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

                                   FORM 10-KSB

|X|  Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
     of 1934 for the Fiscal Year Ended December 31, 2004.

| |  Transition Report Under Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the transition period from --- to ---

                                   Commission file number:     000-31883

                            PROTON LABORATORIES, INC.
                 (Name of small business issuer in its charter)

                    Washington                            91-2022700
         (State or other jurisdiction of              (I.R.S. Employer
          incorporation or organization)             Identification No.)


                        1135 Atlantic Avenue, Suite 101
                    Alameda, CA                                  94501
                 (Address of principal executive offices)     (Zip Code)


                                 (510) 865-6412
                            Issuer's telephone number

              Securities registered under Section 12(b) of the Act:

     Title of Each Class:           Name of exchange on which registered:
                   None.                              None.


              Securities registered under Section 12(g) of the Act:
                         Common Stock, $0.0001 par value
                                (Title of class)

     Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes  |X|     | |  No

     Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of


                                        1
<PAGE>
this Form 10-KSB or any amendment to this Form 10-KSB.          |X|

     Registrant's revenues for its most recent fiscal year: $379,989

     The aggregate market value of the common stock held by non-affiliates of
the registrant on March 30, 2005, based on the last price which was $0.40 per
share on March 30, 2005, was $1,900,400.  On March 30, 2005, the closing bid
price on our common stock on the OTCBB was $0.38.

     On March 30, 2005, the registrant had outstanding  12,975,000 shares of
Common Stock, $0.0001 par value per share.  However, 376,500 of those shares
have not been certificated as of April 12, 2005.

Transitional Small Business Disclosure Format:     Yes  | |     No  |X|


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<TABLE>
<CAPTION>
                                         TABLE OF CONTENTS


PART I                                                                             PAGE
<S>                   <C>                                                    <C>
Item 1                Description of Business                                         4
Item 2.               Description of Property                                        13
Item 3.               Legal Proceedings                                              13
Item 4.               Submission of Matters to a Vote of Security Holders            13

PART II

Item 5.               Market for Common Equity and Related Stockholder
                      Matters and Small Business Issuer Purchases of Equity
                      Securities                                                     13
Item 6.               Management's Discussion &Analysis                              16
Item 7.               Financial Statements                                           19 and F-1
Item 8.               Changes In and Disagreements with Accountants
                      On Accounting and Financial Disclosure                         19
Item 8A.              Controls and Procedures                                        19
Item 8B.              Other Information                                              20

PART III

Item 9.               Directors and Executive Officers of the Registrant             20
Item 10.              Executive Compensation                                         22
Item 11.              Security Ownership of Certain Beneficial Owners and
                      Management and Related Stockholder Matters                     24
Item 12.              Certain Relationships and Related Transactions                 25
Item 13.              Exhibits                                                       26
Item 14.              Principal Accountant Fees and Services                         26

SIGNATURES                                                                           28
FINANCIAL STATEMENTS                                                                 F-1 and 19
EXHIBITS                                                                             28
</TABLE>


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<PAGE>
                                     PART I

ITEM 1.     DESCRIPTION OF BUSINESS.

INTRODUCTION

     Our business is marketing functional water systems.  In March 2004 we filed
an amendment to our Articles of Incorporation to change our name to Proton
Laboratories, Inc.  Our former name was BentleyCapitalCorp.com, Inc.  In this
Form 10-KSB, we refer to ourselves as "Proton", "We", Us" and "Our." References
to us in this Form 10-KSB include our wholly-owned subsidiary which also changed
its name in April 2004.  The new name of our subsidiary is Water Science, Inc.
The former name of our subsidiary was Proton Laboratorie-s, Inc.

     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 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 continue as a going concern.

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

CORPORATE HISTORY

     In November 2002, we entered into an Agreement and Plan of Reorganization
whereby Proton Laboratories, LLC, a California limited liability company merged
with and into VWO I Inc., our wholly owned subsidiary (the "Merger").  As a
result of the Merger, Proton Laboratories, LLC's sole owner, Edward Alexander,
exchanged 100% of his ownership of Proton Laboratories, LLC for 8,750,000 shares
of our common stock, and we cancelled the similar amount of 8,750,000 shares of
our common stock that Mr. Alexander had purchased from Michael Kirsh and Brian
Gruson in June 2002.

     VWO I Inc. changed its name to Proton Laboratorie-s, Inc. as part of the
Merger, and we subsequently changed its name again to Water Science, Inc. in
April 2004.  Proton Laboratories, LLC itself was incorporated in February 2000
in the State of California.  Proton Laboratories, LLC did not begin operations
until January 2001 when Mr. Alexander contributed inventory and property and
equipment to Proton Laboratories, LLC.

     The consideration exchanged pursuant to the Merger was the result of
negotiations between us and Proton Laboratories, LLC.  However, no appraisal was
done.  In evaluating Proton Laboratories, LLC as a candidate for the proposed
Merger, we used criteria such as the


                                        4
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value of the assets of Proton Laboratories, LLC, Proton Laboratories, LLC's then
current business operations and anticipated operations, and Proton Laboratories,
LLC's business name and reputation.  We determined that the consideration for
the Merger was reasonable.

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.


                                        5
<PAGE>
     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
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


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<PAGE>
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
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:


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<PAGE>
     -    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


                                        8
<PAGE>
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, 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.


                                        9
<PAGE>

     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
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


                                       10
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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.

OUR BUSINESS--CUSTOMERS AND VENDORS

     MAJOR  CUSTOMERS.  During  the  year  ended December 31, 2004, our sales to
     ----------------
three  customers accounted for 37% of our 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, our 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.

INTELLECTUAL PROPERTY

     We plan to file patent applications for various functional water
applications. We may also obtain licenses from others. There can be no assurance
that our intellectual property rights, if any, will not be challenged,
invalidated or circumvented, or that any rights granted under our intellectual
property will provide competitive advantages to us. There can be no assurance
that our patent claims allowed on any future patents would be sufficiently broad
to protect our products.

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 IN 2004

     We have done preliminary 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


                                       11
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on wine grapes in a safe and efficacious, large scale manner.  Our preliminary
review of this use of functional water indicates a complete elimination of
mildew on wine grapes in vineyards and the continued growth of healthy grapes.
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.

SUBSEQUENT EVENTS

     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.

     In March 2005, we proposed to engaged the services of J. P. Turner &
Company, L.L.C. for its best efforts to raise funds for us.  We proposed to
issue 550,000 shares of our restricted common stock to J. P. Turner & Company,
L.L.C. as a non-refundable fee and we proposed to pay J. P. Turner & Company,
L.L.C. a sales commission of 10% on any funds raised and grant a warrant to J.
P. Turner & Company, L.L.C. to acquire our common stock in the amount of 10% of
the equivalent of the funds that are raised.  Upon a successful money raise, we
proposed that J. P. Turner & Company, L.L.C. would act as our investment banker
for a fee of 4.5% of our restricted common stock as calculated immediately after
the funds are raised.  This transaction is being finalized at this time.  These
share have not been issued yet.

     In March 2005, we 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.  We also agreed to pay $28,500, or
approximately 17%, in interest.  In addition, we will issue to the lender 47,500
shares of common stock, which will be recorded as a $27,075 discount


                                       12
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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.

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

AVAILABLE INFORMATION ABOUT US

     Our filings with the SEC may be obtained in person or by writing to the
SEC's Public Reference Branch at 450 Fifth Street, N.W., Washington, D.C. 20549,
tel. 1-800-SEC-0330, or through SEC's e-mail address: publicinfo@sec.gov.  In
most cases, this information is also available on the SEC's Web site:
www.sec.gov.

ITEM 2.     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 $3,066 per month.  Under this lease, we are required to
pay a percentage of the property taxes, insurance and maintenance.  The lease
expires in June 2005 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.

ITEM 3.     LEGAL PROCEEDINGS.

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

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

     None.

                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
            BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

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


                                       13
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK PRICE RANGE

YEAR AND QUARTER           HIGH    LOW
----------------------------------------
<S>                       <C>     <C>

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
</TABLE>

---------------------------------
(*)  There was no trading market for our stock until January 2004.

     On March 30, 2005, the closing price of our stock was $0.40.

     On March 30, 2005, we had outstanding 12,975,000 shares of common stock.

     On March 30, 2005, we had approximately 80 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.

     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.

     On December 3, 2004, we sold 280,000 shares of common stock to World
Munsell for consideration of $196,000 in cash.  World Munsell is a Japanese
company that is a division of ItoX Group, also a Japanese company.  World
Munsell has interests in the functional water industry.  We will be working with
World Munsell on various functional water applications for industry and consumer
use.  We issued these securities in reliance on Section 4(2) of the Act.


                                       14
<PAGE>
This transaction occurred outside of the United States and the purchaser is not
a U.S. company.  This was a transaction by us as issuer that did not involve
public offering.  We believe that the purchaser was knowledgeable about our
operations and financial condition.  We believe that the purchaser had the
knowledge and experience in financial and business matters which allowed the
purchaser to evaluate the merits and risk of receipt of our securities.

<TABLE>
<CAPTION>

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))
<S>                     <C>             <C>                 <C>
                            (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                 -0-

     Total                  -0-               n/a                 -0-
</TABLE>

-----------------------------
(1)  All of the 500,000 shares under our 2004 Stock and Stock Option Plan
     (the "Plan") have been approved for issuance. However, 376,500 of those
     shares have not been certificated yet. This Plan was approved by our
     shareholders.

2)   In November 2004, our Board of Directors approved the 2004 Marketing
     Consultants Stock Plan which covered 945,000 shares which were all
     subsequently issued during 2004 pursuant to this Plan. This Plan was not
     approved by our shareholders as of the date of this Form 10-KSB.


                                       15
<PAGE>
ITEM 6.     MANAGEMENT'S DISCUSSION & ANALYSIS.

FORWARD-LOOKING STATEMENT

     Certain statements contained in this report, 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, of 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.  We disclaim any obligation to update any such
factors or to announce publicly the results of any revision of the
forward-looking statements contained or incorporated by reference herein to
reflect future events or developments.  In addition to the forward-looking
statements contained in this Form 10-KSB, 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 in this Form 10-KSB.  The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the U.S.A., 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.  Our 2004 revenue increased by 59% compared to our
2003 revenue.  Capital contributions were required from our President to fund
operations.  These conditions raise 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 have incurred net losses of $965,840 in 2004 and $217,333 in 2003.  We
had a working capital deficit of $203,900 at December 31, 2004  and $156,505 at
December 31, 2003.

     Our operations 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


                                       16
<PAGE>
master distributor of these products to various companies in which uses for the
product range from food processing to retail water sales.  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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our discussion and analysis of our financial condition and results of
operations are 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.

     During the period from March 14, 2000 through November 15, 2002, prior to
our acquisition of Proton Laboratories, LLC in November 2002, we did not engage
in significant operations.  No revenues were received by us during that period.

     In November 2002, we acquired Proton Laboratories, LLC, which is active in
the functional water business.  This acquisition was reported in detail on our
Form 8-K for the event dated November 15, 2002 as filed with the Commission on
November 25, 2002.  Proton Laboratories, LLC is now our wholly-owned subsidiary
and in April 2004 was renamed Water Science Corporation.  Since our acquisition
of Proton Laboratories, LLC in November 2002, 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

     Our fiscal year end is December 31.

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


                                       17
<PAGE>
     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 $365,845 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.

LIQUIDITY

     As of December 31, 2004, we had cash on hand of $14,412.  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 our products at a
profit.

     During the year ended December 31, 2004, our President, 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
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 the year ended December 31, 2004, we accrued $60,000 as salary
payable to Mr. Alexander resulting in an aggregate of $105,000 of salary payable
to Mr. Alexander at December 31, 2004.

     During 2004, we raised $276,000 in cash through the sale of our securities.

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:


                                       18
<PAGE>
     -    The cost to acquire equipment to resell.

     -    The cost of sales and marketing our products.

     -    The rate at which we expand our operations.

     -    The results of our consulting business.

     -    The response of competitors.

ITEM 7.     FINANCIAL STATEMENTS.

     The financial statements required by this item are set forth beginning on
page F-1.

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE.

     None.

ITEM 8A.    CONTROLS AND PROCEDURES.

(a)  Evaluation of disclosure controls and procedures.

     Based on their evaluation of our disclosure controls and procedures (as
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act")), our principal executive officer and principal financial
officer have concluded that as of the end of the period
covered by this annual report on Form 10-KSB such disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

(b)  Changes in internal control over financial reporting.

     During the year under report, there was no change in our internal control
over financial reporting that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.

     The evaluation of our disclosure controls included a review of whether
there were any significant deficiencies in the design or operation of such
controls and procedures, material weaknesses in such controls and procedures,
any corrective actions taken with regard to such deficiencies and weaknesses and
any fraud involving management or other employees with a significant role in
such controls and procedures.

     There have been no changes in our internal control over financial
reporting.


                                       19
<PAGE>
ITEM 8B.    OTHER INFORMATION.

     None.

                                    PART III

ITEM 9.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS

NAME                    AGE    POSITION
-------------------------------------------------------------------------------
<S>                     <C>    <C>
Edward Alexander         53    Director, Chief Executive Officer,
                               Chief Financial Officer, President and Secretary

Michael Fintan Ledwith   62    Director, Member of the Audit Committee
</TABLE>

     Edward Alexander has been our Chairman, a Director, Chief Executive
Officer, Chief Financial Officer, President 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


                                       20
<PAGE>
2001 he has been a partner in World of Star Stuff, which markets whole food
products.

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


                                       21
<PAGE>
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.

SHAREHOLDER NOMINEES FOR DIRECTOR AND SHAREHOLDER COMMUNICATIONS WITH DIRECTORS

     The deadline for stockholders to submit proposals to be considered for
inclusion in the Proxy Statement for the 2005 Annual Meeting of Stockholders is
October 31, 2004.  If you have any proposals that you would like to be included
in the Proxy Statement for the 2005 Annual Meeting of Stockholders, including
nominees for Director, kindly mail them to us.  We encourage our shareholders to
communicate with our Directors by mail addressed to any Director or to all
Directors. Our address is: Proton Laboratories, Inc., 1135 Atlantic Avenue,
Suite 101, Alameda, CA, 94501.  We will not screen such communications.



ITEM 10.     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
compensation set forth below.

<TABLE>
<CAPTION>
                                          SUMMARY COMPENSATION TABLE


                       Annual Compensation                        Long-Term Compensation
                                                                                             Pay-
                                                                   Awards                    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
                            $         $           $             $            #             $
<S>        <C>   <C>  <C>           <C>     <C>            <C>           <C>         <C>         <C>
           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
</TABLE>

--------------------------------
(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


                                       22
<PAGE>
     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 2004 Stock and Stock Option Plan (the
"Plan") which was approved by our shareholders in February 2004.  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 500,000 shares of our common stock that may be granted or
optioned under the Plan, of which all 500,000 shares have been approved for
issuance.  However, 376,500 of those shares have not been certificated yet.
This Plan was approved by our shareholders.

NO EMPLOYMENT AGREEMENT

     We do not have any employment agreements with any employees.


                                       23
<PAGE>
ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
             RELATED STOCKHOLDER MATTERS.

     As a result of the Merger, Mr. Alexander became the majority owner of our
common stock.  The following table sets forth certain information concerning the
number of shares of common stock owned beneficially as of March 30, 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.

<TABLE>
<CAPTION>
Name                               Amount of Shares     Class of    Percentage
and Address                       Beneficially Owned   Securities    of Class
-------------------------------------------------------------------------------
<S>                               <C>                 <C>           <C>
Edward Alexander
1135 Atlantic Avenue, Suite 101
Alameda, CA 94501                          8,224,000  Common Stock       63.43%


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

Executive Officers
As A Group(2 Persons)                      8,224,000  Common Stock        63.4%
</TABLE>

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


                                       24
<PAGE>
<TABLE>
<CAPTION>
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))
<S>                     <C>             <C>                 <C>
                            (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            -0-               n/a                 -0-

     Total                  -0-               n/a                 -0- (1)
</TABLE>

-------------------------------------
(1)  All of the 500,000 shares under our 2004 Stock and Stock Option Plan
     (the "Plan") have been approved for issuance. However, 376,500 of those
     shares have not been certificated yet. This Plan was approved by our
     shareholders.

2)   In November 2004, our Board of Directors approved the 2004 Marketing
     Consultants Stock Plan which covered 945,000 shares which were all
     subsequently issued pursuant to this Plan. This Plan was not approved by
     our shareholders as of the date of this Form 10-KSB.

ITEM 12.     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.


                                       25
<PAGE>
     During the year ended December 31, 2004, our President, 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
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.

ITEM 13.     EXHIBITS.

<TABLE>
<CAPTION>
Exhibit Number  Exhibit Description
----------------------------------------------------------------
<S>             <C>
31.1            Certification pursuant to Section 13a-14  of CEO

31.2            Certification pursuant to Section 13a-14 of CFO

32.1            Certification pursuant to Section 1350 of CEO

32.2            Certification pursuant to Section 1350 of CFO
</TABLE>

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES.

OUR INDEPENDENT ACCOUNTANT

     In 2004, our Board of Directors selected as our independent accountant the
CPA  firm of Hansen, Barnett & Maxwell, a Professional Corporation ("HBM") of
Salt Lake City, Utah. HBM audited our financial statements for the years ended
December 31, 2004 and 2003. Our Audit Committee approved 100% of the work of
HBM.

1.        AUDIT FEES

          For the two years ended December 31, 2004 and 2003, HBM billed us the
          aggregate amount of $ 14,458 and $24,813, respectively, for
          professional services rendered for their


                                       26
<PAGE>
          audits of our annual financial statements for those years and their
          reviews of our quarterly financial statements for those years. We were
          not billed for professional services from any other accounting firm
          for audits or reviews done in 2004 and 2003.

2.        AUDIT-RELATED FEES

          For the two years ended December 31, 2004 and 2003, we were billed
          $1,073 and $0, respectively, by HBM for audit-related fees.

3.        TAX FEES

          For the two years ended December 31, 2004 and 2003, we were not billed
          by HBM for any tax fees.

4.        ALL OTHER FEES

          For the two years ended December 31, 2004 and 2003, we were not billed
          by HBM for any other professional services.

5(I).     PRE-APPROVAL POLICIES

          Our Audit Committee does not pre-approve any work of our independent
          auditor, but rather approves independent auditor engagements before
          each engagement.

5(II).    PERCENTAGE OF SERVICES APPROVED BY OUR AUDIT COMMITTEE

          There were no services performed by our independent auditor of the
          type described in Items 9(e)(2) through 9(e)(4) of Schedule 14A. Our
          Audit Committee considers that the work done for us by HBM is
          compatible with maintaining HBM's independence.

6.        AUDITOR'S TIME ON TASK

          At least 50% of the work expended by HBM on our 2004 audit was
          attributed to work performed by HBM's full-time, permanent employees.


                                       27
<PAGE>
                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized in Alameda, California.


                                PROTON LABORATORIES, INC.

April 12, 2005                  By: /s/ Edward Alexander
                                Edward Alexander
                                Director, Chief Executive Officer, President and
                                Chief Financial Officer


     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.




April 12, 2005                  By: /s/ Edward Alexander
                                Edward Alexander
                                Director, Chief Executive Officer, President and
                                Chief Financial Officer


April 12, 2005                  By: /s/ Michael Fintan Ledwith
                                Michael Fintan Ledwith
                                Director


                                       28
<PAGE>
                            PROTON LABORATORIES, INC.

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                                       AND
                        CONSOLIDATED FINANCIAL STATEMENTS

                           DECEMBER 31, 2004 AND 2003




                            HANSEN, BARNETT & MAXWELL
                           A Professional Corporation
                          CERTIFIED PUBLIC ACCOUNTANTS


<PAGE>
                            PROTON LABORATORIES, INC.
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                       PAGE
<S>                                                                                     <C>
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
</TABLE>


                                      F-1
<PAGE>
   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
<PAGE>
                            PROTON LABORATORIES, INC
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                        2004         2003
===========================================================================================
<S>                                                                <C>           <C>
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
Deposit                                                                 69,500           -
-------------------------------------------------------------------------------------------

  TOTAL CURRENT ASSETS                                                 128,642      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
Less:  accumulated depreciation                                        (19,160)    (11,672)
-------------------------------------------------------------------------------------------

  NET PROPERTY AND EQUIPMENT                                           105,312      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
===========================================================================================
</TABLE>

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

                                      F-3
<PAGE>
                            PROTON LABORATORIES, INC
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                     2004          2003
==========================================================================================
<S>                                                             <C>           <C>
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
==========================================================================================
</TABLE>

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

                                      F-4
<PAGE>
                            PROTON LABORATORIES, INC
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004

<TABLE>
<CAPTION>
                                         PREFERRED STOCK              COMMON STOCK         ADDITIONAL
                                 ==============================  ========================    PAID IN    ACCUMULATED
                                     SHARES          AMOUNT        SHARES       AMOUNT       CAPITAL      DEFICIT        TOTAL
================================================================================================================================
<S>                              <C>              <C>            <C>         <C>           <C>         <C>           <C>
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)
================================================================================================================================
</TABLE>

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

                                      F-5
<PAGE>
                            PROTON LABORATORIES, INC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                     2004        2003
========================================================================================
<S>                                                               <C>         <C>
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                                                        (6,297)    (18,879)
    Deposits                                                        (69,500)          -
    Accounts payable                                                (62,796)     69,938
    Accrued expenses                                                 94,827      15,552
----------------------------------------------------------------------------------------

  NET CASH FROM OPERATING ACTIVITIES                               (365,845)    (80,587)
----------------------------------------------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment                                 (78,166)       (375)
----------------------------------------------------------------------------------------

  NET CASH FROM INVESTING ACTIVITIES                                (78,166)       (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
----------------------------------------------------------------------------------------
</TABLE>

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


                                      F-6
<PAGE>
                            PROTON LABORATORIES, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATIONS

ORGANIZATION-  Proton  Laboratorie-s, 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
<PAGE>
                            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 $203,900 and $156,505 at December 31, 2004 and 2003,
respectively.  Loans  from  the  Company's  president  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
<PAGE>
                            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
<PAGE>
                            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 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:

<TABLE>
<CAPTION>
                                    2004       2003
======================================================
<S>                              <C>         <C>
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           $       -   $      -
======================================================
</TABLE>

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:

<TABLE>
<CAPTION>
                                                  2004       2003
====================================================================
<S>                                            <C>         <C>
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                  $       -   $      -
====================================================================
</TABLE>

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
<PAGE>
                            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:

<TABLE>
<CAPTION>
Year Ending December 31,
---------------------------------
<S>                       <C>
         2005             $21,462
---------------------------------
</TABLE>

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


                                      F-11
<PAGE>
                            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

COMMON  STOCK  - During March 2005, the Company entered into an 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,  resulting  in  $269,500  consulting expense valued using the per
share fair value of the Company's common stock on the date of the agreement.  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.

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
<PAGE>
<TABLE>
<CAPTION>

                                  EXHIBIT INDEX

Exhibit Number  Exhibit Description
----------------------------------------------------------------
<S>             <C>
31.1            Certification pursuant to Section 13a-14  of CEO

31.2            Certification pursuant to Section 13a-14 of CFO

32.1            Certification pursuant to Section 1350 of CEO

32.2            Certification pursuant to Section 1350 of CFO
</TABLE>


                                       29
<PAGE>