0001079973-17-000456.txt : 20170808 0001079973-17-000456.hdr.sgml : 20170808 20170808105418 ACCESSION NUMBER: 0001079973-17-000456 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 56 CONFORMED PERIOD OF REPORT: 20170630 FILED AS OF DATE: 20170808 DATE AS OF CHANGE: 20170808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ProtoKinetix, Inc. CENTRAL INDEX KEY: 0001128189 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943355026 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-32917 FILM NUMBER: 171013670 BUSINESS ADDRESS: STREET 1: 705 DUGAN ROAD CITY: BELPRE STATE: OH ZIP: 45714 BUSINESS PHONE: 304-299-5070 MAIL ADDRESS: STREET 1: 705 DUGAN ROAD CITY: BELPRE STATE: OH ZIP: 45714 FORMER COMPANY: FORMER CONFORMED NAME: RJV NETWORK INC DATE OF NAME CHANGE: 20010130 10-Q 1 pktx_10q-063017.htm FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2017

OR
  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ___________________.

Commission file number:

PROTOKINETIX, INCORPORATED
(Exact name of registrant as specified in its charter) 

Nevada
 
94-3355026
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
705 Dugan Road
Belpre, Ohio  45714
(Address of principal executive offices)

304-299-5070
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No

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

Large accelerated filer   
 
Accelerated filer                    
Non-accelerated filer     
(Do not check if a smaller reporting company)
Smaller reporting company  
    Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes  No

As of August 8, 2017, there were 245,952,433 shares of ProtoKinetix, Incorporated that were issued and outstanding.




PROTOKINETIX, INCORPORATED
TABLE OF CONTENTS


PART I
 
   
FINANCIAL INFORMATION
 
   
Item 1. Financial Statements
 
   
Unaudited Condensed Balance Sheets
3
   
Unaudited Condensed Statements of Operations
4
   
Unaudited Condensed Statement of Stockholders’ Equity
5
   
Unaudited Condensed Statements of Cash Flows
6
   
Notes to Unaudited Condensed Financial Statements
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 20
   
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 23
   
Item 4. Controls and Procedures
 24
   
PART II
 
   
OTHER INFORMATION
 
   
Item 1. Legal Proceedings
 25
   
Item 1A. Risk Factors
 25
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 25
   
Item 3. Defaults Upon Senior Securities
 25
   
Item 4. Mine Safety Disclosure
 25
   
Item 5. Other Information
 25
   
Item 6. Exhibits
 26
   
Signatures
 27
   

2



PROTOKINETIX, INCORPORATED
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)

             
   
June 30, 2017
   
December 31, 2016
 
ASSETS
           
Current Assets
           
 Cash
 
$
238,277
   
$
371,029
 
Prepaid expenses and deposits (Notes 3 and 11)
   
142,500
     
70,384
 
Total current assets
   
380,777
     
441,413
 
                 
Intangible assets (Note 4)
   
151,173
     
100,681
 
                 
Total assets
 
$
531,950
   
$
542,094
 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Current Liabilities
               
Accounts payable and accrued liabilities (Note 10)
 
$
5,369
   
$
45,295
 
Total current liabilities
   
5,369
     
45,295
 
Stockholders' Equity
               
Common stock, $0.0000053 par value; 400,000,000 common shares authorized; 245,952,433 and 237,952,433 shares issued and outstanding as at June 30, 2017 and December 31, 2016 respectively (Note 9)
   
1,316
     
1,273
 
Additional paid-in capital
   
29,852,293
     
29,115,795
 
Accumulated deficit
   
(29,327,028
)
   
(28,620,269
)
Total stockholders’ equity
   
526,581
     
496,799
 
Total liabilities and stockholders’ equity
 
$
531,950
   
$
542,094
 
                 
Basis of Presentation – Going Concern Uncertainties (Note 1)
Commitments and Contingency (Note 11)

 

See Notes to Financial Statements
 
 
3

 
 
PROTOKINETIX, INCORPORATED
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three and Six Months Ended June 30, 2017 and 2016

   
Three months
ended
June 30, 2017
   
Three months
ended
June 30, 2016
   
Six months
ended
June 30, 2017
   
Six months
ended
June 30, 2016
 
                         
                         
                         
EXPENSES
                       
Amortization – intangible assets (Note 4)
 
$
750
   
$
750
   
$
1,500
   
$
1,500
 
General and administrative
   
29,804
     
29,503
     
61,937
     
50,934
 
Professional fees (Note 10)
   
24,322
     
41,806
     
67,274
     
108,313
 
Research and development
   
86,235
     
108,481
     
155,273
     
180,132
 
Share-based compensation (Note 10)
   
186,025
     
190,244
     
416,541
     
374,763
 
                                 
     
(327,136
)
   
(370,784
)
   
(702,525
)
   
(715,642
)
                                 
                                 
OTHER ITEM
                               
Foreign exchange loss
   
(4,259
)
   
(2,169
)
   
(4,234
)
   
(2,166
)
                                 
Net loss for the period
 
$
(331,395
)
 
$
(372,953
)
 
$
(706,759
)
 
$
(717,808
)
                                 
Net loss per common share (basic and diluted)
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
 
$
(0.00
)
                                 
Weighted average number of common shares outstanding (basic and diluted)
   
245,952,433
     
217,340,895
     
228,044,331
     
216,988,147
 

 


See Notes to Financial Statements
 
4

PROTOKINETIX, INCORPORATED
STATEMENT OF STOCKHOLDERS’ EQUITY
(Unaudited)
For the Period from December 31, 2016 to June 30, 2017




 
Common Stock
   
Additional
Paid-in
   
Accumulated
       
   
Shares
   
Amount
   
capital
   
deficit
   
Total
 
Balance, December 31, 2016
   
237,952,433
   
$
1,273
   
$
29,115,795
   
$
(28,620,269
)
 
$
496,799
 
                                         
Issuance of common stock pursuant to private placement offering
   
8,000,000
     
43
     
319,957
     
-
     
320,000
 
                                         
Fair value of compensatory options issued
   
-
     
-
     
416,541
     
-
     
416,541
 
                                         
Net loss for the period
   
-
     
-
     
-
     
(706,759
)
   
(706,759
)
                                         
Balance, June 30, 2017
   
245,952,433
   
$
1,316
   
$
29,852,293
   
$
(29,327,028
)
 
$
526,581
 


 

See Notes to Financial Statements

 
5


PROTOKINETIX, INCORPORATED
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, 2017 and 2016


   
Six Months ended
 June 30, 2017
   
Six Months ended
June 30, 2016
 
             
CASH FLOWS USED IN OPERATING ACTIVITIES
           
Net loss for the period
 
$
(706,759
)
 
$
(717,808
)
Adjustments to reconcile net loss to cash used in operating activities:
               
Amortization – intangible assets
   
1,500
     
1,500
 
Issuance and amortization of common stock for services
   
-
     
7,000
 
Fair value of compensatory options granted
   
416,541
     
374,763
 
                 
Changes in operating assets and liabilities:
               
Prepaid expenses and deposits
   
(87,730
)
   
(154,198
)
Accounts payable and accrued liabilities
   
(36,295
)
   
66,722
 
                 
Net cash used in operating activities
   
(412,743
)
   
(422,021
)
                 
CASH FLOWS USED IN INVESTING ACTIVITIES
               
Purchase of intangible assets
   
(40,009
)
   
(6,538
)
                 
Net cash used in investing activities
   
(40,009
)
   
(6,538
)
                 
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Issuance of common stock for cash
   
320,000
     
166,000
 
                 
Net cash from financing activities
   
320,000
     
166,000
 
                 
Net change in cash
   
(132,752
)
   
(262,559
)
                 
Cash, beginning of period
   
371,029
     
371,072
 
                 
Cash, end of period
 
$
238,277
   
$
108,513
 
                 
Cash paid for interest
 
$
-
   
$
-
 
                 
Cash paid for income taxes
 
$
-
   
$
-
 
 Supplementary information – non-cash transactions:
               
Common stock issued for consulting services
 
$
-
   
$
7,000
 
       Intangible asset costs previously included in accounts payable and accrued liabilities
   
3,631
     
-
 
       Intangible asset costs previously included in prepaid expenses and deposits
   
15,614
     
-
 
                 

 


See Notes to Financial Statements
 
6




PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

Note 1.  Basis of Presentation – Going Concern Uncertainties

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

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

During the year ended December 31, 2016, the Company filed Form 51-105F1 – Notice – OTC Issuer Ceases to be an OTC Reporting Issuer with the British Columbia Securities Commission (“BCSC”).

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

The Company has not developed a commercially viable product, has not generated any significant revenue to date, and has incurred losses since inception, resulting in a net accumulated deficit at June 30, 2017.  These factors raise substantial doubt about the Company's ability to continue as a going concern.

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

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

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. In the opinion of management, the unaudited interim financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K, filed February 21, 2017, with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.




7





PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

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

Use of Estimates

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

Cash

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

Fair Value of Financial Instruments

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

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

Level 1 – quoted prices in active markets for identical assets or liabilities
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Level 1 inputs are used to measure cash. At June 30, 2017 there were no other assets or liabilities subject to additional disclosure.

Income Taxes

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




8

 

PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

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

Intangible Assets – Patent and Patent Application Costs

The Company owns intangible assets consisting of certain patents and patent applications. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which they relate. All other expenditures are recognized in profit or loss as incurred.
 
As at June 30, 2017, the Company does not hold any intangible assets with indefinite lives.
 
Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization method and amortization period of an intangible asset with a finite life is reviewed at least annually.

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the Company’s patents, whereas no amortization has been recognized on the patent application costs as at June 30, 2017.

Research and Development Costs

Research and development costs are expensed as incurred.

Loss per Share and Potentially Dilutive Securities

Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding in the period.  Diluted loss per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities.  The effect of 44,100,000 stock options (June 30, 2016 – 28,600,000), and 6,500,000 warrants (June 30, 2016 – 6,500,000) were not included in the computation of diluted earnings per share for all periods presented because it was anti-dilutive due to the Company's losses.

Share-Based Compensation

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

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



9

PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

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

Share-Based Compensation (cont’d)

The Company accounts for stock compensation arrangements with persons classified as non-employees for accounting purposes in accordance with ASC 505-50 “Stock-Based Transactions with Nonemployees”, which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of share-based compensation is subject to periodic adjustment as the underlying instruments vest. The fair value of stock options is estimated using the Black-Scholes Option Pricing Model and the compensation charges are amortized over the vesting period.

Common stock

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

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

Related Party Transactions

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

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessment of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is substantial doubt about the entity’s ability to continue as a going concern. The requirement is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early adoption is permitted. The adoption of this guidance did not have a material impact on the Company’s financial statements.

Accounting Standards Update 2015-17 – Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This accounting pronouncement requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Currently deferred tax liabilities and assets must be presented as current and noncurrent. The policy was effective for periods ending after December 16, 2016. The adoption of this guidance did not have a material impact on the Company’s financial statements.




10



PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

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

Recent Accounting Pronouncements (cont’d)

Accounting Standards Update 2016-09 – Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. This accounting pronouncement, which goes into effect for periods ending after December 16, 2016, addresses the simplification of several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of this guidance did not have a material impact on the Company’s financial statements.

Accounting Standards Update 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This accounting pronouncement, which goes into effect December 12, 2017, is far reaching and covers several presentation areas dealing with measurement, impairment, assumptions used in estimating fair value and several other areas. The Company is reviewing this update to determine the impact it may have on its financial statements.

Accounting Standards Update 2016-02-Leases (Topic 842). This accounting pronouncement allows lessees to make an accounting policy election to not recognize a lease asset and liability for leases with a term of 12 months or less and do not have a purchase option that is expected to be exercised. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its financial statements.

Note 3.   Prepaid Expenses and Deposits

The following summarizes the Company’s prepaid expenses and deposits outstanding as at June 30, 2017 and December 31, 2016:
 
   
June 30,
2017
   
December 31,
2016
 
             
Deposit on research agreement (Note 11(c))
 
$
134,370
   
$
54,770
 
Other prepaid expenses
   
8,130
     
15,614
 
                 
   
$
142,500
   
$
70,384
 




11

 

PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017


Note 4.   Intangible Assets

Intangible asset transactions are summarized as follows:
 
   
Patent Rights
   
Patent Application
Rights
   
Total
 
Cost
                 
Balance, December 31, 2015
 
$
30,000
   
$
41,760
   
$
71,760
 
Additions
   
-
     
33,421
     
33,421
 
Balance, December 31, 2016
 
$
30,000
   
$
75,181
   
$
105,181
 
Additions
   
-
     
51,992
     
51,992
 
Balance, June 30, 2017
 
$
30,000
   
$
127,173
   
$
157,173
 
                         
Accumulated amortization
                       
Balance, December 31, 2015
 
$
1,500
   
$
-
   
$
1,500
 
Amortization
   
3,000
     
-
     
3,000
 
Balance, December 31, 2016
 
$
4,500
   
$
-
   
$
4,500
 
Amortization
   
1,500
     
-
     
1,500
 
Balance, June 30, 2017
 
$
6,000
   
$
-
   
$
6,000
 
                         
Net carrying amounts
                       
December 31, 2016
 
$
25,500
   
$
75,181
   
$
100,681
 
June 30, 2017
 
$
24,000
   
$
127,173
   
$
151,173
 


During the year ended December 31, 2015, the Company entered into an Assignment of Patents and Patent Application (effective January 1, 2015) (the “Patent Assignment”) with the Institut National des Sciences Appliquees de Rouen (“INSA”) for the assignment of certain patents and all rights associated therewith (the “Patents”). The Company and INSA had previously entered into a licensing agreement for the Patents in August 2004. The Patent Assignment transfers all of the Patents and rights associated therewith to the Company upon payment to INSA in the sum of $30,000 (25,000 Euros) (paid). During the six month period ended June 30, 2017, the Company recorded $1,500 (June 30, 2016 - $1,500) in amortization expense associated with the Patents.

During the year ended December 31, 2015, the Company entered into a Technology Transfer Agreement with Grant Young for the assignment of his 50% ownership of certain patents and all rights associated therewith (the "Patent Application Rights").  In exchange for the Patent Application Rights, the Company agreed to pay $10,000 (paid) and to issue 6,000,000 warrants (issued) to purchase shares of the Company's common stock at an exercise price of $0.10 per share for a period of five years. The Patent Application Rights had a total fair value of $35,000, which was allocated as $10,000 to the cash consideration paid, with the remaining $25,000 being allocated to the warrant component of the overall consideration. The Company has incurred $78,692 in direct costs relating to the Patent Application Rights, $40,922 of which were incurred during the six month period ended June 30, 2017.

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



12




PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

Note 4.   Intangible Assets (cont’d)

During the year ended December 31, 2016, the Company entered into a Universal Assignment with Grant Young for the assignment of his ownership of certain new and useful improvements in an invention entitled “Use of Anti-Aging Glycoprotein for Enhancing Survival of Neurosensory Precursor Cells” (the “New Patent Application Rights”).  In exchange for the New Patent Application Rights, the Company agreed to pay $1 (paid).  The Company has incurred $13,481 in direct costs relating to the New Patent Application Rights, $11,065 of which were incurred during the six month period ended June 30, 2017.

No amortization was recorded on the Patent Application Rights to June 30, 2017.

Note 5.  Credit Facility

On June 16, 2016, the Company executed a line of credit arrangement for an amount of up to $250,000 with Pleasants County Bank, West Virginia.  Pursuant to the terms of the line of credit, interest will accrue on the amount of credit outstanding at a rate of 1.5% above the prime rate adjusted monthly.  The Company’s President and CEO pledged personal assets to secure the line of credit and the Company pledged its patent rights in the provisional patent application numbered 62287857, dated January 21, 2016, “Use of Anti-Aging Glycoprotein for Enhancing Survival of Neurosensory Precursor Cells”. As at March 31, 2017 and December 31, 2016, the balance outstanding was $nil.  As of June 30, 2017 the line of credit was canceled and the pledged assets were released.

Note 6.  Common Shares Issued for Services

During the six month periods ended June 30, 2017 and 2016, the Company issued shares of common stock for services and other value rendered as follows:

 
2017
 
Number
of Shares
   
Value
per Share
   
Total
 
                   
January - June 2017
   
-
   
$
-
   
$
-
 
     
-
           
$
-
 


 
2016
 
Number
of Shares
   
Value
per Share
   
Total
 
                   
March 2016
   
100,000
   
$
0.07
   
$
7,000
 
     
100,000
           
$
7,000
 


Note 7.  Stock Options

On December 30, 2016, the Board of Directors of the Company adopted the 2017 Stock Option and Stock Bonus Plan (the “2017 Plan”).  The Board of Directors adopted the 2017 Plan as it anticipates utilizing equity compensation as part of its ongoing standard corporate operations and in connection with its contemplated activities going forward.

The aggregate number of shares that may be issued under the 2017 Plan is 30,000,000 shares subject to adjustment as provided therein.  The 2017 Plan includes two types of options.  Options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended are referred to as incentive options.  Options which are not intended to qualify as incentive options are referred to as non-qualified options.



13



PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017


Note 7.  Stock Options (cont’d)

As of June 30, 2017, 16,200,000 options and no shares of common stock have been granted under the 2017 Plan.

The 2017 Plan is administered by the Board of Directors, or a committee appointed by the Board of Directors.  In addition to determining who will be granted options or stock bonuses, the committee has the authority and discretion to determine when options and bonuses will be granted and the number of options and bonuses to be granted.  The committee also may determine a vesting and/or forfeiture schedule for bonuses and/or options granted, the time or times when each option becomes exercisable, the duration of the exercise period for options and the form or forms of the agreements, certificates or other instruments evidencing grants made under the 2017 Plan.  The committee may determine the purchase price of the shares of common stock covered by each option.  The committee also may impose additional conditions or restrictions not inconsistent with the provisions of the 2017 Plan.  The committee may adopt, amend and rescind such rules and regulations as in its opinion may be advisable for the administration of the 2017 Plan. 

In the event that a change, such as a stock split, is made in the Company’s capitalization which results in an exchange or other adjustment of each share of common stock for or into a greater or lesser number of shares, appropriate adjustments will be made to unvested bonuses and in the exercise price and in the number of shares subject to each outstanding option.  The committee also may make provisions for adjusting the number of bonuses or underlying outstanding options in the event the Company effects one or more reorganizations, recapitalizations, rights offerings, or other increases or reductions of shares of its outstanding common stock.  Options and bonuses may provide that in the event of the dissolution or liquidation of the Company, a corporate separation or division or the merger or consolidation of the Company, the holder may exercise the option on such terms as it may have been exercised immediately prior to such dissolution, corporate separation or division or merger or consolidation; or in the alternative, the committee may provide that each option granted under the 2017 Plan shall terminate as of a date fixed by the committee.

The exercise price of any option granted under the 2017 Plan must be no less than 100% of the “fair market value” of the Company’s common stock on the date of grant.  The exercise period of any option shall not exceed ten years from the date of grant of the option. Any incentive stock option granted under the 2017 Plan to a person owning more than 10% of the total combined voting power of the common stock must be at a price of no less than 110% of the fair market value per share on the date of grant and the term shall be for no more than five years. 

Stock option transactions are summarized as follows:

   
Number of
Stock Options
   
Weighted Average
Exercise Price
   
Weighted Average
 Fair Value
 
Weighted Average
 Remaining Life
         
$
   
 
(Years)
Outstanding, December 31, 2016
   
28,900,000
     
0.06
     
0.04
   
      Options granted
   
16,200,000
     
0.05
     
0.06
   
      Options expired
   
(1,000,000
)
   
0.10
     
0.03
   
Outstanding, June 30, 2017
   
44,100,000
     
0.06
     
0.05
 
2.72



14

 
PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

Note 7.  Stock Options (cont’d)

The fair values of the stock options granted during the six month periods ended June 30, 2017 and 2016 were estimated using the Black-Scholes Option Pricing Model.  The weighted average assumptions used in the pricing model for these options are as follows:

   
June 30, 2017
   
June 30, 2016
 
Risk-free interest rate
   
1.05
%
   
0.56
%
Dividend yield
   
0.00
%
   
0.00
%
Expected stock price volatility
   
125.00
%
   
125.00
%
Expected forfeiture rate
   
0.00
%
   
0.00
%
Expected life
 
3.46 years
   
3.94 years
 

The following non-qualified stock options were outstanding and exercisable at June 30, 2017:

Expiry date
 
Exercise Price
   
Number of Options
Outstanding
   
Number of
Options
Exercisable
 
                $    
February 25, 2020
   
0.04
     
2,000,000
     
-
 
February 24, 2018
   
0.05
     
1,000,000
     
1,000,000
 
February 25, 2020
   
0.04
     
4,000,000
     
4,000,000
 
February 28, 2020
   
0.04
     
5,000,000
     
5,000,000
 
June 30, 2018
   
0.10
     
600,000
     
600,000
 
December 31, 2019
   
0.08
     
15,000,000
     
15,000,000
 
October 05, 2018
   
0.08
     
300,000
     
300,000
 
December 31, 2020
   
0.05
     
16,200,000
     
8,100,000
 
             
44,100,000
     
34,000,000
 

As at June 30, 2017, the aggregate intrinsic value of the Company’s stock options is $674,000 (December 31, 2016 – $110,000). The weighted average fair value of stock options granted during the six month period ended June 30, 2017 is $0.06 (2016 - $0.05).

Note 8.  Warrants

Warrant transactions for the six month period ended June 30, 2017 are summarized as follows:

   
Number of
Warrants
   
Weighted
Average Exercise
Price
 
Balance, December 31, 2016 and June 30, 2017
   
6,500,000
   
$
0.11
 





15



PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

Note 8.  Warrants (cont’d)

The following warrants were outstanding and exercisable as at June 30, 2017:

Number of Warrants
   
Exercise Price ($)
 
 
Expiry Date
 
500,000
     
0.25
 
November 8, 2018
 
6,000,000
     
0.10
 
April 22, 2020
 
6,500,000
            


Note 9.  Stockholders’ Equity

The Company is authorized to issue 400,000,000 (December 31, 2016 – 400,000,000) shares of $0.0000053 par value common stock.  Each holder of common stock has the right to one vote but does not have cumulative voting rights. Shares of common stock are not subject to any redemption or sinking fund provisions, nor do they have any preemptive, subscription or conversion rights. Holders of common stock are entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid as of June 30, 2017 (December 31, 2016 - $nil).

During the six month period ended June 30, 2017, the Company:

a)
Issued 8,000,000 shares of common stock to investors (which included both the President and CEO as well as the CFO of the Company) at $0.04 for gross proceeds of $320,000.

Note 10. Related Party Transactions and Balances

During the six month period ended June 30, 2016, the Company:

a)
Entered into a consulting agreement with an effective date of January 1, 2016 with the Company’s President and CEO whereby he will be compensated at a nominal amount of $1 for services through to December 31, 2016. The agreement also stipulates a termination fee that would pay the Company’s President and CEO $100,000 per year of service if terminated without cause or in the case of termination upon a change of control event, the termination fee would be equal to $100,000 per year of service plus 2.5% of the aggregate transaction value of the change of control.  In addition, the agreement stipulates that he would be entitled to a bonus payment equal to 2.5% of the aggregate transaction value of an Application Sale or license of any Patent Rights, Patent Application Rights or products effected during the term of his agreement.  Pursuant to the agreement, he was also granted 5,000,000 stock options exercisable into common shares of the Company until December 31, 2019 at a price of $0.08 per share (Note 7).  The options are fully vested as at June 30, 2017.




16




PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017


Note 10. Related Party Transactions and Balances (cont’d)

b)
Entered into a consulting agreement with an effective date of January 1, 2016 with the Company’s CFO whereby she will be compensated at a monthly fee of $6,000 for services through to December 31, 2016.  The agreement also stipulates a termination fee that would pay the Company’s CFO $36,000 if terminated without cause or $72,000 upon termination due to a change of control event.  Pursuant to the agreement, she was also granted 4,000,000 stock options exercisable into common shares of the Company until December 31, 2019 at a price of $0.08 per share (Note 7).  The options are fully vested as at June 30, 2017.  A total of $36,000 was paid to the Company’s CFO during the period ended June 30, 2016.

c)
Entered into a directorship agreement with an effective date of January 1, 2016 with a director of the Company. Pursuant to the agreement, the director was issued 1,000,000 stock options exercisable into common shares of the Company until December 31, 2019 at a price of $0.08 per share (Note 7). The options are fully vested as at June 30, 2017.

d)
Recognized $271,850 in share-based compensation associated with stock options granted to key management personnel.

During the six months ended June 30, 2017, the Company:

a)
Entered into a consulting agreement with an effective date of January 1, 2017 with the Company’s President and CEO whereby he will be compensated at a nominal amount of $1 for services through to December 31, 2017. The agreement also stipulates a termination fee that would pay the Company’s President and CEO $100,000 per year of service if terminated without cause or in the case of termination upon a change of control event, the termination fee would be equal to $100,000 per year of service plus 2.5% of the aggregate transaction value of the change of control.  In addition, the agreement stipulates that he would be entitled to a bonus payment equal to 2.5% of the aggregate transaction value of a sale or license of any Patent Rights, Patent Application Rights or products effected during the term of his agreement.  Pursuant to the agreement, he was also granted 5,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

b)
Entered into a consulting agreement with an effective date of January 1, 2017 with the Company’s CFO whereby she will be compensated at a monthly fee of $6,000 for services through to December 31, 2017.  The agreement also stipulates a termination fee that would pay the Company’s CFO $72,000 per year of service (including the pro-rata amount for partial years of service) if terminated without cause or upon termination due to a change of control event.  Pursuant to the agreement, she was also granted 4,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.  A total of $36,000 was paid to the Company’s CFO during the period ended June 30, 2017.

c)
Entered into a directorship agreement with an effective date of January 1, 2017 with a director of the Company.  Pursuant to the agreement, the director was issued 1,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

d)
Recognized $198,274 in share-based compensation associated with stock options granted to key management personnel.






17




PROTOKINETIX, INCORPORATED
(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS
June 30, 2017

Note 10. Related Party Transactions and Balances (cont’d)

As at June 30, 2017 and December 31, 2016, the following amounts are due to related parties:

     
June 30,
2017
   
December 31,
2016
 
Clarence Smith (CEO)
Accounts payable and accrued liabilities
 
$
-
   
$
81
 

Amounts included in accounts payable and accrued liabilities are non-interest bearing, unsecured and repayable on demand.

Note 11.   Commitments and Contingency

As at June 30, 2017, the Company has the following commitments:

a)
Entered into a consulting agreement with an effective date of January 1, 2017 whereby the Company would pay the consultant $7,000 per month for providing research and development services.  Pursuant to the agreement, the consultant was also granted 5,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

b)
Entered into a consulting agreement for business development services effective January 1, 2017.  The consultant was granted 1,200,000 stock options exercisable into common shares of the Company at a price of $0.05 per share until December 31, 2020 (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

c)
Entered into a Collaborative Research Agreement (the “CREA”) effective May 31, 2016 with The University of British Columbia (“UBC”) for a term of 2 years. Pursuant to the CREA, the Company paid a total of CAD $169,000 ($131,448) in advance for services to be provided by UBC in the first year, and paid an additional CAD $201,500 ($146,585) during the six month period ended June 30, 2017, in advance of services to be provided by UBC in the second year. The CREA can be terminated by either party with 30 days’ written notice.  As at June 30, 2017, a total of $134,370 is included in prepaid expenses and deposits (December 31, 2016 - $54,770).

d)
Entered into a consulting agreement effective March 1, 2015, whereby the Company would pay the consultant $2,700 per month for an initial term of 1 year, continued on a year-to-year basis thereafter unless otherwise terminated by either party with at least 30 days’ notice, for providing public relations services. The consultant is also entitled to 400,000 shares of common stock, which will be issued at a rate of 25% (100,000 shares) every 3 months over the term of the agreement (200,000 shares issued during the six month period ended June 30, 2016 (Note 6)). The consultant was also issued 1,000,000 stock options on signing during the year ended December 31, 2015, with each stock option exercisable into a common share at a price of $0.10. The stock options expired March 12, 2016.



18

 
PROTOKINETIX, INCORPORATED
(A Developmental Stage Company)

NOTES TO THE FINANCIAL STATEMENTS
June 30, 2017

Note 11.   Commitments and Contingency (cont’d)

e)
Entered into a royalty agreement with the Governors of the University of Alberta (the “University”) whereby the University had developed certain intellectual property (the “Additional Patent Rights”) in conjunction with and by permission of the Company employing patented intellectual property of the Company. The agreement assigns the Additional Patent Rights to the Company in return for 5% of any future gross revenues (the “Royalty”) derived from products arising from the Patent Rights. The Company will have the right and option for two years from the earlier of September 1, 2015 or the first date that the University publishes its research related to the Additional Patent Rights to buy out all of the University’s Royalty for consideration of the aggregate sum of CAD $5,000,000.

f)
Entered into a consulting agreement effective May 1, 2015, whereby the Company would pay the consultant $4,000 per month for an initial term of 1 year, continued on a year-to-year basis thereafter unless otherwise terminated by either party with at least 30 days’ notice  for providing research and development services.  During the six month period ended June 30, 2017 the contract was revised whereby the Company would pay the consultant CAD $4,000 per month retroactively beginning January 1, 2017.  As a result of the revision, an amount of $8,130 is included within prepaid expenses as at June 30, 2017 and will be applied towards future services.

g)
Entered into a Material Transfer Agreement effective March 31, 2017 with Proactive Immune Sciences Corporation (“Proactive”) for a term of 1 year.  The Company will furnish AAGP™ at no cost to Proactive so that they may test and evaluate AAGP™ for possible use in Immune Cell Banking.

The Company was delinquent in filing certain income tax returns with the U.S. Internal Revenue Service and reports disclosing its interest in foreign bank accounts on form TDF 90-22.1, “Report of Foreign Bank and Financial Accounts” (“FBARs”). In September 2015, the Company filed the delinquent income tax returns and has sought waivers of any penalties under the IRS Offshore Voluntary Disclosure Program for late filing of the returns and FBARs.  Under the program, the IRS has indicated that it will not impose a penalty for the failure to file delinquent income tax returns if there are no underreported tax liabilities.  The Company may be liable for civil penalties for certain tax years in an indeterminate amount for not complying with the FBAR reporting and recordkeeping requirements.  No claim has been asserted by the U.S. Internal Revenue Service; before any claim is expressly asserted the Company intends to cooperate with the Internal Revenue Service to minimize any liability. The Company is unable to determine the amount of any penalties that may be assessed at this time. 
 
 
 

19



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

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

The following discussion provides information regarding the results of operations for the six month period ended June 30, 2017 and 2016, and our financial condition, liquidity and capital resources as of June 30, 2017, and December 31, 2016.  The financial statements and the notes thereto contain detailed information that should be referred to in conjunction with this discussion.

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

Our capital requirements and the uncertainty of being able to obtain additional funding on terms acceptable to us;
Our plans to develop and commercialize products from the AAGP™ molecule;
Ongoing testing of the AAGP™ molecule;
Our intellectual property position;
Our commercialization, marketing and manufacturing capabilities and strategy;
Our ability to retain key members of our senior management and key scientific consultants;
The effects of competition;
Our potential tax liabilities resulting from conducting business in the United States and Canada;
The effect of further sales or issuances of our common stock and the price and volume volatility of our common stock; and
Our common stock’s limited trading history.

Finally, our future results will depend upon various other risks and uncertainties, including, but not limited to, those detailed in our filings with the SEC under the Exchange Act and the Securities Act, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.  All forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements in this paragraph and elsewhere in this Quarterly Report. Other than as required under securities laws, we do not assume a duty to update these forward looking statements, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.

Business Overview

ProtoKinetix, Incorporated is a research and development stage bio-technology company focused on scientific medical research of AFGPs (Anti-Freeze Glycoproteins) or anti-aging glycoproteins, trademarked as AAGPs™.  The Company has recently been in the process of directing major efforts to the practical side of commercial validation.  The commercial applications for AAGPs™ in large markets such as targeted health care solutions are numerous, and ProtoKinetix is currently working with researchers, business leaders and advisors and commercial entities to bring AAGP™ to market.
 
 
20


Results of Operations

The following table shows selected financial data and operating results for the periods noted.  Following the table, please see management’s discussion of significant changes.
 
   
For the Six Months Ended
 
   
June 30,
 
   
2017
   
2016
 
Revenues
 
$
-
   
$
-
 
Cost of Sales
   
-
     
-
 
Gross (Loss) Profit
   
-
     
-
 
Operating Expenses
               
Amortization-Intangible Assets
 
$
1,500
   
$
1,500
 
General and Administrative
   
61,937
     
50,934
 
Professional Fees
   
67,274
     
66,507
 
Research and Development
   
155,273
     
180,132
 
Share-Based Compensation
   
416,541
     
374,763
 
Total Operating Expenses
   
702,525
     
715,642
 
Loss from Operations
   
(702,525
)
   
(715,642
)
                 
Other Income
               
Foreign Exchange Loss
   
(4,234
)
   
(2,166
)
Total Other Income
   
(4,234
)
   
(2,166
)
Net Loss
 
$
(706,759
)
   
(717,808
)
 
Revenues
We had no revenues for the six month periods ended June 30, 2017 and 2016.

Gross Profit and Expenses
The Company’s net loss was $706,759 for the six month period ended June 30, 2017 compared to $717,808 for the six month period ended June 30, 2016.  These expenses were primarily incurred for professional fees, consulting services related to the operations of the Company’s business, research and development and other general and administrative expenses.  Significant changes from the prior six month period ended June 30, 2016 include:

·
General and administrative expenses increased by $11,003 from $50,934 to $61,937 primarily as a result of an increase in advertising and promotion as well as an increase in travel expenses associated with the commencement of clinical trials.
·
Professional fees increased by $767 from $66,507 to $67,274 primarily as a result of a slight increase in legal fees associated with company operations.
·
Research and development decreased by $24,859 from $180,132 to $155,273 primarily as a result of completion of needed testing for inclusion in the Investigational Testing Authorization Application to Health Canada by the Governors of the University of Alberta.
·
Share-based compensation increased by $41,778 from $374,763 to $416,541 primarily as a result of an increase in stock option valuation for the current quarter.




21

 

Liquidity and Capital Resources

The following summarizes our statements of cash flows at June 30, 2017 and December 31, 2016:

 
June 30, 2017
 
December 31, 2016
 
         
Cash
$
 
238,277
  $
 
371,029
 
                 
Working Capital
$
 
375,408
  $
 
396,118
 

At June 30, 2017, we had $238,277 in cash and $380,777 in total current assets.  As of June 30, 2017 we had a working capital position of $375,408.  Based upon our working capital equity as of June 30, 2017, we require additional equity and/or debt financing in order to meet cash flow projections and carry forward our business objectives.  There can be no assurance that in the future we will be able to raise capital from outside sources in sufficient amounts to fund our new business.

The failure to secure adequate outside funding would have an adverse effect on our plan of operation and results therefrom and a corresponding negative impact on stockholder liquidity.

Sources and Uses of Cash

Net Cash Used in Operating Activities

Net cash used in operating activities decreased by $9,278 from $422,021 to $412,743 for the six months ended June 30, 2016 and 2017, respectively.  This decrease was predominantly due to a decrease in payments made to the Company’s vendors.

Net Cash Used in Investing Activities

Net cash used in investing activities was $40,009 for the six month period ended June 30, 2017 while the Company had net cash used in investing activities of $6,538 for the comparative period.  The difference is attributable to an increase in the purchase of intangible assets.

Net Cash Provided by Financing Activities

Net cash provided by financing activities increased by $154,000 from $166,000 to $320,000 for the six months ended June 30, 2016 and 2017, respectively due to an increase in private placements.

Going Concern

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”), which contemplate continuation of the Company as a going concern.  The history of losses and the inability for the Company to make a profit from selling a good or service has raised substantial doubt about our ability to continue as a going concern. In spite of the fact that the current cash obligations of the Company are relatively minimal, given the cash position of the Company, we have very little cash to operate. We intend to fund the Company and attempt to meet corporate obligations by selling common stock.  However, the Company’s common stock is at a low price and is not actively traded.

Off-Balance Sheet Arrangements

None.

22


Contractual Obligations

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

Critical Accounting Policies

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

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

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

Share-Based Compensation

On July 1, 2015, the Board of Directors of the Company adopted the 2015 Stock Option and Stock Bonus Plan (the “Plan”).  The Company has granted warrants and options to purchase shares of the Company’s common stock to various parties for consulting services outside of the Plan, and beginning July 1, 2015 and ending December 31, 2016 pursuant to the Plan.  On December 30, 2016, the Board of Directors of the Company adopted the 2017 Stock Option and Stock Bonus Plan (the “2017 Plan”). During the six month period ended June 30, 2017, the Company granted options pursuant to the 2017 Plan.  The fair values of the warrants and options issued have been estimated using the Black-Scholes Option Pricing Model.

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

The Company accounts for stock compensation arrangements with persons classified as non-employees for accounting purposes in accordance with ASC 505-50 “Stock-Based Transactions with Nonemployees”, which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of share-based compensation is subject to periodic adjustment as the underlying instruments vest. The fair value of stock options is estimated using the Black-Scholes Option Pricing Model and the compensation charges are amortized over the vesting period.

Sales and Marketing

The Company is currently not selling or marketing any products.

Inflation

Although management expects that our operations will be influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations during the six months ended June 30, 2017.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
 
 
23


 
Item 4: Controls and Procedures

Disclosure Controls and Procedures

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

Our management, under the direction of our Chief Executive Officer (who is our principal executive officer), and Chief Financial Officer (who is our principal accounting officer) has evaluated the effectiveness of our disclosure controls and procedures as required by 1934 Act Rule 13a-15(b) as of June 30, 2017 (the end of the period covered by this report).  Based on that evaluation, our principal executive officer and our principal accounting officer concluded that these disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

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

Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the 1934 Act) during the six months ended June 30, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
 

 
24



PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Other than reported in the Company’s Quarterly Report on Form 10-Q for the six month period ended June 30, 2017, the Company and its management are not aware of any regulatory or legal proceedings or investigations pending involving the Company, any of its subsidiaries or affiliates, or any of their respective officers, directors or employees.

Item 1A. Risk Factors

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item. However, our current risk factors are set forth in our Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC on February 21, 2017, and such risk factors are incorporated herein by this reference.

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

Other than previously reported, there have been no unregistered sales of equity securities during the six month period ended June 30, 2017.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosure

Not applicable.

Item 5. Other Information

Effective June 30, 2017, the Company into a Material Transfer Agreement with Proactive Immune Sciences Corporation (“Proactive”) for a term of one year.  The Company will furnish AAGP™ at no cost to Proactive so that they may test and evaluate AAGP™ for possible use in Immune Cell Banking.
25



Item 6. Exhibits

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

EXHIBIT INDEX
The following documents are being filed with the Commission as exhibits to this Quarterly Report on Form 10-Q.
 
Exhibit
 
Description
3.1
 
Certificate of Incorporation1
3.2
 
Bylaws1
4.1
 
2015 Stock Option and Stock Bonus Plan2
4.2
 
2017 Stock Option and Stock Bonus Plan7
10.1
 
Assignment of Patents and Patent Application between the Company and Institut National des Sciences Appliquées de Rouen dated January 5, 20153
10.2
 
Settlement and Indemnity Agreement by and between the Company and Standard Bankcorp Inc. and Mark Ralston dated March 2, 20153
10.3
 
Royalty Agreement between the Company and The Governors of the University of Alberta, dated April 8, 20153
10.4
 
Technology Transfer Agreement between the Company and Grant Young, dated April 22, 20154
10.5
 
ITR Master Contract between the Company and ITR Laboratories Canada Inc., dated April 19, 20168
10.6
 
Universal Agreement between the Company and Grant Young, dated May 20, 20169
10.7
 
Collaborative Research Agreement between the Company and the University of British Columbia, dated May 31, 20169
10.8
 
Consulting Agreement between the Company and Clarence E. Smith, dated December 30, 20167
10.9
 
Consulting Agreement between the Company and Susan M. Woodward, dated December 30, 20167
10.10
 
Director Consulting Agreement between the Company and Edward P. McDonough, dated December 30, 20167
14.1
 
Code of Ethics6
31.1
 
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2  
Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1
 
Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2  
Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS
 
XBRL Instance Document
101.SCH
 
XBRL Schema Document 
101.CAL
 
XBRL Calculation Linkbase Document 
101.DEF
 
XBRL Definition Linkbase Document 
101.LAB
 
XBRL Label Linkbase Document
101.PRE
 
XBRL Presentation Linkbase Document  
 
 
1.
Incorporated by reference from the Company’s registration statement on Form 10-SB filed on June 22, 2001 with the SEC.
 
2.
Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on August 14, 2015 with the SEC.
 
3.
Incorporated by reference from the Company’s Annual Report on Form 10-K filed on April 14, 2015 with the SEC.
 
4.
Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on May 20, 2015 with the SEC.
 
5.
Incorporated by reference from the Company’s Annual Report on Form 10-K filed on March 30, 2016 with the SEC.
 
6.
Incorporated by reference from the Company’s Annual Report on Form 10-K filed on April 13, 2006 with the SEC.
 
7.
Incorporated by reference from the Company’s Annual Report on Form 10-K filed on February 21, 2017 with the SEC.
 
8.
Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on May 16, 2016 with the SEC.
 
9.
Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on August 15, 2016 with the SEC.
 
*.
Filed herewith.
 
**
Furnished, not filed herewith.


26




 SIGNATURES

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

Date: August 8, 2017 
 
PROTOKINETIX, INCORPORATED
     
   
By:         /s/ Clarence E. Smith
   
Clarence E. Smith
   
Chief Executive Officer
     
   
By:         /s/ Susan M. Woodward
   
Susan M. Woodward
   
Chief Financial Officer


 


27
EX-31.1 2 ex31x1.htm EXHIBIT 31.1

EXHIBIT 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Clarence E. Smith, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ProtoKinetix, Incorporated for the period ended June 30, 2017;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
August 8, 2017
 
/s/ Clarence E. Smith
   
Name:
Clarence E. Smith
   
Title:
Chief Executive Officer
(Principal Executive Officer)
EX-31.2 3 ex31x2.htm EXHIBIT 31.2

EXHIBIT 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Susan M. Woodward, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of ProtoKinetix, Incorporated for the period ended June 30, 2017;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
August 8, 2017
 
/s/ Susan M. Woodward
   
Name:
Susan M. Woodward
   
Title:
Chief Financial Officer
(Principal Financial Officer)
 
EX-32 4 ex32.htm EXHIBIT 32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ProtoKinetix, Incorporated, (the “Company”) on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Clarence E. Smith, Chief Executive Officer and Principal Executive Officer of the Company of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned’s knowledge and belief:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

August 8, 2017
 
/s/ Clarence E. Smith
   
Name:
Clarence E. Smith
   
Title:
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
 
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2 5 ex32x2.htm EXHIBIT 32.2


EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ProtoKinetix, Incorporated, (the “Company”) on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”),  Susan M. Woodward, Chief Financial Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of the undersigned’s knowledge and belief:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.
 
August 8, 2017
 
/s/ Susan M. Woodward
   
Name:
Susan M. Woodward
   
Title:
Chief Financial Officer
(Principal Financial Officer)
 

This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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OTHER ITEM        
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Cash paid for interest
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1. Basis of Presentation - Going Concern Uncertainties
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Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation - Going Concern Uncertainties

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

 

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

 

During the year ended December 31, 2016, the Company filed Form 51-105F1 – Notice – OTC Issuer Ceases to be an OTC Reporting Issuer with the British Columbia Securities Commission (“BCSC”).

 

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

 

The Company has not developed a commercially viable product, has not generated any significant revenue to date, and has incurred losses since inception, resulting in a net accumulated deficit at June 30, 2017.  These factors raise substantial doubt about the Company's ability to continue as a going concern.

 

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

 

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.

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2. Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. In the opinion of management, the unaudited interim financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K, filed February 21, 2017, with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

 

Use of Estimates

 

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

 

Cash

 

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

 

Fair Value of Financial Instruments

 

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

 

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

 

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

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

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

 

Level 1 inputs are used to measure cash. At June 30, 2017 there were no other assets or liabilities subject to additional disclosure.

 

Income Taxes

 

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

 

Intangible Assets – Patent and Patent Application Costs

 

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

 

As at June 30, 2017, the Company does not hold any intangible assets with indefinite lives.

 

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

 

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

 

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the Company’s patents, whereas no amortization has been recognized on the patent application costs as at June 30, 2017.

 

Research and Development Costs

 

Research and development costs are expensed as incurred.

 

Loss per Share and Potentially Dilutive Securities

 

Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding in the period.  Diluted loss per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities.  The effect of 44,100,000 stock options (June 30, 2016 – 28,600,000), and 6,500,000 warrants (June 30, 2016 – 6,500,000) were not included in the computation of diluted earnings per share for all periods presented because it was anti-dilutive due to the Company's losses.

 

Share-Based Compensation

 

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

 

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

 

The Company accounts for stock compensation arrangements with persons classified as non-employees for accounting purposes in accordance with ASC 505-50 “Stock-Based Transactions with Nonemployees”, which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of share-based compensation is subject to periodic adjustment as the underlying instruments vest. The fair value of stock options is estimated using the Black-Scholes Option Pricing Model and the compensation charges are amortized over the vesting period.

 

Common stock

 

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

 

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

 

Related Party Transactions

 

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

 

Recent Accounting Pronouncements

 

In August 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessment of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is substantial doubt about the entity’s ability to continue as a going concern. The requirement is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early adoption is permitted. The adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Accounting Standards Update 2015-17 – Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This accounting pronouncement requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Currently deferred tax liabilities and assets must be presented as current and noncurrent. The policy was effective for periods ending after December 16, 2016. The adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Accounting Standards Update 2016-09 – Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. This accounting pronouncement, which goes into effect for periods ending after December 16, 2016, addresses the simplification of several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Accounting Standards Update 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This accounting pronouncement, which goes into effect December 12, 2017, is far reaching and covers several presentation areas dealing with measurement, impairment, assumptions used in estimating fair value and several other areas. The Company is reviewing this update to determine the impact it may have on its financial statements.

 

Accounting Standards Update 2016-02-Leases (Topic 842). This accounting pronouncement allows lessees to make an accounting policy election to not recognize a lease asset and liability for leases with a term of 12 months or less and do not have a purchase option that is expected to be exercised. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its financial statements.

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3. Prepaid Expenses and Deposits
6 Months Ended
Jun. 30, 2017
Prepaid Expenses And Deposits  
Prepaid Expenses and Deposits

The following summarizes the Company’s prepaid expenses and deposits outstanding as at June 30, 2017 and December 31, 2016:

 

   

June 30,

2017

   

December 31,

2016

 
             
Deposit on research agreement (Note 11(c))   $ 134,370     $ 54,770  
Other prepaid expenses     8,130       15,614  
                 
    $ 142,500     $ 70,384  

 

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4. Intangible Assets
6 Months Ended
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

Intangible asset transactions are summarized as follows:

 

    Patent Rights    

Patent Application

Rights

    Total  
Cost                  
Balance, December 31, 2015   $ 30,000     $ 41,760     $ 71,760  
Additions     -       33,421       33,421  
Balance, December 31, 2016   $ 30,000     $ 75,181     $ 105,181  
Additions     -       51,992       51,992  
Balance, June 30, 2017   $ 30,000     $ 127,173     $ 157,173  
                         
Accumulated amortization                        
Balance, December 31, 2015   $ 1,500     $ -     $ 1,500  
Amortization     3,000       -       3,000  
Balance, December 31, 2016   $ 4,500     $ -     $ 4,500  
Amortization     1,500       -       1,500  
Balance, June 30, 2017   $ 6,000     $ -     $ 6,000  
                         
Net carrying amounts                        
December 31, 2016   $ 25,500     $ 75,181     $ 100,681  
June 30, 2017   $ 24,000     $ 127,173     $ 151,173  

 

 

During the year ended December 31, 2015, the Company entered into an Assignment of Patents and Patent Application (effective January 1, 2015) (the “Patent Assignment”) with the Institut National des Sciences Appliquees de Rouen (“INSA”) for the assignment of certain patents and all rights associated therewith (the “Patents”). The Company and INSA had previously entered into a licensing agreement for the Patents in August 2004. The Patent Assignment transfers all of the Patents and rights associated therewith to the Company upon payment to INSA in the sum of $30,000 (25,000 Euros) (paid). During the six month period ended June 30, 2017, the Company recorded $1,500 (June 30, 2016 - $1,500) in amortization expense associated with the Patents.

 

During the year ended December 31, 2015, the Company entered into a Technology Transfer Agreement with Grant Young for the assignment of his 50% ownership of certain patents and all rights associated therewith (the "Patent Application Rights").  In exchange for the Patent Application Rights, the Company agreed to pay $10,000 (paid) and to issue 6,000,000 warrants (issued) to purchase shares of the Company's common stock at an exercise price of $0.10 per share for a period of five years. The Patent Application Rights had a total fair value of $35,000, which was allocated as $10,000 to the cash consideration paid, with the remaining $25,000 being allocated to the warrant component of the overall consideration. The Company has incurred $78,692 in direct costs relating to the Patent Application Rights, $40,922 of which were incurred during the six month period ended June 30, 2017.

 

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

 

During the year ended December 31, 2016, the Company entered into a Universal Assignment with Grant Young for the assignment of his ownership of certain new and useful improvements in an invention entitled “Use of Anti-Aging Glycoprotein for Enhancing Survival of Neurosensory Precursor Cells” (the “New Patent Application Rights”).  In exchange for the New Patent Application Rights, the Company agreed to pay $1 (paid).  The Company has incurred $13,481 in direct costs relating to the New Patent Application Rights, $11,065 of which were incurred during the six month period ended June 30, 2017.

 

No amortization was recorded on the Patent Application Rights to June 30, 2017.

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5. Credit Facility
6 Months Ended
Jun. 30, 2017
Debt Disclosure [Abstract]  
Credit Facility

On June 16, 2016, the Company executed a line of credit arrangement for an amount of up to $250,000 with Pleasants County Bank, West Virginia.  Pursuant to the terms of the line of credit, interest will accrue on the amount of credit outstanding at a rate of 1.5% above the prime rate adjusted monthly.  The Company’s President and CEO pledged personal assets to secure the line of credit and the Company pledged its patent rights in the provisional patent application numbered 62287857, dated January 21, 2016, “Use of Anti-Aging Glycoprotein for Enhancing Survival of Neurosensory Precursor Cells”. As at March 31, 2017 and December 31, 2016, the balance outstanding was $nil.  As of June 30, 2017 the line of credit was canceled and the pledged assets were released.

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6. Common Shares Issued for Services
6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Common Shares Issued for Services

During the six month periods ended June 30, 2017 and 2016, the Company issued shares of common stock for services and other value rendered as follows:

 

 

2017

  Number
of Shares
    Value
per Share
    Total  
                   
January - June 2017     -     $ -     $ -  
      -             $ -  

 

 

 

2016

  Number
of Shares
    Value
per Share
    Total  
                   
March 2016     100,000     $ 0.07     $ 7,000  
      100,000             $ 7,000  

 

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7. Stock Options
6 Months Ended
Jun. 30, 2017
Stock Options  
Stock Options

On December 30, 2016, the Board of Directors of the Company adopted the 2017 Stock Option and Stock Bonus Plan (the “2017 Plan”).  The Board of Directors adopted the 2017 Plan as it anticipates utilizing equity compensation as part of its ongoing standard corporate operations and in connection with its contemplated activities going forward.

 

The aggregate number of shares that may be issued under the 2017 Plan is 30,000,000 shares subject to adjustment as provided therein.  The 2017 Plan includes two types of options.  Options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended are referred to as incentive options.  Options which are not intended to qualify as incentive options are referred to as non-qualified options.

 

As of June 30, 2017, 16,200,000 options and no shares of common stock have been granted under the 2017 Plan.

 

The 2017 Plan is administered by the Board of Directors, or a committee appointed by the Board of Directors.  In addition to determining who will be granted options or stock bonuses, the committee has the authority and discretion to determine when options and bonuses will be granted and the number of options and bonuses to be granted.  The committee also may determine a vesting and/or forfeiture schedule for bonuses and/or options granted, the time or times when each option becomes exercisable, the duration of the exercise period for options and the form or forms of the agreements, certificates or other instruments evidencing grants made under the 2017 Plan.  The committee may determine the purchase price of the shares of common stock covered by each option.  The committee also may impose additional conditions or restrictions not inconsistent with the provisions of the 2017 Plan.  The committee may adopt, amend and rescind such rules and regulations as in its opinion may be advisable for the administration of the 2017 Plan. 

 

In the event that a change, such as a stock split, is made in the Company’s capitalization which results in an exchange or other adjustment of each share of common stock for or into a greater or lesser number of shares, appropriate adjustments will be made to unvested bonuses and in the exercise price and in the number of shares subject to each outstanding option.  The committee also may make provisions for adjusting the number of bonuses or underlying outstanding options in the event the Company effects one or more reorganizations, recapitalizations, rights offerings, or other increases or reductions of shares of its outstanding common stock.  Options and bonuses may provide that in the event of the dissolution or liquidation of the Company, a corporate separation or division or the merger or consolidation of the Company, the holder may exercise the option on such terms as it may have been exercised immediately prior to such dissolution, corporate separation or division or merger or consolidation; or in the alternative, the committee may provide that each option granted under the 2017 Plan shall terminate as of a date fixed by the committee.

 

The exercise price of any option granted under the 2017 Plan must be no less than 100% of the “fair market value” of the Company’s common stock on the date of grant.  The exercise period of any option shall not exceed ten years from the date of grant of the option. Any incentive stock option granted under the 2017 Plan to a person owning more than 10% of the total combined voting power of the common stock must be at a price of no less than 110% of the fair market value per share on the date of grant and the term shall be for no more than five years. 

 

Stock option transactions are summarized as follows:

 

   

Number of

Stock Options

   

Weighted Average

Exercise Price

   

Weighted Average Fair Value

 

Weighted Average Remaining Life

          $       (Years)
Outstanding, December 31, 2016     28,900,000       0.06       0.04    
      Options granted     16,200,000       0.05       0.06    
      Options expired     (1,000,000 )     0.10       0.03    
Outstanding, June 30, 2017     44,100,000       0.06       0.05   2.72

 

The fair values of the stock options granted during the six month periods ended June 30, 2017 and 2016 were estimated using the Black-Scholes Option Pricing Model.  The weighted average assumptions used in the pricing model for these options are as follows:

 

    June 30, 2017     June 30, 2016  
Risk-free interest rate     1.05 %     0.56 %
Dividend yield     0.00 %     0.00 %
Expected stock price volatility     125.00 %     125.00 %
Expected forfeiture rate     0.00 %     0.00 %
Expected life   3.46 years     3.94 years  

 

The following non-qualified stock options were outstanding and exercisable at June 30, 2017:

 

Expiry date   Exercise Price    

Number of Options

Outstanding

   

Number of

Options

Exercisable

 
                $    
February 25, 2020     0.04       2,000,000       -  
February 24, 2018     0.05       1,000,000       1,000,000  
February 25, 2020     0.04       4,000,000       4,000,000  
February 28, 2020     0.04       5,000,000       5,000,000  
June 30, 2018     0.10       600,000       600,000  
December 31, 2019     0.08       15,000,000       15,000,000  
October 05, 2018     0.08       300,000       300,000  
December 31, 2020     0.05       16,200,000       8,100,000  
              44,100,000       34,000,000  

 

As at June 30, 2017, the aggregate intrinsic value of the Company’s stock options is $674,000 (December 31, 2016 – $110,000). The weighted average fair value of stock options granted during the six month period ended June 30, 2017 is $0.06 (2016 - $0.05).

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8. Warrants
6 Months Ended
Jun. 30, 2017
Warrants  
Warrants

Warrant transactions for the six month period ended June 30, 2017 are summarized as follows:

 

   

Number of

Warrants

   

Weighted

Average Exercise

Price

 
Balance, December 31, 2016 and June 30, 2017     6,500,000     $ 0.11  
                 

 

The following warrants were outstanding and exercisable as at June 30, 2017:

 

Number of Warrants     Exercise Price ($)  

 

Expiry Date

  500,000       0.25   November 8, 2018
  6,000,000       0.10   April 22, 2020
  6,500,000            

 

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9. Stockholders' Equity
6 Months Ended
Jun. 30, 2017
Stockholders' Equity Note [Abstract]  
Stockholders' Equity

The Company is authorized to issue 400,000,000 (December 31, 2016 – 400,000,000) shares of $0.0000053 par value common stock.  Each holder of common stock has the right to one vote but does not have cumulative voting rights. Shares of common stock are not subject to any redemption or sinking fund provisions, nor do they have any preemptive, subscription or conversion rights. Holders of common stock are entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid as of June 30, 2017 (December 31, 2016 - $nil).

 

During the six month period ended June 30, 2017, the Company:

 

a) Issued 8,000,000 shares of common stock to investors (which included both the President and CEO as well as the CFO of the Company) at $0.04 for gross proceeds of $320,000.
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10. Related Party Transactions and Balances
6 Months Ended
Jun. 30, 2017
Related Party Transactions [Abstract]  
Related Party Transactions and Balances

Note 10. Related Party Transactions and Balances

 

During the six month period ended June 30, 2016, the Company:

 

a) Entered into a consulting agreement with an effective date of January 1, 2016 with the Company’s President and CEO whereby he will be compensated at a nominal amount of $1 for services through to December 31, 2016. The agreement also stipulates a termination fee that would pay the Company’s President and CEO $100,000 per year of service if terminated without cause or in the case of termination upon a change of control event, the termination fee would be equal to $100,000 per year of service plus 2.5% of the aggregate transaction value of the change of control.  In addition, the agreement stipulates that he would be entitled to a bonus payment equal to 2.5% of the aggregate transaction value of an Application Sale or license of any Patent Rights, Patent Application Rights or products effected during the term of his agreement.  Pursuant to the agreement, he was also granted 5,000,000 stock options exercisable into common shares of the Company until December 31, 2019 at a price of $0.08 per share (Note 7).  The options are fully vested as at June 30, 2017.

 

b) Entered into a consulting agreement with an effective date of January 1, 2016 with the Company’s CFO whereby she will be compensated at a monthly fee of $6,000 for services through to December 31, 2016.  The agreement also stipulates a termination fee that would pay the Company’s CFO $36,000 if terminated without cause or $72,000 upon termination due to a change of control event.  Pursuant to the agreement, she was also granted 4,000,000 stock options exercisable into common shares of the Company until December 31, 2019 at a price of $0.08 per share (Note 7).  The options are fully vested as at June 30, 2017.  A total of $36,000 was paid to the Company’s CFO during the period ended June 30, 2016.

 

c) Entered into a directorship agreement with an effective date of January 1, 2016 with a director of the Company. Pursuant to the agreement, the director was issued 1,000,000 stock options exercisable into common shares of the Company until December 31, 2019 at a price of $0.08 per share (Note 7). The options are fully vested as at June 30, 2017.

 

d) Recognized $271,850 in share-based compensation associated with stock options granted to key management personnel.

 

During the six months ended June 30, 2017, the Company:

 

a) Entered into a consulting agreement with an effective date of January 1, 2017 with the Company’s President and CEO whereby he will be compensated at a nominal amount of $1 for services through to December 31, 2017. The agreement also stipulates a termination fee that would pay the Company’s President and CEO $100,000 per year of service if terminated without cause or in the case of termination upon a change of control event, the termination fee would be equal to $100,000 per year of service plus 2.5% of the aggregate transaction value of the change of control.  In addition, the agreement stipulates that he would be entitled to a bonus payment equal to 2.5% of the aggregate transaction value of a sale or license of any Patent Rights, Patent Application Rights or products effected during the term of his agreement.  Pursuant to the agreement, he was also granted 5,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

 

b) Entered into a consulting agreement with an effective date of January 1, 2017 with the Company’s CFO whereby she will be compensated at a monthly fee of $6,000 for services through to December 31, 2017.  The agreement also stipulates a termination fee that would pay the Company’s CFO $72,000 per year of service (including the pro-rata amount for partial years of service) if terminated without cause or upon termination due to a change of control event.  Pursuant to the agreement, she was also granted 4,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.  A total of $36,000 was paid to the Company’s CFO during the period ended June 30, 2017.

 

c) Entered into a directorship agreement with an effective date of January 1, 2017 with a director of the Company.  Pursuant to the agreement, the director was issued 1,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

 

d) Recognized $198,274 in share-based compensation associated with stock options granted to key management personnel.

 

As at June 30, 2017 and December 31, 2016, the following amounts are due to related parties:

 

      June 30,2017     December 31,
2016
 
Clarence Smith (CEO) Accounts payable and accrued liabilities   $ -     $ 81  
                   

 

Amounts included in accounts payable and accrued liabilities are non-interest bearing, unsecured and repayable on demand.

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11. Commitments and Contingency
6 Months Ended
Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingency

As at June 30, 2017, the Company has the following commitments:

 

a) Entered into a consulting agreement with an effective date of January 1, 2017 whereby the Company would pay the consultant $7,000 per month for providing research and development services.  Pursuant to the agreement, the consultant was also granted 5,000,000 stock options exercisable into common shares of the Company until December 31, 2020 at a price of $0.05 per share (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

 

b) Entered into a consulting agreement for business development services effective January 1, 2017.  The consultant was granted 1,200,000 stock options exercisable into common shares of the Company at a price of $0.05 per share until December 31, 2020 (Note 7).  The options vest in equal instalments on a quarterly basis beginning March 31, 2017.

 

c) Entered into a Collaborative Research Agreement (the “CREA”) effective May 31, 2016 with The University of British Columbia (“UBC”) for a term of 2 years. Pursuant to the CREA, the Company paid a total of CAD $169,000 ($131,448) in advance for services to be provided by UBC in the first year, and paid an additional CAD $201,500 ($146,585) during the six month period ended June 30, 2017, in advance of services to be provided by UBC in the second year. The CREA can be terminated by either party with 30 days’ written notice.  As at June 30, 2017, a total of $134,370 is included in prepaid expenses and deposits (December 31, 2016 - $54,770).

 

d) Entered into a consulting agreement effective March 1, 2015, whereby the Company would pay the consultant $2,700 per month for an initial term of 1 year, continued on a year-to-year basis thereafter unless otherwise terminated by either party with at least 30 days’ notice, for providing public relations services. The consultant is also entitled to 400,000 shares of common stock, which will be issued at a rate of 25% (100,000 shares) every 3 months over the term of the agreement (200,000 shares issued during the six month period ended June 30, 2016 (Note 6)). The consultant was also issued 1,000,000 stock options on signing during the year ended December 31, 2015, with each stock option exercisable into a common share at a price of $0.10. The stock options expired March 12, 2016.

 

e) Entered into a royalty agreement with the Governors of the University of Alberta (the “University”) whereby the University had developed certain intellectual property (the “Additional Patent Rights”) in conjunction with and by permission of the Company employing patented intellectual property of the Company. The agreement assigns the Additional Patent Rights to the Company in return for 5% of any future gross revenues (the “Royalty”) derived from products arising from the Patent Rights. The Company will have the right and option for two years from the earlier of September 1, 2015 or the first date that the University publishes its research related to the Additional Patent Rights to buy out all of the University’s Royalty for consideration of the aggregate sum of CAD $5,000,000.

 

f) Entered into a consulting agreement effective May 1, 2015, whereby the Company would pay the consultant $4,000 per month for an initial term of 1 year, continued on a year-to-year basis thereafter unless otherwise terminated by either party with at least 30 days’ notice  for providing research and development services.  During the six month period ended June 30, 2017 the contract was revised whereby the Company would pay the consultant CAD $4,000 per month retroactively beginning January 1, 2017.  As a result of the revision, an amount of $8,130 is included within prepaid expenses as at June 30, 2017 and will be applied towards future services.

 

g) Entered into a Material Transfer Agreement effective March 31, 2017 with Proactive Immune Sciences Corporation (“Proactive”) for a term of 1 year.  The Company will furnish AAGP™ at no cost to Proactive so that they may test and evaluate AAGP™ for possible use in Immune Cell Banking.

 

The Company was delinquent in filing certain income tax returns with the U.S. Internal Revenue Service and reports disclosing its interest in foreign bank accounts on form TDF 90-22.1, “Report of Foreign Bank and Financial Accounts” (“FBARs”). In September 2015, the Company filed the delinquent income tax returns and has sought waivers of any penalties under the IRS Offshore Voluntary Disclosure Program for late filing of the returns and FBARs.  Under the program, the IRS has indicated that it will not impose a penalty for the failure to file delinquent income tax returns if there are no underreported tax liabilities.  The Company may be liable for civil penalties for certain tax years in an indeterminate amount for not complying with the FBAR reporting and recordkeeping requirements.  No claim has been asserted by the U.S. Internal Revenue Service; before any claim is expressly asserted the Company intends to cooperate with the Internal Revenue Service to minimize any liability. The Company is unable to determine the amount of any penalties that may be assessed at this time. 

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
2. Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2017
Accounting Policies [Abstract]  
Basis of Presentation

The accompanying unaudited financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) applicable to interim financial information and with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed, or omitted, pursuant to such rules and regulations. In the opinion of management, the unaudited interim financial statements include all adjustments necessary for the fair presentation of the results of the interim periods presented. All adjustments are of a normal recurring nature, except as otherwise noted below. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2016, included in the Company’s Annual Report on Form 10-K, filed February 21, 2017, with the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

Use of Estimates

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

Cash

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

Fair Value of Financial Instruments

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

 

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

 

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

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

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

 

Level 1 inputs are used to measure cash. At June 30, 2017 there were no other assets or liabilities subject to additional disclosure.

Income Taxes

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

Intangible Assets - Patent and Patent Application Costs

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

 

As at June 30, 2017, the Company does not hold any intangible assets with indefinite lives.

 

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

 

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

 

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of the Company’s patents, whereas no amortization has been recognized on the patent application costs as at June 30, 2017.

Research and Development Costs

Research and development costs are expensed as incurred.

Loss per Share and Potentially Dilutive Securities

Basic loss per share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding in the period.  Diluted loss per share takes into consideration common shares outstanding (computed under basic earnings per share) and potentially dilutive securities.  The effect of 44,100,000 stock options (June 30, 2016 – 28,600,000), and 6,500,000 warrants (June 30, 2016 – 6,500,000) were not included in the computation of diluted earnings per share for all periods presented because it was anti-dilutive due to the Company's losses.

Share-Based Compensation

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

 

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

 

The Company accounts for stock compensation arrangements with persons classified as non-employees for accounting purposes in accordance with ASC 505-50 “Stock-Based Transactions with Nonemployees”, which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of share-based compensation is subject to periodic adjustment as the underlying instruments vest. The fair value of stock options is estimated using the Black-Scholes Option Pricing Model and the compensation charges are amortized over the vesting period.

Common stock

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

 

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

Related Party Transactions

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

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The new standard requires management to perform interim and annual assessment of an entity’s ability to continue as a going concern within one year of the date of issuance of the entity’s financial statements (or within one year after the date on which the financial statements are available to be issued, when applicable). Further, an entity must provide certain disclosures if there is substantial doubt about the entity’s ability to continue as a going concern. The requirement is effective for annual periods ending after December 15, 2016, and interim periods thereafter, early adoption is permitted. The adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Accounting Standards Update 2015-17 – Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This accounting pronouncement requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Currently deferred tax liabilities and assets must be presented as current and noncurrent. The policy was effective for periods ending after December 16, 2016. The adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Accounting Standards Update 2016-09 – Compensation—Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting. This accounting pronouncement, which goes into effect for periods ending after December 16, 2016, addresses the simplification of several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The adoption of this guidance did not have a material impact on the Company’s financial statements.

 

Accounting Standards Update 2016-01 – Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This accounting pronouncement, which goes into effect December 12, 2017, is far reaching and covers several presentation areas dealing with measurement, impairment, assumptions used in estimating fair value and several other areas. The Company is reviewing this update to determine the impact it may have on its financial statements.

 

Accounting Standards Update 2016-02-Leases (Topic 842). This accounting pronouncement allows lessees to make an accounting policy election to not recognize a lease asset and liability for leases with a term of 12 months or less and do not have a purchase option that is expected to be exercised. This standard is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its financial statements.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
3. Prepaid Expenses and Deposits (Tables)
6 Months Ended
Jun. 30, 2017
Prepaid Expenses And Deposits Tables  
Prepaid expenses and deposits

The following summarizes the Company’s prepaid expenses and deposits outstanding as at June 30, 2017 and December 31, 2016:

 

   

June 30,

2017

   

December 31,

2016

 
             
Deposit on research agreement (Note 11(c))   $ 134,370     $ 54,770  
Other prepaid expenses     8,130       15,614  
                 
    $ 142,500     $ 70,384  

 

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
4. Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible asset transactions

Intangible asset transactions are summarized as follows:

 

    Patent Rights    

Patent Application

Rights

    Total  
Cost                  
Balance, December 31, 2015   $ 30,000     $ 41,760     $ 71,760  
Additions     -       33,421       33,421  
Balance, December 31, 2016   $ 30,000     $ 75,181     $ 105,181  
Additions     -       51,992       51,992  
Balance, June 30, 2017   $ 30,000     $ 127,173     $ 157,173  
                         
Accumulated amortization                        
Balance, December 31, 2015   $ 1,500     $ -     $ 1,500  
Amortization     3,000       -       3,000  
Balance, December 31, 2016   $ 4,500     $ -     $ 4,500  
Amortization     1,500       -       1,500  
Balance, June 30, 2017   $ 6,000     $ -     $ 6,000  
                         
Net carrying amounts                        
December 31, 2016   $ 25,500     $ 75,181     $ 100,681  
June 30, 2017   $ 24,000     $ 127,173     $ 151,173  

 

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
6. Common Shares Issued for Services (Tables)
6 Months Ended
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Stock Incentive Plan, Issuances

 

2017

  Number of Shares     Value per Share     Total  
                   
January - June 2017     -     $ -     $ -  
      -             $ -  

 

 

2016

  Number of Shares     Value per Share     Total  
                   
March 2016     100,000     $ 0.07     $ 7,000  
      100,000             $ 7,000  

 

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Stock Options (Tables)
6 Months Ended
Jun. 30, 2017
Stock Options  
Schedule of Share-based Compensation, Stock Options, Activity
   

Number of

Stock Options

   

Weighted Average

Exercise Price

    Weighted Average Fair Value   Weighted Average Remaining Life
          $       (Years)
Outstanding, December 31, 2016     28,900,000       0.06       0.04    
      Options granted     16,200,000       0.05       0.06    
      Options expired     (1,000,000 )     0.10       0.03    
Outstanding, June 30, 2017     44,100,000       0.06       0.05   2.72
Schedule of valuation assumptions for options
    June 30, 2017     June 30, 2016  
Risk-free interest rate     1.05 %     0.56 %
Dividend yield     0.00 %     0.00 %
Expected stock price volatility     125.00 %     125.00 %
Expected forfeiture rate     0.00 %     0.00 %
Expected life   3.46 years     3.94 years  
Schedule of options by exercise price
Expiry date   Exercise Price    

Number of Options

Outstanding

   

Number of

Options

Exercisable

 
                $    
February 25, 2020     0.04       2,000,000       -  
February 24, 2018     0.05       1,000,000       1,000,000  
February 25, 2020     0.04       4,000,000       4,000,000  
February 28, 2020     0.04       5,000,000       5,000,000  
June 30, 2018     0.10       600,000       600,000  
December 31, 2019     0.08       15,000,000       15,000,000  
October 05, 2018     0.08       300,000       300,000  
December 31, 2020     0.05       16,200,000       8,100,000  
              44,100,000       34,000,000  
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
8. Warrants (Tables)
6 Months Ended
Jun. 30, 2017
Warrants  
Schedule of Warrant Activity
    Number of Warrants    

Weighted

Average Exercise

Price

 
Balance, December 31, 2016 and June 30, 2017     6,500,000     $ 0.11  
                 
Schedule of Stockholders' Equity Note, Warrants or Rights
Number of Warrants     Exercise Price ($)  

 

Expiry Date

  500,000       0.25   November 8, 2018
  6,000,000       0.10   April 22, 2020
  6,500,000            
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
10. Related Party Transactions and Balances (Tables)
6 Months Ended
Jun. 30, 2017
Related Party Transactions [Abstract]  
Schedule of related party transactions

      June 30,2017     December 31,
2016
 
Clarence Smith (CEO) Accounts payable and accrued liabilities   $ -     $ 81  
                   

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
2. Summary of Significant Accounting Policies (Details Narrative) - shares
3 Months Ended 6 Months Ended
Mar. 31, 2016
Jun. 30, 2017
Warrant    
Antidilutive Securities Excluded from Computation of Earnings Per Share 6,500,000 6,500,000
Stock options    
Antidilutive Securities Excluded from Computation of Earnings Per Share 28,600,000 44,100,000
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
3. Prepaid Expenses and Deposits (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Prepaid Expenses And Deposits Details    
Deposit on research agreement (Note 11(c)) $ 134,370 $ 54,770
Other prepaid expenses 8,130 15,614
Prepaid expenses and deposits $ 142,500 $ 70,384
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
4. Intangible Assets (Details) - USD ($)
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Beginning balance     $ 100,681    
Amortization $ 750 $ 750 1,500 $ 1,500  
Ending balance 151,173   151,173   $ 100,681
Patent Rights [Member] | Cost [Member]          
Beginning balance     30,000    
Additions       0
Ending balance 30,000   30,000   30,000
Patent Rights [Member] | Accumulated Amortization [Member]          
Beginning balance     4,500    
Amortization     1,500   3,000
Ending balance 6,000   6,000   4,500
Patent Rights [Member] | Net Carrying Amount [Member]          
Beginning balance     25,500    
Ending balance 24,000   24,000   25,500
Patent Application Rights [Member] | Cost [Member]          
Beginning balance     75,181    
Additions     51,992   33,421
Ending balance 127,173   127,173   75,181
Patent Application Rights [Member] | Accumulated Amortization [Member]          
Beginning balance     0    
Amortization     0   0
Ending balance 0   0   0
Patent Application Rights [Member] | Net Carrying Amount [Member]          
Beginning balance     75,181    
Ending balance 127,173   127,173   75,181
Total [Member] | Cost [Member]          
Beginning balance     105,181 71,760 71,760
Additions     51,992   33,421
Ending balance 157,173   157,173   105,181
Total [Member] | Accumulated Amortization [Member]          
Beginning balance     4,500 $ 1,500 1,500
Amortization     1,500   3,000
Ending balance 6,000   6,000   4,500
Total [Member] | Net Carrying Amount [Member]          
Beginning balance     100,681    
Ending balance $ 151,173   $ 151,173   $ 100,681
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
4. Intangible Assets (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]        
Amortization - intangible assets $ 750 $ 750 $ 1,500 $ 1,500
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
5. Credit Facility (Details Narrative) - USD ($)
Mar. 31, 2017
Dec. 31, 2016
Debt Disclosure [Abstract]    
Line of credit $ 250,000 $ 250,000
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
6. Common Shares Issued for Services (Details) - USD ($)
3 Months Ended 6 Months Ended
Mar. 31, 2016
Jun. 30, 2017
Number of Shares 7,000 0
Total $ 7,000 $ 0
March 2016    
Number of Shares 100,000  
Value per Share $ .07  
Total $ 7,000  
January - March 2017    
Number of Shares 0  
Value per Share $ 0  
Total $ 0  
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Stock Options (Details) - $ / shares
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Outstanding, ending 44,100,000  
Weighted Average Exercise Price ending $ 0.11  
Weighted Average Fair Value, granted $ .06 $ 0.05
Stock options    
Outstanding, beginning 28,900,000  
Options granted 16,200,000  
Options expired (1,000,000)  
Outstanding, ending 44,100,000  
Weighted Average Exercise Price beginning $ 0.06  
Weighted Average Exercise Price, granted 0.05  
Weighted Average Exercise Price, expired 0.10  
Weighted Average Exercise Price ending 0.06  
Weighted Average Fair Value, beginning 0.04  
Weighted Average Fair Value, granted 0.06  
Weighted Average Fair Value, expired 0.03  
Weighted Average Fair Value, ending $ 0.05  
Weighted Average Remaining Life (Years) 2 years 8 months 19 days  
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Stock Options (Details 1) - Stock options
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Risk-free interest rate 1.05% 0.56%
Dividend yield 0.00% 0.00%
Expected stock price volatility 125.00% 125.00%
Expected forfeiture rate 0.00% 0.00%
Expected life 3 years 5 months 8 days 3 years 11 months 12 days
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Stock Options (Details 2)
Jun. 30, 2017
$ / shares
shares
Exercise Price | $ / shares $ 0.11
Number of Options Outstanding 44,100,000
Number of options exercisable 34,000,000
February 25, 2020 One  
Exercise Price | $ / shares $ 0.04
Number of Options Outstanding 2,000,000
Number of options exercisable
February 24, 2018  
Exercise Price | $ / shares $ 0.05
Number of Options Outstanding 1,000,000
Number of options exercisable 1,000,000
February 25, 2020  
Exercise Price | $ / shares $ 0.04
Number of Options Outstanding 4,000,000
Number of options exercisable 4,000,000
February 28, 2020  
Exercise Price | $ / shares $ 0.04
Number of Options Outstanding 5,000,000
Number of options exercisable 5,000,000
June 30, 2018  
Exercise Price | $ / shares $ 0.10
Number of Options Outstanding 600,000
Number of options exercisable 600,000
December 31, 2019  
Exercise Price | $ / shares $ 0.08
Number of Options Outstanding 15,000,000
Number of options exercisable 15,000,000
October 05, 2018  
Exercise Price | $ / shares $ 0.08
Number of Options Outstanding 300,000
Number of options exercisable 300,000
December 31, 2020  
Exercise Price | $ / shares $ 0.05
Number of Options Outstanding 16,200,000
Number of options exercisable 8,100,000
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
7. Stock Options (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Aggregate intrinsic value $ 674,000   $ 110,000
Weighted average fair value of stock options granted per share $ .06 $ 0.05  
Options      
Common stock granted 16,200,000    
Common Stock      
Common stock granted 0    
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
8. Warrants (Details)
Jun. 30, 2017
$ / shares
shares
Notes to Financial Statements [Abstract]  
Warrant outstanding, ending | shares 6,500,000
Warrant weighted average exercise price | $ / shares $ 0.11
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
8. Warrants (Details 1)
6 Months Ended
Jun. 30, 2017
$ / shares
shares
Number of Warrants 6,500,000
Warrant One  
Number of Warrants 500,000
Warrant Exercise Price | $ / shares $ 0.25
Expiry Date November 8, 2018
Warrant Two  
Number of Warrants 6,000,000
Warrant Exercise Price | $ / shares $ 0.10
Expiry Date April 22, 2020
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
9. Stockholders' Equity (Details Narrative) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Stockholders' Equity Note [Abstract]    
Common Stock, Par Value Per Share $ 0.0000053 $ 0.0000053
Common Stock, Shares Authorized 400,000,000 400,000,000
Dividends declared $ 0 $ 0
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
10. Related Party Transactions and Balances (Details) - USD ($)
Jun. 30, 2017
Dec. 31, 2016
Accounts payable and accrued liabilities $ 5,369 $ 45,295
Clarence Smith (CEO)    
Accounts payable and accrued liabilities $ 81
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
10. Related Party Transactions and Balances (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Related Party Transactions [Abstract]    
Payment to CFO $ 36,000 $ 36,000
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.7.0.1
11. Commitments and Contingency (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Commitments And Contingency Details Narrative      
Additional Paid In Capital $ 29,852,293   $ 29,115,795
prepaid expenses and deposits 134,370 $ 154,595  
prepaid expenses $ 8,130    
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