UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 2006
[ ] 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)
(510) 865-6412
Issuer's telephone number
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
Indicate by check whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] [X] No
On April 11, 2006, the registrant had outstanding 14,622,500 shares of
Common Stock, $0.0001 par value per share.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PROTON LABORATORIES, INC.
TABLE OF CONTENTS
PAGE
Condensed Consolidated Balance Sheets - March 31, 2006 and
December 31, 2005 (Unaudited) F-1
Condensed Consolidated Statements of Operations for the three
months ended March 31, 2006 and 2005 (Unaudited) F-2
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2006 and 2005 (Unaudited) F-3
Notes to Condensed Consolidated Financial Statements (Unaudited) F-4
PROTON LABORATORIES, INC
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31,
2006 2005
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ASSETS
CURRENT ASSETS
Cash $ 1,399 $ 1,384
Accounts receivable, less allowance for doubtful accounts of
$16,522 and $16,522, respectively 13,608 21,927
Inventory 28,722 32,861
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TOTAL CURRENT ASSETS 43,729 56,172
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PROPERTY AND EQUIPMENT
Furniture and fixtures 19,709 19,709
Equipment and machinery 161,833 161,833
Leasehold improvements 11,323 11,323
Accumulated depreciation (53,469) (45,820)
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NET PROPERTY AND EQUIPMENT 139,396 147,045
-------------------------------------------------------------------------------------------------
DEPOSITS 6,131 6,131
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TOTAL ASSETS $ 189,256 $ 209,348
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 99,208 $ 168,378
Accrued expenses 286,055 252,769
Deferred revenue 52,506 52,506
Preferred dividends payable 11,200 9,600
Stockholder loans, current portion 490,500 444,642
-------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 939,469 927,895
-------------------------------------------------------------------------------------------------
STOCKHOLDER LOANS, NET OF CURRENT PORTION 67,994 40,000
-------------------------------------------------------------------------------------------------
STOCKHOLDERS' DEFICIT
Series A convertible preferred stock, 400,000 shares authorized
with a par value of $0.0001; 8,000 shares issued and outstanding;
liquidation preference of $80,000 80,000 80,000
Undesignated preferred stock, 19,600,000 shares authorized with a
par value of $0.0001; no shares issued or outstanding - -
Common stock, 100,000,000 common shares authorized with a par
value of $0.0001; 14,622,500 and 14,270,100 shares issued and
outstanding, respectively 1,464 1,429
Additional paid in capital 1,937,618 1,856,601
Accumulated deficit (2,837,289) (2,696,577)
-------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' DEFICIT (818,207) (758,547)
-------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 189,256 $ 209,348
-------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-1
PROTON LABORATORIES, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 2005
------------------------------------------------------------------------------------
SALES $ 50,922 $ 94,189
COST OF GOODS SOLD 44,292 67,363
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GROSS PROFIT 6,630 26,826
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (including
equity-based expenses of $40,526 and $0, respectively) 128,030 115,494
------------------------------------------------------------------------------------
LOSS FROM OPERATIONS (121,400) (88,668)
------------------------------------------------------------------------------------
OTHER INCOME AND (EXPENSE)
Interest income 25 59
Interest expense (17,737) (23,584)
------------------------------------------------------------------------------------
NET OTHER EXPENSE (17,712) (23,525)
------------------------------------------------------------------------------------
NET LOSS (139,112) (112,193)
PREFERRED STOCK DIVIDEND (1,600) (1,600)
------------------------------------------------------------------------------------
LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (140,712) $ (113,793)
------------------------------------------------------------------------------------
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (0.01) $ (0.01)
------------------------------------------------------------------------------------
BASIC AND DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 14,337,412 12,985,674
------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-2
PROTON LABORATORIES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2006 2005
---------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(139,112) $(112,193)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation 7,649 5,399
Loss on disposal of property and equipment - 181
Common stock issued for services 40,526 -
Amortization of loan costs - 9,025
Changes in operating assets and liabilities
Accounts receivable 8,319 (15,056)
Inventory 4,139 (74,410)
Deposits - 5,000
Accounts payable (28,644) (34,666)
Accrued expenses 33,286 30,668
---------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES (73,837) (186,052)
---------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment - (327)
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NET CASH FROM INVESTING ACTIVITIES - (327)
---------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stockholder loans 73,852 204,000
---------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES 73,852 204,000
---------------------------------------------------------------------------
NET INCREASE IN CASH 15 17,621
CASH AT BEGINNING OF PERIOD 1,384 14,412
---------------------------------------------------------------------------
CASH AT END OF PERIOD $ 1,399 $ 32,033
---------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock for accrued legal services $ 40,526 $ -
Accrual of preferred stock dividends $ 1,600 $ 1,600
Transfer of deposit to property and equipment $ - $ 64,500
Issuance of common stock loan costs $ - $ 27,075
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-3
PROTON LABORATORIES, INC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION AND NATURE OF OPERATIONS
BASIS OF PRESENTATION - The condensed consolidated financial statements include
the accounts of Proton Laboratories, Inc., and its wholly owned subsidiary
("Proton" or the "Company"). All significant intercompany transactions and
balances have been eliminated in consolidation.
In April 2004, the Company changed its name from BentleyCapitalCorp.com, Inc. to
Proton Laboratories, Inc. The Company's subsidiary also changed its name from
Proton Laboratories, Inc. to Water Science, Inc.
CONDENSED FINANCIAL STATEMENTS - The accompanying unaudited condensed
consolidated financial statements are condensed and, therefore, do not include
all disclosures normally required by accounting principles generally accepted in
the United States of America. These statements should be read in conjunction
with the Company's annual financial statements included in the Company's
December 31, 2005 Annual Report on Form 10-KSB. In particular, the Company's
significant accounting principles were presented as Note 1 to the consolidated
financial statements in that report. In the opinion of management, all
adjustments necessary for a fair presentation have been included in the
accompanying condensed consolidated financial statements and consist of only
normal recurring adjustments. The results of operations presented in the
accompanying condensed consolidated financial statements for the three months
ended March 31, 2006 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2006.
NATURE OF OPERATIONS - The Company's operations are located in Alameda,
California. The core business of the Company consists of the sales and
marketing of the Company's industrial, environmental and residential systems
throughout the United States of America which alter the properties of water to
produce functional water. The Company acts as an exclusive importer and master
distributor of these products to various companies. Additionally, the Company
formulates intellectual properties under licensing agreements, supplies consumer
products, consults on projects utilizing functional water, facilitates between
manufacturer and industry and acts as educators on the benefits of functional
water.
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.
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.
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.
4
NOTE 2 - BUSINESS CONDITION
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern. The
company has incurred losses applicable to common shareholders of $140,712 for
the three months ended March 31, 2006. The Company had a working capital deficit
of $895,740, and $871,723 at March 31, 2006 and December 31, 2005,
respectively. Loans were required to fund operations.
The Company is working towards raising public funds to expand its marketing and
revenues. The Company has spent considerable time in contracting with several
major overseas corporations for the co-development of enhanced antioxidant
beverages for distribution into the overseas markets. In addition, the Company
is working with its Canadian business associates to identify institutional
businesses to market various disinfection applications based upon functional
water, pending government approval.
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flows to meet its obligations on a timely
basis, to obtain additional financing as may be required, and ultimately to
attain profitable operations. However, there is no assurance that profitable
operations or sufficient cash flows will occur in the future.
NOTE 3 - RELATED PARTY TRANSACTIONS
Stockholder loans as of March 31, 2006 and December 31, 2005 consist of the
following:
2006 2005
-----------------------------------------------------------------------------------------
Note payable to President; principal and interest due May 2006;
interest is accrued at 30% per annum; secured by inventory $164,000 $168,500
Note payable to President; principal and interest due June 2006;
interest is accrued at 7% per annum; unsecured 24,500 -
Note payable to CEO and majority shareholder; principal and
interest currently due; interest is accrued at 7% per annum;
unsecured. 84,000 84,000
Note payable to CEO and majority shareholder; principal and
interest currently due; interest is accrued at 7% per annum;
unsecured. 125,000 125,000
Note payable to CEO and majority shareholder; principal and
interest currently due; interest is accrued at 7% per annum;
unsecured. 40,000 40,000
Note payable to CEO and majority shareholder; principal and
interest due September 2006; interest is accrued at 7% per annum;
unsecured. 13,000 13,000
Note payable to CEO and majority shareholder; principal and
interest due September 2007; interest is accrued at 7% per annum;
unsecured. 8,642 14,142
5
Note payable to shareholder; principal and interest due January 2007;
interest is accrued at 7% per annum; unsecured. 40,000 40,000
Notes payable to President and CEO; principal and interest due
March 2008; interest is accrued at 7% per annum; unsecured. 59,352 -
-----------------------------------------------------------------------------------------
TOTAL STOCKHOLDER LOANS 558,494 484,642
Less: Current Portion 490,500 444,642
-----------------------------------------------------------------------------------------
TOTAL STOCKHOLDER LOANS - LONG TERM $ 67,994 $ 40,000
-----------------------------------------------------------------------------------------
During the three months ended March 31, 2006, two shareholders advanced the
Company $73,852. These advances bear interest at 7% with principal and accrued
interest due June 2006 and February 2008.
At March 31, 2006 and December 31, 2005, the Company had accrued interest
relating to shareholder loans of $115,068 and $97,331, respectively.
During the three months ended March 31, 2006, the Company accrued $15,000 as
salaries payable to the company's CEO, resulting in $170,987 of salaries payable
at March 31, 2006.
NOTE 4 - COMMON STOCK
In March 2006 the Company issued 352,400 shares of common stock for payment of
legal fees. The value of the shares issued was $81,052, based on a market price
on date of issuance of $0.23. $40,526 of this amount is related to services
rendered during the year ended December 31, 2005.
NOTE 5 - COMMITMENTS
PRODUCTION AGREEMENT - In June 2005, the Company entered into an agreement with
Mitachi, a Japanese electronics component manufacturer, to aid in the production
of enhanced drinking water generators. Pursuant to this agreement, Mitachi
agreed to pay the Company 25,000,000 Yen for engineering design, molding,
tooling and preparation costs, and the exclusive product distribution rights for
China, Taiwan, and Japan. As of March 31, 2006, Mitachi had paid 6,000,000 Yen,
or $52,506, for the above mentioned distribution rights. Since the project is
not yet completed and no units have been sold, this amount is classified as
deferred revenue.
EQUITY LINE - In November 2005, the Company entered into an equity line
agreement with a private investor (the "Equity Line Investor"). Under the
equity line, the Company had the right to draw up to $10,000,000 from the Equity
Line Investor. The Company was entitled to draw funds and to "put" to the
Equity Line Investor shares of the Company's common stock in lieu of repayment
of the draw. As of March 31, 2006, the Company had not drawn funds under the
equity line.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
FORWARD-LOOKING STATEMENT
Certain statements contained herein, including, without limitation,
statements containing the words, "believes," "anticipates," "expects," and other
words of similar meaning, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Given these
uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. In addition to the forward-looking statements
contained herein, the following forward-looking factors could cause our future
results to differ materially our forward-looking statements: competition,
funding, government compliance and market acceptance of our products.
INTRODUCTION
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our audited financial
statements and the accompanying notes thereto for the year ended December 31,
2005 which appear in our Form 10-KSB for the year then ended, and our unaudited
financial statements for the quarter ended March 31, 2006 and the accompanying
notes thereto and the other financial information appearing elsewhere herein.
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the USA, which
contemplate our continuation as a going concern.
We incurred a net losses of $139,112 for the three months ended March 31,
2006 and a net loss of $112,193 for the quarter ended March 31, 2005. We had a
working capital deficit of $895,740 at March 31, 2006, and a working capital
deficit of $871,723 at March 31, 2005. Loans from our president were required to
fund operations.
Our independent auditors made a going concern qualification in their report
dated March 29, 2006, which raises substantial doubt about our ability to
continue as a going concern. The financial statements herein 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.
Our ability to continue as a going concern is dependent upon our ability to
generate sufficient cash flows to meet our obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to attain
profitable operations. However, there is no assurance that profitable operations
or sufficient cash flows will occur in the future.
We are located in Alameda, California. Our business consists of the sales
and marketing of the industrial, environmental and residential systems
throughout the U.S.A. which alter the properties of water to produce functional
water. We act as an exclusive importer and master distributor of these products
to various companies in which uses for the product range from food processing to
retail water sales. We are working towards raising funds to expand our marketing
and revenues. We have spent considerable time negotiating with several overseas
corporations for the co-development of enhanced antioxidant beverages for
distribution into the overseas markets. In addition, we are working with
Canadian businesses to identify markets for various disinfection applications of
functional water, pending government approval. We are working on agricultural
applications of functional water. We are working on packaging for a spray-on
application of function water for pathogen counter-measures.
We formulate intellectual properties under licensing agreements, supply
consumer products, consult on projects utilizing functional water, facilitate
usage, uses and users of functional water between manufacturer and industry and
act as educators on the benefits of functional water. Our business has been
focused on marketing functional water equipment and systems.
Alkaline-concentrated functional water may have health-beneficial properties and
may be used for drinking and cooking purposes. Acidic-concentrated functional
water may be used as a topical, astringent medium.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and
expenses, and related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances. These estimates and assumptions provide a basis for us
to make judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Our actual results may differ from
these estimates under different assumptions or conditions, and these differences
may be material.
We recognize revenue when all four of the following criteria are met: (i)
persuasive evidence that an arrangement exists; (ii) delivery of the products
and/or services has occurred; (iii) the selling price is both fixed and
determinable and; (iv) collectibility is reasonably probable. Our revenues are
derived from sales of our industrial, environmental and residential systems
which alter the properties of water to produce functional water. We believe that
this critical accounting policy affects our more significant judgments and
estimates used in the preparation of our consolidated financial statements.
Our fiscal year end is December 31.
We have a joint research and development program with Weber Farms located
in Washington State. Weber Farms is family-owned with a long history of raising
and marketing quality potatoes, wheat and corn. In 1979, Weber Farms built a
fresh pack potato warehouse to ensure better quality and more oversight of the
marketing of open potatoes both to domestic and foreign markets. In 1997, a
state-of- the-art potato storage facility capable of storing 50,000 tons was
built. End uses of Weber Farm potatoes are generally in the areas of boxed and
bagged potatoes for retail stores, hash browns, French fries and other
retail-type products. We will work together in various areas where Proton's
electrolyzed water, with its unique efficacies, can be integrated into potato
production and post-harvesting processes. Understanding that Proton's water
brings about certain potato maintenance efficacies, environmental and worker
safety, on-site production abilities and cost efficiencies, both parties are
looking forward to a mutually rewarding relationship.
RESULTS OF OPERATIONS-THREE MONTHS ENDED MARCH 31, 2006 AND 2005.
We had revenue of $50,922 for the for the three months ended March 31, 2006
Compared to revenue of $94,189 for the for the three months ended March 31,
2005. This was a revenue decrease of $43,267 or 45.9%.
We had a net loss $139,112 for the for the three months ended March 31,
2006 compared to a net loss of $112,193 for the for the three months ended March
31, 2005.
Cash used by operating activities was $73,837 for the for the three months
ended March 31, 2006 compared to cash used by operating activities of $186,052
for the for the three months ended March 31, 2005. This decrease in cash used by
operating activities was due primarily to a decrease in inventory and an
increase in accrued expenses.
LIQUIDITY
At March 31, 2006, we had cash on hand of $1,399. Our growth is dependent
on our attaining profit from our operations and our raising of additional
capital either through the sale of stock or borrowing. There is no assurance
that we will be able to raise any equity financing or sell any of our products
to generate a profit.
During the three months ended March 31, 2006, both our President and CEO
advanced us an aggregate of $73,852. These advances bear interest at 7% with
principal and accrued interest due in March 2008. At March 31, 2006, we owed the
these two individuals an aggregate of $558,494, compared to March 31, 2005 when
we owed these two individuals an aggregate of $466,000. These amounts include
loans made to us by them prior to 2005.
At March 31, 2006, the accrued interest relating to stockholder loans was
$115,068 and at March 31, 2005, the accrued interest relating to stockholder
loans was $30,505.
During the three months ended March 31, 2006, we accrued $15,000 as
salaries payable, resulting in $170,987 of salaries payable at March 31, 2006.
This accrual includes salary accruals that we made prior to 2005.
In March 2005, we issued a note payable to our current President in the
amount of $164,000. The note was originally due in May 2005 and has been
extended through May 31, 2006 and is secured by inventory. The original terms of
the loan provided for an interest payment of $28,500 or 106% per annum. When the
note was extended in May 2005, the interest rate was amended to 30%. At March
31, 2006, the outstanding balance of the note was $164,000 and $72,308 of
interest had been accrued. In addition, we issued 47,500 shares of common stock
as additional consideration for the loan which was recorded as a $27,075 loan
cost and was amortized over the original term of the note. During October 2005
and March 2006, we obtained an additional $24,500 from the same lender, which
amounts are due June 1, 2006 and accrue interest at 7% per annum.
In June 2005, we entered into an agreement with Mitachi, a Japanese
electronics component manufacturer, to aid in the production of enhanced
drinking water generators. Pursuant to this agreement, Mitachi agreed to pay us
25,000,000 Yen for engineering design, molding, tooling and preparation costs,
and the exclusive product distribution rights for China, Taiwan, and Japan.
Through March 31, 2006, Mitachi had paid to us 6,000,000 Yen (US $52,506) in
connection with this agreement. Since the project is not yet completed and no
units have been sold, this amount is classified as deferred revenue.
FUTURE CAPITAL REQUIREMENTS
Our growth is dependent on attaining profit from our operations, or our
raising additional capital either through the sale of stock or borrowing. There
is no assurance that we will be able to raise any equity financing or sell any
of our products at a profit.
Our future capital requirements will depend upon many factors, including:
- The cost to acquire equipment that we then would resell.
- The cost of sales and marketing.
- The rate at which we expand our operations.
- The results of our consulting business.
- The response of competitors.
ITEM 3. 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.
Our management is responsible for establishing and maintaining adequate
control over our 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.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
In March 2005, we issued a note payable to our current President in the
amount of $164,000. The note was originally due in May 2005 and has been
extended through May 31, 2006 and is secured by inventory. The original terms of
the loan provided for an interest payment of $28,500 or 106% per annum. When the
note was extended in May 2005, the interest rate was amended to 30%. At March
31, 2006, the outstanding balance of the note was $164,000 and $72,308 of
interest had been accrued.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
Exhibit Exhibit
Number Name
--------------------------------------------------------------
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.
SIGNATURES
In accordance with the requirements 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.
May 16, 2006
By: /s/ Edward Alexander
Edward Alexander
Director, Chief Executive Officer, and
Chief Financial Officer