UNITED STATES

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended June 30, 2014

or

For the transition period from _______________ to _______________

Commission File Number: 000-51353

ATRINSIC, INC.
(Exact name of registrant as specified in its charter)

For fiscal year ended: December 31, 2016

OR

Registrant’s telephone number, including area code:          65 Atlantic Avenue, Boston, Massachusetts 02110            (212)

994-8200(Address of Principal Executive Office)                     (Zip Code)

                                (617) 823-2300                               

Registrant’s Telephone Number Including Area Code

Securities registered under Section 12(b) of the Exchange Act:

Securities registered under Section 12(b) of the Exchange Act:None

Title of each class	Name of exchange on which registered
N/A	N/A

Securities registered under Section 12(g) of the Exchange Act:Common Stock, $0.000001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes¨  ☐   Nox  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes¨  ☐   Nox  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes¨  ☒   Nox  ☐

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’sregistrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨  ☐   Nox  ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $800,000on June 30, 2016, based upon theon a closing price per shareas reported on the OTC Markets Group asOTCQB of December 31, 2013, the last business day of the registrant’s most recently completed second fiscal quarter.$16.667 was $4,957,899.

As of September 30, 2014,March 27, 2017, there were 400,000,00010,261,419 shares of the registrant's common stock, par value $0.0001, issued and outstanding, and 872,766 shares of the registrant’s common stock.Series B Preferred Stock, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

ATRINSICPROTAGENIC THERAPEUTICS, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2016

TABLEOF CONTENTS

Form 10-K Annual Report

TABLE OF CONTENTS

EXPLANATORYSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

As used in this Report, unless the context otherwise requires, the terms “we,” “us,” “our,” “Atrinsic,” or “the Company” refer to Atrinsic, Inc., a Delaware corporation, and/or our majority-owned subsidiary, Momspot, LLC (“Momspot”).

FORWARD-LOOKING STATEMENTS

Except for statements of historical fact, some information in this documentThis report on Form 10-K contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these forward-looking statements by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would” or similar words. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is importantmade pursuant to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this Annual Report because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products and licenses. The factors listed in the sections captioned “Risk Factors” and “Description of Business,” as well as other cautionary language in this Annual Report and events in the future may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business, results of operations and financial position. Since our common stock is considered a “penny stock” we are ineligible to rely on the safe harbor for forward-looking statements provided inprovisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

PART Iamended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. As a result, you should not place undue reliance on any forward-looking statements. The most significant of these risks, uncertainties and other factors are described in “Item 1A — Risk Factors” of this Annual Report on Form 10-K. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 1. Business

PARTI

Item1.      Business.

Overview

Protagenic Therapeutic, Inc. (together with its subsidiary, “Protagenic,” the “Company,” “we,” “our” or “us”) is a Delaware corporation specializing in the discovery and development of therapeutics to treat central nervous system (CNS) disorders. Our mission is to provide safe and effective treatments for mood, anxiety, depression and neurodegenerative disorders by using novel peptide-base, brain active therapeutics. Our strategy is to develop, test and obtain regulatory approval for various applications of these brain active therapeutics.

Our principal assetcurrent business model is a 51% membership interest in Momspot, whichdesigned around the further development of these applications, and to obtain the required regulatory approvals to allow for the commercialization of our neuropeptide-based applications and products (see “Governmental Regulation” below). If approval is obtained, we expect to begin our sales efforts and anticipate generating revenue through both licensing and direct sales of our products. We believe that we can establish and subsequently strengthen our market position in the processfollowing ways: (i) working to obtain FDA approval of developing an online affiliated marketing network targeting the Mommy Market, as more particularly described in this Annual Report. We do not conduct any other business activity, directly or indirectly.

Our goal is to be the premier specialty retail affiliate marketing company targeting women between the ages of 24current and 45 who are either mothers or expecting their first child. We refer to our target audience as the “Mommy Market.” Towards that end, we are in the process of building a website that incorporates various existing technologies that allows for product aggregation and enhanced search and filtering capabilities, resulting in increased brand engagement and user trafficfuture neuropeptide applications; (ii) investigating foreign markets for the hundredsuse of manufacturers, distributors, retailersour current and other merchants, whom we refer to as “Platform Partners,” that want to reach the Mommy Market. We will also sell online advertisement space tofuture products; (iii) securing relationships with strong partners in our field; (iv) entering into license agreements, strategic partnerships and joint ventures for our various businesses (hereafter referred to in this context as “Advertisers”). In many cases,applications; and, (v) continuing our Platform Partners will also be Advertiserscurrent research into improving our processes, reducing costs and vice versa. Momspot’s website,www.momspot.com, will function as a vertical search enginedeveloping new and comparison shopping site that will enable mothers and mothers-to-be (hereafter, “Moms” and “Moms-to-be”) to search for and compare thousands of products for themselves and their families from their desktop and lap-top computers and mobile devices. We launched the Momspot website in March 2014.innovative applications.

We will focus on marketingintend to advance our websitelead drug candidate, PT00114 through Investigational New Drug (IND)-enabling studies, and servicesenter PT00114 into clinical proof-of-concept studies in order to build to awarenessTreatment-Resistant Depression (TRD) and/or Post-Traumatic Stress Disorder (PTSD) (anticipated clinical start: 2017-2018).

Corporate History

We are currently a Delaware corporation with one subsidiary named Protagenic Therapeutics Canada (2006) Inc., a corporation formed in 2006 under the laws of the Momspot brand, which, we hope, will translate into heavy user trafficProvince of Ontario, Canada.

We were most recently known as Atrinsic, Inc., a company that was once a reporting company under the Securities Act, but that, in 2012 and engagement. Ultimately, our value will be a function2013, reorganized under Chapter 11 of the numberUnited States Bankruptcy Code and emerged from bankruptcy. On February 12, 2016, we acquired Protagenic Therapeutics, Inc. through a reverse merger (see “Corporate History – The Reverse Business Combination (Merger) Transaction”). On June 17, 2016, Protagenic Therapeutics, Inc. (the then wholly-owned subsidiary of people using our website,Atrinsic, Inc.) was merged with and into Atrinsic, Inc. Atrinsic, Inc. was the number of click-throughssurviving corporation in this merger and changed its name from Atrinsic, Inc. to the web sites of our Platform Partners and Advertisers, and the transactional volume attributable to our users.Protagenic Therapeutics, Inc. (see “Corporate History – The Subsidiary Merger”).

Our marketing strategy will focus on Moms and Moms-to-be, not just their babies and children. We will organize our merchandise and content according to what Moms and Moms-to-be will find informative and helpful. Finally, we hope to distinguish our brandwere originally incorporated as a sophisticated and fashionable comparison shopping tool and social destination for Moms and Moms-to-be, unlike existing Mom-related websites and retailers, whose primary focus is on “cutesy” content havingDelaware corporation under the name Millbrook Acquisition Corp. in 1994. In 2007, Millbrook Acquisition Corp. changed its name to doNew Motion, Inc. In 2008, New Motion, Inc. merged with babies, children and general parenting issues.

AlthoughTraffix, Inc., pursuant to which Traffix, Inc. became wholly-owned subsidiary of New Motion, Inc. In 2009, New Motion, Inc. changed its name to Atrinsic, Inc. On June 15, 2012, we released the first live version of the Momspot website (v1.0) on March 1, 2014 and the second (v2.0) in May 2014, total revenues to date have been negligible.

Our business model is heavily reliant on marketing in order to achieve the website activity required to become profitable. We estimate 10,000 unique visitors per day to the Momspot website is the minimum amount of activity necessary to produce the revenue required to be a profitable business. In order to achieve this level of activity, we estimate that an annual marketing budget of between $115,000 and $150,000 is required. Moreover, we will need to hire the necessary resources to manage the marketing activities and provide the appropriate level of development and technical support for these activities. At a minimum, we estimate we will need $375,000 in funding over the next 12 months and $750,000 over the next two years in order to achieve profitability as it will take between 12 and 24 months to reach the targeted activity levels.

Our auditors, in their report for the year ended June 30, 2014, included a paragraph that there was substantial doubt as to our ability to continue as a going concern. This concern was based on our limited amount of working capital, limited revenues and negative cash flows. Our consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, assuming that we will continue as a going concern.

Business Model — Affiliate Marketing

Our business model, affiliate marketing, is a type of performance-based marketing employed by many successful web-based companies, such as Kayak and Google. Affiliate marketing companies do not hold any inventory or buy and/or sell products. Rather, they facilitate interactions between consumers and merchants by creating an environment – i.e., a website – with multiple contact points for consumers, brands, and merchants. Affiliate marketing enhances the connections between consumers, on the one hand, and merchants and brand owners, on the other hand, by allowing for multiple opportunities for consumers to engage with multiple brands and products and services through an affiliate’s (i.e., publisher’s) website. Affiliates, such as Momspot, offer a risk-free approach for merchants and brand owners to increase consumer engagement with their products and brands, drive traffic to their sites and increase transaction volume. Affiliates specialize in product aggregation and search, and focusing marketing efforts on a well-defined and specific market segment (in our case, middle-to-upper class educated mothers between the ages of 24 and 45).

A publisher, also referred to as an affiliate, is an individual or company that promotes multiple products, brands and/or services in exchange for earning a commission. Merchants and brand owners contractually agree to work with a publisher and then provide the publisher with content – in the form of links, product images and banner or text ads – that the publisher incorporates into its website. When a user visits a publisher's website and clicks on a product, service, ad or other form of an advertiser's content, the visitor's browser receives a special tracking cookie that identifies the advertiser, the publisher, and the specific content and commission amount. This data is stored within the link information in what are called "parameters" and can include even more anonymous data used for attribution.

The Market Opportunity

There are three key factors why we believe Momspot presents a good business opportunity:

Online Advertising Growth¹

Internet advertising revenuesfiled Chapter 11 in the United States totaled $31.7 billionBankruptcy Court in 2011, an increaseSouthern District of 22% over 2010,New York (Case No. 12-12553). As of that date, we terminated all remaining employees and are growing steadily with a compounded annual growth rate of 20.3% over the past ten years. Search remains the largest online advertising revenue format representing 46.5% of 2011 revenues, up from 44.8% in 2010, and in 2011, search revenues totaled $14.8 billion, up almost 27% from $11.7 billion in 2010. We believe our advertising services address the large online and mobile advertising markets. From 2012 to 2017, the worldwide online advertising market, excluding mobile advertising, is projected to increase from $91.1 billion to $124.7 billion, representing a 6.5% compounded annual growth rate, according to industry sources. From 2012 to 2017, the worldwide mobile advertising market is projected to increase from $10.0 billion to $52.2 billion, representing a 39.2% compounded annual growth rate, according to industry sources.

Performance-Based Marketing Growth¹ceased normal business operations.

Advertisers are constantly seeking waysPrior to maximize marketing their return on investment through better alternativesMarch 30, 2012, the Company was a reporting company under the Exchange Act, and filed periodic reports with the SEC. On March 30, 2012, we filed a Form 15 with the SEC, terminating our obligation to acquire users, generate trafficfile periodic reports under Sections 13 and increase sales that produces measurable and repeatable results. The result is an increasing trend on the part of advertisers to use targeted, performance-based marketing that consistently and effectively reaches their desired market segment. As such, ad spending on traditional search engines is expected to grow more slowly than overall online ad spending, driving the growth of topical sites that provide a targeted, performance-based marketing alternative grabbing a larger portion of marketing budgets.

According to the Interactive Advertising Bureau (IAB), online advertising priced on a performance basis represented 62% of total U.S. online advertising spend in 2010, which represents a 20% share gain from cost-per-mille (CPM) and hybrid pricing models since 2004. CPM represents the price per 1000 user impression/views. It does not measure whether any revenue was generated form those views.

Online advertising priced on a performance basis, such as cost-per-click (CPC), has taken significant share from advertising priced on either a per-impression (CPM) or hybrid basis over the last several years, and the IAB expects performance-based online marketing will continue to grow relative to non-performance-based marketing. Performance-based marketing maintains 65%15(d) of the Internet advertising market share, or approximately $20.6 billion. This trend is fueled, in part, by the fact that the Internet enables self-directed and targeted marketing. Highly targeted marketing messages will help advertisers tackle the difficulties of reaching certain fragmented audiences.

1. Interactive Advertising Bureau Advertising Revenue Report, 2011

Internet search behaviors are changing as users expect topical search services that produce more relevant search results. In addition, advertisers are seeking more measurable and effective advertising options and the ability to easily target a well-defined market segment, such as the Mommy Market.

The demand by advertisers for performance-based marketing coupled with the increasing demand by users for more topical relevant search and shopping options are changing the nature of search, resulting in the increased popularity and use of performance-based, topical search tools (also known as vertical search engines) that produce relevant results specific to a narrowly defined market segment. Yelp, Kayak, and ShopStyle are just a few examples of these sorts of search alternatives, and how their popularity has grown in the past few years.

The Value of the “Mommy Market”

The “Mommy Market” is estimated to be in excess of 31 million women under the age of 42. This includes 9.9 million “Millennial Moms” (age 18-29) and 21.9 million GenX Moms (age 30-42), two of the more Internet savvy segments.²Digital media is an essential and important part of a Mom’s life today, and the Internet is a rapidly growing media outlet that Moms turn to for information and entertainment. According to America Online DMS, mothers spend up to 16 hours and 52 minutes per week online, which is more than teens (who are online approximately 12 hours and 17 minutes).³According to the same survey, Moms spend an average of 86 minutes per day reading and sending emails and 38% of those surveyed indicated the Internet is their prime source of information, second only to television (48%).⁴What makes these facts even more interesting is that, when compared to women without children, Moms appear to favor the Internet in many different aspects of their life. Women also tend to seek assistance and opinions from their female peers when making product selection and purchasing decisions.

2 BabyCenter US Mom Market Facts.

3The U.S. Mom Market Report; Silver Stork Research & Packaged Facts, page 56.

4 The U.S. Mom Market Report; Silver Stork Research & Packaged Facts, page 55.

Our Value Proposition – To Users

Momspot endeavors to be a new shopping experience - one tailored to the needs of busy and sophisticated women. For users, Momspot will be a topical, one-stop product aggregator and vertical search engine that offers a simple way to find merchandise for the Mom herself and for her children across all age milestones (i.e., new-born, infant, toddler, kids and teens). In addition, we will provide access to special sales and promotions, allow users to interact with one another and curate informative content, all with the goal of enhancing connections with brands and with other similarly situated users. Momspot will leverage key social networking features to facilitate the sharing and promotion of merchandise, and allow users to create their own customized “spot” where they can highlight and promote merchandise they particularly like for other users to view. We will differentiate ourselves from other websites by focusing on the Mom, not just her babies or children. We will organize our merchandise and content according to what, we believe, Mom will find informative and helpful. Our brand will emphasize this fact, and aims to be a sophisticated and fashionable shopping tool and social destination for Moms and Moms-to-be. Ultimately, our goal is to become the number one destination on the Internet for Moms and Moms-to-be by providing them with a simple, stylish and social way to search for, and compare, thousands of products to make finding what they need, for themselves and their families, informative and easy.

Momspot will bring the following value to its users:

Our Value Proposition – To Platform Partners and Advertisers

The value we will create for our users will be enhanced by our Platform Partners and Advertisers. Platform Partners and Advertisers will integrate withwww.momspot.com through an application programing interface (“API”) that we provide which will allow our users to seamlessly move from our website to the websites of our Platform Partners and Advertisers. We will provide our Platform Partners with a set of development tools, APIs and embeddable widgets that will allow them to seamlessly integrate with our platform.

Affiliate marketing companies, such as Momspot, offer a risk-free approach for merchants to increase consumer engagement with their brands, drive traffic to their sites, and increase transaction volumes. Platform Partners will usewww.momspot.com as a complementary distribution channel to expand their reach and engage with their audiences.

We will also offer advertising services via our website to allow our Advertisers to promote their brands, products and services, and to amplify their visibility and reach. Advertisers can usewww.momspot.com to communicate directly with their natural constituency and reach a broader audience and further promote their brands, products and services. Our natural targeting capabilities allow Advertisers to better reach users who are more likely to engage with their ads, better achieve their goals and improve the return on their ad spending. Our advertising services provide compelling value to our Advertisers by delivering the ability to reach a large audience through our website and to-be-developed mobile applications, the ability to target ads based on our understanding of our users, and the opportunity to generate significant earned media. We expect that most, but not necessarily all, of our Advertisers will be Platform Partners.

We believe the Momspot platform will provide our Platform Partners and Advertisers with the following benefits:

Our Value Proposition – To Data Partners

We will license or sell our data to Data Partners,i.e., third-party marketers and advertisers who will search and analyze historical and real-time data on our platform. Our Data Partners will be able to use this data to generate and monetize data analytics, from which data partners can identify user sentiment, influence and other trends.

Specifically, our platform provides our Data Partners with the following benefits:

Revenue Model

Eventually, we expect our revenue to include the following:

Our Growth Strategy

As is typical of affiliate marketing companies, our strategy is to build brand awareness using marketing strategies that focus on our target market. See “Sales and Marketing”, below. We believe that the growth of our business will be driven by a virtuous cycle that starts with what is best for our users. We believe that growth in our user base and user engagement will be a fundamental driver to the growth of our business, and we believe that there is a significant opportunity to develop a robust user base. Growth in our user base will drive more unique content, which in turn will drive the viral, organic promotion of content on and off our properties, thereby attracting more Platform Partners, Advertisers and even Data Partners. As we attract more users, the value proposition for Platform Partners and Advertisers increases, incentivizing them to develop unique and compelling content for our platform.

In addition to our Sales and Marketing strategy, our growth strategy includes the following:

Acquisitions. We may also seek to acquire other businesses or assets that would enable us to expand our business. These acquisition opportunities may be in the same or complementary markets. We have neither identified any such acquisition opportunities nor can we predict the terms of any such acquisitions. We cannot assure you that we will be able to complete any acquisitions.

Sales and Marketing

As a start-up venture, sales and marketing is critical to our success. Acquisition of users, Platform Partners, and Advertisers requires significant resources, which is why we have made it such a significant part of our budget and one of the largest focuses of our business. Our annual marketing budget, $115,000 to $150,000, for each of the current and ensuing fiscal years represents the largest allocation of funds. Our goal through marketing is to build our brand popularity and reputation that will translate into heavy user traffic and engagement, and ultimately traffic and sales for Platform Partners and Advertisers. To achieve this, we have developed the following sales and marketing strategy:

With respect to acquiring Platform Partners and Advertisers, our principal strategy is to work through third parties that specialize in building affiliate networks, principally CJ Affiliate by Conversant (formerly known as “Commission Junction”), and to solicit Platform Partners and Advertisers directly. At the present time, we have approximately 20 Platform Partners, all of whom we acquired through CJ Affiliate by Conversant.

Competition

Our industry is evolving rapidly and is becoming increasingly competitive, and we cannot assure you that we will be able to compete effectively. See the sections titled “Risk Factors—If we are unable to compete effectively for users and advertiser spend, our business and operating results could be harmed” and “We will need to hire highly skilled personnel to grow and operate our business, and if we are unable to hire, retain and motivate our personnel, we may not be able to grow effectively.” We believe the principal barriers to entry are the following:

We expect to face significant competition in all aspects of our business – for users, Platform Partners, Advertisers and also for personnel.

In general, the competitive landscape in which we operate is vast. Our competitors include traditional “brick and mortar” retailers, whether or not they have an online presence; online retailers, such as Amazon.com; and comparison shopping sites such as GoogleShop, Shopzilla and others. However, rather than view these enterprises as competitors, we prefer to treat them as potential Platform Partners. In our view, our real competitors are online comparison shopping sites that target the Mommy Market. We are aware of three such sites:www.weespring.com,www.theprowl.com andwww.cricketscircle.com.

Many of our competitors and potential competitors have greater financial resources, larger user bases and longer operating histories than we do. As a result, they have a significant competitive advantage over us when it comes to attracting users, Platform Partners, Advertisers and personnel. Our ability to compete effectively will ultimately depend on many factors, some of which may not be entirely within our control. These factors include usefulness, ease of use, performance and reliability of our website; the scope and quality of the products and services offered on our website; our ability to establish and maintain relationships with Platform Partners that integrate with our platform; and our reputation and the strength of our brand.

Notwithstanding the highly competitive environment in which we will operate, we believe we will be able to compete effectively based on the following:

Our belief, as described above, is based on a number of factors including our familiarity with the marketplace, management’s experience with online businesses and the success of other companies that have employed the affiliated network business model. To a lesser extent it is also based on anecdotal evidence acquired through informal surveys and discussions with users and potential users following their participation in various surveys we conducted.

We further believe that, ultimately, the growth of our business will be driven by a virtuous cycle that starts with what is best for our users. We believe that growth in our user base and user engagement will be a fundamental driver to the growth of our business, and we believe that there is a significant opportunity to develop a robust user base. Growth in our user base will drive more unique content, which in turn will drive the viral, organic promotion of content on and off our properties, thereby attracting more Platform Partners, Advertisers and even Data Partners. As we attract more users, the value proposition for Platform Partners, and Advertisers increases, incentivizing them to develop unique and compelling content for our platform.

In order to attract users, we will differentiate ourselves from other websites by focusing on the Mom, not just her babies or children. We will organize our merchandise and content according to what we believe the Mom will find informative and helpful. Our brand will emphasize this fact, and aims to be a sophisticated and fashionable shopping tool and social destination for Moms and Moms-to-be.

Ultimately, our success will depend, in part, on the scope and quality of products available through our website. Therefore, it is imperative that we build the right affiliate relationships. Our competition for Platform Partners will include other online and mobile affiliate marketing companies, as well as online retailers. Our strategy for building an affiliate network is to work through third parties that specialize in this area. To date, we have a 20 Platform Partners. We believe this number will grow rapidly once we launch our website and begin to generate traffic.

We will also face significant competition for Advertisers. Our competition for spending on advertising will include online and mobile businesses and traditional media outlets such as television, radio and print. We believe that our ability to compete effectively for advertiser spend depends upon many factors, including the size and composition of our user base; our ad targeting capabilities; the timing and market acceptance of our advertising services; our marketing and selling efforts; the return our Advertisers receive from our advertising services; and our reputation and the strength of our brand.

As we grow and need to expand our work force, we may also experience significant competition for highly skilled personnel, including senior management, engineers, designers and product managers. Our growth strategy depends in part on our ability to retain our existing personnel and add additional highly skilled employees. Competition for highly skilled personnel is intense, particularly in the New York market, where we are located, and we compete for personnel against online and mobile businesses; other companies in the technology industry; and traditional media businesses such as television, radio and print. In addition, our ability to compete effectively for highly skilled personnel will depend on our ability to foster a work environment that encourages independence, creativity and innovation; opportunities to work on challenging, meaningful and important projects; the reputation and strength of our brand; and compensation.

Finally, and perhaps most importantly, we require significant financial resources to execute our sales and marketing strategy to attract users, Platform Partners and Advertisers. At the present time, we have a limited budget for sales and marketing. Until we raise additional capital, we will rely on strategies that do not involve significant expenditures such as activating our social media presence and user network.

Technology, Research and Development

We are in the process of developing a user-friendly website with many features and functionalities that will be of value to our users, as detailed below.

Site Features

The Momspot website focuses on the following features:

Design and development of the Momspot website will focus on four main sections. These areas are:

“My Momspot”

The “My Momspot” section will be a place where users can customize content in order to highlight certain products they want to recommend and/or promote to their Momspot user community. Certain views of this section will be publicly viewable by all members of Momspot, and others will be viewable only to those members the user has granted access.

My Momspot will consist of six important sub-sections:

Site Design & Development

The site design will have a clean and sleek look and feel, with stylish colors. The user interface will be simple and intuitive, with logical high-level product categorization and navigation. The site imagery will focus on the Mom, not her baby or children, and should dominate the screen space. Moms will be youthful looking and attractive. No sponsored promotions or display/banner ads will be located on the home page.

In terms of technical development, we have organized Momspot’s functionality into the following four areas:

Current Progress

Since July 2013, we have achieved the following milestones in connection with our business plan:

Our development team, comprised of our sole employee and outside consultants, has made good progress with product development, having completed a number of phases of site design and the development of the following areas of the website:

Intellectual Property

At the present time our only intellectual property consists of our name, which is trademarked, and we are the registered owner of the URLwww.momspot.com. Over time, as our business matures we may develop processes, methodologies and/or technologies that we deem proprietary. We may seek to protect those rights through contractual arrangements such as confidentiality and non-disclosure agreements, assignment of invention agreements with employees and/or independent contractors, license agreements with vendors and platform partners, and/or through the filing of trademark and copyright registrations or patent applications. We cannot assure you that our efforts to protect our proprietary information and technology will be effective. We may be unable to obtain patent or trademark protection for our technologies and brands, and even if we do they may not provide us with competitive advantages or distinguish our products and services from those of our competitors. In addition, any patents and trademarks may be contested, circumvented or found unenforceable or invalid, and we may not be able to prevent third parties from infringing, diluting or otherwise violating them.

Many companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to aggressively assert their rights in order to extract value from technology companies. We may, in the future, face allegations that we have infringed on or otherwise violated the patents, copyrights, trademarks, trade secrets, and other intellectual property rights of third parties, including our competitors and non-practicing entities. As we face increasing competition and as our business grows, we will likely face more intellectual property-related claims and litigation matters. For additional information, see the section titled “Risk Factors—We are currently, and expect to be in the future, party to intellectual property rights claims that are expensive and time consuming to defend, and, if resolved adversely, could have a significant impact on our business, financial condition or operating results.”

Government Regulation

We may be subject to a number of foreign and U.S. federal and state and laws and regulations that may involve matters central to our business. These laws and regulations may involve privacy, rights of publicity, data protection, content regulation, intellectual property, competition, consumer protection, taxation or other subjects. Many of these laws and regulations are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate.

We may also subject to federal, state and foreign laws regarding privacy and the protection of user data. Foreign data protection, privacy, consumer protection, content regulation and other laws and regulations are often more restrictive than those in the United States. We may also be affected by a number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. For example, regulation relating to the 1995 European Union Data Protection Directive is currently being considered by European legislative bodies that may include more stringent operational requirements for entities processing personal information and significant penalties for non-compliance.

Employees

As of September 30, 2014, Atrinsic had no employees and Momspot had one full-time employee.

History, Background of Our Reorganization

Exchange Act. Prior to the filing of our Plan of Reorganization under Chapter 11 of the United States Bankruptcy Code on June 15, 2012 (the “Plan of Reorganization”), we were a marketer of direct-to-consumer subscription products and an Internet search marketing agency. We sold entertainment and lifestyle subscription products directly to consumers, which we marketed through the Internet. We also sold Internet marketing services to our corporate and advertising clients. The

We emerged from Chapter 11 on June 26, 2013, at which time the Plan of Reorganization was conditionally confirmed by the United States Bankruptcy Court, Southern District of New York (Case No.: 12-12553 (JMP)) on June 26, 2013York. The confirmation was subject to the consummation of ourthe Company’s acquisition of a 51% controlling equity interest in Momspot,MomSpot LLC (“MomSpot”), which was subsequently completed on July 12, 2013. Momspot currently constitutes2013 (“Emergence Date”). MomSpot’s goal is to be the premier specialty retail affiliate marketing company targeting women between the ages of 24 and 45 who are either mothers or expecting their first child. The Emergence Date was the date the Company adopted fresh start accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 852. The adoption of fresh-start accounting resulted in the Company becoming a new entity for financial reporting purposes. At that time, our only business operation.principal activities were conducted through MomSpot.

On February 12, 2016, we acquired Protagenic Therapeutics, Inc. through a reverse merger, pursuant to which all the issued and outstanding shares of Protagenic common stock converted on a 1-for-1 basis into shares of the Company’s Series B Preferred Stock, par value $0.000001 per share. Concurrently with the reverse merger, we conducted the first closing of a private offering of our Series B Preferred Stock. (see “Corporate History – 2016 Private Placement”)

Since the fourth quarter of the 2015 fiscal year, MomSpot’s development plans have been suspended pending receipt of incremental funding. On February 12, 2016, the Company sold its 51% interest of MomSpot to the remaining 49% interest holder through a split off agreement. Additionally, on February 12, 2016, the Company sold its equity interests in 29 wholly-owned subsidiaries (see “Corporate History – Split-Off Agreements”).

The Reverse Business Combination (Merger) Transaction

On February 12, 2016, which we refer to as the Merger Closing Date, we (as Atrinsic, Inc.), Protagenic Therapeutics, Inc. and Protagenic Acquisition Corp., Atrinsic, Inc.’s wholly-owned subsidiary, entered into a merger agreement and completed the merger contemplated by the merger agreement. Pursuant to the Planmerger agreement, on the Merger Closing Date, Protagenic Acquisition Corp. merged with and into Protagenic Therapeutics, Inc., with Protagenic Therapeutics, Inc. remaining as the surviving entity and wholly-owned subsidiary of Reorganization, all debt was converted to equityAtrinsic, Inc. (the “Merger”)

Simultaneously with the secured creditors receiving 4,600,000,000Merger, on the Merger Closing Date all of the issued and outstanding shares $0.000001of Protagenic common stock converted, on a 1-for-1 basis into shares of the Company’s Series B Preferred Stock, par value $0.000001 per share of a newly created class of preferred stock designated as (“Series A Convertible Preferred Stock (the “Series AB Preferred Stock”) (assuming no exercise of dissenters’ rights by any Protagenic stockholder). Also on the Merger Closing Date, all of the issued and general unsecured creditors receivingoutstanding options to purchase shares of Protagenic common stock, and all of the issued and outstanding warrants to purchase shares of Protagenic common stock, converted, on a 1-for-1 basis, into options (the “New Options”) and new warrants (the “New Warrants”) respectively, to purchase shares of our Series B Preferred Stock. The New Options will be administered under Protagenic’s 2006 Employee, Director and Consultant Stock Plan (the “2006 Plan”), which the Company assumed and adopted on the Merger Closing Date in connection with the Merger.

On the Closing Date, (i) the former Protagenic common stock was exchanged for the right to receive 6,612,838 shares of Series B Preferred Stock; (ii) New Options to purchase 1,807,744 shares of Series B Preferred Stock granted under the 2006 Plan, having an average exercise price of approximately $0.87 per share, were issued to optionees pursuant to the assumption of the 2006 Plan; (iii) the holders of options to purchase the common stock of Atrinsic before the Merger (“Predecessor”) were issued options (“Predecessor Options”) to purchase 17,784 shares of Series B Preferred Stock at $1.25 per share; (iv) New Warrants to purchase 3,403,367 shares of Series B Preferred Stock at an average exercise price of approximately $1.05 per share were issued to holders of Protagenic warrants; and (v) 2,775,000 shares of Series B Preferred Stock were issued to investors at a purchase price of $1.25 per share in the Private Offering, as defined below. In addition, warrants (“Predecessor Warrants”) to purchase 295,945 shares of Series B Preferred Stock at $1.25 per share were issued to Strategic Bio Partners, LLC, the designee (the “Designee”) of the holders of Predecessor’s debt, in consideration of the cancellation of debt of $665,000 in principal and $35,000 in interest, and Placement Agent Warrants, as such term is defined below, to purchase 127,346 shares of Series B Preferred Stock were issued to the Placement Agent of the Private Offering. The common stockholders of Predecessor before the Merger retained 25,867 shares of our common stock, par value $0.000001 per share. In addition, upon the effectiveness of the Merger, the holders of the Predecessor’s Series A Preferred Stock exchanged all of the issued and outstanding Series A Preferred Stock for an aggregate of 300,000,000297,468 shares of Series B Preferred Stock. These shares were issued to the Designee.

The Merger was treated as a recapitalization of Protagenic for financial accounting purposes and the historical financial statements of Protagenic Therapeutics, Inc. are our financial statements as a result of the Merger. The parties to the merger agreement have agreed to take all actions necessary to ensure the Merger is treated as a “plan of reorganization” under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

2016 Private Placement

Concurrently with the closing of the Merger, we conducted the first closing of an offering (the “Private Offering”) of our Series B Preferred Stock. At the first closing, we sold 2,775,000 shares of Series B Preferred Stock at a purchase price of $1.25 per share, for which we received total gross consideration of $3,468,750. Of this amount, $350,000 consisted of conversion of outstanding stockholder debt held by Garo H. Armen, our chairman and a member of our board of directors, and $150,000 of legal expenses incurred by Strategic Bio Partners LLC, stockholders of the Predecessor, in conjunction with and as allowed by the merger agreement. On March 2, 2016, we completed the second closing of the Private Offering, at which we issued an additional 913,200 shares of Series B Preferred Stock to accredited investors, for total gross proceeds of $1,141,500. On April 15, 2016, we completed the final closing of the Private Offering, at which we issued an additional 420,260 shares of Series B Preferred Stock to accredited investors, for total gross proceeds of $525,325.

We paid Katalyst Securities LLC, our placement agent (the “Placement Agent”) and its selected dealers for the Private Offering a commission of 10% of the funds raised in the Private Offering from investors introduced by the Placement Agent and its selected dealers. In addition, the Placement Agent received $15,000 to reimburse it for its expenses in the private Offering, and the placement Agent and its selected dealers were issued warrants (the “Placement Agent Warrants”) to purchase a number of shares of Series B Preferred Stock equal to 10% of the shares of Series B Preferred Stock sold to investors in the Private Offering who were introduced by the Placement Agent and its selected dealers. The Placement Agent Warrants, which contain a “cashless exercise” provision, are exercisable for a period of five years from the initial closing of the Private Offering at a price of $1.25 per share.

Pursuant to a registration statement declared effective by the Securities and Exchange Commission (the “SEC”) on February 8, 2017, we registered the shares of common stock $0.000001underlying the Series B Preferred Stock and the Placement Agent Warrants issued in the 2016 Private Placement for public resale by the selling stockholders named therein and their assigns. The Company is required to update and maintain the effectiveness of this registration statement until February 8, 2018.

Debt Exchange

Simultaneous with the Merger and the Private Offering, holders of $665,000 of Atrinsic’s debt accompanied with $35,000 in accrued interest exchanged such debt for five-year warrants of Predecessor (the “Predecessor Warrants”) to purchase 295,945 shares of Series B Preferred Stock (which became 295,945 shares of common stock as a result of the Reverse Split) at $1.25 per shareshare.

Split-Off Agreements

At the closing of the Merger we had a 51% interest in MomSpot LLC, and the remaining 49% was held by B.E. Global LLC. Barry Eisenberg is the sole owner of B.E. Global LLC and is the Chief Executive Officer of MomSpot LLC. Immediately after the closing of the Merger, we split off our 51% membership interests in MomSpot LLC. The split-off was accomplished through the transfer of all of our membership interests of MomSpot LLC to B.E. Global LLC.

Immediately after the closing of the Merger, we split off all of our equity interest in 29 wholly-owned subsidiaries. The split-off was accomplished through the sale of all equity interests in these wholly-owned subsidiaries to Quintel Holdings, Inc.

Reverse Stock Split

Our stockholders voted at a special meeting held on June 17, 2016 in favor of, and we effectuated, a 1-for-15,463.7183 reverse stock split of our common stock, or the Reverse Split. As a result of the Reverse Split, 400,000,000 shares of common stock were split into 25,867 shares of common stock. Additionally, as a result of the Reverse Split and in accordance with our certificate of designations for our Series B Preferred Stock, our Series B Preferred Stock immediately and automatically converted into our common stock on a 1-for-1 basis other than any Series B Preferred Stock (i) to the extent (but only to the extent) a Series B Preferred Stock holder would beneficially own greater than 9.99% of our common stock (the “Springing Blocker”) and (ii) such holder has notified the Company in writing that it wants the Springing Blocker to apply to such holder. On July 27, 2016, 10,146,000 of the Company’s 11,018,766 outstanding shares of Series B Preferred Stock were eligible to immediately convert into 10,146,000 shares of the Company’s common stock (accounting for the Reverse Split ratio) with 872,766 shares of Series B Preferred Stock remaining as a result of one holder exercising the Springing Blocker. As of December 31, 2016, 10,146,000 shares of the Series B Preferred Stock were converted into 10,146,000 shares of common stock on the records of the Company.

Any Series B Preferred Stock not converted as a result of this provision would automatically convert into common stock as soon as such conversion would not violate the Springing Blocker. Our Series B Preferred Stock will cease to be designated as a separate series of our preferred stock when all of such shares have converted into shares of our common stock.

The Subsidiary Merger

On June 17, 2016, we merged our wholly-owned subsidiary, Protagenic Therapeutics, Inc., with and into the Company and we changed our name from Atrinsic, Inc. to Protagenic Therapeutics, Inc. We are the parent company of Protagenic Therapeutics Canada (2006), Inc., a corporation incorporated in the Province of Ontario.

Mood and Anxiety Disorders 

An estimated 340 million people worldwide and 40-60 million people in the United States alone suffer from mental disorders including Major Depressive Disorder, or MDD, including TRD, PTSD, Bipolar Disorder and various Anxiety Disorders. The global sales of anxiolytic and antidepressant drugs in the US were estimated to be $69 billion in 2013 and are projected to grow to nearly $77.1 billion by 2018. Yet, up to one-half of mood disorder patients are unresponsive to current treatments. Efficacy of therapy is challenged by non-compliance during the weeks to months required to achieve therapeutic benefit in combination with daily dosing requirements. Major targets in this space include TRD and PTSD, both indications which are highly resistant to available therapies.

Approximately 37% of those suffering from a MDD that do not respond to the current antidepressant medications constitute a separate group of people suffering from TRD. Despite a large patient population and current treatments that leave much room for improvement, the developmental pipelines are sparse and few novel candidates are in development. The serendipitous discoveries of current drug classes, and lack of efficacy have led to shrinkage or extinction of many pharma or small biotech neuroscience research programs. It is in this TRD market that we intend to focus our PT00114 development efforts.

TRD is the type of MDD that does not respond to standard courses of antidepressant medication. Stress plays a significant role in this illness that affects as many as half of people diagnosed with depression. Patients suffering with TRD are at greater risk of hospitalization for their psychiatric illness and are more likely to abuse drugs and alcohol. These patients have a lower long-term quality of life and are at increased risk of attempting suicide. As a last resort, this disease is currently managed by invasive treatment, primarily electroconvulsive therapy (ECT). However, the ECT treatment’s side effects and high cost prevent millions of people from taking advantage of it.

According to an article titled “Global prevalence of anxiety disorders: a systemic review and meta-regression,” written by AJ Baxter et al., (published inPsychological Medicine in 2013),PTSD affects an estimated 7.7 million adults (3.5%) in the US, with a disproportionately high prevalence in war veterans. Therapeutic approaches include cognitive therapy in combination with antidepressants, such as selective serotonin reuptake inhibitors (SSRIs). In addition to the vulnerabilities noted above for antidepressant-related treatments, PTSD patients often present with co-morbidities such as addictions or dependencies, which make therapeutic case management difficult.

Protagenic Research

PT00114 is the first known example of a new class of brain-targeted therapies based on a newly-described and highly conserved family of neuropeptides that regulate stress-induced mood and addictive behaviors. PT00114 is believed to act via a novel mechanism of action and is therefore expected to provide an extremely attractive therapeutic and commercial profile, especially for those patients who are not fully responsive to or compliant with current interventions. Based on preclinical data, we believe that PT00114 is well differentiated from other drug candidates on the basis of having: Dual activity on stress- and addiction-related pathways (as present in TRD and PTSD); Blood-brain barrier permeability; Rapid onset of action and long duration of therapeutic effects; Restoration of normalcy in stress, anxiety and addiction disorders; No adverse effects with little to no accumulation; Good safety and tolerability profiles; Convenient dosing route and schedule; High potency/low dose; and, Ease of chemical synthesis.

We believe that optimal cellular energy metabolism is fundamental to the biology of the brain, and clinical manifestation of aberrant energy metabolism often manifests in debilitating neurological disorders. PT00114’s ability in preclinical models to enhance glucose mobilization and utilization in the brain, maintain energy homeostasis, inhibit stress-related pathways and protect cells from oxidative damage suggests potential therapeutic benefits in a range of indications involving both acute and chronic neurological injury. Potential applications include traumatic brain injury, stroke recovery, and neurodegenerative diseases such as Alzheimer’s disease, Parkinson’s disease and ALS, among others.

Technology

PT00114 is a synthetic form of the natural peptide sequence TCAP-1.

TCAP-1 was discovered in a genome-wide search for proteins related to corticotropin releasing factor (CRF), a key brain peptide hormone in stress response. While TCAP-1 counteracts stress, it does so by a non-CRF receptor pathway and unlike direct CRF antagonists it does not exhibit negative effects in animal models studied to date.

PT00114 inhibits stress and stress (CRF)-induced actions in clinically-relevant gold-standard animal models of anxiety, depression and addiction at concentrations several magnitudes below current front-line therapeutics. These beneficial effects are maintained for as long as three weeks after treatment. PT00114 promotes neuronal process development, spine density, axon fasciculation and branching in neurons.

PT00114 crosses the blood brain barrier and concentrates in regions of the brain associated with the regulation of mood disorders. Preliminary toxicity assessment (non-GLP) indicates no clear or significant adverse effects, although further toxicity testing is required.

PT00114 is highly soluble and shows excellent stability in several storage conditions. The initial dosage form is intended as a subcutaneous injection but is also amenable to other routes of administration.

Business plan / Proposed next steps

The Company’s business plan calls for the following processes during 2017 and 2018:

Preclinical Efficacy Data

Historically, much of the preclinical efficacy data regarding specific therapeutic benefits of PT00114 had been generated in the lab of our Chief Technology Officer, Dr. David Lovejoy at the University of Toronto. The Company recognizes that to fully validate its business proposal, and persuade potential corporate partners of target-disease efficacy, additional preclinical efficacy data from unaffiliated research organizations would be valuable. Hence, the Company has engaged two contract research organizations (CROs) to conduct preclinical tests of PT00114 for anxiety and depression, as well as alleviation of drug addictive behavior.

Process Development and Manufacturing

In parallel with the Company’s external CRO research studies, the Company is pursuing good manufacturing practices (cGMP) synthesis of PT00114. The Company anticipates that it may obtain enough TCAP in July 2017 to supply its Phase I human clinical trials anticipated to begin in 2018. The Company intendes to secure at least two supplier relationships for sourcing synthesized human PT00114.

Preclinical Safety & Toxicology

A key part of the Company’s preclinical studies for IND readiness is the toxicology testing of PT00114 in two animal species. Because these toxicology tests will be carried out with a drug concentration that is a multiple of the intended concentration in the eventual marketable drug, the Company plans to commence its safety and toxicology testing only after receiving a confirmatory positive result from the latest external CRO efficacy tests. This means toxicology testing could begin as soon as the third quarter of 2017.

Pursue Strategic Partnership

The Company believes it would be to its advantage to secure a collaboration with a pharma/biopharma company with a presence in neurological and psychiatric diseases and/or addiction. Therefore, it plans to use the preclinical efficacy data to be generated during 2017 as a point of instigation with potential pharma/biopharma corporate partners.

Compile and File IND

The most important corporate goal for which the Company is deploying the working capital it raised in 2016 is the compilation and submission of an investigational new drug (IND) application to the FDA. This is a prerequisite to begin Phase I human testing of PT00114 for any indication. The preclinical efficacy data currently being generated at two external CROs, as well as the toxicology test results that the company plans to obtain, and a specific plan and protocol for a Phase I trial, will be among the components of this key regulatory submission anticipated in early 2018.

Initiate Phase 1 Clinical Studies

One the Company’s IND application has been filed, the next major milestone is anticipated to be an approval by the Company’s FDA review team that the Phase I trial protocol proposed in the IND application is acceptable to begin. The Company believes that this may be achieved in the second half of 2018.

Technology License Agreement

On July 31, 2005, the Company had entered into a Technology License Agreement (“Common Stock”License Agreement”) with the University of Toronto (the “University” or “UT”) pursuant to which the University agreed to license to the Company patent rights and other intellectual property, among other things (the “Technologies”). The Technology License Agreement was amended on February 18, 2015 and currently does not provide for an expiration date.

Pursuant to the License Agreement and its amendment, the Company obtained an exclusive worldwide license to make, have made, use, sell and import products based upon the Technologies, or to sublicense the Technologies in accordance with the terms of the License Agreement and amendment. In consideration, the Company agreed to pay to the University a royalty payment of 2.5% of net sales of any product based on the Technologies. If the Company elects to sublicense any rights under the License Agreement and amendment, the Company agrees to pay to the University 10% of any up-front sub-license fees for any sub-licenses that occurred on or after September 9, 2006, and, on behalf of the sub-licensee, 2.5% of net sales by the sub-licensee of all products based on the Technologies. The Company had no sales revenue for the year ended December 31, 2016 and therefore was not subject to paying any royalties.

In the event the Company fails to provide the University with semi-annual reports on the progress or fails to continue to make reasonable commercial efforts towards obtaining regulatory approval for products based on the Technologies, the University may convert our exclusive license into a non-exclusive arrangement. Interest on any amounts owed under the License Agreement and amendment will be at 3% per annum. All intellectual property rights resulting from the Technologies or improvements thereon will remain the property of the other inventors and/or Dr. David Lovejoy (“The Professor”) at the University, and/or the University, as the case may be. The Company has agreed to pay all out-of- pocket filing, prosecution and maintenance expenses in connection with any patents relating to the Technologies. In the case of infringement upon any patents relating to the Technologies, the Company may elect, at its own expense, to bring a cause of action asserting such infringement. In such a case, after deducting any legal expenses the Company may incur, any settlement proceeds will be subject to the 2.5% royalty payment owed to the University under the License Agreement and amendment.

The patent applications were made in the name of the Professor and other inventors, but the Company’s exclusive, worldwide rights to such patent applications are included in the License Agreement and its amendment with the University. The Company maintains exclusive licensing agreements and it currently controls the six intellectual patent properties.

Sales and Marketing 

We currently have no sales, marketing or distribution capabilities. In order to commercially market PT00114 and any product candidates we develop in the future, we would either need to develop an internal sales team and marketing department or collaborate with third parties who have sales and marketing capabilities.

Manufacturing

We currently do not own any manufacturing facilities, nor have we entered into any agreements with contract manufacturer for the production of PT00114. Currently we synthesize all the PT00114 we use in our development activities.

Competition

The pharmaceutical and biotechnology industries are highly competitive and characterized by rapidly evolving technology and intense research and development efforts. We expect to compete with companies, including major international pharmaceutical companies, and other institutions that have substantially greater financial, research and development, marketing and sales capabilities and have substantially greater experience in undertaking preclinical and clinical testing of products, obtaining regulatory approvals and marketing and selling biopharmaceutical products. We will face competition based on, among other things, product efficacy and safety, the timing and scope of regulatory approvals, product ease of use and price.

Major depressive disorder patients that do not respond to the current antidepressant medications constitute a separate group of TRD. Despite a large patient population and current treatments that leave much room for improvement, the developmental pipelines are sparse and few novel candidates are in development. The serendipitous discoveries of current drug classes, side effects and lack of efficacy have led to shrinkage or extinction of many pharma or small biotech neuroscience research programs. According to a May 10, 2016 Zion Research report, the current global depression drug market was valued at approximately $14.5 billion in 2014, and is expected to generate $16.8 billion by the end of 2020. Slightly smaller but on the rise, according to Global Industry Analysts, Inc., the global market for anti-anxiety medications is expected to be $5.9 billion in 2017. It is in either or both of the TRD and anti-anxiety markets that we intend to launch PT00114.

Set forth below is a discussion of competitive factors for each of the current drug classes commercially available for TRD, and the competitive advantages that we believe PT00114 may offer. The basis for our beliefs regarding the competitive advantages that PT00114 may offer over its competitors is our own pre-clinical animal studies. We acknowledge that these beliefs and conclusions about competitive advantages must be regarded as theoretical until such time as we have human clinical data that supports and re-affirms the results seen in the pre-clinical animal studies.

Opioid receptor modulators

Opioid receptor modulators have the potential to be non-addictive therapeutic drugs for TRD. Competitors include ALKS 5461 (from Alkermes) is a fixed combination of buprenorphine and samidorphan being developed as a therapy for TRD. Buprenorphine is a mu opioid receptor partial agonist as well as an antagonist of the kappa-opioid receptor (KOR), while samidorphan is an antagonist of mu opioid receptors that essentially works to block the buprenorphine from binding to the mu-receptor. The combination of these mechanisms may result in attenuation of the mu agonist effects of buprenorphine, potentially making this a non-addictive therapy. ALKS 5461 is in phase 3 as a once-daily therapy administered as a sublingual tablet. It is well tolerated and treatment effects were evident after one week of dosing. We believe that our competitive advantage is that PT00114 targets different receptor system therefore it is not likely to have a clinical overlap with opioid receptor modulators.

Antipsychotics with antidepressant effects (dopamine receptor modulators)

Brexpiprazole (from Otsuka) is a dopamine (D2 receptor) partial stimulator (agonist) approved as an oral adjunctive TRD therapy. Its side effects include suicidal risk, weight gain and restlessness. Cariprazine (from Gedeon Richter) is an oral dopamine D2 and D3 receptor antagonist approved for schizophrenia and bipolar disorder in development for TRD. The most common side effects reported were extrapyramidal symptoms, the urge to move (akathisia), indigestion (dyspepsia), vomiting, drowsiness (somnolence) and restlessness. We believe that our competitive advantage is that PT00114, due to its low toxicity profile, will be clinically preferable to these antipsychotic drugs.

Ketamine-like TRD drugs

Drugs that act in a mechanism similar to Ketamine, such as Esketamine nasal spray (from Johnson and Johnson) is the S(+) enantiomer of the drug ketamine acts primarily as a non-competitive NMDA receptor antagonist, but is also a dopamine reuptake inhibitor. As of July 2014, it is in phase II clinical trials for treatment-resistant depression (TRD). This class of candidates is generating a lot of excitement but uncertainty due to their use history will be a compounding factor. We believe that our competitive advantage is that the toxicity profile is likely to be less favorable when compared with PT00114.

NMDA receptor modulators

The N-methyl-D-aspartate (or “NMDA”) receptor is a molecule that appears on the surface of neurons. When “activated” by a drug that binds with it, the NMDA receptor is a potential natural way to counteract TRD. A drug called GLYX 13, an amidated tetrapeptide (with the amino acid sequence Thr-Pro-Pro-Thr-NH2) is a glycine-site functional partial agonist of the NMDA receptor discovered at Northwestern University, now being developed by Naurex/Allergan, in Phase 3 U.S. clinical trials. It will be administered by intravenous injection and has a rapid onset. Phase 2 results have shown that GLYX 13 treatment reduces depression scores in patients with TRD, with no psychotomimetic side effects common to other NMDA receptor modulators. The major peptide candidate in this group GLYX13 shows a better tolerance profile and even IV dosing once weekly is not a deterrent enough in the clinic so PT00114 peptide with possible subcutaneous delivery would be a much more preferable clinical option. The development of the tetrapeptide and entry into the trials demonstrated room and willingness to accept peptide based therapies in TRD. More candidates are expected to come from this therapeutic class that may present a competitive challenge for PT00114.

Another of Naurex’s small molecule candidates, NRX-1074, is an orally active therapy based on GLYX13, in preclinical stages. L-4-Chlorokynurenine, AV-101 (from VistaGen Therapeutics) is a fast acting, orally active small molecule glycine binding site NMDA receptor antagonist. A NIH-funded phase 2 trial in major depressive disorder has been initiated in the US. CERC-301 (Cerecor) is an orally-active, selective NMDA receptor subunit 2B (NR2B) antagonist which is in phase 2 an adjunctive therapy for TRD.

PT00114’s Competitive Advantages/Disadvantages

We believe PT00114 will be able to compete against each of these drugs based on its core advantages:

The main competitive disadvantage that PT00114 will have relative to other antidepressant drugs is that it will have fewer marketing resources behind it, assuming that the Company consummates a partnership with a large pharmaceutical company during its commercial marketing phase. Beyond this marketing resources disadvantage, the Company acknowledges that PT00114 may have efficacy disadvantages that we are not yet aware of since the drug has not yet been tested in humans. Extrapolating the early results obtained in rodent studies, PT00114 appears to be more effective and with few or no side effects, but this must be treated as an unknown since no human studies have yet been performed, and a new competitive disadvantage could be discovered during the clinical trial phase.

Although we believe PT00114’s advantages will allow it to compete effectively against other antidepressant drugs in the TRD market, many of our competitors and potential competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to our programs or advantageous to our business.

Intellectual Property

We believe that patents, trademarks, copyrights and other proprietary rights are important to our business. We also rely on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive position. We seek to protect our intellectual property rights by a variety of means, including obtaining patents, maintaining trade secrets and proprietary know-how, and technological innovation to operate without infringing on the proprietary rights of others and to prevent others from infringing on our proprietary rights. Our policy is to seek to protect our proprietary position by, among other methods, actively seeking patent protection in the United States and foreign countries.

As of December 31, 2016, we have four patents issued by the Governments of the United States, Canada, European Union and Australia and two patent applications pending worldwide including US. The patent applications were made in the name of Dr. David A. Lovejoy and inventors, but the Company’s exclusive, worldwide rights to such patent applications are included in the License Agreement with UT.

Our success will depend in part on our ability to maintain our proprietary position through effective patent claims and their enforcement against our competitors. Although we believe our patent applications provide a competitive advantage, the patent positions of companies like ours are generally uncertain and involve complex legal and factual questions. We do not know whether any of our patent applications will result in the issuance of any patents. Those patents that may be issued in the future or those acquired by us may be challenged, invalidated or circumvented, and the rights granted under any issued patent may not provide us with proprietary protection or competitive advantages against competitors with similar technology. In particular, we do not know if competitors will be able to design variations on our treatment methods to circumvent our current and anticipated patent claims. Furthermore, competitors may independently develop similar technologies or duplicate any technology developed by us. Because of the extensive time required for the development, testing and regulatory review of a potential product, it is possible that, before any of our products can be commercialized or marketed, any related patent claim may expire or remain in force for only a short period following commercialization, thereby reducing the advantage of the patent.

 We also rely upon trade secrets, confidentiality agreements, proprietary know-how and continuing technological innovation to remain competitive, especially where we do not believe patent protection is appropriate or obtainable. We continue to seek ways to protect our proprietary technology and trade secrets, including entering into confidentiality or license agreements with our employees and consultants, and controlling access to and distribution of our technologies and other proprietary information. While we use these and other reasonable security measures to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our proprietary information to competitors.

Our commercial success will depend in part on our ability to operate without infringing upon the patents and proprietary rights of third parties. It is uncertain whether the issuance of any third party patents would require us to alter our products or technology, obtain licenses or cease certain activities. Our failure to obtain a license to technology that we may require to discover, develop or commercialize our future products may have a material adverse impact on us. One or more third-party patents or patent applications may conflict with patent applications to which we have rights. Any such conflict may substantially reduce the coverage of any rights that may issue from the patent applications to which we have rights. If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference proceedings in the USPTO to determine priority of invention.

We may collaborate in the future with other entities on research, development and commercialization activities. Disputes may arise about inventorship and corresponding rights in know-how and inventions resulting from the joint creation or use of intellectual property by us and our subsidiaries, collaborators, partners, licensors and consultants. As a result, we may not be able to maintain our proprietary position.

As of December 31, 2016, we controlled the following intellectual property: 

In the future we may file additional patent applications based on proprietary formulations and novel compounds.

Governmental Regulation

Our technologies are subject to extensive government regulation, principally by FDA and state and local authorities in the United States and by comparable agencies in foreign countries. Governmental authorities in the United States extensively regulate the preclinical and clinical testing, safety, efficacy, research, development, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution, among other things, of pharmaceutical products under various federal laws including the Federal Food, Drug and Cosmetic Act, or FFDCA, and under comparable laws by the states and in most foreign countries.

The Company has not commenced its FDA approval application process, and does not plan to launch the FDA application process until 2022 or 2023. We cannot commence the FDA application process until we have obtained clinical human data on PT00114 in three phases of trials, none of which have been initiated. Similarly, the Company will be required to obtain regulatory approval in every country or region outside the United States into which it plans to sell its drug products. We may seek approval from authorities outside the United States such as the European Union CE Mark and Japanese Ministry of Health. As of December 31, 2016, the Company has not launched the approval application process for any region in the world because of its lack of clinical human data on PT00114.

Domestic Regulation

In the United States, the FDA, under the FFDCA, the Public Health Service Act and other federal statutes and regulations, subject pharmaceutical and biologic products to rigorous review. If we do not comply with applicable requirements, we may be fined, the government may refuse to approve our marketing applications or allow us to manufacture or market our products or product candidates, and we may be criminally prosecuted. The FDA also has the authority to discontinue or suspend manufacture or distribution, require a product withdrawal or recall or revoke previously granted marketing authorizations, if we fail to comply with regulatory standards or if we encounter problems following initial marketing.

FDA Approval Process

To obtain approval of a new product from the FDA, we must, among other requirements, submit data demonstrating the product’s safety and efficacy as well as detailed information on the manufacture and composition of the product candidate. In most cases, this entails extensive laboratory tests and preclinical and clinical trials. This testing and the preparation of necessary applications and processing of those applications by the FDA are expensive and typically take many years to complete. The FDA may deny our applications or may not act quickly or favorably in reviewing these applications, and we may encounter significant difficulties or costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing any products we may develop. The FDA also may require post-marketing testing and surveillance to monitor the effects of approved products or place conditions on any approvals that could restrict the commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards or if we encounter problems following initial marketing. With respect to patented products or technologies, delays imposed by the governmental approval process may materially reduce the period during which we will have the exclusive right to exploit the products or technologies.

The process required by the FDA before a new drug or biologic may be marketed in the United States generally involves the following:

Preclinical tests include laboratory evaluation of product chemistry formulation and stability, as well as studies to evaluate toxicity. The results of preclinical testing, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application. The FDA requires a 30-day waiting period after the filing of each IND application before clinical trials may begin, in order to ensure that human research subjects will not be exposed to unreasonable health risks. At any time during this 30-day period or at any time thereafter, the FDA may halt proposed or ongoing clinical trials, or may authorize trials only on specified terms. The IND application process may become extremely costly and substantially delay development of our products. Moreover, positive results of preclinical tests will not necessarily indicate positive results in clinical trials.

The sponsor typically conducts human clinical trials in three sequential phases, which may overlap. These phases generally include the following:

Phase I: The product is usually first introduced into healthy humans or, on occasion, into patients, and is tested for safety, dosage tolerance, absorption, distribution, excretion and metabolism.

Phase II: The product is introduced into a limited patient population to:

Phase III: These are commonly referred to as pivotal studies. If a product is found to have an acceptable safety profile and to be potentially effective in Phase II clinical trials, new clinical trials will be initiated to further demonstrate clinical efficacy, optimal dosage and safety within an expanded and diverse patient population at geographically-dispersed clinical study sites.

If the FDA does ultimately approve the product, it may require post-marketing testing, including potentially expensive Phase IV studies, to monitor its safety and effectiveness.

Clinical trials must meet requirements for Institutional Review Board, or IRB, oversight, informed consent and the FDA’s Good Clinical Practices. Prior to March 30, 2012,commencement of each clinical trial, the Company wassponsor must submit to the FDA a clinical plan, or protocol, accompanied by the approval of the committee responsible for overseeing clinical trials at one of the clinical trial sites. The FDA and the IRB at each institution at which a clinical trial is being performed may order the temporary or permanent discontinuation of a clinical trial at any time if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients.

The sponsor must submit to the FDA the results of the preclinical and clinical trials, together with, among other things, detailed information on the manufacturing and composition of the product, in the form of an NDA, or, in the case of a biologic, a BLA. Once the submission has been accepted for filing, the FDA has 180 days to review the application and respond to the applicant. The review process is often significantly extended by FDA requests for additional information or clarification. The FDA may refer the BLA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved, but the FDA is not bound by the recommendation of an advisory committee.

It is possible that our product candidates will not successfully proceed through this approval process or that the FDA will not approve them in any specific period of time, or at all. The FDA may deny or delay approval of applications that do not meet applicable regulatory criteria, or if the FDA determines that the clinical data do not adequately establish the safety and efficacy of the product. Satisfaction of FDA pre-market approval requirements for a new biologic is a process that may take several years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. The FDA reviews these applications and, when and if it decides that adequate data are available to show that the product is both safe and effective and that other applicable requirements have been met, approves the drug or biologic for marketing. Government regulation may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our activities. Success in early stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinical activities is not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval. Upon approval, a product candidate may be marketed only for those indications approved in the BLA or NDA and may be subject to labeling and promotional requirements or limitations, including warnings, precautions, contraindications and use limitations, which could materially impact profitability. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-market regulatory standards is not maintained or if safety, efficacy or other problems occur after the product reaches the marketplace.

The FDA may, during its review of an NDA or BLA, ask for additional test data. If the FDA does ultimately approve the product, it may require post-marketing testing, including potentially expensive Phase IV studies, to monitor the safety and effectiveness of the product. In addition, the FDA may, in some circumstances, impose restrictions on the use of the product, which may be difficult and expensive to administer and may require prior approval of promotional materials.

We have not yet begun the preparation of our IND application to begin Phase I clinical trials. We anticipate doing so in 2018. We also have not begun to prepare our application for FDA approval which we anticipate will be in 2022 or 2023. The process of collecting the clinical data needed to complete our IND application is the focus of all of our working capital, and is expected to consume all of our available capital resources over the next eighteen months. The expenditures necessary to make progress along our IND program are expected to keep our operations in a cash flow negative state for the entire period from now until and after our IND application in 2018. To maintain our liquidity, we will have to receive an influx of cash from a non-revenue source in mid-2018, from either an up-front payment from a large pharmaceutical partner or an equity financing.

Ongoing FDA Requirements

Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities are in compliance with the FDA’s current Good Manufacturing Practices, or cGMP, requirements which govern the manufacture, holding and distribution of a product. Manufacturers of biologics also must comply with the FDA’s general biological product standards. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with the cGMP requirements. Manufacturers must continue to expend time, money and effort in the areas of production, quality control, record keeping and reporting to ensure full compliance with those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing, seizure of product, voluntary recall of product, withdrawal of marketing approval or civil or criminal penalties. Adverse experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.

The labeling, advertising, promotion, marketing and distribution of a drug or biologic product also must be in compliance with FDA and FTC requirements which include, among others, standards and regulations for direct-to-consumer advertising, industry-sponsored scientific and educational activities, and promotional activities involving the internet. The FDA and FTC have very broad enforcement authority, and failure to abide by these regulations can result in penalties, including the issuance of a Warning Letter directing the company to correct deviations from regulatory standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA and enforcement actions that can include seizures, injunctions and criminal prosecution.

Manufacturers are also subject to various laws and regulations governing laboratory practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances in connection with their research. In each of the above areas, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products and deny or withdraw approvals.

HIPAA Requirements

Other federal legislation may affect our ability to obtain certain health information in conjunction with our research activities. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, mandates, among other things, the adoption of standards designed to safeguard the privacy and security of individually identifiable health information. In relevant part, the U.S. Department of Health and Human Services, or HHS, has released two rules mandating the use of new standards with respect to such health information. The first rule imposes new standards relating to the privacy of individually identifiable health information. These standards restrict the manner and circumstances under which covered entities may use and disclose protected health information so as to protect the privacy of that information. The second rule released by HHS establishes minimum standards for the security of electronic health information. While we do not believe we are directly regulated as a covered entity under HIPAA, the HIPAA standards impose requirements on covered entities conducting research activities regarding the use and disclosure of individually identifiable health information collected in the course of conducting the research. As a result, unless they meet these HIPAA requirements, covered entities conducting clinical trials for us may not be able to share with us any results from clinical trials that include such health information.

In addition to the statutes and regulations described above, we are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other present and potential future federal, state and local regulations.

Research and Development

Our research and development efforts with respect to the formulations of PT00114 as our first potential product are exclusively conducted under premises of UT, Ontario, Canada. Much of our scientific research and discovery work is performed by Dr. David A. Lovejoy, our Chief Science Advisor and Dr. Dalia Barsyte, our Chief Technology Officer. These activities are funded by us under our Sponsored Research agreements with UT. We intend in the future to raise capital in distinct phases, matched to relevant scientific developments. The Company has financed completion of its preclinical proof of principle studies and the solidification of its intellectual property position through private offerings of its securities. In addition, the proceeds of bridge loans from the Company’s Chairman were used to fund research, development and the general operating activities of the Company. We anticipate that we will require additional financing through IND-enabling studies, and to support entry into clinical proof-of-concept studies in Treatment-Resistant Depression (TRD) and/or Post-Traumatic Stress Disorder (PTSD). As we develop new product candidates, we may be required to conduct additional scientific, preclinical and as well as clinical studies. We currently have no commitments to provide us with any such additional funding.

We incurred approximately $533,693 and $456,274 for research and development activities for the years ended December 31, 2016 and 2015, respectively.

The Company derives income from scientific research and experimental development tax credits/and or refunds issued by the Canada Revenue Agency for qualified expenditures. The credits are recognized when the refund is issued. The amounts received are reinvested into the Company’s scientific research, experimental development and operational works conducted in Canada.

Subsidiary

Protagenic Therapeutics Canada (2006) Inc. (“PTI Canada”) was incorporated in 2006 in the Province on Ontario, Canada. PTI Canada is a wholly-owned subsidiary of Protagenic. It provides operational support and assistance for the implementation of corporate and operational activities conducted in Canada. It also oversees and supports research and development activities conducted under auspices of UT. PTI Canada has three directors: Garo H. Armen (Chairman), Alexander K. Arrow and Vigen Nazarian. PTI Canada also has one part-time consultant, Robert Ziroyan. PTI Canada also benefits through tax incentive programs provided by the governments of Canada and the Province of Ontario. We derived income from Canadian research and development tax credits for the years ended December 31, 2016 and 2015 of $56,085 and $8,181, respectively.

Employees

We currently have three part-time employees. We also engage consultants and temporary employees from time to time to provide services that relate to our research and development activities as well as for general administrative and accounting services. We believe that our current personnel are capable of meeting our operating requirements in the near term. We expect that as our business grows we may hire additional personnel to handle the increased demands on our operations, preclinical and clinical activities.

Facilities

Our principal office is located at 149 Fifth Avenue, Suite 500, New York, New York 10010, in a conference room of Agenus, Inc. We utilize our principal office for quarterly board meetings and our annual shareholder meeting. Our personnel and consultants all work remotely, the Company’s basic science laboratory work is conducted in the Lovejoy Lab at the University of Toronto, and its preclinical efficacy work is conducted at CROs. Hence the company does not have the need for a day-to-day physical office location other than a mailing address and conference room facility for meetings. For that reason, the Agenus conference room suits its purposes without imposing any inconveniences upon Agenus. Dr. Armen, our Executive Chairman, is also the Chairman and Chief Executive Officer of Agenus Inc.

Legal Matters

From time to time we may be named in claims arising in the ordinary course of business. Currently, no legal proceedings, government actions, administrative actions, investigations or claims are pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business and financial condition.

We anticipate that we will expend significant financial and managerial resources in the defense of our intellectual property rights in the future if we believe that our rights have been violated. We also anticipate that we will expend significant financial and managerial resources to defend against claims that our products and services infringe upon the intellectual property rights of third parties.

Reports to Security Holders

Our principal offices are located at 149 Fifth Avenue, New York, New York 10010. Our web address iswww.protagenic.com.

We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file or furnish such materials to the Securities and filed periodic reports with theExchange Commission, or SEC. On March 30, 2012,In addition, you may read and copy any materials we filed a Form 15file with the SEC terminating our obligationat its Public Reference Room at 100 F Street, NE, Washington, DC 20549, on official business days during the hours of 10:00 am to file periodic reports under Sections 13 and 15(d)3:00 pm. You may obtain information on the operation of the Exchange Act.Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site,www.sec.gov, that contains reports, proxy and information statements, and other information that we file electronically with the SEC.

Atrinsic, Inc. was originally incorporated under the name Millbrook Acquisition Corp. on or about February 3, 1994. On or about May 2, 2007, Millbrook Acquisition Corp. changed its name to New Motion, Inc. On or about February 4, 2008, New Motion, Inc. merged with Traffix, Inc., pursuant to which Traffix, Inc. became wholly-owned subsidiary of New Motion, Inc. On or about June 25, 2009, New Motion, Inc. changed its name to Atrinsic, Inc. Pursuant to the terms of a Membership Interest Purchase Agreement dated July 12, 2013, we acquired a 51% equity interest in Momspot in exchange for our commitment to contribute up to $165,000 of working capital to Momspot over a two-year period to fund its business development and operations. Simultaneous with the acquisition, we became a party to the Momspot, LLC Operating Agreement and the manager thereunder.Item1A. Risk Factors.

Item 1A. Risk Factors

InvestingAn investment in our common stock is speculative and illiquid and involves a high degree of risk.risk including the risk of a loss of your entire investment. You should carefully consider the risks and uncertainties described below together with all ofand the other information contained in this Annual Report, including the section titled “Management’s Discussion and Analysisreport before purchasing shares of Financial Condition and Plan of Operation” and our consolidated financial statements and related notes, before making a decision to invest in our common stock. The risks and uncertainties describedset forth below mayare not be the only ones we face.facing us. Additional risks and uncertainties may exist that could also adversely affect our business, operations and prospects. If any of the following risks actually occur,materialize, our business, financial condition, operating results and prospects and/or operations could be materially and adversely affected.suffer. In thatsuch event, the market pricevalue of our common stock could decline, and you could lose partall or alla substantial portion of your investment.the money that you pay for our common stock.

Risk Related to our Company and our Business

Risks Related to our Discovery, Development and Commercialization of New Medicines

Our Businessresults to date provide no basis for predicting whether any of our product candidates will be safe or effective, or receive regulatory approval.

The Company’s proprietary portfolio of five new neuropeptide hormones are in various stages of research and Our Industry

Aspreclinical evaluation and their risk of failure is high. It is impossible to predict when or if any of our neuropeptide hormones will prove effective or safe in humans or will receive regulatory approval. These compounds may not demonstrate in patients the chemical and pharmacological properties ascribed to them in laboratory studies, and they may interact with human biological systems or other drugs in unforeseen, ineffective or harmful ways. If we have no operating historyare unable to discover or successfully develop drugs that are effective and we plan to operatesafe in a new and unproven market, it is difficult to evaluate our future prospects and the risk thathumans, we will not be successful is heightened.have a viable business.

We have no operating history, which makes it difficult to effectively assess our future prospects or forecast our future results. Given our lack of any operating history and the rapidly evolving markets in which we compete, it is very difficult, if not impossible, for you to predict our future operating results. You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in this developing and rapidly evolving market. These risks and challenges include our ability to, among other things:

If we fail to educate potential users and potential advertisers about the value of our product offerings, if the market for our platform does not develop as we expect or if we fail to address the needs of this market, our business will be harmed. We may not be able to successfully address these risksinitiate and challenges or others. Failure to adequately address these riskscomplete preclinical studies and challengesclinical trials for our product candidates which could harmadversely affect our business and cause our operating results to suffer.

We require additional capital to support our operations and the growth of our business, and we cannot be certain that this capital will be available on reasonable terms when required, or at all..

We must successfully initiate and complete extensive preclinical studies and clinical trials for our product candidates before we can receive regulatory approval. Preclinical studies and clinical trials are expensive and will need additional financingtake several years to operatecomplete and growmay not yield results that support further clinical development or product approvals. Conducting clinical studies for any of our business.drug candidates for approval in the United States requires filing an IND and reaching agreement with the FDA on clinical protocols, finding appropriate clinical sites and clinical investigators, securing approvals for such studies from the independent review board at each such site, manufacturing clinical quantities of drug candidates, supplying drug product to clinical sites and enrolling sufficient numbers of participants. We anticipate only a modest amount of affiliate and advertising revenue over the next 12cannot guarantee that we will be able to 24 months, which will only have a negligible impact on our future capital requirements. We estimate that our operating budget for eachsuccessfully accomplish all of the current (i.e., year ending June 30, 2015)activities necessary to initiate and ensuing (i.e., year ending June 30, 2016) fiscal years is $375,000, or $750,000 in the aggregate. The largest single line items in our budget are marketing ($115,000 to $150,000 per year) and development ($80,000 to $130,000 per year), which is essentially the cost of one to two full-time equivalent software engineers and/or programmers.complete clinical trials.

In orderAs a result, our preclinical studies and clinical trials may be extended, delayed or terminated, and we may be unable to enable us to continue to sustainobtain regulatory approvals or successfully commercialize our operations until we consummate a financing, on August 15, 2014 eachproducts.

None of our two principal stockholders loaned us $45,000, or $90,000 in the aggregate, which should provide us with sufficient working capital for an additional 90 days. We have recently begun to explore new financing opportunities.

Our ability to obtain additional financing, if and when required, will depend on investor and lender interest, our operating performance, the condition of the capital markets and other factors, and we cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, and our existing stockholders may experience dilution.product candidates has received regulatory approvals. If we are unable to obtain adequate financingregulatory approvals to market one or financing on terms satisfactorymore of our product candidates, our business may be adversely affected.

All of our product candidates are in early stages of development, and we do not expect our product candidates to us whenbe commercially available for several years, if at all. Our product candidates are subject to strict regulation by regulatory authorities in the United States and in other countries. We cannot market any product candidate until we require it,have completed all necessary preclinical studies and clinical trials and have obtained the necessary regulatory approvals. We do not know whether regulatory agencies will grant approval for any of our product candidates. Even if we complete preclinical studies and clinical trials successfully, we may not be able to obtain regulatory approvals or we may not receive approvals to make claims about our products that we believe to be necessary to effectively market our products. Data obtained from preclinical studies and clinical trials are subject to varying interpretations that could delay, limit or prevent regulatory approval, and failure to comply with regulatory requirements or inadequate manufacturing processes are examples of other problems that could prevent approval. In addition, we may encounter delays or rejections due to additional government regulation from future legislation, administrative action or changes in the FDA policy. Even if the FDA approves a product, the approval will be limited to those indications covered in the approval.

Outside the United States, our ability to continue to support the operation or growthmarket any of our business couldpotential products is dependent upon receiving marketing approvals from the appropriate regulatory authorities. These foreign regulatory approval processes include all of the risks associated with the FDA approval process described above. If we are unable to receive regulatory approvals, we will be significantly impairedunable to commercialize our product candidates, and our operating resultsbusiness may fail.

We may not be harmed.able to gain market acceptance of our product candidates, which would prevent us from becoming profitable.

We cannot be certain that any of our product candidates will gain market acceptance among physicians, patients, healthcare payers, pharmaceutical companies or others. Demonstrating the safety and efficacy of our product candidates and obtaining regulatory approvals will not guarantee future revenue. Sales of medical products largely depend on the reimbursement of patients’ medical expenses by government healthcare programs and private health insurers. Governments and private insurers closely examine medical products to determine whether they should be covered by reimbursement and if so, the level of reimbursement that will apply. We cannot be certain that third party payers will sufficiently reimburse sales of our products, or enable us to sell our products at profitable prices. Similar concerns could also limit the reimbursement amounts that health insurers or government agencies in other countries are prepared to pay for our products. In many countries where we plan to market our products, including Europe and Canada, the pricing of prescription drugs is controlled by the government or regulatory agencies. Regulatory agencies in these countries could determine that the pricing for our products should be based on prices of other commercially available drugs for the same disease, rather than allowing us to market our products at a premium as new drugs. Sales of medical products also depend on physicians’ willingness to prescribe the treatment, which is likely to be based on a determination by these physicians that the products are safe, therapeutically effective and cost-effective. We cannot predict whether physicians, other healthcare providers, government agencies or private insurers will determine that our products are safe, therapeutically effective and cost effective relative to competing treatments.

We may not be able to manufacture our product candidates in clinical or commercial quantities, which would prevent us from commercializingour product candidates.

To date, our product candidates have been manufactured in small quantities by us and third party manufacturers for preclinical studies. If any of our product candidates is approved by the FDA or other regulatory agencies for commercial sale, we will need to manufacture it in larger quantities and we intend to use third party manufacturers for commercial quantities. Our third party manufacturers may not be able to successfully increase the manufacturing capacity for any of our product candidates in a timely or efficient manner, or at all. If we are unable to successfully increase the manufacturing capacity for a product candidate, the regulatory approval or commercial launch of that product candidate may be delayed or there may be a shortage in the supply of the product candidate. Our failure or the failure of our third party manufacturers to comply with the FDA’s good manufacturing practices and to pass inspections of the manufacturing facilities by the FDA or other regulatory agencies could seriously harm our business.

We may not be able to obtain and maintain the third party relationships that are necessary to develop, commercialize and manufacture some or all of our product candidates.

We expect to depend on collaborators, partners, licensees, clinical research organizations, manufacturers and other third parties to support our discovery efforts, to formulate product candidates, to conduct clinical trials for some or all of our product candidates, to manufacture clinical and commercial scale quantities of our product candidates and products and to market, sell, and distribute any products we successfully develop.

We cannot guarantee that we will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, manufacturers and other third parties on favorable terms, if at all. If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate, manufacture, obtain regulatory approvals for or commercialize our product candidates, which will in turn adversely affect our business.

We expect to expend substantial management time and effort to enter into relationships with third parties and, if we successfully enter into such relationships, to manage these relationships. In addition, substantial amounts of our expenditures will be paid to third parties in these relationships. However, we cannot control the amount or timing of resources our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot guarantee that these parties will fulfill their obligations to us under these arrangements in a timely fashion, if at all.

We have no experience in sales, marketing and distribution and may have to enter into agreements with third parties to perform these functions, which could prevent us from successfully commercializing our product candidates.

We currently have no sales, marketing or distribution capabilities. To commercialize our product candidates, we must either develop our own sales, marketing and distribution capabilities, which will be expensive and time consuming, or make arrangements with third parties to perform these services for us. If we decide to market any of our products on our own, we will have to commit significant resources to developing a marketing and sales force and supporting distribution capabilities. If we decide to enter into arrangements with third parties for performance of these services, we may find that they are not available on terms acceptable to us, or at all. If we are not able to establish and maintain successful arrangements with third parties or build our own sales and marketing infrastructure, we may not be able to commercialize our product candidates which would adversely affect our business and financial condition.

We may fail to select or capitalize on the most scientifically, clinically or commercially promising or profitable product candidates.

We have limited technical, managerial and financial resources to determine which of our product candidates should proceed to initial clinical trials, later stage clinical development and potential commercialization. We may make incorrect determinations. Our decisions to allocate our research and development, management and financial resources toward particular product candidates or therapeutic areas may not lead to the development of viable commercial products and may divert resources from better opportunities. Similarly, our decisions to delay or terminate drug development programs may also be incorrect and could cause us to miss valuable opportunities.

We may not be able to maintain our exclusive worldwide license to use and develop PT00114 which could materially affect our businessplan.

On July 21, 2005, we entered into the License Agreement with UT pursuant to which UT agreed to license to us patent rights and other intellectual property related to PT00114, among other things. The Technology License Agreement was amended on February 18, 2015. There is no expiration date to this agreement as long as we continue to provide UT with progress reports every 6 months and make ongoing progress toward development of the drug. 

Pursuant to the License Agreement, we obtained an exclusive worldwide license to make, have made, use, sell and import products based upon the Technologies, or to sublicense the Technologies in accordance with the terms of the License Agreement. In the event we fail to provide UT with semi-annual reports on our progress or fail to continue to make reasonable commercial efforts towards obtaining regulatory approval for products based on the Technologies, UT may convert our exclusive license into a non-exclusive one. In such a case, we would lose our competitive advantage in the development of treatments based on PT00114.

If we are not able toretain our current senior management team and our scientific advisors or continue to attract and retain qualified scientific,technical and business personnel, our business will suffer.

We are dependent on the members of our management team and our scientific advisors for our business success. An important element of our strategy is to take advantage of the research and development expertise of our current management and to utilize the unique expertise of our scientific advisors. We do not have any employment agreements with our executive officers. The loss of any one of our executive officers or key scientific consultants, including, in particular, Garo Armen, Ph.D., Chairman of the Board, and Dr. David A. Lovejoy, our Chief Scientific Advisor, could result in a significant loss in the knowledge and experience that we, as an organization, possess and could cause significant delays, or outright failure, in the development and further commercialization of our product candidates.

To grow, we will eventually need to hire a significant number of qualified commercial, scientific and administrative personnel. However, there is intense competition for human resources, including management in the technical fields in which we operate, and we may not be able to attract and retain qualified personnel necessary for the successful development and commercialization of our product candidates. Our inability to attract new employees or to retain existing employees could limit our growth and harm our business.

We have not entered into an employment agreement with Dr. David A. Lovejoy, our Chief Scientific Advisor.

Dr. David A. Lovejoy is a key contributor to our Company due to his role in the development of PT00114 and his continued role in the development of our products as our Chief Scientific Advisor. We have not entered into an employment agreement with Dr. Lovejoy. If Dr. Lovejoy elects to discontinue his service as our Chief Scientific Advisor, the development of our products and our overall business plan could be materially affected.

Disputes under key agreements or conflicts of interest with our scientific advisors or clinical investigators could delay or prevent development or commercialization of our product candidates.

Any agreements we have or may enter into with third parties, such as collaboration, license, formulation supplier, manufacturing, clinical research organization or clinical trial agreements, may give rise to disputes regarding the rights and obligations of the parties. Disagreements could develop over rights to ownership or use of intellectual property, the scope and direction of research and development, the approach for regulatory approvals or commercialization strategy. We intend to conduct research programs in a range of therapeutic areas, but our pursuit of these opportunities could result in conflicts with the other parties to these agreements who may be developing or selling pharmaceuticals or conducting other activities in these same therapeutic areas. Any disputes or commercial conflicts could lead to the termination of our agreements, delay progress of our product development programs, compromise our ability to renew agreements or obtain future agreements, lead to the loss of intellectual property rights or result in costly litigation.

We collaborate with outside scientific advisors and collaborators at academic and other institutions that assist us in our research and development efforts. Our scientific advisors are not our employees and may have other commitments that limit their availability to us. If a conflict of interest between their work for us and their work for another entity arises, we may lose their services.

We may encounter difficulties in managing our growth, which could adversely affect our operations.

Our ability to manage our operations and growth effectively depends upon the continual improvement of our procedures, reporting systems, and operational, financial, and management controls. We may not be able to implement improvements in an efficient or timely manner and may discover deficiencies in existing systems and controls. If we do not meet these challenges, we may be unable to take advantage of market opportunities, execute our business strategies or respond to competitive pressures which in turn may slow our growth or give rise to inefficiencies that would increase our losses.

We may acquire additional technology and complementary businesses in the future. Acquisitions involve many risks, any one of which could materially harm our business, including the diversion of management’s attention from core business concerns, failure to exploit acquired technologies, or the loss of key employees from either our business or the acquired business.

Company Risks

We have a history of losses and expect that losses may continue in the future.

We have generated net losses since we began operations, including $2,275,826 and $1,023,422 for the years ended December 31, 2016 and December 31, 2015, respectively. As of December 31, 2016, we had an accumulated deficit of $8,582,123. We have no approved products and have generated no product revenue. We expect that product development, preclinical and clinical programs will increase losses significantly over the next five years. In order to achieve profitability, we will need to generate significant revenue. We cannot be certain that we will generate sufficient revenue to achieve profitability. We anticipate that we will continue to generate operating losses and negative cash flow from operations and our current cash position is sufficient to fund our current business plan at least until the third quarter of 2018. We cannot be certain that we will ever achieve, or if achieved, maintain profitability. If our revenue grows at a slower rate than we anticipate or if our product development, marketing and operating expenses exceed our expectations or cannot be adjusted accordingly, our business, results of operation and financial condition will be materially adversely affected and we may be unable to continue operations.

We will not be able to generate product revenue unless and until one of our product candidates successfully completes clinical trials and receives regulatory approval. As our most advanced product candidates are at an early proof-of-concept stage, we do not expect to receive revenue from any product candidate for the foreseeable future. We may seek to obtain revenue from collaboration or licensing agreements with third parties. We currently have no such agreements which will provide us with material, ongoing future revenue and we may never enter into any such agreements. Even if we eventually generate revenues, we may never be profitable, and if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

We need to obtain financing in order to continue our operations.

On a prospective basis, we will require both short-term financing for operations and long-term capital to fund our expected growth. We have no existing bank lines of credit and have not established any definitive sources for additional financing. We believe that cash on hand provided by the investors in the Private Offering will be sufficient to meet our short-term financial requirements for approximately twelve months. However, we will require additional funds if we want to fully implement our business plan and proceed with submission of an IND/CTA application. Additional financing may not be available to us, or if available, then it may not be available upon terms and conditions acceptable to us. If adequate funds are not available, then we may be required to delay, reduce or eliminate product development or clinical programs. Our inability to take advantage of opportunities in the industry because of capital constraints may have a material adverse effect on our business and our prospects. If we fail to obtain the capital necessary to fund our operations, we will be unable to advance our development programs and complete our clinical trials.

In addition, our research and development expenses could exceed our current expectations. This could occur for many reasons, including:

While we expect to seek additional funding through public or private financings, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. These arrangements would generally require us to relinquish rights to some of our technologies, product candidates or products, and we may not be able to enter into such agreements, on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our development programs, including some or all of our product candidates.

We currently do not have sufficient cash to fully implement our business plan.

We have experienced a lack of adequate capital resources causing us to be unable to fully implement our business plan. We believe that we need to raise or otherwise obtain additional financing beyond the Private Offering in order to satisfy our existing obligations and fully implement our business plan. We do not expect to have positive cash flow until the middle of 2018 or longer. If we are not successful in obtaining additional financing, we will not be able to fully implement our business plan and we may not be able to continue our operations.

We have a limited operating history and a history of operating losses, and expect to incur significant additional operating losses.

We began our business in September 2004 and have a limited operating history. Though we have enlisted the assistance of pharmaceutical and academic experts, our lack of experience may cause us to encounter unforeseen problems that could have a material adverse effect on our business and financial condition. As well, there is limited historical financial information upon which to base an evaluation of our performance.

The Company’s financial statements have been prepared on a going concern basis, and do not include adjustments that might be necessary if the Company is unable to continue as a going concern, you will lose your entire investment.concern.

In their report in connection with ourThe Company’s consolidated financial statements forhave been prepared on a going concern basis, which contemplates the fiscal year ended June 30, 2014, our independent registered public accounting firm included an explanatory paragraph stating that because we haverealization of assets and the satisfaction of liabilities in the normal course of business. As of December 31, 2016, the Company had incurred netsignificant operating losses since inception, and have yetcontinues to establish profitablegenerate losses from operations, and other factors, there ishas an accumulated deficit of $8,582,123. These matters raise substantial doubt as to ourabout the Company’s ability to continue as a going concern. If we cannot continue as a going concern, your entire investment mayThe consolidated financial statements incorporated in this annual report do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be worthless. Our abilitynecessary should the Company be unable to continue as a going concern will depend, in large part, on our ability to obtain additional financing and generate positive cash flow from operations, neither of which is certain.concern.

The drug development and approval process is uncertain, time-consuming and expensive.

The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive and uncertain. It also can vary substantially based on the type, complexity, and novelty of the product. We must provide the FDA and foreign regulatory authorities with preclinical and clinical data demonstrating that our products are safe and effective before they can be approved for commercial sale. Clinical development, including preclinical testing, is a long, expensive and uncertain process. It may take us several years to complete our testing, and failure can occur at any stage of testing. Any preclinical or clinical test may fail to produce results satisfactory to the FDA. Preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval. Negative or inconclusive results from a preclinical study or clinical trial, adverse medical events during a clinical trial or safety issues resulting from products of the same class of drug could cause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful.

We have to sustain and further build our intellectual property rights.

If we fail to sustain and further build our intellectual property rights, competitors will be able to take advantage of our research and development efforts to develop a significant user base,competing products. If we are not able to protect our proprietary technology, trade secrets, and know-how, our competitors may use our inventions to develop competing products. Protagenic has obtained worldwide exclusive rights to PT00114 and related technology that was developed at the University of Toronto. The Company currently has four patents issued by the Governments of the United States, Canada, European Union and Australia. As of December 31, 2016, six patent applications are pending. However, our patents and patent applications, even if granted, may not protect us against our competitors. Our patent positions, and those of other pharmaceutical and biotechnology companies, are generally uncertain and involve complex legal, scientific and factual questions. The standards which the United States Patent and Trademark Office uses to grant patents, and the standards which courts use to interpret patents, are not always applied predictably or uniformly and can change, particularly as new technologies develop. Consequently, the level of protection, if user engagement or ad engagement onany, that will be provided by our platform dopatents if we attempt to enforce them, and they are challenged, is uncertain. In addition, the type and extent of patent claims that will be issued to us in the future is uncertain. Any patents that are issued may not materialize, our revenue, business and operating results may be harmed.contain claims that permit us to stop competitors from using similar technology.

The size of our user base and their level of engagement will be critical

In addition to our overall success, including our financial performance. Convincing potential new users of the value of our product offering is critical to increasing our user basepatentable technology, we also rely on unpatented technology, trade secrets, and to the success of our business.confidential information. We are unable to predict the size of our user base or its growth rate. If the Mommy Market does not perceive our website to be useful, reliable and trustworthy, we may not be able to attract userseffectively protect our rights to this technology or increaseinformation. Other parties may independently develop substantially equivalent information and techniques or otherwise gain access to or disclose our technology. We generally require each of our employees, consultants, collaborators, and certain contractors to execute a confidentiality agreement at the frequencycommencement of their engagementan employment, consulting, collaborative, or contractual relationship with us. However, these agreements may not provide effective protection of our platform.technology or information or, in the event of unauthorized use or disclosure, they may not provide adequate remedies.

Our patent position is generally uncertain and involves complex legal and factual questions. In addition, the laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and other biotechnology companies have encountered significant problems in protecting and defending their proprietary rights in foreign jurisdictions. Whether filed in the United States or abroad, our patent applications may be challenged or may fail to result in issued patents. In addition, any future patents we cannot assure youobtain may not be sufficiently broad to prevent others from practicing our technologies or from developing or commercializing competing products. Furthermore, others may independently develop or commercialize similar or alternative technologies or drugs, or design around our patents. Our patents may be challenged, invalidated or fail to provide us with any competitive advantages. We may not have the funds available to protect our patents or other technology; such protection is costly and can result in further litigation expenses.

If we do not obtain or we are unable to maintain adequate patent or trade secret protection for our products in the United States, competitors could duplicate them without repeating the extensive testing that we will be ablerequired to maintainundertake to obtain approval of the products by the FDA. Regardless of any patent protection, under the current statutory framework the FDA is prohibited by law from approving any generic version of any of our products for three years after it has approved our product. Upon the expiration of that period, or sustain any levelif that time period is altered, the FDA could approve a generic version of user base or engagement. A numberour product unless we have patent protection sufficient for us to block that generic version. Without sufficient patent protection, the applicant for a generic version of consumer-oriented websitesour product would be required only to conduct a relatively inexpensive study to show that achieved early popularityits product is bioequivalent to our product and may not have since seen their user bases or levels of engagement decline, in some cases precipitously. There is no guaranteeto repeat the studies that we will need to conduct to demonstrate that the product is safe and effective. In the absence of adequate patent protection in other countries, competitors may similarly be able to obtain regulatory approval in those countries of products that duplicate our products.

We have to comply with our obligations in our intellectual property licenses with third parties.

If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.We are a party to the License Agreement with UT under which we receive the right to practice and use important third party patent rights. We may enter into additional licenses in the future. Our existing licenses impose, and we expect future licenses will impose, various diligences, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not experiencebe able to market any product that is covered by the licensed patents.

We may need to resort to litigation to enforce or defend our intellectual property rights, including any patents issued to us. If a similar erosioncompetitor or collaborator files a patent application claiming technology also invented by us, in order to protect our rights, we may have to participate in an expensive and time consuming interference proceeding before the United States Patent and Trademark Office. We cannot guarantee that our product candidates will be free of claims by third parties alleging that we have infringed their intellectual property rights. Third parties may assert that we are employing their proprietary technologies without authorization and they may resort to litigation to attempt to enforce their rights. Third parties may have or obtain patents in the future and claim that the use of our user basetechnology or engagement levels. A numberany of factors could potentially negatively affect user growth and engagement, including if:

If we are unable to attract aredesign our product candidates or processes to avoid actual or potential patent or other intellectual property infringement. Obtaining, protecting and defending patent and other intellectual property rights can be expensive and may require us to incur substantial costs, including the diversion of management and technical personnel. An unfavorable ruling in patent or intellectual property litigation could subject us to significant number of usersliabilities to third parties, require us to cease developing, manufacturing or ifselling the number of users beginsaffected products or using the affected processes, require us to decline, this couldlicense the disputed rights from third parties, or result in awards of substantial damages against us.

There can be no assurance that we would prevail in any intellectual property infringement action, will be able to obtain a license to any third party intellectual property on commercially reasonable terms, successfully develop non-infringing alternatives on a timely basis, or license non-infringing alternatives, if any exist, on commercially reasonable terms. Any significant intellectual property impediment to our website being less attractiveability to potential new usersdevelop and commercialize our products could seriously harm our business and prospects.

Patent litigation or other litigation in connection with our intellectual property rights may lead to publicity that may harm our reputation and the value of our common stock may decline.

During the course of any patent litigation, there may be public announcements of the results of hearings, motions, and other interim proceedings or developments in the litigation. If securities analysts or investors regard these announcements as well as to Platform Partnersnegative, the value of our common stock may decline. General proclamations or statements by key public figures may also have a negative impact on the perceived value of our intellectual property.

Protecting and Advertisers, which woulddefending against intellectual property claims may have a material adverse effect on our business.

From time to time, we may receive notice that others have infringed on our proprietary rights or that we have infringed on the intellectual property rights of others. There can be no assurance that infringement or invalidity claims will not materially adversely affect our business, financial condition or results of operations. Regardless of the validity or the success of the assertion of claims, we could incur significant costs and diversion of resources in protecting or defending against claims, which could have a material adverse impacteffect on our business, financial condition and operating results.

Our revenue will depend onor results of operations. We may not have the funds or resources available to protect our ability to attract Platform Partners and Advertisers to advertise on our website.intellectual property.

We anticipateOur competitors and potential competitors may develop products and technologies that at least initially, most, if not allmake ours less attractive or obsolete.

Many companies, universities, and research organizations developing competing product candidates have greater resources and significantly greater experience in financial, research and development, manufacturing, marketing, sales, distribution, and technical regulatory matters than we have. In addition, many competitors have greater name recognition and more extensive collaborative relationships. Our competitors could commence and complete clinical testing of their product candidates, obtain regulatory approvals, and begin commercial-scale manufacturing of their products faster than we are able to for our products. They could develop products that would render our product candidates, and those of our revenue will be performance-based, determined by the frequency that users click through to a Platform Partner’s or Advertiser’s website or purchase a Platform Partner’s or Advertiser’s products or services. It is unlikely that we will have long-term commitments from Platform Partners or Advertisers. In addition, Platform Partnerscollaborators, obsolete and Advertisers may view our business experimental and unproven, and we may need to devote additional time and resources to educate them about our business. Platform Partners may not want to partner with us if they feel that user engagement with their products and services is too infrequent. Advertisers will not continue to do business with us or will reduce the prices they are willing to pay to advertise with us if we do not deliver ads in an effective manner, or if they do not believe that their investment in advertising with us will generate a competitive return relative to alternatives, including online, mobile and traditional advertising platforms. Thus, our revenue could be adversely affected by a number of other factors, including:

The occurrence of any of these or other factors could result in a reduction in demand for the products and services available through our website, which may reduce the prices we receive for our ads, either of which would negatively affect our revenue and operating results.

noncompetitive. If we are unable to compete effectively for users, Platform Partners and Advertisers,against these companies, then we may not be able to commercialize our business and operating results could be harmed.product candidates or achieve a competitive position in the market. This would adversely affect our ability to generate revenues.

Competition in the biotechnology and pharmaceutical industries may result in competing products, superior marketing of other products and lower revenues or profits for users will be intense. We will compete againstus.

There are many companies that are seeking to attractdevelop products and engage users, including traditional “bricktherapies for the treatment of mood, anxiety and mortar” retailers that serve the Mommy Market,neurodegenerative disorders. Many of our competitors have substantially greater financial, technical, human and online shopping sites including a number of online shopping sites that target the sameother resources than we do and may be better equipped to develop, manufacture and market segment that we target. Mosttechnologically superior products. In addition, many of these competitors and potential competitors have significantly greater financial resources and substantially larger user basesexperience than we do such as Amazon.com, ShopStyle, Googlein undertaking preclinical testing and Cafemom, which offer a varietyhuman clinical studies of Internet and mobile device-basednew pharmaceutical products services and content. For example, users can search, compare and shop using both Amazon and Google. The online affiliate marketing websites that target the Mommy Market, includingwww.weespring.com,www.theprowl.com andwww.cricketscircle.com, tend to be smaller but nevertheless are already serving the market and in some cases, are well-funded. As a result,obtaining regulatory approvals of human therapeutic products. Accordingly, our competitors may acquire and engage users at the expense of the growth or engagement of our user base, which would negatively affect our business. We may also compete against smaller companies, and companies basedsucceed in foreign countries.obtaining FDA approval for superior products.

We believe that Other risks and uncertainties include:

We also face significant competition for Advertisers as we will be competing against online and mobile businesses, including those referenced above, as well as traditional media outlets such as television, radio and print, for advertising budgets. In order to compete effectively for advertising spend, our budget for that form of revenue must be commensurate with those of our competitors, many of which are larger companies that offer more traditional and widely accepted advertising products. In addition, some of our larger competitors have substantially broader product or service offerings and are able to leverage their relationships based on other products or services to gain additional share of advertising budgets.

We believe that our ability to compete effectively for Advertisers depends upon many factors both within and beyond our control, including:

In recent years, there have been significant acquisitions and consolidation by and among our actual and potential competitors. We anticipate that this trend of consolidation will continue, and that it will present heightened competitive challenges for our business. Acquisitions by our competitors may adversely impact our existing relationships or ability to forge new relationships with Platform Partners and Advertisers. Consolidation may also enable our larger competitors to offer bundled or integrated products that feature alternatives to our platform. A reduction in the number of our strategic relationships or an increase in our competitors’ ability to offer bundled or integrated products that compete directly with us may cause our user growth, user engagement and ad engagement to decline and Advertisers to reduce their spend with us.

If we are not able to compete effectively for users and advertiser spend, our business and operating results would be materially and adversely affected.

User growth and engagement depend upon effective interoperation with operating systems, networks, devices, web browsers and standards that we do not control.

Ultimately, we want our platform to be available across a variety of operating systems. Thus, the interoperability of our platform with popular devices, web browsers, and desktop and mobile operating systems that we do not control, such as Mac OS, Windows, Android, iOS, Chrome and Firefox will be critical to our future success. Any changes in such systems, devices or web browsers that degrade the functionality of our platform or that give preferential treatment to competitive products or services could adversely affect usage of our website. Further, if the number of operating systems for which we develop our platform expands, it will result in an increase in our operating expenses. In order to deliver high quality products and services, it is important that our platform work well with a range of operating systems, networks, devices, web browsers and standards that we do not control. In addition, because we expect that a significant percentage of our users will access our platform through mobile devices, we will be particularly dependent on the interoperability of our platform with mobile devices and operating systems. We may not be successful in developing relationships with key participants in the mobile industry or in developing or modifying our platform to operate effectively with these operating systems, networks, devices, web browsers and standards. In the event that it is difficult for our users to access and use our website, particularly on their mobile devices, our user growth and engagement could be harmed, and our business and operating results could be adversely affected.

Our operating results may fluctuate from quarter to quarter, which makes them difficult to predict.

Our quarterly operating results will likely fluctuate. Our operating results in any given quarter can be influenced by numerous factors, many of which we are unable to predict or are outside of our control, including: