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                                  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 June 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
                                                    July 24, 2007

Transitional Small Business Disclosure Format
(Check one):
Yes |_|  No [X].

================================================================================

<PAGE>

                                  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 June 30, 2007                                                 F-1

         Unaudited Condensed Consolidated  Statements of Operations
         and Comprehensive Loss for the Three-month and Six-month
         Periods Ended June 30, 2007 and 2006, and for the Period
         From November 22, 2000 (Inception) Through June 30, 2007            F-2

         Unaudited  Condensed  Consolidated  Statements of Cash
         Flows for the Six-month  Periods Ended June 30, 2007 and
         2006, and for the Period From November 22, 2000 (Inception)
         Through June 30, 2007                                               F-3

         Notes to Unaudited Condensed Consolidated Financial Statements      F-4

Item 2.  Management's Discussion and Analysis or Plan of Operations            2

Item 3.  Controls and Procedures                                               5

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                     6

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds           6

Item 3.  Defaults Upon Senior Securities                                       6

Item 4.  Submission of Matters to a Vote of Security Holders                   6

Item 5.  Other Information                                                     6

Item 6.  Exhibits                                                              6

SIGNATURES                                                                     7

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                                      PROTEO, INC. AND SUBSIDIARY
                                     (A DEVELOPMENT STAGE COMPANY)
                                  CONDENSED CONSOLIDATED BALANCE SHEET
                                             JUNE 30, 2007

------------------------------------------------------------------------------------------------------

                                               UNAUDITED


                                                ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                                         $        309,593
   Research supplies inventory                                                                 92,566
   Prepaid expenses and other current assets                                                   11,765
                                                                                    ------------------
                                                                                              413,924

PROPERTY AND EQUIPMENT, NET                                                                   367,025
                                                                                    ------------------

                                                                                     $        780,949
                                                                                    ==================

                                 LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable and accrued liabilities                                          $         66,360
   Accrued licensing fees                                                                     889,000
                                                                                    ------------------
                                                                                              955,360

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
   Preferred stock, par value $0.001 per share; 10,000,000 shares authorized;
       no shares issued and outstanding                                                             -
   Common stock, par value $0.001 per share; 300,000,000 shares authorized;
       23,879,350 shares issued or outstanding                                                 23,880
   Additional paid-in capital                                                               4,968,234
   Stock subscriptions receivable                                                            (681,349)
   Accumulated other comprehensive income                                                     300,198
   Deficit accumulated during development stage                                            (4,785,374)
                                                                                    ------------------
                                                                                             (174,411)
                                                                                    ------------------

                                                                                     $        780,949
                                                                                    ==================

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PAGE F-1                  SEE ACCOMPANYING NOTES TO THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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                                                    PROTEO, INC. AND SUBSIDIARY
                                                   (A DEVELOPMENT STAGE COMPANY)
                                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                       AND COMPREHENSIVE LOSS
                               FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2007 AND 2006
                            AND FOR THE PERIOD FROM NOVEMBER 22, 2000 (INCEPTION) THROUGH JUNE 30, 2007

-----------------------------------------------------------------------------------------------------------------------------------

                                                             UNAUDITED

                                                                                                                     NOVEMBER 22,
                                                                                                                        2000
                                              THREE-MONTHS      THREE-MONTHS      SIX-MONTHS       SIX-MONTHS        (INCEPTION)
                                             ENDED JUNE 30,    ENDED JUNE 30,    ENDED JUNE 30,   ENDED JUNE 30,   THROUGH JUNE 30,
                                                 2007               2006             2007             2006              2007

REVENUES                                     $           -     $           -     $           -    $           -    $             -
                                            ---------------   ---------------   ---------------  ---------------  -----------------

EXPENSES
  General and Administrative                        40,517            76,626           135,457          167,447          3,315,935
  Research and Development, net of grants           37,071            (3,477)           59,723           39,407          1,542,700
                                            ---------------   ---------------   ---------------  ---------------  -----------------
                                                    77,588            73,149           195,180          206,854          4,858,635
                                            ---------------   ---------------   ---------------  ---------------  -----------------

INTEREST AND OTHER INCOME (EXPENSE), NET            (5,718)          (22,464)          (12,788)         (32,660)            10,287
                                            ---------------   ---------------   ---------------  ---------------  -----------------

NET LOSS BEFORE MINORITY INTEREST                  (83,306)          (95,613)         (207,968)        (239,514)        (4,848,348)

MINORITY INTEREST IN LOSS OF
  CONSOLIDATED SUBSIDIARY, NET OF TAXES                  -                 -             3,948                -             62,974
                                            ---------------   ---------------   ---------------  ---------------  -----------------

NET LOSS (AVAILABLE TO COMMON
  STOCKHOLDERS)                                    (83,306)          (95,613)         (204,020)        (239,514)        (4,785,374)

FOREIGN CURRENCY TRANSLATION
  ADJUSTMENTS                                       13,892            16,724            19,807           43,419            300,198
                                            ---------------   ---------------   ---------------  ---------------  -----------------

COMPREHENSIVE LOSS                           $     (69,414)    $     (78,889)    $    (184,213)   $    (196,095)   $    (4,485,176)
                                            ===============   ===============   ===============  ===============  =================

BASIC AND DILUTED LOSS PER
  COMMON SHARE                               $       (0.00)    $       (0.00)    $       (0.01)   $       (0.01)
                                            ===============   ===============   ===============  ===============

WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                            23,879,350        22,079,350        23,879,350       22,379,350
                                            ===============   ===============   ===============  ===============


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PAGE F-2                                               SEE ACCOMPANYING NOTES TO THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

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                                              PROTEO, INC. AND SUBSIDIARY
                                             (A DEVELOPMENT STAGE COMPANY)
                                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2007 AND 2006, AND
                        FOR THE PERIOD FROM NOVEMBER 22, 2000 (INCEPTION) THROUGH JUNE 30, 2007

----------------------------------------------------------------------------------------------------------------------

                                                    UNAUDITED

                                                                                                        NOVEMBER 22,
                                                                                                           2000
                                                                  SIX-MONTHS         SIX-MONTHS         (INCEPTION)
                                                                     ENDED              ENDED             THROUGH
                                                                 JUNE 30, 2007      JUNE 30, 2006      JUNE 30, 2007
                                                               -----------------  -----------------  -----------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                        $      (204,020)   $      (239,514)   $    (4,785,374)
Adjustments to reconcile net loss to net cash used in
  operating activities:
    Depreciation                                                         27,366             27,806            248,185
    Loss on disposal of property and equipment                            3,684                  -              3,684
    Unrealized foreign transaction loss                                  18,000             40,000            142,000
    Changes in operating assets and liabilities:
       Research supplies inventory                                            -              9,944           (113,904)
       Prepaid expenses and other current assets                         36,776            (45,538)            (9,405)
       Accounts payable and accrued liabilities                         (28,705)           (66,597)            38,435
       Accrued licensing fees                                                 -             68,000            747,000
                                                               -----------------  -----------------  -----------------
NET CASH USED IN OPERATING ACTIVITIES                                  (146,899)          (205,899)        (3,729,379)
                                                               -----------------  -----------------  -----------------

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment                                    (1,108)                 -           (602,836)
Cash of reorganized entity                                                    -                  -             27,638
                                                               -----------------  -----------------  -----------------
NET CASH USED IN INVESTING ACTIVITIES                                    (1,108)                 -           (575,198)
                                                               -----------------  -----------------  -----------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock                                        -                  -          1,792,610
Proceeds for subscribed stock                                           180,732            187,296          2,509,646
                                                               -----------------  -----------------  -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                               180,732            187,296          4,302,256
                                                               -----------------  -----------------  -----------------

NET EFFECT OF FOREIGN CURRENCY TRANSLATION
    ON CASH                                                               7,386               (261)           311,914
                                                               -----------------  -----------------  -----------------

NET INCREASE (DECREASE) IN CASH                                          40,111            (18,864)           309,593

CASH AND CASH EQUIVALENTS - beginning
    of period                                                           269,482            227,777                  -
                                                               -----------------  -----------------  -----------------

CASH AND CASH EQUIVALENTS - end of
    period                                                      $       309,593    $       208,913    $       309,593
                                                               =================  =================  =================

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PAGE F-3                                  SEE ACCOMPANYING NOTES TO THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2007

--------------------------------------------------------------------------------

1.  NATURE OF BUSINESS AND BASIS OF PRESENTATION

BASIS OF PRESENTATION

The management of Proteo, Inc. ("Proteo" or the "Company") and its wholly owned
subsidiary Proteo Biotech, AG, without audit, prepared the condensed
consolidated financial statements for the six-month periods ended June 30, 2007
and 2006 and for the period from November 22, 2000 (Inception) through June 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, the Company's financial position as of June 30, 2007, and the
results of operations and cash flows for the six-month periods ended June 30,
2007 and 2006 and for the period from November 22, 2000 (Inception) through June
30, 2007, 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 accounting principles generally accepted
in the United States of America 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 Proteo, Inc.'s Form 10-KSB
filed with the Securities and Exchange Commission (the "SEC") on March 31, 2007.

The results of operations for the three-month and six-month periods ended June
30, 2007 are not necessarily indicative of the results to be expected for the
full year.

NATURE OF BUSINESS

The Company and its subsidiary intend 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".

                                      F-4
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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2007

--------------------------------------------------------------------------------

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 he 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. The Company 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 approval 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 action to address these matters. They include:

      o     Retention of experienced management personnel with particular skills
            in the commercialization of such products.
      o     Attainment of 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 products, to the extent they may be deemed drugs or biologics, are
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 the above 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.

                                      F-5
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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2007

--------------------------------------------------------------------------------

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 accounting principles generally accepted in the United States of America
and include the accounts of the Company and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

SIGNIFICANT RECENT ACCOUNTING PRONOUNCEMENTS

In the opinion of management, neither Financial Accounting Standards Board
("FASB"), it's Emerging Issues Task Force, the AICPA, or the SEC have issued any
accounting pronouncements since the Company filed its December 31, 2006 Form
10KSB 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
Securities and Exchange Commission 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.

                                      F-6
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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2007

--------------------------------------------------------------------------------

2.  STOCK SUBSCRIPTIONS RECEIVABLE AND OTHER STOCK ISSUES

During the six-month periods ended June 30, 2007 and 2006, the Company received
$180,732 and $187,296, 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
six-month period ended June 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 at June 30, 2007 and 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 income/loss and accumulated in a separate
component of stockholders' deficit. Accumulated comprehensive income
approximated $300,000 at June 30, 2007.

                                      F-7
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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2007

--------------------------------------------------------------------------------

5. FOREIGN CURRENCY TRANSACTIONS

The Company records payables related to a certain licensing agreement 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 the time 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 six-month periods ended June 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 unrealized foreign currency
exchange losses of approximately $18,000 and $40,000 for the six-months ended
June 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 agreement.

                                      F-8
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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2007

--------------------------------------------------------------------------------

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 74,000 and
141,000 Euros ($98,000 and $173,000, respectively) have been reported as a
reduction of research and development expenses for the six-month periods ended
June 30, 2007 and 2006, respectively. As of June 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 the 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 June 30, 2007, the Company has accrued $889,000 (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 annual payments of 30,000 Euros, to be paid 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 June 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.

                                      F-9
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR 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, and 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.

In November 2004, we entered into an exclusive worldwide license and
collaboration agreement with ARTES Biotechnology GmbH ("ARTES"). This license
agreement enables us to economically produce Elafin on a large scale by using
the sublicensed yeast HANSENULA POLYMORPHA as a high performance expression
system. Rhein Biotech GmbH ("Rhein") has licensed the yeast to ARTES, who
in-turn sublicensed it to us. The agreement has a term of 15 years with an
annual license fee of 10,000 Euros per year or 2.5% royalties on the future
sales of Elafin. Should the license agreement between Rhein and ARTES terminate,
Rhein will assume the sublicense agreement with us under similar terms.

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 the upcoming clinical trials has to comply with a large number of
rules and regulations. Eurogentec has completed its required production run of
Elafin.

                                       2
<PAGE>

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. 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 European Agency for the
Evaluation of Medicinal Products (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 the Company's Elafin project as one of the top 10 most
interesting cardiovascular projects. We presented the Elafin project at the
"Windhover's Therapeutic Alliances Cardiovascular Conference" in Chicago on
November 16, 2006.

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 $180,732 and $187,296, respectively, in connection with such
subscription agreements during the six-month periods ended June 30, 2007 and
2006, respectively. Approximately $300,000 is owed to us at June 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 64,000 Euros (approximately $87,000) for the six-month period, and
33,000 Euros (approximately $45,000) for the three-month period ended June 30,
2007, respectively, under the new grant and qualified for an additional 9,250
Euros (approximately $12,500), which we have recorded as a receivable at period
end. As of June 30, 2007, management believes that all milestones required by
the New Grant have been satisfied.

The Company has cash approximating $310,000 as of June 30, 2007. This is an
increase over the June 30, 2006 cash balance of approximately $210,000, due to
receipts from the grant and equity financing activities.

Management believes that the Company will not generate any significant revenues
in the next few 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 favorable
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 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.

                                       3
<PAGE>

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 funds 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.


                                       4
<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES

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 June
30, 2007. There have been no significant changes in the Company's internal
control over financial reporting during the quarter ended June 30, 2007 that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

                                       5
<PAGE>

                            PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         None.

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

         None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

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

         None.

ITEM 5.  OTHER INFORMATION.

         None.

ITEM 6.  EXHIBITS.

         Exhibits:

         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.

                                       6
<PAGE>

                                   SIGNATURES

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


                                            PROTEO, INC.

Dated: July 30, 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)

                                       7