UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

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: 000-32917

 

PROTOKINETIX, INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

Nevada		94-3355026
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

	412 Mulberry St. Marietta, Ohio 45750
	(Address of principal executive offices, including zip code)

 

(Registrant’s telephone number, including area code: 740-434-5041)

 

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

 

Title of each class		Trading Symbol		Name of each exchange on which registered
N/A

 

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

 

$.0000053 par value common stock

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:  ☐   Yes   ☒  No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act:   ☐   Yes   ☒  No

 

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

 

 

 

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

 

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

 

Large accelerated filer ☐		Accelerated filer  ☐
Non-accelerated filer ☐		Smaller reporting company ☒
Emerging growth company  ☐

 

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

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes ☐  No ☒

 

As of October 16, 2020, there were 281,596,071 shares of ProtoKinetix, Incorporated common stock that were issued and outstanding.

 

 

 

 

PROTOKINETIX, INCORPORATED

TABLE OF CONTENTS

 

 

PART I
FINANCIAL INFORMATION
Item 1. Financial Statements	4
Unaudited Balance Sheets	4
Unaudited Statements of Operations	5
Unaudited Statement of Stockholders’ Equity	6
Unaudited Statements of Cash Flows	8
Notes to Unaudited Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	25
Item 4. Controls and Procedures	25
PART II
OTHER INFORMATION
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	27
Item 4. Mine Safety Disclosure	27
Item 5. Other Information	27
Item 6. Exhibits	28
Signatures	29

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

BALANCE SHEETS

(Unaudited)

 

		September 30, 2020				December 31, 2019
ASSETS
Current Assets
Cash		$	44,763			$	377,349
Prepaid expenses (Note 3)			1,050				1,050
Total current assets			45,813				378,399
Intangible assets (Note 4)			250,638				207,508
Total assets		$	296,451			$	585,907
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	5,000			$	25,520
Total current liabilities		$	5,000			$	25,520
Stockholders’ Equity
Common stock, $0.0000053 par value; 400,000,000 common shares authorized; 281,596,071 and 275,400,259 shares issued and outstanding as at September 30, 2020 and December 31, 2019 respectively (Note 7)			1,506				1,472
Additional paid-in capital			42,900,764				36,107,058
Accumulated deficit			(42,610,819	)			(35,548,143	)
Total stockholders’ equity			291,451				560,387
Total liabilities and stockholders’ equity		$	296,451			$	585,907

Basis of Presentation – Going Concern Uncertainties (Note 1)

Commitments and Contingency (Note 9)

 

 

See Notes to Financial Statements

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

For the Three and Nine Months Ended September 30, 2020 and 2019

 

		Three months ended September 30, 2020				Three months ended September 30, 2019				Nine months ended September 30, 2020				Nine months ended September 30, 2019
EXPENSES
Amortization – intangible assets (Note 4)		$	750			$	750			$	2,250			$	2,250
General and administrative			46,460				76,905				174,480				202,238
Professional fees			39,063				31,032				116,112				92,315
Research and development			142,221				140,933				438,544				279,089
Share-based compensation (Notes 5 and 8)			1,458,990				342,218				6,331,290				1,167,629
			(1,687,484	)			(591,838	)			(7,062,676	)			(1,743,521	)
OTHER ITEM
Foreign exchange gain or (loss)							(90	)			—				(106	)
Net loss for the period			(1,687,484	)			(591,928	)			(7,062,676	)			(1,743,627	)
Net loss per common share (basic and diluted)			(0.01	)			(0.00	)			(0.03	)			(0.01	)
Weighted average number of common shares outstanding (basic and diluted)			279,648,342				272,816,256				277,211,051				267,232,714

 

 

 

 

 

 

See Notes to Financial Statements

 

 

 

 

PROTOKINETIX, INCORPORATED

STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Period from January 1, 2020 to September 30, 2020

 

 

		Common Stock								Additional Paid-in				Accumulated
		Shares				Amount				capital				deficit				Total
Balance, December 31, 2019			275,400,259			$	1,472			$	36,107,058			$	(35,548,143	)		$	560,387
Issuance of common stock pursuant to private placement offering			6,195,812				34				462,416				—				462,450
Fair value of share-based compensation			—				—				6,331,290				—				6,331,290
Net loss for the period			—				—				—				(7,062,676	)			(7,062,676	)
Balance, September 30, 2020			281,596,071			$	1,506			$	42,900,764			$	(42,610,819	)		$	291,451
Balance, June 30, 2020			277,622,481			$	1,484			$	41,179,346			$	(40,923,335	)		$	257,495
Issuance of common stock pursuant to private placement offering			3,973,590				22				262,428				—				262,450
Fair value of share-based compensation			—				—				1,458,990				—				1,458,990
Net loss for the period			—				—				—				(1,687,484	)			(1,687,484	)
Balance, September 30, 2020			281,596,071			$	1,506			$	42,900,764			$	(42,610,818	)		$	291,451

 

 

 

 

 

PROTOKINETIX, INCORPORATED

STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Period from January 1, 2020 to September 30, 2020

 

 

		Common Stock								Additional Paid-in				Accumulated
		Shares				Amount				capital				deficit				Total
Balance, December 31, 2018			259,785,766			$	1,389			$	31,594,822			$	(31,350,246	)		$	245,965
Issuance of common stock pursuant to private placement offering			13,016,667				69				816,931				—				817,000
Issuance of common stock pursuant to cashless option exercise			97,826				1				(1)				—				—
Share-based compensation			—				—				1,167,629				—				1,167,629
Loss for the period			—				—				—				(1,743,627	)			(1,151,699	)
Balance, September 30, 2019			272,900,259			$	1,459			$	33,579,381			$	(33,093,873	)		$	486,967
Balance, June 30, 2019			272,802,433			$	1,458			$	33,237,164			$	(32,501,945	)		$	736,677
Issuance of common stock pursuant to cashless option exercise			97,826				1				(1)				—				—
Share-based compensation			—				—				342,218				—				342,218
Loss for the period			—				—				—				(591,928	)			(591,928	)
Balance, September 30, 2019			272,900,259			$	1,459			$	33,579,381			$	(33,093,873	)		$	486,967

 

 

 

See Notes to Financial Statements

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended September 30, 2020 and 2019

 

		Nine Months ended September 30, 2020				Nine Months ended September 30, 2019
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss for the period		$	(7,062,676	)		$	(1,743,627	)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization – intangible assets			2,250				2,250
Fair value of share-based compensation			6,331,290				1,167,629
Changes in operating assets and liabilities:
Prepaid expenses			—				(9,540	)
Accounts payable and accrued liabilities			(20,520	)			(73,464	)
Net cash used in operating activities			(749,656	)			(656,752	)
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of intangible assets			(45,380	)			(6,418	)
Net cash used in investing activities			(45,380	)			(6,418	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash			462,450				817,000
Net cash from financing activities			462,450				817,000
Net change in cash			(332,586	)			153,830
Cash, beginning of period			377,349				136,029
Cash, end of period		$	44,763			$	289,859
Cash paid for interest		$	—			$	—
Cash paid for income taxes		$	—			$	—

 

See Notes to Financial Statements

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 1.  Basis of Presentation – Going Concern Uncertainties

 

ProtoKinetix, Incorporated (the “Company”), a development stage company, was incorporated under the laws of the State of Nevada on December 23, 1999.  The Company is a medical research company whose mission is the advancement of human health care.

 

The Company is currently researching the benefits and feasibility of synthesized Antifreeze Glycoproteins (“AFGP”) or anti-aging glycoproteins, trademarked AAGP.  During the year ended December 31, 2015, the Company acquired certain patents and rights for cash consideration of $30,000 (25,000 Euros), as well as additional patent applications for cash consideration of $10,000 and 6,000,000 share purchase warrants with a fair value of $25,000 (Note 4).

 

The Company’s financial statements are prepared consistent with accounting principles generally accepted in the United States applicable to a going concern.

 

The Company has not developed a commercially viable product, has not generated any significant revenue to date, and has incurred losses since inception, resulting in a net accumulated deficit at September 30, 2020.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company needs additional working capital to continue its medical research or to be successful in any future business activities and continue to pay its liabilities.  Therefore, continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to accomplish its objective.  Management is presently engaged in seeking additional working capital through equity financing or related party loans.

 

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

 

The accompanying financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company fail in any of the above objectives and is unable to operate for the coming year.

 

Note 2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. In the opinion of management, the unaudited interim financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2019, included in the Company’s Annual Report on Form 10-K, filed February 19, 2020, with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

 

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 2. Summary of Significant Accounting Policies (cont’d)

 

Use of Estimates

 

Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.  The more significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates as to valuation of equity related instruments issued, deferred income taxes, and the useful life and impairment of intangible assets.

 

Cash

 

Cash consists of funds held in checking accounts.  Cash balances may exceed federally insured limits from time to time.

 

Fair Value of Financial Instruments

 

Financial instruments, which includes cash and accounts payable and accrued liabilities, are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments.

 

The Company measures the fair value of financial assets and liabilities pursuant to ASC 820 “Fair Value Measurements and Disclosures” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The policy describes three levels of inputs that may be used to measure fair value:

 

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

Level 1 inputs are used to measure cash. At September 30, 2020, there were no other assets or liabilities subject to additional disclosure.

 

Income Taxes

 

The Company accounts for income taxes following the assets and liability method in accordance with the ASC 740 “Income Taxes.”  Under such method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  The Company applies the accounting guidance issued to address the accounting for uncertain tax positions.  This guidance clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements as well as provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years that the asset is expected to be recovered or the liability settled.

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 2. Summary of Significant Accounting Policies (cont’d)

 

Intangible assets – patent and patent application costs

 

The Company owns intangible assets consisting of certain patents and patent applications. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred.

 

As at September 30, 2020, the Company does not hold any intangible assets with indefinite lives.

 

Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and amortization period of an intangible asset with a finite life is reviewed at least annually.

 

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the Company’s patents. No amortization is recognized on patent application costs, as amortization of these costs will only commence once the patents have been granted.

 

Research and Development Costs

 

Research and development costs are expensed as incurred.

 

Loss per Share and Potentially Dilutive Securities

 

Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding in the period.  Diluted loss per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities.  The effect of 83,100,000 stock options (September 30, 2019 – 76,450,000), and 8,500,000 warrants (September 30, 2019 – 6,000,000) were not included in the computation of diluted earnings per share for all periods presented because it was anti-dilutive due to the Company’s losses.

 

Share-Based Compensation

 

The Company has granted warrants and options to purchase shares of the Company’s common stock to various parties for consulting services.  The fair values of the warrants and options issued have been estimated using the Black-Scholes Option Pricing Model.

 

The Company accounts for stock compensation with persons classified as employees for accounting purposes in accordance with ASC 718 “Compensation – Stock Compensation”, which recognizes awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. Cliff Vesting is used and awards vest on the last day of the vesting period. The fair value of stock options is determined using the Black-Scholes Option Pricing Model. The fair value of common shares issued for services is determined based on the Company’s stock price on the date of issuance.

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 2. Summary of Significant Accounting Policies (cont’d)

 

Share-Based Compensation (cont’d)

 

Share-based compensation for non-employees in exchange for goods and services used or consumed in an entity’s own operations are also recorded at fair value on the measurement date and accounted for in accordance with ASC 718. The measurement of share-based compensation is subject to periodic adjustment as the underlying instruments vest. The fair value of stock options is estimated using the Black-Scholes Option Pricing Model and the compensation charges are amortized over the vesting period.

 

Common stock

 

Common stock issued for non-monetary consideration are recorded at their fair value on the measurement date and classified as equity. The measurement date is defined as the earliest of the date at which the commitment for performance by the counterparty to earn the common shares is reached or the date at which the counterparty’s performance is complete.

 

Transaction costs directly attributable to the issuance of common stock, units and stock options are recognized as a deduction from equity, net of any tax effects.

 

Related Party Transactions

 

A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company.  A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

 

Recent Accounting Pronouncements

 

Certain new accounting pronouncements that have been issued are not expected to have a material effect on the Company’s financial statements.

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

 

Note 3.   Prepaid Expenses

 

The following summarizes the Company’s prepaid expenses outstanding as at September 30, 2020 and December 31, 2019:

 

		September 30,  2020				December 31,   2019
Rental deposit		$	1,050			$	1,050
		$	1,050			$	1,050

 

 

 

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 4.   Intangible Assets

 

Intangible asset transactions are summarized as follows:

 

		Patent Rights				Patent Application Rights				Total
Cost
Balance, December 31, 2018		$	30,000			$	168,271			$	198,271
Additions			—				22,737				22,737
Balance, December 31, 2019		$	30,000			$	191,008			$	221,008
Additions			—				45,380				45,380
Balance, September 30, 2020		$	30,000			$	236,388			$	266,388
Accumulated amortization
Balance, December 31, 2018		$	10,500			$	—			$	10,500
Amortization			3,000				—				3,000
Balance, December 31, 2019		$	13,500			$	—			$	13,500
Amortization			2,250				—				2,250
Balance,September 30, 2020		$	15,750			$	—			$	15,750
Net carrying amounts
December 31, 2019		$	16,500			$	191,008			$	207,508
September 30, 2020		$	14,250			$	236,388			$	250,638

 

During the year ended December 31, 2015, the Company entered into an Assignment of Patents and Patent Application (effective January 1, 2015) (the “Patent Assignment”) with the Institut National des Sciences Appliquees de Rouen (“INSA”) for the assignment of certain patents and all rights associated therewith (the “Patents”). The Company and INSA had previously entered into a licensing agreement for the Patents in August 2004. The Patent Assignment transfers all of the Patents and rights associated therewith to the Company, upon payment to INSA in the sum of $30,000. During the nine month period ended September 30, 2020, the Company recorded $2,250 (2019 - $2,250) in amortization expense associated with the Patents.

 

During the year ended December 31, 2015, the Company entered into a Technology Transfer Agreement with Grant Young for the assignment of his 50% ownership of certain patents and all rights associated therewith (the “Patent Application Rights”).  In exchange for the Patent Application Rights, the Company agreed to pay $10,000 (paid) and to issue 6,000,000 warrants (issued) to purchase shares of the Company’s common stock at an exercise price of $0.10 per share for a period of five years. The Patent Application Rights had a total fair value of $35,000, which was allocated as $10,000 to the cash consideration paid, with the remaining $25,000 being allocated to the warrant component of the overall consideration. The Company has incurred $201,388 in direct costs relating to the Patent Application Rights, $45,380 of which were incurred during the nine month period ended September 30, 2020.

 

The remaining 50% ownership of the Patent Application Rights was acquired from the Governors of the University of Alberta in exchange for a future gross revenue royalty.

 

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 4.  Intangible Assets (cont’d)

 

During the year ended December 31, 2016, the Company entered into a Universal Assignment with Grant Young for the assignment of his ownership of certain new and useful improvements in an invention entitled “Use of Anti-Aging Glycoprotein for Enhancing Survival of Neurosensory Precursor Cells” (the “New Patent Application Rights”).  In exchange for the New Patent Application Rights, the Company agreed to pay $1 (paid).  The Company incurred $2,415 in direct costs relating to the New Patent Application Rights during the year ended December 31, 2016.

 

No amortization was recorded on the Patent Application Rights to September 30, 2020.

 

 

Note 5.  Stock Options

Pursuant to an amendment on April 6, 2020, the aggregate number of shares that may be issued under the 2017 Stock Option and Stock Bonus Plan (the “2017 Plan”) is 85,700,000 shares, subject to adjustment as provided therein. The 2017 Plan is administered by the Company’s Board of Directors, or a committee appointed by the Board of Directors, and includes two types of options. Options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, are referred to as incentive options. Options that are not intended to qualify as incentive options are referred to as non-qualified options. The exercise price of an option may be paid in cash, in shares of the Company's common stock or other property having a fair market value equal to the exercise price of the option, or in a combination of cash, shares, other securities and property.

As of September 30, 2020, there are 83,100,000 options granted and outstanding under the 2017 Plan.

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

 

Note 5.  Stock Options (cont’d)

 

Stock option transactions are summarized as follows:

		Number of Stock Options				Weighted Average Exercise Price				Weighted Average Remaining Life
						$				(Years)
Outstanding, December 31, 2019			91,450,000				0.14
Options cancelled			(36,000,000	)			0.13
Options expired			(2,000,000	)			0.04
Options granted			29,650,000				0.13
Outstanding, September 30, 2020			83,100,000				0.15				4.23

 

		Number of Stock Options				Weighted Average Exercise Price				Weighted Average Remaining Life
						$				(Years)
Outstanding, December 31, 2018			58,600,000				0.07
Options cancelled			(16,000,000	)			0.07
Options exercised			(250,000	)			0.07
Options granted			34,100,000				0.25
Outstanding, September 30, 2019			76,450,000				0.15				3.48

 

 

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 5.  Stock Options (cont’d)

 

On May 6, 2020, the Company granted 650,000 stock options to a research and development, and a business development consultant of the Company. The options are exercisable at $0.11 per share for a period of six years and expire on May 5, 2026. The options vest in equal instalments starting on the date of grant with the remaining options vesting on a quarterly basis beginning on June 30, 2020.

The Company granted 22,000,000 replacement options and 7,000,000 replacement options on March 26, 2020 and June 12, 2020, respectively, to certain key management (Note 8) and a consultant (Note 9) of the Company. Total share-based compensation for 29,650,000 stock options granted (2019 - 34,100,000) and vested during the nine month period ended September 30, 2020 was $6,331,290 (2019 - $1,167,629) at a weighted average fair value per option of $0.12 (2019 - $0.07). The fair values of the stock options granted were estimated using the Black-Scholes Option Pricing Model, based on the following weighted average assumptions:

 

		September 30, 2020				September 30, 2019
Risk-free interest rate			2.55	%			2.41	%
Dividend yield			0.00	%			0.00	%
Expected stock price volatility			143.57	%			125.00	%
Expected forfeiture rate			0.00	%			0.00	%
Expected life			5.09 years				4.60 years

 

The following non-qualified stock options were outstanding and exercisable at September 30, 2020:

 

Expiry date		Exercise Price				Number of Options Outstanding				Number of Options Exercisable
		$
December 31, 2020			0.05				1,200,000				1,200,000
November 14, 2021			0.07				750,000				750,000
December 31, 2022			0.06				800,000				800,000
August 31, 2023			0.08				600,000				600,000
November 8, 2023			0.09				15,000,000				15,000,000
May 5, 2023			0.13				1,600,000				1,600,000
July 14, 2024			0.26				18,500,000				18,500,000
November 17, 2024			0.11				15,000,000				11,250,000
March 26, 2026			0.14				22,000,000				22,000,000
May 5, 2026			0.11				650,000				487,500
June 11, 2026			0.12				7,000,000				7,000,000
							83,100,000				79,187,500

 

As at September 30, 2020, the aggregate intrinsic value of the Company’s stock options is $458,165 (December 31, 2019 – $1,005,350).

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 6.  Warrants

 

Warrant transactions for the nine months ended September 30, 2020 are summarized as follows:

 

				Number of Warrants				Weighted Average Exercise Price
	Balance,December 31, 2018 and September 30, 2019				6,000,000			$	0.26
	Balance, December 31, 2019 and September 30, 2020				8,500,000			$	0.22

 

 

The following warrants were outstanding and exercisable as at September 30, 2020:

 

Number of Warrants				Exercise Price ($)				Expiry Date
	6,000,000				0.26			July 14, 2024
	833,333				0.12			October 15, 2022
	250,000				0.12			October 21, 2022
	116,667				0.12			November 11, 2022
	83,334				0.12			November 12, 2022
	833,333				0.12			December 1, 2022
	166,667				0.12			December 18, 2022
	216,666				0.12			December 18, 2022
	8,500,000

 

 

Note 7.  Stockholders’ Equity

 

The Company is authorized to issue 400,000,000 (December 31, 2019 – 400,000,000) shares of $0.0000053 par value common stock. Each holder of common stock has the right to one vote but does not have cumulative voting rights. Shares of common stock are not subject to any redemption or sinking fund provisions, nor do they have any preemptive, subscription or conversion rights. Holders of common stock are entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid as of September 30, 2020 (December 31, 2019 - $nil).

 

During the nine month period ended September 30, 2020, the Company:

 

a)

Issued 2,222,222 shares of common stock to investors at $0.09 for gross proceeds of $200,000.

b)

Issued 320,513 shares of common stock to investors at $0.078 for gross proceeds of $25,000.

c)

Issued 3,653,077 shares of common stock to investors at $0.065 for gross proceeds of $237,450.

 

During the nine month period ended September 30, 2019, the Company:

 

a)

Issued 750,000 shares of common stock to investors at $0.06 for gross proceeds of $45,000.

b)

Issued 10,000,000 shares of common stock to investors at $0.05 for gross proceeds of $500,000.

	c)	Issued 2,266,667 shares of common stock to investors at $0.12 for gross proceeds of $272,000.
	d)	Issued 97,826 shares of common stock to the CFO pursuant to a cashless exercise of 250,000 stock options.

 

 

 

PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 8. Related Party Transactions and Balances

 

During the nine month period ended September 30, 2020 and 2019, the Company entered into the following related party transactions:

a) Pursuant to a consulting agreement with an effective date of November 14, 2017, a total of $45,000 (2019 - $45,000) was paid or accrued to the Company's CFO. During the nine months ended September 30, 2020, the Company reimbursed a company controlled by the CFO a total of $9,450 (2019 - $9,450) in office rent.

b) On March 25, 2020, the Company cancelled and concurrently approved for issuance on March 26, 2020 10,000,000 stock options and 2,000,000 stock options previously issued to the Company’s CEO and a Director of the Company in 2017, respectively. The 12,000,000 replacement options granted have a term of 6 years and are exercisable at a price of $0.14 per share, expiring on March 25, 2026.

Also on March 25, 2020, the Company cancelled an additional 5,000,000 stock options previously issued to the Company’s CEO in 2019. There were no replacement options granted in connection with these cancelled options.

In accordance with ASC 718, the 12,000,000 replacement options were accounted for as a modification of the terms of the cancelled award, with the incremental cost being measured as the excess of the fair value of the replacement options over the fair value of the cancelled options at the cancellation date.

Total share-based compensation of $282,844 was recorded in connection with the option modification, based on the following assumptions used in the Black-Scholes Option Pricing Model: risk-free interest rate of 1.76%; dividend yield of 0.00%; stock price volatility of 144.40%; forfeiture rate of 0%; and an expected life of 6 years.

b) On June 12, 2020, the Company cancelled 4,000,000 stock options previously issued in July 2019 to the Company’s CFO and a replaced them with 3,500,000 stock options. The 3,500,000 replacement options granted have a term of 6 years and are exercisable at a price of $0.12 per share, expiring on June 11, 2026.

The 3,500,000 replacement options were accounted for as a modification of the terms of the cancelled award, with the incremental cost being measured as the excess of the fair value of the replacement options over the fair value of the cancelled options at the cancellation date.

Total share-based compensation of $5,704 was recorded in connection with the option modification, based on the following assumptions used in the Black-Scholes Option Pricing Model: risk-free interest rate of 1.76%; dividend yield of 0.00%; stock price volatility of 144.75%; forfeiture rate of 0%; and an expected life of 6 years.

c) The Company recognized $3,233,377 (2019 - $502,795) in share-based compensation during the period associated with stock options granted to key management personnel.

As at September 30, 2020 and December 31, 2019, there were $nil balances owing to related parties.

 

 

 PROTOKINETIX, INCORPORATED

(A Development Stage Company)

 

NOTES TO FINANCIAL STATEMENTS

September 30, 2020

 

Note 9.  Commitments and Contingency

 

As at September 30, 2020, the Company has the following commitments:

 

a) Entered into a consulting agreement with an effective date of January 1, 2017 whereby the Company would pay the consultant $7,000 per month for providing research and development services. On March 25, 2020, the Company cancelled and concurrently approved for issuance on March 26, 2020, 10,000,000 stock options previously issued to the consultant in 2017. The 10,000,000 replacement options granted have a term of 6 years and are exercisable at a price of $0.14 per share, expiring on March 25, 2026.

The 10,000,000 replacement options were accounted for as a modification of the terms of the cancelled award, with the incremental cost being measured as the excess of the fair value of the replacement options over the fair value of the cancelled options at the cancellation date.

Total share-based compensation of $235,703 was recorded in connection with the option modification based on the following assumptions used in the Black-Scholes Option Pricing Model: risk-free interest rate of 0.81%; dividend yield of 0.00%; stock price volatility of 144.40%; forfeiture rate of 0%; and an expected life of 6 years.

On June 12, 2020, the Company cancelled 4,000,000 stock options previously issued in July 2019 to the consultant and a replaced them with 3,500,000 stock options. The 3,500,000 replacement options granted have a term of 6 years and are exercisable at a price of $0.12 per share, expiring on June 11, 2026. There was no incremental cost recorded on the option modification based on the following assumptions used in the Black-Scholes Option Pricing Model: risk-free interest rate of 1.76%; dividend yield of 0.00%; stock price volatility of 144.75%; forfeiture rate of 0%; and an expected life of 6 years.

b) Entered into a consulting agreement effective January 1, 2018, whereby the Company would pay the consultant $1,000 per month for a term of 1 year for providing public relations services, unless otherwise terminated by either party with at least 30 days’ notice.

c) Entered into a consulting agreement effective April 1, 2019, whereby the Company would pay the consultant $1,500 per month minimum plus travel expenses for a term of 1 year for providing research consulting services, unless otherwise terminated by either party with at least 30 days’ notice. On May 6, 2020, the Company granted the consultant 500,000 stock options exercisable at a price of $0.11 per share, expiring on May 5, 2026 (Note 5).

d) Entered into a consulting agreement effective September 1, 2020, whereby the Company would pay the consultant CAD $3,000 per month for a term of 1 year for providing technical expertise and public relations services, unless otherwise terminated by either party with at least 30 days’ notice.

Contingency

 

The Company was delinquent in filing certain income tax returns with the U.S. Internal Revenue Service and reports disclosing its interest in foreign bank accounts on form TDF 90-22.1, "Report of Foreign Bank and Financial Accounts" ("FBARs"). In September 2015, the Company filed the delinquent income tax returns and has sought waivers of any penalties under the IRS Offshore Voluntary Disclosure Program for late filing of the returns and FBARs.  Under the program, the IRS has indicated that it will not impose a penalty for the failure to file delinquent income tax returns if there are no under reported tax liabilities.  On November 30, 2017, the Company received a letter from the IRS concluding their review of the Company's tax returns under the program and accepting the returns as filed.  No penalties have been assessed by the IRS to date, and management does not believe that the Company will incur any penalties relating to the tax years submitted under the program.

 

 

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Unless the context requires otherwise, references in this document to “ProtoKinetix”, “we”, “our”, “us” or the “Company” are to ProtoKinetix, Incorporated.

 

The following discussion provides information regarding the results of operations for the nine month period ended September 30, 2020 and 2019, and our financial condition, liquidity and capital resources as of September 30, 2020, and December 31, 2019.  The financial statements and the notes thereto contain detailed information that should be referred to in conjunction with this discussion.

 

Cautionary Note Regarding Forward-Looking Statements

The information discussed in this Quarterly Report on Form 10-Q include “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”).  All statements, other than statements of historical facts, included herein and therein concerning, among other things, planned capital expenditures, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward looking statements. These forward looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases.  Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties and are not (and should not considered to be) guarantees of future performance. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, among others:

 

•

Our capital requirements and the uncertainty of being able to obtain additional funding on terms acceptable to us;

 

•

Our plans to develop and commercialize products from the AAGP® molecule;

 

•

Ongoing testing of the AAGP® molecule;

 

•

Our intellectual property position;

 

•

Our commercialization, marketing and manufacturing capabilities and strategy;

 

•

Our ability to retain key members of our senior management and key scientific consultants;

 

•

The effects of competition;

 

•

Our potential tax liabilities resulting from conducting business in the United States and Canada;

 

•

The effect of further sales or issuances of our common stock and the price and volume volatility of our common stock; and

 

•

Our common stock’s limited trading history.

 

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our filings with the SEC under the Exchange Act and the Securities Act, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and subsequent Quarterly Reports and Current Reports as filed with the SEC.  All forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this Quarterly Report. Other than as required under securities laws, we do not assume a duty to update these forward-looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

 

 

 

Business Overview

 

ProtoKinetix, Incorporated is a research and development stage bio-technology company focused on scientific medical research of AFGPs (Anti-Freeze Glycoproteins) or anti-aging glycoproteins, trademarked as AAGP®.  The Company has recently been in the process of directing major efforts to the practical side of commercial validation.  The commercial applications for AAGP® in large markets such as targeted health care solutions are numerous, and ProtoKinetix is currently working with researchers, business leaders and advisors and commercial entities to bring AAGP® to market.

 

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn.

As of the date of this filing, the Company has regained a significant portion of its operational capacity and we continue to move forward with our research goals. Our supply of the patented AAGP® molecule has been manufactured and stored in the United States and we have adequate inventory to carry out the projects currently underway. The Company engages contract research organizations (CROs) located in both the United States and Canada. The CROs contracted by the Company for research projects have been able to meet milestone goals without disruption due to the pandemic. We cannot predict future disruptions to the Company which may occur due to the spread of COVID-19. We continue to monitor the status of the pandemic and will adjust our strategy accordingly in order to mitigate the impact on our research projects. 

Results of Operations

 

The following table shows selected financial data and operating results for the periods noted.  Following the table, please see management’s discussion of significant changes.

 

		For the Nine Months Ended
		September 30,
		2020				2019
Revenues		$	—			$	—
Cost of Sales			—				—
Gross (Loss) Profit			—				—
Operating Expenses
Amortization		$	2,250			$	2,250
General and Administrative			174,480				202,238
Professional Fees			116,112				92,315
Research and Development			438,544				279,089
Share-Based Compensation			6,331,290				1,167,629
Total Operating Expenses			7,062,676				1,743,521
Loss from Operations			(7,062,676	)			(1,743,521	)
Other Income
Foreign Exchange Loss			—				(106	)
Total Other Loss			—				(106	)
Net Loss		$	(7,062,676	)			(1,743,627	)

 

 

 

 

Revenues

We had no revenues for the nine month periods ended September 30, 2020 and 2019.

 

Gross Profit and Expenses

The Company’s net loss was $7,062,676 for the nine month period ended September 30, 2020 compared to $1,743,627 for the nine month period ended September 30, 2019.  These expenses were primarily incurred for professional fees, consulting services related to the operations of the Company’s business, research and development and other general and administrative expenses.  Significant changes from the prior nine month period ended September 30, 2019 include:

 

General and administrative fees decreased by $27,758 from $202,238 to $174,480 primarily as a result of a decrease in spending on investor relations that overtook the increase in advertising and the upgrade of the company website.

 

Research and development increased significantly with a change of $159,455 from $279,089 to $438,544 with the primary spending being production and testing of AAGP molecule for use in several ongoing research projects including the treatment of macular degeneration and Phase I trials at University of Alberta, Edmonton, Alberta, Canada.

 

Share-based compensation increased significantly by $5,163,661 from $1,167,629 to $6,331,290 as a result of additional stock options granted and vested during the period, as well as the incremental cost associated with replacement stock options granted.

 

Liquidity and Capital Resources

 

The following summarizes our statements of cash flows at September 30, 2020 and December 31, 2019:

 

		September 30, 2020				December 31, 2019
Cash		$	44,763			$	377,349
Working Capital		$	40,813			$	352,879

 

 

At September 30, 2020, we had $44,763 in cash and $45,813 in total current assets.  As of September, 30, 2020, we had a positive working capital equity position of $40,813. Based upon our working capital equity as of September 30, 2020, we will require additional equity and/or debt financing in order to meet cash flow projections and carry forward our business objectives.  

 

There can be no assurance that in the future we will be able to raise capital from outside sources in sufficient amounts to fund our new business. The failure to secure adequate outside funding would have an adverse effect on our plan of operation and results therefrom and a corresponding negative impact on stockholder liquidity.

 

 

 

 

Sources and Uses of Cash

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities increased by $92,904 from $656,752 to $749,656 for the nine months ended September 30, 2019 and 2020, respectively.  This increase was predominantly due to an increase in research spending and marketing expense.

 

Net Cash Used in Investing Activities

 

Net cash used in investing activities was $45,380 for the nine month period ended September 30, 2020 while the Company had net cash used in investing activities of $6,418 for the prior year comparative period.  The difference is attributable to an increase in the purchase and maintenance of patents and patent portfolio categorized as intangible assets.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities decreased by $354,550 from $817,000 to $462,450 for the nine months ended September 30, 2019 and 2020, respectively, due to a decrease of funding from private placements which is affected by fluctuations in share price.

 

Going Concern

 

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”), which contemplate continuation of the Company as a going concern.  The history of losses and the inability for the Company to make a profit from selling a good or service has raised substantial doubt about our ability to continue as a going concern. In spite of the fact that the current cash obligations of the Company are relatively minimal, given the cash position of the Company, we have very little cash to operate. We intend to fund the Company and attempt to meet corporate obligations by selling common stock.  However, the price and volume of the Company’s common stock is volatile.

 

Off-Balance Sheet Arrangements

 

None.

 

Contractual Obligations

 

As a smaller reporting company, we are not required to provide the information required by paragraph (a)(5) of this Item.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements.

 

Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operation and/or financial condition. Our significant accounting policies are disclosed in Note 2 to the Financial Statements included in this Form 10-Q.

 

While all of the significant accounting policies are important to the Company’s financial statements, the following accounting policies and the estimates derived there from have been identified as being critical.

 

 

 

 

Share-Based Compensation

 

The Company accounts for stock compensation with persons classified as employees for accounting purposes in accordance with ASC 718 “Compensation – Stock Compensation”, which recognizes awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. Cliff Vesting is used and awards vest on the last day of the vesting period. The fair value of stock options is determined using the Black-Scholes Option Pricing Model. The fair value of common shares issued for services is determined based on the Company’s stock price on the date of issuance.

 

Share-Based Compensation for non-employees in exchange for goods and services used or consumed in an entity’s own operations are also recorded at fair value on the measurement date and accounted for in accordance with ASC 718. The measurement of share-based compensation is subject to periodic adjustment as the underlying instruments vest. The fair value of stock options is estimated using the Black-Scholes Option Pricing Model and the compensation charges are amortized over the vesting period.

 

Sales and Marketing

 

The Company is currently not selling or marketing any products.

 

Inflation

 

Although management expects that our operations will be influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the nine months ended September 30, 2020.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

 

Item 4: Controls and Procedures

 

Disclosure Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “1934 Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the 1934 Act is accumulated and communicated to management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Our management, under the direction of our Chief Executive Officer (who is our principal executive officer), and Chief Financial Officer (who is our principal accounting officer) has evaluated the effectiveness of our disclosure controls and procedures as required by 1934 Act Rule 13a-15(b) as of June 30, 2020 (the end of the period covered by this report).  Based on that evaluation, our principal executive officer and our principal accounting officer concluded that these disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

 

The Company, including its Chief Executive Officer and Chief Financial Officer, does not expect that its internal controls and procedures will prevent or detect all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

 

Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the 1934 Act) during the six months ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

Other than previously reported, the Company and its management are not aware of any regulatory or legal proceedings or investigations pending involving the Company, any of its subsidiaries or affiliates, or any of their respective officers, directors or employees.

 

Item 1A. Risk Factors

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.  However, our current risk factors are set forth in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on February 19, 2020, in our Current Report on Form 8-K as filed with the SEC on March 31, 2020, and such risk factors are incorporated herein by this reference and below.

 

We face significant business disruption and related risks resulting from the COVID-19 pandemic, which could have a material adverse effect on our business and results of operations. 

 

The ongoing and developing COVID-19 pandemic has caused a broad impact globally. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, any resulting recession or economic slowdown will have a negative impact on our business and results of operations.

 

As of the date of this filing, the Company has regained a significant portion of its operational capacity and we continue to move forward with our research goals. Our supply of the patented AAGP® molecule has been manufactured and stored in the United States and we have adequate inventory to carry out the projects currently underway. The Company engages contract research organizations (CROs) located in both the United States and Canada. The CROs contracted by the Company for research projects have been able to meet milestone goals without disruption due to the pandemic. We cannot predict future disruptions to the Company which may occur due to the spread of COVID-19. We continue to monitor the status of the pandemic and will adjust our strategy accordingly in order to mitigate the impact on our research projects.

 

In addition, any significant disruption of global financial markets, reducing our ability to access capital, could negatively affect our liquidity and ability to continue operations. The exact impact is and will remain unknown and largely dependent upon future developments, including but not limited to information on the duration and spread of COVID-19, changes in customer demand, additional mitigation strategies proposed by governmental authorities (including federal, state, or local stay at home or similar orders), restrictions on the activities of our domestic and international suppliers and shipment of goods.

 

 

 

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

 

Between April 13, 2020 and May 29, 2020, the Company sold 2,222,222 shares of common stock of the Company at a price per share of $0.09 for gross proceeds of $200,000 to accredited investors in a private placement, of which the Company’s President and CEO purchased 222,222 shares for gross proceeds of $20,000. No solicitation was used in the offering. The Company relied on the exemption from registration available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering.  No commissions were paid in connection with these issuances of securities.  A Form D was filed on April 24, 2020 and an amended Form D was filed on June 2, 2020.

Between July 20, 2020 and July 27, 2020, the Company sold 320,513 shares of common stock at a price per share of $0.078 for gross proceeds of $25,000 to accredited investors in a private placement. No solicitation was used in the offering. The Company relied on the exemption from registration available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering.  No commissions were paid in connection with these issuances of securities.  A Form D was filed on August 4, 2020.

Between August 4, 2020 and September 9, 2020, the Company sold 3,653,077 shares of common stock of the Company at a price per share of $0.065 for gross proceeds of $237,450 to accredited investors in a private placement, of which the Company’s President and CEO purchased 1,000,000 shares for gross proceeds of $65,000. No solicitation was used in the offering. The Company relied on the exemption from registration available under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated under the Securities Act with respect to transactions by an issuer not involving any public offering.  No commissions were paid in connection with these issuances of securities.  A Form D was filed on August 13, 2020 and an amended Form D was filed on September 1, 2020.

Other than described herein, there have been no other unregistered sales of equity securities during the nine month period ended September 30, 2020.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosure

 

Not applicable.

 

Item 5. Other Information

 

None.

 

 

 

Item 6. Exhibits

 

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

 

EXHIBIT INDEX

 

The following documents are being filed with the Commission as exhibits to this Quarterly Report on Form 10-Q.

 

Exhibit		Description
3.1		Articles of Incorporation as filed on December 23, 1999(1)
3.2		Articles of Amendment to Articles of Incorporation as filed on July 8, 2003(11)
3.3		Articles of Amendment to Articles of Incorporation as filed on December 8, 2003(11)
3.4		Certificate of Change to the Articles of Incorporation as filed November 16, 2011(11)
3.5		Certificate of Change to the Articles of Incorporation as filed May 1, 2014(11)
3.6		Bylaws(1)
4.1		Amended 2017 Stock Option and Stock Bonus Plan(2)
4.2		Amendment to Amended 2017 Stock Option and Stock Bonus Plan as approved on July 15, 2019(5)
4.3		Amendment to Amended 2017 Stock Option and Stock Bonus Plan as approved on April 6, 2020(9)
10.1		Royalty Agreement between the Company and The Governors of the University of Alberta, dated April 8, 2015(3)
10.2		Collaborative Research Agreement between the Company and the University of British Columbia, dated May 31, 2016(4)
10.3		Consulting Agreement between the Company and Clarence E. Smith, dated December 30, 2016(6)
10.4		Director Consulting Agreement between the Company and Edward P. McDonough, dated December 30, 2016(6)
10.5		Consulting Agreement between the Company and Grant Young, dated December 30, 2016(7)
10.6		First Amendment to Consulting Agreement between Clarence E. Smith and the Company dated September 1, 2017(8)
10.7		First Amendment to Consulting Agreement between Grant Young and the Company dated September 1, 2017(8)
10.8		First Amendment to Consulting Agreement between Edward P. McDonough and the Company dated September 1, 2017(8)
10.9		Consulting Agreement between ProtoKinetix Incorporated and Michael Guzzetta, dated November 14, 2017(10)
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1		Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS		XBRL Instance Document
101.SCH		XBRL Schema Document
101.CAL		XBRL Calculation Linkbase Document
101.DEF		XBRL Definition Linkbase Document
101.LAB		XBRL Label Linkbase Document
101.PRE		XBRL Presentation Linkbase Document

 

1.

Incorporated by reference from the Company’s registration statement on Form 10-SB filed on June 22, 2001 with the SEC.

 

2.

Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 13, 2018 with the SEC.

 

3.

Incorporated by reference from the Company’s Annual Report on Form 10-K filed on April 14, 2015 with the SEC.

 

4.

Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on August 15, 2016 with the SEC.

 

5.

Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 17, 2019 with the SEC.

 

6.

Incorporated by reference from the Company’s Annual Report on Form 10-K filed on February 21, 2017 with the SEC.

 

7.

Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on November 13, 2017 with the SEC.

 

8.

Incorporated by reference from the Company’s amended Current Report on Form 8-K filed on September 12, 2017 with the SEC.

 

9.

Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 10, 2020 with the SEC.

 

10.

Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 15, 2017 with the SEC.

 

	11.	Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on July 10, 2020 with the SEC.
	*	Filed herewith.

 

**

Furnished, not filed herewith.

 

 

 

 SIGNATURES

 

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

 

Date: October 16, 2020		PROTOKINETIX, INCORPORATED
		By: /s/ Clarence E. Smith
		Clarence E. Smith
		Chief Executive Officer
		By: /s/ Michael Guzzetta
		Michael Guzzetta
		Chief Financial Officer