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 our pipeline of product candidates;

? seek regulatory approvals for any product candidates that successfully complete clinical trials;

? continue research and preclinical development and initiate clinical trials of our other product candidates;

? seek to discover and develop additional product candidates either internally or in partnership with other pharmaceutical companies;

? adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products;

? maintain, expand and protect our intellectual property portfolio; and

? incur additional legal, accounting and other expenses in operating as a public company.



44





Results of Operations

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


During the year ended December 31, 2021, we incurred a loss from operations of
$4,140,413 as compared to $2,551,611 for the year ended December 31, 2020. The
increase in the loss is due to an increase in research and development expense
of $436,993 from $699,797 for the year ended December 31, 2020 to $1,136,790 for
the year ended December 31, 2021, and an increase in general and administrative
expenses of $1,151,809 from $1,851,814 for the year ended December 31, 2020 to
$3,003,623 for the year ended December 31, 2021.

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.



In April 2021, we completed a public offering of our securities and uplisted to
the Nasdaq Capital Market (the "Offering"). Pursuant to the Offering, we issued
and sold 3,180,000 units at a public offering price of $4.15 Each unit consisted
of one share of our common stock and one warrant, for a total of 3,180,000
shares of our common stock and 3,180,000 warrants to purchase up to an aggregate
3,180,000 shares of our common stock. Each warrant is exercisable to purchase
one share of common stock at an exercise price of $4.98 per share (120% of the
public offering price of the unit). The warrants are exercisable at any time
from the date of issuance through the fifth anniversary of the date of issuance.
The aggregate net proceeds receive by the Company from the Offering (before
expenses) were $12.1 million. Upon the pricing of the Offering, our common stock
was approved for listing on The Nasdaq Capital Market and commenced trading
under the ticker symbol "PTIX" . At this time, our warrants were also approved
for listing and commenced trading under the ticker symbol "PTIXW".



In June 2021, the SEC declared effective a shelf registration statement filed by
us. This shelf registration statement allows us to issue any combination of our
common stock, preferred stock, debt securities, warrants, or units from time to
time for an aggregate initial offering price of up to $100.0 million. In July
2021, we entered into an At Market Issuance Agreement, or the ATM Agreement,
with B. Riley Securities, Inc. and EF Hutton, division of Benchmark Investments,
LLC, or the Sales Agents, under which we may issue and sell from time to time up
to $10.0 million of our common stock through or to the Sales Agents, as agent or
principal. Any sale of shares of our common stock under the Sales Agreement will
be made under our shelf registration statement on Form S-3. Sales of our common
stock under the Sales Agreement are made at market prices by any method that is
deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the
Securities Act of 1933, as amended. The Company has not yet sold any shares
under the ATM Agreement. Therefore, as of December 31, 2021, $10.0 million of
our common stock remained available for sale under the Sales Agreement.



Operating activities used $2,798,614 and $1,348,779 in cash for the years ended
December 31, 2021 and 2020, respectively. The use of cash in operating
activities during the year ended December 31, 2021, primarily comprised of
$4,522,934 net loss, $1,518,756 in stock compensation expense, ($83,670) of
change in the fair value of the derivative liability since December 31, 2020, an
increase in prepaid expenses and other current assets of ($480,510),
amortization of debt discount of $427,137, and a $340,121 increase of accounts
payable and accrued expenses, which included payments to tax penalties, legal
and accounting professionals, payments to consultants, and other administrative
expenses.

Investing activities provided $9,909,601 and $0 in cash for the years ended December 31, 2021 and 2020, respectively. The cash provided by investing activities during the year ended December 31, 2021 consisted of $485,946 from the sale of marketable securities and ($10,395,547) in the purchase of marketable securities.




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 December 31, 2021, we had cash of $541,171
and working capital of $10,260,388.



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 2023.
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.

Contractual Obligations

The following table sets forth certain information concerning the future contractual obligations under our convertible notes at December 31, 2021.



                                         Payments due by period
                                               Less than                                       More than
  Contractual obligations        Total          1 year         1-3 years       3-5 years        5 years
Long-Term PIK convertible
notes payable                  $ 315,000     $           -     $  315,000     $         -     $         -
Long-Term PIK convertible
notes payable- Related Party   $ 200,000     $           -     $  200,000
  $         -     $         -
Total                          $ 515,000     $           -     $  515,000     $         -     $         -



45





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 2025.

Development Milestones Currently Anticipated

Recent communications with the U.S. FDA has resulted in following revised guidance for clinical timelines.

? The Company in the process of refiling its IND application for PT00114

addressing the questions raised by regulators.

? Anticipate Q2 2022: Initiation of Phase I/IIa study for PT00114

Human Resources (current state of employees)


The Company has two part-time employees: Garo H. Armen, PhD, the Executive
Chairman, and Alexander K. Arrow, MD, the Chief Financial Officer. The Company
also has six paid consultants: Andrew Slee, PhD, Chief Operating Officer, Robert
S. Stein, MD, PhD, Chief Medical Officer, Dalia Barsyte, PhD, Scientific
Advisor, David Lovejoy, PhD, Scientific Advisor, and Zack Armen, Strategic

Advisor.

Financing Activities


Financing activities provided $12,577,664 and $1,223,410 in cash for the years
ended December 31, 2021 and 2020, respectively. The cash provided by financing
consisted of $100,000 in proceeds from convertible notes, ($100,000) from the
repayment of convertible notes, $327,125 from the exercise of warrants, $542,500
from the exercise of options, and $11,708,039 from the sale of shares and
warrants, net of offering costs, for the year ended December 31, 2020. The cash
provided by financing consisted of $1,177,500 in proceeds from convertible
notes, $150,000 in proceeds from convertible notes from related parties, and
($104,090) in payment of debt issuance costs of convertible notes for the year
ended December 31, 2020.



46

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 significant accounting policies used in the
preparation of the consolidated financial statements. 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.

COVID-19



On March 11, 2020, the World Health Organization ("WHO") declared the Covid-19
outbreak to be a global pandemic. In addition to the devastating effects on
human life, the pandemic is having a negative ripple effect on the global
economy, leading to disruptions and volatility in the global financial markets.
Most U.S. states and many countries have issued policies intended to stop or
slow the further spread of the disease. Covid-19 and the U.S. response to the
pandemic are significantly affecting the economy. There are no comparable events
that provide guidance as to the effect the Covid-19 pandemic may have, and, as a
result, the ultimate effect of the pandemic is highly uncertain and subject to
change. We do not yet know the full extent of the effects on the economy, the
markets we serve, our business, or our operations.

Recently Issued Accounting Pronouncements

None

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