Filed Pursuant to Rule 424(b)3
                                                      SEC File Number 333-130460

                                   PROSPECTUS



                            PROTON LABORATORIES, INC.
                        1135 Atlantic Avenue, Suite 101
                                Alameda, CA 94501
                              voice: (510) 865-6412
                              fax: (510) 865-9385

                        50,000,000 Shares of Common Stock

     This prospectus relates to the sale of up to 50,000,000 shares of our
common stock by Selling Stockholders. We will not receive proceeds from the sale
of our shares by the Selling Stockholders. However, we will receive proceeds
from our sale of the common stock to the Selling Stockholder (also called the
"Investor"). The Investor will purchase the common stock from us at a purchase
price of 95% of the lowest closing best bid price of the common stock during
each pricing period.

     Our common stock is traded on the OTCBB under the trading symbol "PLBI."

     We have engaged the services of US EURO Securities, Inc. to be our
placement agent in connection with the equity line of credit. US EURO
Securities, Inc. is a member of the NASD.

     INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 8 OF THIS PROSPECTUS
BEFORE MAKING A DECISION TO PURCHASE OUR STOCK.

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

           The date of this Prospectus is January 5, 2006





                                TABLE OF CONTENTS


                                                                      Page
                                                                   

Available Information                                                 6
Prospectus Summary                                                    6
Risk Factors                                                          8
Information Regarding Forward-Looking Statements                      10
Use of Proceeds                                                       10
Dilution                                                              11
Description of Business                                               12
Description of Property                                               17
Financial Statements                                                  17 and F-1
Management's Discussion and Analysis                                  17
Market for Common Equity and Related Stockholder Matters              20
Directors, Executive Officers, Promoters and Control Persons          21
Executive Compensation                                                22
Security Ownership of Certain Beneficial Owners and Management        23
Certain Relationships and Related Transactions                        24
Description of Securities                                             25
Selling Stockholders                                                  26
Plan of Distribution                                                  26
Changes In and Disagreements With Accountants
    on Accounting and Financial Disclosure                            27
Legal Proceedings                                                     28
Interest of Named Experts and Counsel                                 28
Disclosure of Commission Position on Indemnification
    for Securities Act Liabilities                                    28




                              AVAILABLE INFORMATION

     We are currently subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). We file periodic reports,
proxy materials and other information with the Securities and Exchange
Commission (the "Commission"). In addition, we will furnish stockholders with
annual reports containing audited financial statements certified by our
independent accountants and interim reports containing unaudited financial
information as it may be necessary or desirable. We will provide without charge
to each person who receives a copy of this prospectus, upon written or oral
request, a copy of any information that is incorporated by reference in this
prospectus (not including exhibits to the information that is incorporated by
reference unless the exhibits are themselves specifically incorporated by
reference). Such request should be directed to: Edward Alexander, Chief
Executive Officer, PROTON LABORATORIES, INC., 1135 Atlantic Avenue, Suite 101,
Alameda, CA 94501, voice: (510) 865-6412, fax: (510) 865-9385. Our Web site is
www.protonlabs.com.

     We have filed with the Securities and Exchange Commission a Registration
Statement under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities offered by this prospectus. This prospectus does
not contain all of the information set forth in the Registration Statement,
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to us and this offering,
reference is made to the Registration Statement, including the exhibits filed
therewith, that may be inspected without charge at the public reference room
maintained by the Commission at 100 F Street N.E., Washington , D.C. 20549, tel.
1-800-SEC-0330, , or through SEC's e-mail address: publicinfo@sec.gov. Copies of
such material may also be obtained from the Public Reference Section of the
Commission at 100 F Street N.E., Washington , D.C. 20549, at prescribed rates.

     The Web site of the Commission is www.sec.gov which contains reports, proxy
and information statements and other information regarding issuers that file
electronically with the Commission. Visitors to the Commission's Web site may
access such information by searching the EDGAR database.

                               PROSPECTUS SUMMARY

     Effective November 28, 2005, we entered into an Investment Agreement, as
amended on December 19, 2005, which is an equity line of credit ("ELOC"), with
Dutchess Private Equities Fund, LP ("Dutchess"). The ELOC terminates 36 months
after the registration statement is effective. The maximum amount of money that
the ELOC may provide to us over the 36 month period of time is $10,000,000.
During this 36 months, commencing at such time as the registration statement is
effective, we may periodically deliver new issue registered shares of our common
stock to Dutchess who then delivers cash to us based on a fluctuating price per
share of our common stock. We are not obligated to request the entire
$10,000,000. The actual aggregate number of shares that we may issue pursuant to
the Investment Agreement is not determinable as it is based on the market price
of our common stock from time to time and how much funding we desire from time
to time. We have reserved 50 million shares for the ELOC which we are
registering in the registration statement pursuant to the Investment Agreement's
Registration Rights Agreement. The 50 million shares of stock represents the
number of shares at a price of $0.20 per share needed to fund the entire $10
million of the ELOC.

     We can commence drawing down on the ELOC at such time as the registration
statement is effective. Since only the Commission can order a registration
statement effective, we do not know when or if the registration statement will
become effective. For an equal amount of dollars of funding from time to time
pursuant to the ELOC, the number of shares we would issue to Dutchess would be
greater during times of our stock price being low, and conversely so during
times when our stock price is high. Pursuant to the ELOC, we are subject to
penalties if we fail to deliver stock to Dutchess after we request a draw down
from the ELOC.

     Upon the effectiveness of the registration statement, and pursuant to the
ELOC, we may issue and sell to the Investor, and the Investor will purchase from
us, up to that number of shares pf common stock having an aggregate value of
$10,000,000. From time to time, we may, in our sole discretion, deliver a put
notice to the Investor which states the dollar amount which we intend to sell to
the Investor which will be, at our choice, either: (A) 200% of the average daily
volume (U.S. market only) of our common stock for the 20 trading days prior to
the applicable put notice date, multiplied by the average of the 3 daily closing
bid prices immediately preceding the put date, or, (B) $100,000. The purchase
price for the common stock identified in the put notice will be equal to 95% of
the lowest closing bid price of the common stock during the pricing period. The
pricing period is the period beginning on a put notice date and ending on and
including the date that is 5 trading days after the put notice date. The
Investor is required to purchase from us during the related pricing period that
number of shares having an aggregate purchase price equal to the Put Amount set
forth in the Put Notice.

     Pursuant to the ELOC, we are subject to a penalty if we fail to deliver
stock to Dutchess after requesting a draw down from the ELOC. The penalty varies
based on the number of undelivered shares, if any. The penalty is as follows:


                                        6



NO. OF DAYS LATE          Per $10,000 OF COMMON STOCK
                       
1                         $  100
2                         $  200
3                         $  300
4                         $  400
5                         $  500
6                         $  600
7                         $  700
8                         $  800
9                         $  900
10                        $1,000
Over 10                   $1,000 + $200 for each Business Day late beyond 10 days.


     As we draw down on the equity line of credit, more shares will be sold into
the market by Dutchess. This new supply of shares may cause our stock price to
drop. In turn, as the stock price drops and as we make more draw downs on the
ELOC, even more stock will come into the market which may cause yet a further
drop in stock price. You should be aware that there is an inverse relationship
between our stock price and the number of shares to be issued pursuant to the
ELOC. If our stock price declines, we will be required to issue a greater number
of shares under the ELOC. We are not required to draw down or use the full
amount available of the ELOC.

Examples of share issuances under the equity line of credit if the full $10
million of the ELOC is funded:



                                                                        
Purchase Price:         (1)       $0.30           $0.20           $0.15                $0.10
Shares Purchased:       (2)       33,333,333      50,000,000      66,666,666 (3)       100,000,000 (3)



----------------------------------
(1)  Represents recent market prices or lower than recent market prices that may
     apply to the equity line of credit.

(2)  Represents the number of shares of common stock to be issued at the prices
     set forth in the table to generate $10 million in gross proceeds from the
     equity line of credit.

(3)  Would require that we register additional shares.

     We have engaged the services of US EURO Securities, Inc. to be our
placement agent in connection with the equity line of credit. US EURO
Securities, Inc. is a member of the NASD. Pursuant to the terms of the Placement
Agent Agreement, US EURO will render consulting services to us with respect to
the Investment Agreement and will be available for consultation in connection
with ELOC funding.

THE OFFERING



                     
Outstanding
Common Stock            14,270,100 shares outstanding as of December 12, 2005
Before This             (includes 47,500 shares that have not been certificated yet).
Offering

Common Stock            Up to 50,000,000 shares of common stock underlying the equity line credit.
Offered

Outstanding             64,270,100 shares if all offered shares are sold.
Common Stock
After This
Offering

Offering Price          Determined at the time of sale by the Selling Stockholders.

Proceeds                We will not receive proceeds from the sale of our shares by the Selling Stockholders.
                        However, we will receive proceeds from our sale of the common stock to the Selling
                        Stockholder (also called the "Investor").  The Investor will purchase the common stock from us
                        at a purchase price of 95% of the lowest  closing  best  bid  price of the common stock during
                        each pricing period.  The pricing period is the period beginning on a put notice date and ending
                        on  and  including the date that is 5 trading days after the put notice  date.  The put notice date
                        is the date that we request a draw down of the ELOC.

Risk Factors            The securities offered hereby involve a high degree of risk. See "Risk Factors."



                                        7

                                  RISK FACTORS

     You should carefully consider the following risk factors before purchasing
our common stock. The risks and uncertainties described below are not the only
ones we face. There may be additional risks and uncertainties that are not known
to us or that we do not consider to be material at this time. If the events
described in these risks occur, our business, financial condition and results of
operations would likely suffer. This prospectus contains forward-looking
statements that involve risks and uncertainties. Our actual results may differ
significantly from the results discussed in the forward-looking statements.

IF WE ISSUE SECURITIES PURSUANT TO THE EQUITY LINE OF CREDIT, THEN EXISTING
STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION.

     The sale of shares pursuant to equity line of credit will have a dilutive
impact on our stockholders. As a result, our net income per share could decrease
in future periods, and the market price of our common stock could decline. The
lower our stock price at the time we exercise draw down on the equity line of
credit, then the more shares we will have to issue to Dutchess. If our stock
price decreases, then our existing stockholders would experience greater
dilution.

DUTCHESS WILL EFFECTIVELY PAY LESS THAN THE THEN PREVAILING MARKET PRICE OF OUR
COMMON STOCK, WHICH COULD CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.

     As we draw down the equity line of credit and we issue common stock to
Dutchess, such common stock will be purchased by Dutchess at less than the then
market price. At such times, Dutchess will have a financial incentive to sell
our common stock immediately upon receiving the shares. When Dutchess sells
shares of our common stock, the price of our stock could decrease. If our stock
price decreases, Dutchess may have a further incentive to sell the shares of our
common stock that it holds. Such sales of common stock by Dutchess could cause
the market price of our common stock to decline.

OUR STOCK PRICE IS HIGHLY VOLATILE AND YOU MAY LOSE SOME OR ALL OF YOUR
INVESTMENT.

     Trading prices of our common stock may fluctuate in response to a number of
events and factors, such as:

     -    general economic conditions changes in interest rates;

     -    fluctuations in the stock market in general ;

     -    quarterly variations in our operating results;

     -    new products, services, innovations, and strategic developments by our
          competitors , or business combinations and investments by our
          competitors;

     -    changes in our capital structure, including issuance of additional
          debt or equity to the public;

     -    additions or departures of our key personnel;

     -    corporate restructurings, including layoffs or closures of facilities;

     -    certain analyst reports, news and speculation.

OUR PAST LOSSES RAISE DOUBTS ABOUT OUR ABILITY TO OPERATE PROFITABLY OR CONTINUE
AS A GOING CONCERN.

     We have experienced substantial operating losses. For the year ended
December 31, 2004, we had a net loss of $965,840. For the nine months ended
September 30, 2005 we had a net loss of $824,231. For the quarter ended
September 30, 2005 we had a net loss of $128,979. Our stockholders deficit as of
December 31, 2004 was $276,588. Our stockholders deficit at September 30, 2005
was $599,504. We expect to incur significant operating losses until product
sales increase. We will also need to raise sufficient funds to finance our
activities. We may not be able to achieve or sustain profitability. Our
independent auditors made a going concern qualification in their report dated
March 7, 2005, which raises substantial doubt about our ability to continue as a
going concern. These factors raise substantial doubt about our ability to
continue as a going concern.

WE MUST RAISE CAPITAL TO BE SUCCESSFUL

     We will require additional funds to conduct our operations. We may not be
able to raise funds. To raise additional capital, we may sell additional equity
securities, or accept debt financing or obtaining financing through a bank or
other entity. There is no limit as to the amount of debt we may incur.
Additional financing may not be available to us or may not be available on terms
additional stock, there may be a significant dilution in the value of our
outstanding common stock.


                                        8

LACK OF INDUSTRIAL AND CONSUMER ACCEPTANCE OF FUNCTIONAL WATER WOULD IMPAIR OUR
BUSINESS.

     We sell equipment that makes functional water. The current market for
industrial and consumer functional water equipment is small in the USA. We must
increase market acceptance of functional water in order to be successful. We do
not know if the products we sell will receive market acceptance at a level that
would allow us to operate profitably.

IF WE DO NOT KEEP PACE WITH OUR COMPETITORS AND WITH TECHNOLOGICAL AND MARKET
CHANGES, OUR PRODUCTS MAY BECOME OBSOLETE AND OUR BUSINESS MAY SUFFER.

     The market for our products is competitive and could be subject to rapid
technological changes. We believe that there are potentially many competitive
approaches being pursued, including some by private companies for which
information is difficult to obtain. Many of our competitors have significantly
greater resources, more product candidates and have developed product candidates
and processes that directly compete with our products. Our competitors may have
developed, or could in the future develop, new technologies that compete with
our products or even render our products obsolete. To the extent that others
develop new technologies that address the applications for functional water, our
business will suffer.

THE SHARES AVAILABLE FOR SALE BY THE SELLING STOCKHOLDERS COULD SIGNIFICANTLY
REDUCE THE MARKET PRICE OF OUR COMMON STOCK.

     A total of 50,000,000 shares of our common stock are being registered for
Resale. The market price of our common stock could drop if a substantial amount
of these shares are sold in the public market. A drop in the market price will
reduce the value of your investment.

SELLING STOCKHOLDERS MAY SELL SECURITIES AT ANY PRICE OR TIME WHICH COULD REDUCE
THE MARKET PRICE OF OUR COMMON STOCK.

     After effectiveness of this prospectus, the Selling Stockholders may offer
and sell their shares at a price and time determined by them. The timing of
sales and the price at which the shares are sold by the Selling Stockholders
could have an adverse effect upon the public for our common stock.

SINCE WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON STOCK AND DO NOT INTEND TO DO
SO IN THE FUTURE, A PURCHASER OF OUR STOCK WILL ONLY REALIZE A GAIN ON HIS
INVESTMENT IF THE MARKET PRICE OF OUR COMMON STOCK INCREASES.

     We have never paid, and do not intend, to pay any cash dividends on our
common stock. Therefore an investor in this offering, in all likelihood, will
only realize a profit on his investment if the market price of our common stock
increases in value.

BECAUSE SHARES OF OUR COMMON STOCK WILL MOST LIKELY CONTINUE TO TRADE UNDER
$5.00 PER SHARE, THE APPLICATION OF THE PENNY STOCK REGULATION COULD ADVERSELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND MAY AFFECT THE ABILITY OF
HOLDERS OF OUR COMMON STOCK TO SELL THEIR SHARES.

     Our securities may be considered a penny stock. Penny stocks generally are
securities with a price of less than $5.00 per share other than securities
registered on national securities exchanges or quoted on the Nasdaq stock
market, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system. Our
securities may be subject to penny stock rules that impose additional sales
practice requirements on broker-dealers who sell penny stock securities to
persons other than established customers and accredited investors. For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of penny stock securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the penny stock rules require the delivery, prior to the transaction, of
a disclosure schedule prescribed by the Commission relating to the penny stock
market. The broker-dealer also must disclose the sales commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Monthly statements must be sent by the broker-dealer
disclosing recent price information on the limited market in penny stocks. The
penny stock rules may restrict the ability of broker-dealers to sell our
securities and may have the effect of reducing the level of trading activity of
our common stock in the public market, if any.

EDWARD ALEXANDER OWNS 58% OF OUR COMMON STOCK AND HE CONTROL US.

     Edward Alexander is our CEO. Mr. Alexander has the ability to control
substantially all matters submitted to our stockholders for approval, including
the election and removal of directors and any merger, consolidation, takeover or
other business combination involving us, and to control our management and
affairs. This may discourage a potential acquirer from making a


                                        9

tender offer or otherwise attempting to obtain control in an acquisition or
takeover.

OUR OFFICERS AND DIRECTORS HAVE LIMITED LIABILITY AND HAVE INDEMNITY RIGHTS.

     The State of Washington law, our Article of Incorporation and our By-Laws
provide that we may indemnify our officers and directors against losses or
liabilities which arise in their corporate capacity. The effect of these
provisions could be to dissuade lawsuits against our officers and directors. The
cost of indemnification could be high.

     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.

                INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements contained in this prospectus, including, without
limitation, statements containing the words "believes," "anticipates,"
"expects," and other words of similar import, are "forward-looking statements."
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual results, performance or achievements to
be materially different from any future results, performance, or achievements
expressed or implied by forward-looking statements. Given these uncertainties,
readers are cautioned not to place undue reliance on forward-looking statements.
In addition to the forward-looking statements contained in this prospectus, the
following forward-looking factors could cause our future results to differ
materially from our forward-looking statements: market acceptance of our
products and our functional water technology, competition, funding and
government compliance.

                                USE OF PROCEEDS

     We will not receive proceeds from the sale of our shares by the Selling
Stockholders. However, we will receive proceeds from our sale of the common
stock to the Selling Stockholder (also called the "Investor"). The Investor will
purchase the common stock from us at a purchase price of 95% of the lowest
closing best bid price of the common stock during each pricing period. The
pricing period is the period beginning on a put notice date and ending on and
including the date that is 5 trading days after the put notice date. The put
notice date is the date that we request a draw down of the ELOC.

     We will pay for the cost of registering the shares of common stock in this
offering. We will not receive any proceeds from the sale of the common stock by
the Selling Stockholders. However, we will receive proceeds from our sale of the
common stock to the Selling Stockholder (also called the "Investor"). The
Investor will purchase the common stock from us at a purchase price of 95% of
the lowest closing best bid price of the common stock during each pricing
period.

     We may receive up to the gross amount of $10,000,000 if we draw down on the
entire ELOC. However, we are not required to use the entire ELOC.




Example of Funds Raised Using the ELOC:
---------------------------------------

                                                        
Number of Shares Sold:         5,000,000   12,500,000   25,000,000   50,000,000

Funds provided by the ELOC:  $ 1,000,000  $ 2,500,000  $ 5,000,000  $10,000,000

Use of Funds:                General corporate purposes and working capital



                                       10

                                    Dilution

     Our net tangible book value, based on our unaudited financial statements
for the fiscal quarter ended September 30, 2005, was $(599,504) or, $(0.042) per
share of common stock (unaudited).

     Net tangible book value per share is determined by dividing our tangible
book value (total tangible assets less total liabilities) by the number of
outstanding shares of our common stock which was 14,270,100 shares outstanding
as of December 12, 2005.

     Since this offering is being made solely by the selling securities holders
and none of the proceeds will be paid to us, our net tangible book value will be
unaffected by this offering. Our net tangible book value, however, will be
impacted by the common stock that we will sell to Dutchess under the Investment
Agreement. The amount of dilution resulting from share issuances to Dutchess
will be determined by our stock price at or near the time of the put of shares
to Dutchess by us.

     The following example shows the dilution to new investors assuming the
issuance of 100%, 50%, 25% and 10% of the 50,000,000 shares of common stock to
Dutchess at an assumed offering price of $0.20 per share which is based on the
closing price of our common stock on December 9, 2005 ($0.24) that has been
adjusted for the 5% discount at which we will issue shares under our agreement
with Dutchess and a 15% downward fluctuation in share price (total of a 20%
decrease in price from the actual closing price of $0.24 per share on December
12, 2005). The Dutchess discount is defined as 95% of the lowest closing bid
price of our common stock during the pricing period.

     Our pro forma net tangible book value as of September 30, 2005 (unaudited)
would have been as follows:

     Pro Forma Effects of Dilution from Dutchess Offering:



                                                        
Assumed percentage of
Shares issued:                    100%           50%           25%          10%

Number of shares issued:   50,000,000    25,000,000    12,500,000    5,000,000 

Assumed public offering
price:                    $      0.20   $      0.20   $      0.20   $     0.20 

Net tangible book value
Per share before this
Offering:                 $    (0.042)  $    (0.042)  $    (0.042)  $   (0.042)

Net tangible book value
after this offering       $ 9,449,023   $ 4,449,003   $ 2,444,903   $  449,003 

Net tangible book value
per share after this
Offering:                 $     0.147   $     0.112   $     0.071   $    0.021 

Dilution of net tangible
Book value per share
To new investors:         $     0.053   $     0.088   $     0.129   $    0.179 

Increase in net tangible
Book value per share
To existing shareholders  $     0.188   $     0.154   $     0.113   $    0.063 



                                       11

                            DESCRIPTION OF BUSINESS

INTRODUCTION

     Our executive offices are located at: Proton Laboratories, Inc., 1135
Atlantic Avenue, Suite 101, Alameda, CA 94501, tel. (510) 865-6412, fax: (510)
865-9385. Our Web site is www.protonlabs.com.

     Our growth is dependent on attaining profit from our operations and our
raising capital through the sale of stock or debt. There is no assurance that we
will be able to raise any equity financing or sell any of our products at a
profit.

     Our stock is traded on the OTCBB. Our trading symbol is "PLBI."

     OUR BUSINESS--THE BACKGROUND OF FUNCTIONAL WATER

     Our business is the marketing of residential and commercial "functional
water systems." "Functional water" is water that has been processed through an
electrolytic ion separation process or electrolysis process and has a wide array
of functional properties due to its unique characteristics. Our functional water
systems restructure tap water into one type of water that is alkaline in
concentration and one type of water that is acidic in concentration. We believe
that the functional water systems that we market will have applications in a
large variety of industries, such as corporate agriculture, organic agriculture,
food processing, medicine and dentistry, dermatology, heavy industry, mining,
environmental clean-up, product formulations and beverages.

     We are an exclusive importer and master distributor of functional water
systems that are manufactured by Matsushita Electric Corporation of America. We
utilize functional water intellectual property under licensing agreements. We
supply consumer products related to functional water. We consult on projects
utilizing functional water. We facilitate knowledge about functional water
between the manufacturer and industry, and we act as educators about the
benefits of functional water. We are a provider of systems that produce
functional water, also called "electrolyzed water" or "functional electrolyzed
water." Functional water is water that has been restructured through the process
of electrolysis. Electrolysis forces a separation to occur in the electrolytes
that are present in the water molecules. Through the process of creating
functional water, regular tap water can be restructured into two separate types
of water. For instance, tap water can be restructured into one type of water
that is alkaline in concentration and one type of water that is acidic in
concentration.

     We believe that water with these unique functional properties is desirable
for a number of reasons. Water with smaller clusters of molecules has a lower
surface tension. With a lower surface tension, water may have improved
hydrating, permeating and solubility properties. These properties may enhance
the overall functional effectiveness of water. The separation of the alkaline
and acidic properties found in water provides the water with functional
abilities. For example, functional acidic water has disinfecting abilities to
meet a wide array of disinfecting requirements in food processing procedures.
Functional alkaline water makes an excellent drinking water due to improved
hydration.

OUR BUSINESS--SYSTEMS AND MARKETS

     We market functional water systems to the residential and commercial
markets. For the residential market, we market functional water systems that are
used to produce a health-beneficial, alkaline-concentrated drinking water. For
the commercial market, we market commercial-grade functional water systems that
are used in applications ranging from food preparation to hospital disinfection.
Our goal is to take our functional water technology and market it throughout
North America.

     Our business model envisions us as: a supplier of technology for functional
water  applications; a supplier of hardware for functional water systems; a
provider of intellectual property for functional water systems under licensing
agreements; a supplier of consumer functional water products; consultants to
industries requiring functional water; facilitators between Japanese functional
water manufacturers and industrial users in the U.S.A.; and educators of
academia, government and industry on the benefits of functional water.

OUR BUSINESS--SCIENCE

     "Functional water" is a term that has been assigned to a new category of
water. Functional water has a wide array of functional properties due to its


                                       12

unique characteristics. We believe the uses for this type of water are far
reaching, since we are identifying new applications and uses for functional
water on an ongoing basis. Functional water systems are capable of producing the
following types of functional water:

     Ionic-Structured Water. Ionic-structured water is electrolyzed drinking
water that is alkaline-concentrated and utilizes smaller molecular clusters than
regular water for improved hydration and solubility. Ionic structured water is
smooth to the palate.

     Electro-Structured Water. Electro-structured water is water that is
anti-microbial in nature and may be effective against virus, bacteria, fungus,
mildew and spores. This water may have a wide array of disinfectant uses.

     Derma-Structured Water. Derma-structured water is electrolyzed low pH water
that has astringent and disinfecting properties and may have a wide array of
cosmetic, dermatological and post-plastic surgery applications that may minimize
infections and scarring and expedite healing.

FUNCTIONAL WATER RESEARCH IN ACADEMIA

     The process to produce functional water was developed by Scottish inventor
Michael Faraday in Boston, Massachusetts in 1834. In 1929, the value of
electrolytic water separation to produce water with functional properties was
realized in Japan. Japanese researchers have since taken this process, created a
wide array of functional waters and have introduced this technology to food
processing, hospital disinfection, wound care, agriculture, organic agriculture
and food safety in Japan. During recent years, functional water applications
have been studied by universities in the U.S.A. and Canada. For example, in a
University of Georgia study published in the Journal of Food Protection in 1999
entitled "Inactivation of Escherichia coli O157:H7 and Listeria monocytogenes on
Plastic Kitchen Cutting Boards by Electrolyzed Oxidizing Water," the immersion
of plastic kitchen cutting boards in electrolyzed oxidizing water was found to
be an effective method for inactivating food-borne pathogens such as E. coli.
Other studies at the University of Georgia have looked at the efficacy of
electrolyzed oxidizing water for inactivating E. coli, Salmonella and Listeria
and have determined that such water may be a useful disinfectant. A University
of Georgia study entitled "Antimicrobial effect of electrolyzed water for
inactivating Campylobacter jejuni during poultry washing" demonstrated that
electrolyzed water is not only effective in reducing the populations of C.
jejuni on chicken, but also may be effective in the prevention of
cross-contamination of processing environments.

OUR BUSINESS--FUNCTIONAL WATER SYSTEMS

     Residential Systems. The residential countertop, functional water systems
produce water that scientists believe contains more wellness and
health-beneficial properties than regular tap water (see, "Electrolyzed-Reduced
Water Scavenges Active Oxygen Species and Protects DNA from Oxidative Damage,"
Biochemical and Biophysical Research Communications, Vol. 234, No. 1, pp.
269-274 (1997); and, Hanaoka, K., "Antioxidant Effects Of Reduced Water Produced
By Electrolysis Of Sodium Chloride Solutions," 31 Journal of Applied
Electrochemistry 1307-1313 (2001)). Generally, the residential countertop system
sits next to the kitchen faucet, and through the use of a diverter, allows tap
water to be routed through the system. The water is then processed through a
charcoal filter where chlorine and sediments are removed. The filtered water
then proceeds to the electrolysis chamber that is made up of electrodes and
membranes. A positive and negative electrical charge is passed through the
electrodes. The minerals that are found in the filtered water are attracted to
opposite electrodes. For example, the alkaline minerals (minerals with
positive(+) properties that include calcium, magnesium, sodium, manganese, iron
and potassium) are attracted to the negatively charged (-) electrode. The acidic
minerals (minerals with negative (-) properties include nitric acid, sulfuric
acid and chlorine) are attracted to the positively-charged (+) electrode.
Through this mineral separation process, two separate types of water are formed,
which are water with alkaline-concentrated minerals, and water with
acidic-concentrated minerals. Each type of water is held in a separate chamber
in the residential countertop system. The alkaline-concentrated water may be
consumed for drinking and cooking purposes, while the acidic-concentrated water
may be used in a topical, astringent medium.

     Commercial Systems. We are in preparation to market commercial functional
water systems to the food processing, medical and agricultural industries. The
system for the food processing industry includes: (1) a hand disinfectant system
for proper hand washing, and (2) an anti-microbial water production system for
general sterilization and disinfectant needs. We also intend to market similar
systems to the medical industry. For the agricultural industry, we intend to
sell functional water systems to organic food growers who desire to use
functional water to replace the use of pesticides, fungicides, herbicides and
chemical fertilizers. Our commercial functional water systems produce


                                       13

approximately one gallon per minute of electrolyzed alkaline and acidic waters.
For the food processing industry, the alkaline water may be used as an effective
medium for removing pesticides from agricultural products, while the acidic
water may be used as anti-microbial water. For the hospital industry, the
alkaline water may be used as an effective medium in removing protein buildup
from surfaces, while the acidic water may be used as anti-microbial water. For
the organic agricultural industry, the alkaline water may be used for plant
growth and as a solid nutrient, while the acidic water may be used as a
substitute for fungicides, pesticides, herbicides and sporicides.

OUR BUSINESS--MARKETING STRATEGY

     Our objectives are:

     -    To create a revenue stream through our marketing of residential
          systems. These sales may be made through independent distributors,
          network marketing, infomercials, mail order, retail sales and direct
          sales generated through word-of-mouth referrals.

     -    To create a revenue stream through the sale of disinfectant systems to
          the food processing industry.

     -    To create a revenue stream through licensing agreements based upon a
          wide array of applications for functional water that will be targeted
          to specific industries. For example, electrolyzed water may be used in
          the beverage industry to extract flavors from their natural sources,
          such as extracting tea from tea leaves for use in bottled iced tea.
          Electrolyzed water may also be used in the formulation of
          nutraceutical-type dietary supplement products in the health-food and
          dietary supplement industries.

     To continue the development of functional water applications for industries
that are currently dependent upon chemicals as a processing medium. In addition
to the food processing, medical and agricultural markets, we intend to develop
market-driven applications for functional water, provide the science to these
applications, publish the developments in scientific and industrial circulars
and perform consulting functions to industries that can benefit from functional
water. We intend to hire engineers from Japan to design, engineer and assemble
prototypes of functional water systems that are built for specific industrial
needs. We believe that by performing these functions ourselves, we will have all
of the necessary tools to become a leading provider of functional water
technology.

OUR BUSINESS--GOVERNMENT REGULATIONS

     Our functional water systems are, or may be, subject to regulation by a
variety of federal, state and local agencies, including the Consumer Product
Safety Commission (CPSC") and the Food and Drug Administration ("FDA").

     Our hand disinfectant functional water system may be subject to pre-market
approval by the FDA under Title 21 of the Code of Federal Regulations. We would
expect such an approval process to take approximately 90 days after filing with
the FDA, although there is no assurance that we will be able to obtain
pre-market approval from the FDA. We have not made any applications to the FDA
yet. We have engaged the consulting services of Environ Health Associates Inc.
to assist us with our FDA application for the hand disinfectant. We anticipate
filing the FDA application in the near future. Environ Health Associates Inc. is
familiar with a modern food safety procedure known as Hazard Analysis and
Critical Control Point ("HACCP"). HACCP is a food safety procedure that focuses
on identifying and preventing hazards that could cause food-borne illnesses. We
believe that complying with the HACCP procedure may assist us in getting FDA
approval, since the FDA generally encourages retailers to apply HACCP-based food
safety principles, along with other recommended practices.

     At such time as we may obtain FDA approval for the hand disinfectant, we
then would request that the system be tested by Underwriter's Laboratories and
the National Sanitation Foundation.

OUR BUSINESS--MARKETING AND DISTRIBUTION

     We intend to develop systems for the following markets:

     -    Hand disinfection for the food processing, fast food, medical, dental,
          personal care and general health care industries.

     -    Residential, countertop drinking water electrolysis systems.

     -    Commercial functional water systems, such as metal mining and
          refining, wine grape mildew treatment, wine aging control, potato
          maintenance


                                       14

          treatment, and the formulation of dietary supplement products.

     Hand Disinfection. After we obtain FDA approvals for the hand disinfection
system, we plan to introduce the device and what we believe to be its
operational simplicity, user-friendliness, high efficacy and affordability,
through industrial circulars where hand disinfection is of a primary concern. We
also intend to arrange with a leasing company to lease the hand disinfectant
system to the fast food industry. A large part of our marketing efforts will be
directed to educating our target markets about functional water. We plan to
write and publish articles through industrial media, disinfection forums, trade
shows and documentary-type films that may be aired through CNN, PBS and Voice of
America introducing a new and novel method for hand disinfection. We intend to
handle all inquiries through a toll-free number.

     We plan to hire a public relations company that provides the news media
with documentary videos for the purpose of educating the public on the
technology, processes and applications that we market. The videos will cover the
following subjects:

     -    The use of functional electrolyzed water for food safety.

     -    The use of functional electrolyzed water for effective disinfection in
          hospitals and clinical settings.

     -    The use of functional electrolyzed water for agriculture and organic
          agriculture.

     -    The use of functional electrolyzed water as a wellness medium.

     Residential Countertop Units. The first step towards the marketing and
distribution of residential countertop units is to develop a national product
distribution program through network marketing, mail order catalogs sales,
infomercials, independent distributor channels and word of mouth sales. Since we
understand that the demographics in these sales channels is predominately
composed of females in the age groups of 35-60, we intend to concentrate on this
market segment. The second step in the marketing and distribution of residential
countertop units is to introduce a simplified, lower price-point system that
will be introduced through retail outlets under a series of private labels.

     Commercial Functional Water Systems. In addition to marketing the
residential countertop systems, we plan to develop marketing plans for
commercial systems. We may enter into agreements with companies to act as
distributors of our functional water systems. We may also grant exclusive rights
to companies to use our systems in specific industries for specific applications
in exchange for royalties.

     We presently have 12 product distributors. We are presently seeking 108
additional product distributors. In 2004 we had a radio advertising campaign to
advertise our residential consumer products.

OUR BUSINESS--COMPETITION

     Our competitors include several entry-level importers of systems from Japan
and Korea. We believe that we have several distinctive advantages over
entry-level distributors:

     We and our consultants, who are scientists, business people and advisers,
are individuals who have helped pioneer the understanding, documentation,
representation and structuring of the technology and its relevance to the U.S.A.
during the past nine-year period through various companies and organizations.
These consultants are the leaders in the U.S.A. in the knowledge and
representation of functional water.

     We have been able to create a strong platform of specialists to advance
functional water technology in the U.S.A., which would be difficult for others
to replicate due to our high level of focused commitment and dedication.

     We have close working relationships with our Japanese counterparts which
have been developed and nurtured over the past ten-year period. These members
are highly respected within the Japanese electrolysis community and attend
annual conferences as invited speakers.

     We have excellent working relationships with the Japanese manufacturers and
we are often relied upon to provide international perspectives to be used in the
refinement of their scientific, design and engineering thought processes to
create products that will be accepted on a global basis.

     With our knowledge, experience and foresight into the electrolyzed water


                                       15

industry, we are well-positioned to branch out on our own without reliance on
Japanese manufacturing, if necessary.

     We have strategically positioned ourselves as the "go to" organization for
technology, hardware and informational support for the public.

     Although the majority of competitors are small resellers, the one
significant competitor that we have is named Hoshizaki U.S.A., which is an
established U.S.A.-based Japanese company that has a substantial market presence
in refrigeration and icemakers. We expect that we may face additional
competition from new market entrants and current competitors as they expand
their business models, but we do not believe that any real strong competitors
are imminent for the foreseeable 3 to 4 year period, other than Hoshizaki U.S.A.

     To be competitive, we must assemble a strategic marketing and sales
infrastructure. Our success will be dependent on our ability to become a
formidable marketing and sales entity based upon the technology we have and our
ability to aggressively introduce this technology and its far-reaching benefits
through documentary videos and other methods of public relations.

EMPLOYEES

     We currently have 3 full-time employees all of whom are in management
positions. None of our employees is subject to a collective bargaining
agreement. We believe that our employee relations are good.

OTHER DEVELOPMENTS

     We have done preliminary field testing in the wine industry with respect to
the control of mildew on wine grapes in vineyards. Mildew on wine grapes is a
serious grapevine fungal disease. The tendency for mildew to grow on wine grapes
occurs, for example, in areas of Napa Valley where foggy conditions prevail. If
mildew is found on the wine grapes, then spraying with dusty sulfur is done.
Spraying with dusty sulfur will generally eliminate and control the mildew on
grapes. If this fungus is ignored, the wine grapes may spoil. However, the
long-term effects of sulfur exposure is unknown. The use of low pH functional
water may remove mildew

     We have done preliminary field testing in the potato growing industry with
respect to potato maintenance during storage. Our preliminary review of this use
of functional water indicates better potato maintenance during storage. We plan
to continue this preliminary test using an automated functional water sprayer.

     We have done preliminary testing in the mining and refining industry with
respect to the effect of the use of functional water on heap leaching and
refining of precious metals.

     We obtained, through a sublicense from Edward Alexander at no cost to us,
the North American rights to manufacture and distribute an electrolyzed
water-based antioxidant dietary supplement developed by MIZ Corporation, a
Japanese company specializing in advanced uses of electrolyzed water. We plan to
sell this product to the fitness, sports and wellness markets.

     We have been developing a proprietary process allowing for electrolysis to
be applied to wine. The primary objective for this application is to allow for a
wine maker to have direct control over the aging process of wine such that it
allows a wine maker to shorten, complement or, if desired, bypass the wine aging
process. The test results that were achieved showed promise in creating the
"optimal" wine through a controlled process which provides a smooth texture to
the wine along with an enhancement to the various active properties of the wine.

     We plan to file an FDA application for our hand disinfectant system and our
surface disinfectant system.

     In February 2005, MIZ Company, a Japanese company that owns four U.S.
patents whose subject matter is the electrolysis of water, assigned a 50%
ownership interest in those four patents to Mr. Alexander in consideration of
consulting services provided to MIZ Company by Mr. Alexander. Mr. Alexander has
agreed to allow us to exploit the four patents on a royalty-free basis. Since
MIZ Company and Mr. Alexander each has an ownership interest in the four
patents, either Mr. Alexander or the Japanese company could grant licenses to
others to use the four patents, and the Japanese company could exploit the four
patents by itself.

     Our functional currency is the U.S. dollar.

     Our independent auditors made a going concern qualification in their report
dated March 7, 2005 which raises substantial doubt about our ability to


                                       16

continue as a going concern.

                            DESCRIPTION OF PROPERTY

     We lease approximately 4,000 square feet of office and storage space
located at 1135 Atlantic Avenue, Suite 101, Alameda, CA 94501, for a lease
payment of approximately $6,000 per month. Under this lease, we are required to
pay a percentage of the property taxes, insurance and maintenance. The lease
expires in July 2006 and we anticipate renewing the lease at that time. We
believe this space is adequate for our current needs, and that additional space
is available to us at a reasonable cost, if needed.

                              FINANCIAL INFORMATION

     Our financial statements begin on page F-1.


                      Management's Discussion and Analysis

FORWARD-LOOKING STATEMENT

     Certain statements contained herein, including, without limitation,
statements containing the words, "believes," "anticipates," "expects," and other
words of similar meaning, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. In addition to the forward-looking statements
contained herein, the following forward-looking factors could cause our future
results to differ materially our forward-looking statements: competition,
funding, government compliance and market acceptance of our products.

INTRODUCTION

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the audited financial
statements and accompanying notes and the other financial information appearing
elsewhere herein. The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
USA., which contemplate our continuation as a going concern.

     Our independent auditors made a going concern qualification in their report
dated March 7, 2005, which raises substantial doubt about our ability to
continue as a going concern. We incurred net losses applicable to common
shareholders of $829,031 for the nine months ended September 30, 2005. We have
incurred net losses of $965,840 for the year ended December 31, 2004, and
$217,333 for the year ended December 31, 2003. We had a working capital deficit
of $713,997 at September 30, 2005 and $273,400 at December 31, 2004. Loans were
required to fund operations. This condition raises a substantial doubt about our
ability to continue as a going concern.

     The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should we be unable to
continue in existence. Our ability to continue as a going concern is dependent
upon our ability to generate sufficient cash flows to meet our obligations on a
timely basis, to obtain additional financing as may be required, and ultimately
to attain profitable operations. However, there is no assurance that profitable
operations or sufficient cash flows will occur in the future.

     We are located in Alameda, California. Our business consists of the sales
and marketing of the industrial, environmental and residential systems
throughout the U.S.A. which alter the properties of water to produce functional
water. We act as an exclusive importer and master distributor of these products
to various companies in which uses for the product range from food processing to
retail water sales. We are working towards raising funds to expand our marketing
and revenues. We have spent considerable time negotiating with several overseas
corporations for the co-development of enhanced antioxidant beverages for
distribution into the overseas markets. In addition, we are working with
Canadian businesses to identify markets for various disinfection applications of
functional water, pending government approval. We are working on agricultural
applications of functional water. We are working on packaging for a spray-on
application of function water for pathogen counter-measures.


                                       17

     We: formulate intellectual properties under licensing agreements; supply
consumer products; consult on projects utilizing functional water; facilitate
usage, uses and users of functional water between manufacturer and industry; and
act as educators on the benefits of functional water. Our business has been
focused on marketing functional water equipment and systems.
Alkaline-concentrated functional water may have health-beneficial properties and
may be used for drinking and cooking purposes. Acidic-concentrated functional
water may be used as a topical, astringent medium.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. These estimates and assumptions provide a basis for us
to make judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Our actual results may differ from
these estimates under different assumptions or conditions, and these differences
may be material.

     We recognize revenue when all four of the following criteria are met: (i)
persuasive evidence that an arrangement exists; (ii) delivery of the products
and/or services has occurred; (iii) the selling price is both fixed and
determinable and; (iv) collectibility is reasonably probable. Our revenues are
derived from sales of our industrial, environmental and residential systems
which alter the properties of water to produce functional water. We believe that
this critical accounting policy affects our more significant judgments and
estimates used in the preparation of our consolidated financial statements.

     Our fiscal year end is December 31.

     We began a joint research and development program with Weber Farms located
in Washington State. Weber Farms is family-owned with a long history of raising
and marketing quality potatoes, wheat and corn. In 1979, Weber Farms built a
fresh pack potato warehouse to ensure better quality and more oversight of the
marketing of open potatoes both to domestic and foreign markets. In 1997, a
state-of- the-art potato storage facility capable of storing 50,000 tons was
built. End uses of Weber Farm potatoes are generally in the areas of boxed and
bagged potatoes for retail stores, hash browns, French fires and other
retail-type products. We will work together in various areas where Proton's
electrolyzed water, with its unique efficacies, can be integrated into potato
production and post-harvesting processes. Understanding that Proton's water
brings about certain potato maintenance efficacies, environmental and worker
safety, on-site production abilities and cost efficiencies, both parties are
looking forward to a mutually rewarding relationship.

RESULTS OF OPERATIONS-YEARS ENDED DECEMBER 31, 2004 AND 2003.

     We had revenue of $379,989 for the year ended December 31, 2004 compared to
revenue of $238,805 for the year ended December 31, 2003. This increase is a 59%
increase in revenue. This increase in revenue was due primarily to our hiring a
sales manager in 2004.

     We had a net loss $965,840 for the year ended December 31, 2004 compared to
a net loss of $217,333 for the year ended December 31, 2003. This increase in
net loss was due primarily to our increase in equity-based compensation for
sales, general and administrative expenses.

     Cash used by operating activities was $323,722 for the year ended December
31, 2004 compared to cash used by operating activities of $80,587 for the year
ended December 31, 2003. This increase in cash used by operating activities was
due primarily to the issuance of common stock used as in-kind compensation to
pay for legal services and consulting services.

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004

     We had revenue of $274,501 for the nine months ended September 30, 2005
Compared to revenue of $278,907 for the nine months ended September 30, 2004.

     We had Selling, General and Administrative Expenses of $793,599 for the
nine months ended September 30, 2005 compared to Selling, General and
Administrative Expenses of $341,119 for the nine months ended September 30,
2004. This increase in Selling, General and Administrative Expenses was due


                                       18

primarily to stock compensation we paid to a consultant that we valued at
$459,040 during the second quarter

     We had a net loss of $824,231 for the nine months ended September 30, 2005
compared to a net loss of $246,114 for the nine months ended September 30, 2004.
This increase in net loss was due primarily to the increase in expenses for
Selling, General and Administrative Expenses.

     Net cash used by operating activities was $231,096 for the nine months
Ended September 30, 2005 compared to cash used by operating activities of
$230,446 for the none months ended September 30, 2004.

LIQUIDITY

     As of September 30, 2005, we had cash on hand of $12,396. Our growth is
dependent on attaining profit from our operations and our raising of additional
capital either through the sale of stock or borrowing. There is no assurance
that we will be able to raise any equity financing or sell any of our products
to generate a profit.

     During 2005 to date, two of our shareholders advanced us an aggregate of
$48,642. These advances bear interest at 7% with principal and accrued interest
due between November 2005 and January 2007. At September 30, 2005 we owed the
two shareholders an aggregate of $310,642 and at December 31, 2004, we owed the
two shareholders an aggregate of $262,000. These amounts include loans made to
us by them prior to 2005. At September 30, 2005 and December 31, 2004, the
accrued interest was $31,604 and $15,946, respectively.

     During the nine months ended September 30, 2005, we accrued $45,000 as
salaries payable to our majority shareholders resulting in $139,890 of salaries
payable at September 30, 2005. This accrual includes salary accruals that we
made prior to 2005.

     In March 2005, we issued a note payable in the amount of $164,000. The note
was originally due in May 2005 and has been extended to December 2005 secured by
inventory. The original terms of the loan provided for an interest payment of
$28,500 or 106% per annum; when the note was extended in May 2005, the interest
rate was amended to 30% on the original principal balance. At September 30, 2005
$47,776 of interest had been accrued. In addition, the Company issued the lender
47,500 shares of common stock, which was recorded as a $27,075 loan cost and was
amortized over the original term of the note. The lender is Gary Taylor who is
our President. These shares have not been issued yet.

     During July 2005, we sold 100,000 shares of our common stock to one
investor at $0.20 per share.

     In June 2005, we entered into an agreement with Mitachi, a Japanese
electronics component manufacturer, to aid in the production of enhanced
drinking water generators. Pursuant to this agreement, Mitachi agreed to pay us
25,000,000 Yen for engineering design, molding, tooling and preparation costs,
and the exclusive product distribution rights for China, Taiwan, and Japan.
Thought September 30, 2005, Mitachi had paid to us 6,000,000 Yen (US $52,506) in
connection with this agreement. Since the project is not yet completed and no
units have been sold, this amount is classified as deferred revenue.

FUTURE CAPITAL REQUIREMENTS

     Our growth is dependent on attaining profit from our operations, or our
raising additional capital either through the sale of stock or borrowing. There
is no assurance that we will be able to raise any equity financing or sell any
of our products at a profit.

     Our future capital requirements will depend upon many factors, including:

     -    The cost to acquire equipment that we then would resell.

     -    The cost of sales and marketing.

     -    The rate at which we expand our operations.

     -    The results of our consulting business.

     -    The response of competitors.


                                       19

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES.

     Our stock is traded on the OTCBB under the trading symbol "PLBI." Our stock
was added to the OTCBB in late December 2003. The first reported trade in our
stock on the OTCBB occurred in January 2004. We are not aware of any trading
market for our stock prior to January 2004. The following table sets forth the
quarterly high and low bid price per share for our common stock. These bid and
asked price quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual prices. There were no
trades in our common stock until January 2004. Our fiscal year ends December 31.



COMMON STOCK PRICE RANGE

YEAR AND QUARTER           HIGH       LOW
--------------------------------------------
                                

2003:

First Quarter                 (*)        (*)
Second Quarter                (*)        (*)
Third Quarter                 (*)        (*)
Fourth Quarter                (*)        (*)


2004: (**)

First Quarter              $ 2.45     $ 0.60
Second Quarter             $ 2.30     $ 0.90
Third Quarter              $ 1.15     $ 0.30
Fourth Quarter             $ 2.90     $ 0.35


2005 (**)

First Quarter              $ 1.55     $ 0.38
Second Quarter             $ 0.48     $ 0.32
Third Quarter              $ 0.40     $ 0.20
Fourth Quarter (through    $ 0.29     $ 0.14
December 9, 2005)


---------------------------------
(*)  There was no trading market for our stock until January 2004.
(**) As set forth on www.yahoo.com

     On December 9, 2005, the closing price of our stock was $0.24.

     On December 12, 2005, we had outstanding 14,270,100 shares of common stock
(includes 47,500 shares that have not been certificated yet).

     On December 12, 2005, we had approximately 86 shareholders of record which
includes shares held directly by shareholders and shares beneficially owned by
shareholders who have deposited their shares into an account at a broker-dealer.
Such deposited shares into a brokerage account are accumulated in a nominee
account in the name of Cede, Inc. Cede, Inc. is the nominee account that most
broker-dealers use to deposit shares held in the name of the broker-dealer.
Cede, Inc. is counted as one record shareholder, even though it could represent
many beneficial shareholders who have deposited their shares into an account at
a broker-dealer.

     Our transfer agent is Holladay Stock Transfer, Inc., 2939 North 67th Place,
Scottsdale, Arizona 85251, tel. (480) 481 3940.

     We have not paid any cash dividends on our common stock and we do not
expect to declare or pay any cash dividends on our common stock in the
foreseeable future. Payment of any cash dividends will depend upon our future
earnings, if any, our financial condition, and other factors as deemed relevant
by the Board of Directors.

     We have outstanding 8,000 shares of Series A Preferred Stock. We have no
outstanding options, warrants, convertible debt. Our Series A Preferred Stock
pays dividends.


                                       20



SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

                        Number of
                        securities to                       Number of securities
                        be issued                           remaining available
                        upon            Weighted-average    for future issuance
                        exercise of     exercise price of   under equity
                        outstanding     outstanding         compensation
                        options,        options,            plans (excluding
                        warrants and    warrants and        securities reflected
                        rights          rights              in column (a))

                          (a)               (b)                    (c)
                                                   
PLAN CATEGORY:

Equity compensation
plans approved by
security holders          -0-               n/a                   -0- (1)

Equity compensation
plans not approved by
security holders (2)      -0-               n/a                    352,400 

    Total                 -0-               n/a                    352,400 



          Directors, Executive Officers, Promoters and Control Persons



EXECUTIVE OFFICERS AND DIRECTORS

NAME                    AGE     POSITION
--------------------------------------------------------------------------------
                          

Edward Alexander         54     Director, Chief Executive Officer,
                                Chief Financial Officer, and Secretary

Michael Fintan Ledwith   63     Director, Member of the Audit Committee

Gary Taylor              56     Director and President


     Edward Alexander has been our Chairman, a Director, Chief Executive
Officer, Chief Financial Officer, and Secretary since 2002. He had been the
owner and president of Proton Laboratories, LLC from January, 2001 until its
merger with us. Proton Laboratories, LLC introduced an electrolytic water
separation technology that has many uses in industry, product formulations and
consumer products. From January 1997 to July 1998, Mr. Alexander served as owner
and president of Advanced H2O, LLC. In July 1998, Mr. Alexander formed Advanced
H2O, Inc. to specialize in bottled water production. Mr. Alexander continues to
serve as a consultant to Advanced H2O, Inc. Prior to 1997, Mr. Alexander served
as General Manager for Tomoe Incorporated and held various positions with
various divisions of the U.S. Navy Resale System. In February 2002, the
Securities and Exchange Commission accepted a settlement offer from Mr.
Alexander and imposed a cease and desist order against Mr. Alexander from
committing or causing any violation or future violation of Section 10(b) of the
Exchange Act and Rule 10b-5 thereunder. This order was imposed in connection
with a press release that Mr. Alexander was persuaded to release about Proton
Laboratories, LLC by a business associate whom Mr. Alexander trusted at the
time.

     Michael Ledwith has been our Director since 2002. He has been a member of
the Audit Committee since June 2004. He has been semi-retired from daily
business activities since 1998. He was Professor of Systematic Theology at the
Pontifical University of Maynooth in Ireland from 1976 to 1994. He was later
Dean of the Faculty, Head of Department and Editor of "The Irish Theological
Quarterly." He was later appointed as a Consulting Editor of the renowned
international review "Communio" and still serves in that capacity. He was
appointed Vice-President of the University in 1980, re-appointed in 1983, and
was appointed President in 1985. He served as Chairman of the Committee of Heads
of the Irish Universities and was a Member of the Governing Bureau of the
European University Presidents' Federation (CRE). He retired from his
Professorship on September 30, 1996 and has since continued to pursue his
interest in research, writing, and lecturing in the field of actualizing human
potential. Since November 2001 he has been a partner in World of Star Stuff,
which markets whole food


                                       21

products.

     On June 3, 2005, Gary Taylor was appointed as a Director and President. We
granted 131,600 shares of common stock to Mr. Taylor in connection with this
appointment. Since 1998, Mr. Taylor has been the CEO of The Moore Company which
provides consulting for product distribution and third party logistical
services.

COMMITTEES OF THE BOARD OF DIRECTORS

     We do not have any nominating, or compensation committees of the Board, or
committees performing similar functions.

     In December 2003, our Board adopted our Audit Committee Charter (the
"Charter") which established our Audit Committee. The Board of Directors has
selected Michael Ledwith, our only independent Director, to be on the Audit
Committee. Mr. Ledwith is not a financial expert. We have determined Mr.
Ledwith's independence using the definition of independence set forth in NASD
Rule 4200-(14). We have not yet been able to recruit an independent director who
is also a financial expert.

     The primary purpose of the Audit Committee is to oversee our financial
reporting process on behalf of the Board of Directors. The Audit Committee will
meet privately with our Chief Accounting Officer and with our independent public
accountants and evaluate the responses by the Chief Accounting Officer both to
the facts presented and to the judgments made by our independent accountants.
The Charter establishes the independence of our Audit Committee and sets forth
the scope of the Audit Committee's duties. The Purpose of the Audit Committee is
to conduct continuing oversight of our financial affairs. The Audit Committee
conducts an ongoing review of our financial reports and other financial
information prior to filing them with the Securities and Exchange Commission, or
otherwise providing them to the public. The Audit Committee also reviews our
systems, methods and procedures of internal controls in the areas of: financial
reporting, audits, treasury operations, corporate finance, managerial, financial
and SEC accounting, compliance with law, and ethical conduct. A majority of the
members of the Audit Committee will be independent directors. The Audit
Committee is objective, and reviews and assesses the work of our independent
accountants and our internal audit department. The Audit Committee will review
and discuss the matters required by SAS 61 and our audited financial statements
for the year ended December 31, 2004 with our management and our independent
auditors. The Audit Committee will receive the written disclosures and the
letter from our independent accountants required by Independence Standards Board
No. 1, and the Audit Committee will discuss with the independent accountant the
independent accountant's independence.

MEETINGS OF THE BOARD OF DIRECTORS

     The Board of Directors did not hold meetings during the year ended December
31, 2004, but did act by consent on four occasions. There is no family
relationship between or among any of our directors and executive officers.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Exchange Act requires our officers, directors and
persons who beneficially own more than 10% of our common stock to file reports
of ownership and changes in ownership with the SEC. These reporting persons also
are required to furnish us with copies of all Section 16(a) forms they file. To
the best of our knowledge, all persons required to file reports under Section
16(a) of the Exchange Act have done so in a timely manner.

CODE OF ETHICS

     We have a Code of Ethics that applies to our principal executive officer
and our principal financial officer. We undertake to provide to any person,
without charge, upon request, a copy of our Code of Ethics. You may request a
copy of our Code of Ethics by mailing your written request to us. Your written
request must contain the phrase "Request for a Copy of the Code of Ethics of
Proton Laboratories, Inc." Our address is: Proton Laboratories, Inc., 1135
Atlantic Avenue, Suite 101, Alameda, CA 94501.


                             Executive Compensation

     The following table sets forth certain information as to our highest paid
officers and directors for our fiscal year ended December 31, 2004. No other
compensation was paid to any such officers or directors other than the


                                       22

compensation set forth below.



                                          SUMMARY COMPENSATION TABLE


                           Annual Compensation                 Long-Term Compensation
                                                                  Awards                 Pay-Outs
                                                                       Securities
                                                            Other        Under-
Name and                                                  Restricted     lying                   All
Principal                                    Annual         Stock       Options/     LTIP       Other
Position   Year          Salary   Bonus   Compensation     Award(s)       SARs     Payouts   Compensation
                            $       $           $             $            #          $
                                                                  
           2004  (1)      62,400     -0-            -0-           -0-         -0-       -0-           -0-
Edward     2003  (2)      62,400     -0-            -0-           -0-         -0-       -0-           -0-
Alexander  2002  (3)      60,000     -0-            -0-           -0-         -0-       -0-           -0-
CEO, CFO


--------------------------------
(1)  Mr. Alexander received $2,400 as cash compensation. We determined that the
     value of his services was $62,400, of which $60,000 was recorded as accrued
     wages.

(2)  Mr. Alexander received $2,400 as cash compensation. We determined that the
     value of his services was $62,400, of which $45,000 was recorded as
     additional paid-in capital and $15,000 was recorded as accrued wages.

(3)  Mr. Alexander did not receive any cash compensation. This amount was
     determined to be the value of his services and was recorded as additional
     paid in capital.

OUTSTANDING STOCK OPTIONS

     We have not granted any options to purchase common stock and we do not have
any outstanding options to purchase common stock.

COMPENSATION OF DIRECTORS

     Our directors do not receive cash compensation for their services as
directors or members of committees of the Board of Directors.

EMPLOYEE STOCK OPTION PLANS

     We believe that our future success will depend in part on our continued
ability to attract and retain highly qualified personnel. We pay wages and
salaries that we believe are competitive. We also believe that equity ownership
is an important factor in our ability to attract and retain skilled personnel.
Our Board of Directors has adopted the 2005 Stock and Stock Option Plan (the
"Plan"). It has not yet been approved by shareholders. The purpose of the Plan
is to further our interests, our subsidiaries and our stockholders by providing
incentives in the form of stock and stock options to our officers, directors,
employees, vendors, consultants, attorneys and subcontractors. There are a total
of 352,400 shares remaining available for issuance in the Plan.

NO EMPLOYMENT AGREEMENT

     We do not have any employment agreements with any employees.

         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                        AND RELATED STOCKHOLDER MATTERS.



SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS


                        Number of
                        securities to                       Number of securities
                        be issued                           remaining available
                        upon            Weighted-average    for future issuance
                        exercise of     exercise price of   under equity
                        outstanding     outstanding         compensation
                        options,        options,            plans (excluding
                        warrants and    warrants and        securities reflected
                        rights          rights              in column (a))

                            (a)               (b)                    (c)
                                                   
PLAN CATEGORY:

Equity compensation
plans approved by
security holders            -0-               n/a                  -0- (1)

Equity compensation
plans not approved by
security holders (2)        -0-               n/a                  352,400 

    Total                   -0-               n/a                  352,400 



                                       23

     The following table sets forth certain information concerning the number of
shares of common stock owned beneficially as of December 12, 2005 by: (i) each
person (including any group) known by us to own more than five percent (5%) of
any class of our voting securities, (ii) each of our directors and executive
officers, and (iii) and our officers and directors as a group. Unless otherwise
indicated, the shareholders listed possess sole voting and investment power with
respect to the shares shown. As of December 12, 2005 we had 14,270,100 shares of
common stock outstanding (includes 47,500 shares that have not been certificated
yet).



Name                               Amount of Shares     Class of    Percentage
and Address                       Beneficially Owned   Securities    of Class
--------------------------------------------------------------------------------
                                                           
Edward Alexander
1135 Atlantic Avenue, Suite 101
Alameda, CA 94501                          8,224,000  Common Stock          58%

Gary Taylor
333 S.E. 2ND AVE.
PORTLAND OR 97214                            156,400  Common Stock           1%

Michael Fintan Ledwith
6610 Churchill Rd. SE
Tenino, WA 98589                                 -0-  Common Stock         -0-%

Executive Officers
As A Group(3 Persons)                      8,380,400  Common Stock          59%


     We are not aware of any arrangements that could result in a change of
control.

                 Certain Relationships and Related Transactions


     We have a policy that our business affairs will be conducted in all
respects by standards applicable to publicly held corporations and that we will
not enter into any future transactions and/or loans between us and our officers,
directors and 5% shareholders unless the terms are: (a) no less favorable than
could be obtained from independent third parties, and (b) will be approved by a
majority of our independent and disinterested directors. In our view, all of the
transactions described below meet this standard.

     In March 2005, Gary Taylor loaned us $164,000 and we issued to him a note
payable in the amount of $164,000. The note was originally due in May 2005 and
has since been extended to mature on December 31, 2005. The note is secured by
inventory. The original terms of the loan provided for an interest payment of
$28,500 or 106% per annum. When the note's maturity was extended in May 2005,
the interest rate was amended to 30% on the original principal balance. At
September 30, 2005 $47,776 of interest had been accrued. In addition, the
Company issued the lender 47,500 shares of common stock, which was recorded as a
$27,075 loan cost and was amortized over the original term of the note. These
shares have not been issued yet.

     During the year ended December 31, 2004, Edward Alexander advanced to us
the amount of $178,000 in cash. This advance accrues interest at the rate of 7%
per annum and is due on dates ranging from March through


                                       24

September 2006. At December 31, 2004, the aggregate balance we owe on loans from
shareholders is $262,000 which includes $84,000 in loans from prior periods. All
of these loans accrues interest at the rate of 7% per annum and are due on dates
ranging from November 2005 through September 2006. At December 31, 2004, the
aggregate accrued interest on these loans was $16,681.

     During 2004, we obtained, through a sublicense from Edward Alexander, at no
cost to us, the North American rights to manufacture and distribute an
electrolyzed water-based antioxidant dietary supplement developed by MIZ
Corporation, a Japanese company specializing in advanced uses of electrolyzed
water. We plan to sell this product to the fitness, sports and wellness markets.

     In January 2005, a shareholder advanced $40,000 to us. This advance bears
interest at 7% with principal and accrued interest due January 2007.

                            DESCRIPTION OF SECURITIES

CAPITAL STOCK

     The following description of our capital stock is a summary of the material
terms of our capital stock. Our authorized capital stock consists of 120,000,000
shares of which there are 100,000,000 shares of common stock having a par value
of $0.0001 per share and 20,000,000 shares of preferred stock having a par value
of $0.0001 per share. As of December 12, 2005, there are 14,270,100 shares of
common stock outstanding (includes 47,500 shares that have not been certificated
yet), and 8,000 shares of Series A Preferred Stock outstanding. The outstanding
shares of common stock are validly issued, fully paid and non-assessable.

     Of our 14,270,100 shares of common stock outstanding, 5,571,600 shares are
free trading shares and 8,698,500 shares are restricted shares.

     Our Articles of Incorporation do not permit cumulative voting for the
election of directors, nor do stockholders have any preemptive rights,
subscription or conversion rights to purchase shares in any future issuance of
our common stock.

     The holders of common stock have the sole right to vote, except as
otherwise provided by law or by the Articles, including provisions governing any
preferred stock. Election of directors and other general stockholder action
requires the affirmative vote of a majority of shares represented at a meeting
in which a quorum is represented. The holders of more than 50% of such
outstanding shares common stock, voting for the election of directors, can elect
all of the directors to be elected, if they so choose, and, in such event, the
holders of the remaining shares will not be able to elect any other directors.

     Subject to the rights, if any, of any outstanding shares of preferred
stock, if any, the holders of shares of common stock are entitled to dividends,
out of funds legally available therefore, when, if and as declared by the Board
of Directors. The Board of Directors has never declared a dividend and does not
anticipate declaring a dividend in the future. Each outstanding share of common
stock entitles the holder thereof to one vote per share on all matters required
by law to be submitted to a vote of stockholders.

     In the event of liquidation, dissolution or winding up of our affairs,
holders of common stock are entitled to receive, ratably, our net assets of
available after payment of all creditors and any preferential liquidation
rights, if any, of any preferred stock, if any, then outstanding.

     All of the issued and outstanding shares of common stock are duly
authorized, validly issued, fully paid, and non-assessable. To the extent that
additional shares of our common stock are issued, the relative interests of
existing stockholders may be diluted.

THE PENNY STOCK RULES

     Our securities may be considered a penny stock. Penny stocks are securities
with a price of less than $5.00 per share other than securities registered on
national securities exchanges or quoted on the Nasdaq stock market, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or system. Our securities may be subject
to "penny stock rules" that impose additional sales practice requirements on
broker-dealers who sell penny stock securities to persons other than established
customers and accredited investors. For transactions covered by these rules, the
broker-dealer must make a special suitability determination for the purchase of
penny stock securities and have received the purchaser's written consent to the
transaction prior to the


                                       25

purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the "penny stock rules" require the delivery, prior to the transaction,
of a disclosure schedule prescribed by the Commission relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. The "penny stock rules" may
restrict the ability of broker-dealers to sell our securities and may have the
effect of reducing the level of trading activity of our common stock in the
secondary market. The penny stock restrictions will not apply to our securities
when our market price is $5.00 or greater. The price of our securities may not
reach or maintain a $5.00 price level.

                              SELLING STOCKHOLDERS

     The following table sets forth the name of each Selling Stockholder, the
number of shares of common stock offered by each Selling Stockholder, the number
of shares of common stock to be owned by each Selling Stockholder if all shares
were to be sold in this offering and the percentage of our common stock that
will be owned by each Selling Stockholder if all shares are sold in this the
offering. The shares of common stock being offered hereby are being registered
to permit public secondary trading and the Selling Stockholders may offer all,
none or a portion of the shares for resale from time to time.



-----------------------------------------------------------------------------------------------
Name                                 Shares    Shares          Shares          Percentage
Of                                   Owned     Offered         Owned           Owned After
Selling                              Before    For             After           Offering If All
Stockholder                          Offering  Sale            Offering        Shares Are
Sold                                                           If All Shares
                                                               Are Sold
          (1)                                                  (2)             (2)
-----------------------------------------------------------------------------------------------
                                                                   

Dutchess Private Equities Fund, LP(4)     -0-  50,000,000 (3)            -0-               -0- 


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

(1)  To the best of our knowledge, no Selling Stockholder has a short position
     in our common stock. To the best of our knowledge, no Selling Stockholder
     that is a beneficial owner of any of these shares is a broker-dealer or an
     affiliate of a broker-dealer (a broker-dealer may be a record holder). No
     Selling Stockholder has held any position or office, or has had any
     material relationship with us or any of our affiliates within the past
     three years. The Selling Stockholders, Dutchess Private Equities Fund, II,
     LP, and any broker-dealers or agents that are involved in selling the
     shares are underwriters within the meaning of the Securities Act for such
     sales. An underwriter is a person who has purchased shares from an issuer
     with a view towards distributing the shares to the public. In such event,
     any commissions received by such broker-dealers or agents and any profit on
     the resale of the shares purchased by them may be considered to be
     underwriting commissions or discounts under the Securities Act.

(2)  Assumes no sales or purchases are transacted by the Selling Stockholder
     during the offering period other than in this offering.

(3)  Includes 50,000,000 shares not yet beneficially owned that are the subject
     of our equity line of credit agreement with Dutchess

(4)  Douglas Leighton and Michael Novielli are managing members of Dutchess
     Capital Management, LLC which is the general partner of Dutchess Private
     Equities Fund, LP.

                              PLAN OF DISTRIBUTION

     The Selling Stockholders (of record ownership and of beneficial ownership)
and any of their pledgees, assignees, and successors-in-interest may, from time
to time, sell any or all of their shares of common stock on any stock exchange,
market, or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. There is no
assurance that the Selling Stockholders will sell any or all of the common stock
in this offering. The Selling Stockholders may use any one or more of the
following methods when selling shares:

-    Ordinary brokerage transactions and transactions in which the broker-dealer
     solicits purchasers.

-    Block trades in which the broker-dealer will attempt to sell the shares as
     agent but may position and resell a portion of the block as principal to
     facilitate the transaction.


                                       26

-    Purchases by a broker-dealer as principal and resale by the broker-dealer
     for its own account.

-    An exchange distribution following the rules of the applicable exchange.

-    Privately negotiated transactions.

-    Short sales or sales of shares not previously owned by the seller.

-    An agreement between a broker-dealer and a Selling Stockholder to sell a
     specified number of such shares at a stipulated price per share.

-    A combination of any such methods of sale.

-    Any other lawful method.

     The  Selling Stockholder may also engage in:

-    Short selling against the box, which is making a short sale when the seller
     already owns the shares.

-    Buying puts, which is a contract whereby the person buying the contract may
     sell shares at a specified price by a specified date.

-    Selling calls, which is a contract giving the person buying the contract
     the right to buy shares at a specified price by a specified date.

-    Selling under Rule 144 under the Securities Act, if available, rather than
     under this prospectus.

-    Other transactions in our securities or in derivatives of our securities
     and the subsequent sale or delivery of shares by the stock holder.

-    Pledging shares to their brokers under the margin provisions of customer
     agreements. If a Selling Stockholder defaults on a margin loan, the broker
     may, from time to time, offer and sell the pledged shares.

     Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholder in amounts to be negotiated. If any
broker-dealer acts as agent for the purchaser of shares, the broker-dealer may
receive commission from the purchaser in amounts to be negotiated. We do not
expect these commissions and discounts to exceed what is customary in the types
of transactions involved.

     We are required to pay all fees and expenses incident to the registration
of the shares in this offering. However, we will not pay any commissions or any
other fees in connection with the resale of the common stock in this offering.

     If we are notified by a Selling Stockholder that they have a material
arrangement with a broker-dealer for the resale of the common stock, then we
would be required to amend the Registration Statement of which this prospectus
is a part, and file a prospectus supplement to describe the agreements between
the Selling Stockholder and the broker-dealer.

     The Selling Stockholders, Dutchess Private Equities Fund, II, LP, and any
broker-dealers or agents that are involved in selling the shares are
underwriters within the meaning of the Securities Act for such sales. An
underwriter is a person who has purchased shares from an issuer with a view
towards distributing the shares to the public. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be considered to be underwriting commissions or
discounts under the Securities Act.

     We have engaged the services of US EURO Securities, Inc. to be our
placement agent in connection with the equity line of credit. US EURO
Securities, Inc. is a member of the NASD. We will pay $10,000 to US EURO
Securities, Inc. for this service. The placement agent provides consulting
services to us with respect to the Dutchess Investment Agreement. The placement
agent is available to us for consultation in connection with financings to be
requested by us pursuant to the Dutchess Investment Agreement.


          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                            AND FINANCIAL DISCLOSURE.

     None.


                                       27

                                LEGAL PROCEEDINGS

     We are not a plaintiff or defendant in any litigation, nor is any
litigation threatened against us.

                      INTEREST OF NAMED EXPERTS AND COUNSEL

     Joel Seidner, Esq., Attorney At Law, 1240 Blalock Road, Suite 250, Houston,
Texas 77055, tel. (713) 461-2627 ext. 210, has acted as our legal counsel for
this offering. The validity of the shares offered by this prospectus has been
passed upon for Proton Laboratories, Inc. by Mr. Seidner. As of the date of this
prospectus, Mr. Seidner owns 86,000 shares of our common stock.

     Our consolidated balance sheets as of December 31, 2004 and 2003, and the
consolidated statements of operations, stockholders' deficit, and cashflows, for
the years then ended, have been included in the registration statement on Form
SB-2 of which this prospectus forms a part, in reliance on the report of Hansen,
Barnett & Maxwell, an independent registered public accounting firm, given on
the authority of that firm as experts in auditing and accounting.

                      DISCLOSURE OF COMMISSION POSITION ON
                 INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

     The Washington Business Corporation Act at Title 23 RCW provides that we
shall indemnify our officers and directors and hold harmless each person who
was, is or is threatened to be made a party to or is otherwise involved in any
threatened proceedings by reason of the fact that he or she is or was our
director or officer, against losses, claims, damages, liabilities and expenses
actually and reasonably incurred or suffered in connection with such proceeding.

     However, the statutory indemnity does not apply to: (a) acts or omissions
of the director finally adjudged to be intentional misconduct or a knowing
violation of law; (b) unlawful distributions; or (c) any transaction with
respect to which it was finally adjudged that such director personally received
a benefit in money, property, or services to which the director was not legally
entitled.

     Our Articles of Incorporation and By-Laws also state that we indemnify our
officers and directors and hold harmless each person who was, is or is
threatened to be made a party to or is otherwise involved in any threatened
proceedings by reason of the fact that he or she is or was our director or
officer, against losses, claims, damages, liabilities and expenses actually and
reasonably incurred or suffered in connection with such proceeding.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the forgoing provisions or otherwise, we have been advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in that Act and is, therefore, unenforceable.


                                       28



                            PROTON LABORATORIES, INC.

                              FINANCIAL STATEMENTS

                                TABLE OF CONTENTS


                                                                            PAGE
                                                                         
Report of Independent Registered Public Accounting Firm                     F-2

Consolidated Balance Sheets - December 31, 2004 and 2003                    F-3

Consolidated Statements of Operations for the years ended
  December 31, 2004 and 2003                                                F-4

Consolidated Statements of Stockholders' Deficit for the years ended
  December 31, 2003 and 2004                                                F-5

Consolidated Statements of Cash Flows for the years ended
  December 31, 2004 and 2003                                                F-6

Notes to Consolidated Financial Statements                                  F-7


Condensed Consolidated Balance Sheets - September 30, 2005 and
  December 31, 2004 (Unaudited)                                             FF-1

Condensed Consolidated Statements of Operations for the three
  and nine months ended September 30, 2005 and 2004 (Unaudited)             FF-2

Condensed Consolidated Statements of Cash Flows for the nine months ended
  September 30, 2005 and 2004 (Unaudited)                                   FF-3

Notes to Condensed Consolidated Financial Statements (Unaudited)            FF-4



                                      F-1

   HANSEN, BARNETT & MAXWELL
  A Professional Corporation                 REGISTERED WITH THE PUBLIC COMPANY
 CERTIFIED PUBLIC ACCOUNTANTS                     ACCOUNTING OVERSIGHT BOARD
  5 Triad Center, Suite 750
 Salt Lake City, UT 84180-1128                        [GRAPHIC OMITTED]
   Phone: (801) 532-2200                           in independent member of
    Fax: (801) 532-7944                                  BAKER TILLY
     www.hbmcpas.com                                    INTERNATIONAL


     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and the Stockholders
Proton Laboratories, Inc. and subsidiaries

We  have audited the consolidated balance sheets of Proton Laboratories, Inc. as
of  December  31,  2004  and  2003,  and  the related consolidated statements of
operations,  stockholders'  deficit  and cash flows for the years ended December
31,  2004  and  2003.  These  consolidated  financial  statements  are  the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based  on  our  audits.

We  conducted  our  audits  in  accordance  with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits  to  obtain  reasonable  assurance  about  whether the
financial  statements  are  free  of  material  misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial  statement presentation. We believe that our
audits  provide  a  reasonable  basis  for  our  opinion.

In  our  opinion the consolidated financial statements referred to above present
fairly,  in all material respects, the consolidated financial position of Proton
Laboratories  as  of  December  31,  2004  and  2003,  and  the results of their
consolidated  operations  and  their cash flows for the years ended December 31,
2004  and  2003,  in conformity with accounting principles generally accepted in
the  United  States  of  America.

The  accompanying  consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated  financial  statements, the Company has an accumulated deficit, has
suffered  reoccurring  losses from operations, has negative working capital, and
has  required  loans from the Company's majority shareholder to fund operations.
These  factors  raise substantial doubt about its ability to continue as a going
concern.  Management's  plans  in regards to these matters are also described in
Note  2.  The  consolidated  financial statements do not include any adjustments
that  might  result  from  the  outcome  of  this  uncertainty.

                            HANSEN, BARNETT & MAXWELL


Salt Lake City, Utah
March 7, 2005


                                      F-2



                                   PROTON LABORATORIES, INC
                                 CONSOLIDATED BALANCE SHEETS
                                  DECEMBER 31, 2004 AND 2003


                                                                       2004         2003

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

ASSETS
CURRENT ASSETS
Cash                                                               $    14,412   $   4,423 
Accounts receivable, less allowance for doubtful accounts of
  $16,522 and $10,092, respectively                                     10,633      24,583 
Inventory                                                               34,097      27,800 

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

    TOTAL CURRENT ASSETS                                                59,142      56,806 
-------------------------------------------------------------------------------------------

PROPERTY AND EQUIPMENT
Furniture and fixtures                                                  18,438       4,670 
Equipment and machinery                                                 95,039      43,724 
Leasehold improvements                                                  10,995       1,886 
Deposit on equipment                                                    69,500           - 
Less:  accumulated depreciation                                        (19,160)    (11,672)
-------------------------------------------------------------------------------------------

    NET PROPERTY AND EQUIPMENT                                         174,812      38,608 
-------------------------------------------------------------------------------------------

TOTAL ASSETS                                                       $   233,954   $  95,414 
===========================================================================================

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable                                                   $   134,780   $ 197,576 
Accrued expenses                                                       110,562      15,735 
Preferred dividends payable                                              3,200           - 
Stockholder loan, current portion                                       84,000           - 
-------------------------------------------------------------------------------------------

  TOTAL CURRENT LIABILITIES                                            332,542     213,311 
-------------------------------------------------------------------------------------------

STOCKHOLDER LOAN, NET OF CURRENT PORTION                               178,000      84,000 
-------------------------------------------------------------------------------------------

STOCKHOLDERS' DEFICIT
Series A convertible preferred stock, 400,000 shares authorized
  with a par value of $0.0001; 8,000 and no shares issued and
  outstanding, respectively; liquidation preference of $80,000
  and $0, respectively                                                  80,000           - 
Undesignated preferred stock, 19,600,000 shares authorized with a
  par value of $0.0001; no shares issued or outstanding                      -           - 
Common stock, 100,000,000 common shares authorized with a par
  value of $0.0001; 12,975,000 and 11,250,000 shares issued and
  outstanding, respectively                                              1,299       1,126 
Additional paid in capital                                           1,350,616     536,440 
Accumulated deficit                                                 (1,708,503)   (739,463)
-------------------------------------------------------------------------------------------

  TOTAL STOCKHOLDERS' DEFICIT                                         (276,588)   (201,897)
-------------------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                        $   233,954   $  95,414 
===========================================================================================


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-3



                                 PROTON LABORATORIES, INC
                           CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                    2004          2003

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

SALES                                                           $   379,989   $   238,805 

COST OF GOODS SOLD                                                  263,395       175,505 
------------------------------------------------------------------------------------------

GROSS PROFIT                                                        116,594        63,300 
------------------------------------------------------------------------------------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (including
  equity-based expenses of $663,349 and $45,000, respectively)    1,065,595       270,420 
------------------------------------------------------------------------------------------

LOSS FROM OPERATIONS                                               (949,001)     (207,120)

OTHER INCOME AND (EXPENSE)
Loss on disposal of property and equipment                           (1,648)       (9,483)
Interest income                                                          20             5 
Interest expense                                                    (15,211)         (735)
------------------------------------------------------------------------------------------
NET OTHER EXPENSE                                                   (16,839)      (10,213)
------------------------------------------------------------------------------------------

    NET LOSS                                                       (965,840)     (217,333)

PREFERRED STOCK DIVIDEND                                             (3,200)            - 
------------------------------------------------------------------------------------------

LOSS APPLICABLE TO COMMON SHAREHOLDERS                          $  (969,040)  $  (217,333)
==========================================================================================

BASIC AND DILUTED LOSS PER
  COMMON SHARE                                                  $     (0.08)  $     (0.02)
==========================================================================================

BASIC AND DILUTED WEIGHTED AVERAGE
  SHARES OUTSTANDING                                             11,525,510    11,250,000 
==========================================================================================


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-4



                                                    PROTON LABORATORIES, INC
                                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                         FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004


                                    PREFERRED STOCK         COMMON STOCK        ADDITIONAL
                                 =====================  ======================    PAID IN     ACCUMULATED
                                  SHARES      AMOUNT      SHARES      AMOUNT      CAPITAL       DEFICIT        TOTAL

========================================================================================================================
                                                                                       
BALANCE - DECEMBER 31, 2002              -  $        -  11,250,000       1,126      491,440      (522,130)      (29,564)

Fair value of officer services,
  no additional shares issued            -           -           -           -       45,000             -        45,000 

Net loss for the period                  -           -           -           -            -      (217,333)     (217,333)
------------------------------------------------------------------------------------------------------------------------

BALANCE - DECEMBER 31, 2003              -           -  11,250,000       1,126      536,440      (739,463)     (201,897)

Sale of preferred stock              8,000      80,000           -           -            -             -        80,000 

Issuance of shares                       -           -     100,000          10       39,990             -        40,000 
  for legal services

Issuance of shares for                   -           -   1,345,000         135      578,214             -       578,349 
  consulting services

Issuance of common stock                 -           -     280,000          28      195,972             -       196,000 
  for cash

Dividends accrued                        -           -           -           -            -        (3,200)       (3,200)

Net loss for the period                  -           -           -           -            -      (965,840)     (965,840)
------------------------------------------------------------------------------------------------------------------------

BALANCE - DECEMBER 31, 2004          8,000  $   80,000  12,975,000  $    1,299  $ 1,350,616  $ (1,708,503)  $  (276,588)
========================================================================================================================


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-5



                                PROTON LABORATORIES, INC
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                     2004        2003

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

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                          $(965,840)  $(217,333)
Adjustments to reconcile net loss to cash used
  in operating activities:
  Depreciation                                                        9,814       7,480 
  Bad debt expense                                                    6,430           - 
  Loss on disposal of property and equipment                          1,648       9,483 
  Fair value of officer services                                          -      45,000 
  Common stock issued for legal services and consulting services    618,349           - 
  Changes in operating assets and liabilities
    Accounts receivable                                               7,520       8,172 
    Inventory                                                       (33,674)    (18,879)
    Accounts payable                                                (62,796)     69,938 
    Accrued expenses                                                 94,827      15,552 
----------------------------------------------------------------------------------------

  NET CASH FROM OPERATING ACTIVITIES                               (323,722)    (80,587)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment                                (120,289)       (375)
----------------------------------------------------------------------------------------

  NET CASH FROM INVESTING ACTIVITIES                               (120,289)       (375)
----------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stockholder loans                                     178,000      84,000 
Proceeds from sale of preferred stock                                80,000           - 
Proceeds from sale of common stock                                  196,000           - 
----------------------------------------------------------------------------------------

  NET CASH FROM FINANCING ACTIVITIES                                454,000      84,000 
----------------------------------------------------------------------------------------

NET INCREASE IN CASH                                                  9,989       3,038 

CASH AT BEGINNING OF PERIOD                                           4,423       1,385 
----------------------------------------------------------------------------------------

CASH AT END OF PERIOD                                             $  14,412   $   4,423 
========================================================================================

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of inventory to equipment                                $  27,377   $  11,740 
----------------------------------------------------------------------------------------


              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                      F-6

                            PROTON LABORATORIES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATIONS

ORGANIZATION-  Proton  Laboratories,  LLC. (Proton) was incorporated on February
16,  2000  in the State of California. Proton did not begin its operations until
January  1,  2001. On January 1, 2001, Proton's sole owner contributed inventory
and  property  and  equipment  to  the  Company.

BentleyCapitalCorp.com  Inc.  (Bentley)  was  incorporated  in  the  State  of
Washington,  U.S.A. on March 14, 2000. On November 15, 2002, Proton entered into
an  Agreement and Plan of Reorganization with Bentley whereby the Company merged
with  and  into  VWO  I  Inc.  (VWO),  a wholly owned subsidiary of Bentley (the
"Merger").  In April 2004 the subsidiary changed its name to Water Science, Inc.

For financial statement purposes Proton is considered the parent corporation and
originally elected to maintain BentleyCapitalCorp.com, Inc as its business name.
In  December  2003  the  Company's  board  elected  to change its name to Proton
Laboratories,  Inc.,  and  hereafter  collectively referred to as the "Company".

CONSOLIDATION  POLICY  -  The  accompanying  consolidated  financial  statements
reflect  the  financial  position of and operations for Proton as of and for the
years  ended  December  31,  2004  and  2003.  All  significant  intercompany
transactions  have  been  eliminated  in  consolidation.

NATURE  OF  OPERATIONS  -  The  Company's  operations  are  located  in Alameda,
California. The core business of the Company consists of the sales and marketing
of  the  Company's  industrial, environmental and residential systems throughout
the  United  States  of  America  which alter the properties of water to produce
functional  water.  The  Company  acts  as  an  exclusive  importer  and  master
distributor of these products to various companies in which uses for the product
range  from  food  processing  to  retail water sales. Additionally, the Company
formulates intellectual properties under licensing agreements, supplies consumer
products,  consults  on projects utilizing functional water, facilitates between
manufacturer  and  industry  and acts as educators on the benefits of functional
water.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE  OF  ESTIMATES  - The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities,  disclosure  of  contingent  assets  and
liabilities  and  the  reported  amounts  of  revenues  and  expenses during the
reporting  period.  Actual  results  could  differ  from  those  estimates.

FINANCIAL  INSTRUMENTS  -The  Company is subject to concentration of credit risk
with  respect to sales primarily in the functional water industry and sales to a
significant  customer  and  purchases  from  a  significant  vendor.  Accounts
receivable  are  generally unsecured. The Company normally obtains payments from
customers prior to delivery of the related products. Otherwise, the Company does
not  require  collateral  for  accounts  receivable.

The  carrying  value  of  the  note  payable approximates fair value based on it
bearing  interest at a rate which approximates market rates. The amount reported
as  inventory  is  considered  to  be  a  reasonable


                                      F-7

                            PROTON LABORATORIES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


approximation  of its fair value. The fair value estimates presented herein were
based  on  market  information  available  to  management  at  the  time  of the
preparation  of  the  financial  statements.

BUSINESS  CONDITION  -  The  accompanying consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the
United  States  of  America,  which contemplate continuation of the Company as a
going  concern. The Company has incurred net losses of $965,840 and $217,333 for
the  years  ended  December  31,  2004 and 2003, respectively. The Company had a
working  capital deficit of $273,400 and $156,505 at December 31, 2004 and 2003,
respectively.  Loans  from  Edward  Alexander  were required to fund operations.
These  conditions  raise  a  substantial  doubt  about  the Company's ability to
continue  as  a  going  concern.  The  financial  statements  do not include any
adjustments  relating to the recoverability and classification of recorded asset
amounts  or  amounts  and  classification of liabilities that might be necessary
should  the  Company  be  unable  to  continue  in  existence.

The  Company is working towards raising public funds to expand its marketing and
revenues.  The  Company  has spent considerable time in contracting with several
major  overseas  corporations  for  the  co-development  of enhanced antioxidant
beverages  for  distribution into the overseas markets. In addition, the Company
is  working  with  its  Canadian  business  associates to identify institutional
businesses  to  market  various  disinfection applications based upon functional
water,  pending  government  approval.

The  Company's  ability  to  continue  as  a going concern is dependent upon its
ability  to  generate  sufficient cash flows to meet its obligations on a timely
basis,  to  obtain  additional  financing  as may be required, and ultimately to
attain  profitable  operations.  However,  there is no assurance that profitable
operations  or  sufficient  cash  flows  will  occur  in  the  future.

CASH  AND CASH EQUIVALENTS - The Company considers all highly liquid instruments
purchased  with  a  maturity  of  less than three months to be cash equivalents.

ACCOUNTS  RECEIVABLE  -  Accounts receivable are recorded at the invoiced amount
and  do  not bear interest. The allowance for doubtful accounts is the Company's
best  estimate of the amount of probable credit losses in the Company's existing
accounts  receivable.  The  Company determines the allowance based on historical
write-off  experience. Past due balances over 90 days and a specified amount are
reviewed  individually  for  collectibility.  Account  balances  are charged off
against  the allowance after all means of collection have been exhausted and the
potential  for  recovery  is  considered  remote.  The Company does not have any
off-balance  sheet  credit  exposure  related  to  its  customers.

INVENTORY  - Inventory consists of purchased finished goods and is stated at the
lower  of  cost  (using  the  first-in,  first-out  method)  or  market  value.

PROPERTY  AND  EQUIPMENT  -  Equipment, and furniture and fixtures are stated at
cost. Depreciation is computed using the straight-line method over the estimated
useful  lives  of  the  assets.  Estimated useful lives range from 3 to 7 years.
Depreciation  expense for the years ended December 31, 2004 and 2003, was $9,814
and  $7,480,  respectively.  Expenditures for maintenance, repairs, and renewals
are  charged  to  expense  as  incurred.  Expenditures  for  major  renewals and
betterments  that  extend the useful lives of existing equipment are capitalized
and  depreciated.  On  retirement  or disposition of property and equipment, the
cost  and accumulated depreciation are removed and any resulting gain or loss is
recognized  in  the  statement  of  operations.


                                      F-8

                            PROTON LABORATORIES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Long-lived  assets  are reviewed for impairment yearly. Recoverability of assets
to be held and used is measured by comparison of the carrying amount of an asset
to  future  net cash flows expected to be generated by the asset. If such assets
are  considered  to  be impaired, the impairment to be recognized is measured by
the  amount that the carrying amount of the assets exceeds the fair value of the
assets.  Assets  to  be  disposed  of  are reported at the lower of the carrying
amount  or fair value less costs to sell. Based on the evaluation, no impairment
was  considered  necessary  during  the  years  ended December 31, 2004 or 2003.

INCOME TAXES - The Company recognizes an asset or liability for the deferred tax
consequences  of  all  temporary  differences between the tax bases of assets or
liabilities  and  their  reported amounts in the financial statements. That will
result  in  taxable  or  deductible  amounts  in  future years when the reported
amounts  of  the  assets or liabilities are recovered. These deferred tax assets
and  or  liabilities  are  measured  using the enacted tax rates that will be in
effect  when  the  differences  are expected to reverse. Deferred tax assets are
reviewed  periodically  for  recoverability  and  valuation  allowances  and
adjustments  are  provided  as  necessary.

ADVERTISING - The Company follows the policy of charging the cost of advertising
to expense as incurred. Advertising expense for the year ended December 31, 2004
and  2003  was  $10,776  and  $3,952,  respectively.

CONCENTRATIONS  OF  RISK  - Sales to major customers are defined as sales to any
one  customer  which  exceeded  10%  of total sales. The risk of loss of a major
customer  subjects  the Company to the possibility of decreased sales. Purchases
from  major vendors are defined as inventory purchases from any one vendor which
exceeded  10%  of  total inventory purchases. The risk of loss of a major vendor
subjects the Company to the possibility of increased costs and not being able to
fulfill  customer  orders.  See  Note  7.

REVENUE  RECOGNITION  -  The  Company  recognizes  revenue  when all four of the
following  criteria  are  met:  (i) persuasive evidence that arrangement exists;
(ii)  delivery  of  the products and/or services has occurred; (iii) the selling
price  is  both  fixed  and  determinable and; (iv) collectibility is reasonably
probable.  The  Company's  revenues  are derived from sales of their industrial,
environmental  and  residential  systems  which alter the properties of water to
produce  functional  water.

BASIC  AND  DILUTED  LOSS  PER  COMMON  SHARE  -  Basic loss per common share is
calculated  by dividing net loss by the weighted-average number of common shares
outstanding. Diluted loss per common share is calculated by dividing net loss by
the  weighted-average number of Series A convertible preferred shares and common
shares  outstanding  to give effect to potentially issuable common shares except
during  loss  periods  when those potentially issuable shares are anti-dilutive.
Potential  common shares from convertible preferred stock have not been included
as  they  are  anti-dilutive.

NEW  ACCOUNTING  STANDARDS  -  In  December  2004,  the FASB issued SFAS No. 123
(revised  2004),  "Share-Based  Payment," which is an amendment to SFAS No. 123,
"Accounting  for  Stock-Based  Compensation."  This  new standard eliminates the
ability  to  account  for share-based compensation transactions using Accounting
Principles  Board  (APB) No. 25, "Accounting for Stock Issued to Employees" (APB
25)  and requires such transactions to be accounted for using a fair-value-based
method  and the resulting cost recognized in the Company's financial statements.
This  new  standard  is effective for interim and annual periods beginning after
June  15,  2005. The Company is currently evaluating SFAS No. 123 as revised and
intends to implement it in the third quarter of 2005 and will not presently have
an  effect  on  the  Company's  financial  statements.


                                      F-9

                            PROTON LABORATORIES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


In  December  2004,  the  FASB  issued  SFAS  Statement  No.  153, "Exchanges of
Non-monetary  Assets-an  amendment of APB Opinion No. 29." This Statement amends
APB  Opinion 29 to eliminate the exception for non-monetary exchanges of similar
productive  assets  and  replaces  it  with a general exception for exchanges of
non-monetary  assets  that  do  not  have  commercial  substance. A non-monetary
exchange  has  commercial  substance  if the future cash flows of the entity are
expected to change significantly as a result of the exchange. The Statement will
be  effective  in January 2006. The Company does not expect that the adoption of
SFAS  No.  153  will  have  a  material  impact  on  its  Consolidated Financial
Statements.

NOTE 3 - RELATED PARTY TRANSACTIONS

During  the  years  ended  December  31,  2004  and 2003, the Company's [former]
president  and  majority  shareholder advanced the Company $178,000 and $84,000,
respectively.  These  advances  bear  interest  at 7% with principal and accrued
interest  due between November 2005 and September 2006. At December 31, 2004 and
2003,  the  accrued  interest  was  $15,946  and  $735,  respectively.

NOTE 4 - INCOME TAXES

There  was  no  provision  for  or  benefit  from income tax for any period. The
components  of  the  net deferred tax asset at December 31, 2004 and 2003 are as
follows:



                                    2004       2003

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

Net operating loss carryforward  $ 416,124   $ 71,395 
Bad debt reserve                     6,381      3,898 
Accrued salaries                    29,000      5,793 
Less: valuation allowance         (451,505)   (81,086)
------------------------------------------------------

NET DEFERRED TAX ASSET           $       -   $      - 
======================================================


For tax reporting purposes, the Company has net operating loss carry forwards in
the  amount  of  $1,077,482  which  will  begin  expiring  in  2023.

The following is a reconciliation of the amount of tax benefit that would result
from  applying  the  federal statutory rate to pretax loss with the benefit from
income  taxes  for  the  years  ended  December  31,  2004  and  2003:



                                                  2004       2003

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

Benefit as statutory rate (34%)                $(328,386)  $(73,893)
Non-deductible expenses                            2,589     17,567 
Change in valuation allowance                    370,419     66,367 
State tax benefit, net of federal tax effect     (44,622)   (10,041)
--------------------------------------------------------------------

NET BENEFIT FROM INCOME TAXES                  $       -   $      - 
====================================================================


NOTE 5 - PREFERRED STOCK

During May 2004, the Company designated 400,000 shares of the preferred stock as
Series  A  convertible  preferred  stock.

The holders of Series A convertible preferred stock are entitled to a cumulative
dividend  of  8%  per  year  in  cash  payable  in  arrears.

The  holders  of  Series A convertible preferred stock may convert any or all of
their shares plus all accrued dividends on the preferred stock into common stock
at  any  time.  Each  share  of  preferred  stock  may  be


                                      F-10

                            PROTON LABORATORIES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


converted  into  5  shares of common stock. The holder will receive one share of
common  stock  for  $2  of  accrued  dividends.

Upon  the  liquidation,  dissolution  or  winding  up of the Company, holders of
Series  A  convertible  preferred stock, are entitled to receive, out of legally
available  assets,  a  liquidation  preference  of $10 per share, plus an amount
equal  to  any  unpaid dividends through the payment date, before any payment or
distribution  was  made  to  holders  of  common  stock. The holders of Series A
convertible  preferred  stock  are  not  entitled  to  vote.

During  the  July  2004,  the Company issued 8,000 shares of preferred stock for
$80,000.  At  December  31,  2004, dividends payable was $3,200, or 40 cents per
share.

NOTE 6 - COMMON STOCK

During  September  2004,  the  Company issued 100,000 shares of common stock for
$40,000  of  legal  services.  These shares were valued using the per share fair
value  of  the  Company's  common  stock  on  the  date  of  issuance.

In  December  2003, the Company's shareholders approved the 2004 Stock and Stock
Option  Plan  effective  January  1,  2004  whereby  up to 500,000 shares may be
granted,  optioned  or sold. The plan is for its key employees and directors who
contribute materially to the success and profitability of the Company as well as
attracting  other  key employees and directors. In November 2004, 400,000 common
shares  were  issued  pursuant to this plan, resulting in $172,000 in consulting
expense.  These  shares  were  valued  using  the  per  share  fair value of the
Company's  common  stock  on  the  date  of  issuance.

In  November  2004, the Company's board of directors approved the 2004 Marketing
Consultant  Stock  Plan  whereby  up  to  945,000  common shares may be granted,
optioned  or sold. The plan is for its consultants, key employees, and directors
who  contribute  materially  to  the success and profitability of the Company as
well  as attracting other key employees and directors. In November 2004, 945,000
shares  were  issued  under  this  plan  resulting in $406,349 of consulting and
employee  expense  valued using the per share fair value of the Company's common
stock  on  the  date  of  issuance.

NOTE 7 - COMMITMENTS AND CONTINGENCIES

OPERATING  LEASES - The Company currently leases office and storage space from a
third  party.  On  August 1, 2004, the Company entered into a lease agreement to
pay  a  monthly  lease  payment  of  $3,066  until  June  2005.

Future  minimum  lease payments under operating lease obligations as of December
31,  2004,  were  as  follows:



Year Ending December 31,
------------------------------------
                          

          2005               $21,462
------------------------------------


Rent  expense  for  the  years  ended December 31, 2004 and 2003 was $33,678 and
$27,097,  respectively.


                                      F-11

                            PROTON LABORATORIES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


MAJOR  CUSTOMER  -  During  the  year  ended  December  31, 2004, sales to three
customers  accounted for 37% of total sales. As of December 31, 2004, there were
no  amounts  due  from these customers. During the year ended December 31, 2003,
sales to one customer accounted for 11% of total sales. As of December 31, 2003,
there  were  no  amounts  due  from  this  customer.

MAJOR  VENDOR  -  During  the year ended December 31, 2004, purchases from three
vendors accounted for 96% of total inventory purchases. As of December 31, 2004,
amounts  due  to these vendors accounted for 54% of accounts payable. During the
year  ended  December  31, 2003, purchases from two vendors accounted for 87% of
total inventory purchases. As of December 31, 2003, amounts due to these vendors
accounted  for  65%  of  accounts  payable.

NOTE 8 - SUBSEQUENT EVENTS (Unaudited)

COMMON STOCK - During March 2005, the Company entered into a tentative agreement
with  a  consultant  related  to  promoting the Company and the possibility of a
future offering of the Company's common stock. Under this agreement, the Company
agreed  to  immediately  issue  the  consultant  550,000 shares of the Company's
common  stock. In addition, the Company agreed to pay a cash fee equal to 10% of
the  gross proceeds of any future common stock offering. The Company also agreed
to  issue  the  investment  bank  company  a warrant to purchase a number of the
Company's  common  shares equal to 10% of the gross proceeds of the offering. As
part  of  the  agreement,  the consultant is to provide advisory services for 12
months  from the close of the offering. In consideration for these services, the
Company  will  issue  the  consultant  common  shares equal to 4.5% of the total
number  of  common  shares outstanding following the close of the offering. This
agreement  was  abandoned  with  no  shares  or  funds  being  delivered.

NOTES  PAYABLE  -  In  March  2005 the Company also issued a note payable in the
amount  of $164,000 for the purchase of inventory. The inventory will be held by
the  lender  as collateral until the note is repaid in May 2005. The Company has
also  agreed to pay $28,500, or approximately 17%, in interest. In addition, the
Company  is  to  issue  the  lender 47,500 shares of common stock, which will be
recorded as a $27,075 discount valued on the date of issuance and amortized over
the  term  of  the  note.  These shares are to be issued prior to the note's due
date.

During  January  2005,  a shareholder advanced the Company $40,000. This advance
bears  interest  at  7%  with  principal  and accrued interest due January 2007.


                                      F-12



                                       PROTON LABORATORIES, INC.
                           CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)


                                                                        SEPTEMBER 30,    DECEMBER 31,
                                                                                 2005            2004
------------------------------------------------------------------------------------------------------
                                                                                  
ASSETS
CURRENT ASSETS
Cash                                                                   $       12,396   $      14,412 
Accounts receivable, less allowance for doubtful accounts of  $16,522          17,786          10,633 
Inventory                                                                      63,798          34,097 
------------------------------------------------------------------------------------------------------
  TOTAL CURRENT ASSETS                                                         93,980          59,142 
------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Furniture and fixtures                                                         19,709          18,438 
Equipment and machinery                                                       161,502          95,039 
Leasehold improvements                                                         11,323          10,995 
Deposit on equipment                                                                -          69,500 
  LESS:  ACCUMULATED DEPRECIATION                                             (35,530)        (19,160)
------------------------------------------------------------------------------------------------------
  NET PROPERTY AND EQUIPMENT                                                  157,004         174,812 
DEPOSITS                                                                        6,131               - 
------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                           $      257,115   $     233,954 
------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable                                                       $      102,201   $     134,780 
Accrued expenses                                                              219,270         110,562 
Deferred revenue                                                               52,506               - 
Preferred dividends payable                                                     8,000           3,200 
Note payable                                                                  164,000               - 
Stockholder loans, current portion                                            262,000          84,000 
------------------------------------------------------------------------------------------------------
  TOTAL CURRENT LIABILITIES                                                   807,977         332,542 
------------------------------------------------------------------------------------------------------
STOCKHOLDER LOANS, NET OF CURRENT PORTION                                      48,642         178,000 
------------------------------------------------------------------------------------------------------
STOCKHOLDERS' DEFICIT
Series A convertible preferred stock, 400,000 shares authorized
  with a par value of $0.0001; 8,000 shares issued and outstanding;
  liquidation preference of $80,000                                            80,000          80,000 
Undesignated preferred stock, 19,600,000 shares authorized with a
  par value of $0.0001; no shares issued or outstanding                             -               - 
Common stock, 100,000,000 common shares authorized with a par
  value of $0.0001; 14,270,100 and 12,975,000 shares issued and
  outstanding, respectively                                                     1,429           1,299 
Additional paid in capital                                                  1,856,602       1,350,616 
Accumulated deficit                                                        (2,537,535)     (1,708,503)
------------------------------------------------------------------------------------------------------
  TOTAL STOCKHOLDERS' DEFICIT                                                (599,504)       (276,588)
------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                            $      257,115   $     233,954 
------------------------------------------------------------------------------------------------------


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                      FF-1



                                            PROTON LABORATORIES, INC.
                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                  FOR THE THREE MONTHS ENDED        FOR THE NINE MONTHS ENDED
                                                        SEPTEMBER 30,                     SEPTEMBER 30,
                                               --------------------------------  --------------------------------
                                                    2005             2004             2005             2004
-----------------------------------------------------------------------------------------------------------------
                                                                                      
SALES                                          $      116,791   $      120,902   $      274,501   $      278,907 

COST OF GOODS SOLD                                    113,786           99,401          214,649          172,371 
-----------------------------------------------------------------------------------------------------------------

GROSS PROFIT                                            3,005           21,501           59,852          106,536 
-----------------------------------------------------------------------------------------------------------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES          114,219          178,361          793,599          341,119 
-----------------------------------------------------------------------------------------------------------------

LOSS FROM OPERATIONS                                 (111,214)        (156,860)        (733,747)        (234,583)
-----------------------------------------------------------------------------------------------------------------

OTHER INCOME AND (EXPENSE)
Loss on disposal of property and equipment                  -             (943)               -             (943)
Interest income                                            61                -              161                - 
Interest expense                                      (17,826)          (5,117)         (90,645)         (10,588)
-----------------------------------------------------------------------------------------------------------------
  NET OTHER EXPENSE                                   (17,765)          (6,060)         (90,484)         (11,531)
-----------------------------------------------------------------------------------------------------------------

    NET LOSS                                         (128,979)        (162,920)        (824,231)        (246,114)

PREFERRED STOCK DIVIDEND                               (1,600)          (1,600)          (4,800)          (1,600)
-----------------------------------------------------------------------------------------------------------------

LOSS APPLICABLE TO COMMON SHAREHOLDERS         $     (130,580)  $     (164,520)  $     (829,031)  $     (247,714)
-----------------------------------------------------------------------------------------------------------------

BASIC AND DILUTED LOSS PER
  COMMON SHARE                                 $        (0.01)  $        (0.01)  $        (0.06)  $        (0.02)
-----------------------------------------------------------------------------------------------------------------

BASIC AND DILUTED WEIGHTED AVERAGE
  SHARES OUTSTANDING                               14,234,230       11,268,481       13,534,217       11,256,230 
-----------------------------------------------------------------------------------------------------------------


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                      FF-2



                            PROTON LABORATORIES, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005        2005        2004
-----------------------------------------------------------------------
                                                       

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                         $(824,231)  $(246,114)
Adjustments to reconcile net loss to cash used
  in operating activities:
  Depreciation                                      16,370       8,495 
  Provision for allowance for doubtful accounts          -       6,430 
  Loss on disposal of property and equipment             -         943 
  Common stock issued for services                 459,040      40,000 
  Amortization of loan costs                        27,075           - 
  Changes in operating assets and liabilities
    Accounts receivable                             (7,153)       (591)
    Inventory                                      (29,701)    (67,034)
    Deposits                                        (1,131)          - 
    Deferred revenue                                52,506           - 
    Accounts payable                               (32,579)    (28,437)
    Accrued expenses                               108,708      55,862 
-----------------------------------------------------------------------
  NET CASH FROM OPERATING ACTIVITIES              (231,096)   (230,446)
-----------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment                 (3,562)    (24,760)
-----------------------------------------------------------------------
  NET CASH FROM INVESTING ACTIVITIES                (3,562)    (24,760)
-----------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock                  20,000           - 
Proceeds from sale of preferred stock                    -      80,000 
Proceeds from notes payable                        164,000           - 
Proceeds from shareholder loans                     48,642     178,000 
-----------------------------------------------------------------------
  NET CASH FROM FINANCING ACTIVITIES               232,642     258,000 
-----------------------------------------------------------------------
NET INCREASE IN CASH                                (2,016)      2,794 
CASH AT BEGINNING OF PERIOD                         14,412       4,423 
-----------------------------------------------------------------------
CASH AT END OF PERIOD                            $  12,396   $   7,217 
-----------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Transfer of inventory to equipment               $  64,500   $  27,377 
Issuance of common stock for loan costs          $  27,075   $       - 
Accrual of preferred stock dividends             $   4,800   $       - 
-----------------------------------------------------------------------


              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                      FF-3

                            PROTON LABORATORIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION AND NATURE OF OPERATIONS

BASIS  OF PRESENTATION - The condensed consolidated financial statements include
the  accounts  of  Proton  Laboratories,  Inc.,  and its wholly owned subsidiary
("Proton"  or  the  "Company").  All  significant  intercompany transactions and
balances  have  been  eliminated  in  consolidation.

In April 2004, the Company changed its name from BentleyCapitalCorp.com, Inc. to
Proton  Laboratories,  Inc.  The Company's subsidiary also changed its name from
Proton  Laboratories,  Inc.  to  Water  Science,  Inc.

CONDENSED  FINANCIAL  STATEMENTS  -  The  accompanying  unaudited  condensed
consolidated  financial  statements are condensed and, therefore, do not include
all disclosures normally required by accounting principles generally accepted in
the  United  States  of  America. These statements should be read in conjunction
with  the  Company's  annual  financial  statements  included  in  the Company's
December  31,  2004  Annual  Report.  In  particular,  the Company's significant
accounting  principles  were  presented  as Note 1 to the consolidated financial
statements  in  that  report.  In  the  opinion  of  management, all adjustments
necessary  for  a  fair  presentation  have  been  included  in the accompanying
condensed consolidated financial statements and consist of only normal recurring
adjustments.  The  results of operations presented in the accompanying condensed
consolidated  financial  statements for the nine months ended September 30, 2005
are  not necessarily indicative of the results that may be expected for the full
year  ending  December  31,  2005.

NATURE  OF  OPERATIONS  -  The  Company's  operations  are  located  in Alameda,
California. The core business of the Company consists of the sales and marketing
of  the  Company's  industrial, environmental and residential systems throughout
the  United  States  of  America  which alter the properties of water to produce
functional  water.  The  Company  acts  as  an  exclusive  importer  and  master
distributor  of  these  products to various companies. Additionally, the Company
formulates intellectual properties under licensing agreements, supplies consumer
products,  consults  on projects utilizing functional water, facilitates between
manufacturer  and  industry  and acts as educators on the benefits of functional
water.

BASIC  AND  DILUTED  LOSS  PER  COMMON  SHARE  -  Basic loss per common share is
calculated  by dividing net loss by the weighted-average number of common shares
outstanding. Diluted loss per common share is calculated by dividing net loss by
the  weighted-average number of Series A convertible preferred shares and common
shares  outstanding  to give effect to potentially issuable common shares except
during  loss  periods  when those potentially issuable shares are anti-dilutive.
Potential  common shares from convertible preferred stock have not been included
as  they  are  anti-dilutive.

NOTE 2 - BUSINESS CONDITION

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America,  which  contemplate continuation of the Company as a going concern. The
company  has  incurred  losses applicable to common shareholders of $829,031 for
the  nine  months  ended  September  30, 2005. The Company had a working capital
deficit  of  $713,997  and $273,400 at September 30, 2005 and December 31, 2004,
respectively.  Loans  were  required  to  fund  operations.


                                      FF-4

NOTE 2 - BUSINESS CONDITION  (continued)

The  Company is working towards raising public funds to expand its marketing and
revenues.  The  Company  has spent considerable time in contracting with several
major  overseas  corporations  for  the  co-development  of enhanced antioxidant
beverages  for  distribution into the overseas markets. In addition, the Company
is  working  with  its  Canadian  business  associates to identify institutional
businesses  to  market  various  disinfection applications based upon functional
water,  pending  government  approval.

The  Company's  ability  to  continue  as  a going concern is dependent upon its
ability  to  generate  sufficient cash flows to meet its obligations on a timely
basis,  to  obtain  additional  financing  as may be required, and ultimately to
attain  profitable  operations.  However,  there is no assurance that profitable
operations  or  sufficient  cash  flows  will  occur  in  the  future.

NOTE 3 - RELATED PARTY TRANSACTIONS

During 2005, two shareholders advanced the Company $48,642. These advances bears
interest at 7% with principal and accrued interest due between November 2005 and
January  2007. At September 30, 2005 and December 31, 2004, the company owed the
two  shareholders $310,642 and $262,000, respectively. At September 30, 2005 and
December  31,  2004, the accrued interest was $31,604 and $15,946, respectively.

During  the nine months ended September 30, 2005, the Company accrued $45,000 as
salaries  payable  to the majority shareholder resulting in $139,890 of salaries
payable  at  September  30,  2005.

NOTE 4 - NOTES PAYABLE

In  March  2005 the Company issued a note payable in the amount of $164,000. The
note  was  originally  due  in  May  2005 and has been extended to December 2005
secured  by  inventory.  The original terms of the loan provided for an interest
payment  of  $28,500  or 106% per annum; when the note was extended in May 2005,
the  interest  rate  was  amended  to  30% on the original principal balance. At
September  30,  2005  $47,776  of  interest  had  been accrued. In addition, the
Company issued the lender 47,500 shares of common stock, which was recorded as a
$27,075 loan cost and was amortized over the original term of the note.

NOTE  5  -  COMMON  STOCK

During  the  nine  months  ended  September 30, 2005, the Company issued 131,600
shares  of  its  common  stock  to  a director for compensation of services. The
shares  were  valued at $52,640 based on the market value of the Company's stock
on  the  date  of  issuance.

In  June  2005,  the Company issued 1,016,000 of its common stock to consultants
for  services.  The  shares were valued at $406,400 based on the market value of
the  Company's  stock  on  the  date  of  issuance.

In  August 2005, the Company sold 100,000 shares of restricted common stock at a
sale price of $0.20 per share for total consideration of $20,000 in cash.


                                      FF-5

NOTE 6 - COMMITMENTS

In  June  2005,  the  Company entered into an agreement with Mitachi, a Japanese
electronics  component  manufacturer,  to  aid  in  the  production  of enhanced
drinking water generators. Pursuant to this agreement, Mitachi agreed to pay the
Company  25,000,000 Yen for engineering design, molding, tooling and preparation
costs,  and  the  exclusive  product  distribution rights for China, Taiwan, and
Japan. As of September 30, 2005, Mitachi had paid 6,000,000 Yen, or $52,506, for
the  above mentioned distribution rights. Since the project is not yet completed
and no units have been sold, this amount is classified as deferred revenue.


                                      FF-6