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

                                  FORM 10-QSB

     (Mark  One)

     [ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
     Act  of  1934

     For  the  quarterly  period  ended  June 30, 2004

     [    ]  Transition  report  under  Section  13  or  15(d) of the Securities
     Exchange  Act  of  1934

     For  the  transition  period  from  _________  to  _________

     Commission  File  No.  0-27039

                                 PROTEO, INC.
                 (Name of Small Business Issuer in Its Charter)

          NEVADA                                      88-0292249
(State or Other Jurisdiction of                     (IRS Employer
Incorporation or Organization)                 Identification Number)

                         3206 WEST WIMBLEDON DRIVE
                             AUGUSTA, GA 30909
              (Address of Principal Executive Offices) (Zip Code)

                              (706) 737-6600
                       (Issuer's Telephone Number)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                     (None)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         Common Stock, par value $0.0001
                                (Title of Class)

     Check  whether  the  issuer  (1)  filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports); and (2)
has  been  subject  to  such  filing  requirements  for  the  past  90  days.

     Yes  [ X ]    No [   ]


     Indicate  the number of shares outstanding of each of the issuer's class of
common  stock  as  of  the  latest  practicable  date:

   Title of each class of Common Stock         Outstanding as June 30, 2004
   ----------------------------------------- ----------------------------------
   Common  Stock,  $0.001  par  value                  21,667,101



     Transitional  Small  Business  Disclosure  Format  (check  one):

Yes [   ]  No [ X ]

<PAGE>


                                  PROTEO, INC.
                                AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                                TABLE OF CONTENTS


PART  I.  FINANCIAL  INFORMATION

Item  1.  Condensed  Consolidated  Financial  Statements:

Unaudited  Condensed  Consolidated  Balance  Sheet  as  of  June  30,  2004

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss
for  the Three-month and Six-month Periods Ended June 30, 2004 and 2003, and for
the  Period  From  November  22,  2000  (Inception)  Through  June  30,  2004

Unaudited  Condensed  Consolidated  Statements  of  Cash Flows for the Six-month
Periods  Ended June 30, 2004 and 2003, and for the Period From November 22, 2000
(Inception)  Through  June  30,  2004

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.  Changes  in  Securities

Item  3.  Defaults  Upon  Senior  Securities

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

Item  5.  Other  Information

Item  6.  Exhibits  and  Reports  on  Form  8-K

SIGNATURES



<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2004
                                    UNAUDITED

                                     ASSETS

<TABLE>
<CAPTION>
<S>                                                                                                                <C>
CURRENT ASSETS
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   372,727
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       46,236
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       32,413
                                                                                                                   ------------
                                                                                                                       451,376

PROPERTY AND EQUIPMENT, NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      400,463
                                                                                                                   ------------

                                                                                                                   $   851,839
                                                                                                                   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    36,909
Accrued licensing fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      465,000
                                                                                                                   ------------
                                                                                                                       501,909

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
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; 21,667,101 shares issued and outstanding       21,667
Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    3,653,447
Stock subscriptions receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (1,039,955)
Accumulated other comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      225,870
Deficit accumulated during development stage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (2,511,099)
                                                                                                                   ------------
                                                                                                                       349,930
                                                                                                                   ------------

                                                                                                                   $   851,839
                                                                                                                   ============
</TABLE>


Page  1     See  accompanying  notes  to  these condensed consolidated financial
statements.

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
     FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 2004 AND 2003
   AND FOR THE PERIOD FROM NOVEMBER 22, 2000 (INCEPTION) THROUGH JUNE 30, 2004
                                    UNAUDITED

<TABLE>
<CAPTION>
<S>                          <C>           <C>           <C>           <C>           <C>
                                                                                     NOVEMBER
                                                                                     22,  2000
                                                                                     (INCEPTION)
                             THREE-MONTHS  THREE-MONTHS  SIX-MONTHS    SIX-MONTHS    THROUGH
                             ENDED JUNE    ENDED JUNE    ENDED JUNE    ENDED JUNE    JUNE 30,
                             30, 2004      30, 2003      30, 2004      30, 2003      2004
                             ------------  -----------   ----------    ----------    ------------
REVENUES. . . . . . . . . .  $         -   $         -   $         -   $         -   $         -

EXPENSES
General and Administrative.      100,245       139,422       188,112       259,782     1,976,089
Research and Development,
net of grants . . . . . . .       85,696        65,283       185,355       121,229       558,188
                             ------------  -----------   ----------    ----------    ------------
                                 185,941       204,705       373,467       381,011     2,534,277

INTEREST AND OTHER
INCOME. . . . . . . . . . .        7,749         2,846        22,328        44,870        23,178
                             ------------  -----------   ----------    ----------    ------------

NET LOSS (AVAILABLE TO
   COMMON STOCKHOLDERS) . .     (178,192)     (201,859)     (351,139)     (336,141)   (2,511,099)

FOREIGN CURRENCY
   TRANSLATION ADJUSTMENTS.       (6,819)       48,417       (34,093)       83,530       225,870
                             ------------  -----------   ----------    ----------    ------------

COMPREHENSIVE LOSS. . . . .  $  (185,011)  $  (153,442)  $  (385,232)  $  (252,611)  $(2,285,229)
                             ============  ===========   ============  ============  ============

BASIC AND DILUTED LOSS
   AVAILABLE TO COMMON
   STOCKHOLDERS PER
   COMMON SHARE . . . . . .  $     (0.01)  $     (0.01)  $     (0.02)  $     (0.01)
                             ============  ===========   ============  ============

WEIGHTED AVERAGE
   NUMBER OF COMMON
   SHARES OUTSTANDING . . .   21,667,101    21,635,000    21,667,101    21,617,000
                             ============  ===========   ============  ============
</TABLE>

Page  2    See  accompanying  notes  to  these condensed consolidated financial
statements.

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
           FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2004 AND 2003, AND
     FOR THE PERIOD FROM NOVEMBER 22, 2000 (INCEPTION) THROUGH JUNE 30, 2004

                                   UNAUDITED

<TABLE>
<CAPTION>
<S>                                         <C>           <C>           <C>
                                                                         NOVEMBER
                                                                         22,  2000
                                                                        (INCEPTION)
                                             SIX-MONTHS    SIX-MONTHS    THROUGH
                                             ENDED JUNE    ENDED JUNE    JUNE 30,
                                             30, 2004      30, 2003      2004
                                            ------------  ------------  ------------

CASH FLOWS FROM OPERATING
    ACTIVITIES
Net loss . . . . . . . . . . . . . . . . .  $  (351,139)  $  (336,141)  $(2,511,099)
Adjustments to reconcile net loss to net
    cash used in operating activities:
Depreciation . . . . . . . . . . . . . . .       24,369        22,451        91,044
Unrealized foreign transaction
loss (gain). . . . . . . . . . . . . . . .      (15,000)            -        64,000
Changes in operating assets and
liabilities:
Inventory. . . . . . . . . . . . . . . . .        1,805        (2,977)      (46,236)
Prepaid expenses and other
current assets . . . . . . . . . . . . . .        2,095        49,441       (28,751)
Accounts payable and
accrued liabilities. . . . . . . . . . . .      (11,279)      (39,607)       28,717
Accrued licensing fees . . . . . . . . . .       66,000        76,000       401,000
                                            ------------  ------------  ------------
NET CASH USED IN OPERATING ACTIVITIES. . .     (283,149)     (230,833)   (2,001,325)

CASH FLOWS FROM INVESTING
    ACTIVITIES
Acquisition of property and equipment. . .       (1,313)      (63,166)     (506,106)
Cash of reorganized entity . . . . . . . .            -             -        27,638
                                            ------------  ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES. . .       (1,313)      (63,166)     (478,468)

CASH FLOWS FROM FINANCING
    ACTIVITIES
Proceeds from issuance of common stock . .            -        40,000     1,627,610
Proceeds for subscribed stock. . . . . . .      200,000       127,800       999,040
                                            ------------  ------------  ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES.      200,000       167,800     2,626,650

FOREIGN CURRENCY
    TRANSLATION ADJUSTMENT . . . . . . . .      (34,093)       83,530       225,870
                                            ------------  ------------  ------------

NET (DECREASE) INCREASE IN CASH. . . . . .     (118,555)      (42,669)      372,727

CASH - beginning of period . . . . . . . .      491,282       448,868             -
                                            ------------  ------------  ------------

CASH - end of period . . . . . . . . . . .  $   372,727   $   406,199   $   372,727
                                            ============  ============  ============
</TABLE>

Page  3     See  accompanying  notes  to  these condensed consolidated financial
statements.

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2004

1.  NATURE  OF  BUSINESS  AND  BASIS  OF  PRESENTATION

BASIS  OF  PRESENTATION

The  management of Proteo, Inc. ("Proteo" or the "Company") and its wholly owned
subsidiaries  Proteo  Marketing,  Inc.  and  Proteo  Biotech, AG, without audit,
prepared the condensed consolidated financial statements for the three-month and
six-month  periods ended June 30, 2004 and 2003 and for the period from November
22,  2000  (Inception) through June 30, 2004.  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, 2004, and the results of operations and cash
flows for the three-month and six-month periods ended June 30, 2004 and 2003 and
for  the  period  from November 22, 2000 (Inception) through June 30, 2004, have
been  made.  Such  adjustments  consist  only  of  normal recurring adjustments.

Certain  note  disclosures  normally included in our annual 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  on  April  14,  2004.

The  results  of operations for the three-month and six-month periods ended June
30,  2004  are  not necessarily indicative of the results to be expected for the
full  year.

NATURE  OF  BUSINESS

Proteo Marketing, Inc. ("PMI") was incorporated in the State of Nevada and began
operations  on  November  22,  2000.  In  December  2000,  PMI  entered  into  a
reorganization  and stock exchange agreement with Proteo Biotech AG, ("PBAG"), a
German corporation, incorporated in Kiel, Germany. As a result, PBAG is a wholly
owned subsidiary of PMI.  On April 25, 2002, PMI completed a reverse merger with
the Company.  The Company's common stock is currently quoted on the OTC Bulletin
Board of the National Association of Securities Dealers under the symbol "PTEO".

Page 4

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2004

1.  NATURE  OF  BUSINESS  AND  BASIS  OF  PRESENTATION  (continued)

NATURE  OF  BUSINESS  (continued)

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. Elafin 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.

Since  its inception, the Company has primarily been engaged in the research and
development of its proprietary product Elafin. Once the research and development
phase  is complete, the Company will begin 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,  and  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:

-     Retention  of  experienced  management personnel with particular skills in
the  commercialization  of  such  products.
-     Attainment  of  technology  to  develop  additional  biotech  products.
-     Raising  additional  funds through the sale of debt and equity securities.
-     Applying  for  additional  research  grants.

Page 5

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2004

1.  NATURE  OF  BUSINESS  AND  BASIS  OF  PRESENTATION  (continued)

DEVELOPMENT  STAGE  AND  GOING  CONCERN  CONSIDERATIONS  (continued)

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 elsewhere or that the regulatory authorities will
review  the  product  within  the  average  period  of  time.

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 the additional
sales of debt and 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.

These circumstances, among others, raise concerns about the Company's ability to
continue  as a going concern. The accompanying 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.

RECENT  ACCOUNTING  PRONOUNCEMENTS

Recent accounting pronouncements discussed in the Notes to the December 31, 2003
consolidated  financial  statements  filed  previously  with  the Securities and
Exchange  Commission  in Form 10-KSB that were required to be adopted during the
year  ended December 31, 2004 did not have a significant impact on the Company's
financial  statements.

Page 6

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2004

2.  INVENTORY

Inventory  is  stated  at  the  lower of cost (first-in, first-out) or estimated
market  value.  Inventories  are  entirely  comprised  of  research supplies and
materials.


3.  STOCK  SUBSCRIPTIONS  RECEIVABLE  AND  OTHER  STOCK  ISSUES

During  the  three-month  and six-month periods ended June 20, 2004, the Company
received  approximately  $50,000  and  $200,000, respectively in connection with
stock  subscriptions  receivable.  Management expects the outstanding balance of
the  stock subscription receivable to be received in installments through August
2005.

There  have  been  no  issuances  of preferred stock during the six-month period
ended  June  30,  2004,  nor  have  any  stock  options  been  granted.

The  Company  previously  entered  into  a  common stock purchase agreement with
FID-Esprit to purchase up to 1,000,000 shares of the Company's restricted common
stock.  Under  the  agreement, the Company will sell its common stock at a price
per share equal to 40% of the average ask price for the 20 trading days previous
to  the  date of subscription, as quoted on a public market.  However, the price
per  share  will  be  no  less  than $0.40.  The agreement shall expire upon the
earlier  of  the purchase of 1,000,000 or December 31, 2004.  The Company issued
no  shares under this agreement during the six-month period ended June 30, 2004.


4.  LOSS  PER  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 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,  2004  and  2003.

Page 7

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2004

5.  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 exchange gains or losses resulting from such
translation  are  excluded  from  net earnings but are included in comprehensive
income  and  accumulated  in  a  separate  component  of  stockholders'  equity.
Accumulated  comprehensive  income  approximated  $226,000  at  June  30,  2004.


6.  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. At each quarter-end,
the  Company  translates the quarterly amount to US Dollars at the exchange rate
effective  on  that date. If the exchange rate changes between the time incurred
and  the  time  actual payment is made, a foreign exchange gain or loss results.
The Company has made no payments under this licensing agreement, and, therefore,
the  Company  has not realized any exchanges losses during the six-month periods
ended  June  30,  2004  and  2003.

Additionally,  the  Company  computes  a  foreign  exchange gain or loss at each
balance  sheet  date  on  all  recorded  foreign transactions that have not been
settled.  The  difference between the exchange rate that could have been used to
settle  the  transaction  at  the date it occurred, and the exchange rate at the
balance  sheet  date,  is  the unrealized gain or loss recognized in current net
income.  The  Company  recorded  an  unrealized  exchange  loss of approximately
$15,000  for  the  six-months  ended  June  30,  2004. There were no significant
unrealized  exchange  gains or losses during the six-month period ended June 30,
2003.


7.  SEGMENTS  OF  AN  ENTERPRISE  AND  RELATED  INFORMATION

The  Company  adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and  Related Information." SFAS No. 131 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
significant  revenues  since  its  inception.  All  fixed  assets are located in
Germany.

Page 8

<PAGE>

                          PROTEO, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                                  JUNE 30, 2004

8.  GRANTS

Proteo  Biotech  AG's  previous  research  grant  from  the  German  state  of
Schleswig-Holstein  expired  during the three-month period ended March 31, 2004.
No  grant funds were received during such period.  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  new 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.  The new grant covers 49.74% of eligible
research  and development costs and is subject to the Company's ability to cover
the  remaining  50.26  %  of  the  costs.

The  Company has qualified to receive approximately 150,000 Euros (approximately
$180,000)  of  the  new grant in 2004.  No funds have been received from the new
Grant  during  the  three-month  period  ended  June  30,  2004.  Grant  funds
approximating  107,000  Euros  were  received  and  recorded  as  a reduction of
research  and development expenses for the six-month period ended June 30, 2003.
As of June 30, 2004, management believes that all milestones required by the new
grant  have  been  satisfied.


Page 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  significant  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 intends to specialize 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, if any, 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 assumes that it
will take at least five years to achieve first governmental approval for the use
of  Elafin  as  a  drug in the treatment of serious tissue and muscle damage. In
order  to  conduct clinical trials, the Company must first complete the research
and  development of an efficient production process in accordance with GMP (Good
Manufacturing  Practices)  standards.

The  Company's  success  will  depend  on  its ability to implement an efficient
production process in accordance with GMP standards, and to prove that Elafin is
well  tolerated  by  humans and its efficiency in the indicated treatment. There
can be no assurance that the Company will be able to develop feasible production

<PAGE>

procedures  in  accordance  with  GMP standards, or that Elafin will receive any
governmental  approval  for the use as drug in any of the intended applications.

In  collaboration with a non-affiliated third party company in 2003, the Company
identified  the yeast to be utilized in the production of Elafin and ordered the
third party to develop efficient clones of such yeasts. Further, the Company has
optimized  the yeast expression systems to increase efficient production of such
yeasts.  Also,  the  Company  has  equipped  its  facilities  to  scale  up  its
fermentation  abilities, and is now able to produce sufficient amounts of Elafin
for  its  research  and  development.

In  collaboration  with  another non-affiliated third party in 2003, the Company
successfully  completed animal studies about the acute toxicity of a single dose
intravenous  application  of  Elafin  in  mice  and  rats  as  well as continuos
intravenous  application  of  Elafin  in  rats  over  two  weeks.


LIQUIDITY  AND  CAPITAL  RESOURCES

Since Inception, the Company has raised a total of approximately $3,666,000 from
the  sale  of  17,853,179  shares of restricted common stock, of which 5,085,487
shares have been sold at $0.40 per share under a stock subscription agreement in
the  amount  of  approximately $2,035,000.  As of June 30, 2004, the Company has
received  approximately  $999,000  related  to the stock subscription agreement.

Previously,  the  Company's wholly owned German subsidiary Proteo Biotech AG had
received  a  grant  from  the  German  State Schleswig-Holstein in the amount of
approximately  $994,000  (790,000  Euros).  That grant covered 47.95% of related
costs  and  expenses of research and development of the Company's Elafin project
during  the period from 2001 to  March 2004. The grant depended on the Company's
ability  to cover 52.05% of such costs and expenses, and from the achievement of
research  project milestones. We received no funds during the quarter ended June
30,  2004.

During  the  quarter ended June 30, 2004, the German State of Schleswig-Holstein
granted  Proteo  Biotech  AG  an  additional 760,000 Euros under a new grant for
further research and development of the Company's pharmaceutical product Elafin.
The  new  Grant  covers the period from April 1, 2004 to March 31, 2007 based on
certain  milestones which have to be achieved 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  cover  the  remaining  50.26  %  of the costs.  No grant funds were
received  during  the  six-months  ended June 30, 2004, but we have qualified to
receive  approximately 150,000 Euros (approximately $180,000) from the new grant
in  2004.  We  believe  that  Proteo  Biotech  AG  is  on track to meet required
milestones.

The  Company's cash was approximately $373,000 as of June 30, 2004. The decrease
compared  to  approximately $491,000 as of December 31, 2003 is primarily due to
research  and  development  expenditures,  net  of  cash received for subscribed
stock.

The  Management  of  the Company 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 restricted common
stock  and/or  the sale  of  other  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,  at  all.

<PAGE>

CAPITAL  EXPENDITURES

The Company intends to purchase capital equipment over the next twelve months to
meet  the  Company's  research  and  development  requirements.  The  costs  are
estimated  to  total  approximately  $150,000.  Further,  the Company intends to
utilize  third  party  services  in  its  research and development over the next
twelve  months.  Such  costs  are  estimated  to  total  approximately $120,000.

ITEM  3.  CONTROLS  AND  PROCEDURES

Walter  J. Thomsen, the Company's new principal executive and financial officer,
has  evaluated  the  effectiveness  of  the  Company's  disclosure  controls and
procedures  (as  defined  in  Rule  13a-15(c)  of the Securities Exchange Act of
1934).  Based on his most recent evaluation, he has concluded that the Company's
disclosure  controls  and  procedures  were effective as of June 30, 2004. There
have  been  no  significant  changes  in  the  Company's  internal  control over
financial  reporting during the quarter ended June 30, 2004 that have materially
affected,  or are reasonably likely to materially affect, the Company's internal
control  over  financial  reporting.

ITEM  5.  OTHER  INFORMATION

Appointment  of  new  Directors  and  Officers

Ulrich Glaeser resigned as Director, and the Company's Secretary, as well as the
CEO  of  the  Company's  wholly  owned German subsidiary Proteo Biotech AG as of
April  30, 2004. Furthermore Joerg Alte has resigned as the Company's President,
CEO  and  CFO  as  of July 15, 2004. Such resignations were due only to personal
reasons and were not caused by any dissent to the Company, its management or its
policies.  The  Company  and  its  Board  are grateful for the valuable services
rendered  by  Ulrich  Glaeser  and  Joerg  Alte.

Walter  J.  Thomsen, age 40, has joined the Company and succeeded Ulrich Glaeser
as  CEO  of  the  Company's  wholly  owned subsidiary Proteo Biotech AG. Further
Walter  J.  Thomsen has been appointed as a new member of the Board of Directors
and as the Company's new President, CEO and CFO effective as of July 20th, 2004.

Walter  J.  Thomsen was born in San Francisco, California and grew up in the USA
and  Germany.  He  holds  a  Masters  degree in business administration from the
Christian-Albrechts-University  in  Kiel,  Germany.  Mr.  Thomsen  has  gained
international  management  experience  in  a  multinational  Industry  service
corporation,  of  which he served 5 years as managing director within affiliated
companies.  Before  joining  the  Company,  Mr.  Thomsen  topped  off  his broad
experience  in an international business consultancy as a management consultant.

Dr.  Barbara  Kahlke,  a  Director,  has  been  appointed  as  the Company's new
Secretary  also  effective  as of July 20th, 2004, the date of the resolution of
the  Board  of  Directors.


ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     Exhibits
31.1     Rule  13a-14(e)  and 15d-14(a) Certification of Chief Executive Officer

31.2     Rule  13a-14(e)  and 15d-14(a) Certification of Chief Financial Officer

32     Section  1350  Certification

(b)     Reports  on  Form  8-K

None

<PAGE>

SIGNATURES

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

                              PROTEO,  INC.

                              By:  /  s  /  Walter  Thomsen
                              -----------------------------------------------
                              Walther  Thomsen
                              Principal  Executive  Officer

Dated:  August  12,  2004