Full Press Release Details
PROTAGENIC THERAPEUTICS, INC.
| Page | ||||
| Independent Auditors Report | 1 | |||
| Consolidated Financial Statements | ||||
| Consolidated Balance Sheets | 2 | |||
| Consolidated Statements of Operations and Comprehensive (Loss) | 3 | |||
| Consolidated Statements of Stockholders (Deficit) Equity | 4 | |||
| Consolidated Statements of Cash Flows | 5 | |||
| Notes to Consolidated Financial Statements | 6 - 24 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Therapeutics, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Protagenic Therapeutics, Inc. and Subsidiary as of
December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive (loss), stockholders (deficit) equity, and cash flows for the years then ended. Protagenic Therapeutics, Inc. and Subsidiary s
management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of their internal control
over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company s internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Protagenic
Therapeutics, Inc. and Subsidiary as of December 31, 2014 and 2013 and the results of their consolidated operations and their consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. The Company has continued to incur net (losses), has an accumulated (deficit) as of December 31, 2014 and its principal operations have not yet commenced. These factors among others create a substantial doubt about the Company s
ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern. Our opinion is not modified with respect to that matter.
Lobel Zand Katzen Williams & Blackman LLP
CERTIFIED PUBLIC ACCOUNTANTS
| North Brunswick, New Jersey |
| October 16, 2015 |
| 2014 | 2013 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 22,733 | $ | 155,983 | ||||
| Prepaid research and developemnt expenses | 47,224 | |||||||
| TOTAL CURRENT ASSETS | 22,733 | 203,207 | ||||||
| EQUIPMENT | ||||||||
| Office | 9,414 | 9,414 | ||||||
| Computer | 12,506 | 12,506 | ||||||
| 21,920 | 21,920 | |||||||
| Less: Accumulated depreciation | (21,920 | ) | (21,540 | ) | ||||
| Total equipment | 380 | |||||||
| OTHER ASSETS | 4,147 | 3,063 | ||||||
| TOTAL ASSETS | $ | 26,880 | $ | 206,650 | ||||
| LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 145,733 | $ | 130,310 | ||||
| Income taxes payable | 2,500 | 3,100 | ||||||
| TOTAL CURRENT LIABILITIES | 148,233 | 133,410 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| STOCKHOLDERS (DEFICIT) EQUITY | ||||||||
| Common stock at $.001 par value, 10,000,000 shares authorized; 7,613,338 shares issued and 6,613,338 shares outstanding | 7,613 | 7,613 | ||||||
| Additional paid-in-capital | 5,580,548 | 5,316,322 | ||||||
| Accumulated (deficit) | (5,461,933 | ) | (5,159,452 | ) | ||||
| Treasury stock, at cost $.001 par value, 1,000,000 shares | (100,000 | ) | (100,000 | ) | ||||
| Accumulated other comprehensive (loss) gain - foreign currency translation | (147,581 | ) | 8,757 | |||||
| TOTAL STOCKHOLDERS (DEFICIT) EQUITY | (121,353 | ) | 73,240 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY | $ | 26,880 | $ | 206,650 |
| 2014 | 2013 | |||||||
| REVENUE | $ | $ | ||||||
| OPERATING AND ADMINISTRATIVE EXPENSES | ||||||||
| Research and development expenses | ||||||||
| Sponsorship research and development | 67,270 | 178,018 | ||||||
| Legal fees | 25,287 | 13,549 | ||||||
| Salaries | 88,791 | 95,238 | ||||||
| Patent expense | 60,434 | 25,500 | ||||||
| Consulting | 10,861 | 11,650 | ||||||
| Payroll taxes and employee benefits | 5,335 | 5,089 | ||||||
| Rent - related party and officer | 5,862 | 5,079 | ||||||
| Travel | 2,892 | 477 | ||||||
| Telephone, internet and website | 2,703 | 2,713 | ||||||
| Rebates from research and development Canadian tax credits | (78,366 | ) | (46,355 | ) | ||||
| Total research and development expenses | 191,069 | 290,958 | ||||||
| Depreciation expense | 380 | 1,200 | ||||||
| Consulting expense - other | 4,133 | 16,662 | ||||||
| Stock compensation expense | 85,168 | 603,785 | ||||||
| Tax expense based on capital tax | 3,463 | 3,100 | ||||||
| Miscellaneous expenses | 7,887 | 15,523 | ||||||
| TOTAL OPERATING AND ADMINISTRATIVE EXPENSES | 292,100 | 931,228 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income | 49 | 74 | ||||||
| Interest expense - stockholder | (3,282 | ) | ||||||
| Loss on foreign transaction exchange | (10,430 | ) | (2,560 | ) | ||||
| TOTAL OTHER (EXPENSE) - NET | (10,381 | ) | (5,768 | ) | ||||
| NET (LOSS) | (302,481 | ) | (936,996 | ) | ||||
| COMPREHENSIVE (LOSS) | ||||||||
| Other Comprehensive (Loss) - net of tax | ||||||||
| Foreign exchange translation (loss) | (156,338 | ) | (111,757 | ) | ||||
| TOTAL COMPREHENSIVE (LOSS) | $ | (458,819 | ) | $ | (1,048,753 | ) | ||
| Net (loss) per common share - basic and diluted | $ | (0.05 | ) | $ | (0.14 | ) | ||
| Weighted average common shares - basic and diluted | 6,613,338 | 6,780,074 |
| Accumulated | ||||||||||||||||||||||||||||||||
| Other | Stockholders | |||||||||||||||||||||||||||||||
| Common Stock | Additional | Accumulated | Treasury Stock | Comprehensive | (Deficit) | |||||||||||||||||||||||||||
| Shares | Amount | Paid-in-Capital | (Deficit) | Shares | Amount | Gain (Loss) | Equity | |||||||||||||||||||||||||
| BALANCE - December 31, 2012 | 6,795,549 | $ | 6,795 | $ | 3,920,566 | $ | (4,222,456 | ) | $ | 120,514 | $ | (174,581 | ) | |||||||||||||||||||
| Issuance of common stock | 475,000 | 475 | 474,525 | 475,000 | ||||||||||||||||||||||||||||
| Issuance of warrants on conversion of bridge loan | 310,000 | 310 | 309,690 | 310,000 | ||||||||||||||||||||||||||||
| Issuance of warrants on conversion of bridge loan interest | 7,789 | 8 | 7,781 | 7,789 | ||||||||||||||||||||||||||||
| Issuance of common stock for consulting services | 25,000 | 25 | 24,975 | 25,000 | ||||||||||||||||||||||||||||
| Stock option grants | 5,735 | 5,735 | ||||||||||||||||||||||||||||||
| Issuance of warrants | 573,050 | 573,050 | ||||||||||||||||||||||||||||||
| Purchase of common stock | (1,000,000 | ) | (100,000 | ) | (100,000 | ) | ||||||||||||||||||||||||||
| Foreign currency translation (loss) | (111,757 | ) | (111,757 | ) | ||||||||||||||||||||||||||||
| Net (loss) | (936,996 | ) | (936,996 | ) | ||||||||||||||||||||||||||||
| BALANCE - December 31, 2013 | 7,613,338 | 7,613 | 5,316,322 | (5,159,452 | ) | (1,000,000 | ) | (100,000 | ) | 8,757 | 73,240 | |||||||||||||||||||||
| Stock option grants | 264,226 | 264,226 | ||||||||||||||||||||||||||||||
| Foreign currency translation (loss) | (156,338 | ) | (156,338 | ) | ||||||||||||||||||||||||||||
| Net (loss) | (302,481 | ) | (302,481 | ) | ||||||||||||||||||||||||||||
| BALANCE - December 31, 2014 | 7,613,338 | $ | 7,613 | $ | 5,580,548 | $ | (5,461,933 | ) | (1,000,000 | ) | $ | (100,000 | ) | $ | (147,581 | ) | $ | (121,353 | ) |
| 2014 | 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (Loss) | $ | (302,481 | ) | $ | (936,996 | ) | ||
| Adjustments to reconcile net (loss) to net cash provided by (used in) provided by (used in) operating activities | ||||||||
| Depreciation expense | 380 | 1,200 | ||||||
| Stock based compensation | 264,226 | 603,785 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid research and development expenses | 47,224 | (47,224 | ) | |||||
| Other assets | (1,084 | ) | (415 | ) | ||||
| Accounts payable and accrued expenses | 15,423 | 103,642 | ||||||
| Income taxes payable | (600 | ) | 3,100 | |||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 23,088 | (272,908 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Purchase of treasury stock | (100,000 | ) | ||||||
| Proceeds from bridge loan | 160,000 | |||||||
| Proceeds from issuance of common stock | 475,000 | |||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 535,000 | |||||||
| Effect of exchange rate on cash and cash quivalents | (156,338 | ) | (111,757 | ) | ||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (133,250 | ) | 150,335 | |||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 155,983 | 5,648 | ||||||
| CASH AND CASH EQUIVALENTS, END OF YEAR | $ | 22,733 | $ | 155,983 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest expense | $ | $ | ||||||
| Cash paid for income taxes based on capital tax | $ | 4,063 | $ | |||||
| NONCASH TRANSACTIONS | ||||||||
| Warrants issued for interest on bridge loan | $ | $ | 7,789 | |||||
| Warrants issued for bridge loan | $ | $ | 310,000 |
PROTAGENIC THERAPEUTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Protagenic Therapeutics, Inc. ( PTI
U.S.A. ) was organized on September 29, 2004 in the State of Delaware. On September 14, 2015, PTI U.S.A. obtained its renewal and revival of its Delaware charter which had become inoperative effective August 7, 2015. The Company
is a privately held biotechnology company focused on the discovery, research and development of pre-clinical studies for developing novel, naturally occurring, human neuropeptide-based, brain-active therapeutics for treatment of depression, mood,
anxiety and other neurodegenerative disorders. The Company is also interested in acquiring exclusive intellectual property rights for peptide-based therapeutics for the treatment of neurological and mood disorders. Once the Company s planned
principal operations commence, its focus will be licensing certain technologies and the continued research of the new technologies.
Protagenic Therapeutics Canada (2006) Inc. ( PTI Canada ) was incorporated in 2006 in the Province of Ontario, Canada. PTI
Canada is a wholly-owned subsidiary of PTI U.S.A. (collectively, the Company ). It provides operational support and assistance for the implementation of corporate and operational activities conducted in Canada.
The Company s accompanying consolidated financial statements indicate that there is substantial doubt about its ability to continue as a
going concern since the Company is dependent on its ability to obtain additional capital or obtain short term financing and actually commence its operations to fund the Company s long-term plans. The Company has incurred net (losses) of
($302,481) and ($936,996) for the years ended December 31, 2014 and 2013, respectively, resulting in an accumulated (deficit) of ($5,461,933) and ($5,159,452) as of December 31, 2014 and 2013, respectively. The success of the Company is
dependent upon obtaining the necessary regulatory approvals, bringing its products to market and achieving profitable operations. The continuation of the research and development programs and the commercialization of its products are dependent upon
the Company s ability to successfully complete these activities and to obtain adequate financing through a combination of financing activities and operations. No assurances can be given that management of the Company will be successful in its
efforts. The Company s existing liquidity is not sufficient to fund its operations, working capital and other financing requirements for the foreseeable future. The consolidated financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be not able to continue as a going concern. These factors among others create a substantial
doubt about the Company s ability to continue as a going concern.
The Company intends to finance its activities through managing current cash and cash equivalents on hand and seeking additional funds raised
in the future through the issuance of common stock or borrowing of funds. However, there can be no assurance that financing of such funds will be available when required, or if available, obtained on satisfactory terms to the Company.
PROTAGENIC THERAPEUTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Principles of Consolidation
The consolidated financial statements include the accounts of the parent company, PTI U.S.A, and its wholly owned subsidiary, PTI Canada. All
significant intercompany transactions and balances have been eliminated from the consolidated financial statements.
The accompanying consolidated financial statements of the Company have been prepared on the accrual basis of accounting in
accordance with accounting principles generally accepted in the United States of America under the Financial Accounting Standards Board ( FASB ) Accounting Standards Codification.
Foreign Currency Translation and Transactions
The assets and liabilities of the Company s foreign subsidiary PTI Canada are translated into U.S. dollars from its functional currency
using the exchange rate in effect at the balance sheets date. Additionally, the accounts on the statements of operations are translated using exchange rates approximating average rates prevailing during the years. Translation adjustments that arise
from translating its financial statements from the local currency to the U.S. dollar are accumulated and reflected as a separate component of stockholders equity (deficit). Transaction gains and losses that arise from exchange rate changes
denominated in currencies other than the local currency are included in the consolidated statements of operations as incurred. As of December 31, 2014, PTI U.S.A. recorded an accumulated translation loss of $147,581 which converts to CA$
170,251. At December 31, 2013, PTI U.S.A. recorded an accumulated translation gain of $8,757 which converts to CA$ 9,315.
amounts pertaining to the Canada Revenue Agency included in the accompanying notes to the consolidated financial statements may be in Canada dollars (denoted as CA$ ). If not denoted with CA$, then all amounts are stated in U.S. dollars
As of December 31, 2014 and 2013, approximately 49% and 3%, respectively, of the Company s cash and cash
equivalent balances was translated to U.S. dollars since the amount was maintained with PTI Canada. As of December 31, 2013, 100% of the prepaid research and development expenses were translated to U.S. dollars since it was paid by and
maintained with PTI Canada.
In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amount
of revenues and expenses during the reporting period. Significant estimates include accruals, contingencies, valuation allowance for deferred tax assets and valuation of stock options and warrants. These estimates may be adjusted as more current
information becomes available, and any adjustment could have a significant impact on recorded amounts. Actual results could differ from those estimates.
PROTAGENIC THERAPEUTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Cash and Cash Equivalents
Cash equivalents consist of money market instruments purchased with an original maturity of three months or less. The Company maintains its
cash and cash equivalents with two high credit quality financial institutions with one located in each the United States and Canada, which at times, may be in excess of insured amounts with the U.S. Federal Deposit Insurance Company. The
Company s policy is to maintain its cash and cash equivalents with reputable financial institutions assessed on an annual basis.
stated at cost less accumulated depreciation. Improvements and replacements of equipment are capitalized. Maintenance and repairs that do not improve or extend the lives of equipment are charged to expense as incurred. When assets are retired, their
cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the consolidated statements of operations. Depreciation is computed using straight-line methods over their estimated useful lives ranging
During 2013, the Company purchased 1,000,000 shares of common stock at $.10 per share for a total cost of $100,000. Management of the Company
does not plan to retire the stock and applies the cost method to its treasury stock transactions. Differences between proceeds for reissuance of treasury stock and the cost are credited or charged to additional paid in capital to the extent of the
prior credits and thereafter to accumulated deficit.
Financial Instruments
Financial assets and financial liabilities are initially recorded at fair value and their subsequent measurements are determined in accordance
with their classification. The classification depends on the purpose for which the financial instruments were acquired or issued and their characteristics. Cash and cash equivalents are classified as held-for-trading assets and are reported at fair
value. Accounts payable and accrued liabilities are classified as other liabilities and after initial recognition are recorded at amortized cost. As of December 31, 2014 and 2013, there were no significant differences between the carrying
values of these amounts and their estimated fair values due to their short-term nature.
Rebates from Research and Development Credits
The Company derives rebates from scientific research and experimental development tax credits issued by the Canada Revenue Agency for
qualified expenditures. The credits are recognized when the rebate is issued. The amounts received are reinvested into the Company s scientific research, experimental development and operational works conducted in Canada.
Research and Development Expenses, net of Rebates
The Company s research and development expenditures for present and future products are expensed as incurred. The Company incurred
research and development expenses of $191,069 and $290,958 net of rebates from research and development credits during the years ended December 31, 2014 and 2013, respectively.
PROTAGENIC THERAPEUTICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
Stock-Based Compensation
Stock-based compensation expense consists of expenses for the granting of shares, stock options and issuance of warrants periodically by the
Company. Stock-based compensation cost is measured at each grant date, based on the fair value of the award using a Black Scholes Merton option pricing model ( Black Scholes ) when third party valuation is not available and are recognized
as an operating expense on the straight-line basis over the vesting period, if applicable. Any unvested shares are re-measured at the end of each reporting period and adjusted accordingly, if material. All of the Company s stock-based
compensation is accounted for as an equity instrument.