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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 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|.

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

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                                  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


<PAGE>

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

                                    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.


                                      F-1

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<TABLE>
<S>     <C>
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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 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

<PAGE>

--------------------------------------------------------------------------------------------------
                                    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
</TABLE>

<PAGE>

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

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".


                                      F-4

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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 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 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.


                                      F-5

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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 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 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.


                                      F-6

<PAGE>

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.


                                      F-7

<PAGE>

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                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               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.


                                      F-8

<PAGE>

--------------------------------------------------------------------------------
                           PROTEO, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 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 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.


                                      F-9

<PAGE>

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


                                        1

<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. 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.


                                        2

<PAGE>

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.


                                        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 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.


                                        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
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.


                                        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:

         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.


                                        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: 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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