Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Oct. 30, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | PROTEO INC | |
Entity Central Index Key | 1,063,104 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 23,879,350 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 438,187 | $ 781,988 |
Research supplies | 254,148 | 282,076 |
Prepaid expenses and other current assets | 340,762 | 31,805 |
Current Assets | 1,033,097 | 1,095,869 |
PROPERTY AND EQUIPMENT, NET | 9,241 | 13,608 |
Patents | 0 | 8,406 |
Total Assets | 1,042,338 | 1,117,883 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 87,884 | 97,385 |
Deferred revenues | 527,421 | 0 |
Current Liabilities | 615,305 | 97,385 |
LONG TERM LIABILITIES | ||
Deferred revenues | 0 | 567,130 |
Accrued licensing fees | 640,908 | 692,835 |
Noncurrent Liabilities | $ 640,908 | $ 1,259,965 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS' DEFICIT | ||
Non-voting preferred stock, par value $0.001 per share; 10,000,000 shares authorized; 723,590 shares issued and outstanding | $ 724 | $ 724 |
Common stock, par value $0.001 per share; 300,000,000 shares authorized; 23,879,350 shares issued and outstanding | 23,880 | 23,880 |
Additional paid-in capital | 8,988,125 | 8,988,125 |
Accumulated other comprehensive income | 26,072 | 105,585 |
Accumulated deficit | (9,252,676) | (9,357,781) |
Total Stockholders' Deficit | (213,875) | (239,467) |
Total Liabilities and Stockholders' Deficit | $ 1,042,338 | $ 1,117,883 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Non-voting preferred stock par value | $ 0.001 | $ 0.001 |
Non-voting preferred stock shares authorized | 10,000,000 | 10,000,000 |
Non-voting preferred stock shares issued | 723,590 | 723,590 |
Non-voting preferred stock shares outstanding | 723,590 | 723,590 |
Common stock par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 23,879,350 | 23,879,350 |
Common stock, shares outstanding | 23,879,350 | 23,879,350 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Income Statement [Abstract] | ||||
REVENUES | $ 158,630 | $ 174,833 | $ 465,911 | $ 249,609 |
EXPENSES | ||||
General and administrative | 36,304 | 45,643 | 126,788 | 131,713 |
Research and development | 122,345 | 126,582 | 341,250 | 342,972 |
Costs and Expenses | 158,649 | 172,225 | 468,038 | 474,685 |
INCOME (LOSS) FROM OPERATIONS | (19) | 2,608 | (2,127) | (225,076) |
INTEREST AND OTHER INCOME (EXPENSE) , NET | (11,495) | 97,711 | 107,231 | 112,868 |
NET INCOME (LOSS) | $ (11,514) | $ 100,319 | $ 105,104 | $ (112,208) |
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE | $ 0 | $ 0 | $ 0 | $ 0 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 23,879,350 | 23,879,350 | 23,879,350 | 23,879,350 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
NET INCOME (LOSS) | $ (11,514) | $ 100,319 | $ 105,104 | $ (112,208) |
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS | 14,098 | (81,760) | (79,513) | (91,985) |
COMPREHENSIVE INCOME (LOSS) | $ 2,584 | $ 18,559 | $ 25,591 | $ (204,193) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income (loss) | $ 105,104 | $ (112,208) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||
Depreciation | 3,977 | 7,768 |
Foreign currency transaction gain | (90,927) | (105,652) |
Changes in operating assets and liabilities: | ||
Research supplies | 6,736 | 5,957 |
Prepaid expenses and other current assets | (309,016) | 9,818 |
Accounts payable and accrued liabilities | 257 | (65,752) |
Deferred revenue | 2,774 | 396,460 |
NET CASH USED IN (PROVIDED BY) OPERATING ACTIVITIES | (281,095) | 136,391 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisition of property and equipment | (663) | (4,742) |
Patent development costs | (9,380) | |
NET CASH USED IN INVESTING ACTIVITIES | (663) | (14,122) |
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (62,043) | (44,879) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (343,801) | 77,390 |
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 781,988 | 456,310 |
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ 438,187 | $ 533,700 |
1. NATURE OF BUSINESS AND BASIS
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF BUSINESS AND BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying condensed consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements, and the accompanying interim condensed consolidated financial statements as of September 30, 2015 and for the three-month and nine-month periods ended September 30, 2015 and 2014, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary to present fairly the financial condition, results of operations and cash flows of Proteo, Inc. and its wholly owned subsidiary (hereinafter collectively referred to as the "Company") as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Operating results for the three-month and nine-month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 30, 2015. NATURE OF BUSINESS The Company is a clinical stage drug development company focusing on the development of anti-inflammatory treatments for rare diseases with significant unmet needs. The Company's management deems its lead drug candidate Tiprelestat (also known as Elafin) for intravenous use to be one of the most prospective treatments of acute postoperative inflammatory complications, in particular after esophageal cancer surgery. Elafin appears to be also a promising compound for the treatment of pulmonary arterial hypertension and for preventing complications of organ transplant. The clinical development is currently focused in Europe with the intention to receive the primary approval in Europe. The products that the Company is developing, to the extent they are considered drugs or biologics, are governed by the Federal Food, Drug and Cosmetics Act (in the United States) and the regulations of State and various foreign government agencies. The Company's proposed pharmaceutical products to be used by humans are subject to certain clearance procedures administered by the above regulatory agencies. Since its inception, the Company has primarily been engaged in the research and development of its proprietary product Elafin. The Company intends to seek the various governmental regulatory approvals for the marketing of Elafin. Management believes that none of its planned products will produce sufficient revenues in the near future. As a result, the Company intends to generate revenue by out-licensing and marketing activities. There are no assurances, however, that the Company will be able to develop such products, or if produced, that they will be accepted in the marketplace. From time to time, the Company enters into collaborative arrangements for the research and development (R&D), manufacture and/or commercialization of products and product candidates. These collaborations may provide for non-refundable, upfront license fees, R&D and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. The Company's collaboration agreements with third parties are generally performed on a best efforts basis with no guarantee of either technological or commercial success. Proteo, Inc.'s common stock is currently quoted on the OTCQB under the symbol PTEO. Subsequent to the reorganization of the OTC markets, the application of the Company for continued trading on the OTCQB venture market place for early stage and developing companies was approved on May 7, 2015. CONCENTRATIONS The Company maintains substantially all of its cash in bank accounts at a German private commercial bank. The Company's bank accounts at this financial institution are presently protected by the voluntary Deposit Protection Fund of The German Private Commercial Banks. The Company has not experienced any losses in these accounts. The Company's operations, including research and development activities and most of its assets, are located in Germany. The Company's operations are subject to various political, economic, and other risks and uncertainties inherent in Germany and the European Union. OTHER RISKS AND UNCERTAINTIES The Company will require substantial additional funding for continuing research and development, obtaining regulatory approval, and for the commercialization of its products. Management plans to generate revenues from product sales, but there are no purchase commitments for any of the proposed products. Additionally, the Company may generate revenues from out-licensing activities. There can be no assurance that further out-licensing may be achieved or whether such will generate significant profit. In the absence of significant sales and profits, the Company may seek to raise additional funds to meet its working capital requirements through the additional placement of debt and/or equity securities. There is no assurance that the Company will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to the Company. The Company's line of future pharmaceutical products being developed by its German subsidiary, to the extent they may be considered drugs or biologics, are governed by the Federal Food, Drug and Cosmetics Act (in the United States) and by the regulations of State agencies and various foreign government agencies. There can be no assurances that the Company will obtain the regulatory approvals required to market its products. The pharmaceutical products under development will be subject to more stringent regulatory requirements because they are recombinant products for humans. The Company has no experience in obtaining regulatory clearance on these types of products. Therefore, the Company will be subject to the risks of delays in obtaining or failing to obtain regulatory clearance and other uncertainties, including financial, operational, technological, regulatory and other risks associated with an emerging business, including the potential risk of business failure. The Company is exposed to risks related to fluctuations in foreign currency exchange rates. Management does not utilize derivative instruments to hedge against such exposure. PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Proteo, Inc. and Proteo Biotech AG (PBAG), its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. RESEARCH AND DEVELOPMENT ACTIVITIES The Company capitalizes the cost of supplies used in its research and development activities if such supplies are deemed to have alternative future uses, usually in other research and development projects. Such costs are expensed as used to research and development expenses in the accompanying condensed consolidated statements of operations. Nonrefundable advance payments for goods or services that have the characteristics that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses. Such amounts are expensed to research and development as the related goods and services are received. The costs of materials that are acquired for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are expensed as research and development costs at the time the costs are incurred. FAIR VALUE MEASUREMENTS The Fair Value Measurements and Disclosures Topic of the Financial Accounting Standard Boards (FASB) Accounting Standards Codification (Codification) requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. Management believes that the carrying amounts of the Company's financial instruments, consisting primarily of cash, accounts payable and accrued expenses, approximate their fair value at September 30, 2015 due to their short-term nature. The Company does not have any assets or liabilities that are measured at fair value on a recurring basis and, during the three-month and nine-month periods ended September 30, 2015 and 2014, did not have any assets or liabilities that were measured at fair value on a non-recurring basis. REVENUE RECOGNITION It is the Company's intent to recognize revenues from product sales at the time of product delivery. As more fully described in Note 6, amounts received under the Development Agreement are initially deferred and recognized as revenue over the projected performance period under the Development Agreement in direct relation to development expenses incurred. RECLASSIFICATIONS Certain reclassifications have been made to prior period financial statements to conform to current period presentation. Revenues recognized under the Development Agreement (see Note 6) for the three-month and nine-month periods ended September 30, 2014 have been reclassified from interest and other income to revenues in the accompanying condensed consolidated statements of operations. These reclassifications had no impact on accumulated deficit, net income (loss), or comprehensive income (loss) for any of the periods presented. SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS In the opinion of management, neither the FASB, its Emerging Issues Task Force, the AICPA, nor the SEC have issued any additional accounting pronouncements since the Company filed its December 31, 2014 Form 10-K that are expected to have material impact on the Company's future consolidated financial statements. |
2. INCOME (LOSS) PER COMMON SHA
2. INCOME (LOSS) PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |
INCOME (LOSS) PER COMMON SHARE | Basic income (loss) per common share is computed based on the weighted average number of shares outstanding for the period. Diluted income (loss) per common share is computed by dividing net income (loss) by the weighted average shares outstanding assuming all dilutive potential common shares were issued. There were no dilutive potential common shares outstanding at September 30, 2015 and 2014. As such, basic and diluted income (loss) per common share equals net income (loss), as reported, divided by the weighted average number of common shares outstanding for the respective periods. |
3. FOREIGN CURRENCY TRANSLATION
3. FOREIGN CURRENCY TRANSLATION | 9 Months Ended |
Sep. 30, 2015 | |
Foreign Currency Translation [Abstract] | |
FOREIGN CURRENCY TRANSLATION | Assets and liabilities of the Company's German operations are translated from Euros (the functional currency) into U.S. dollars (the reporting currency) at period-end exchange rates; equity transactions are translated at historical rates; and income and expenses are translated at weighted average exchange rates for the period, which approximates the exchange rate at the dates on which those elements were recognized. Net foreign currency exchange translation gains or losses are excluded from the results of operations but are included in other comprehensive income and accumulated in a separate component of stockholders' equity. Accumulated comprehensive income approximated $26,000 at September 30, 2015 and $106,000 at December 31, 2014. |
4. FOREIGN CURRENCY TRANSACTION
4. FOREIGN CURRENCY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2015 | |
Foreign Currency Translation [Abstract] | |
FOREIGN CURRENCY TRANSACTIONS | The Company records payables related to a certain licensing agreement (see Note 7) in accordance with the Foreign Currency Matters Topic of the Codification. Quarterly commitments under such agreement are denominated in Euros. For each reporting period, the Company translates the quarterly amount to U.S. dollars at the exchange rate effective on that date. If the exchange rate changes between when the liability is incurred and the time payment is made, a foreign exchange transaction gain or loss results. Additionally, the Company computes a foreign exchange transaction gain or loss at each balance sheet date on all recorded transactions denominated in foreign currencies that have not been settled. The difference between the exchange rate that could have been used to settle the transaction on the date it occurred and the exchange rate at the balance sheet date is the gain or loss that is currently recognized. The Company recorded foreign currency transaction gains (losses) of approximately $91,000 and $106,000 for the nine-month periods ended September 30, 2015 and 2014, respectively, and ($16,000) and $94,000 for the three-month periods ended September 30, 2015 and 2014, respectively, which are included in interest and other income (expense), net in the accompanying condensed consolidated statements of operations and comprehensive loss. |
5. PREPAID EXPENSES AND OTHER C
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS | 9 Months Ended |
Sep. 30, 2015 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS | During 2015, PBAG commissioned the manufacturing of Elafin for an upcoming clinical study. The manufacturing is still ongoing at September 30, 2015. Initial payments made by PBAG to the manufacturer for such manufacturing approximating $221,000 have been included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets. Per the terms of the Development Agreement (Note 6), the Company was owed 100,000 Euros (approximately $112,000) at September 30, 2015. Such receivable has been included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets. |
6. DEFERRED REVENUES
6. DEFERRED REVENUES | 9 Months Ended |
Sep. 30, 2015 | |
Deferred Revenue Disclosure [Abstract] | |
6. DEFERRED REVENUES | On May 16, 2014, the Company entered into a funding and revenue sharing agreement (the Development Agreement) with an unrelated third party (disclosed in the Companys 8-K filing to the SEC as of May 22, 2014). The third party will fund operational expenses of the Company as well as the development costs related to the clinical development program aimed at receiving regulatory approval for the use of Elafin for the intravenous treatment of patients undergoing esophageal cancer surgery in the European Union. Total payments by the third party to the Company shall not exceed 3.5 million Euros. As of September 30, 2015, the Company has received approximately 1.2 million Euros of the 3.5 million Euro maximum. Revenue participation right payments will be made to the party when and if Elafin is commercialized within the European Union for the intravenous treatment of patients undergoing esophageal cancer surgery. The Development Agreement will terminate after the earlier of 15 years or 10 complete and consecutive years after the first regulatory approval of Elafin for this indication. Under no circumstances are the payments refundable, even if the drug is never commercialized. As no revenue sharing payments will be made unless Elafin is commercialized, the payments received are being accounted for as payments for the Company to use reasonable efforts to complete development, obtain regulatory approvals, and to commercialize Elafin (i.e. the performance period). Therefore, amounts received from the party will be initially deferred and recognized as revenue over the projected performance period under the Development Agreement in direct relation to expenses incurred. For the nine-months ended September 30, 2015 and 2014, the Company recognized approximately $466,000 and $250,000, respectively, of development income under the Development Agreement, which is included in revenues in the accompanying condensed consolidated statements of operations. Deferred revenues approximated $527,000 at September 30, 2015. For the three-months ended September 30, 2015 and 2014, the Company recognized development income of $159,000 and $175,000, respectively. |
7. ACCRUED RELATED PARTY LICENS
7. ACCRUED RELATED PARTY LICENSING FEES | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
7. ACCRUED RELATED PARTY LICENSING FEES | On December 30, 2000, the Company entered into a thirty-year license agreement, beginning January 1, 2001 (the "License Agreement"), with Dr. Oliver Wiedow, MD, the owner and inventor of several patents, patent rights and technologies related to Elafin. Pursuant to the License Agreement, the Company agreed to pay Dr. Wiedow an annual license fee of 110,000 Euros for a period of six years. The License Agreement was amended in December 2008 to waive non-payment defaults and to defer the due dates of each payment. In July 2011, in February 2012, February 2013, and again in June 2014, Dr. Wiedow agreed in writing to waive the non-payment defaults and agreed to defer the due dates of the payments for the outstanding balance of 570,000 Euro. As a result, the outstanding balance of 570,000 Euros is due on April 30, 2018. While the total amount owed does not currently bear interest, the Amendment provides that any late payment shall be subject to interest at an annual rate equal to the German Base Interest Rate plus six percent. In the event that the Company's financial condition improves, the parties can agree to increase and/or accelerate the payments. Dr. Wiedow, who is a director of the Company, beneficially owned approximately 27% of the Company's outstanding common stock as of September 30, 2015. At September 30, 2015, the Company has accrued approximately $641,000 of licensing fees payable to Dr. Wiedow, which are included in long-term liabilities. This is a decrease over the respective accrual of approximately $693,000 at December 31, 2014, due solely to changes in foreign currency exchange rates. |
8. INCOME TAXES
8. INCOME TAXES | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of existing temporary differences, the period in which they are expected to be recovered and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is more likely than not that some or all of the deferred tax assets will not be realized. Management has determined that a full valuation allowance against the Companys net deferred tax assets is appropriate. There is no material income tax expense recorded for the periods ended September 30, 2015 and 2014, due to the Company's net losses and related changes to the full valuation allowance for deferred tax assets. As of September 30, 2015, the Company has a deferred tax asset and an equal amount of valuation allowance of approximately $2,178,000, relating primarily to federal and foreign net operating loss carryforwards and temporary differences related to the recognition of accrued licensing fees. Based on managements evaluation of uncertainty in income taxes, the Company concluded that there were no significant uncertain tax positions requiring recognition in its financial statements or related disclosures. Accordingly, no adjustments to recorded tax liabilities or accumulated deficit were required. As of September 30, 2015, there were no increases or decreases to liability for income taxes associated with uncertain tax positions. |
1. NATURE OF BUSINESS AND BAS14
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying condensed consolidated balance sheet as of December 31, 2014, which has been derived from audited financial statements, and the accompanying interim condensed consolidated financial statements as of September 30, 2015 and for the three-month and nine-month periods ended September 30, 2015 and 2014, have been prepared by management pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. These interim condensed consolidated financial statements are unaudited and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments and accruals) necessary to present fairly the financial condition, results of operations and cash flows of Proteo, Inc. and its wholly owned subsidiary (hereinafter collectively referred to as the "Company") as of and for the periods presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Operating results for the three-month and nine-month periods ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, or for any other interim period during such year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations of the SEC, although the Company believes that the disclosures made are adequate to make the information not misleading. The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC on March 30, 2015. |
NATURE OF BUSINESS | NATURE OF BUSINESS The Company is a clinical stage drug development company focusing on the development of anti-inflammatory treatments for rare diseases with significant unmet needs. The Company's management deems its lead drug candidate Tiprelestat (also known as Elafin) for intravenous use to be one of the most prospective treatments of acute postoperative inflammatory complications, in particular after esophageal cancer surgery. Elafin appears to be also a promising compound for the treatment of pulmonary arterial hypertension and for preventing complications of organ transplant. The clinical development is currently focused in Europe with the intention to receive the primary approval in Europe. The products that the Company is developing, to the extent they are considered drugs or biologics, are governed by the Federal Food, Drug and Cosmetics Act (in the United States) and the regulations of State and various foreign government agencies. The Company's proposed pharmaceutical products to be used by humans are subject to certain clearance procedures administered by the above regulatory agencies. Since its inception, the Company has primarily been engaged in the research and development of its proprietary product Elafin. The Company intends to seek the various governmental regulatory approvals for the marketing of Elafin. Management believes that none of its planned products will produce sufficient revenues in the near future. As a result, the Company intends to generate revenue by out-licensing and marketing activities. There are no assurances, however, that the Company will be able to develop such products, or if produced, that they will be accepted in the marketplace. From time to time, the Company enters into collaborative arrangements for the research and development (R&D), manufacture and/or commercialization of products and product candidates. These collaborations may provide for non-refundable, upfront license fees, R&D and commercial performance milestone payments, cost sharing, royalty payments and/or profit sharing. The Company's collaboration agreements with third parties are generally performed on a best efforts basis with no guarantee of either technological or commercial success. Proteo, Inc.'s common stock is currently quoted on the OTCQB under the symbol PTEO. Subsequent to the reorganization of the OTC markets, the application of the Company for continued trading on the OTCQB venture market place for early stage and developing companies was approved on May 7, 2015. |
CONCENTRATIONS | CONCENTRATIONS The Company maintains substantially all of its cash in bank accounts at a German private commercial bank. The Company's bank accounts at this financial institution are presently protected by the voluntary Deposit Protection Fund of The German Private Commercial Banks. The Company has not experienced any losses in these accounts. The Company's operations, including research and development activities and most of its assets, are located in Germany. The Company's operations are subject to various political, economic, and other risks and uncertainties inherent in Germany and the European Union. |
OTHER RISKS AND UNCERTAINTIES | OTHER RISKS AND UNCERTAINTIES The Company will require substantial additional funding for continuing research and development, obtaining regulatory approval, and for the commercialization of its products. Management plans to generate revenues from product sales, but there are no purchase commitments for any of the proposed products. Additionally, the Company may generate revenues from out-licensing activities. There can be no assurance that further out-licensing may be achieved or whether such will generate significant profit. In the absence of significant sales and profits, the Company may seek to raise additional funds to meet its working capital requirements through the additional placement of debt and/or equity securities. There is no assurance that the Company will be able to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to the Company. The Company's line of future pharmaceutical products being developed by its German subsidiary, to the extent they may be considered drugs or biologics, are governed by the Federal Food, Drug and Cosmetics Act (in the United States) and by the regulations of State agencies and various foreign government agencies. There can be no assurances that the Company will obtain the regulatory approvals required to market its products. The pharmaceutical products under development will be subject to more stringent regulatory requirements because they are recombinant products for humans. The Company has no experience in obtaining regulatory clearance on these types of products. Therefore, the Company will be subject to the risks of delays in obtaining or failing to obtain regulatory clearance and other uncertainties, including financial, operational, technological, regulatory and other risks associated with an emerging business, including the potential risk of business failure. The Company is exposed to risks related to fluctuations in foreign currency exchange rates. Management does not utilize derivative instruments to hedge against such exposure. |
PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Proteo, Inc. and Proteo Biotech AG (PBAG), its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation. |
RESEARCH AND DEVELOPMENT ACTIVITIES | RESEARCH AND DEVELOPMENT ACTIVITIES The Company capitalizes the cost of supplies used in its research and development activities if such supplies are deemed to have alternative future uses, usually in other research and development projects. Such costs are expensed as used to research and development expenses in the accompanying condensed consolidated statements of operations. Nonrefundable advance payments for goods or services that have the characteristics that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses. Such amounts are expensed to research and development as the related goods and services are received. The costs of materials that are acquired for a particular research and development project and that have no alternative future uses (in other research and development projects or otherwise) and therefore no separate economic values are expensed as research and development costs at the time the costs are incurred. |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS The Fair Value Measurements and Disclosures Topic of the Financial Accounting Standard Boards (FASB) Accounting Standards Codification (Codification) requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. Management believes that the carrying amounts of the Company's financial instruments, consisting primarily of cash, accounts payable and accrued expenses, approximate their fair value at September 30, 2015 due to their short-term nature. The Company does not have any assets or liabilities that are measured at fair value on a recurring basis and, during the three-month and nine-month periods ended September 30, 2015 and 2014, did not have any assets or liabilities that were measured at fair value on a non-recurring basis. |
REVENUE RECOGNITION | REVENUE RECOGNITION It is the Company's intent to recognize revenues from product sales at the time of product delivery. As more fully described in Note 6, amounts received under the Development Agreement are initially deferred and recognized as revenue over the projected performance period under the Development Agreement in direct relation to development expenses incurred. |
RECLASSIFICATIONS | RECLASSIFICATIONS Certain reclassifications have been made to prior period financial statements to conform to current period presentation. Revenues recognized under the Development Agreement (see Note 6) for the three-month and nine-month periods ended September 30, 2014 have been reclassified from interest and other income to revenues in the accompanying condensed consolidated statements of operations. These reclassifications had no impact on accumulated deficit, net income (loss), or comprehensive income (loss) for any of the periods presented. |
SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS | SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS In the opinion of management, neither the FASB, its Emerging Issues Task Force, the AICPA, nor the SEC have issued any additional accounting pronouncements since the Company filed its December 31, 2014 Form 10-K that are expected to have material impact on the Company's future consolidated financial statements. |
1. NATURE OF BUSINESS (Details
1. NATURE OF BUSINESS (Details Narrative) | Sep. 30, 2015USD ($) |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Fair value assets | $ 0 |
Fair value liabilities | $ 0 |
2. LOSS PER COMMON SHARE (Deta
2. LOSS PER COMMON SHARE (Details Narrative) - shares | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Earnings Per Share [Abstract] | ||
Antidilutive shares included in earnings per loss | 0 | 0 |
3. FOREIGN CURRENCY TRANSLATI17
3. FOREIGN CURRENCY TRANSLATION (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Foreign Currency Translation [Abstract] | ||
Accumulated other comprehensive income | $ 26,072 | $ 105,585 |
4. FOREIGN CURRENCY TRANSACTI18
4. FOREIGN CURRENCY TRANSACTIONS (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Foreign Currency Translation [Abstract] | ||
Foreign currency transaction gains (losses) | $ 90,927 | $ 105,652 |
5. PREPAID EXPENSES (Details Na
5. PREPAID EXPENSES (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Prepaid expenses | $ 340,762 | $ 31,805 |
Elafin Clinical Study | ||
Prepaid expenses | 221,000 | |
Third party development agreement | ||
Prepaid expenses | $ 112,000 |
6. DEFERRED REVENUES (Details N
6. DEFERRED REVENUES (Details Narrative) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($) | Sep. 30, 2015EUR (€) | Sep. 30, 2014USD ($) | |
Development income | $ 158,630 | $ 174,833 | $ 465,911 | $ 249,609 | |
Deferred revenue | $ 527,000 | $ 527,000 | |||
Third party development agreement | Euro Member Countries, Euro | |||||
Proceeds from funding agreement | € | € 1,200,000 |
7. ACCRUED LICENSING FEES (Deta
7. ACCRUED LICENSING FEES (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Payables and Accruals [Abstract] | ||
Accrued licensing fees | $ 640,908 | $ 692,835 |
8. INCOME TAXES (Details Narrat
8. INCOME TAXES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 0 | $ 0 |
Deferred tax asset | 2,178,000 | |
Valuation allowance | $ 2,178,000 |