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, 2022, we incurred a loss from operations of
$3,557,788 as compared to $4,140,413 for the year ended December 31, 2021. The
decrease in the loss is due to an increase in research and development expense
of $452,449 from $1,136,790 for the year ended December 31, 2021 to $1,589,239
for the year ended December 31, 2022, and a decrease in general and
administrative expenses of $1,035,074 from $3,003,623 for the year ended
December 31, 2021 to $1,968,549 for the year ended December 31, 2022. The
increase in research and development expense is due to additional cost related
to the Company's continued research and development efforts. The decrease in
general and administrative expenses was due to lower stock compensation expense
in the current year.

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 795,000 units at a public offering price of $16.60 Each unit consisted
of one share of our common stock and one warrant, for a total of 795,000 shares
of our common stock and 795,000 warrants to purchase up to an aggregate 795,000
shares of our common stock. Each warrant is exercisable to purchase one share of
common stock at an exercise price of $19.92 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 received 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.


45







Operating activities used $1,993,814 and $2,798,614 in cash for the years ended
December 31, 2022 and 2021, respectively. The use of cash in operating
activities during the year ended December 31, 2022, primarily comprised of
$3,555,505 net loss, $864,681 in stock compensation expense, a decrease in
prepaid expenses and other current assets of $631,728, amortization of debt
discount of $110,797, and a $91,596 decrease of accounts payable and accrued
expenses, which included payments to legal and accounting professionals,
payments to consultants, and other administrative expenses.



Investing activities provided $1,596,974 and used $9,909,601 in cash for the
years ended December 31, 2022 and 2021, respectively. The cash provided by
investing activities during the year ended December 31, 2022 consisted of
$1,632,901 from the sale of marketable securities and ($34,122) 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, 2022, we had cash of $215,189
and working capital of $6,915,783.



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 2024.
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, 2022.





                                         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                  $ 230,000     $  230,000     $           -     $           -     $           -
Long-Term PIK convertible
notes payable- Related Party   $ 200,000     $  200,000     $           -     $           -     $           -
Total                          $ 430,000     $  430,000     $           -     $           -     $           -




46







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 2026.

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 Q3 2023: 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, and one full-time employee, Lauren Mueller, PhD, a Senior Research Scientist. 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 $0 and $12,577,664 in cash for the years ended
December 31, 2022 and 2021, 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, 2021.



47

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 January 30, 2020, the World Health Organization declared the COVID-19 novel
coronavirus outbreak a "Public Health Emergency of International Concern" and on
March 10, 2020, declared it to be a pandemic. Actions taken around the world to
help mitigate the spread of the coronavirus include restrictions on travel, and
quarantines in certain areas, and forced closures for certain types of public
places and businesses. The COVID-19 coronavirus and actions taken to mitigate it
have had and are expected to continue to have an adverse impact on the economies
and financial markets of many countries, including the geographical area in
which the Company operates. While it is unknown how long these conditions will
last and what the financial impact will be to the Company, it is reasonably
possible that future capital raising efforts and additional development of our
technologies may be negatively affected.

Recently Issued Accounting Pronouncements

None

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