From 10-KSB/A
U.
S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-KSB/A
(Mark
One)
[X]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
fiscal year ended December
31, 2005
[
]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
transition period from ___________ to _____________
Commission
File Number: 0-32917
PROTOKINETIX,
INC.
Formerly
known as RJV Networks, Inc.
(Name
of
small business issuer as specified in its charter)
Nevada
|
94-3355026
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
Suite
1500-885 West Georgia Street
Vancouver,
British Columbia Canada V6C 3E8
________________________________________________________________________
(Address
of principal executive offices, including zip
code)
|
Registrant’s
telephone number, including area code: (604)
687-9887
Securities
registered pursuant to Section 12(b) of the Act: None
Securities
registered pursuant to Section 12(g) of the Act: $.001
par value common stock
Check
whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 X
No
___
Check
if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not
contained in this form, and no disclosure will be contained, to the best of
registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment
to
this Form 10-KSB. [ ]
The
issuer’s revenues for the most recent fiscal year were USD $2,000
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant was approximately $20,954,192 based upon the
closing price of our common stock which was $0.66 on April 12, 2006. Shares
of
common stock held by each officer and director and by each person or group
who
owns 10% or more of the outstanding common stock amounting to 7,918,780 shares
have been excluded in that such persons or groups may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
As
of
April 12, 2006, there were 39,667,556 shares of our common stock were issued
and
outstanding.
Documents
Incorporated by Reference: None.
Transitional
Small Business Disclosure Format: No.
INTRODUCTION
The
following discussion should be read in conjunction with our audited financial
statements and notes thereto. Because we desire to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995,
we
caution readers regarding certain forward looking statements in the following
discussion and elsewhere in this report and in any other statement made by,
or
on our behalf, whether or not in future filings with the Securities and Exchange
Commission. Forward looking statements are statements not based on historical
information and which relate to future operations, strategies, financial results
or other developments. Forward looking statements are necessarily based upon
estimates and assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond our control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward looking statements made by, or our behalf. We disclaim any
obligation to update forward looking statements.
Forward
looking statements involve known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity, performance,
or
achievements to be materially different from any future results, levels of
activity, performance, or achievement expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "could," "intend,"
"expects," "plan," "anticipates," "believes," "estimates," "predicts,"
"potential," or "continue" or the negative of such terms or other comparable
terminology. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance, or achievements. Moreover, neither we nor
any
other person assumes responsibility for the accuracy and completeness of such
statements.
WE
ARE A
DEVELOPMENT STAGE BUSINESS AND AN INVESTMENT IN OUR COMPANY IS EXTREMELY
RISKY.
TABLE
OF
CONTENTS
FORM
10-KSB ANNUAL REPORT
_________________________
PROTOKINETIX,
INC.
Section
|
Heading
|
Page
|
Part
I
|
|
|
Item
1
|
Description
of Business
|
5
|
Item
2
|
Description
of Property
|
10
|
Item
3
|
Legal
Proceedings
|
10
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
10
|
Part
II
|
|
|
Item
5
|
Market
for the Registrant's Common Equity and Related Stockholder
Matters
|
11
|
Item
6
|
Management's
Discussion and Analysis of Financial Condition and Results of Operations
or Plan of Operation
|
16
|
Item
6A
|
Quantitative
and Qualitative Disclosures About Market Risk
|
22
|
Item
7
|
Financial
Statements
|
22
|
Item
8
|
Changes
in and Disagreements on Accounting and Financial
Disclosure
|
22
|
Item
8A
|
Controls
and Procedures
|
22
|
Item
8B
|
Other
Information
|
22
|
Part
III
|
|
|
Item
9
|
Directors,
Executive Officers, Promoters and Control Persons, Compliance with
Section
16(a) of the Exchange Act
|
23
|
Item
10
|
Executive
Compensation
|
24
|
Item
11
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
25
|
Item
12
|
Certain
Relationships and Related Transactions
|
25
|
Part
IV
|
|
|
Item
13
|
Exhibits
and Reports on Form 8-K
|
25
|
Item
14
|
Principal
Accountant Fees and Services
|
26
|
|
Certifications
and Signatures
|
27
|
PART
I
ITEM
1. DESCRIPTION
OF BUSINESS
Important
Disclosures and Disclaimers.
Please
note that ProtoKinetix, Inc. (the "Company") is a development stage company
that
has not yet sold or marketed any products. The Company had $2,000 in revenues
for the year ended December 31, 2005.
It
is
important to understand that although the Company (as is discussed below) is
focused on various promising scientific efforts, to date, there has not been
a
commercial product developed by the Company. The Company continues to conduct
research; however, the ultimate commercialization of a viable product may never
occur. Further, even if a product is developed, the desired results for which
it
was originally intended may not be achieved.
General
ProtoKinetix
is a biotechnical company headquartered in Vancouver, British Columbia that
owns
the world-wide rights to a family of synthetic anti-freeze glycoproteins
(trademarked by the Company as AAGP™). The Company is dedicated to the
commercial development of AAGP™ for use in human and veterinary medicine, food
additives and supplements, and the biotechnology and cosmetic industry.
ProtoKinetix is making rapid and meaningful progress in this domain by
coordinating a team of world recognized intellectual talent in a networked
environment. This team has been able to use previously published research on
native antifreeze proteins and antifreeze glycoproteins as a guide to the
expansion and development of markets for this valuable family of
molecules.
The
ProtoKinetix business plan is based primarily on the furtherance of certain
intellectual property rights obtained by way of "sub-licenses" of technology
from other companies. At present, although the Company has engaged the
prestigious patent law firm of Cabinet-Moutard of Versaille, France, to file
a
number of international patent applications (consistent with our agreements
with
the licensors of various technologies we license), the Company itself has no
finished commercial product or products, and has received no final patents
awards or FDA approvals for any product or diagnostic procedures.
The
Company currently has no full time employees. The Company operates with a
skeletal management team headed by John Todd, M.D. In addition to Dr. Todd,
the
Company receives advice and counsel from its Scientific Advisory Board. A short
biography of Dr. Todd may be found within this Form 10-KSB, and the biographies
of other members of the ProtoKinetix Scientific Advisory Board may be found
within the "About Us" section of the Company's website located at
www.protokinetix.com.
The
Company is focused on the research and development of one primary compound
which
it has filed a trademark application for. This compound is called AFGP.
AFGP
Project
The
Company has undertaken is to develop and test synthetic antifreeze glycoproteins
(AFGP).
ProtoKinetix
has entered into agreements to acquire the exclusive right to develop products
derived from patent pending technologies related to synthetic AFGPs. The
ProtoKinetix intellectual property rights were developed by Dr. Jean-Charles
Quirion.
Intellectual
Property
As
of the
date of this report, although the Company's development agents, including the
parties the Company has licensed AFGP technologies from, have applied to receive
patents for technologies ProtoKinetix has licensed and continues to primarily
base it's research efforts on, no
patents
have been issued by a governmental or quasi-governmental agency. The references
of applications that the Company has filed to date are PCT/IB2005/003940, filed
on December 2, 2005 under the priority of the French patent application FR
0412782 which was filed on December 2, 2004.
Subject
to our available financial resources, our intellectual property strategy is:
(1)
to pursue licenses, trade secrets, and know-how within the Company's primary
research areas, and (2) to develop and acquire proprietary positions to reagents
and new platforms for the development of products related to these technologies.
Trade
Secrets and Know-How
We
believe that even if the Company's intellectual property position is ultimately
diminished as a result of our development agents and licensors to receive patent
protection for the licenses ProtoKinetix has contracted to access, we have
developed a substantial body of trade secrets and know-how relating to the
development of AAGP™, including but not limited to the optimization of materials
for efforts, and how to maximize sensitivity, speed-to-result, specificity,
stability and reproducibility.
Competition
The
markets that the Company is attempting to enter are multi-billion dollar
international industries. They are intensely competitive. Many of our
competitors (from every perspective) are substantially larger and have greater
financial, research, manufacturing, and marketing resources.
Industry
competition in general is based on the following:
· |
Scientific
and technological capability;
|
· |
The
ability to develop and market products and
processes;
|
· |
The
ability to obtain FDA or other required regulatory
approvals;
|
· |
The
ability to manufacture products that meet applicable FDA requirements,
(i.e. FDA’s Quality System Regulations) see Governmental Regulation
section;
|
· |
Access
to adequate capital;
|
· |
The
ability to attract and retain qualified personnel;
and
|
· |
The
availability of patent protection.
|
We
believe our scientific and technological capabilities are significant. Some
of
the results of our research are available at our website located at
www.protokinetix.com.
Our
ability to develop our research is in large measure dependent on our having
additional resources and/or collaborative relationships, particularly where
we
can have our product development efforts funded on a project or milestone basis.
We believe that our know-how with our AFGP project, in spite of not yet
receiving any patent protected rights, has been instrumental in our obtaining
the collaborations we have developed.
Although
there is no such immediate need to make any regulatory filing in the United
States or abroad, one should know that we have limited experience with regard
to
obtaining FDA or other required regulatory approvals, and no experience with
obtaining pre-marketing approval of a biologic product. (See "Governmental
Regulation" for definition of pre-marketing approval.) For this reason, should
our research efforts continue to show promise, we will likely need to hire
consultants to assist the Company with such governmental regulations.
Our
access to capital is more challenging, relative to most of our competitors.
This
is a competitive disadvantage. We believe however that our access to capital
may
increase as we get closer to the development of a commercially viable
product.
To
date,
we believe our research has enabled us to attract and retain qualified
consultants. Because of the greater financial resources of many of our
competitors, we may not be able to complete effectively for the same individuals
to the extent that a competitor uses its substantial resources to attract any
such individuals.
As
is
discussed above, with respect to the availability of patent protection, we
do
not have our own portfolio of patents or the financial resources to develop
and/or acquire a portfolio of patents similar to those of our larger
competitors. We have been able to obtain access to patent-pending technology
by
entering into licensing arrangements. However, there can be no certainty that
any of the patent-pending technologies we have licensed will ever receive final
approval by any patent office.
Abandonment
of the RECAF Project
The
Company has completed its evaluation of the existence on the RECAF receptor
site. Validation trials were set up in order to determine the specificity of
the
RECAF receptor site with a view towards developing a therapeutic antibody to
destroy the cancer target the super antibody binds to. These trials failed
to
provide the Company with the specificity required necessary to fund the
development of a therapeutic hunter killer antibody. The Company continues
to
own the rights to both the Super Anti-Body and the catalytic antibody platform
technologies. The Company will continue to search for a receptor site that
exists only on cancer cells, as well as one that is patentable.
The
Company is not currently directing significant resources towards the RECAF
Antibody Project
Governmental
Regulation
As
was
discussed above, the Company currently has no commercially viable products.
The
below discussion relates to factors that may come into play when
and if
the
Company has a commercially viable product.
All
of
the Company’s research relates to products that are regulated by the European
regulatory agencies, FDA, U.S. Department of Agriculture, certain state and
local agencies, and/or comparable regulatory bodies in other countries
(collectively, these agencies shall be referred to as the "Agencies").
Government regulation affects almost all aspects of development, production,
and
marketing, including product testing, authorizations to market, labeling,
promotion, manufacturing, and record keeping. The FDA - and U.S. Department
of
Agriculture - regulated products require some form of action by that agency
before they can be marketed in the United States, and, after approval or
clearance, the Company must continue to comply with other FDA requirements
applicable to marketed products. Both before and after approval or clearance,
failure to comply with the FDA’s requirements can lead to significant
penalties.
The
Company's proposed AAGP™ products may be regulated as medical devices and/or
biologics. There are two review procedures by which medical devices can receive
FDA clearance or approval. Some products may qualify for clearance under Section
510(k) of the Federal Food, Drug and Cosmetic Act, in which the manufacturer
provides a pre-market notification that it intends to begin marketing the
product, and shows that the product is substantially equivalent to another
legally marketed product (i.e., that it has the same intended use and is as
safe
and effective as a legally marketed device and does not raise different
questions of safety and effectiveness). In some cases, the submission must
include data from human clinical studies. Marketing may commence when the FDA
issues a clearance letter finding such substantial equivalence. An applicant
must submit a 510(k) application at least 90 days before marketing of the
affected product commences. Although FDA clearance may be granted within that
90-day period, in some cases as much as a year or more may be required before
clearance is obtained, if at all.
If
the
medical device does not qualify for the 510(k) procedure (either because it
is
not substantially equivalent to a legally marketed device or because it is
required by statute and the FDA’s implementing regulations to have an approved
application), the FDA must approve a pre-market approval application before
marketing can begin. Pre-market approvals must demonstrate, among other matters,
that the medical device provides a reasonable assurance of safety and
effectiveness. A pre-market approval is typically a complex submission,
including the results of preclinical and clinical studies. Preparing a
pre-market approval is a detailed and time-consuming process. Once a pre-market
approval has been submitted, the FDA is required to review the submission within
a statutory period of time. However, the FDA’s review may, and often is, much
longer, often requiring one year or more, and may include requests for
additional data.
Biologic
products must be the subject of an approved biologics license application before
they can be marketed. The FDA approval process for a biologic product is similar
to the pre-market approval process, involving a demonstration of the product’s
safety and effectiveness based in part on both preclinical and clinical studies.
The
Company's proposed
AAGP™
products may be considered by FDA to be a biologic and will therefore be
submitted to the biologics division of FDA, the Center for Biologics Evaluation
and Research.
Every
company that manufactures biologic products or medical devices distributed
in
the United States must comply with the FDA’s Quality System Regulations. These
regulations govern the manufacturing process, including design, manufacture,
testing, release, packaging, distribution, documentation, and purchasing.
Compliance with the Quality System Regulations is required before the FDA will
approve an application, and these requirements also apply to marketed products.
Companies are also subject to other post-market and general requirements,
including compliance with restrictions imposed on marketed products, compliance
with promotional standards, record keeping, and reporting of certain adverse
reactions or events. The FDA regularly inspects companies to determine
compliance with the Quality System Regulations and other post-approval
requirements. Failure to comply with statutory requirements and the FDA’s
regulations can lead to substantial penalties, including monetary penalties,
injunctions, product recalls, seizure of products, and criminal
prosecution.
The
Clinical Laboratory Improvement Act of 1988 prohibits laboratories from
performing in vitro tests for the purpose of providing information for the
diagnosis, prevention or treatment of any disease or impairment of, or the
assessment of, the health of human beings unless there is in effect for such
laboratories a certificate issued by the U.S. Department of Health and Human
Services applicable to the category of examination or procedure performed.
Although a certificate is not required for ProtoKinetix, ProtoKinetix considers
the applicability of the requirements of the Clinical Laboratory Improvement
Act
in the potential design and development of its products.
In
addition, the FDA regulates the export of medical devices that have not been
approved for marketing in the United States. The Federal Food, Drug and Cosmetic
Act contains general requirements for any medical device that may not be sold
in
the United States and is intended for export. Specifically, a medical device
intended for export is not deemed to be adulterated or misbranded if the
product: (1) accords to the specifications of the foreign purchaser; (2) is
not
in conflict with the laws of the county to which it is intended for export;
(3)
is labeled on the outside of the shipping package that it is intended for
export; and (4) is not sold or offered for sale in the United States. Some
medical devices face additional statutory requirements before they can be
exported. If an unapproved device does not comply with an applicable performance
standard or premarket approval requirement, is exempt from either such
requirement because it is an investigational device, or is a banned device,
the
device may be deemed to be adulterated or misbranded unless the FDA has
determined that exportation of the device is not contrary to the public health
and safety and has the approval of the country to which it is intended for
export. However, the Federal Food, Drug and Cosmetic Act does permit the export
of devices to any country in the world, if the device complies with the laws
of
the importing country and has valid marketing authorization in one of several
"listed" countries under the theory that these listed countries have
sophisticated mechanisms for the review of medical devices for safety and
effectiveness.
ProtoKinetix
is also subject to regulations in foreign countries governing products, human
clinical trials and marketing, and may need to obtain approval or evaluations
by
international public health agencies, such as the World Health Organization,
in
order to sell products in certain countries. Approval processes vary from
country to country, and the length of time required for approval or to obtain
other clearances may in some cases be longer than that required for U.S.
governmental approvals. The extent of potentially adverse governmental
regulation affecting ProtoKinetix that might arise from future legislative
or
administrative action cannot be predicted.
Environmental
Laws
To
date,
we have not encountered any costs relating to compliance with any environmental
laws.
ITEM
2. DESCRIPTION
OF PROPERTY
The
Company does not own any real property. The Company is not currently paying
a
rental fee where it is located.
ITEM
3. LEGAL
PROCEEDINGS
There
are
currently no legal matters pending.
ITEM
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
A
shareholder meeting was not held during fiscal year 2005.
PART
II
ITEM
5. MARKET
FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Trades
of
our common stock are subject to Rule 15g-9 of the Securities and Exchange
Commission, known as the Penny Stock Rule. This rule imposes requirements on
broker/dealers who sell securities subject to the rule to persons other than
established customers and accredited investors. For transactions covered by
the
rule, brokers/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser’s written agreement to
the transaction prior to sale. The Securities and Exchange Commission also
has
rules that regulate broker/dealer practices in connection with transactions
in
"penny stocks." Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in that security is provided by the
exchange or system). The Penny Stock Rules requires a broker/ dealer, prior
to a
transaction in a penny stock not otherwise exempt from the rules, to deliver
a
standardized risk disclosure document prepared by the Commission that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker/dealer also must provide the customer with current
bid
and offer quotations for the penny stock, the compensation of the broker/dealer
and its salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer’s account. The bid and
offer quotations, and the broker/dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before
or
with the customer’s confirmation. These disclosure requirements have the effect
of reducing the level of trading activity in the secondary market for our common
stock. As a result of these rules, investors may find it difficult to sell
their
shares.
The
Company's Common Stock is quoted on the over-the-counter market and quoted
on
the National Association of Securities Dealers Electronic Bulletin Board ("OTC
Bulletin Board") under the symbol "PKTX". The high and low bid prices for the
Common Stock, as reported by the National Quotation Bureau, Inc., are indicated
for the periods described below. Such prices are inter-dealer prices without
retail markups, markdowns or commissions, and may not necessarily represent
actual transactions.
2004
|
Low
|
High
|
As
of March 31, 2004
|
$.47
|
.55
|
As
of June 30, 2004
|
.90
|
.98
|
As
of September 30, 2004
|
.54
|
.62
|
As
of December 31, 2004
|
.60
|
.70
|
2005
|
Low
|
High
|
As
of March 31, 2005
|
$.45
|
$.55
|
As
of June 30, 2005
|
.87
|
.94
|
As
of September 30, 2005
|
.52
|
.58
|
As
of December 31, 2005
|
.60
|
.63
|
Dividends
We
have
never paid cash dividends and have no plans to do so in the foreseeable future.
Our future dividend policy will be determined by our board of directors and
will
depend upon a number of factors, including our financial condition and
performance, our cash needs and expansion plans, income tax consequences, and
the restrictions that applicable laws, our current preferred stock instruments,
and our future credit arrangements may then impose.
Currently
under Nevada law, a dividend may not be made by a corporation if, after giving
it effect:
· |
the
corporation would not be able to pay its debts as they become due
in the
usual course of business; or
|
· |
except
as otherwise specifically allowed by the corporation’s articles of
incorporation, the corporation’s total assets would be less than the sum
of its total liabilities plus the amount that would be needed, if
the
corporation were to be dissolved at the time of distribution, to
satisfy
the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the
distribution.
|
Holders
As
of
April 12, 2006, there were approximately 76 shareholders of record of the
company's Common Stock.
As
of
April 12, 2006, the Company had 39,667,556 shares issued and outstanding. During
the year ended December 31, 2005, the Company issued 12,507,991 new common
shares. From January 1, 2006 through April 12, 2006 the Company issued 166,359
common shares.
Recent
Sales of Unregistered Securities; Use of Proceeds From Registered
Securities
The
previously filed Form 10-QSBs outline transactions related to new issuances
for
the first, second and third calendar quarters of 2005. Below is a table showing
the number of newly issued shares by quarter:
Period
|
Number
of Newly Issued Common Shares
|
First
Quarter
|
2,000,000
|
Second
Quarter
|
7,428,922
|
Third
Quarter
|
147,344
|
Fourth
Quarter
|
2,931,725
|
Total
|
12,507,991
|
There
have been no sales of unregistered securities during calendar 2005 which would
be required to be disclosed pursuant to Item 701 of Regulation S-B, except
for
the following:
On
March
8, 2005 the Company issued a total of 2,000,000 common shares that were
previously issueable, pursuant to a licensing agreement. These issuances were
made in lieu of cash payments for services rendered and were considered exempt
transactions under Section 4(2) of the Securities Act of 1933, as
amended.
On
April
4, 2005 the Company issued a total of 3,050,000 common shares, of the 3,450,000
issueable common shares represented by the issuance of 2,050,000 shares of
common stock for warrants exercised and the issuance of 1,400,000 shares of
common stock for stock subscriptions received. These issuances were considered
exempt transactions under Section 4(2) of the Securities Act of 1933, as
amended.
On
April
5, 2005 the Company issued a total of 285,832 common shares to Thunderbird
Global Corporation in consideration of the conversion of $85,749.60 of the
outstanding debentures Thunderbird Global Corporation holds. These issuances
were considered exempt transactions under Section 4(2) of the Securities Act
of
1933, as amended.
On
April
30, 2005, the Company issued a total of 30,000 common shares pursuant to a
due
diligence fee agreement. These issuances were made in lieu of cash payments
for
services rendered and were considered exempt transactions under Section 4(2)
of
the Securities Act of 1933, as amended.
On
May 9,
2005 the Company issued a total of 353,090 common shares to Thunderbird Global
Corporation in consideration of the conversion of $105,927 of the outstanding
debentures Thunderbird Global Corporation holds. These issuances were considered
exempt transactions under Section 4(2) of the Securities Act of 1933, as
amended.
On
May
10, 2005 the Company issued a total of 1,150,000 common shares pursuant to
a
consulting agreement. These issuances were made in lieu of cash payments for
services rendered and were considered exempt transactions under Section 4(2)
of
the Securities Act of 1933, as amended.
On
May
11, 2005 the Company issued a total of 1,200,000 common shares pursuant to
a
consulting agreement with Sedona West Investment Group, Inc. These issuances
were made in lieu of cash payments for services rendered and were considered
exempt transactions under Section 4(2) of the Securities Act of 1933, as
amended. The Company has cancelled these shares and is in the process of filing
a complaint and a request for an order from a state court in Nevada against
Sedona in order to have these shares returned to the Company treasury.
On
May
20, 2005 the Company issued a total of 300,000 common shares pursuant to the
exercise of outstanding options. These issuances were considered exempt
transactions under Section 4(2) of the Securities Act of 1933, as
amended.
On
June
23, 2005 the Company issued a total of 810,000 common shares of which 775,000
were pursuant to consulting agreements, 725,000 of which were payable on May
10,
2005. The remaining 35,000 common shares were issued pursuant to the exercise
of
outstanding options. These issuances were made in lieu of cash payments for
services rendered and were considered exempt transactions under Section 4(2)
of
the Securities Act of 1933, as amended.
On
October 10, 2005 the Company issued a total of 36,233 common shares pursuant
to
a consulting agreement. These issuances were made in lieu of cash payments
for
services rendered and were considered exempt transactions under Section 4(2)
of
the Securities Act of 1933, as amended.
On
August
25, 2005 the Company issued a total of 111,111 common shares pursuant to a
consulting agreement. These issuances were made in lieu of cash payments for
services rendered and were considered exempt transactions under Section 4(2)
of
the Securities Act of 1933, as amended.
On
November 7, 2005 the Company issued a total of 1,000,000 common shares pursuant
to a prior executed contract for AFGP License. These issuances were made in
lieu
of cash payments for services rendered and were considered exempt transactions
under Section 4(2) of the Securities Act of 1933, as amended.
On
November 15, 2005 the Company issued a total of 311,725 common shares pursuant
to a consulting agreement. These issuances were made in lieu of cash payments
for services rendered and were considered exempt transactions under Section
4(2)
of the Securities Act of 1933, as amended.
On
December 2, 2005 the Company issued a total of 400,000 common shares, of the
3,450,000 common shares which were issueable on April 4, 2005, pursuant to
the
exercise of prior issued Warrants. These issuances were made in lieu of cash
payments for services rendered and were considered exempt transactions under
Section 4(2) of the Securities Act of 1933, as amended.
On
December 23 2005 the Company issued a total of 1,220,000 common shares pursuant
to a consulting agreement. These issuances were made in lieu of cash payments
for services rendered and were considered exempt transactions under Section
4(2)
of the Securities Act of 1933, as amended.
There
have been no sales of unregistered securities during calendar 2006 which would
be required to be disclosed pursuant to Item 701 of Regulation S-B, except
for
the following:
On
February 22, 2006 the company issued a total of 166,359 common shares pursuant
to three consulting agreements. These issuances were made in lieu of cash
payments for services rendered and were considered exempt transactions under
Section 4(2) of the Securities Act of 1933, as amended.
Warrants
On
November 21, 2005, in lieu of payment for advisory services rendered to the
Company, the Company issued the following parties warrants to purchase common
shares of the Company's stock:
|
|
No.
of shares
|
|
Exercise
Price
|
|
Date
Exercised
|
|
Date
Expired
|
|
|
|
|
|
|
|
|
|
|
|
|
Murdock
Capital Partners
|
|
100,000
|
|
0.60
|
|
Not
Exercised(1)
|
|
11/21/06
|
Murdock
Capital Partners
|
|
100,000
|
|
0.58
|
|
Not
Exercised(2)
|
|
11/21/06
|
Total
|
|
200,000
|
|
|
|
|
|
|
(1) As
of
April 12, 2006 these warrants have not been exercised.
(2) As
of
April 12, 2006 these warrants have not been exercised.
Disclosure
Related to Form S-8 Issuances
Prior
to
issuing any common shares under Form S-8, the Company requests and receives
an
executed verification from all issuees stating that the issuee is a natural
person and that: (a) the shares being issued are not being provided to create
or
sustain a market for the Company's securities, and (b) that the shares are
not
being issued as a part of a capital raising transaction. All consultants to
the
Company are required to provide work product as a part of and condition to
their
relationship with the Company. Consultant work product is delivered in
accordance with the terms and conditions of each respective Consultants'
agreement.
ITEM
6. MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This
discussion and analysis should be read in conjunction with the accompanying
Consolidated Financial Statements and related notes. Our discussion and analysis
of our 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. The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States of America requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of any contingent liabilities at the financial statement date and
reported amounts of revenue and expenses during the reporting period. On an
on-going basis we review our estimates and assumptions. Our estimates were
based
on our historical experience and other assumptions that we believe to be
reasonable under the circumstances. Actual results are likely to differ from
those estimates under different assumptions or conditions, but we do not believe
such differences will materially affect our financial position or results of
operations. Our critical accounting policies, the policies we believe are most
important to the presentation of our financial statements and require the most
difficult, subjective and complex judgments, are outlined below in "Critical
Accounting Policies," and have not changed significantly.
In
addition, certain statements made in this report may constitute "forward-looking
statements." These forward-looking statements involve known or unknown risks,
uncertainties and other factors that may cause the actual results, performance,
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by the forward-looking
statements. Specifically, 1) our ability to obtain necessary regulatory
approvals for our products; and 2) our ability to increase revenues and
operating income, is dependent upon our ability to develop and sell our
products, general economic conditions, and other factors. You can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continues" or the negative of these terms or other
comparable terminology. Although we believe that the expectations reflected-in
the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements.
Critical
Accounting Policies
Our
critical and significant accounting policies, including the assumptions and
judgments underlying them, are disclosed in the Notes to the Financial
Statements. These policies have been consistently applied in all material
respects and address such matters as revenue recognition and depreciation
methods. The preparation of the financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates. The accounting treatment of a particular transaction is specifically
dictated by accounting principles, generally accepted in the United States
of
America, with no need for management’s judgment in their application. There are
also areas in which management’s judgment in selecting any viable alternative
would not produce a materially different result. See our audited financial
statements and notes thereto which contain accounting policies and other
disclosures required by accounting principles, generally accepted in the United
States of America.
Overview
ProtoKinetix
is a biotechnical company headquartered in Vancouver, British Columbia that
owns
the world-wide rights to a family of synthetic anti-freeze glycoproteins
(trademarked by the Company as AAGP™). The Company is dedicated to the
commercial development of AAGP™ for use in human and veterinary medicine, food
additives and supplements, and the biotechnology and cosmetic industry.
ProtoKinetix is making rapid and meaningful progress in this domain by
coordinating a team of world recognized intellectual talent in a networked
environment. This team has been able to use previously published research on
native antifreeze proteins and antifreeze glycoproteins as a guide to the
expansion and development of markets for this valuable family of
molecules.
The
ProtoKinetix business plan is based primarily on the furtherance of certain
intellectual property rights obtained by way of "sub-licenses" of technology
from other companies. At present, although the Company has engaged the
prestigious patent law firm of Cabinet-Moutard of Versaille, France, to file
a
number of international patent applications (consistent with our agreements
with
the licensors of various technologies we license), the Company itself has no
finished commercial product or products, and has received no final patents
awards or FDA approvals for any product or diagnostic procedures.
The
Company currently has no full time employees. The Company operates with a
skeletal management team headed by John Todd, M.D. In addition to Dr. Todd,
the
Company receives advice and counsel from its Scientific Advisory Board. A short
biography of Dr. Todd may be found within this Form 10-KSB, and the biographies
of other members of the ProtoKinetix Scientific Advisory Board may be found
within the "About Us" section of the Company's website located at
www.protokinetix.com.
The
Company is focused on the research and development of one primary compound
which
it has filed a trademark application for. This compound is called AFGP.
Project
The
Company has undertaken is to develop and test synthetic antifreeze glycoproteins
(AFGP).
ProtoKinetix
has entered into agreements to acquire the exclusive right to develop products
derived from patent pending technologies related to synthetic AFGPs. The
ProtoKinetix intellectual property rights were developed by Dr. Jean-Charles
Quirion.
Intellectual
Property
As
of the
date of this report, although the Company's development agents, including the
parties the Company has licensed AFGP technologies from, have applied to receive
patents for technologies ProtoKinetix has licensed and continues to primarily
base it's research efforts on, no
patents
have issued by a governmental or quasi-governmental agency. The references
of
applications that the Company has filed to date are PCT/IB2005/003940, filed
on
December 2, 2005 under the priority of the French patent application FR 0412782
which was filed on December 2, 2004.
Subject
to our available financial resources, our intellectual property strategy is:
(1)
to pursue licenses, trade secrets, and know-how within the Company's primary
research areas, and (2) to develop and acquire proprietary positions to reagents
and new platforms for the development of products related to these technologies.
Trade
Secrets and Know-How
We
believe that even if the Company's intellectual property position is ultimately
diminished as a result of our development agents and licensors to receive patent
protection for the licenses ProtoKinetix has contracted to access, we have
developed a substantial body of trade secrets and know-how relating to the
development of AAGP™, including but not limited to the optimization of materials
for efforts, and how to maximize sensitivity, speed-to-result, specificity,
stability and reproducibility.
Competition
The
markets that the Company is attempted to enter are multi-billion dollar
international industries. They are intensely competitive. Many of our
competitors (from every perspective) are substantially larger and have greater
financial, research, manufacturing, and marketing resources.
Industry
competition in general is based on the following:
· |
Scientific
and technological capability;
|
· |
The
ability to develop and market products and
processes;
|
· |
The
ability to obtain FDA or other required regulatory
approvals;
|
· |
The
ability to manufacture products that meet applicable FDA requirements,
(i.e. FDA’s Quality System Regulations) see Governmental Regulation
section;
|
· |
Access
to adequate capital;
|
· |
The
ability to attract and retain qualified personnel;
and
|
· |
The
availability of patent protection.
|
We
believe our scientific and technological capabilities are significant. Some
of
the results of our research are available at our website located at
www.protokinetix.com.
Our
ability to develop our research is in large measure dependent on our having
additional resources and/or collaborative relationships, particularly where
we
can have our product development efforts funded on a project or milestone basis.
We believe that our know-how with our AFGP project, in spite of not yet
receiving any patent protected rights, has been instrumental in our obtaining
the collaborations we have developed.
Although
there is no such immediate need to make any regulatory filing in the United
States or abroad, one should know that we have limited experience with regard
to
obtaining FDA or other required regulatory approvals, and no experience with
obtaining pre-marketing approval of a biologic product. (See "Governmental
Regulation" for definition of pre-marketing approval.) For this reason, should
our research efforts continue to show promise, we will likely need to hire
consultants to assist the Company with such governmental regulations.
Our
access to capital is more challenging, relative to most of our competitors.
This
is a competitive disadvantage. We believe however that our access to capital
may
increase as we get closer to the development of a commercially viable
product.
To
date,
we believe our research has enabled us to attract and retain qualified
consultants. Because of the greater financial resources of many of our
competitors, we may not be able to complete effectively for the same individuals
to the extent that a competitor uses its substantial resources to attract any
such individuals.
As
is
discussed above, with respect to the availability of patent protection, we
do
not have our own portfolio of patents or the financial resources to develop
and/or acquire a portfolio of patents similar to those of our larger
competitors. We have been able to obtain access to patent-pending technology
by
entering into licensing arrangements. However, there can be no certainty that
any of the patent-pending technologies we have licensed will ever receive final
approval by any patent office.
AFGP
Project
The
second project that the Company has undertaken is to develop and test synthetic
antifreeze proteins (AFP) and antifreeze glycoproteins (AFGP).
ProtoKinetix
has entered into agreements to acquire the exclusive right to develop products
derived from patent pending technologies related to synthetic AFGPs. The
ProtoKinetix intellectual property rights were developed by Dr. Jean-Charles
Quirion.
As
of the
date of this report, although the Company's development agents, including the
parties the Company has licensed AFGP technologies from, have applied to receive
patents for technologies ProtoKinetix has licensed and continues to primarily
base it's research efforts on, no
patents
have issued by a governmental or quasi-governmental agency.
Below
is a further discussion of the Company's AFGP Project:
One
of
many accomplishments from pioneering research of the U.S. Antarctic Program
was
the discovery, in the early sixties, that fish living year-long in subzero
temperature are extremely resistant to freezing. The substances that prevent
these fish from freezing were isolated, characterized and designated as
antifreeze glycoproteins or AFGP. Over the years, various kinds of AFGP were
isolated from many species of fishes, and in some amphibians, plants and
insects. All of the AFGPs share a common characteristic that prevents ice
crystals from growing and connecting to each other.
A
review
of the scientific literature will confirm that there has been a great deal
of
interest around the world in these natural antifreeze glycoproteins which are
able to protect a great many creatures which are subjected to freezing
temperatures. A further review will also confirm that the natural antifreeze
is
able to preserve mammalian cells tissue and organs. The metabolic rate in living
cells is reduced as the temperature is lowered. Keeping cells and tissue at
a
low temperature enables their preservation for a longer time than cells can
be
preserved for at a higher temperature. Yet, when cells are exposed to sub zero
temperatures, they are destroyed by the formation of ice crystals which disrupts
the cell membrane.
Scientists
have conducted many experiments in which they extracted naturally occurring
AFGP
from a variety of fish and then used these naturally occurring antifreeze
glycoproteins to reduce the temperature at which ice crystals are formed. It
has
been determined in experiments by many scientists that mammalian cells in a
solution containing natural AFGP could be successfully preserved at temperatures
several degrees below zero C (see attached). At this temperature the metabolic
rate of the cells is very low, and these cells can be preserved for a longer
period of time at sub zero temperatures as long as the cells are not destroyed
by the formation of ice crystals. However, until today, applications of AFGP
were limited since researchers were unable to produce sufficient quantities
or
stable enough copies of these antifreeze glycoproteins for commercial
applications, and the use of naturally occurring compounds extracted from fish
is too labour and cost-intensive to be practical.
Researchers,
headed by Dr. Jean Charles Quirion in Rouen, France have developed an innovative
and patented chemical synthesis protocol for manufacturing and stabilizing
AFGP
molecules using a chemical bond that protects these compounds from degradation
by naturally occurring enzymes. Dr. Quirion and his team have produced several
synthetic antifreeze glycoproteins and have the ability to produce many more
different types of these molecules. The synthetic AFGP which has been made
has
been tested and we were able to show:
· |
The
molecules are stable down to a pH of
1.8
|
· |
There
is no toxicity demonstrated in 2 separate
trials
|
· |
The
molecules tested have shown that they reduce the freezing point to
minus
18 degrees celcius
|
· |
We
have been able to preserve red cells at temperatures below zero Celcius
using 1 mg per ml of the synthetic
antifreeze
|
Current
research is being conducted to confirm the efficacy of these chemically
synthesized new molecules and applications are being sought for the use of
the
synthetic AFGP to prolong the shelf-life of human blood and blood products
as
well as for other cell types, live vaccines, tissue and organs. The market
for
the preservation of blood and blood products is very large, as is the market
for
the preservation of human and animal cells for research purposes. The subzero
cryopreservation of organs using our synthetic AFGP will be a major milestone
in
transplantation medicine
ProtoKinetix
will continue to conduct research on the synthetic AFGP which are being
manufactured. This work will be conducted by government agencies as well as
by
contract with private laboratory facilities.
Expenses
Our
expenses in 2005 were $333,186 which consisted of $302,500 in professional
legal
expenses and $30,686 in professional accounting expenses. We incurred $1,527,000
in professional fees relating to the costs associated with the operation of
the
company as well as satisfying the reporting requirements under the Securities
Exchange Act of 1934, as amended. We operate the company by hiring outside
consultants to assist us with management, strategic planning, organization
and
daily operations. We also incurred professional consulting fees of $2,388,676.
These professional consulting services related to marketing, product and market
research and development and investment banking services including financing,
capitalization and merger opportunities.
Plan
of Operation
Our
current operations are centered around the Company's relationships with various
research and development consultants who are conducting research on behalf
of
the company at discrete and established laboratories in various parts of the
world. The Company intends to continue these efforts throughout
2006.
Sales
and Marketing
The
Company is currently not selling or marketing any products.
Liquidity
and Capital Resources
At
December 31, 2005, we had $96,571 in cash and $109,310 in total current assets.
As of the date of this report, we require additional capital investments or
borrowed funds to meet cash flow projections and carry forward our business
objectives. There can be no assurance that 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 affect on
our
plan of operation and results therefrom and a corresponding negative impact
on
shareholder liquidity.
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 year ending December 31, 2005.
Going
Concern
The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, 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 Company's common stock is at a low price and is not actively
traded.
Results
of Operations for the Year Ended December 31, 2005
We
had
$2,000 in net revenues.
We
had a
$5,096,296 loss from operations for 2005.
Operating
expenses were $5,098,296 in 2005. These expenses were primarily incurred for
professional fees, consulting services related to the operations of the
Company's business, specifically, research and development related expenses,
and
other general and administrative expenses.
ITEM
6A QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
face
exposure to fluctuations in the price of our common stock due to the very
limited cash resources we have. For example, the Company has very limited
resources to pay legal and accounting professionals. If we are unable to pay
a
legal or accounting professional in order to perform various professional
services for the company, it may be difficult, if not impossible, for the
Company to maintain its reporting status under the '34 Exchange Act. If the
Company felt that it was likely that it would not be able to maintain its
reporting status, it would make a disclosure by filing a Form 8-K with the
SEC.
In any case, if the Company was not able to maintain its reporting status,
it
would become "delisted" and this would potentially cause an investor or an
existing shareholder to lose all or part of his investment.
ITEM
7. FINANCIAL
STATEMENTS
The
Consolidated Financial Statements and schedules that constitute Item 7 are
attached at the end of this Annual Report on Form 10-KSB on the "F"
pages.
ITEM
8. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not
applicable.
ITEM
8A. CONTROLS
AND PROCEDURES
Under
the
supervision and with the participation of our Chief Executive Officer and Chief
Financial Officer, we have evaluated the effectiveness of the design and
operation of our disclosure controls and procedures as of the end of the period
covered by this annual report, and based on their evaluation, our Chief
Executive Officer and Chief Financial Officer have concluded that these
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company required to be included in the
Company’s periodic SEC filings. There were no significant changes in our
internal control over financial reporting that could significantly affect this
control since our last fiscal quarter.
Disclosure
controls and procedures are the controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports we
file
or submit under the Exchange 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 by us in the reports that we file under the Exchange
Act is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure.
ITEM
8B. OTHER
INFORMATION
Not
applicable.
PART
III
ITEM
9. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
As
of
April 12, 2006, the Company's current officers and directors consist of the
following persons:
Name
|
Age
|
Office
|
Since
|
Dr.
John Todd
|
61
|
Chairman
of the Board, President, CEO and CFO
|
Inception
|
Mr.
C. Fred Whittaker
|
63
|
Director
|
2005
|
Dr.
John Todd
Dr.
John
Todd has held the position of Chairman and President of ProtoKinetix, Inc since
July 2003. From 1999 to 2003 Dr. Todd was a visiting consultant at the BC
Women's Hospital. Dr. Todd received his Doctor of Medicine from the University
of Calgary in 1974.
C.
Fred Whittaker
Mr.
C.
Fred Whittaker was elected to our Board of Directors in 2005. Mr. Whittaker
has
been in the accounting profession for over 40 years. Mr. Whittaker received
his
Chartered Accounting designation in 1967, and has worked for various accounting
firms, including KPMG, as well as for himself at different times in the past.
For the last 15 years, he has worked exclusively for Whittaker & Associates,
a regional accounting firm which he founded located in Vancouver, British
Columbia. Currently, Mr. Whittaker is a senior partner at the accounting firm
of
Whittaker & Associates and has been for the past 30 years.
Section
16(a) Beneficial Ownership Reporting Compliances
Section
16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
requires the Company’s directors, executive officers and holders of more than
10% of the Company’s common stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership
of
common stock and other equity securities of the Company. The Company believes
that during the year ended December 31, 2005, its officers, directors and
holders of more than 10% of the Company’s common stock complied with all Section
16(a) filing requirements.
Code
of Ethics
Effective
March 31, 2006, our board of directors adopted the ProtoKinetix, Inc. Code
of
Business Conduct and Ethics. The board of directors believes that our Code
of
Business Conduct and Ethics provides standards that are reasonably designed
to
deter wrongdoing and to promote the following: (1)
honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships;
(2)
full,
fair, accurate, timely, and understandable disclosure in reports and documents
that we file with, or submits to, the Securities and Exchange
Commission;
(3)
compliance with applicable governmental laws, rules and regulations;
the
prompt internal reporting of violations of the Code of Business Conduct and
Ethics to an appropriate person or persons; and (4)
accountability for adherence to the Code of Business Conduct and Ethics.
Identification
of Audit Committee; Audit Committee Financial Expert
The
Company currently does not have an audit committee and has not made a
determination of whether there is a financial expert. The Company plans to
establish an audit committee during the third quarter of the current fiscal
year.
ITEM
10. EXECUTIVE
COMPENSATION
The
following table summarizes the annual compensation paid to ProtoKinetix’s named
executive officers for the two years ended December 31, 2005, and
2004:
|
|
Annual
Compensation
|
|
Long-Term
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
All
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
Options
|
|
Other
|
|
|
|
|
|
|
|
|
Other
Annual
|
|
Stock
|
|
Granted
|
|
Compen
|
Name
and Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Compensation
|
|
Awards
($)
|
|
(#
Shares)
|
|
-sation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
John Todd
|
|
2005
|
|
$0
|
|
-0-
|
|
-0-
|
|
-0-
|
|
------
|
|
-0-
|
President,
Chief
|
|
2004
|
|
0
|
|
-0-
|
|
-0-
|
|
-0-
|
|
------
|
|
-0-
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr.
C. Fred Whittaker
|
|
2005
|
|
$0
|
|
-0-
|
|
-0-
|
|
-0-
|
|
------
|
|
-0-
|
Director
|
|
2004
|
|
0
|
|
-0-
|
|
-0-
|
|
-0-
|
|
------
|
|
-0-
|
And
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/SAR
Grants in the Last Fiscal Year
N/A
Employment
Agreements
None
Chief
Executives Officer’s compensation
During
fiscal year 2005, Dr. John Todd did not draw a salary nor did the Company accrue
a salary for any obligation.
Compensation
of Directors
Directors
receive no remuneration for their services as directors at this time. The
Company has adopted no retirement, pension, profit sharing or other similar
programs.
ITEM
11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information regarding the beneficial
ownership of the Company’s Common Stock as of December 31, 2005 based on
information available to the Company by (i) each person who is known by the
Company to own more than 5% of the outstanding Common Stock based upon reports
filed by such persons within the Securities and Exchange Commission; (ii) each
of the Company’s directors; (iii) each of the Named Executive Officers; and (iv)
all officers and directors of the Company as a group.
Name
and Address
|
Shares
Beneficially Owned
|
Percent
of Class
|
Dr.
John Todd (2)
|
3,130,000(1)
|
.076%
|
Mr.
C. Fred Whittaker (3)
|
120,000
|
.002%
|
Centrum
Bank AG (4)
|
4,668,780
|
.113%
|
TOTAL
|
7,918,780
|
.193%
|
(2) This
amount includes 400,000 shares beneficially owned J.D. Todd Medical
Inc.
(3) The
address is 1500-885 Georgia Street, Vancouver, BC V6C 3E8 Canada
(4) The
address is 1500-885 Georgia Street, Vancouver, BC V6C 3E8 Canada
(5) The
address is Kirchstrasse 3, 9490 Vaduz Liechtenstein
A
person is
deemed to be the beneficial owner of securities that can be acquired by such
person within 60 days from the date of the registration statement upon the
exercise of options or warrants. Each beneficial owner's percentage ownership
is
determined by assuming that options or warrants that are held by such person
and
which are exercisable within 60 days of the date of this registration statement
have been exercised. Unless otherwise indicated, the company believes that
all
persons named in the table have voting and investment power with respect to
all
shares of common stock beneficially owned by them.
ITEM
12. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
N/A
ITEM
13. EXHIBITS
AND REPORTS ON FORM 8-K
(a)
Exhibits.
Exhibit
#
|
|
Description
|
|
|
|
3.1(i)
|
|
Certificate
of Incorporation filed as an exhibit to the Company's registration
statement on Form 10-SB/A filed on July 24, 2001 and incorporated
herein
by reference.
|
|
|
|
3.1(ii)
|
|
By-Laws
filed as an exhibit to the Company's registration statement on Form
10-SB/A filed on July 24, 2001 and incorporated herein by
reference.
|
|
|
|
14.1
|
|
ProtoKinetix,
Inc. Code of Ethics (Attached)
|
|
|
|
23.1
|
|
Consent
of Experts (Attached)
|
|
|
|
31.1
|
|
Rule
13a-12(a)/15d-14(a) Certification (Attached).
|
|
|
|
32.1
|
|
Section
1350 Certification attached.
|
ITEM
14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES
Audit
Fees
For
the
years ended December 31, 2005 and December 31, 2004, Peterson Sullivan PLLC,
the
Company’s principal accountants, billed the Company $30,292 and $27,403,
respectively, for fees for the audit of the Company’s annual financial
statements and review of financial statements included in the Company’s Forms
10-QSB.
Audit-Related
Fees
For
the
years ended December 31, 2005 and December 31, 2004, Peterson Sullivan PLLC
did
not provide the Company with any assurances or related services reasonably
related to the performance of the audit or review of the Company’s financial
statements and are not reported above under "Audit Fees."
Tax
Fees
For
the
years ended December 31, 2005 and December 31, 2004, Peterson Sullivan PLLC
did
not bill for professional services for tax compliance, tax advice, and tax
planning.
All
Other Fees
For
the
years ended December 31, 2005 and December 31, 2004, Peterson Sullivan PLLC
did
not bill the Company for fees associated with the preparation and filing of
the
Company’s registration statements, the creation of pro forma financial
statements and other related matters.
Audit
Committee Pre-Approval Policies
The
Company currently does not have an audit committee. The Company’ Board of
Directors currently approves in advance all audit and non-audit related services
performed by the Company’s principal accountants.
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
|
|
PROTOKINETIX,
INC.
|
|
|
|
|
|
Date: August
9, 2006
|
|
By:
|
|
/s/
Dr. John Todd
|
|
|
Dr.
John Todd
|
|
|
President,
CEO and CFO
|
|
|
|
|
|
|
In
accordance with the requirements of the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signatures
|
Title
|
Date
|
/s/Dr.
John Todd
Dr.
John Todd
|
Chief
Executive Officer, President, Chief Financial Officer and Chairman
Of The
Board
|
April
12, 2006
|
PROTOKINETIX,
INCORPORATED
(A
Development Stage Company)
FINANCIAL
REPORT
DECEMBER
31, 2005
|
C
O N T E N T S
Page
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
and 2
FINANCIAL
STATEMENTS
BALANCE
SHEET
STATEMENTS
OF OPERATIONS
STATEMENTS
OF STOCKHOLDERS' EQUITY
and
6
STATEMENTS
OF CASH FLOWS
NOTES
TO
FINANCIAL STATEMENTS
-
14
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Shareholders
Protokinetix,
Incorporated
We
have
audited the accompanying balance sheet of Protokinetix, Incorporated (a
development stage company) as of December 31, 2005, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 2005 and 2004, and for the period from December 23, 1999
(date of inception) through December 31, 2005. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. The Company has determined that
it
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration
of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well
as evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Protokinetix, Incorporated (a
development stage company) as of December 31, 2005, and the results of its
operations and its cash flows for the years ended December 31, 2005 and
2004, and for the period from December 23, 1999 (date of inception) through
December 31, 2005, in conformity with accounting principles generally
accepted in the United States.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has not generated revenues or positive cash flows from operations
and has an accumulated deficit at December 31, 2005. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plan regarding those matters is also described in Note 1. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
/s/
Peterson Sullivan PLLC
March
27,
2006
Seattle,
Washington
PROTOKINETIX,
INCORPORATED
(A
Development Stage Company)
BALANCE
SHEET
December
31, 2005
|
|
|
|
ASSETS
|
|
|
Current
Asset
|
|
|
|
Cash
|
|
|
$
96,571
|
|
Accounts
receivable
|
|
6,539
|
|
Prepaid
expenses
|
|
6,200
|
|
|
|
|
Total
current assets
|
|
109,310
|
Computer
Equipment, net
|
|
2,461
|
Intangible
Assets
|
|
3,110,000
|
|
|
|
|
|
|
$
3,221,771
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
Current
Liabilities
|
|
|
|
Due
to outside management consultants
|
|
$
306,892
|
|
Accounts
payable
|
|
31,087
|
|
Accrued
interest
|
|
36,294
|
|
|
|
|
Total
current liabilities
|
|
374,273
|
Convertible
Note Payable
|
|
123,323
|
|
|
|
|
Total
liabilities
|
|
497,596
|
Stockholders'
Equity
|
|
|
|
Common
stock, $.0000053 par value; 100,000,000 common
|
|
|
|
shares
authorized; 40,801,197 shares issued and outstanding
|
|
220
|
|
Common
stock issuable; 608,375 shares
|
|
6
|
|
Additional
paid-in capital
|
|
14,503,079
|
|
Deficit
accumulated during the development stage
|
|
(11,779,130)
|
|
|
|
|
|
|
2,724,175
|
|
|
|
|
|
|
$
3,221,771
|
|
|
|
|
|
|
|
PROTOKINETIX,
INCORPORATED
(A
Development Stage Company)
STATEMENTS
OF OPERATIONS
For
the
Years Ended December 31, 2005 and 2004, and for the
Period
from December 23, 1999 (Date of Inception) to December 31,
2005
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
During
the
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
2005
|
|
2004
|
|
Stage
|
Revenues
|
$
2,000
|
|
$
-
|
|
$
2,000
|
Expenses
|
|
|
|
|
|
|
Professional
fees
|
333,186
|
|
1,573,933
|
|
2,426,693
|
|
Consulting
fees
|
3,915,676
|
|
3,460,613
|
|
8,037,679
|
|
Research
and development
|
410,650
|
|
209,532
|
|
620,182
|
|
General
and administrative
|
155,835
|
|
121,096
|
|
347,061
|
|
Impairment
loss
|
269,756
|
|
|
|
269,756
|
|
Interest
|
13,193
|
|
23,100
|
|
36,293
|
|
|
|
|
|
5,098,296
|
|
5,388,274
|
|
11,737,664
|
|
|
|
|
Loss
from continuing operations
|
(5,096,296)
|
|
(5,388,274)
|
|
(11,735,664)
|
Discontinued
Operations
|
|
|
|
|
|
|
Loss
from operations of the discontinued
|
|
|
|
|
|
|
|
segment
|
|
|
|
|
(43,466)
|
|
|
|
|
Net
loss
|
$(5,096,296)
|
|
$(5,388,274)
|
|
$(11,779,130)
|
Net
Loss per Common Share (basic and
|
|
|
|
|
|
|
fully
diluted)
|
$
(0.13)
|
|
$
(0.18)
|
|
|
Weighted
average number of common
|
|
|
|
|
|
|
shares
outstanding
|
38,598,215
|
|
29,941,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROTOKINETIX,
INCORPORATED
(A
Development Stage Company)
STATEMENTS
OF STOCKHOLDERS' EQUITY
For
the
Years Ended December 31, 2005 and 2004, and for the
Period
from December 23, 1999 (Date of Inception) to December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
|
|
Stock
|
|
During
the
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Issuable
|
|
Paid-in
|
|
Subscriptions
|
|
Development
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Receivable
|
|
Stage
|
|
Total
|
Issuance
of common stock, December 1999
|
9,375,000
|
|
$
50
|
|
-
|
|
$
-
|
|
$
4,950
|
|
$
-
|
|
$
-
|
|
$
5,000
|
Net
loss for period
|
|
|
|
|
|
|
|
|
|
|
|
|
(35)
|
|
(35)
|
Balance,
December 31, 2000
|
9,375,000
|
|
50
|
|
-
|
|
-
|
|
4,950
|
|
|
|
(35)
|
|
4,965
|
Issuance
of common stock, April 2001
|
5,718,750
|
|
30
|
|
|
|
|
|
15,220
|
|
|
|
|
|
15,250
|
Net
loss for year
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,902)
|
|
(16,902)
|
Balance,
December 31, 2001
|
15,093,750
|
|
80
|
|
-
|
|
-
|
|
20,170
|
|
|
|
(16,937)
|
|
3,313
|
Net
loss for year
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,878)
|
|
(14,878)
|
Balance,
December 31, 2002
|
15,093,750
|
|
80
|
|
-
|
|
-
|
|
20,170
|
|
|
|
(31,815)
|
|
(11,565)
|
Issuance
of common stock for services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
2003
|
2,125,000
|
|
11
|
|
|
|
|
|
424,989
|
|
|
|
|
|
425,000
|
|
August
2003
|
300,000
|
|
2
|
|
|
|
|
|
14,998
|
|
|
|
|
|
15,000
|
|
September
2003
|
1,000,000
|
|
5
|
|
|
|
|
|
49,995
|
|
|
|
|
|
50,000
|
|
October
2003
|
1,550,000
|
|
8
|
|
|
|
|
|
619,992
|
|
|
|
|
|
620,000
|
Issuance
of common stock for licensing rights
|
14,000,000
|
|
74
|
|
|
|
|
|
2,099,926
|
|
|
|
|
|
2,100,000
|
Common
stock issuable for licensing rights
|
|
|
|
|
2,000,000
|
|
11
|
|
299,989
|
|
|
|
|
|
300,000
|
Shares
cancelled on September 30, 2003
|
(9,325,000)
|
|
(49)
|
|
|
|
|
|
49
|
|
|
|
|
|
-
|
Net
loss for year
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,262,745)
|
|
(1,262,745)
|
Balance,
December 31, 2003
|
24,743,750
|
|
131
|
|
2,000,000
|
|
11
|
|
3,530,108
|
|
-
|
|
(1,294,560)
|
|
2,235,690
|
Issuance
of common stock for services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
2004
|
1,652,300
|
|
9
|
|
|
|
|
|
991,371
|
|
|
|
|
|
991,380
|
|
May
2004
|
500,000
|
|
3
|
|
|
|
|
|
514,997
|
|
|
|
|
|
515,000
|
|
July
2004
|
159,756
|
|
1
|
|
|
|
|
|
119,694
|
|
|
|
|
|
119,695
|
|
August
2004
|
100,000
|
|
1
|
|
|
|
|
|
70,999
|
|
|
|
|
|
71,000
|
|
October
2004
|
732,400
|
|
4
|
|
|
|
|
|
479,996
|
|
|
|
|
|
480,000
|
|
November
2004
|
650,000
|
|
4
|
|
|
|
|
|
454,996
|
|
|
|
|
|
455,000
|
|
December
2004
|
255,000
|
|
1
|
|
|
|
|
|
164,425
|
|
|
|
|
|
164,426
|
Common
stock issuable for AFGP license
|
|
|
|
|
1,000,000
|
|
5
|
|
709,995
|
|
|
|
|
|
710,000
|
Common
stock issuable for Recaf license
|
|
|
|
|
400,000
|
|
2
|
|
223,998
|
|
|
|
|
|
224,000
|
Warrants
granted (for 3,450,000 shares) for services,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October
2004
|
|
|
|
|
|
|
|
|
1,716,253
|
|
|
|
|
|
1,716,253
|
Options
granted for services, October 2004
|
|
|
|
|
|
|
|
|
212,734
|
|
|
|
|
|
212,734
|
Stock
subscriptions receivable
|
|
|
|
|
1,800,000
|
|
10
|
|
329,990
|
|
(330,000)
|
|
|
|
-
|
Warrants
exercised:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
August
2004
|
|
|
|
|
50,000
|
|
|
|
15,000
|
|
|
|
|
|
15,000
|
|
October
2004
|
|
|
|
|
600,000
|
|
3
|
|
134,997
|
|
|
|
|
|
135,000
|
|
December
2004
|
|
|
|
|
1,000,000
|
|
5
|
|
224,995
|
|
|
|
|
|
225,000
|
Options
exercised, December 2004
|
|
|
|
|
100,000
|
|
1
|
|
29,999
|
|
|
|
|
|
30,000
|
Net
loss for period
|
|
|
|
|
|
|
|
|
|
|
-
|
|
(5,388,274)
|
|
(5,388,274)
|
Balance,
December 31, 2004
|
28,793,206
|
|
$
154
|
|
6,950,000
|
|
$
37
|
|
$
9,924,547
|
|
$
(330,000)
|
|
$
(6,682,834)
|
|
$
2,911,904
|
PROTOKINETIX,
INCORPORATED
(A
Development Stage Company)
STATEMENTS
OF STOCKHOLDERS' EQUITY
(Continued)
For
the
Years Ended December 31, 2005 and 2004, and for the
Period
from December 23, 1999 (Date of Inception) to December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Additional
|
|
Stock
|
|
During
the
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
Issuable
|
|
Paid-in
|
|
Subscriptions
|
|
Development
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Receivable
|
|
Stage
|
|
Total
|
Balance,
December 31, 2004
|
28,793,206
|
|
$
154
|
|
6,950,000
|
|
$
37
|
|
$
9,924,547
|
|
$
(330,000)
|
|
$
(6,682,834)
|
|
$
2,911,904
|
Issuance
of common stock for stock subscriptions received
|
|
|
|
|
|
|
|
|
|
240,000
|
|
|
|
240,000
|
Issuance
of common stock for licensing rights
|
2,000,000
|
|
11
|
|
(2,000,000)
|
|
(11)
|
|
|
|
|
|
|
|
-
|
Issuance
of stock for warrants exercised
|
2,050,000
|
|
10
|
|
(2,050,000)
|
|
(10)
|
|
|
|
|
|
|
|
-
|
Options
exercised,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
February
2005
|
|
|
|
|
35,000
|
|
1
|
|
10,499
|
|
|
|
|
|
10,500
|
|
May
2005
|
200,000
|
|
1
|
|
|
|
|
|
59,999
|
|
|
|
|
|
60,000
|
Note
payable conversion, February 2005
|
|
|
|
|
285,832
|
|
1
|
|
85,749
|
|
|
|
|
|
85,750
|
Issuance
of common stock for note payable conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
2005
|
285,832
|
|
1
|
|
(285,832)
|
|
(1)
|
|
|
|
|
|
|
|
-
|
|
May
2005
|
353,090
|
|
2
|
|
|
|
|
|
105,925
|
|
|
|
|
|
105,927
|
Issuance
of common stock for AFGP license
|
1,000,000
|
|
5
|
|
(1,000,000)
|
|
(5)
|
|
|
|
|
|
|
|
-
|
Issuance
of common stock for stock subscriptions received
|
1,400,000
|
|
6
|
|
(1,400,000)
|
|
(6)
|
|
|
|
90,000
|
|
|
|
90,000
|
Issuance
of stock for options exercised
|
135,000
|
|
2
|
|
(135,000)
|
|
(2)
|
|
|
|
|
|
|
|
-
|
Issuance
of common stock for services:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
2005
|
30,000
|
|
1
|
|
|
|
|
|
14,999
|
|
|
|
|
|
15,000
|
|
May
2005
|
3,075,000
|
|
15
|
|
|
|
|
|
3,320,985
|
|
|
|
|
|
3,321,000
|
|
June
2005
|
50,000
|
|
1
|
|
|
|
|
|
50,499
|
|
|
|
|
|
50,500
|
|
August
2005
|
111,111
|
|
1
|
|
(92,593)
|
|
(1)
|
|
15,000
|
|
|
|
|
|
15,000
|
|
October
2005
|
36,233
|
|
1
|
|
(36,233)
|
|
(1)
|
|
|
|
|
|
|
|
-
|
|
November
2005
|
311,725
|
|
2
|
|
(245,000)
|
|
(1)
|
|
36,249
|
|
|
|
|
|
36,250
|
|
December
2005
|
1,220,000
|
|
8
|
|
|
|
|
|
756,392
|
|
|
|
|
|
756,400
|
Common
stock canceled; August 2005
|
(250,000)
|
|
(1)
|
|
|
|
|
|
(257,499)
|
|
|
|
|
|
(257,500)
|
Common
stock issuable for services rendered
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
2005
|
|
|
|
|
200,000
|
|
1
|
|
149,999
|
|
|
|
|
|
150,000
|
|
August
2005
|
|
|
|
|
36,233
|
|
1
|
|
21,739
|
|
|
|
|
|
21,740
|
|
September
2005
|
|
|
|
|
125,000
|
|
1
|
|
74,999
|
|
|
|
|
|
75,000
|
|
September
2005 (Proteocell)
|
|
|
|
|
100,000
|
|
1
|
|
57,999
|
|
|
|
|
|
58,000
|
|
December
2005
|
|
|
|
|
120,968
|
|
1
|
|
74,999
|
|
|
|
|
|
75,000
|
Net
loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,096,296)
|
|
(5,096,296)
|
Balance,
December 31, 2005
|
40,801,197
|
|
$
220
|
|
608,375
|
|
$
6
|
|
$
14,503,079
|
|
$
-
|
|
$
(11,779,130)
|
|
$
2,724,175
|
PROTOKINETIX,
INCORPORATED
(A
Development Stage Company)
STATEMENTS
OF CASH FLOWS
For
the
Years Ended December 31, 2005 and 2004, and for the
Period
from December 23, 1999 (Date of Inception) to December 31, 2005
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
During
the
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
2005
|
|
2004
|
|
Stage
|
Cash
Flows from Operating Activities
|
|
|
|
|
|
|
Net
loss for year
|
$
(5,096,296)
|
|
$
(5,388,274)
|
|
$
(11,779,130)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
used
in operating activities
|
|
|
|
|
|
|
|
Depreciation
expense
|
674
|
|
253
|
|
927
|
|
|
Write-off
of Recaf license
|
269,756
|
|
|
|
269,756
|
|
|
Issuance
of common stock for services
|
|
|
|
|
|
|
|
|
and
expenses
|
4,316,390
|
|
2,796,501
|
|
8,222,891
|
|
|
Warrants
issued for consulting services
|
|
|
1,716,253
|
|
1,716,253
|
|
|
Stock
options issued for consulting services
|
|
|
212,734
|
|
212,734
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
(6,539)
|
|
|
|
(6,539)
|
|
|
|
Prepaid
expenses
|
(6,200)
|
|
|
|
(6,200)
|
|
|
|
Due
to outside
|
|
|
|
|
|
|
|
|
|
management
consultants
|
(86,958)
|
|
270,984
|
|
306,892
|
|
|
|
Accounts
payable
|
10,199
|
|
(20,660)
|
|
31,087
|
|
|
|
Accrued
interest payable
|
13,194
|
|
23,100
|
|
36,294
|
|
|
|
|
Net
cash used in operating activities
|
(585,780)
|
|
(389,109)
|
|
(995,035)
|
Cash
Flows from Investing Activities
|
|
|
|
|
|
|
Acquisition
of intangible assets
|
-
|
|
(45,756)
|
|
(45,756)
|
|
Purchase
of computer equipment
|
(1,705)
|
|
(1,683)
|
|
(3,388)
|
|
|
|
|
Net
cash flows used in investing activities
|
(1,705)
|
|
(47,439)
|
|
(49,144)
|
Cash
Flows from Financing Activities
|
|
|
|
|
|
|
Warrants
exercised
|
330,000
|
|
375,000
|
|
705,000
|
|
Stock
options exercised
|
70,500
|
|
30,000
|
|
100,500
|
|
Issuance
of common stock for cash
|
|
|
|
|
20,250
|
|
Proceeds
from convertible note
|
|
|
315,000
|
|
315,000
|
|
|
|
|
Net
cash flows provided by financing activities
|
400,500
|
|
720,000
|
|
1,140,750
|
|
|
|
|
Net
change in cash
|
(186,985)
|
|
283,452
|
|
96,571
|
Cash,
beginning of year
|
283,556
|
|
104
|
|
|
Cash,
end of year
|
$
96,571
|
|
$
283,556
|
|
$
96,571
|
Cash
paid for interest
|
$
-
|
|
$
-
|
|
$
-
|
Cash
paid for income taxes
|
$
-
|
|
$
-
|
|
$
-
|
Supplementary
Information - Non-cash Transactions:
|
|
|
|
|
|
|
Common
stock issuable for acquisition of intangible assets
|
$
-
|
|
$
934,000
|
|
$
934,000
|
|
Stock
subscriptions received
|
|
|
330,000
|
|
330,000
|
|
Note
payable converted to common stock
|
191,677
|
|
|
|
191,677
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO FINANCIAL STATEMENTS
Note
1. The Company and Significant Accounting Policies
Organization
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.
In
2003,
the Company entered into an assignment of license agreement (the "Agreement")
with BioKinetix, Inc., an Alberta, Canada, corporation. The Agreement provided
the Company with an exclusive assignment of all of the rights (the "Rights")
that BioKinetix possessed relating to proprietary technologies that are being
developed for the creation and commercialization of "superantibodies," an
enhancement of antibody technology that makes ordinary antibodies much more
lethal. In consideration, the Company's Board of Directors authorized the
Company to issue 16,000,000 shares of its common stock to the shareholders
of
BioKinetix.
The
Company is also currently researching the benefits and feasibility of
proprietary synthesized Antifreeze Glycoproteins ("AFGP"). In preliminary
studies, AFGP has demonstrated an ability to protect and preserve human cells
at
temperatures below freezing.
Going
Concern
As
shown
in the financial statements, 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,
2005. 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.
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.
Cash
Cash
consists of funds held in checking accounts. Cash balances may exceed federally
insured limits from time to time.
Accounts
Receivable
Receivables
consist of cost advances and $2,000 due from a veterinary center that purchased
the Company's AFGP product for research.
Computer
Equipment
Computer
equipment is stated at cost and is depreciated using straight-line methods
over
the estimated useful lives.
Intangible
Assets
The
intangible assets consist of license rights to proprietary medical research
technologies. The license rights are stated at cost or the value of the shares
issued by the Company to acquire the license rights. The cost is not amortized
because the licenses have indefinite lives. Intangible assets that have
indefinite useful lives are not amortized but are tested at least annually
for
impairment.
Due
to Outside Management Consultants
The
Company's offices are currently provided by outside management consultants
and
costs are allocated to the Company. The amounts due are unsecured, bear no
interest and are due on demand.
Convertible
Note Payable
On
February 1, 2004, the Company executed a subscription agreement under which
the Company issued to a corporation an 8% secured convertible note in exchange
for $315,000. The note was due February 1, 2006, and is convertible into
shares of the Company's common stock at the lower of $.30 per share or 70%
of
the average of the three lowest trading prices for the 30 days prior to the
conversion date. No beneficial conversion feature was applicable to this
convertible note.
Fair
Value of Financial Instruments
Financial
instruments consist of cash, accounts receivable, due to outside management
consultants, accounts payable, accrued interest and convertible note payable.
The fair value of these financial instruments approximates the carrying amounts
due to the short-term nature.
Revenue
Recognition
The
Company recognizes revenue when a sale is made, the fee is fixed or
determinable, collectibility is probable and no significant company obligations
remain.
Income
Taxes
The
Company accounts for income taxes under an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for expected
future tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences,
the
Company generally considers all expected future events other than enactments
of
changes in the tax laws or rates.
Research
and Development Costs
Research
and development costs are expensed as incurred.
Earnings
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. The Company's stock split 1:75 on August 24, 2001. In April 2002,
the Board of Directors approved a 2.5 for 1 split of the Company's stock. The
accompanying financial statements are presented on a post-split basis. The
loss
per share for the years ended December 31, 2005 and 2004, have been
adjusted accordingly. Diluted loss per share takes into consideration common
shares outstanding (computed under basic earnings per share) and potentially
dilutive securities. The effect of debt convertible into common shares was
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. Common
stock
issuable
is
considered outstanding as of the original approval date for purposes of earnings
per share computations.
There
are
200,000 warrants outstanding of which 100,000 are exercisable at $0.60 per
share
and 100,000 are exercisable at $0.58 per share; all with an expiration date
of
November 21, 2006.
Stock-Based
Compensation
The
Company has a stock-based equity incentive plan, which is described more fully
in Note 4. The Company accounts for the plan under the recognition and
measurement principles of APB Opinion No. 25, "Accounting for Stock Issued
to
Employees," and related interpretations. No stock-based employee compensation
cost is reflected in the net loss when options granted under the plan have
an
exercise price equal to or greater than the market value of the underlining
common stock on the date of grant. No options have been granted to employees
under the plan, therefore no reconciliation is provided of the effects on net
loss in applying the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Compensation for stock options and
warrants to purchase stock granted to non-employees is measured using the
Black-Scholes valuation model at the date of grant multiplied by the number
of
options or warrants granted. The issuance of common shares for services is
recorded at the quoted price of the shares on the date the services are
rendered.
Estimates
The
preparation of these financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
these financial statements and the reported amounts of revenues and expenses
during the period. Actual results could differ from these
estimates.
Recent
Accounting Pronouncements
SFAS
No.
151, "Inventory Costs," is effective for fiscal years beginning after June
15,
2005. This Statement amends the guidance in APB No. 43, Chapter 4, "Inventory
Pricing," to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). The adoption
of SFAS No. 151 is expected to have no impact on the Company's financial
statements.
SFAS
No.
152, "Accounting for Real Estate Time-Sharing Transactions," is effective for
fiscal years beginning after June 15, 2005. This Statement amends SFAS No.
66, "Accounting for Sales of Real Estate," to reference the financial accounting
and reporting guidance for real estate time-sharing transactions that is
provided in AICPA Statement of Position 04-2, "Accounting for Real Estate
Time-Sharing Transactions." The adoption of SFAS No. 152 is expected to have
no
impact on the Company's financial statements.
SFAS
No.
123(R), "Share-Based Payment," replaces SFAS No. 123, "Accounting for
Stock-Based Compensation," and supersedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees." This Statement requires that the compensation cost
relating to share-based payment transactions be recognized at fair value in
the
financial statements. The Company is required to apply this statement in the
first interim period that begins after December 15, 2005. The Company is
currently researching the effect of SFAS No. 123(R) on the financial
statements.
SFAS
No.
153, "Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29,"
is
effective for fiscal years beginning after June 15, 2005. This Statement
addresses the measurement of exchange of nonmonetary assets and eliminates
the
exception from fair value measurement for nonmonetary exchanges of similar
productive assets in paragraph 21(b) of APB Opinion No. 29, "Accounting for
Nonmonetary Transactions," and replaces it with an exception for exchanges
that
do not have commercial substance. The adoption of SFAS No. 153 is expected
to
have no impact on the Company's financial statements.
The
EITF
reached consensus on Issue No. 03-1, "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments," which provides guidance
on determining when an investment is considered impaired, whether that
impairment is other than temporary, and the measurement of an impairment loss.
The FASB issued FSP EITF 03-1-1, "Effective Date of Paragraphs 10-20 of EITF
Issue No. 03-1," "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments," which delays the effective date for the
measurement and recognition criteria contained in EITF 03-1 until final
application guidance is issued. The adoption of this consensus or FSP is
expected to have no impact on the Company's financial statements.
SFAS
No.
154, "Accounting Changes and Error Corrections," a replacement of APB No. 20,
"Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim
Financial Statements." SFAS No. 154 changes the requirements for the accounting
for and reporting of a change in accounting principle. Previously, most
voluntary changes in accounting principles required recognition via a cumulative
effect adjustment within net income of the period of the change. SFAS No. 154
requires retrospective application to prior periods' financial statements,
unless it is impracticable to determine either the period-specific effects
or
the cumulative effect of the change. SFAS No. 154 is effective for accounting
changes made in fiscal years beginning after December 15, 2005; however,
this Statement does not change the transition provisions of any existing
accounting pronouncements. The adoption of SFAS No. 154 is expected to have
no
impact on the Company's financial statements.
In
September 2005, the EITF reached consensus on Issue No. 05-08, "Income Tax
Consequences of Issuing Convertible Debt with a Beneficial Conversion Feature."
EITF 05-08 is effective for financial statements beginning in the first interim
or annual reporting period beginning after December 15, 2005. The adoption
of EITF 05-08 is expected to have no impact on the Company's financial
statements.
In
September 2005, the EITF reached consensus on Issue No. 05-02, "The Meaning
of
'Conventional Convertible Debt Instrument' in EITF Issue No. 00-19, 'Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in,
a
Company's Own Stock.'" EITF 05-02 is effective for new instruments entered
into
and instruments modified in reporting periods beginning after June 29,
2005. The adoption of EITF 05-02 is expected to have no impact on the Company's
financial statements.
In
September 2005, the EITF reached consensus on Issue No. 05-07, "Accounting
for Modifications to Conversion Options Embedded in Debt Instruments and Related
Issues." EITF 05-07 is effective for future modifications of debt instruments
beginning in the first interim or annual reporting period beginning after
December 15, 2005. The adoption of EITF 05-07 is expected to have no impact
on the Company's financial statements.
Note
2. Intangible Assets
The
Company has the following intangible assets at December 31:
BioKinetix
License
|
|
$2,400,000
|
AFGP
License
|
|
710,000
|
|
|
$3,110,000
|
At
December 31, 2005, management has determined that there is no remaining useful
life of the RECAF license. Accordingly, an impairment loss of $269,756 was
recorded in 2005.
Note
3. Income Taxes
The
Company is liable for taxes in the United States. As of December 31, 2005,
the Company did not have any income for tax purposes and therefore, no tax
liability or expense has been recorded in these financial
statements.
The
Company has tax losses of approximately $11,780,000 available to reduce future
taxable income. The tax loss expires in years between 2022 and
2024.
The
deferred tax asset associated with the tax loss carry forward is approximately
$4,005,000. The Company has provided a valuation allowance against the deferred
tax asset. The valuation allowance increased by $1,731,000 and $1,949,000 for
2005 and 2004, respectively.
Note
4. Discontinued Operations
In
2003,
the Company signed the licensing agreement described in Note 1. This agreement
changed the Company's business plan to that of a medical research company.
Accordingly, the operating results related to the internet-based real estate
listing segment have been presented as discontinued operations in these
financial statements for all periods presented. There were no revenues for
the
years presented in losses from discontinued operations.
Note
5. Stock-Based Compensation
In
2003,
the Company adopted its 2003 and 2004 Stock Incentive Plans. Each plan provides
for the issuance of incentive and non-qualified shares of the Company's stock
to
officers, directors, employees and non-employees. The Board of Directors
determines the terms of the shares or options to be granted, including the
number of shares or options, the exercise price, and the vesting schedule,
if
applicable. In 2004 and 2005, the Company issued common shares from both plans
to non-employee consultants for services rendered as follows:
2004
|
|
Number
of
Shares
|
|
Value
per
Share
|
March
|
|
1,652,300
|
|
$0.60
|
May
|
|
500,000
|
|
$1.03
|
July
|
|
159,756
|
|
$0.75
|
August
|
|
100,000
|
|
$0.71
|
October
|
|
732,400
|
|
$0.65
|
November
|
|
650,000
|
|
$0.70
|
December
|
|
255,000
|
|
$0.65
|
Total
2004
|
|
4,049,456
|
|
|
2005
|
|
Number
of
Shares
|
|
Value
per
Share
|
April
|
|
30,000
|
|
$0.50
|
May
|
|
3,075,000
|
|
$1.08
|
June
|
|
50,000
|
|
$1.01
|
August
|
|
18,518
|
|
$0.81
|
November
|
|
66,725
|
|
$0.54
|
December
|
|
1,220,000
|
|
$0.62
|
Total
2005
|
|
4,460,243
|
|
|
In
addition, during 2004 and 2005, the Company issued stock options to directors,
advisors and consultants. A summary of the Company's outstanding stock options
is as follows:
|
|
Number
of
Options
|
|
Weighted
Average
Exercise
Price
|
Outstanding
at December 31, 2003
|
|
-
|
|
$
-
|
Granted
|
|
400,000
|
|
$0.30
|
Exercised
|
|
(100,000)
|
|
$0.30
|
Outstanding
at December 31, 2004
|
|
300,000
|
|
$0.30
|
Granted
|
|
|
|
|
Exercised
|
|
(235,000)
|
|
$0.30
|
Forfeited
|
|
(65,000)
|
|
$0.30
|
Outstanding
at December 31, 2005
|
|
-
|
|
|
Options
exercisable at December 31, 2005
|
|
-
|
|
|
The
fair
value of each option granted is estimated at the date of grant using the
Black-Scholes option-pricing model. The assumptions used in calculating the
fair
value of the options granted were a risk-free interest rate of 4.75%, a one-year
expected life (except for the options exercised for which a two-week expected
life was used), volatility of 118% and a dividend yield of 0.0%.
Note
6. Subsequent Event
In
2006,
the Company entered into letter agreements for a private placement offering
raising a total of $450,000 by issuing 900,000 shares of common stock at $0.50
per share including warrants to purchase 450,000 shares of common stock. The
warrants are exercisable at $0.50 per share until February 1,
2007.
In
February 2006, the Company issued 166,359 shares of common stock for
consulting services.