Edgar Filing: ProtoKinetix, Inc.

Form 10-QSB

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission File Number: 0-32917

PROTOKINETIX, INC.

Nevada	94-3355026
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Suite 1500-885 West Georgia Street Vancouver, British Columbia Canada V6C3E ________________________________________________________________________ (Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (604) 687-9887

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: $.0000053 par value common stock

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 a 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 ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes ___ No ____

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

42,690,169 common shares outstanding, $0.0000053 par value, at August 10, 2006.

Transitional Small Business Disclosure Format: Yes __ No X

PART I

ITEM 1. FINANCIAL STATEMENTS

Our Financial Statements and explanatory notes are attached on the “F” pages at the end of this Report.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The information in this Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business plans, and expectations. These risks and uncertainties could cause actual results to differ materially from those expressed in forward-looking statements. We base these forward-looking statements on our expectations and projections about future events, which we derive from the information currently available to us. Such forward-looking statements relate to future events or our future performance. Forward-looking statements are only predictions. The forward-looking events discussed in this Quarterly Report, the documents to which we refer you, and other statements made from time to time by us or our representatives, may not occur, and actual events and results may differ materially and are subject to risks, uncertainties, and assumptions about us. For these statements, we claim the protection of the “bespeaks caution” doctrine. The forward-looking statements speak only as of the date hereof, and we expressly disclaim any obligation to publicly release the results of any revisions to these forward-looking statements to reflect events or circumstances after the date of this filing.

Critical Accounting Policies

Our critical and significant accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Financial Statements. These policies have been consistently applied in all material respects and address such matters as revenue recognition and depreciation methods. The preparation of the financial statements in conformity with generally accepted accounting principles in the United States 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 reported period. Actual results could differ from those estimates. The accounting treatment of a particular transaction is specifically dictated by accounting principles, generally accepted in the United States of America, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any viable alternative would not produce a materially different result. See our audited financial statements and notes thereto which contain accounting policies and other disclosures required by accounting principles, generally accepted in the United States of America.

Overview

We are a biotechnical company headquartered in Vancouver, British Columbia that owns the world-wide rights to a family of synthetic anti-freeze glycoproteins (trademarked by us as AAGP™). We are dedicated to the commercial development of AAGP™ for use in human and veterinary medicine, food additives and supplements, and the biotechnology and cosmetic industry. We are making rapid and meaningful progress in this domain by coordinating a team of world recognized intellectual talent in a networked environment. This team has been able to use previously published research on native antifreeze proteins and antifreeze glycoproteins as a guide to the expansion and development of markets for this valuable family of molecules.

The ProtoKinetix business plan is based primarily on the furtherance of certain intellectual property rights obtained by way of "sub-licenses" of technology from other companies. At present, although we have engaged the prestigious patent law firm of Cabinet-Moutard of Versaille, France, to file a number of international patent applications (consistent with our agreements with the licensors of various technologies we license), we have no finished commercial product or products, and have received no final patents awards or FDA approvals for any product or diagnostic procedures. We are focused on the research and development of one primary compound known as AFGP, which we have filed a trademark application for.

Employees

We currently have no full time employees. We operate with a skeletal management team headed by John Todd, M.D. In addition to Dr. Todd, we receive advice and counsel from our Scientific Advisory Board.

Our Main Project

We are currently developing and testing synthetic antifreeze glycoproteins (AFGP). ProtoKinetix has entered into agreements to acquire the exclusive right to develop products derived from patent pending technologies related to synthetic AFGPs. Our intellectual property rights were developed by Dr. Jean-Charles Quirion.

Background on our AFGP Project

One of many accomplishments from pioneering research of the U.S. Antarctic Program was the discovery, in the early sixties, that fish living year-long in subzero temperature are extremely resistant to freezing. The substances that prevent these fish from freezing were isolated, characterized and designated as antifreeze glycoproteins or AFGP. Over the years, various kinds of AFGP were isolated from many species of fishes, and in some amphibians, plants and insects. All of the AFGPs share a common characteristic that prevents ice crystals from growing and connecting to each other.

A review of the scientific literature will confirm that there has been a great deal of interest around the world in these natural antifreeze glycoproteins which are able to protect a great many creatures which are subjected to freezing temperatures. A further review will also confirm that the natural antifreeze is able to preserve mammalian cells tissue and organs. The metabolic rate in living cells is reduced as the temperature is lowered. Keeping cells and tissue at a low temperature enables their preservation for a longer time than cells can be preserved for at a higher temperature. Yet, when cells are exposed to sub zero temperatures, they are destroyed by the formation of ice crystals which disrupts the cell membrane.

Scientists have conducted many experiments in which they extracted naturally occurring AFGP from a variety of fish and then used these naturally occurring antifreeze glycoproteins to reduce the temperature at which ice crystals are formed. It has been determined in experiments by many scientists that mammalian cells in a solution containing natural AFGP could be successfully preserved at temperatures several degrees below zero Celsius. At this temperature the metabolic rate of the cells is very low, and these cells can be preserved for a longer period of time at sub zero temperatures as long as the cells are not destroyed by the formation of ice crystals. However, until today, applications of AFGP were limited since researchers were unable to produce sufficient quantities or stable enough copies of these antifreeze glycoproteins for commercial applications, and the use of naturally occurring compounds extracted from fish is too labor and cost-intensive to be practical.

Researchers, headed by Dr. Jean Charles Quirion in Rouen, France have developed an innovative and patented chemical synthesis protocol for manufacturing and stabilizing AFGP molecules using a chemical bond that protects these compounds from degradation by naturally occurring enzymes. Dr. Quirion and his team have produced several synthetic antifreeze glycoproteins and have the ability to produce many more different types of these molecules. The synthetic AFGP which has been made has been tested and we were able to show:

·	The molecules are stable down to a pH of 1.8

·	There is no toxicity demonstrated in 2 separate trials

·	The molecules tested have shown that they reduce the freezing point to minus 18 degrees Celcius

·	We have been able to preserve red cells at temperatures below zero Celcius using 1 mg per ml of the synthetic antifreeze

Current research is being conducted to confirm the efficacy of these chemically synthesized new molecules and applications are being sought for the use of the synthetic AFGP to prolong the shelf-life of human blood and blood products as well as for other cell types, live vaccines, tissue and organs. The market for the preservation of blood and blood products is very large, as is the market for the preservation of human and animal cells for research purposes. The subzero cryopreservation of organs using our synthetic AFGP will be a major milestone in transplantation medicine

ProtoKinetix will continue to conduct research on the synthetic AFGP which are being manufactured. This work will be conducted by government agencies as well as by contract with private laboratory facilities.

Intellectual Property

As of the date of this Report, although our development agents, including the parties we have licensed AFGP technologies from, have applied to receive patents for technologies ProtoKinetix has licensed and continues to primarily base it's research efforts on, no patents have issued by a governmental or quasi-governmental agency. The references of applications that we have filed to date are PCT/IB2005/003940, filed on December 2, 2005 under the priority of the French patent application FR 0412782 which was filed on December 2, 2004.

Subject to our available financial resources, our intellectual property strategy is: (1) to pursue licenses, trade secrets, and know-how within our primary research areas, and (2) to develop and acquire proprietary positions to reagents and new platforms for the development of products related to these technologies.

Trade Secrets and Know-How

We believe that even if our intellectual property position is ultimately diminished as a result of our development agents and licensors to receive patent protection for the licenses ProtoKinetix has contracted to access, we have developed a substantial body of trade secrets and know-how relating to the development of AAGP™, including but not limited to the optimization of materials for efforts, and how to maximize sensitivity, speed-to-result, specificity, stability and reproducibility.

Competition

The markets that we are attempting to enter are multi-billion dollar international industries. They are intensely competitive. Many of our competitors (from every perspective) are substantially larger and have greater financial, research, manufacturing, and marketing resources.

Industry competition in general is based on the following:

·	Scientific and technological capability;

·	Proprietary know-how;

·	The ability to develop and market products and processes;

·	The ability to obtain FDA or other required regulatory approvals;

·	The ability to manufacture products that meet applicable FDA requirements, (i.e. FDA’s Quality System Regulations) see Governmental Regulation section;

·	Access to adequate capital;

·	The ability to attract and retain qualified personnel; and

·	The availability of patent protection.

We believe our scientific and technological capabilities are significant. Some of the results of our research are available at our website located at www.protokinetix.com.

Our ability to develop our research is in large measure dependent on our having additional resources and/or collaborative relationships, particularly where we can have our product development efforts funded on a project or milestone basis. We believe that our know-how with our AFGP project, in spite of not yet receiving any patent protected rights, has been instrumental in our obtaining the collaborations we have developed.

Although there is no such immediate need to make any regulatory filing in the United States or abroad, you should be aware that we have limited experience with regard to obtaining FDA or other required regulatory approvals, and no experience with obtaining pre-marketing approval of a biologic product. For this reason, should our research efforts continue to show promise, we will likely need to hire consultants to assist us with such governmental regulations.

Our access to capital is more challenging, relative to most of our competitors. This is a competitive disadvantage. We believe, however, that our access to capital may increase as we get closer to the development of a commercially viable product.

To date, we believe our research has enabled us to attract and retain qualified consultants. Because of the greater financial resources of many of our competitors, we may not be able to complete effectively for the same individuals to the extent that a competitor uses its substantial resources to attract any such individuals.

As is discussed above, with respect to the availability of patent protection, we do not have our own portfolio of patents or the financial resources to develop and/or acquire a portfolio of patents similar to those of our larger competitors. We have been able to obtain access to patent-pending technology by entering into licensing arrangements. However, there can be no certainty that any of the patent-pending technologies we have licensed will ever receive final approval by any patent office.

Plan of Operation

Our current operations are centered around our relationships with various research and development consultants who are conducting research on our behalf at discrete and established laboratories in various parts of the world. We intend to continue these efforts for the next 12 months and believe, that due to our relatively minimal cash obligations, that we can satisfy our cash requirements during this period. We intend to help meet our corporate obligations by selling our common stock. However our common stock is at a low price and is not actively traded.

Sales and Marketing

We are not currently selling or marketing any products.

Expenses

Expenses for the period ending June 30, 2006 arose primarily from professional and consulting fees. We incurred professional fees relating to costs associated with our being a reporting company under the Securities Exchange Act of 1934, as amended. We also incurred consulting fees which contributed to a net loss of $1,589,313 during the three month period ended June 30, 2006.

Liquidity and Capital Resources

At June 30, 2006, we had $342,899 in cash and $377,248 in total current assets. As of the date of this report, we do not believe that we require additional capital investments or borrowed funds to meet cash flow projections and carry forward our business objectives. In the event that we need to raise additional capital, there can be no assurance that we will be able to raise capital from outside sources in sufficient amounts to fund our new business.

The failure to secure adequate outside funding would have an adverse affect on our plan of operation and results therefrom and a corresponding negative impact on shareholder liquidity.

Inflation

Although management expects that our operations will be influenced by general economic conditions, we do not believe that inflation had a material effect on our results of operations for the period ending June 30, 2006.

Going Concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate our continuation as a going concern. The history of losses and our inability to make a profit from selling a good or service has raised substantial doubt about our ability to continue as a going concern.

Results of Operations for the Period Ending June 30, 2006

We had $0 in net revenues.

We had a $1,589,313 loss from continuing operations for the Period Ending June 30, 2006.

Operating expenses were $1,589,313 for the period ending June 30, 2006. These expenses were primarily incurred for professional fees, consulting services related to the operations of the Company's business, specifically, research and development related expenses, and other general and administrative expenses.

ITEM 3. CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”) we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2006, being the date of our most recently completed fiscal quarter. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to them to allow timely decisions regarding required disclosure.

During our most recently completed quarter ended June 30, 2006, there were no changes in our internal control over financial reporting that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are not party to any legal proceedings and to our knowledge, no such proceedings are threatened or contemplated against us.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We did not complete any sales of securities without registration under the Securities Act of 1933 during our first quarter ended June 30, 2006.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to our security holders for a vote during our first quarter ended June 30, 2006.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

Ex. #		Description

3(i).1		Certificate of Incorporation filed as an exhibit to the Company's registration statement on Form 10SB/A filed on July 24, 2001 and incorporated herein by reference.

3(ii).1		By-Laws filed as an exhibit to the Company's registration statement on Form 10SB/A filed on July 24, 2001 and incorporated herein by reference.

14.1		ProtoKinetix, Inc. Code of Ethics file as an exhibit to our annual report on Form 10-KSB filed on April 13, 2006.

31.1		Rule 13a-12(a)/15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 302 the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Signatures

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Protokinetix, Inc.

/s/ Dr. John Todd

____________________________

By: Dr. John Todd

Its: President, CEO and CFO

In accordance with the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/Dr. John Todd Dr. John Todd	Chief Executive Officer, President, Chief Financial Officer and Chairman Of The Board	August 10, 2006

PROTOKINETIX, INC.
		Page

Balance Sheet at June 30, 2006		F-1

Statements of Operations for the three and six months ended June 30, 2006 and 2005 and for the Period from December 23, 1999 (Date of Inception) to June 30, 2006		F-2

Statements of Stockholder’s Equity for the Six Months Ended June 30, 2006 and For the Period From December 23, 1999 (Date of Inception) to June 30, 2006		F-3

Statements of Cash Flows for the six months ended June 30, 2006 and 2005 and for the Period from December 23, 1999 (Date of Inception) to June 30, 2006		F-4

Notes to Financial Statements		F-5

PROTOKINETIX, INC.
(A Development Stage Company)

BALANCE SHEET
June 30, 2006
(unaudited)

ASSETS

Current Asset
	Cash			$ 342,899
	Accounts receivable			34,149
	Prepaid expenses			200

		Total current assets		377,248

Computer equipment, net				1,952
Intangible Assets				3,110,000
				$ 3,489,200

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

	Due to outside management consultants			$ 306,892
	Accounts payable			95,453

			Total current liabilities	402,345

Long-term Debt				-
			Total liabilities	402,345


Stockholders' Equity

	Common stock, $.0000053 par value; 100,000,000 common shares authorized; 42,490,169 shares issued
	and outstanding			227
	Common stock issuable: 1,650,000 shares			11
	Additional paid-in capital			16,670,106
	Deficit accumulated during the development stage			(13,583,489)
				3,086,855
				$ 3,489,200

See notes to Financial Statements

PROTOKINETIX, INCORPORATED
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2006 and 2005, and for the
Period from December 23, 1999 (Date of Inception) to June 30, 2006
(Unaudited)

					Three Months Ended June 30, 2006	Three Months Ended June 30, 2005	Six Months Ended June 30, 2006	Six Months Ended June 30, 2005	Cumulative During the Development Stage
Revenues					$ -	$ -	$ -	$ -	$ 2,000
General and administrative
	expenses
	Professional fees				102,504	95,496	204,529	171,186	2,631,222
	Consulting fees				1,413,756	3,381,500	1,445,256	3,392,976	9,482,935
	Research and development				27,250	24,466	64,313	167,268	684,495
	General and Administrative				36,400	34,514	78,392	86,925	425,453
	Impairment Loss				-	-	-	-	269,756
	Interest				9,403	2,533	11,869	8,261	48,162

					1,589,313	3,538,509	1,804,359	3,826,616	13,542,023
		Loss from continuing
			operations		(1,589,313)	(3,538,509)	(1,804,359)	(3,826,616)	(13,540,023)
Discontinued Operations
Loss from operations of the
	discontinued segment					-		-	(43,466)
				Net loss	$ (1,589,313)	$ (3,538,509)	$ (1,804,359)	$ (3,826,616)	$ (13,583,489)

Net Loss per Share (basic and fully diluted)					$ (0.04)	$ (0.10)	$ (0.04)	$ (0.11)
	Discontinued operations				0.00	(0.00)	0.00	(0.00)
	Net loss per common shares				$ (0.04)	$ (0.10)	$ (0.04)	$ (0.11)
Weighted average shares outstanding					42,274,240	38,260,911	42,154,073	37,113,014

PROTOKINETIX, INCORPORATED
(A Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2006, and for the Period From
December 23, 1999 (Date of Inception) to June 30, 2006
(Unaudited)
							Deficit	Deficit
							Accumulated	Accumulated
				Common Stock		Additional	Stock	During the
		Common Stock		Issuable		Paid-in	Subscriptions	Development
		Shares	Amount	Shares	Amount	Capital	Receivable	Stage	Total
Issuance of common stock, December 1999		9,375,000	$50	-	$ -	$ 4,950	$ -	$ -	$5,000
Net loss for period								(35)	(35)
Balance, December 31, 2000		9,375,000	50	-	-	4,950		(35)	4,965
Issuance of common stock, April 2001		5,718,750	30			15,220			15,250
Net loss for year								(16,902)	(16,902)
Balance, December 31, 2001		15,093,750	80	-	-	20,170		(16,937)	3,313
Net loss for year								(14,878)	(14,878)
Balance, December 31, 2002		15,093,750	80	-	-	20,170		(31,815)	(11,565)
Issuance of common stock for services:
	July 2003	2,125,000	11			424,989			425,000
	August 2003	300,000	2			14,998			15,000
	September 2003	1,000,000	5			49,995			50,000
	October 2003	1,550,000	8			619,992			620,000
Issuance of common stock for licensing rights		14,000,000	74			2,099,926			2,100,000
Common stock issuable for licensing rights				2,000,000	11	299,989			300,000
Shares cancelled on September 30, 2003		(9,325,000)	(49)			49			-
Net loss for year								(1,262,745)	(1,262,745)
Balance, December 31, 2003		24,743,750	131	2,000,000	11	3,530,108	-	(1,294,560)	2,235,690
Issuance of common stock for services:
	March 2004	1,652,300	9			991,371			991,380
	May 2004	500,000	3			514,997			515,000
	July 2004	159,756	1			119,694			119,695
	August 2004	100,000	1			70,999			71,000
	October 2004	732,400	4			479,996			480,000
	November 2004	650,000	4			454,996			455,000
	December 2004	255,000	1			164,425			164,426
Common stock issuable for AFGP license				1,000,000	5	709,995			710,000
Common stock issuable for Recaf License				400,000	2	223,998			224,000
Warrants granted (for 3,450,000 shares) for services,
	October 2004					1,716,253			1,716,253
Options granted for services, October 2004						212,734			212,734
Stock subscriptions receivable				1,800,000	10	329,990	(330,000)		-
Warrants exercised:									-
	August 2004			50,000		15,000			15,000
	October 2004			600,000	3	134,997			135,000
	December 2004			1,000,000	5	224,995			225,000
Options exercised, December 2004				100,000	1	29,999			30,000
Net loss for period								(5,388,274)	(5,388,274)
Balance, December 31, 2004		28,793,206	$154	6,950,000	$ 37	$ 9,924,547	$ (330,000)	$(6,682,834)	$2,911,904



Issuance of stock subscriptions receivable							$240,000		240,000
Issuance of common stock for licensing rights		2,000,000	11	(2,000,000)	(11)				-
Issuance of stock for warrants exercised		2,050,000	10	(2,050,000)	(10)				-
Options exercised,
	February 2005			35,000	1	10,499			10,500
	May 2005	200,000	1			59,999			60,000
Note payable conversion, February 2005				285,832	1	85,749			85,750
Issuance of common stock for Note payable conversion
	April 2005	285,832	1	(285,832)	(1)				-
	May 2005	353,090	2			105,925			105,927
Issuance of common stock for AFGP license		1,000,000	5	(1,000,000)	(5)				-
Issuance of common stock for stock subscriptions received		1,400,000	6	(1,400,000)	(6)		90,000		90,000
Issuance of stock for options exercised		135,000	2	(135,000)	(2)				-
Issuance of common stock for services:
	April 2005	30,000	1			14,999			15,000
	May 2005	3,075,000	15			3,320,985			3,321,000
	June 2005	50,000	1			50,499			50,500
	August 2005	(250,000)	(1)			(257,499)			(257,500)
	August 2005	111,111	1	(92,593)	(1)	15,000			15,000
	October 2005	36,233	1	(36,233)	(1)	-			-
	November 2005
	November 2005	311,725	2	(245,000)	(1)	36,249			36,250
	December 2005	1,220,000	8			756,392			756,400


Common stock issuable for services rendered
	June 2005			200,000	1	149,999			150,000
	August 2005			36,233	1	21,739			21,740
	September 2005			125,000	1	74,999			75,000
	September 2005(Proteocell)			100,000	1	57,999			58,000
	December 2005			120,968	1	74,999			75,000
Net loss for the year								(5,096,296)	(5,096,296)
Balance, December 31, 2005		40,801,197	$220	608,375	$ 6	$ 14,503,079	$-	$(11,779,130)	$2,724,175



Common stock issuable:
	February 2006 private placement			900,000	2	352,145			352,147
	February/March 2006 services			20,000	1	10,499			10,500
Warrants granted from private placement (450,000)						97,853			97,853

Issuance of common stock for services:
	March 2006	166,359	1	(108,375)	(1)	36,750			36,750
	May 2006	1,266,278	7	(70,000)	(1)	792,750			792,756
	June 2006	27,056		1,200,000	6	718,244			718,250

Cancellation of shares issued in prior year		(1,200,000)	(6)			6			-
Issuance of Private Placement stock (June 2006)		900,000	2	(900,000)	(2)				-
Issuance of common stock for Note payable conversion
	May 2006	529,279	3			158,780			158,783



Net loss for the period								(1,804,359)	(1,804,359)

Balance, June 30, 2006		42,490,169	227	1,650,000	11	16,670,106	-	(13,583,489)	3,086,855

PROTOKINETIX, INCORPORATED
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005, and for the Period From
December 23, 1999 (Date of Inception) to June 30, 2006
(Unaudited)
				Six Months Ended June 30, 2006	Six Months Ended June 30, 2005	Cumulative During the Development Stage
Cash Flows from Operating Activities
	Net loss for period			$ (1,804,359)	$ (3,826,616)	$ (13,583,489)
	Adjustments to reconcile net loss to net cash
		provided by (used in) operating activities
		Depreciation expense		509	$ 252	1,436
		Write-off of Recaf license				269,756
	Issuance of common stock for services
		and expenses		1,558,256	3,536,500	9,781,147
	Warrants issued for consulting services			-	-	1,716,253
	Stock options issued for consulting services			-	-	212,734
	Changes in operating assets and liabilities
		Accounts receivable		(27,610)		(34,149)
		Prepaid expenses		6,000		(200)
		Due to outside management consultants		-	-	306,892
		Accounts payable		64,366	18,680	95,453
		Accrued interest payable		(36,294)	8,261	-0-
			Net cash flows used in
			operating activities	(203,672)	(262,923)	(1,198,707)
Cash Flows from Investing Activities
	Acquisition of intangible assets				-	(45,756)
	Purchase of computer equipment			-	-	(3,388)
			Net cash flows used in investing
			activities	-	-	(49,144)
Cash Flows from Financing Activities
	Warrants exercised				240,000	705,000
	Stock options exercised				70,500	100,500
	Issuance of common stock and warrants for cash			450,000	-0-	470,250
	Loan proceeds				-0-	315,000

			Net cash flows provided by (used in)
			financing activities	450,000	310,500	1,590,750
			Net change in cash	246,328	47,577	342,899
Cash, beginning of period				96,571	283,556
Cash, end of period				$ 342,899	$ 331,133	$ 342,899
Cash paid for interest				$ 12,703	$ -	$ 12,703
Cash paid for income taxes				$ -	$ -	$ -

Supplementary information - Non-cash Transactions:
	Common stock issuable for acquisition of intangible assets			-	-	934,000
	Stock subscriptions received				-	90,000
	Note payable and interest converted to common stock			158,783		350,460

NOTES TO FINANCIAL STATEMENTS

Note 1. Organization and Significant Accounting Policies

Organization

ProtoKinetix, Incorporated (the "Company"), a development stage company, was incorporated under the laws of the State of Nevada on December 23, 1999. The Company is a medical research company whose mission is the advancement of human health care.

In 2003, the Company entered into an assignment of license agreement (the "Agreement") with BioKinetix, Inc., an Alberta, Canada, corporation. The Agreement provided the Company with an exclusive assignment of all of the rights (the "Rights") that BioKinetix possessed relating to two proprietary technologies that are being developed for the creation and commercialization of "superantibodies," an enhancement of antibody technology that makes ordinary antibodies much more lethal. In consideration, the Company's Board of Directors authorized the Company to issue 16,000,000 shares of its common stock to the shareholders of BioKinetix.

The Company is also currently researching the benefits and feasibility of proprietary synthesized Antifreeze Glycoproteins ("AFGP"). In preliminary studies, AFGP has demonstrated an ability to protect and preserve human cells at temperatures below freezing.

Interim Period Financial Statements

The interim period financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. The interim period financial statements should be read together with the audited financial statements and accompanying notes included in the Company's audited financial statements for the years ended December 31, 2005 and 2004. In the opinion of the Company, the unaudited financial statements contained herein contain all adjustments (consisting of a normal recurring nature) necessary to present a fair statement of the results of the interim periods presented.

New Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.” This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” FIN No. 48 prescribes a threshold condition that a tax position must meet for any of the benefit of an uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding derecognition, classification and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect that this Interpretation will have a material impact on their financial position, results of operations or cash flows.

Going Concern

As shown in the financial statements, the Company has not developed a commercially viable product, has not generated any revenues to date and has incurred losses since inception, resulting in a net accumulated deficit at June 30, 2006. These factors raise substantial doubt about the Company's ability to continue as a going concern.

The Company needs additional working capital to continue its medical research or to be successful in any future business activities and continue to pay its liabilities. Therefore, continuation of the Company as a going concern is dependent upon obtaining the additional working capital necessary to accomplish its objective. Management is presently engaged in seeking additional working capital.

The accompanying financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company fail in any of the above objectives and is unable to operate for the coming year.

Intangible Assets

The intangible assets consist of license rights to proprietary medical research technologies. The cost of the license rights is stated at cost or the value of the shares issued by the Company to acquire the license rights. The cost is not amortized because the licenses have indefinite lives. At June 30, 2006, management has determined that there is no impairment in the license rights that should be recorded against the carrying amount of the assets.

Earnings per Share

Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding in the period. The Company's stock split 1:75 on August 24, 2001. In April 2002, the Board of Directors approved a 2.5 for 1 split of the Company's stock. The accompanying financial statements are presented on a post-split basis. The loss per share for the periods ended June 30, 2006 and 2005, have been adjusted accordingly. Diluted earnings per share takes into consideration common shares of outstanding (computed under basic earnings per share) and potentially dilutive securities. The effect of debt convertible into common shares was not included in the computation of diluted earnings per share for all periods presented because it was anti-dilutive due to the Company's losses. Common stock issuable is considered outstanding as of the original approval date for purposes of earnings per share computations.

Stock Based Compensation

Prior to January 1, 2006, the Company accounted for stock-based awards under the intrinsic value method, which followed the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations. The intrinsic value method of accounting resulted in compensation expense for stock options to the extent that the exercise prices were set below the fair market price of the Company’s stock at the date of grant.

As of January 1, 2006, the Company adopted SFAS No. 123(R) using the modified prospective method, which requires measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation model, which is consistent with the Company’s valuation techniques previously utilized for options in footnote disclosures required under SFAS No. 123, “Accounting for Stock Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock Based Compensation Transition and Disclosure”.

Since the Company did not issue stock options to employees during the six months ended June 30, 2006 or 2005, there is no effect on net loss or earnings per share had the Company applied the fair value recognition provisions of SFAS No. 123(R) to stock-based employee compensation. When the Company issues shares of common stock to employees and others, the shares of common stock are valued based on the market price at the date the shares of common stock are approved for issuance.

Note 2. Convertible Note Payable

On February 1, 2004, the Company executed a subscription agreement under which the Company issued to a corporation an 8% secured convertible note in exchange for $315,000. The note is due February 1, 2006, and is convertible into shares of the Company's common stock at the lower of $0.30 per share or 70% of the average of the three lowest trading prices for the 30 days prior to the conversion date. No beneficial conversion feature was applicable to this convertible note.

In March 2005, 285,832 common shares, in May 2005, 353,090 common shares and in May 2006, 529,279 common shares were issued in lieu of payment on this note and interest. The May 2006 payment of common stock repaid the balance owing on the note and all related interest.

Note 3. Discontinued Operations

In 2003, the Company signed the licensing agreement described in Note 1. This agreement changed the Company's business plan to that of a medical research company. Accordingly, the operating results related to the Company's research prior to the licensing agreement have been presented as discontinued operations in these financial statements for all periods presented.