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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarter Ended June 30, 2011
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from   to

Commission File Number  000-54001

PROTECT PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)

Nevada
27-1877179
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)

759 Bloomfield Avenue, Suite 411, West Caldwell, New Jersey 07006
(Address of principal executive offices)

(973) 568-1617
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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  x    No  ¨

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company

Large accelerated filer         ¨
 
Accelerated filer                        ¨
Non-accelerated filer           ¨
 
Smaller reporting company      x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨    No  x

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class
Outstanding as of August 12, 2011
Common Stock, $0.005 par value
43,663,012

 
 

 
 
TABLE OF CONTENTS

Heading
   
Page
       
 
PART  I— FINANCIAL INFORMATION
   
       
Item 1.
Unaudited Financial Statements
 
3
       
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
15
       
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
 
17
       
Item 4(T).
Controls and Procedures
 
17
       
 
PART II— OTHER INFORMATION
   
       
Item 1.
Legal Proceedings
 
18
       
Item 1A.
Risk Factors
 
18
       
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
 
18
       
Item 3.
Defaults Upon Senior Securities
 
18
       
Item 4.
(Removed and Reserved)
 
18
       
Item 5.
Other Information
 
18
       
Item 6.
Exhibits
 
18
       
 
Signatures
  
19

 
2

 
 
PART  I   —   FINANCIAL INFORMATION

Item 1.  Financial Statements

The accompanying unaudited balance sheets of Protect Pharmaceutical Corporation at June 30, 2011 and related unaudited statements of operations, stockholders' equity (deficit) and cash flows for the three and six months ended June 30, 2011, have been prepared by management in conformity with United States generally accepted accounting principles.   In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.  It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the December 31, 2010 audited financial statements included in our registration statement on Form 10.  Operating results for the period ended June 30, 2011, are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2011 or any other subsequent period.
 
 
3

 

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Balance Sheets
     
ASSETS
 
   
June 30,
   
December 31,
 
   
2011
   
2010
 
   
(Unaudited)
       
CURRENT ASSETS
           
             
Cash
  $ 168,115     $ -  
                 
Total Current Assets
    168,115       -  
                 
TOTAL ASSETS
  $ 168,115     $ -  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
               
                 
CURRENT LIABILITIES
               
                 
Accounts payable and accrued expenses
  $ 89,359     $ 84,545  
Accounts payable - related parties
    1,675       150,000  
Accrued officer salaries
    326,690       224,658  
                 
Total Current Liabilities
    417,724       459,203  
                 
TOTAL LIABILITIES
    417,724       459,203  
                 
STOCKHOLDERS' EQUITY (DEFICIT)
               
                 
Preferred stock; 10,000,000 shares authorized,
               
   at $0.001 par value, no shares issued or outstanding
    -       -  
Common stock; 100,000,000 shares authorized,
               
   at $0.005 par value, 43,663,012 and 43,368,012
               
   shares issued and outstanding, respectively
    218,315       216,840  
Additional paid-in capital
    7,425,184       7,122,909  
Deficit accumulated during the development stage
    (7,893,108 )     (7,798,952 )
                 
Total Stockholders' Equity (Deficit)
    (249,609 )     (459,203 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS'
               
   EQUITY (DEFICIT)
  $ 168,115     $ -  
 
The accompanying notes are an integral part of these financial statements.
 
 
4

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
 
                           
From Inception
 
                           
on August 5,
 
   
For the Three Months Ended
   
For the Six Months Ended
   
1987 Through
 
   
June 30,
   
June 30,
   
June 30,
 
   
2011
   
2010
   
2011
   
2010
   
2011
 
                               
REVENUES
  $ -     $ -     $ -     $ -     $ -  
                                         
EXPENSES
                                       
                                         
Research and development
    -       -       123,192       1,250,000       1,376,212  
Professional fees
    286,360       156,450       286,360       156,450       621,350  
Executive compensation
    200,295       5,156,100       269,199       5,156,100       5,649,957  
General and administrative
    35,761       -       55,405       1,665       266,748  
                                         
LOSS FROM OPERATIONS
    (522,416 )     (5,312,550 )     (734,156 )     (6,564,215 )     (7,914,267 )
                                         
OTHER INCOME (EXPENSES)
                                       
                                         
Gain on sale of patents
    -       -       640,000       -       640,000  
                                         
INCOME (LOSS) BEFORE DISCONTINUED
                                 
OPERATIONS
    (522,416 )     (5,312,550 )     (94,156 )     (6,564,215 )     (7,274,267 )
                                         
LOSS FROM DISCONTINUED OPERATIONS
    -       -       -       -       (4,340,551 )
                                         
Income Taxes
    -       -       -       -       -  
                                         
NET INCOME (LOSS)
  $ (522,416 )   $ (5,312,550 )   $ (94,156 )   $ (6,564,215 )   $ (11,614,818 )
                                         
BASIC AND DILUTED INCOME (LOSS) PER
                                 
SHARE OF COMMON STOCK
  $ (0.01 )   $ (0.13 )   $ (0.00 )   $ (0.17 )        
                                         
WEIGHTED AVERAGE NUMBER OF
                                 
SHARES OUTSTANDING
    43,520,155       40,107,737       43,444,504       37,980,526          
 
The accompanying notes are an integral part of these financial statements.
 
 
5

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
 
                     
Deficit
       
                     
Accumulated
   
Total
 
               
Additional
   
During the
   
Stockholders'
 
   
Common Stock
   
Paid-In
   
Development
    Equity/  
   
Shares
   
Amount
   
Capital
   
Stage
   
(Deficit)
 
                               
Balance August 5, 1987
    -     $ -     $ -     $ -     $ -  
                                         
Net loss for the period ended December 31, 1987
    -       -       -       (30 )     (30 )
                                         
Balance, December 31, 1987
    -       -       -       (30 )     (30 )
                                         
Common stock issued for services rendered at $15.00 per share on January 27, 1988
    624,000       3,120       2,336,880       -       2,340,000  
                                         
Common stock issued for Midway Mining Development Corp. at $15.00 per share on January 27, 1988
    359,592       1,798       1,346,672       -       1,348,470  
                                         
Common stock issued for mining claims at predecessor cost on May 24, 1988
    19,420       97       (97 )     -       -  
                                         
Common stock cancelled due to the acquisition agreement on Midway Mining and Development Corp. being rescinded on July 6, 1988
    (209,112 )     (1,046 )     -       -       (1,046 )
                                         
Common stock issued for services rendered at $0.00 per share on July 6, 1988
    209,112       1,046       -       -       1,046  
                                         
Additional capital contributed
    -       -       33,000       -       33,000  
                                         
Net loss for the year ended December 31, 1988
    -       -       -       (3,721,500 )     (3,721,500 )
                                         
Balance, December 31, 1988
    1,003,012       5,015       3,716,455       (3,721,530 )     (60 )
                                         
Net loss for the year ended December 31, 1989
    -       -       -       (30 )     (30 )
                                         
Balance, December 31, 1989
    1,003,012     $ 5,015     $ 3,716,455     $ (3,721,560 )   $ (90 )
 
The accompanying notes are an integral part of these financial statements.
 
 
6

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
 
                     
Deficit
       
                     
Accumulated
   
Total
 
               
Additional
   
During the
   
Stockholders'
 
   
Common Stock
   
Paid-In
   
Development
    Equity/  
   
Shares
   
Amount
   
Capital
   
Stage
   
(Deficit)
 
                               
Balance, December 31, 1989
    1,003,012     $ 5,015     $ 3,716,455     $ (3,721,560 )   $ (90 )
                                         
Net loss for the year ended December 31, 1990
    -       -       -       (30 )     (30 )
                                         
Balance, December 31, 1990
    1,003,012       5,015       3,716,455       (3,721,590 )     (120 )
                                         
Net loss for the year ended December 31, 1991
    -       -       -       (30 )     (30 )
                                         
Balance, December 31, 1991
    1,003,012       5,015       3,716,455       (3,721,620 )     (150 )
                                         
Net loss for the year ended December 31, 1992
    -       -       -       (30 )     (30 )
                                         
Balance, December 31, 1992
    1,003,012       5,015       3,716,455       (3,721,650 )     (180 )
                                         
Net loss for the year ended December 31, 1993
    -       -       -       (30 )     (30 )
                                         
Balance, December 31, 1993
    1,003,012       5,015       3,716,455       (3,721,680 )     (210 )
                                         
Quasi - reorganization (Note 2)
    -       -       (3,721,710 )     3,721,710       -  
                                         
Net loss for the year ended December 31, 1994
    -       -       -       (30 )     (30 )
                                         
Balance, December 31, 1994
    1,003,012       5,015       (5,255 )     -       (240 )
                                         
Common stock issued for services rendered at $15.00 per share on June 12, 1995
    160,000       800       599,200       -       600,000  
                                         
Additional capital contributed
    -       -       2,605       -       2,605  
                                         
Net loss for the year ended December 31, 1995
    -       -       -       (605,105 )     (605,105 )
                                         
Balance, December 31, 1995
    1,163,012     $ 5,815     $ 596,550     $ (605,105 )   $ (2,740 )
 
The accompanying notes are an integral part of these financial statements.
 
 
7

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
 
                     
Deficit
       
                     
Accumulated
   
Total
 
               
Additional
   
During the
   
Stockholders'
 
   
Common Stock
   
Paid-In
   
Development
    Equity/  
   
Shares
   
Amount
   
Capital
   
Stage
   
(Deficit)
 
                               
Balance, December 31, 1995
    1,163,012     $ 5,815     $ 596,550     $ (605,105 )   $ (2,740 )
                                         
Common stock issued for expenses paid at $0.01 per share
    2,000,000       10,000       5,000       -       15,000  
                                         
Net loss for the year ended December 31, 1996
    -       -       -       (12,260 )     (12,260 )
                                         
Balance, December 31, 1996
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 1997
    -       -       -       -       -  
                                         
Balance, December 31, 1997
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 1998
    -       -       -       -       -  
                                         
Balance, December 31, 1998
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 1999
    -       -       -       -          
                                         
Balance, December 31, 1999
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 2000
    -       -       -       -       -  
                                         
Balance, December 31, 2000
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 2001
    -       -       -       -       -  
                                         
Balance, December 31, 2001
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 2002
    -       -       -       -       -  
                                         
Balance, December 31, 2002
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 2003
    -       -       -       -       -  
                                         
Balance, December 31, 2003
    3,163,012       15,815       601,550       (617,365 )     -  
                                         
Net loss for the year ended December 31, 2004
    -       -       -       -       -  
                                         
Balance, December 31, 2004
    3,163,012     $ 15,815     $ 601,550     $ (617,365 )   $ -  
 
The accompanying notes are an integral part of these financial statements.
 
 
8

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
 
                     
Deficit
       
                     
Accumulated
   
Total
 
               
Additional
   
During the
   
Stockholders'
 
   
Common Stock
   
Paid-In
   
Development
    Equity/  
   
Shares
   
Amount
   
Capital
   
Stage
   
(Deficit)
 
                               
Balance, December 31, 2004
    3,163,012     $ 15,815     $ 601,550     $ (617,365 )   $ -  
                                         
Net loss for the year ended December 31, 2005
    -       -       -       (1,476 )     (1,476 )
                                         
Balance, December 31, 2005
    3,163,012       15,815       601,550       (618,841 )     (1,476 )
                                         
Net loss for the year ended December 31, 2006
    -       -       -       -       -  
                                         
Balance, December 31, 2006
    3,163,012       15,815       601,550       (618,841 )     (1,476 )
                                         
Common stock issued for services at $0.005 per share on May 9, 2007
    30,000,000       150,000       -       -       150,000  
                                         
Net loss for the year ended December 31, 2007
    -       -       -       (150,000 )     (150,000 )
                                         
Balance, December 31, 2007
    33,163,012       165,815       601,550       (768,841 )     (1,476 )
                                         
Net loss for the year ended December 31, 2008
    -       -       -       (1,605 )     (1,605 )
                                         
Balance, December 31, 2008
    33,163,012       165,815       601,550       (770,446 )     (3,081 )
                                         
Net loss for the year ended December 31, 2009
    -       -       -       (2,150 )     (2,150 )
                                         
Balance, December 31, 2009
    33,163,012       165,815       601,550       (772,596 )     (5,231 )
                                         
Common stock issued for patents at $0.25 per share
    5,000,000       25,000       1,225,000       -       1,250,000  
                                         
Common stock issued for services at $1.02 per commnon share
    5,205,000       26,025       5,283,075       -       5,309,100  
                                         
Contibuted capital
    -       -       13,284       -       13,284  
                                         
Net loss for the year ended December 31, 2010
    -       -               (7,026,356 )     (7,026,356 )
                                         
Balance, December 31, 2010
    43,368,012       216,840       7,122,909       (7,798,952 )     (459,203 )
                                         
Common stock issued for services at $1.05 per share (unaudited)
    145,000       725       151,525       -       152,250  
                                         
Common stock issued for services at $1.01 per share (unaudited)
    150,000       750       150,750       -       151,500  
                                         
Net income for the six months ended June 30, 2011 (unaudited)
    -       -       -       (94,156 )     (94,156 )
                                         
Balance, June 30, 2011 (unaudited)
    43,663,012     $ 218,315     $ 7,425,184     $ (7,893,108 )   $ (249,609 )
 
The accompanying notes are an integral part of these financial statements.

 
9

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
 
               
From Inception
 
               
on August 5,
 
   
For the Six Months Ended
   
1987 Through
 
   
June 30,
         
June 30,
 
   
2011
   
2010
   
2011
 
                   
OPERATING ACTIVITIES
                 
                   
Net Income (loss)
  $ (94,156 )   $ (6,564,215 )   $ (11,614,818 )
Adjustments to reconcile loss
                       
   to cash flows from operating activities
                       
Common stock issued for services
    303,750       5,309,100       9,487,020  
Common stock issued for research and
                       
   development costs
    -       1,250,000       1,250,000  
Loss from disposition of subsidiary
    -       -       564,300  
Expenses paid on behalf of the Company
    -       6,115       65,620  
Changes in operating assets and liabilities
                       
Accounts payable and accrued expenses
    4,815       (1,000 )     89,360  
Account payable - related parties
    (148,326 )     -       (57 )
Increase in accrued salaries
    102,032       -       326,690  
                         
Net Cash Used
                       
  in Operating Activities
    168,115       -       168,115  
                         
INVESTING ACTIVITIES
    -       -       -  
                         
FINANCING ACTIVITIES
    -       -       -  
                         
NET INCREASE IN CASH
    168,115       -       168,115  
                         
CASH AT BEGINNING OF PERIOD
    -       -       -  
                         
CASH AT END OF PERIOD
  $ 168,115     $ -     $ 168,115  
                         
SUPPLEMENTAL CASH FLOW INFORMATION:
                       
CASH PAID FOR:
                       
                         
Interest
  $ -     $ -     $ -  
Income taxes
  $ -     $ -     $ -  
 
The accompanying notes are an integral part of these financial statements.
 
 
10

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Condensed Notes to Financial Statements
June 30, 2011 and December 31, 2010
(Unaudited)
 
NOTE 1 - CONDENSED FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2011, and for all periods presented herein, have been made.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2010 audited financial statements.  The results of operations for the periods ended June 30, 2011 and 2010 are not necessarily indicative of the operating results for the full years.

NOTE 2 - GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet Established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates
 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Recent Accounting Pronouncements
 
The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position or statements.
 
 
11

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Condensed Notes to Financial Statements
June 30, 2011 and December 31, 2010
(Unaudited)

NOTE 4 - PAYABLE RELATED PARTY

Shareholders of the Company have advanced the corporation $250 as of June 30, 2011. The liability is non interest bearing, is unsecured and is due and payable upon demand.  In addition, the Company holds trade accounts payable to a related party in the amount of $1,425 at June 30, 2011.

NOTE 5 – SALE OF PATENTS

On January 31, 2011, Protect Pharmaceutical Corporation (the “Company”) finalized and closed a Patent Purchase Agreement (the “Agreement”) with Grünenthal GmbH (“Grünenthal”), a company organized under the laws of Germany.  Pursuant to the terms of the Agreement, the Company sold to Grünenthal all of the Company’s rights title and interest in and to certain inventions described and claimed in certain patents and patent applications (collectively “the Patents”), including without limitation, all extensions, continuations, provisions, derivatives and related applications thereof.  The Patents relate to Opioid Formulations and Methods of treating acute and chronic pain.

In exchange for the Patents, Grünenthal paid the Company $1,600,000. The Company originally acquired the subject Patents sold to Grünenthal, together with other inventions and patents, in February 2010 pursuant to a Patent Acquisition Agreement with Nectid, Inc. (“Nectid”), a privately held New Jersey company.  Under the terms of the Patent Acquisition Agreement and Addendum, the Company agreed that in the event the Company sold out right any of the patents acquired from Nectid without first undertaking any development of the patents, the proceeds from such sale would be divided, 60% to Nectid and 40% to the Company.  Accordingly, the Company realized 40%, or $640,000 from the proceeds of the sale and the balance will be paid to Nectid.  The Company retains all other inventions, patents and technologies initially acquired from Nectid.

The Company’s Chief Operating Officer and director is the inventor of all the Patents and is also a principal and former President of Nectid.  The director was not affiliated with the Company at the time the Patents were initially acquired from Nectid in February 2010.  Although Nectid was not a party to the Agreement with Grünenthal, it will benefit pursuant to the terms of its Patent Acquisition Agreement and Addendum with the Company.

NOTE 6 - STOCK PURCHASE AGREEMENT

On June 17, 2011, Protect Pharmaceutical Corporation finalized the execution of an Investment Agreement with Kodiak Capital Group, LLC, a Delaware limited liability company. The Agreement provides the Company with an equity line whereby the Company can sell to Kodiak, from time-to-time, shares of the Company’s common stock up to an aggregate value of $10 million dollars over a two-year period. As part of the agreement, the Company will file with the SEC a registration statement under the Securities Act of 1933 to register the common stock that may be sold to Kodiak pursuant to the Agreement.
 
Under the terms of the Agreement, The Company has the right to deliver to Kodiak a “put notice” stating the dollar amount of common shares we intend to sell to Kodiak, up to $250,000. The amount that the Company is entitled to sell to Kodiak under any single put notice will be equal to, at Kodiak's election, either: (i) 200% of the average daily volume (U.S. market only) of the common stock for the three trading days prior to the put notice, multiplied by the average of the three daily closing bid prices immediately preceding the put notice date; or (ii) up to $250,000.
 
 
12

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Condensed Notes to Financial Statements
June 30, 2011 and December 31, 2010
(Unaudited)

NOTE 6 - STOCK PURCHASE AGREEMENT (CONTINUED)

The Company cannot submit a new put notice until after the closing of the previous notice. The purchase price for the shares pursuant to the put notice will be equal to 92% of the lowest closing best bid price of the common stock during the five trading days after the put notice is delivered. The shares must be paid for and share certificates delivered within the “pricing period,” which is seven days from the date the put notice is delivered.

The Company has the option to specify a floor price for any put notice. In the event our shares fall below the floor price, the put will be temporarily suspended. The put will resume if, during the pricing period for that put, the common stock trades above the floor price.

The Company has agreed to pay to Kodiak an initial fee of 150,000 shares of common stock following execution of the Agreement. Also, the Company has agreed to pay Kodiak a commitment fee equal to 3% of the total amount of the commitment, payable as follows: (i) 25% on the first closing of a put notice; (ii) 25% on the second closing, (iii) 25% on the third closing; and (iv) 25% on the fourth closing or eight months from execution of the Agreement. The commitment fee is payable in Company common stock.

In connection with the Agreement, we entered into a Registration Rights Agreement with Kodiak, whereby the Company agreed to register with the SEC the shares to be issued pursuant to the Agreement. The Company must prepare and file within 90 days from the date of the Agreement, a registration statement under the Securities Act of 1933.

The Company intends to use the proceeds from the sale of common stock pursuant to the Agreement for general corporate and working capital purposes and acquisitions of assets, businesses or operations, or for other purposes that the board of directors deems to be in the best interest of the Company.

NOTE 7 – COMMON STOCK

On June 20, 2011, the Company received written consent from its majority stockholders to amend the Company’s articles of incorporation to change the authorized capitalization. The board of directors previously approved the resolution to increase the number of authorized common stock from 50,000,000 to 100,000,000 shares and to authorize 10,000,000 shares of “blank check” preferred shares.

The newly authorized preferred shares may be issued from time to time in one or more series in the discretion of the board of directors. The board will have the authority to establish the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations and restrictions thereof.

The Company will file with the SEC and information statement pursuant to Schedule 14C announcing the action to amend our articles of incorporation by written consent. We anticipate the information statement will be mailed to stockholders on or about July 7, 2011. The Company anticipates a certificate of amendment related to the change in capitalization will be filed with the State of Nevada with an effective date on or about July 29, 2011.

 
13

 
 
PROTECT PHARMACEUTICAL CORPORATION
(A Development Stage Company)
Condensed Notes to Financial Statements
June 30, 2011 and December 31, 2010
(Unaudited)

NOTE 7 – COMMON STOCK (Continued)

On April 11, 2011, the Board of Directors appointed a new Chief Financial Officer, effective immediately and for a term of twelve months.  The Company issued 60,000 shares of its common stock at $1.05 per share to the officer as compensation for his services.  On the same date, the Company also issued 85,000 shares of its common stock at $1.05 per share to two consultants as compensation for professional services.

On June 17, 2011, the Company issued 150,000 shares of common stock at $1.01 per share to a consultant for services rendered.

NOTE 8 – SUBSEQUENT EVENTS

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and determined that there are no additional material subsequent events to report.
 
 
14

 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q.

Forward-Looking and Cautionary Statements

This report contains forward-looking statements relating to future events or our future financial performance.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or similar terms, variations of such terms or the negative of such terms.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors included in our periodic reports with the SEC.  Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

We are considered a development stage company with limited capital and no current revenues.  We do not expect to realize any revenues until we are successful in developing, achieving approval and marketing one or more of our drug delivery technologies or solutions.  We anticipate that in the near term, ongoing expenses, including the costs associated with the preparation and filing of requisite reports with the SEC, will be paid for by advances from stockholders or from the private sale of securities, either debt or equity.  However, there is no assurance that we will be able to realize such funds on terms favorable to us, or at all.

Results of Operations

Three Months Ended June 30, 2011 and 2010

We did not realize revenues for the three month period ended June 30, 2011 and 2010.   During the three months ended June 30, 2011 (“second quarter”), we recorded total expenses of $522,416, consisting primarily of $200,295 in executive compensation and $286,360 in professional fees.  In the comparable period of 2010 we recorded expenses totaling $5,312,550, resulting primarily from executive compensation.  These factors resulted in a net loss for the second quarter of 2011 in the amount of $522,416 ($0.01 per share), compared to a net loss of $5,312,550 ($0.13 per share) for the three months ended June 30, 2010.

Six Months Ended June 30, 2011 and 2010

We did not realize revenues for the six month period ended June 30, 2011 and 2010.   During the six months ended June 30, 2011 we recorded total expenses of $734,156, consisting primarily of $269,199 in executive compensation, $286,360 in professional fees, and $123,192 in research and development.  In the comparable period of 2010 we recorded expenses totaling $6,564,215, resulting primarily from $5,156,100 in executive compensation and $1,250,000 in research and development.  The company also recognized a gain on sale of patents in the amount of $640,000 during the six months ended June 30, 2011.  These factors resulted in net loss for the six months ended June 30, 2011 in the amount of $94,156 ($0.00 per share), compared to a net loss of $6,564,215 ($0.17 per share) for the six months ended June 30, 2010.

Liquidity and Capital Resources

Total assets at June 30, 2011 were $168,115, compared to $-0- at December 31, 2010.  Total liabilities at June 30, 2011 were $417,724, consisting primarily of $326,690 in accrued officer salaries.  At December 31, 2010, total liabilities were $459,203, consisting primarily of $150,000 in accounts payable to a related party and $224,658 in accrued officer salaries.

Because currently we have no revenues, for the immediate future we will have to rely on our existing cash reserves to continue to implement our business activities.   Because we currently have no revenues, it is likely the only source of funding our operations will be through the private sale of our securities, either equity or debt.
 
 
15

 

On June 17, 2011, we entered into an Investment Agreement with Kodiak Capital Group, LLC that would provide the company an equity line.  Under the agreement, we can sell to Kodiak, from time-to-time, shares of our common stock up to an aggregate value of $10 million dollars over a two-year period.  To effect the equity line, we must deliver a put notice to Kodiak stating the dollar amount of shares we intend to sell, up to $250,000 per notice.
 
In order to activate the equity line, we must first file with the SEC a registration statement under the Securities Act of 1933 to register the common stock that may be sold to Kodiak pursuant to the Agreement.  The registration statement must be declared effective prior to the company being able to use the equity line.  There can be no assurance that our registration statement will become effective or that we will eventually realize funds from the equity line.  If the equity line is not successful and we are unable to raise the necessary funding from alternative sources, our research and development plans will be delayed indefinitely. There can be no assurance that we will be able to raise the funds necessary to carry out our business plan on terms favorable to the company, or at all.

At June 30, 2011, we had stockholders’ deficit of $249,609 compared to a stockholders’ deficit of $459,203 at December 31, 2010.  The increased deficit is primarily due to the net loss the company recognized for the six-month period ended June 30, 2011.

In the opinion of management, inflation has not and will not have a material effect on the ongoing operations of our company.

Plan of Operation

We are developing new generation drug delivery technologies that we believe will enable products with improved clinical benefits.  We believe our drugs will offer enhanced pain relief and reduced tolerance/physical dependence, reduced addiction potential and side effects compared to existing neuropathic and fibromyalgia drugs and opioid painkillers.  We intend to conduct our research and development through collaborative programs. We anticipate relying on arrangements with third party drug developers such as contract research organizations and clinical research sites for a significant portion of our product development efforts.

We expect to incur significant operating losses for the next several years and until we are able to formulate a commercially viable product.  We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will increase substantially in the foreseeable future as we:

● 
continue to undertake formulation of novel products and subsequent preclinical and clinical trials for our product candidates;

● 
seek regulatory approvals for our product candidates;

● 
develop, formulate, manufacture and commercialize our drugs;

● 
implement additional internal systems and develop new infrastructure;

● 
acquire or in-license additional products or technologies, or expand the use of our technology;

● 
maintain, defend and expand the scope of our intellectual property; and

● 
hire additional personnel.

Future product revenue will depend on our ability to receive regulatory approvals for, and successfully market, our product candidates. In the event that our development efforts result in regulatory approval and successful commercialization of our product candidates, we will generate revenue from direct sales of our products and/or, if we license our products to future collaborators, from the receipt of license fees and royalties from licensed products.
 
 
16

 

Management estimates that our research and development expenses for the next 12 months will be approximately $2.5 million, primarily for research and pilot studies.  We also estimate that other expenses, including personnel, general and administrative and miscellaneous expenses could be as much as $1.5 million during the same time period.  Because we currently have no revenues, most likely the only source of funding these expenses will be through he private sale of our securities, either equity or debt.   If we are unable to secure the necessary funding, our research and development plans will be delayed indefinitely.  There can be no assurance that we will be able to raise the funds necessary to carry out our business plan on terms favorable to the company, or at all.

 Net Operating Loss

We have accumulated approximately $471,011 of net operating loss carryforwards as of December 31, 2010.  This loss carry forward may be offset against taxable income and income taxes in future years and expires starting in the year 2011 through 2031.  The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards.  In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards that can be used.  No tax benefit has been reported in the financial statements for fiscal years ended December 31, 2010 and 2009 or the six months ended June 30, 2011 because it has been fully offset by a valuation reserve.  The use of future tax benefit is undeterminable because presently we have not started full operations.

Inflation

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future.  Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

Off-balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

This item is not required for a smaller reporting company.

Item 4(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.  Disclosure controls and procedures (as defined in Rules  13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.  Disclosure and control procedures are also designed to ensure that such information is accumulated and communicated to management, including the chief executive officer and principal accounting officer, to allow timely decisions regarding required disclosures.

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  In designing and evaluating the disclosure controls and procedures, management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their desired control objectives.  Additionally, in evaluating and implementing possible controls and procedures, management is required to apply its reasonable judgment.  Based on the evaluation described above, our management, including our principal executive officer and principal accounting officer, have concluded that, as of June 30, 2011, our disclosure controls and procedures were not effective.

Changes in Internal Control Over Financial Reporting.  Management has evaluated whether any change in our internal control over financial reporting occurred during the second quarter of fiscal 2011. Based on its evaluation, management, including the chief executive officer and principal accounting officer, has concluded that there has been no change in our internal control over financial reporting during the second quarter of fiscal 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 
17

 

PART  II   —   OTHER INFORMATION

Item 1. Legal Proceedings

There are no material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.

Item 1A. Risk Factors

This item is not required for a smaller reporting company.

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

This Item is not applicable.

Item 3. Defaults Upon Senior Securities

This Item is not applicable.

Item 4. (Removed and Reserved)

Item 5. Other Information

On April 11, 2011, our current director Ramesha Sesha assumed the additional positions of Chief Executive Officer, Chief Scientific Officer and Chairman of the Board.  Mr. Sesha retains his current offices as Chief Operating Officer and Secretary of our company.  Mr. Sesha remains as our sole director, but we are actively pursuing adding one or more directors to the Board.

Also on April 11, 2011, the Board of Directors appointed Keith Elison to become and serve as our Chief Financial Officer, effective immediately and for a term of twelve months.  We have issued 60,000 shares of our common stock to Mr. Elison as compensation for his services.
On August 2, 2011, Dipak Chattaraj was appointed to the company’s board of directors. Mr. Chattaraj was formerly the chairman of Ranbaxy USA, a global generic pharmaceutical company.  Mr. Chattaraj joined Ranbaxy in 1991and in 1996 he assumed responsibility for Ranbaxy’s U.S. operations.  He recently retired as Ranbaxy’s President, Corporate Development.  Mr. Chattaraj, who holds a Masters degree in Economics.

On June 20, 2011, stockholders owning a majority of our outstanding shares consented in writing in lieu of a stockholders’ meeting, to amend the company’s articles of incorporation to change the authorized capitalization.  The board of directors previously approved the resolution to increase the number of  authorized common stock from 50,000,000 to 100,000,000 shares and to authorize 10,000,000 shares of “blank check” preferred shares.  The amendment became effective on July 29, 2011.

Item 6. Exhibits

Exhibit 31.1
Certification of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Exhibit 31.2
Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Exhibit 32.1
Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
Exhibit 32.2
Certification of Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
18

 
 
SIGNATURES

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

 
PROTECT PHARMACEUTICAL CORPORATION
     
Date:  August 12, 2011
By:
/S/ Ramesha Sesha
   

Ramesha Sesha
   
President, C.E.O. and Director
     
Date:  August 12, 2011
By:
/S/ Keith Elison
   

Keith Elison
   
C.F.O., Chief Accounting Officer

 
19