets and liabilities at historical carrying values as of the Unwind Date. Total consideration of $268,808 was measured as cash paid by the Company of $310,000, net of the fair value of 117,690 shares of common stock returned to the Company of $41,192, based on the closing market price of the Company’s common stock on the Unwind Date. Shares of Series C, Series C-1, and Series D preferred stock and common stock warrants returned to the Company as part of the exchange were each ascribed a fair value of zero, based on management’s determination that the shareholder approval required for conversion or exercise of these instruments had not been obtained, the parties had elected not to pursue such approval further, and, absent conversion or exercise, these instruments carry no liquidation preference, dividend rights, redemption rights, or other economic preferences. The common shares received were recorded as treasury stock at fair value pending retirement. The Company recognized a gain on disposal of subsidiary of $7,310,719, calculated as net liabilities deconsolidated of $7,579,527 less total consideration of $268,808.
Because Phytanix was determined to be the accounting acquirer in the original reverse acquisition, the Company’s historical consolidated financial statements continue to represent a continuation of Phytanix’s financial statements in accordance with ASC 805-40-45-1 and 45-2. Accordingly, the intangible assets (IPR&D and assembled workforce) recognized in connection with the original reverse acquisition, which relate to Protagenic Inc. (the legal acquirer/accounting acquiree in that transaction), were not affected by the deconsolidation of Phytanix and remain recorded in the Company’s consolidated financial statements. Management determined that the deconsolidation is accounted for prospectively under ASC 810-10-40-4 and 40-5 and does not qualify as a discontinued operation under ASC 205-20; accordingly, no retrospective revision or re-presentation of previously issued comparative periods was required.
We identified the accounting for the deconsolidation of Phytanix and the related gain on disposal as a critical audit matter. This matter involved especially subjective auditor judgment due to (i) the significant judgment required by management to interpret the legal terms of the Unwind Agreement and their appropriate accounting treatment, including management’s determination that the Company lost control of Phytanix, that the transaction should be accounted for prospectively rather than as a discontinued operation, and that no retrospective re-presentation of prior period financial statements was required, and (ii) the significant judgment involved in determining the fair value of the consideration exchanged, including management’s conclusion that the preferred stock and warrant components had no residual economic value as a result of the extinguishment of the related conversion and exercise contingencies. Auditing these determinations required especially subjective auditor judgment and specialized knowledge of complex GAAP guidance related to deconsolidation, loss of control, and fair value measurement of equity instruments with contingent features.
| F-4 |
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the accounting for the deconsolidation of Phytanix and the related gain on disposal included the following, among others:
| ● | We read and evaluated the Settlement Agreement and the Unwind, Termination and Share Exchange Agreement in its entirety to obtain an understanding of the legal and contractual terms of the transaction. | |
| ● | We obtained and evaluated management’s accounting memorandum analyzing the transaction, including management’s conclusions regarding loss of control under ASC 810-10-40, the determination that the transaction did not qualify as a discontinued operation under ASC 205-20, and the basis for prospective, rather than retrospective, accounting treatment. | |
| ● | We agreed the carrying values of the assets and liabilities of Phytanix deconsolidated as of the Unwind Date to the Company’s underlying accounting records. | |
| ● | We agreed the cash paid by the Company as part of the settlement to bank statements and other supporting documentation. | |
| ● | We tested the fair value of the common stock component of the consideration by agreeing the number of shares returned and the closing market price on the Unwind Date to independent, third-party market data. | |
| ● | We evaluated management’s determination that the Series C, Series C-1, and Series D preferred stock and the common stock warrants had a fair value of zero, including evaluating the terms of these instruments to corroborate management’s conclusion that the shareholder approval contingency required for conversion or exercise had been extinguished as of the Unwind Date, and that, absent conversion or exercise, these instruments carried no liquidation, dividend, redemption, or other economic preferences. | |
| ● | We independently recalculated the gain on disposal of subsidiary, including the components of total consideration and net assets/liabilities deconsolidated, and compared our calculation to management’s recorded amount. | |
| ● | We evaluated the appropriateness of recording the common shares returned to the Company as treasury stock at fair value. | |
| ● | We evaluated management’s conclusion that the intangible assets (IPR&D and assembled workforce) recognized in the original reverse acquisition, which relate to Protagenic Inc. as the accounting acquiree in that transaction, were not affected by, and appropriately remained recorded following, the deconsolidation of Phytanix. | |
| ● | We performed audit procedures over the completeness and accuracy of the disclosures related to the deconsolidation included in Note 4 to the consolidated financial statements. |
August 14, 2026
We have served as the Company’s auditor since 2025.
PCAOB ID Number 6580
| F-5 |
Report of Independent Registered Public Accounting Firm
To
the Board of Directors and
Stockholders of Protagenic Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying Consolidated Balance Sheets of Phytanix Bio, Inc. and subsidiaries (the Company) as of March 31, 2025 and the related Consolidated Statements of Operations and Comprehensive Loss, Consolidated Statement of Stockholders’ Deficit, and Consolidated Statement of Cash Flows for the year in the period ended in March 31, 2025, and the related notes (collectively referred to as the financial statements).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and the results of its operations and its cash flows for the year in the period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Consideration of the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
August 27, 2025
We have served as the Company’s auditor since 2025.
PCAOB ID Number 6580
| F-6 |
PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| March 31, 2026 | March 31, 2025 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash in bank | $ | $ | ||||||
| Prepaid expenses | ||||||||
| VAT receivable | ||||||||
| Inventories | ||||||||
| Total current assets | ||||||||
| Long-term assets: | ||||||||
| Fixed assets, net | ||||||||
| Intangible assets, net | ||||||||
| Total long-term assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| LIABILITIES: | ||||||||
| Current liabilities: | ||||||||
| Notes payable, net | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Derivative liabilities | ||||||||
| Loans payable, related parties | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies - NOTE 13 | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Preferred stock, $ par value, shares authorized issued and outstanding | ||||||||
| Series A Convertible Preferred stock, $ par value. shares authorized and shares issued and outstanding | ||||||||
| Series B Convertible Preferred stock, $ par value. shares authorized and shares issued and outstanding | ||||||||
| Series C Convertible Preferred stock, $par value. shares authorized and issued and outstanding | ||||||||
| Series C-1 Convertible Preferred stock, $ par value. shares authorized and issued and outstanding | ||||||||
| Series D Convertible Preferred stock, $ par value shares authorized and issued and outstanding | ||||||||
| Preferred stock, value | ||||||||
| Common stock, $ par value, respectively; authorized; and shares issued outstanding | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
See accompanying notes to the consolidated financial statements
| F-7 |
PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Year Ended | Year Ended | |||||||
| March 31, 2026 | March 31, 2025 | |||||||
| OPERATING EXPENSES: | ||||||||
| Accounting and audit fees | ||||||||
| Research and Development | ||||||||
| Legal Fees | ||||||||
| Consulting Fees | ||||||||
| Salaries and wages | ||||||||
| Bad debt expense | ||||||||
| General and administrative - other | ||||||||
| Stock compensation | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSES): | ||||||||
| Interest expenses | ( | ) | ( | ) | ||||
| Derivative expense | ( | ) | ||||||
| Change in fair value of derivative liabilities | ||||||||
| Foreign currency exchange differences | ||||||||
| Gain/loss on disposal of subsidiary | ||||||||
| Gain/loss on extinguishment of debt | ( | ) | ||||||
| TOTAL OTHER INCOME (EXPENSE) | ( | ) | ||||||
| INCOME (LOSS) BEFORE INCOME TAXES | ( | ) | ||||||
| PROVISION FOR INCOME TAXES | ||||||||
| NET INCOME (LOSS) | $ | $ | ( | ) | ||||
| NET INCOME (LOSS) PER SHARE: | ||||||||
| Basic and diluted | $ | $ | ) | |||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: | ||||||||
| Basic and diluted | ||||||||
| COMPREHENSIVE INCOME (LOSS): | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Other comprehensive gain (loss): | ||||||||
| Unrealized foreign currency translation loss | ( | ) | ( | ) | ||||
| Shares issued in connection with Phytanix Bio purchase | ( | ) | ||||||
| Comprehensive income (loss) | $ | $ | ( | ) | ||||
See accompanying notes to the consolidated financial statements
| F-8 |
PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGE IN STOCKHOLDERS’ EQUITY
For the Year Ended March 31, 2026 and 2025
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series C-1 Convertible Preferred Stock | Series D Convertible Preferred Stock | Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balances March 31, 2024 | $ | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forgiveness of related party payables | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash received for founders’ shares | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued in connection with exchange agreement | 17,000 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series C-1 Convertible Preferred Stock | Series D Convertible Preferred Stock | Common Stock | Additional Paid-in | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Income (Loss) | Deficit | Equity | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balances March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Change in foreign currency | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Series A Convertible Preferred Stock to officers | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of shares in reverse merger | ( | ) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued in connection with Phytanix Bio purchase | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for cash | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for warrant exercises | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rounding from reverse split | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares returned in connection unwinding of Phytanix Bio purchase | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Net income for the period | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2026 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to the consolidated financial statements
| F-9 |
PROTAGENIC THERAPEUTICS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended | Year Ended | |||||||
| March 31, 2026 | March 31, 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income/loss to net cash flows used in operating activities: | ||||||||
| Amortization of debt discount to interest expense | ||||||||
| Stock based compensation | ||||||||
| Warrants and stock issued for services | ||||||||
| Bad debt expense | ||||||||
| Derivative expense | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Depreciation expense | ||||||||
| Gain/loss on disposal of subsidiary | ( | ) | ||||||
| Gain/loss on extinguishment of debt | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| VAT receivable | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash received in acquisition of Phytanix Bio | ||||||||
| Cash spent on unwind of Phytanix Bio acquisition | ( | ) | ||||||
| Purchase of fixed assets | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Increase in note payable for acquisition of Phytanix Bio | ( | ) | ||||||
| Net proceeds from notes payable | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from related party loans | ||||||||
| Net cash provided by financing activities | ||||||||
| NET INCREASE IN CASH | ||||||||
| Effect of exchange rate adjustments on cash | ( | ) | ( | ) | ||||
| CASH, beginning of period | ||||||||
| CASH, end of period | $ | $ | ||||||
| SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING INFORMATION: | ||||||||
| Bifurcation of warrants as derivative liabilities | $ | $ | ||||||
| Debt extinguishment - related party parent reflected as capital contribution | $ | $ | ||||||
| Net assets acquired of Phytanix Bio, net of cash paid | $ | $ | ||||||
| Shares issued for warrant exercises | $ | $ | ||||||
See accompanying notes to the consolidated financial statements
| F-10 |
PROTAGENIC THERAPEUTICS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2026
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Company Background
Protagenic Therapeutics, Inc. (“we,” “our,” “Protagenic” or “the Company”), formerly known as Atrinsic, Inc., is a Delaware corporation and prior to May 15, 2025 has a wholly-owned subsidiary named Protagenic Therapeutics Canada (2006) Inc. (“PTI Canada”), a corporation formed in 2006 under the laws of the Province of Ontario, Canada.
We are a biopharmaceutical company specializing in the discovery and development of therapeutics to treat stress-related neuropsychiatric and mood disorders.
On May 15, 2025, the Company, entered into the Share Exchange Agreement (the “Exchange Agreement”) with Alterola Biotech, Inc. a Nevada corporation (“Alterola”) whereby Alterola owns Phytanix Bio, Inc. (“Phytanix Bio”) that was formed on April 16, 2024 as a holding company which owns ABTI Pharma Limited (“ABTI Pharma”) and its wholly-owned subsidiaries, which existed prior to the formation of Phytanix Bio.
On February 17, 2026, the Company entered into an Unwind, Termination and Share Exchange Agreement (the “Unwind Agreement”) with Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders, and Colin Stott, as Sellers’ Representative. The Company, Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders and Sellers’ Representative. The closing of the unwind transactions occurred simultaneously with the execution of the Unwind Agreement on February 17, 2026.
Reverse Stock Split
On
May 5, 2025, the
Change in Fiscal Year End
As a result of the merger with Phytanix Bio, the Company changed its fiscal year end to March 31, to align with Phytanix Bio who was considered the accounting acquirer.
Restructuring Plan
On August 8, 2025, the Board of Directors (the “Board”) approved a focused restructuring plan (the “Restructuring Plan”) to transition to a virtual operating model and concentrate capital on the Company’s highest-priority clinical program(s). In approving the Restructuring Plan, the Board determined that a disciplined cost structure and a sharper focus on near-term value inflection are in the best interests of the Company and its stockholders.
Under the Restructuring Plan, the Company (i) temporarily suspended expenditures related to its preclinical programs described above and (ii) initiated a process to evaluate strategic alternatives for those programs, including partnerships and/or out-licensing, with the objective of advancing them with appropriate external funding while preserving cash for the Company’s lead clinical assets. By doing so, the Company reduced operating expenses, overhead, and headcount primarily associated with preclinical activities.
When
fully implemented, the Restructuring Plan is expected to reduce annualized operating expenses by approximately $
| F-11 |
In connection with the Restructuring Plan, the Board terminated the employment of (i) Barrett Evans as Chief Executive Officer and President and (ii) Colin Stott as Chief Operating Officer, in each case effective immediately. Messrs. Evans and Stott remain members of the Company’s Board of Directors. Any severance or other compensatory agreements, if applicable, will be disclosed when determined. Workforce reductions also included the certain roles primarily associated with preclinical operations, regulatory affairs, and intellectual property functions.
In total, the Restructuring Plan was designed to accomplish three things:
| 1. | Clinical focus. The Company will allocate available resources to efficiently execute the ongoing Phase 2 clinical trial of PT00114 (peptide analogue), which the Company currently expects to complete in approximately 9 to 12 months, subject to enrollment and other customary factors. | |
| 2. | Virtual operating model. The Company is transitioning to a virtual operating model to minimize cash burn while prioritizing its clinical-stage program. |
On February 3, 2026, William (Bill) Nichols, Jr was appointed as the new President of the Company. On April 30, 2026, the Company’s former Chief Financial Officer, Alex Arow, departed the Company.
NOTE 2 – LIQUIDITY AND GOING CONCERN
As
shown in the accompanying consolidated financial statements, the Company has incurred recurring losses and negative cash flows from operations
and expects to continue to incur losses as it advances the development of its programs. As of March 31, 2026 and March 31, 2025, the
Company had working capital of $
During
the year ended March 31, 2026, the Company raised approximately $
The Company is actively exploring strategic and financing alternatives, including possible corporate transactions involving a partnership for its lead program, royalty-based financing arrangements, and other business development opportunities. The Company has also received an unsolicited inquiry regarding a potential partnership from an established company with expertise in neurobiology and is broadening its outreach to additional potential partnership candidates.
While there can be no assurance that these efforts will result in additional capital or strategic transactions on acceptable terms, or at all, management believes that these initiatives represent potential avenues to strengthen the Company’s liquidity position. Based on its cash resources as of March 31, 2026, the Company does not have sufficient resources to fund its operations past twelve months from the date these consolidated financial statements are available to be issued. The Company expects that additional capital may be required during the next 12 months to continue executing its business plan and to meet its obligations as they become due. Accordingly, these conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.
These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
| F-12 |
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”).
Principles of consolidation
The consolidated financial statements include the accounts of Protagenic Therapeutics, Inc., and its wholly owned Canadian subsidiary. All significant intercompany balances and transactions have been eliminated. Up until the date of the unwind of the merger, February 17, 2026, Phytanix Bio and its subsidiaries were also included in the consolidated financial statements, but have been deconsolidated after that date.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates. Significant estimates underlying the consolidated financial statements include valuation of stock options and warrants, derivative liabilities, and assessment of deferred tax asset valuation allowance. Foreign currency exchange rates, fair value of the valuation of Protagenic Therapeutics, Inc. and the purchase price allocation.
Concentrations of Credit Risk
The Company maintains its cash accounts at financial institutions which are insured by the Federal Deposit Insurance Corporation. At times, the Company may have deposits in excess of federally insured limits. As of March 31, 2026, the Company has bank balances that exceed the federally insured limits. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.
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, 2026 and 2025 the Company did
Fixed Assets and Long-Lived Assets
ASC 360 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment.
The Company reviews recoverability of long-lived assets on a periodic basis whenever events and changes in circumstances have occurred which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds the fair value of the assets.
Fixed assets and intangible assets with finite useful lives are stated at cost less accumulated amortization and impairment. Intangible assets with infinite lives, such as in process research and development are valued at costs and reviewed for indicators of impairment at least annually, or more depending on circumstances.
| F-13 |
The Company assesses the impairment of identifiable intangibles whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include, but are not limited to, the following:
| 1. | Significant underperformance relative to expected historical or projected future operating results; | |
| 2. | Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and | |
| 3. | Significant negative industry or economic trends. |
When the Company determines that the carrying value of intangibles may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.
The annual impairment test is performed during March of each fiscal year, or more frequently if there are indicators of potential impairment. The impairment review is conducted at the level of the reporting unit or cash-generating unit (“CGU”), which represents the lowest level at which goodwill is monitored for internal management purposes and is not larger than an operating segment.
In assessing whether intangible assets are impaired, the Company first evaluates qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit or CGU is less than its carrying amount. These qualitative factors include, but are not limited to:
| ● | Macroeconomic conditions (e.g., a significant adverse change in general economic conditions) | |
| ● | Industry and market considerations (e.g., declines in market capitalization or increased competition) | |
| ● | Cost factors (e.g., increases in raw material, labor, or other costs that could negatively impact earnings) | |
| ● | Overall financial performance (e.g., negative or declining cash flows, reductions in revenue growth) | |
| ● | Other relevant entity-specific events (e.g., changes in management, strategy, or key personnel) |
If the qualitative assessment indicates potential impairment, the Company proceeds with a quantitative analysis to determine the fair value of the reporting unit or CGU. If the carrying amount exceeds the estimated fair value, an impairment loss is recognized in the amount by which the carrying amount of goodwill exceeds its recoverable amount or fair value.
For
the period ended March 31, 2026, the Company did
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.
| F-14 |
The carrying amount of the Company’s financial assets and liabilities, such as cash, accounts payable, and accrued liabilities.
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.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management evaluates all the Company’s financial instruments, including warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
The Company used a Black-Scholes model for the warrants and conversion feature included in the convertible notes, as applicable, to value the derivative instruments at inception and subsequent valuation dates when needed. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is remeasured at the end of each reporting period.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Research and development
We engage in a variety of research and development activities to develop our technologies and work toward the development of a saleable product. When it is determined that the research and development products we are creating have reached a point where saleable products are possible, these amounts are capitalized. Until that time, research and development expenses are charged to operations as incurred. As of March 31, 2026 and 2025, the research and development costs incurred by the company relate to the following:
| ● | Continued patent prosecution and internationalization of company intellectual property. | |
| ● | Staff costs and consultancy costs relating to research and development. |
| F-15 |
Segment Reporting
In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07 (“ASU 2023-07”). ASU 2023-07 was effective for public companies in fiscal years beginning after December 15, 2023. The Company adopted Financial Accounting Standards Board issued Accounting Standards Update 2023-07. ASU 2023-07 improves segment reporting disclosures for public companies. ASU 2023-07 requires more detailed information about reportable segments and expenses including the requirement to disclose qualitative information about factors used to identify reportable segments and quantitative information about profit and loss measures and significant expense categories, The Company has not yet begun generating revenue from its planned principal operations and operates as a single reportable segment. The chief operating decision maker is the Company’s chief executive officer who assesses performance based on total expenses, cash flows, and progress made in the Company’s ongoing development efforts. The Company analyzed ASU 2023-07 and determined that the required information is presented within the consolidated financial statements and footnote disclosures herein.
Stock-Based Compensation
The Company accounts for stock-based compensation costs under the provisions of ASC 718, “Compensation—Stock Compensation”, which requires the measurement and recognition of compensation expense related to the fair value of stock-based compensation awards that are ultimately expected to vest. Stock based compensation expense recognized includes the compensation cost for all stock-based payments granted to employees, officers, non-employees, and directors based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported.
If any award granted under the Company’s 2016 Equity Compensation Plan (the “2016 Plan”) payable in shares of common stock is forfeited, cancelled, or returned for failure to satisfy vesting requirements, otherwise terminates without payment being made, or if shares of common stock are withheld to cover withholding taxes on options or other awards, the number of shares of common stock as to which such option or award was forfeited, or which were withheld, will be available for future grants under the 2016 Plan. The Company recognizes the impact of forfeitures when they occur.
Basic income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for each period. Diluted income (loss) per share is computed by dividing the net income (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 income (loss) becomes anti-dilutive and therefore is not reflected on the consolidated statements of operations and comprehensive loss.
For the Year Ended March 31, 2026 | For the Year Ended March 31, 2025 | |||||||
Potentially Outstanding Dilutive Common Shares | ||||||||
For the Year Ended March 31, 2026 | For the Year Ended March 31, 2025 | |||||||
| Conversion Feature Shares | ||||||||
| Preferred Stock | ||||||||
| Stock Options | ||||||||
| Preferred Warrants | ||||||||
| Warrants | ||||||||
| Total potentially outstanding dilutive common shares | ||||||||
| F-16 |
Foreign Currency Translation
The Company follows ASC 830, Foreign Currency Matters (“ASC 830”) for foreign currency translation to translate the financial statements of the foreign subsidiary from the functional currency, generally the local currency, into U.S. Dollars. ASC 830-10-45 sets out the guidance relating to how a reporting entity determines the functional currency of a foreign entity (including of a foreign entity in a highly inflationary economy), re-measures the books of record (if necessary), and characterizes transaction gains and losses. Pursuant to ASC 830-10-45, the assets, liabilities, and operations of a foreign entity shall be measured using the functional currency of that entity. An entity’s functional currency is the currency of the primary economic environment in which the entity operates; normally, that is the currency of the environment, or local currency, in which an entity primarily generates and expends cash.
The functional currency of each foreign subsidiary is determined based on management’s judgment and involves consideration of all relevant economic facts and circumstances affecting the subsidiary. Generally, the currency in which the subsidiary transacts a majority of its transactions, including billings, financing, payroll and other expenditures, would be considered the functional currency, but any dependency upon the parent and the nature of the subsidiary’s operations must also be considered. If a subsidiary’s functional currency is deemed to be the local currency as is the case with Canada and the UK, 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 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 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 consolidated statements of operations and comprehensive loss.
Based on an assessment of the factors discussed above, the management of the Company determined its subsidiaries’ local currency (i.e. the Canadian dollar, British Pound) to be the functional currency for its foreign subsidiaries.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The purpose of the amendment is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. The Company adopted this ASU and has updated its disclosure with segment reporting information.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, or ASU 2023-09. ASU 2023-09 requires a company’s annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. Adoption is either with a prospective method or a fully retrospective method of transition. The Company has adopted Accounting Standards Update 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) for the year ended March 31, 2026, and applied the new disclosure requirements.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” to improve disclosures about the nature of expenses in commonly presented financial statement captions. ASU 2024-03 is effective for all public business entities for annual reporting periods beginning after December 15, 2026, on either a prospective or retrospective basis. Early adoption permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
| F-17 |
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” to improve disclosures about the nature of expenses in commonly presented financial statement captions. ASU 2024-03 is effective for all public business entities for annual reporting periods beginning after December 15, 2026, on either a prospective or retrospective basis. Early adoption permitted. In January 2025, the FASB issued ASU No. 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU No. 2025-11, “Interim Reporting”, which is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies. The amendment specifies when an entity is subject to ASC 270 and addresses the form and content of financial statements and interim disclosures requirements. The ASU clarifies that an entity must disclose events since the end of the last annual reporting period that have a material impact. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company does not expect this update to have a material impact to the Company’s consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-12, “Codification Improvements”. ASU No. 2025-12 addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S. GAAP. The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. ASU No. 2025-12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments may be applied prospectively or retrospectively. Early adoption is permitted. The Company does not expect this update to have a material impact to the Company’s consolidated financial statements.
NOTE 4 - REVERSE MERGER
The acquisition of Phytanix Bio was considered a reverse merger. In accordance with ASC 805-40-45-1, the consolidated financial statements prepared following a reverse acquisition are issued under the name of the legal parent (Protagenic Therapeutics, Inc.) but described in the notes to the financial statements as a continuation of the financial statements of the legal subsidiary (Phytanix Bio), with one adjustment, which is to retroactively adjust the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree (Protagenic Therapeutics, Inc.). That adjustment is required to reflect the capital of the legal parent. Comparative information presented in the consolidated financial statements also is retroactively adjusted to reflect the legal capital of the legal parent.
Under ASC 805-40-45-2, the consolidated financial statements represent the continuation of the legal subsidiary except for the capital structure, as follows:
| (a) | The assets and liabilities of the legal subsidiary recognized and measured at their precombination carrying amounts; | |
| (b) | The assets and liabilities of the legal parent recognized and measured in accordance with the guidance in this topic applicable to business combinations (ASC 805); | |
| (c) | The retained earnings and other equity balances of the legal subsidiary before the business combination; | |
| (d) | The amount recognized as issued equity interests in the consolidated financial statements determined by adding the issued equity interest of the legal subsidiary outstanding immediately before the business combination to the fair value of the legal parent determined in accordance with the guidance in ASC 805 applicable to business combinations. However, the equity structure reflects the equity structure of the legal parent, including the equity interests the legal parent issued to effect the combination. Accordingly, the equity structure of the legal subsidiary is restated using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition. |
| F-18 |
The
Company reverse merged with Phytanix Bio for an aggregate of (A) shares of the Company’s common stock, par value $ per share
(“Common Stock”), which shares shall represent a number of shares equal to no more than
On May 15, 2025, the Company completed its acquisition of Phytanix Bio. As a result of this transaction, which is accounted for as a reverse merger, Phytanix Bio is a wholly owned subsidiary of the Company (the “Merger”). This exchange of shares and the resulting controlling ownership of Phytanix Bio constitutes a reverse acquisition resulting in a recapitalization of Phytanix Bio and purchase accounting being applied to Protagenic Therapeutics, Inc. under ASC 805 due to Phytanix Bio being the accounting acquirer and Protagenic Therapeutics, Inc., being deemed an acquired business. This requires financial reporting from the Merger close date forward to reflect only the historic consolidated results of Phytanix Bio and to include the consolidated results for Protagenic Therapeutics, Inc. and subsidiaries from May 15, 2025 forward.
The primary reasons Phytanix Bio consummated the merger with Protagenic Therapeutics, Inc. were the opportunity to immediately become a public company without the process of doing its own initial public offering, thereby affording it the opportunity to more quickly raise capital and provide liquidity options to its stockholders, and at the same time acquiring the infrastructure required of a public company run by people experienced in investor relations and the public company regulatory compliance.
The estimated allocation of the purchase price of the assets acquired and liabilities assumed for the acquisition by Phytanix Bio of Protagenic Therapeutics, Inc. via the reverse acquisition are set forth below:
Purchase Price Allocation of Protagenic Therapeutics, Inc.
SCHEDULE OF PURCHASE PRICE ALLOCATION
| Current assets – cash and prepaid | $ | |||
| Intangible assets – in process research and development and assembled workforce | ||||
| Fixed assets | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Purchase price | $ |
This allocation is based on an independent valuation received by the Company. The value was derived based off the share price of Protagenic Therapeutics, Inc. at the time of the merger. The Company accounted for this transaction as a reverse merger. From May 15, 2025 through March 31, 2026, there are no indications of impairment of the long-lived assets.
| F-19 |
Settlement regarding lawsuit against Phytanix
On February 17, 2026, the Company entered into a Settlement Agreement (the “Settlement Agreement”) with Alterola Biotech Inc., EMC2 Capital LLC, and the former stockholders of Phytanix Bio (collectively, the “Former Phytanix Stockholders”), in connection with the litigation styled Protagenic Therapeutics, Inc. v. Alterola Biotech Inc., et al., Case No. 2025-1238-KMM, pending in the Court of Chancery of the State of Delaware (the “Litigation”). The Settlement Agreement provides for, among other things, the dismissal of the Litigation and the execution of an agreement to terminate, and unwind the transactions contemplated by, the Share Exchange Agreement dated May 15, 2025 (the “SEA”). Pursuant to the SEA, the Company had previously reverse merged with Phytanix Bio, which transaction was disclosed in the Company’s Current Reports on Form 8-K filed with the Securities and Exchange Commission on May 19, 2025 and August 28, 2025.
On October 28, 2025, the Company filed a Verified Complaint in the Court of Chancery of the State of Delaware seeking rescission of the Share Exchange Agreement dated May 15, 2025 by which the Company acquired Phytanix Bio, Inc. or, in the alternative, damages and an order compelling delivery of audited financial statements as required by that agreement.
Unwind, Termination and Share Exchange Agreement
On February 17, 2026, the Company entered into an Unwind, Termination and Share Exchange Agreement (the “Unwind Agreement”) with Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders, and Colin Stott, as Sellers’ Representative (as defined therein). The Company, Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders and Sellers’ Representative are collectively referred to herein as the “Parties”. The closing of the unwind transactions (the “Closing”) occurred simultaneously with the execution of the Unwind Agreement on February 17, 2026.
Pursuant to the Unwind Agreement:
| ● | The SEA was terminated. | |
| ● | The Parties agreed to unwind the transactions contemplated by the SEA. | |
| ● | The Former Phytanix Stockholders forfeited and returned to the Company all shares of the Company’s common stock and preferred stock that had been issued to them as closing consideration under the SEA. | |
| ● | PTIX
transferred back to the Former Phytanix Stockholders | |
| ● | Upon Closing, the Former Phytanix Stockholders re-acquired full ownership of Phytanix Bio, and the Company relinquished all ownership and related rights in Phytanix Bio. | |
| ● | Phytanix Bio will continue to own its pre-merger assets and retain its liabilities as reflected on its balance sheet as of the date of the Unwind Agreement. | |
| ● | PTIX
agreed to pay Phytanix Bio $ |
The Unwind Agreement also includes:
| ● | Mutual releases between the Company and the Former Phytanix Stockholders. | |
| ● | Termination of related agreements between the Parties. | |
| ● | Acknowledgement of resignations of Former Phytanix Stockholders and their affiliates from any positions with the Company. | |
| ● | Mutual releases between the Parties. | |
| ● | Indemnification provisions in favor of the Company relating to liabilities associated with the SEA and Phytanix Bio. Indemnification provisions in favor of Phytanix Bio for any third party claims relating to any action taken by, or on behalf of, Phytanix Bio outside the ordinary course of business during the period between the closing of the transactions under the SEA and the closing of the transactions under the Unwind Agreement that are not otherwise reflected on the balance sheet of Phytanix Bio as of the date of the Unwind Agreement. |
| F-20 |
Consideration Received Calculation
| Amount | ||||
| Cash | $ | |||
| Receipt of Company shares | ( | ) | ||
| Total Consideration (Fair Value) | $ | |||
Net assets calculation
| Amount | ||||
| Total Assets of Phytanix | $ | |||
| Less: Total Liabilities of Phytanix | ||||
| Net Liabilities Deconsolidated | $ | ( | ) | |
Gain/(loss) calculation
| Amount | ||||
| Total Consideration | $ | |||
| Less: Net Assets Deconsolidated | ||||
| Gain on disposal of subsidiary | $ | ( | ) | |
During
the year ended March 31, 2026, the Company recognized a $
NOTE 5 – FIXED ASSETS
The Company acquired equipment in connection with the Merger of Phytanix Bio. As of March 31, 2026 and 2025, the Company has the following fixed assets:
SCHEDULE OF FIXED ASSETS
| March 31, 2026 | March 31, 2025 | |||||||
| Equipment | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ||||||
| Net fixed assets | $ | $ | ||||||
The
Company recorded $
| F-21 |
NOTE 6 - INTANGIBLE ASSETS
The Company acquired in process research and development costs and assembled workforce costs in connection with the Merger of Phytanix Bio.
As of March 31, 2026 and March 31, 2025, the Company has the following intangible assets:
SCHEDULE OF INTANGIBLE ASSETS
| March 31, 2026 | March 31, 2025 | |||||||
| In process research and development | $ | $ | ||||||
| Assembled workforce | ||||||||
| Intangible assets, gross | ||||||||
| Accumulated amortization | ||||||||
| Net intangible assets | $ | $ | ||||||
The intangible assets identified will commence amortization upon a Phase 3 clinical trial for the drugs acquired. As of March 31, 2026, none of the trials have entered Phase 3. The Company anticipates that Phase 3 will start around Q3 2027. The Company will include these assets in their annual impairment test.
NOTE 7 – ACCOUNTS PAYABLE
Accounts payable consisted of the following on March 31, 2026 and 2025:
SCHEDULE OF ACCOUNTS PAYABLE
| March 31, 2026 | March 31, 2025 | |||||||
| Accounting and audit fees | $ | $ | ||||||
| Research and development | ||||||||
| Legal | ||||||||
| Compensation | ||||||||
| General and administrative | ||||||||
| Total accounts payable | $ | $ | ||||||
NOTE 8 – ACCRUED LIABILITIES
Accrued liabilities consisted of the following on March 31, 2026 and 2025:
SCHEDULE OF ACCRUED LIABILITIES
| March 31, 2026 | March 31, 2025 | |||||||
| Research and development | $ | $ | ||||||
| General and administrative | ||||||||
| Total accrued expenses | $ | $ | ||||||
NOTE 9 – NOTES PAYABLE AND DERIVATIVE LIABILITIES
On
June 26, 2024, certain investors (the “Financing Investors”) and Phytanix Bio entered into certain Securities Purchase Agreements
pursuant to which, among other things, the Financing Investors agreed to purchase (i) certain promissory notes of the Company in the
original principal amount of $
In
2024, the Company closed the Securities Purchase Agreements, pursuant to which the Company issued and sold to the Financing Investors
(i) promissory notes in the principal amount of $
| F-22 |
The convertible notes payable includes variable conversion prices. The Company evaluated these terms and determined that the warrants issued with the notes payable contained characteristics that required the Company to classify them as derivative liabilities. The Derivative Instruments have been accounted for utilizing ASC 815 “Derivatives and Hedging.” The Company has incurred a liability for the estimated fair value of Derivative Instruments. The estimated fair value of the Derivative Instruments has been calculated based on an independent valuation received that valued these warrants.
Upon
completion of the Merger with Protagenic Therapeutics, Inc. Phytanix Bio recognized additional debt in the amount of $
Phytanix
Bio recognized a derivative liability of $
Phytanix
Bio recognized a change in the fair value of the derivative liabilities related to the conversion option and warrants of $
Phytanix
Bio also in June 2024 issued Common Stock Warrants as commissions valued at $
The fair value of the warrants were based on an independent valuation of the warrants on the measurement date. The warrants are considered to be a level 2 fair value due to them using observable quoted prices in the fair value calculation.
On
April 17, 2025, the Company entered into a note with an individual for $
The accounting treatment of derivative financial instruments requires that the Company treat the instrument as liability and record the fair value of the instrument as derivatives as of the inception date of the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.
The Company determined the derivative liabilities to be a Level 3 fair value measurement.
Activity related to the derivative liabilities for the period ended March 31, 2026 is as follows:
SCHEDULE OF DERIVATIVE LIABILITIES
| Beginning balance as of March 31, 2025 | $ | |||
| Recognition of conversion option on the notes payable | ||||
| Change in fair value of derivative liabilities | ( | ) | ||
| Disposal of derivative assets on unwind of Phyanix Bio merger | ( | ) | ||
| Ending balance as of March 31, 2026 | $ |
During the year ended March 31, 2026, all notes and derivative liabilities were returned to Phyatnix Bio as part of the unwind of the Phyatnix Bio merger.
| F-23 |
NOTE 10 – RELATED PARTY TRANSACTIONS
Loans Payable – Related Parties
The
Company leases office space from a company in which an officer has an ownership interest. The lease is believed to be at or below market
rate and is on a month-to-month basis. The rent is $
During
the year ended March 31, 2026 and 2025, several related parties made advances to the Company to fund operating expenses in the amount
of $
The
Board of Directors resolved on July 31, 2025, to approve the forgiveness of an intercompany loan owed by ABTI Pharma Limited to the Company,
in the amount of £
Office Space
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.
Agenus
During the year ended March 31, 2026, the Company engaged Agenus Inc., a related party, to perform research and development services. Agenus Inc. is a related party due to the Company’s Director and Chairman of the Board being the CEO and Chairman of the Board for Agenus Inc. The Company has not incurred any expenses nor has any amounts outstanding for the year ended March 31, 2026 and 2025.
Phytanix Bio Related Party
Upon the completion of the unwind of the reverse merger on February 17, 2026, the related party balances related Phytanix Bio and its subsidiaries was transferred back to Phytanix Bio.
NOTE 11 - STOCKHOLDERS’ DEFICIT
Common Stock
During
the year ended March 31, 2026, the Company issued common shares, Series C Preferred shares, Series C-1 Preferred
shares and Series D preferred shares in the merger with Phytanix Bio as discussed in Note 1. All of these shares were returned
to the Company upon the completion of the unwind of the Phytanix Bio merger. In addition, the Company issued shares of common
stock for cash in the amount of $
During
the year ended March 31, 2025, Protagenic’s issued no shares of common stock or preferred stock. Phytanix Bio did issue
common shares and preferred shares pursuant to an exchange agreement with Alterola valued at $
Series C Non-Voting Certificate of Designation
On May 15, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series C Non-Voting Convertible Preferred Stock (the “Series C Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series C Certificate of Designation provides for the designation of shares of the Series C Stock.
| F-24 |
Holders of Series C Stock are entitled to receive dividends on shares of Series C Stock (on an as-if-converted-to-Common-Stock basis, without regard to the Beneficial Ownership Limitation (as defined in the Series C Certificate of Designation), equal to and in the same form, and in the same manner, as dividends (other than dividends on shares of the Common Stock payable in the form of Common Stock) actually paid on shares of the Common Stock when, as if such dividends (other than dividends payable in the form of Common Stock) are paid on the shares of the Common Stock. In addition, holders of Series C Stock shall be entitled to receive, and the Company shall pay, payment-in-kind dividends on each share of Series C Stock, accruing at a rate equal to five percent (5.0%) per annum payable in shares of Series C Stock on the date that is 180 days after the date of the original issuance of such Series C Stock or such earlier date that that such holder may convert any portion of the Series C Stock to Common Stock.
Except as otherwise required by law, the Series C Stock does not have voting rights. However, as long as any shares of Series C Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series C Stock , (i) alter or change adversely the powers, preferences or rights given to the Series C Stock or alter or amend the Series C Certificate of Designation, amend or repeal any provision of, or add any provision to, the Company’s third amended and restated certificate of incorporation, as amended (the “Charter”) or Second Amended and Restated Bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series C Stock , regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series C Stock , or increase or decrease (other than by conversion) the number of authorized shares of Series C Stock (iii) prior to the Stockholder Approval (as defined in the Series C Certificate of Designation) or at any time while at least 30% of the originally issued Series C Stock remains issued and outstanding, consummate either: (A) any Fundamental Transaction (as defined in the Series C Certificate of Designation) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.
The Series C Stock shall rank on parity with the Common Stock as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily.
Following stockholder approval of the Conversion Proposal, each share of Series C Stock will automatically convert into one () share of Common Stock, subject to certain limitations provided in the Series C Certificate of Designation, including that the Company shall not affect any conversion of Series C Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”); provided, however, that the Beneficial Ownership Limitation will not apply after the stockholder approval of the Change of Control Proposal and upon the occurrence of certain other events as set forth in the Series C Certificate of Designation.
If at any time following the earliest of Stockholder Approval (as defined in the Series C Certificate of Designation), the occurrence of an event set forth in clause (ii) of Section 1.4(a) of the Exchange Agreement, or September 1, 2025, the Company fails to deliver to a holder certificates representing shares of Common Stock or electronically deliver such shares, the Series C Stock is redeemable for cash at the option of the holder thereof at a price per share equal to the then-current Fair Value of the Series C Stock , as defined and described in the Series C Certificate of Designation.
Series C-1 Certificate of Designation
On May 15, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series C-1 Non-Voting Convertible Preferred Stock (the “Series C-1 Certificate of Designation”) with the Secretary of State of the State of Delaware in connection with the Combination. The Series C-1 Certificate of Designation provides for the designation of shares of the Series C-1 Preferred Stock.
| F-25 |
Holders of Series C-1 Stock are entitled to receive dividends on shares of Series C-1 Stock (on an as-if-converted-to-Common-Stock basis, without regard to the Beneficial Ownership Limitation (as defined in the Series C-1 Certificate of Designation), equal to and in the same form, and in the same manner, as dividends (other than dividends on shares of the Common Stock payable in the form of Common Stock) actually paid on shares of the Common Stock when, as if such dividends (other than dividends payable in the form of Common Stock) are paid on the shares of the Common Stock. In addition, holders of Series C-1 Stock shall be entitled to receive, and the Company shall pay, payment-in-kind dividends on each share of Series C-1 Stock, accruing at a rate equal to five percent (5.0%) per annum payable in shares of Series C-1 Stock on the date that is 180 days after the date of the original issuance of such Series C-1 Stock or such earlier date that that such holder may convert any portion of the Series C-1 Stock to Common Stock.
Except as otherwise required by law, the Series C-1 Stock does not have voting rights. However, as long as any shares of Series C-1 Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series C-1 Stock, (i) alter or change adversely the powers, preferences or rights given to the Series C-1 Stock or alter or amend the Series C-1 Certificate of Designation, amend or repeal any provision of, or add any provision to, the Company’s third amended and restated certificate of incorporation, as amended (the “Charter”) or Second Amended and Restated Bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series C-1 Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series C-1 Stock, or increase or decrease (other than by conversion) the number of authorized shares of Series C-1 Stock (iii) prior to the Stockholder Approval (as defined in the Series C-1 Certificate of Designation) or at any time while at least 30% of the originally issued Series C-1 Stock remains issued and outstanding, consummate either: (A) any Fundamental Transaction (as defined in the Series C-1 Certificate of Designation) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.
The Series C-1 Stock shall rank on parity with the Common Stock as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily.
Following stockholder approval of the Conversion Proposal, each share of Series C-1 Stock will automatically convert into one () share of Common Stock, subject to certain limitations provided in the Series C-1 Certificate of Designation, including that the Company shall not affect any conversion of Series C-1 Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”); provided, however, that the Beneficial Ownership Limitation will not apply after the stockholder approval of the Change of Control Proposal and upon the occurrence of certain other events as set forth in the Series C-1 Certificate of Designation.
If at any time following the earliest of Stockholder Approval (as defined in the Series C-1 Certificate of Designation), the occurrence of the event described in clause (ii) of Section 1.4(a) of the Exchange Agreement,, or September 1, 2025, the Company fails to deliver to a holder certificates representing shares of Common Stock or electronically deliver such shares, the Series C-1 Stock is redeemable for cash at the option of the holder thereof at a price per share equal to the then-current Fair Value of the Series C-1 Stock, as defined and described in the Series C-1 Certificate of Designation.
Series D Certificate of Designation
On May 15, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series D Non-Voting Convertible Preferred Stock (the “Series D Certificate of Designation”, and together with the Series C Certificate of Designation and the Series C-1 Certificate of Designation, the “Certificates of Designations”) with the Secretary of State of the State of Delaware in connection with Merger. The Series D Certificate of Designation provides for the designation of shares of the Series D Preferred Stock.
| F-26 |
Subject to the senior rights of the Senior Preferred Stock (as defined in the Series D Certificate of Designation), and pari passu with the holders of shares of Series C Stock (the “Parity Stock” as defined in the Series D Certificate of Designation), from and after the first date of issuance of any Series D Preferred Stock, each holder of a share of Series D Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which dividends shall by paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms of the Series D Certificate of Designation, in cash, in securities of the Company or any other entity, or using assets as determined by the Board on the Stated Value (as defined in the Series D Certificate of Designation) of such share of Series D Preferred Stock.
Except as otherwise required by law, the Series D Preferred Stock does not have voting rights, either as a separate series or class or together with any other series or class of share of capital stock. Except as otherwise required by law, holders of the Series D Preferred Stock shall not be entitled to call a meeting of such holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock.
All shares of capital stock of the Company shall by junior in rank to all of the Series D Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, subject to the express consent of the holders of at least a majority of the outstanding Series D Preferred Stock to create Parity Stock.
Following
stockholder approval of the Conversion Proposal, each holder of Series D Preferred Stock shall be entitled to convert any portion of
the outstanding Series D Preferred Stock held by such holder into validly issued, fully paid and non-assessable common stock using a
Conversion Price of $
Stock-Based Compensation
The Company adopted an Employee, Director and Consultant Stock Plan on June 17, 2016 (the “2016 Plan”). Pursuant to the 2016 Plan, the Company’s Compensation Committee may grant awards to any employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary. Due to an annual “evergreen” provision in the 2016 Plan, the number of shares reserved for future grants automatically increases each year. As a result of these increases, as of March 31, 2026 and 2025, the aggregate number of shares of common stock available for awards under the 2016 Plan was shares and shares, respectively. Options issued under the 2016 Plan are exercisable for up to ten years from the date of issuance.
There were options outstanding as of March 31, 2026 and 2025. During the years ended March 31, 2026 and 2025, the Company issued and options, respectively.
SCHEDULE OF SHARE-BASED COMPENSATION, STOCK OPTIONS, ACTIVITY
| Number | Weighted Average Exercise Price | Weighted Average Remaining Life | ||||||||||
| Stock Options | ||||||||||||
| Outstanding March 31, 2025 | $ | - | ||||||||||
| Assumed from reverse merger | ||||||||||||
| Granted | - | |||||||||||
| Expired | ( | ) | - | |||||||||
| Exercised | - | |||||||||||
| Outstanding March 31, 2026 | $ | |||||||||||
| F-27 |
SCHEDULE OF SHARE-BASED COMPENSATION NONVESTED SHARES
| Nonvested Options | Options | Weighted- Average Exercise Price | ||||||
| Nonvested at March 31, 2025 | $ | |||||||
| Assumed from reverse merger | ||||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Forfeited | ||||||||
| Nonvested at March 31, 2026 | $ | |||||||
As of March 31, 2026, the Company had shares issuable under options outstanding at a weighted average exercise price of $ and an intrinsic value of $.
The Company recognized compensation expense related to options issued of $ and $ for the year ended March 31, 2026 and 2025, respectively, in which $ and $ is included in general and administrative expenses and $ and $ in research and development expenses, respectively. For the year ended March 31, 2026 and 2025, $ and $ of the stock compensation was related to employees and $ and $ was related to non-employees, respectively.
As of March 31, 2026, the unamortized stock option expense was $ with $ being related to employees and $ being related to non-employees. As of March 31, 2026, the weighted average remaining vesting period for the unamortized stock compensation to be recognized is years.
On February 21, 2025, the Company held its 2024 Annual Meeting of Stockholders (the “Annual Meeting”) on February 21, 2025. At the Company’s Annual Meeting, the Company’s stockholders approved the proposal to approve the repricing of certain outstanding stock options granted (the “Option Grants”) under the Company’s 2006 and 2016 Equity Incentive Plans (the “Plans”) to allow the Board of Directors (the “Board”) to reprice the exercise price of outstanding stock options under the Plans. Pursuant to that authority, on February 21, 2025, the Board repriced the Option Grants. The repriced Option Grants under the 2006 Equity Incentive Plan had original exercise prices ranging from $to $ per share, and the repriced Option Grants under the 2016 Equity Incentive Plan had original exercise prices ranging from $ to $ per share. All the Option Grants under the Plans were repriced to have an exercise price of $per share, which was the closing price of the Company’s common stock on February 21, 2025.
Warrants:
A summary of warrant issuances are as follows:
SUMMARY OF WARRANT
| Number | Weighted Average Exercise Price | Weighted Average Remaining Life | ||||||||||
| Warrants | ||||||||||||
| Outstanding March 31, 2025 | $ | |||||||||||
| Assumed from reverse merger | ||||||||||||
| Granted | - | |||||||||||
| Expired | ( | ) | - | |||||||||
| Exercised | ( | ) | - | |||||||||
| Disposal on unwind of Phyanix Bio merger | ( | ) | - | |||||||||
| Outstanding March 31 ,2026 | $ | |||||||||||
As of March 31, 2026, the Company had shares issuable under warrants outstanding at a weighted average exercise price of $ and an intrinsic value of $.
On
May 15, 2025,
On February 17, 2026,
The
Company recognized compensation expense related to warrants issued of $
| F-28 |
NOTE 12 - 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 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, 2024. On December 20, 2024, the agreement was amended and the research agreement has been further extended to the entire lifetime of the last issued patent covered by the license.
The
sponsorship research and development expenses pertaining to the Research Agreements were $
NOTE 13 - 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
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
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.
| F-29 |
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.
Notice of Delisting
On
July 24, 2024, the Company received a deficiency letter (the “Notification Letter”) from the Nasdaq Listing Qualifications
(“Nasdaq”) stating that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule
5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain
a minimum bid price of $
On January 22, 2025, Nasdaq provided a notice to the Company that the Company had not regained compliance with Rule 5550(a)(2) and is not eligible for a second 180 calendar day compliance period as the Company does not comply with the requirements for initial listing on The Nasdaq Capital Market. This notification is part of the ongoing discussions with the Nasdaq Hearings Panel (the “Panel”) regarding the Company’s listing status, and the Company included this matter in its presentation to the Panel on January 30, 2025.
On February 19, 2025, the Company received a hearing panel decision from Nasdaq (Nasdaq Listing Qualifications Hearings Docket No. NQ 7072C-25) indicating that its provisional plan for regaining compliance with the Nasdaq listing requirements had been accepted. For continued listing on the Nasdaq Capital Market, the Company has until April 28, 2025 to: (1) demonstrate compliance with Nasdaq Rules 5550(a)(2) and 5550(b)(2), (2) file a public disclosure describing any transactions undertaken by the Company to increase its equity and provide an indication of its equity following those transactions, and (3) provide the Panel with an update on its fundraising plans and updated income projections for the next 12 months.
On April 18, 2025, the Company held a Special Meeting of Shareholders in which the Shareholders voted to authorize a reverse split of a magnitude between 1-for-10 and 1-for-20, for the purpose of increasing the chances of the Company regaining compliance with Nasdaq Listing Rule. 5550(a)(2). The Board determined that the best ratio to use was 1-for-14, because it would be the highest ratio that maintained at least shares remaining in the Company’s public float, while maximizing the Company’s likely price per share.
On
April 25, 2025, the Company provided an update to Nasdaq on its plans for both minimum bid compliance and capital raising, along with
a request for an extension on the April 28, 2025 deadline. The update included that the 1-for-14 reverse split would be effective May
5, 2025, and the company had engaged a syndicate of two underwriters to market and implement an equity financing for the purpose of raising
enough capital to comply with Nasdaq Listing Rule 5810(c)(3)(A). On May 1, 2025, Nasdaq provided a response to the Company’s representative
that the Panel has approved the Company’s extension request. As a result, the Company believes that it should be able to achieve
a minimum bid price for 10 days above $
On June 17, 2025, the Company received a letter from Nasdaq stating that the Nasdaq Hearings Panel found the Company in compliance with Listing Rules 5550(a)(2), 5550(a)(4), 5550(b)(1), and 5620(a), the Bid Price, Public Float, Equity and Annual Shareholder Meeting Rule, respectively as required by the February 19, 2025, decision. The letter also stated that pursuant to Listing Rule 5815(d)(4)(B), the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of this letter. If, within that one-year monitoring period, Staff finds the Company again out of compliance with the Equity Rule, notwithstanding Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, nor will the company be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Instead, Staff will issue a Delist Determination Letter, and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened Hearings Panel if the initial Panel is unavailable. The Company will have the opportunity to respond/present to the Hearings Panel as provided by Listing Rule 5815(d)(4)(C). The Company’s securities may be at that time delisted from Nasdaq.
| F-30 |
On August 20, 2025, the “Company received a notification letter (the “Notification Letter”) from the Nasdaq Listing Qualifications department (“Nasdaq”) stating that it is not in compliance with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to timely file its Quarterly Report on Form 10-Q for the period ended September 30, 2025 (the “Form 10-Q”) with the Securities and Exchange Commission (the “SEC”). The Notification Letter states that the Company has 60 calendar days to submit a plan to regain compliance and if Nasdaq accepts such plan, they can grant an exception of up to 180 calendar days from the Form 10-Q’s due date (or until February 17, 2026).
As previously reported in the Company’s Notification of Late Filing on Form 12b-25 filed with the SEC on August 14, 2025 (the “Form 12b-25”), the Company was unable to file the Form 10-Q within the prescribed period without unreasonable effort or expense. The Company is working a restructuring plan and related accounting and disclosures. Such procedures are being completed with Audit Committee oversight and consultation with the Company’s external advisors. Subsequent to filing the Form 12b-25, the Company continued to dedicate significant resources to the completion of such procedures but was unable to file the Form 10-Q by August 19, 2025, the end of the extension period provided by the Form 12b-25.
The Company intends to take the necessary steps to regain compliance with Nasdaq’s listing rules as soon as practicable and currently expects to submit a plan of compliance with Nasdaq and/or file the Form 10-Q within the 60-day period granted by Nasdaq in the Notification Letter. However, there can be no assurance that a plan of compliance will be submitted within such period, the Form 10-Q will be filed within such period, Nasdaq will grant the Company an exception of up to 180 calendar days from the Form 10-Q’s due date, or that the Company will be able meet the continued listing requirements during any compliance period that may be granted by Nasdaq.
Axiom
Axiom
Real-Time Metrics Inc. (Axiom), based in Mississauga, Ontario, was placed into receivership on July 11, 2025, after defaulting on a financing
agreement with National Bank of Canada, which was owed approximately C$
NOTE 14 – SEGMENT REPORTING
The
Company operates in
The accounting policies for our single operating segment are the same as those described in the summary of significant accounting policies. Our single operating segment incurs expenses from the development of therapeutics. The Company has not yet generated revenue in its operating history.
For the segment, the chief operating decision makers use net income/loss, that also is reported on the consolidated statements of operations as consolidated net income/loss, to allocate resources. The chief operating decision maker also uses consolidated net income/loss, along with non-financial inputs and qualitative information, to evaluate our performance, establish compensation, monitor budget versus actual results, and decide the allocation of funds in our various research activities.
| F-31 |
NOTE 15 – INCOME TAXES
The income tax provision and effective tax rate for the year ended March 31, 2026 are not comparable to the prior-year period because the comparative period reflects the historical operations and tax attributes of the accounting acquirer prior to the reverse acquisition transaction, while the current-year period reflects the post-deconsolidation operations of the legal acquirer following the February 17, 2026 deconsolidation transaction.
The components of income (loss) before income taxes are
SCHEDULE OF LOSS BEFORE INCOME TAX
| 2026 | 2025 | |||||||
| Domestic | ( | ) | ||||||
| State | ( | ) | ||||||
| Income (loss) before income taxes | ( | ) | ||||||
The Company had income tax expense due to operating losses incurred for the years ended March 31, 2026 and 2025.
For the years ended March 31, 2026 and 2025, a reconciliation of the Company’s effective tax rate to the statutory U.S. Federal rate is as follows:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| 2026 | 2025 | |||||||
| Income taxes at Federal statutory rate | % | % | ||||||
| State income taxes, net of Federal income tax effect | % | % | ||||||
| Change in valuation allowance | % | ( | )% | |||||
| Nontaxable or Nondeductible Items | ||||||||
| Derivative Liability | ( | )% | % | |||||
| Non-Deductible Interest | % | ( | )% | |||||
| Gain on Deconsolidation | ( | )% | % | |||||
| Effective Tax Rate | % | % | ||||||
The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities are as follows:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
| 2026 | 2025 | |||||||
| U.S. net operating loss carryforwards | ||||||||
| Stock compensation | ||||||||
| Fixed assets | ||||||||
| Allowance for doubtful accounts | ||||||||
| Deferred tax assets, gross | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets | ||||||||
As
of March 31, 2026 the Company had federal net operating loss carryforwards (“NOL”) of approximately $
| F-32 |
As
of March 31, 2026 and 2025, the Company had Canadian NOL of approximately $
As
a result of losses and uncertainty of future profit, the net deferred tax asset has been fully reserved. The net change in the valuation
allowance during the years ended March 31, 2026 and 2025 was an increase of $
Foreign earnings are assumed to be permanently reinvested. U.S. Federal income taxes have not been provided on undistributed earnings of our foreign subsidiary.
The Company recognizes interest and penalties related to uncertain tax positions in selling, general and administrative expenses. The Company has not identified any uncertain tax positions requiring a reserve as of March 31, 2026 and 2025.
The Company is required to file U.S. federal and state income tax returns. These returns are subject to audit by tax authorities beginning with the year ended December 31, 2018.
NOTE 16 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through August 14, 2026 and has concluded that no events or transactions have occurred that require disclosure in the accompanying condensed consolidated financial statements, except as follows:
| ● | On
April 14, 2026, the Company issued options to the Company’s President, William
Nichols. These options have an exercise price of $ |
There are no other matters or circumstances that have arisen since March 31, 2026 which significantly affect or may significantly affect the results of the operations of the Company.
| F-33 |
Exhibit 23.1
To the Board of Directors and Shareholders of Protagenic Therapeutics, Inc.
We consent to the inclusion in the Form 10-K of Protagenic Therapeutics, Inc. of our report dated August 27, 2025, relating to our audit of the consolidated balance sheets of Phytanix Biotherapeutics Inc. of December 31, 2025, and the related consolidated statements of comprehensive loss, changes in stockholders’ deficit, and cash flows for the year then ended, and the related notes.
August 14, 2026.
We served as the Company’s auditor since 2025.
Los Angeles, California
PCAOB ID Number 6580
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 annual report on Form 10-K of Protagenic Therapeutics, Inc..
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| August 14, 2026 | /s/ Garo H. Armen | |
| Name: | Garo H. Armen, Ph.D. | |
| Title: | Executive Chairman | |
| (Principal Executive Officer and Principal Financial Officer) | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES OXLEY ACT OF 2002
In connection with the annual Report of Protagenic Therapeutics, Inc. (the “Company”) on Form 10-K for the period ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Garo H. Armen, Executive Chairman, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
| August 14, 2026 | By: | /s/ Garo H. Armen |
| Garo H. Armen, PhD | ||
| Executive Chairman | ||
| (Principal Executive Officer and Principal Financial Officer) |