ProtoKinetix, Inc.: Form 10-K for the period ended Dec 31, 2023

ProtoKinetix, Incorporated (“ProtoKinetix,” “we,” “us,” “our,” or the “Company”) 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.

ProtoKinetix was incorporated as RJV Network, Inc. under the laws of the State of Nevada on December 23, 1999 for the primary purpose of developing an internet-based listing site that would provide detailed commercial real estate property listings and related data. In July 2003, the Company entered into an assignment of license agreement with BioKinetix Research, Incorporated for the assignment of rights relating to proprietary technologies of BioKinetix Research, Incorporated for the creation and commercialization of “superantibodies.” On July 8, 2003, the Company changed its name to “ProtoKinetix, Incorporated.”

The Company’s executive (or corporate) offices are located at 109 W Main St, Dalton, Ohio 44618. Our telephone number is (330) 445-4971 and our website is www.protokinetix.com (http://www.protokinetix.com).

Cautionary Note Regarding Forward-Looking Statements

The information discussed in this Annual Report on Form 10-K for the fiscal year ended December 31, 2023 as well as some statements in press releases and some oral statements of the Company’s officers during presentations about the Company 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 the section entitled “Risk Factors” included elsewhere in this Annual Report. 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 section and elsewhere in this Annual 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.

Recent Developments

On June 6, 2023, the Company announced the submission of a research paper describing cell characterization, graft evaluation, and yield of islet-like cells differentiated from patient-derived iPSCS for the treatment and eventual cure of Type-1 Diabetes for publication in Transplantation.

Research and Development

Our business depends on our ability to sponsor research and development activities. For the year ended December 31, 2022, the Company incurred total research and development expenses of $448,873. For the year ended December 31, 2023, the Company incurred total research and development expenses of $112,444. In order to reach the Company’s goals of developing a marketable product, we will need to increase the funding of our research and development activities which at this time is limited by our ability to raise money to fund the Company.

The Company’s securities are highly speculative and involve a high degree of risk, including among other items the risk factors described below. The below risk factors are intended to generally describe certain risks that could materially affect the Company and its current business operations and activities.

You should carefully consider the risks described below and elsewhere herein in connection with any decision whether to acquire, hold or sell the Company’s securities. If any of the contingencies discussed in the following paragraphs or other materially adverse events actually occur, the business, financial condition and results of operations could be materially and adversely affected. In such case, the trading price of our common stock could decline, and you could lose all or a significant part of your investment.

Our Company has a lack of operating history and lack of revenues from operations. Our Company has no revenues and very limited operating history. As of the date of this Annual Report, our most significant assets are cash and our intellectual property. Our ability to successfully generate revenues from our intellectual property is dependent on a number of factors, including availability of funds to complete development efforts, to adequately test and refine our products, and to commercialize our products. There can be no assurance that we will not encounter setbacks with our products, or that funding will be sufficient to bring our products to the point of commercialization.

We are dependent on our key personnel, and the loss of such personnel could adversely affect our business. We depend on the continued performance of the members of our management team and our Business and Scientific Advisory Board who have contributed to the expertise of our team and the position of our business. If we lose the services of members of our management teams, and are unable to locate a suitable replacement in a timely manner, it could have a material adverse effect on our business. We do not expect to obtain key man life insurance for any members of management in the foreseeable future.

We may experience difficulty implementing our business plan. Our business plan is to continue with the development of the Company’s intellectual property and to develop a product for sale commercially. We may require additional capital in order to develop our products for sale commercially. There can be no assurance that we would be able to obtain additional capital on reasonable terms, or at all.

We have been and expect to be significantly dependent on our collaborative agreements for the research, development and testing of AAGP®, which exposes us to the risk of reliance on the performance of third parties. In conducting our research and development activities, we currently rely, and expect to continue to rely, on numerous collaborative agreements with third parties such as contract research organizations, commercial partners, universities, governmental agencies and not-for-profit organizations for both strategic and financial resources. The loss of, or failure to perform by us or our partners (who are subject to regulatory, competitive and other risks) under any applicable agreements or arrangements, or our failure to secure additional agreements for our product candidates, would substantially disrupt or delay our research and development and commercialization activities. Any such loss would likely increase our expenses and materially harm our business, financial condition and results of operations.

We may have difficulty raising any needed additional capital. We may have difficulty raising needed capital in the future as a result of, among other factors, our lack of revenues from operations, as well as the inherent business risks associated with our Company and present and future market conditions. Our business currently generates no revenue from operations. We will likely require additional funds to conduct research and development, establish and conduct non-clinical and clinical trials, secure clinical and commercial-scale manufacturing arrangements and provide for marketing and distribution. If adequate funds are unavailable, we may be required to delay, reduce the scope of or eliminate one or more of our research, development or commercialization programs, product launches or marketing efforts, any of which may materially harm our business, financial condition and results of operations.

We are a research and product development stage company that has not yet developed or sold any products. To date, we have not yet developed nor marketed a product. Ongoing testing of the AAGP® molecule with three amino acids joined to a monosaccharide by a gemdiflouride bond continues to show that there is significant promise in the field of medicine of preserving cells, tissue and organs from various stresses. Tests have confirmed that the AAGP® molecule improves the harvest of cells from cryopreservation by 30% to 120%. We believe there is a market for AAGP® to preserve cells, particularly various stem cells, and we will continue testing with potential customers. At the same time, we are taking steps to improve the manufacturing process to reduce costs and improve purity and biochemical activity.

Even if we develop product candidates which obtain regulatory approval they may never achieve market acceptance or commercial success. Even if we develop products and obtain FDA or other regulatory approvals, our products may not achieve market acceptance among physicians, patients and third party payors and, ultimately, may not be commercially successful. Market acceptance of our product candidates for which we receive approval depends on a number of factors. Any failure by our product candidates that obtain regulatory approval to achieve market acceptance or commercial success would adversely affect our financial results.

The potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our formulations or products, even if commercialized. Many of our targeted diseases and conditions can also be treated by other medication or technologies. These treatments may be widely accepted in medical communities and have a longer history of use. The established use of these competitive drugs may limit the potential for our technologies, formulations and products to receive widespread acceptance if commercialized.

The market for our product candidates is rapidly changing and competitive, and new technologies treatments which may be developed by others could impair our ability to maintain and grow our business and remain competitive. The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Developments by others may render our technologies and our product candidates noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others now existing or diversifying into the field is intense and is expected to increase. Many of these entities have significantly greater research and development capabilities, human resources and budgets than we do, as well as substantially more marketing, manufacturing, financial and managerial resources. These entities represent significant competition for us.

Risks Related to Product Development and Regulation

Our ability to generate revenues will be dependent on our ability to develop a product that complies with legal requirements. Although the laws and regulations of the various jurisdictions in which we may operate vary in their technical requirements and are subject to amendment from time to time, virtually all of these jurisdictions require licenses, permits, and other forms of approval. We will have to apply for, and obtain, all requisite government licenses, registrations, findings of suitability, permits and approvals necessary for us to do business in these new markets. We cannot offer any assurance that we will be able to obtain all necessary licenses, registrations, findings of suitability, permits, or approvals.

Our failure to obtain costly government approvals, including required FDA approvals, or to comply with ongoing governmental regulations relating to our technologies and product candidates could delay or limit introduction of our products and result in failure to achieve revenues or maintain our ongoing business. Our research and development activities and the manufacture and marketing of our product candidates are subject to extensive regulation for safety, efficacy and quality by numerous government authorities in the United States and abroad. Before receiving FDA or foreign regulatory clearance to market our proposed formulations and products, we will have to demonstrate that our formulations and products are safe and effective in the population. Clinical trials, manufacturing and marketing of drugs are subject to the rigorous testing and approval process of the FDA and equivalent foreign regulatory authorities. The Federal Food, Drug and Cosmetic Act and other federal, state and foreign statutes and regulations govern and influence the testing, manufacture, labeling, advertising, distribution and promotion of drugs and medical devices. As a result, regulatory approvals can take a number of years or longer to accomplish and require the expenditure of substantial financial, managerial and other resources.

Conducting and completing the clinical trials necessary for FDA and/or Health Canada approval is costly and subject to intense regulatory scrutiny as well as the risk of failing to meet the primary endpoint of such trials. We will not be able to commercialize and sell our proposed products and formulations without completing such trials. In order to conduct clinical trials that are necessary to obtain approval by the FDA and/or Health Canada to market a formulation or product, it is necessary to receive clearance from the FDA and/or Health Canada to conduct such clinical trials. The FDA and/or Health Canada can halt clinical trials at any time for safety reasons or because we or our clinical investigators did not follow the FDA’s and/or Health Canada requirements for conducting clinical trials. If we are unable to receive clearance to conduct clinical trials or the trials are permanently halted by the FDA and/or Health Canada, we would not be able to achieve any revenue from such product as it is illegal to sell any drug or medical device for human consumption or use without FDA and/or Health Canada approval.

We could be exposed to significant drug product liability claims which could be time consuming and costly to defend, divert management attention and adversely impact our ability to obtain and maintain insurance coverage. The testing, manufacturing, marketing and sale of our proposed products involve an inherent risk that product liability claims will be asserted against us. Product liability insurance may prove inadequate to cover claims and/or litigation costs. Product liability claims or other claims related to our products, regardless of their outcome, could require us to spend significant time and money in litigation or to pay significant settlement amounts or judgments. Any successful product liability or other claim may prevent us from obtaining adequate liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our products and product candidates. A product liability claim could also significantly harm our reputation and delay market acceptance of our proposed formulations and products.

Risk Factors Related to Intellectual Property and Obsolescence

We rely on patents and other intellectual property to protect our business interests. We have attempted to protect our products and will attempt to protect other products through a combination of trade secrets, confidentiality agreements, patents and other contractual provisions. Patents only provide a limited protection against infringement, and patent infringement suits are complex, expensive, and not always successful. Although the Company believes its patents will provide significant protection, there can be no assurance that they will be issued and if they are, that they will provide enough protection.

Because it is difficult and costly to protect our proprietary rights, we may not be able to ensure their protection. Our commercial success will depend in part on maintaining patent protection and trade secret protection for our products, as well as successfully defending these patents against third-party challenges. We will only be able to protect our technologies from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover them.

The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical or biotechnology patents has emerged to date in the United States. The patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

Our competitive position could be harmed if we are unable to enforce confidentiality agreements. Our proprietary information is critically important to our competitive position and is a significant aspect of our business plan. We generally enter into confidentiality agreements with most of our employees and consultants, and control access to, and distribution of, our documentation and other proprietary information. Despite these precautions, we cannot assure you that these strategies will be adequate to prevent misappropriation of our proprietary information. Therefore, we could be required to expend significant amounts to defend our rights to proprietary information in the future if a breach were to occur.

General Corporate Risk Factors

Insiders continue to have substantial control over the Company. As of March 20, 2024, the Company’s directors and executive officers hold the current right to vote approximately 34.4% of the Company’s outstanding voting stock; of which 28.4% is owned or controlled, directly or indirectly by the Company CEO, Clarence Smith. In addition, the Company’s directors and executive officers have the right to acquire additional shares which could increase their voting percentage significantly. As a result, Mr. Smith acting alone, and/or many of these individuals acting together, may have the ability to exert significant control over the Company’s decisions and control the management and affairs of the Company, and also to determine the outcome of matters submitted to stockholders for approval, including the election and removal of a director, the removal of any officer and any merger, consolidation or sale of all or substantially all of the Company’s assets. Accordingly, this concentration of ownership may harm a future market price of the Company’s common stock by:

• Delaying, deferring or preventing a change in control of the Company;
• Impeding a merger, consolidation, takeover or other business combination involving the Company; or
• Discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company .

The Company may not be able to continue as a going concern. Our independent public accountants noted that our recurring losses from operations ($415,479 and $1,907,309 for the years ended December 31, 2023 and 2022, respectively) and negative net operating cash flow ($375,989 and $804,669 for the years ended December 31, 2023 and 2022, respectively) raise substantial doubt about our ability to continue as a going concern. This may hinder our future ability to obtain financing or may force us to obtain financing on less favorable terms than would otherwise be available.

The Company is dependent upon additional financing which it may not be able to secure in the future. As it has in the past, the Company will likely continue to require financing to address its working capital needs, continue its development efforts, support business operations, fund possible continuing operating losses, and respond to unanticipated capital requirements. There can be no assurance that additional financing or capital will be available and, if available, upon acceptable terms and conditions. To the extent that any required additional financing is not available on acceptable terms, the Company’s ability to continue in business may be jeopardized and the Company may need to curtail its operations and implement a plan to extend payables and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. Such a plan could have a material adverse effect on the Company’s business, financial condition and results of operations, and ultimately the Company could be forced to discontinue its operations, liquidate and/or seek reorganization in bankruptcy.

Our management is relatively inexperienced with running a public company and could create a risk of non-compliance. Management’s inexperience may cause us to fall out of compliance with applicable regulatory requirements, which could lead to enforcement action against us and a negative impact on our stock price.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses and could create a risk of non-compliance. Changing laws, regulations and standards relating to corporate governance and public disclosure have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the public markets and public reporting. These corporate governance standards are the product of many sources, including, without limitation, public market perception, stock exchange regulations and SEC disclosure requirements. Our management team expects to invest significant management time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities. Management’s inexperience may cause us to fall out of compliance with applicable regulatory requirements, which could lead to enforcement action against us and a negative impact on our stock price.

As a company with a class of securities registered pursuant to the Exchange Act the Company has significant obligations under the Exchange Act. Having a class of securities registered under the Exchange Act is a time consuming and expensive process and subjects the Company to increased regulatory scrutiny and extensive and complex regulation. Complying with these regulations is expensive and requires a significant amount of management’s time. For example, public companies are obligated to institute and maintain financial accounting controls and for the accuracy and completeness of their books and records. These requirements could necessitate additional corporate spending on procedures and personnel requiring us to reallocate funds from other business objectives.

Risk Factors Related to Our Common Stock

The Company will face significant regulation by the SEC and state securities administrators. The holders of shares of the Company’s common stock and preferred stock may not offer or sell the shares in private transactions or (should a public market develop, of which there can be no assurance) public transactions without compliance with regulations imposed by the SEC and various state securities administrators. To the extent that any holder desires to offer or sell any such shares, the holder must prove to the reasonable satisfaction of the Company that he has complied with all applicable securities regulations, and the Company may require an opinion of the holder’s legal counsel to that effect. Thus, there can be no assurance that the holder will be able to resell the shares or any interest therein when the holder desires to do so.

Our existing stockholders could experience further dilution if we elect to raise equity capital to meet our liquidity needs or finance a strategic transaction. As part of our growth strategy we may desire to raise capital and or utilize our common stock to effect strategic business transactions. Either such action will likely require that we issue equity (or debt) securities which would result in dilution to our existing stockholders. Although we will attempt to minimize the dilutive impact of any future capital-raising activities or business transactions, we cannot offer any assurance that we will be able to do so. If we are successful in raising additional working capital, we may have to issue additional shares of our common stock at prices at a discount from the then-current market price of our common stock.

Because we have no plans to pay dividends on our common stock, investors must look solely to stock appreciation for a return on their investment in us. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all future earnings to fund the development and growth of our business. Any payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, our earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions applying to the payment of dividends and other considerations that the board of directors deems relevant. Investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.

As our stock is not listed on a national securities exchange, trading in our shares will be subject to rules governing “penny stocks,” which will impair trading activity in our shares. Our stock is not on a national securities exchange. Therefore, our stock is subject to rules adopted by the SEC regulating broker dealer practices in connection with transactions in “penny stocks.” Those disclosure rules applicable to “penny stocks” require a broker dealer, prior to a transaction in a “penny stock” not otherwise exempt from the rules, to deliver a standardized list disclosure document prepared by the SEC. That disclosure document advises an investor that investment in “penny stocks” can be very risky and that the investor’s salesperson or broker is not an impartial advisor but rather paid to sell the shares. The disclosure contains further warnings for the investor to exercise caution in connection with an investment in “penny stocks,” to independently investigate the security, as well as the salesperson with whom the investor is working and to understand the risky nature of an investment in this security. The broker dealer must also provide the customer with certain other information and must make a special written determination that the “penny stock” is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. Further, the rules require that, following the proposed transaction, the broker provide the customer with monthly account statements containing market information about the prices of the securities.

The over-the-counter market for stock such as ours is subject to extreme price and volume fluctuations. You may not be able to resell your shares at or above the public sale price. The securities of companies such as ours have historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations and other factors, such as new product developments and trends in the industry and in the investment markets generally, as well as economic conditions and quarterly variations in our operational results, may have a negative effect on the market price of our common stock.

The Company’s principal executive office, for all operations during the year 2023 was at 109 W. Main St, Dalton, Oh 44618.

The Company does not have a lease for its principal executive office but rents month to month. A lease on the space is held by the CFO’s, company, The Guzzetta Company LLC. The Company paid $500 per month for the office ($500 in 2022). ProtoKinetix does not own any real property.

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.

The following discussion provides information regarding the results of operations for the years ended December 31, 2023 and 2022, and our financial condition, liquidity and capital resources as of December 31, 2023 and 2022. The financial statements and the notes thereto contain detailed information that should be referred to in conjunction with this discussion.

The following discussion and analysis should be read in conjunction with and our historical financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K, as well as the Risk Factors and the Cautionary Note Regarding Forward-Looking Statements included above.

Results of Operations

Revenues

We had no revenues for the years ended December 31, 2023 and 2022.

Gross profit and expenses

The Company’s net loss was $415,479 for the year ending December 31, 2023 compared to $1,907,309 for the year ending December 31, 2022. These expenses were primarily incurred for professional fees, share-based compensation related to the operations of the Company’s business, research and development and other general and administrative expenses. Significant changes from the prior year include:

• Professional fees decreased by $11,097, year over year going to $155,157 from $166,254 as legal and auditing fees contributed to a small decrease , while accounting activity remained unchanged over prior year totals.
• Share-based compensation decreased by $1,070,983 from $1,070,983 to $Nil primarily because the Company did not issue share options as a form of compensation.
• Research and development decreased significantly by $336,429 from $448,873 to $112,444 as the Company scaled back on new research and moves toward leveraging the positive study findings. New projects will be targeted investments expanding the development of the AAGP® molecule through institutional collaborations and industry partnerships. The Company is making a concentrated effort to find industry partners to move research forward.
• General and administrative expenses pushed downward again year over year, changing by $63,130 from $162,749 to $99,619 due to the spending cuts in marketing, press releases and social media exposure. Majority of new information is currently released through updates to Company website.

Our expenses in 2023 were $415,479 which included $155,157 in professional fees. We operate the Company by hiring outside consultants to assist us with management, strategic planning, organization and daily operations. These professional consulting services are related to marketing, accounting, merger opportunities as well as research development services. The Company also incurred total research and development expenses of $112,444 and general and administrative costs of $99,619 during the year ended December 31, 2023.

Liquidity and Capital Resources

At December 31, 2023, we had $20,408 in cash and $21,458 in total current assets. As of December 31, 2023, we had a working capital equity deficit position of $23,238. Although as of the date of this Annual Report we do not believe we have sufficient capital to meet cash flow projections and carry forward our business objectives in the short-term, the Company will need additional working capital to continue its medical research or to be successful in any future business activities and continue to pay its liabilities. 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 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 for the Years ended December 31, 2023 and 2022

Net Cash Used in Operating Activities

During the year ended December 31, 2023, net cash used in operating activities decreased $428,680 from $804,669 to $375,989 for the years ended December 31, 2022 and 2023, respectively. This decrease was predominantly due to the overall decreased spending on web marketing, news releases, and social media, as well as significant reduction in new research spending. Informative updates have been posted on the Company website, reducing the need for news releases and associated expenses.

Net Cash Used in Investing Activities

During the year ended December 31, 2023, net cash used in investing activities decreased by $72,896 primarily from reduced number of new patent applications. Current year spending was narrowed to maintenance of existing patent family. Net cash used for investing activities for the year ended December 31, 2022 was $132,049. Net cash used for investing activities for the year ended December 31, 2023 was $59,153.

Net Cash Provided by Financing Activities

During the year ended December 31, 2022, net cash provided by financing activities reduced by $474,700 from $904,700 to $430,000 for the years ended December 31, 2022 and 2023 respectively. This decrease was predominantly due to a reduction in funding of new research through private placement of common stock shares.

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 potential 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 trading is not consistent.

Off-Balance Sheet Arrangements

None.

Contractual Obligations

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

Critical Accounting Policies

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

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

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

Share-Based Compensation

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

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

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

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. The Company capitalizes its patent application costs. All other expenditures are recognized in profit or loss as incurred.

As at December 31, 2023, 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 not yet approved patent application costs for any new patents as at December 31, 2023.

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 year ending December 31, 2023.

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 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 December 31, 2023 (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 not 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 not 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.

Management’s Annual Report on Internal Control Over Financial Reporting

In accordance with Item 308 of SEC Regulation S-K, management is required to provide an annual report regarding internal controls over our financial reporting. This report, which includes management’s assessment of the effectiveness of our internal controls over financial reporting, is found below. Inasmuch as the Company is neither an accelerated filer nor a large accelerated filer, the Company is not obligated to provide an attestation report on the Company’s internal control over financial reporting by the Company’s registered public accounting firm.

Internal Control Over Financial Reporting

Our management is also responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act. Our ICFR are intended to be designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our ICFR are expected to include those policies and procedures that management believes are necessary that:

(1) Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with proper authorizations of management and our directors; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

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Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect of financial statement preparation and may not prevent or detect misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

As of December 31, 2023, management (with the participation of the Chief Executive Officer and the Chief Financial Officer) conducted an evaluation of the effectiveness of the Company’s ICFR based on the framework set forth in Internal Control--Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and SEC guidance on conducting such assessments by smaller reporting companies and non-accelerated filers. Based on that assessment, management (with the participation of the Chief Executive Officer and the Chief Financial Officer) concluded that, during the period covered by this report, such internal controls and procedures were not effective as of December 31, 2023.

Material Weaknesses Identified

In connection with the preparation of our financial statements for the year ended December 31, 2023, certain significant deficiencies in internal control became evident to management that, in the aggregate, represent material weaknesses, which include the following:

Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended December 31, 2023, we used outside services to perform all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

Insufficient corporate governance policies. Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by our Board of Directors to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management.

Plan for Remediation of Material Weaknesses

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies provided that we have the resources to implement them.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by our registered public accounting firm.

There was no change in our internal control over financial reporting that occurred during the year ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.