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STOCKHOLDERS’ DEFICIT
 3 Months Ended
Jun. 30, 2025
Equity [Abstract]  
STOCKHOLDERS’ DEFICIT

NOTE 11 - STOCKHOLDERS’ DEFICIT

 

Common Stock

 

During the three months ended June 30, 2025, the Company issued 117,690 common shares, 5,705 Series C Preferred shares, 950,000 Series C-1 Preferred shares and 20,000 Series D preferred shares in the merger with Phytanix Bio as discussed in Note 1. In addition, the Company issued 51,203 shares of common stock for cash in the amount of $395,474 and 1,145,928 shares of common stock in the exercise of warrants totalling $3,949,730. The Company also incurred an adjustment of 3,920 shares of common stock due to the reverse split on May 5, 2025.

 

 

During the three months ended June 30, 2024, Protagenic’s issued no shares of common stock or preferred stock. Phytanix Bio did issue 800,000 common shares and 17,000 preferred shares pursuant to an exchange agreement with Alterola valued at $44,560; received $200 in issuance of founders shares of ABTI Pharma; and had forgiveness of related party dent in the amount of $319,761. In addition, there was $10 in stock-based compensation in Phytanix Bio prior to the merger on May 15, 2025.

 

Series C Non-Voting Certificate of Designation

 

On May 15, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series C Non-Voting Convertible Preferred Stock (the “Series C Certificate of Designation”) with the Secretary of State of the State of Delaware. The Series C Certificate of Designation provides for the designation of shares of the Series C Stock.

 

Holders of Series C Stock are entitled to receive dividends on shares of Series C Stock (on an as-if-converted-to-Common-Stock basis, without regard to the Beneficial Ownership Limitation (as defined in the Series C Certificate of Designation), equal to and in the same form, and in the same manner, as dividends (other than dividends on shares of the Common Stock payable in the form of Common Stock) actually paid on shares of the Common Stock when, as if such dividends (other than dividends payable in the form of Common Stock) are paid on the shares of the Common Stock. In addition, holders of Series C Stock shall be entitled to receive, and the Company shall pay, payment-in-kind dividends on each share of Series C Stock, accruing at a rate equal to five percent (5.0%) per annum payable in shares of Series C Stock on the date that is 180 days after the date of the original issuance of such Series C Stock or such earlier date that that such holder may convert any portion of the Series C Stock to Common Stock.

 

Except as otherwise required by law, the Series C Stock does not have voting rights. However, as long as any shares of Series C Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series C Stock , (i) alter or change adversely the powers, preferences or rights given to the Series C Stock or alter or amend the Series C Certificate of Designation, amend or repeal any provision of, or add any provision to, the Company’s third amended and restated certificate of incorporation, as amended (the “Charter”) or Second Amended and Restated Bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series C Stock , regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series C Stock , or increase or decrease (other than by conversion) the number of authorized shares of Series C Stock (iii) prior to the Stockholder Approval (as defined in the Series C Certificate of Designation) or at any time while at least 30% of the originally issued Series C Stock remains issued and outstanding, consummate either: (A) any Fundamental Transaction (as defined in the Series C Certificate of Designation) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.

 

The Series C Stock shall rank on parity with the Common Stock as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily.

 

Following stockholder approval of the Conversion Proposal, each share of Series C Stock will automatically convert into one (1) share of Common Stock, subject to certain limitations provided in the Series C Certificate of Designation, including that the Company shall not affect any conversion of Series C Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”); provided, however, that the Beneficial Ownership Limitation will not apply after the stockholder approval of the Change of Control Proposal and upon the occurrence of certain other events as set forth in the Series C Certificate of Designation.

 

 

If at any time following the earliest of Stockholder Approval (as defined in the Series C Certificate of Designation), the occurrence of an event set forth in clause (ii) of Section 1.4(a) of the Exchange Agreement, or September 1, 2025, the Company fails to deliver to a holder certificates representing shares of Common Stock or electronically deliver such shares, the Series C Stock is redeemable for cash at the option of the holder thereof at a price per share equal to the then-current Fair Value of the Series C Stock , as defined and described in the Series C Certificate of Designation.

 

Series C-1 Certificate of Designation

 

On May 15, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series C-1 Non-Voting Convertible Preferred Stock (the “Series C-1 Certificate of Designation”) with the Secretary of State of the State of Delaware in connection with the Combination. The Series C-1 Certificate of Designation provides for the designation of shares of the Series C-1 Preferred Stock.

 

Holders of Series C-1 Stock are entitled to receive dividends on shares of Series C-1 Stock (on an as-if-converted-to-Common-Stock basis, without regard to the Beneficial Ownership Limitation (as defined in the Series C-1 Certificate of Designation), equal to and in the same form, and in the same manner, as dividends (other than dividends on shares of the Common Stock payable in the form of Common Stock) actually paid on shares of the Common Stock when, as if such dividends (other than dividends payable in the form of Common Stock) are paid on the shares of the Common Stock. In addition, holders of Series C-1 Stock shall be entitled to receive, and the Company shall pay, payment-in-kind dividends on each share of Series C-1 Stock, accruing at a rate equal to five percent (5.0%) per annum payable in shares of Series C-1 Stock on the date that is 180 days after the date of the original issuance of such Series C-1 Stock or such earlier date that that such holder may convert any portion of the Series C-1 Stock to Common Stock.

 

Except as otherwise required by law, the Series C-1 Stock does not have voting rights. However, as long as any shares of Series C-1 Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series C-1 Stock, (i) alter or change adversely the powers, preferences or rights given to the Series C-1 Stock or alter or amend the Series C-1 Certificate of Designation, amend or repeal any provision of, or add any provision to, the Company’s third amended and restated certificate of incorporation, as amended (the “Charter”) or Second Amended and Restated Bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series C-1 Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series C-1 Stock, or increase or decrease (other than by conversion) the number of authorized shares of Series C-1 Stock (iii) prior to the Stockholder Approval (as defined in the Series C-1 Certificate of Designation) or at any time while at least 30% of the originally issued Series C-1 Stock remains issued and outstanding, consummate either: (A) any Fundamental Transaction (as defined in the Series C-1 Certificate of Designation) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.

 

The Series C-1 Stock shall rank on parity with the Common Stock as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily.

 

Following stockholder approval of the Conversion Proposal, each share of Series C-1 Stock will automatically convert into one (1) share of Common Stock, subject to certain limitations provided in the Series C-1 Certificate of Designation, including that the Company shall not affect any conversion of Series C-1 Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”); provided, however, that the Beneficial Ownership Limitation will not apply after the stockholder approval of the Change of Control Proposal and upon the occurrence of certain other events as set forth in the Series C-1 Certificate of Designation.

 

 

If at any time following the earliest of Stockholder Approval (as defined in the Series C-1 Certificate of Designation), the occurrence of the event described in clause (ii) of Section 1.4(a) of the Exchange Agreement,, or September 1, 2025, the Company fails to deliver to a holder certificates representing shares of Common Stock or electronically deliver such shares, the Series C-1 Stock is redeemable for cash at the option of the holder thereof at a price per share equal to the then-current Fair Value of the Series C-1 Stock, as defined and described in the Series C-1 Certificate of Designation.

 

Series D Certificate of Designation

 

On May 15, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series D Non-Voting Convertible Preferred Stock (the “Series D Certificate of Designation”, and together with the Series C Certificate of Designation and the Series C-1 Certificate of Designation, the “Certificates of Designations”) with the Secretary of State of the State of Delaware in connection with Merger. The Series D Certificate of Designation provides for the designation of shares of the Series D Preferred Stock.

 

Subject to the senior rights of the Senior Preferred Stock (as defined in the Series D Certificate of Designation), and pari passu with the holders of shares of Series C Stock (the “Parity Stock” as defined in the Series D Certificate of Designation), from and after the first date of issuance of any Series D Preferred Stock, each holder of a share of Series D Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which dividends shall by paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms of the Series D Certificate of Designation, in cash, in securities of the Company or any other entity, or using assets as determined by the Board on the Stated Value (as defined in the Series D Certificate of Designation) of such share of Series D Preferred Stock.

 

Except as otherwise required by law, the Series D Preferred Stock does not have voting rights, either as a separate series or class or together with any other series or class of share of capital stock. Except as otherwise required by law, holders of the Series D Preferred Stock shall not be entitled to call a meeting of such holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock.

 

All shares of capital stock of the Company shall by junior in rank to all of the Series D Preferred Stock with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, subject to the express consent of the holders of at least a majority of the outstanding Series D Preferred Stock to create Parity Stock.

 

Following stockholder approval of the Conversion Proposal, each holder of Series D Preferred Stock shall be entitled to convert any portion of the outstanding Series D Preferred Stock held by such holder into validly issued, fully paid and non-assessable common stock using a Conversion Price of $10.00 and a Stated Value of $1,000 per share of Series D Preferred Stock (as each term is defined in the Series D Certificate of Designation).

 

Stock-Based Compensation

 

The Company adopted an Employee, Director and Consultant Stock Plan on June 17, 2016 (the “2016 Plan”). Pursuant to the 2016 Plan, the Company’s Compensation Committee may grant awards to any employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary. Due to an annual “evergreen” provision in the 2016 Plan, the number of shares reserved for future grants was increased by 14,062, 13,329 and 13,162 in 2024, 2023 and 2022, respectively. As a result of these increases, as of June 30, 2025 and March 31, 2025, the aggregate number of shares of common stock available for awards under the 2016 Plan was 62,412 shares and 91,371 shares, respectively. Options issued under the 2016 Plan are exercisable for up to ten years from the date of issuance.

 

There were 136,183 options outstanding as of June 30, 2025 and March 31, 2025. During the three months ended June 30, 2025 and 2024, the Company issued 0 and 0 options, respectively.

 

The following is an analysis of the stock option grant activity under the Plan:

 

   Number  

Weighted

Average

Exercise Price

  

Weighted

Average

Remaining Life

 
Stock Options               
Outstanding March 31, 2025   136,183   $3.72    5.53 
Granted   -    -    - 
Expired   -    -    - 
Exercised   -    -    - 
Outstanding June 30, 2025   136,183   $3.72    5.28 

 

 

A summary of the status of the Company’s nonvested options as of June 30, 2025, and changes during the three months ended June 30, 2025 is presented below:

 

Nonvested Options  Options  

Weighted-

Average

Exercise Price

 
Nonvested at March 31, 2025   35,123   $3.72 
Granted   -    - 
Vested   (4,532)   86.59 
Forfeited   -    - 
Nonvested at June 30, 2025   30,591   $3.72 

 

As of June 30, 2025, the Company had 136,183 shares issuable under options outstanding at a weighted average exercise price of $3.72 and an intrinsic value of $0.

 

The Company recognized compensation expense related to options issued of $125,117 and $236,014 for the three months ended June 30, 2025 and 2024, respectively, in which $89,523 and $134,769 is included in general and administrative expenses and $35,594 and $101,245 in research and development expenses, respectively. For the three months ended June 30, 2025 and 2024, $61,701 and $81,052 of the stock compensation was related to employees and $63,416 and $154,962 was related to non-employees, respectively.

 

As of June 30, 2025, the unamortized stock option expense was $675,791 with $400,293 being related to employees and $275,498 being related to non-employees. As of June 30, 2025, the weighted average remaining vesting period for the unamortized stock compensation to be recognized is 2.79 years.

 

On February 21, 2025, the Company held its 2024 Annual Meeting of Stockholders (the “Annual Meeting”) on February 21, 2025. At the Company’s Annual Meeting, the Company’s stockholders approved the proposal to approve the repricing of certain outstanding stock options granted (the “Option Grants”) under the Company’s 2006 and 2016 Equity Incentive Plans (the “Plans”) to allow the Board of Directors (the “Board”) to reprice the exercise price of outstanding stock options under the Plans. Pursuant to that authority, on February 21, 2025, the Board repriced the Option Grants. The repriced Option Grants under the 2006 Equity Incentive Plan had original exercise prices ranging from $56.00 to $70.00 per share, and the repriced Option Grants under the 2016 Equity Incentive Plan had original exercise prices ranging from $24.36 to $278.88 per share. All of the Option Grants under the Plans were repriced to have an exercise price of $3.72 per share, which was the closing price of the Company’s common stock on February 21, 2025.

 

Warrants:

 

A summary of warrant issuances are as follows:

 

   Number  

Weighted

Average

Exercise Price

  

Weighted

Average

Remaining Life

 
Warrants               
                
Outstanding March 31, 2025   4,620,192   $221.32    1.49 
Granted   719,056    3.65    - 
Expired   (1,458)   70.00    - 
Exercised   (1,359,790)   113.64    - 
Outstanding June 30, 2025   3,978,000   $219.05    0.93 

 

As of June 30, 2025, the Company had 3,978,000 shares issuable under warrants outstanding at a weighted average exercise price of $219.05 and an intrinsic value of $147,310.

 

On May 15, 2025, 719,056 warrants were assumed in the merger with Phytanix Bio, Inc.

 

 

The Company recognized compensation expense related to warrants issued of $0 and $0 during the three months ended June 30, 2025 and 2024, respectively.