Annual Report for Fiscal Year Ending March 31, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes included at the end of this report. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties such as statements of our plans, objectives, expectations, and intentions. As a result of many factors, including those factors set forth in the "Risk factors" section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

The discussion and analysis of our financial condition and results of operations are based on Protagenic's financial statements, which Protagenic has prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires Protagenic to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, Protagenic evaluates such estimates and judgments, including those described in greater detail below. Protagenic bases its estimates on historical experience and on various other factors that Protagenic believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We expect to continue to incur significant expenses and minimal positive net cash flows from operations or negative net cash flows from operations for the foreseeable future, and those expenses and losses may fluctuate significantly from quarter-to-quarter and year-to-year. We anticipate that our expenses will fluctuate substantially as we:

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continue our ongoing preclinical studies, clinical trials and our product development activities for PT00114;

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

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continue research and preclinical development and initiate clinical trials of our other potential indications for PT00114;

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

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

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maintain, expand and protect our intellectual property portfolio; and

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

Recent Events

Acquisition of five preclinical drug candidate assets

As a result of the Exchange Agreement with Alterola Biotech Inc., the Company acquired five preclinical drug candidate assets and five new employees, all of whom were working for, or affiliated with, the Alterola subsidiary known as Phytanix Bio, Inc. The drug candidate assets temporarily expanded our pipeline into multiple therapeutic areas beyond the target markets of PT00114, supported by an intellectual property portfolio.

Settlement Agreement

On February 17, 2026, the Company entered into a Settlement Agreement (the "Settlement Agreement") with Alterola Biotech Inc., EMC2 Capital LLC, and the former stockholders of Phytanix Bio (collectively, the "Former Phytanix Stockholders"), in connection with the litigation styled Protagenic Therapeutics, Inc. v. Alterola Biotech Inc., et al., Case No. 2025-1238-KMM, pending in the Court of Chancery of the State of Delaware (the "Litigation").

The Settlement Agreement provides for, among other things, the dismissal of the Litigation and the execution of an agreement to terminate, and unwind the transactions contemplated by, the Share Exchange Agreement dated May 15, 2025 (the "SEA"). Pursuant to the SEA, the Company had previously reverse merged with Phytanix Bio.

Unwind, Termination and Share Exchange Agreement

On February 17, 2026, the Company entered into an Unwind, Termination, and Share Exchange Agreement (the "Unwind Agreement") with Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders, and Colin Stott, as Sellers' Representative. The Company, Phytanix Bio, Alterola Biotech Inc., EMC2 Capital LLC, the Former Phytanix Stockholders, and Sellers' Representative are collectively referred to herein as the "Parties". The closing of the unwind transactions (the "Closing") occurred simultaneously with the execution of the Unwind Agreement on February 17, 2026.

Pursuant to the Unwind Agreement:

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The SEA was terminated;

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The Parties agreed to unwind the transactions contemplated by the SEA;

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The Former Phytanix Stockholders forfeited and returned to the Company all shares of common stock and preferred stock that had been issued to them as closing consideration under the SEA;

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The Company transferred back to the Former Phytanix Stockholders 100% of the outstanding capital stock of Phytanix Bio;

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Upon Closing, the Former Phytanix Stockholders re-acquired full ownership of Phytanix Bio, and the Company relinquished all ownership and related rights in Phytanix Bio;

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Phytanix Bio will continue to own its pre-merger assets and retain its liabilities as reflected on its balance sheet as of the date of the Unwind Agreement; and

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The Company agreed to pay Phytanix Bio $300,000 at Closing and an additional $10,000 following receipt of specified financial information, in accordance with the terms of the Unwind Agreement.

The Unwind Agreement also includes:

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Mutual releases between the Company and the Former Phytanix Stockholders;

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Termination of related agreements between the Parties;

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Acknowledgement of resignations of Former Phytanix Stockholders and their affiliates from any positions with the Company;

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Mutual releases between the Parties;

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Indemnification provisions in favor of the Company relating to liabilities associated with the SEA and Phytanix Bio; and

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Indemnification provisions in favor of Phytanix Bio for any third-party claims relating to any action taken by, or on behalf of, Phytanix Bio outside the ordinary course of business during the period between the closing of the transactions under the SEA and the closing of the transactions under the Unwind Agreement that are not otherwise reflected on the balance sheet of Phytanix Bio as of the date of the Unwind Agreement.

The foregoing descriptions of the Settlement Agreement and the Unwind Agreement do not purport to be complete and are qualified in their entirety by reference to the full text of the Settlement Agreement and the Unwind Agreement, copies of which are filed as exhibits 10.1 and 10.2, respectively, to the Current Report on Form 8-K filed by the Company on February 17, 2026 and are incorporated herein by reference.

Notice of Delisting and Related Actions

On July 24, 2024, the Company received a deficiency letter (the "Notification Letter") from the Nasdaq Listing Qualifications ("Nasdaq") stating that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The Notification Letter states that the Company has 180 calendar days, or until January 20, 2025, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the Company's closing bid price of the Company's common stock must have a closing bid price of at least $1.00 for a minimum of ten consecutive business days.

On January 22, 2025, Nasdaq provided a notice to the Company that the Company had not regained compliance with Rule 5550(a)(2) and is not eligible for a second 180 calendar day compliance period as the Company does not comply with the requirements for initial listing on The Nasdaq Capital Market. This notification is part of the ongoing discussions with the Nasdaq Hearings Panel (the "Panel") regarding the Company's listing status, and the Company included this matter in its presentation to the Panel on January 30, 2025.On February 19, 2025, the Company received a hearing panel decision from Nasdaq (Nasdaq Listing Qualifications Hearings Docket No. NQ 7072C-25) indicating that its provisional plan for regaining compliance with the Nasdaq listing requirements had been accepted. For continued listing on the Nasdaq Capital Market, the Company has until April 28, 2025 to: (1) demonstrate compliance with Nasdaq Rules 5550(a)(2) and 5550(b)(2), (2) file a public disclosure describing any transactions undertaken by the Company to increase its equity and provide an indication of its equity following those transactions, and (3) provide the Panel with an update on its fundraising plans and updated income projections for the next 12 months.

On April 18, 2025, the Company held a Special Meeting of Shareholders in which the Shareholders voted to authorize a reverse split of a magnitude between 1-for-10 and 1-for-20, for the purpose of increasing the chances of the Company regaining compliance with Nasdaq Listing Rule. 5550(a)(2). The Board determined that the best ratio to use was 1-for-14, because it would be the highest ratio that maintained at least 500,000 shares remaining in the Company's public float, while maximizing the Company's likely price per share.

On April 25, 2025, the Company provided an update to Nasdaq on its plans for both minimum bid compliance and capital raising, along with a request for an extension on the April 28, 2025 deadline. The update included that the 1-for-14 reverse split would be effective May 5, 2025, and the company had engaged a syndicate of two underwriters to market and implement an equity financing for the purpose of raising enough capital to comply with Nasdaq Listing Rule 5810(c)(3)(A). On May 1, 2025, Nasdaq provided a response to the Company's representative that the Panel has approved the Company's extension request. As a result, the Company believes that it should be able to achieve a minimum bid price for 10 days above $1 by May 16, 2025, and the shareholder equity compliance by May 19, 2025.

On June 17, 2025, the Company received a letter from Nasdaq stating that the Nasdaq Hearings Panel found the Company in compliance with Listing Rules 5550(a)(2), 5550(a)(4), 5550(b)(1), and 5620(a), the Bid Price, Public Float, Equity and Annual Shareholder Meeting Rule, respectively as required by the February 19, 2025, decision. The letter also stated that pursuant to Listing Rule 5815(d)(4)(B), the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of this letter. If, within that one-year monitoring period, Staff finds the Company again out of compliance with the Equity Rule, notwithstanding Rule 5810(c)(2), the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency and Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, nor will the company be afforded an applicable cure or compliance period pursuant to Rule 5810(c)(3). Instead, Staff will issue a Delist Determination Letter, and the Company will have an opportunity to request a new hearing with the initial Panel or a newly convened Hearings Panel if the initial Panel is unavailable. The Company will have the opportunity to respond/present to the Hearings Panel as provided by Listing Rule 5815(d)(4)(C). The Company's securities may be at that time delisted from Nasdaq.

On August 20, 2025, the "Company received a notification letter (the "Notification Letter") from the Nasdaq Listing Qualifications department ("Nasdaq") stating that it is not in compliance with Nasdaq Listing Rule 5250(c)(1) as a result of its failure to timely file its Quarterly Report on Form 10-Q for the period ended September 30, 2025 (the "Form 10-Q") with the Securities and Exchange Commission (the "SEC"). The Notification Letter states that the Company has 60 calendar days to submit a plan to regain compliance and if Nasdaq accepts such plan, they can grant an exception of up to 180 calendar days from the Form 10-Q's due date (or until February 17, 2026).

As previously reported in the Company's Notification of Late Filing on Form 12b-25 filed with the SEC on August 14, 2025 (the "Form 12b-25"), the Company was unable to file the Form 10-Q within the prescribed period without unreasonable effort or expense.

The Company's common stock was delisted from the Nasdaq Capital Market effective January 5, 2026 and is currently quoted on the OTCQB under the symbol "PTIX."

The Company intends to take the necessary steps to regain compliance with Nasdaq's listing rules as soon as practicable. However, there can be no assurance that the Company will be able regain compliance and be able to be listed on Nasdaq again.

Change of Fiscal Year

On August 7, 2025, the Board approved a change in the Company's fiscal year-end from December 31 to March 31, effective immediately. The Company filed a transition report on Form 10-QT with the Securities and Exchange Commission for the transition period beginning April 1, 2025 and ending June 30, 2025.

Corporate Restructuring

On August 8, 2025, the Board of Directors (the "Board") approved a focused restructuring plan (the "Restructuring Plan") to transition to a virtual operating model and concentrate capital on the Company's highest-priority clinical program(s). In approving the Restructuring Plan, the Board determined that a disciplined cost structure and a sharper focus on near-term value inflection are in the best interests of the Company and its stockholders.

Under the Restructuring Plan, the Company (i) temporarily suspended expenditures related to its preclinical programs described above and (ii) initiated a process to evaluate strategic alternatives for those programs, including partnerships and/or out-licensing, with the objective of advancing them with appropriate external funding while preserving cash for the Company's lead clinical assets. By doing so, the Company reduced operating expenses, overhead, and headcount primarily associated with preclinical activities.

When fully implemented, the Restructuring Plan is expected to reduce annualized operating expenses by approximately $8 million. The Company expects to incur one-time charges in connection with the Restructuring Plan; however, because key actions remain in process, the Company cannot reasonably estimate the total amount or timing of such charges at this time and will provide an update in a subsequent filing once such amounts are estimable.

In connection with the Restructuring Plan, the Board terminated the employment of (i) Barrett Evans as Chief Executive Officer and President and (ii) Colin Stott as Chief Operating Officer, in each case effective immediately. Messrs. Evans and Stott remain members of the Company's Board of Directors. Any severance or other compensatory agreements, if applicable, will be disclosed when determined. Workforce reductions also included the certain roles primarily associated with preclinical operations, regulatory affairs, and intellectual property functions.

In total, the Restructuring Plan was designed to accomplish three things:

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Clinical focus. The Company will allocate available resources to efficiently execute the ongoing Phase 2 clinical trial of PT00114 (peptide analogue), which the Company currently expects to complete in approximately 9 to 12 months, subject to enrollment and other customary factors.

2.

Virtual operating model. The Company is transitioning to a virtual operating model to minimize cash burn while prioritizing its clinical-stage program.

On February 3, 2026, William (Bill) Nichols, Jr was appointed as the new President of the Company. On April 30, 2026, the Company's former Chief Financial Officer, Alex Arow, departed the Company.

As part of the unwind, Messrs. Evans and Stott were removed from the board of directors.

Results of Operations

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

Below are the changes in operating expenses between the year ended March 31, 2026 and 2025:

		Year Ended				Year Ended								Percent
		March 31, 2026				March 31, 2025				Changes				Changes
Accounting and audit fees		$	272,579			$	132,600			$	139,979				106	%
Research and Development			901,896				376,740				525,156				139	%
Legal Fees			874,395				183,097				691,298				378	%
Consulting Fees			939,210				667,584				271,626				41	%
Salaries and wages			764,648				132,775				631,873				476	%
Bad debt expense			-				1,023,235				(1,023,235	)			(100	)%
General and administrative - other			332,393				77,530				254,863				329	%
Stock compensation			418,589				-				418,589				100	%
TOTAL OPERATING EXPENSES		$	4,503,710			$	2,593,561			$	1,910,149				74	%

The increase in research and development expense is due to the low year-ago comparable figure of only $376,740, which was driven by the fact that the former Phytanix Bio, Inc., which was acquired by the Company in May 2025 but is being treated as the accounting acquirer and therefore solely responsible for the historical 2025 operating expenses, was conducting little or no drug development work in the year ended March 31, 2025 (as Phytanix Bio had only been incorporated in Nevada in 2024). By contrast, the combined company was conducting a level of R&D spending in the year ended March 31, 2026 that was commensurate with a Phase I clinical trial, which was in progress for the compound known as PT11004.

The increase in general and administrative expenses is due to an increase in stock compensation due to option vesting. The increase in R&D expense is due to lower expenses related to our clinical trials and related expenses due to changes in the Company's stage of research and development and change to the Company's outsourced research partners. The increase in transaction fees is from our merger that occurred in May 2025. This increase has been the primary driver of our increased loss from operations for the year ended March 31, 2026 compared to the same period for 2025.

During the year ended March 31, 2026, the Company entered into a reverse merger with Phytanix Bio as well as an unwind of this merger. Due to this reverse merger, the Company presents the historical financial information of Phytanix Bio and only includes the financial information for Protagenic for the period after the reverse merger. The financial numbers for Phytanix Bio are consolidated only through the date of the unwind. (See Note 4) This limits comparability of the Company's number between the years presented.

Below are the changes in other income and expenses between the year ended March 31, 2026 and 2025:

		Year Ended				Year Ended								Percent
		March 31, 2026				March 31, 2025				Changes				Changes
Interest expenses/amortization of discount		$	(1,495,007	)		$	(1,039,353	)		$	(455,654	)			44	%
Derivative expense			(343,399	)			-				(343,399	)			(100	)%
Change in fair value of derivative liabilities			1,507,869				-				1,507,869				100	%
Foreign currency exchange differences			9,283				41,056				(31,773	)			(77	)%
Gain/loss on disposal of subsidiary			7,310,719				-				7,310,719				100	%
Gain/loss on extinguishment of debt			(1,117,778	)			-				(1,117,778	)			(100	)%
TOTAL OTHER INCOME (EXPENSE)		$	5,871,687			$	(998,297	)		$	6,869,984				(688	)%

During the year ended March 31, 2026, the Company entered into a reverse merger with Phytanix Bio as well as an unwind of this merger. Due to this reverse merger, the Company presents the historical financial information of Phytanix Bio and only includes the financial information for Protagenic for the period after the reverse merger. The financial numbers for Phytanix Bio are consolidated only through the date of the unwind. (See Note 4) This limits comparability of the Company's number between the years presented.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all. To date, we have primarily financed our operations through the public offering of our equity securities and the private placement of our convertible securities.

Below are the changes in cashflow between the years ended March 31, 2026 and 2025:

		Year Ended				Year Ended								Percent
		March 31, 2026				March 31, 2025				Changes				Changes
Net cash used in operating activities		$	(2,806,800	)		$	(1,768,908	)		$	(1,037,892	)			59	%
Net cash provided by investing activities		$	629,883			$	-			$	629,883				100	%
Net cash provided by financing activities		$	3,873,653			$	1,809,265			$	2,064,388				114	%

The use of cash in operating activities during the year ended March 31, 2026, primarily comprised of $1,367,977 net income, $418,589 in stock compensation expense, $1,507,869 from the change in fair value of the derivative liability, $7,310,719 from the gain on disposal of the Phytanix subsidiary, $1,567,479 from amortization of debt discount, a decrease in prepaid expenses and other current assets of $53,393, and a $1,056,323 increase of accounts payable and accrued expenses, which included payments to legal and accounting professionals, payments to consultants, and other administrative expenses.

The use of cash in operating activities during the year ended March 31, 2025, primarily comprised of $3,591,858 net loss, $598,810 from amortization of debt discount, $103,184 from stock compensation expense, $773,234 from bad debt, and a $388,118 increase of accounts payable and accrued expenses, which included payments to legal and accounting professionals, payments to consultants, and other administrative expenses.

The cash provided by investing activities during the year ended March 31, 2026 consisted of $943,180 from the cash revived in the acquisition of Phytanix Bio and partly offset by $310,000 from cash spent in the unwind of the Phytanix Bio acquisition.

The cash provided by financing activities during the year ended March 31, 2026 consisted of $395,474 from the issuance of shares for cash, $533,898 from the increase in note payable for acquisition of Phytanix Bio, and $3,949,730 for proceeds from the exercise of warrants.

The cash provided by financing activities during the year ended March 31, 2025 consisted of $1,622,003 from the proceeds from notes payable and $187,062 for proceeds from related party loans.

During the year ended March 31, 2026, the Company entered into a reverse merger with Phytanix Bio as well as an unwind of this merger. Due to this reverse merger, the Company presents the historical financial information of Phytanix Bio and only includes the financial information for Protagenic for the period after the reverse merger. The financial numbers for Phytanix Bio are consolidated only through the date of the unwind. (See Note 4) This limits comparability of the Company's number between the years presented.

We continually project anticipated cash requirements, predominantly from the ongoing funding requirements of our neuropeptide drug development program. The majority of these expenses relate to paying external vendors such as Contract Research Organizations (CROs) and peptide synthesizer companies. They could also include business combinations, capital expenditures, and new drug development working capital requirements. As of March 31, 2026, we had cash of $1,509,178 and working capital of $511,107.

We anticipate that losses will continue for the foreseeable future. Based on our current operating plans, we believe that our cash resources will be sufficient to fund its operations until approximately the end of the third quarter of 2026. In order to continue our operations beyond our forecasted runway we will need to raise additional capital, and we have no committed sources of additional capital at this time. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be on terms favorable or acceptable to us when needed, if at all. If adequate additional funds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our product candidates, management may need to curtail its development efforts and planned operations.

Plan of Operations

Business Overview

The Company is in its developmental stage, with encouraging but not conclusive evidence that its lead drug candidate, PT00014, may be effective as an anti-anxiety and/or anti-depression drug. It is focused on confirming the efficacy of this drug candidate, along with performing the other preclinical steps needed to progress along the pathway to bring this drug candidate into human clinical trials and eventually, to the global market to provide a new pharmaceutical for patients suffering from anxiety or treatment-resistant depression.

If we are able to successfully develop our drug, PT00114, and obtain FDA approval, we could then begin marketing and selling it in the United States and generate revenue. FDA approval to begin commercial sales is the singular gating item that will allow us to begin generating sales revenue in the U.S., so it will have an enormous impact on our business plan and our financial condition. It is anticipated that the sale of our drug will allow the Company to generate enough sales revenue to support all of our operations and to generate a profit. However, given the stage of development, even if FDA Approval is obtained, we do not anticipate generating any revenue from sales prior to 2029. On May 22, 2024, we announced the results of the single dose portion of the Phase I study for PT00114. On December 9, 2025 we announced positive topline safety results from its Phase 1 Multiple Dose (MD) study of PT00114.

Development Milestones Currently Anticipated

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

	●	The Company is in the process of refiling its IND application for PT00114 addressing the questions raised by regulators.
	●	Anticipate Q4 2026: Commence multiple dose portion of Phase Ib study for PT00114
	●	Anticipate Q2 2027: Initiation of Phase IIa study for PT00114
	●	Anticipate Q3 2027: Public availability of Phase IIa study results for PT00114

Human Resources (current state of employees)

The Company has two: two full-time employees: Bill Nichols, Jr, the President of Protagenic Therapeutics and Lauren Mueller, PhD, a Senior Research Scientist. The Company also has three paid consultants: Andrew Slee, PhD, Chief Operating Officer, David Lovejoy, PhD, Scientific Advisor, and Zack Armen, Strategic Advisor.

Off Balance Sheet Arrangements

We have no material off-balance sheet arrangements that are likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital resources, or capital expenditures.

Critical accounting policies and estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The notes to the consolidated financial statements contained in this Annual Report describe our accounting policies used in the preparation of the consolidated financial statements. None of those policies are deemed to be critical accounting policies nor critical accounting estimates. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We continually evaluate our critical accounting policies and estimates. Significant estimates underlying the consolidated financial statements include valuation of stock options and warrants, derivative liabilities, and assessment of deferred tax asset valuation allowance. Foreign currency exchange rates, fair value of convertible notes, fair value of derivative liabilities, fair value of the valuation of Protagenic Therapeutics, Inc. and the purchase price allocation.

Recently Issued Accounting Pronouncements

None