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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Proteo Inc (GM) | USOTC:PTEO | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 179.80 | 0.00 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
OR
|_| 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 000-32849
PROTEO, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0292249 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 2102 BUSINESS CENTER DRIVE, IRVINE, CALIFORNIA 92612 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) |
Issuer's telephone number, including area code: (949) 253-4616
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports); and (2) has been subject to such filing requirements for the past
90 days. Yes |X| No |_|.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|.
State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
CLASS NUMBER OF SHARES OUTSTANDING ------------------------------------- -------------------------------------- Common Stock, $0.001 par value 23,879,350 shares of common stock as November 14, 2007 |
Transitional Small Business Disclosure Format
(Check one):
Yes |_| No |X|.
PROTEO, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Unaudited Condensed Consolidated Balance Sheet as of September 30, 2007
Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three-month and Nine-month Periods Ended September 30, 2007 and 2006, and for the Period From November 22, 2000 (Inception) Through September 30, 2007
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine-month Periods Ended September 30, 2007 and 2006, and for the Period From November 22, 2000 (Inception) Through September 30, 2007
Notes to Unaudited Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operations
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
SIGNATURES
UNAUDITED
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 469,038 Research supplies inventory 98,042 Prepaid expenses and other current assets 69,547 ------------ 636,627 PROPERTY AND EQUIPMENT, NET 374,385 ------------ $ 1,011,012 ============ |
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 102,144 Accrued licensing fees 942,000 ------------ 1,044,144 |
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding -- Common stock, par value $0.001 per share; 300,000,000 shares authorized; 23,879,350 shares issued and outstanding 23,880 Additional paid-in capital 4,968,234 Stock subscriptions receivable (538,742) Accumulated other comprehensive income 345,204 Deficit accumulated during development stage (4,831,708) ------------ (33,132) ------------ $ 1,011,012 ============ |
SEE ACCOMPANYING NOTES TO THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
---------------------------------------------------------------------------------------------------------------------------------- PROTEO, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2007 AND 2006 AND FOR THE PERIOD FROM NOVEMBER 22, 2000 (INCEPTION) THROUGH SEPTEMBER 30, 2007 ---------------------------------------------------------------------------------------------------------------------------------- UNAUDITED NOVEMBER 22, 2000 THREE-MONTHS THREE-MONTHS NINE-MONTHS NINE-MONTHS (INCEPTION) ENDED ENDED ENDED ENDED THROUGH SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 2006 2007 ------------ ------------ ------------ ------------ ------------ REVENUES $ -- $ -- $ -- $ -- $ -- ------------ ------------ ------------ ------------ ------------ EXPENSES General and Administrative 58,221 234,828 193,678 402,275 3,374,156 Research and Development, net of grants 43,641 36,971 103,364 76,378 1,586,341 ------------ ------------ ------------ ------------ ------------ 101,862 271,799 297,042 478,653 4,960,497 ------------ ------------ ------------ ------------ ------------ INTEREST AND OTHER INCOME (EXPENSE), NET 55,528 1,480 42,740 (31,180) 65,815 ------------ ------------ ------------ ------------ ------------ NET LOSS BEFORE MINORITY INTEREST (46,334) (270,319) (254,302) (509,833) (4,894,682) MINORITY INTEREST IN LOSS OF CONSOLIDATED SUBSIDIARY, NET OF TAXES -- -- 3,948 -- 62,974 ------------ ------------ ------------ ------------ ------------ NET LOSS (AVAILABLE TO COMMON STOCKHOLDERS) (46,334) (270,319) (250,354) (509,833) (4,831,708) FOREIGN CURRENCY TRANSLATION ADJUSTMENTS 45,006 5,023 64,813 31,718 345,204 ------------ ------------ ------------ ------------ ------------ COMPREHENSIVE LOSS $ (1,328) $ (265,296) $ (185,541) $ (478,115) $ (4,486,504) ============ ============ ============ ============ ============ BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.00) $ (0.01) $ (0.01) $ (0.02) ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 23,879,350 22,379,350 23,879,350 22,379,350 ============ ============ ============ ============ SEE ACCOMPANYING NOTES TO THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-2 |
-------------------------------------------------------------------------------------------------- PROTEO, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2007 AND 2006, AND FOR THE PERIOD FROM NOVEMBER 22, 2000 (INCEPTION) THROUGH SEPTEMBER 30, 2007 -------------------------------------------------------------------------------------------------- UNAUDITED NOVEMBER 22, 2000 NINE-MONTHS NINE-MONTHS (INCEPTION) ENDED ENDED THROUGH SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2007 2006 2007 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (250,354) $ (509,833) $(4,831,708) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 40,655 40,666 261,474 Loss on disposal of property and equipment 3,723 -- 3,723 Unrealized foreign currency transaction loss 71,000 49,000 142,000 Changes in operating assets and liabilities: Research supplies inventory -- 10,068 (113,904) Prepaid expenses and other current assets (16,044) (23,388) (62,225) Accounts payable and accrued liabilities 983 (42,256) 68,123 Accrued licensing fees -- 103,000 800,000 Settlement liability -- 86,526 -- ----------- ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (150,037) (286,217) (3,732,517) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property and equipment (1,197) -- (602,925) Cash of reorganized entity -- -- 27,638 ----------- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (1,197) -- (575,287) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock -- -- 1,792,610 Proceeds from subscribed stock 323,339 225,680 2,652,253 Capital Contributions -- 63,471 ----------- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 323,339 289,151 4,444,863 ----------- ----------- ----------- NET EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH AND CASH EQUIVALENTS 27,451 1,088 331,979 ----------- ----------- ----------- NET INCREASE IN CASH 199,556 4,022 469,038 CASH AND CASH EQUIVALENTS - beginning of period 269,482 227,777 -- ----------- ----------- ----------- CASH AND CASH EQUIVALENTS - end of period $ 469,038 $ 231,799 $ 469,038 =========== =========== =========== SEE ACCOMPANYING NOTES TO THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. F-3 |
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
BASIS OF PRESENTATION
The management of Proteo, Inc. ("Proteo") and its wholly owned subsidiary Proteo Biotech, AG (hereinafter collectively referred to as "the Company"), without audit, prepared the accompanying condensed consolidated financial statements for the three-month and nine-month periods ended September 30, 2007 and 2006 and for the period from November 22, 2000 (Inception) through September 30, 2007. In the opinion of management, all adjustments necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company's financial position as of September 30, 2007, and the results of operations and cash flows for the aforementioned periods, have been made. Such adjustments consist only of normal recurring adjustments.
Certain note disclosures normally included in our annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to instructions for Form 10-QSB. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto which are included in the Company's Form 10-KSB filed with the Securities and Exchange Commission (the "SEC") on March 30, 2007.
The results of operations for the three-month and nine-month periods ended September 30, 2007 are not necessarily indicative of the results to be expected for the full year.
NATURE OF BUSINESS
The Company intends to develop, manufacture, promote and market pharmaceuticals and other biotech products. The Company is focused on the development of pharmaceuticals based on the human protein Elafin which is a human protein that naturally occurs in human skin, lungs, and mammary glands. The Company believes Elafin may be useful in the treatment of cardiac infarction, serious injuries caused by accidents, post surgery damage to tissue and complications resulting from organ transplantations.
The Company's common stock is currently quoted on the OTC Bulletin Board of the National Association of Securities Dealers under the symbol "PTEO".
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)
NATURE OF BUSINESS (continued)
Since its inception, the Company has primarily been engaged in the research and development of its proprietary product Elafin. After the research and development phase is complete, the Company intends to manufacture and obtain the various governmental regulatory approvals for the marketing of Elafin. The Company is in the development stage and has not generated any significant revenues from any product sales. Management believes that none of its planned products will produce sufficient revenues in the near future. As a result, the Company plans to identify and develop other potential products. There are no assurances, however, that the Company will be able to produce such products, or if produced, that they will be accepted in the marketplace.
DEVELOPMENT STAGE AND GOING CONCERN CONSIDERATIONS
The Company has been in the development stage since it began operations on November 22, 2000, has not generated any significant revenues from operations, and there is no assurance of any future revenues.
The Company will require substantial additional funding for continuing research and development, obtaining regulatory approvals and for the commercialization of its product. There can be 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.
Management has taken actions to address these matters. They include:
o Retention of experienced management personnel with particular skills
in the commercialization of such products.
o Obtaining technology to develop additional biotech products.
o Raising additional funds through the sale of debt and equity
securities.
o Applying for additional research grants.
The Company's proposed products, to the extent they may be deemed drugs or biologics, will be governed by the Federal Food, Drug and Cosmetics Act and the regulations of State and various foreign government agencies. The Company's proposed pharmaceutical products to be used with humans are subject to certain clearance procedures administered by such regulatory agencies. There can be no assurance that the Company will receive the regulatory approvals required to market its proposed products or that the regulatory authorities will review the product within the average period of time.
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION (continued)
DEVELOPMENT STAGE AND GOING CONCERN CONSIDERATIONS (continued)
Management plans to obtain revenues from product sales, but there is no commitment by any persons for purchase of any of the proposed products. In the absence of significant sales and profits, the Company may seek to raise additional funds to meet its working capital requirements through additional sales of debt and equity securities.
These circumstances, among others, raise concerns about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements have been prepared in accordance with GAAP and include the accounts of Proteo and its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.
SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS
In the opinion of management, neither the Financial Accounting Standards Board ("FASB"), its Emerging Issues Task Force, the AICPA, nor the SEC have issued any accounting pronouncements since the Company filed its December 31, 2006 Form 10-KSB that are expected to have a material impact on the Company's future consolidated financial statements.
Other recent accounting pronouncements discussed in the notes to the December 31, 2006 audited consolidated financial statements, filed previously with the SEC in Form 10-KSB, that were required to be adopted during the year ending December 31, 2007, did not have or are not expected to have a significant impact on the Company's 2007 consolidated financial statements.
2. STOCK SUBSCRIPTIONS RECEIVABLE AND OTHER STOCK ISSUANCES
During the nine-month periods ended September 30, 2007 and 2006, the Company received $323,339 and $225,680, respectively, in connection with stock subscriptions receivable. Management expects the outstanding balance of the stock subscriptions receivable to be received in installments through December 2007 and believes such balance to be fully collectible.
There have been no issuances of common stock or preferred stock during the nine-month period ended September 30, 2007, nor have any stock options been granted from inception to-date.
3. LOSS PER COMMON SHARE
The Company computes loss per common share using Statement of Financial Accounting Standards ("SFAS") No. 128 EARNINGS PER SHARE. Basic loss per common share is computed based on the weighted average number of shares outstanding for the period. Diluted loss per common share is computed by dividing net 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, 2007 or 2006. Additionally, there were no adjustments to net loss to determine net loss available to common shareholders. As such, basic and diluted loss per common share equals the reported net loss, divided by the weighted average common shares outstanding for the respective periods.
4. FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's German operations are translated into U.S. dollars 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. Net foreign currency exchange gains or losses resulting from such translation are excluded from the results of operations but are included in comprehensive loss and accumulated in a separate component of stockholders' deficit. Accumulated comprehensive income approximated $345,000 at September 30, 2007.
5. FOREIGN CURRENCY TRANSACTIONS
The Company records payables related to the licensing agreement described in Note 8 in accordance with SFAS No. 52, FOREIGN CURRENCY TRANSLATION. Quarterly commitments under such agreement are denominated in Euros. For each reporting period, the Company translates the quarterly amount to US dollars at the exchange rate effective on that date. If the exchange rate changes between when the liability is incurred and payment is made, a foreign exchange gain or loss results. The Company has made no payments under this licensing agreement, and, therefore, has not realized any foreign currency exchanges gains or losses during the nine-month periods ended September 30, 2007 and 2006.
Additionally, the Company computes a foreign exchange 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 unrealized gain or loss that is currently recognized. The Company recorded an unrealized foreign currency transaction loss of approximately ($71,000) and ($49,000) for the nine-months ended September 30, 2007 and 2006, respectively.
6. SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, establishes standards for the way public companies report information about segments of their business in their annual financial statements and requires them to report selected segment information in their quarterly reports issued to shareholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers.
The Company considers itself to operate in one segment and has not generated any significant operating revenues since its inception. All fixed assets are located in Germany.
7. GRANTS
In May 2004, the German State of Schleswig-Holstein granted Proteo Biotech AG approximately 760,000 Euros for further research and development of the Company's pharmaceutical product Elafin. The grant covers the period from April 1, 2004 to March 31, 2007 if certain milestones have been reached by September 30 of each year, with a possible extension as defined in the related agreement.
7. GRANTS (continued)
The grant covers 49.74% of eligible research and development costs and is
subject to the Company's ability to finance the remaining costs. During 2006,
the grant was modified and extended through December 31, 2007, so that the
Company is eligible to receive the following amounts: 120,911 Euros in 2004
(received); 197,316 Euros in 2005 (received); 225,000 Euros in 2006 (received)
and approximately 217,000 Euros in 2007. Grant funds approximating 112,000 and
181,000 Euros ($151,000 and $226,000, respectively) have been reported as a
reduction of research and development expenses for the nine-month periods ended
September 30, 2007 and 2006, respectively. The Company reasonably assumes to
incur eligible expenses to cover the outstanding grant. However, any portion of
the grant that will not be used by December 31, 2007 may not be rolled forward
and would be forfeited. As of September 30, 2007, management believes that all
milestones required by the grant have been satisfied.
8. LICENSE AGREEMENT
On December 30, 2000, the Company entered into a thirty year license agreement with Dr. Oliver Wiedow, MD, the owner and inventor of several patents, patent rights and technologies related to Elafin. In exchange for an exclusive worldwide license for such intellectual property, the Company agreed to pay Dr. Wiedow a licensing fee of 110,000 Euros per year, for a term of six years for a total obligation of 660,000 Euros. Such licensing fees shall be reduced by payments to Dr. Wiedow during such term for any royalties and for 50% of any salary.
Royalties are to be paid quarterly, for the term of the agreement, to Dr. Wiedow in the amount of 3% of gross revenues earned from sales of products based on the licensed technology. Dr. Wiedow has not been paid any salary since execution of the agreement.
At September 30, 2007, the Company has accrued $942,000 (660,000 Euros) of licensing fees payable to Dr. Wiedow. The Company has not made any payments to Dr. Wiedow as required under the original agreement. During 2004, the licensing agreement was amended to require payments of 30,000 Euros, on July 15 of each year, beginning on July 15, 2004. Such amount can be increased up to 110,000 Euros by June 1 of each year based on an assessment of the Company's financial ability to make such payments. The annual payments will continue until the entire obligation of 660,000 Euros has been paid. No payments have been made to Dr. Wiedow as of September 30, 2007, and this is a technical breach of the agreement. Dr. Wiedow waived such breach and deferred the 2004 through 2006 payments to later in 2007.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
PLAN OF OPERATIONS
CAUTIONARY STATEMENTS:
This Quarterly Report on Form 10-QSB contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company intends that such forward-looking statements be subject to the safe harbors created by such statutes. The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties. Accordingly, to the extent that this Quarterly Report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of the Company, please be advised that the Company's actual financial condition, operating results and business performance may differ materially from that projected or estimated by the Company in forward-looking statements. The differences may be caused by a variety of factors, including but not limited to adverse economic conditions, intense competition, including intensification of price competition and entry of new competitors and products, adverse federal, state and local government regulation, inadequate capital, unexpected costs and operating deficits, increases in general and administrative costs, and other specific risks that may be alluded to in this Quarterly Report or in other reports issued by the Company. In addition, the business and operations of the Company are subject to substantial risks that increase the uncertainty inherent in the forward-looking statements. The inclusion of forward looking statements in this Quarterly Report should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved.
The Company does not currently generate any revenue from its operations and does not expect to report any significant revenue until the successful development and marketing of its planned pharmaceutical and other biotech products. Additionally, after the launch of the Company's products, there can be no assurance that the Company will generate positive cash flow and there can be no assurances as to the level of revenues, if any, the Company may actually achieve from its planned operations.
PLAN OF OPERATIONS
The Company specializes in the research, development and marketing of drugs for inflammatory diseases with Elafin as its first project. The Company's management deems Elafin to be one of the most prospective substances in the treatment of serious tissue and muscle damage. Independently conducted animal experiments have indicated that Elafin may have benefits in the treatment of tissue and muscle damage caused by insufficient oxygen supply and therefore may be useful in the treatment of heart attacks, serious injuries and in the course of organ transplants. Other applications have yet to be determined.
The Company intends to implement Elafin as a drug in the treatment of serious tissue and muscle damage, e.g. due to traffic accidents, and intends to achieve governmental approval in Europe first. Currently, management estimates that it will take at least four years to achieve its first governmental approval for the use of Elafin as a drug in the treatment of serious tissue and muscle damage.
The Company's success will depend on its ability to prove that Elafin is well tolerated by humans and its efficacy in the indicated treatment. There can be no assurance that the Company will be able to develop feasible production procedures in accordance with Good Manufacturing Practices ("GMP") standards, or that Elafin will receive any governmental approval for its use as a drug in any of the intended applications.
A necessary pre-requisite for the commencement of clinical trials was the production of Elafin according to GMP Standards. In anticipation of commencing clinical trials, on March 18, 2005 we entered into a contractual agreement with Eurogentec S.A., located in Liege, Belgium, an experienced Contract Manufacturing Organization (CMO), for the production of a required amount of Elafin according to GMP standards. The authorities demand strict standards for the manufacture of medicines for clinical testing, and the GMP production of Elafin for clinical trials must comply with a large number of rules and regulations. Eurogentec completed its required production run of Elafin which was used in our clinical trial discussed below
In April 2005, we entered into an agreement with the German Institut fur klinische Pharmakologie ("IKP"), an experienced Contract Research Organization (CRO), to assist us with our initial clinical trial involving Elafin, to evaluate the tolerability, safety, pharmacokinetic and dynamics of Elafin pursuant to a clinical protocol [e.g. with healthy young men]. In November 2005 we commenced, and in December 2005, we successfully completed, a first Phase I trial for Elafin. Elafin was tested on 32 healthy male volunteers in a single-ascending-dose, double blind, randomized, placebo-controlled trial to evaluate tolerability and safety at the IKP in Kiel, Germany. All intravenously applied doses were well tolerated. No severe adverse events occurred.
During 2006, the Company gathered and evaluated additional data from the results of the Phase I study, and currently is in the process of planning a Phase II clinical trial. The design of a first Phase II study is intended to prove Elafin's efficacy in a certain indication is substantially complete.The realization of such Phase II study will depend widely on the Company's ability to acquire sufficient funds in its financial activities. In addition, during 2006, we established a procedure to incorporate Elafin as an active ingredient in cream.
In September 2006 we filed an application with the EMEA (European Medicines Agency) to obtain orphan drug status in the European markets for Elafin to be used in the treatment of pulmonary hypertension. Subsequent to the year's end, the Committee for Orphan Medical Products (COMP) of the EMEA adopted a positive opinion recommending the granting of orphan medicinal product designation for Elafin for treatment of pulmonary arterial hypertension and chronic thromboembolic pulmonary hypertension. The orphan drug designation became effective on March 20, 2007 upon adoption of this recommendation by the European Commission.
In September 2006, Windhover Information, Inc., an established provider of business information for decision makers in the biotechnology and pharmaceutical industries, chose our Elafin project as one of the top 10 unlicensed cardiovascular compounds. We presented the Elafin project at the "Windhover's Therapeutic Alliances Cardiovascular Conference" in Chicago, United States on November 16, 2006.
In July 2007, we entered into an agreement with the University of Alberta, Canada to cooperate in research on Elafin for the treatment of pulmonary diseases in neonates. Proteo will initially provide support for animal experiments with its lead product on newborn rats to be carried out by Dr. Bernard Thebaud, associate professor at the Department of Pediatrics and Neonatology and a recognized authority in this area, with profound knowledge of animal models and clinical experience.
In August 2007, the Company's subsidiary entered into a license agreement with Rhein Minapharm ("Rhein"), a well established Egyptian pharmaceutical company based in Cairo, for clinical development, production and marketing of Elafin. We have granted Rhein the right to exclusively market Elafin in Egypt and certain Middle Eastern and African countries. Proteo received an initial payment of $110,000 upon execution of the license agreement, and may receive milestone-payments upon Rhein's attainment of certain clinical milestones as well as royalties on net product sales. In addition, Rhein will take over the funding of clinical research activities for the designated region. The agreement schedules the transfer of the biotechnological production process of Elafin to Cairo.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception we have raised a total of approximately $4,983,000 from the sale of 20,065,428 shares of our common stock, of which 6,585,487 shares, 300,000 shares and 1,500,000 shares have been sold at $0.40 per share, $0.84 per share and $0,60 per share, respectively, under stock subscription agreements in the amount of approximately $2,035,000, $252,000 and $900,000, respectively. We received $323,339 and $225,680, respectively, in connection with such subscription agreements during the nine-month periods ended September 30, 2007 and 2006, respectively. Approximately $539,000 is owed to us at September 30, 2007 under such subscription agreements. We expect to receive the outstanding balance in installments through December 2007 and believe such balance to be fully collectible.
In May 2004, the German State of Schleswig-Holstein granted Proteo Biotech AG approximately 760,000 Euros (the "New Grant") for further research and development of the Company's pharmaceutical product Elafin. The New Grant, as amended, covers the period from April 1, 2004 to December 31, 2007 if certain milestones have been reached by September 30 of each year, with a possible extension as defined in the agreement. The New Grant covers 49.74% of eligible research and development costs and is subject to the Company's ability to otherwise finance the remaining costs. An additional condition of the grant is that the product is to be developed and subsequently produced in the German state of Schleswig-Holstein.
The Company qualified to receive approximately 217,000 Euros and 225,000 Euros of the New Grant in 2007 and 2006, respectively. We received grant funds approximating 112,000 Euros (approximately $151,000) for the nine-month period ended September 30, 2007, and 38,000 Euros (approximately $52,000) for the three-month period ended September 30, 2007, respectively, under the New Grant. We recorded approximately $52,000 as a receivable at period end under prepaid expenses and other current assets in the condensed consolidated balance sheet. The management reasonably expects to incur eligible expenses to cover the outstanding grant. However, any portion of the grant that will not be used by December 31, 2007 may not be rolled forward and would be forfeited. As of September 30, 2007, management believes that all milestones required by the New Grant have been satisfied.
The Company has cash approximating $469,000 as of September 30, 2007. This is an increase over the September 30, 2006 cash balance of approximately $232,000, due to receipts from the grant, the payment received from Rhein and equity financing activities.
Management believes that the Company will not generate any significant revenues for at least the next four years, nor will it have sufficient cash to fund operations. As a result, the Company's success will largely depend on its ability to secure additional funding through the sale of its Common Stock and/or the sale of debt securities. There can be no assurance, however, that the Company will be able to consummate debt or equity financing in a timely manner, or on a basis favourable to the Company, if at all.
GOING CONCERN
The Company's independent registered public accounting firm stated in its Auditor's Report included in our Form 10-KSB for the year ended December 31, 2006 filed with the SEC on March 30, 2007, that the Company will require a significant amount of additional capital to advance the Company's products to the point where they become commercially viable and has incurred significant losses since inception. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern.
The Company intends to continue to fund operations through grant proceeds and increased equity financing arrangements which management believes may be insufficient to fund its capital expenditures, working capital and other cash requirements for the fiscal year ending December 31, 2007. Therefore, the Company will be required to seek additional cash to fund its long-term operations. The successful outcome of future activities cannot be determined at this time and there is no assurance that if achieved, the Company will have sufficient funds to execute its intended business plan or generate positive operating results.
INFLATION
Management believes that inflation has not had a material effect on the Company's results of operations.
OFF BALANCE SHEET ARRANGEMENTS
The Company does not currently have any off balance sheet arrangements.
CAPITAL EXPENDITURES
None significant.
The Company's principal executive officer and chief financial officer has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under of the Securities Exchange Act of 1934, as amended). Based on her most recent evaluation, she has concluded that the Company's disclosure controls and procedures were effective as of September 30, 2007. There have been no significant changes in the Company's internal control over financial reporting during the quarter ended September 30, 2007 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
None.
None.
None.
None.
None.
Exhibits:
10.7 License Agreement dated August 9, 2007, by and between Proteo Biotech AG and Rhein Minapharm Biogenetics SAE.
31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32 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.
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.
PROTEO, INC.
Dated: November 14, 2007 By: /s/ Birge Bargmann --------------------------- Birge Bargmann Principal Executive Officer and Chief Financial Officer (signed both as an Officer duly authorized to sign on behalf of the Registrant and Principal Financial Officer and Chief Accounting Officer) |
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