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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-QSB

(Mark One)

**[ x ]**Quarterly Report Pursuant To Section 13
  Or 15(d) Of The Securities Exchange Act Of 1934

For the quarterly period ended June 30, 2006

[]
  Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of
  1934

For the transition period ________ to ________

COMMISSION FILE NUMBER000-50163

AQUA SOCIETY, INC.(Name of small business issuer in its charter)

|NEVADA                                                                                 | 52-2357931                          
|-------------------------------------------------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation or
      organization)                   | (I.R.S. Employer Identification No.)
|                                                                                       |                                     
|                                                                                       |                                     
|Konrad - Adenauer Strasse 9-13                                                         |                                     
|45699 Herten, Germany                                                                  |                                     
|(Address of principal executive offices)                                               | (Zip Code)                          
|                                                                                       |                                     
|                                                                                       |                                     
|011-49-6031-791-760                                                                    |                                     
|Issuer's telephone number                                                              |                                     
|                                                                                       |                                     
|**Not Applicable**                                                                    
|Former name, former address and former fiscal
      year, if changed since last report

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

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the Exchange Act). Yes []
  No [ x ]

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of August 16,
2006, the Issuer had 118,178,323 Shares of Common Stock outstanding.

Transitional Small Business Disclosure Format (check one): Yes
  []
  No [ x ]

1

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.



2

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AQUA SOCIETY, INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2006

(Stated in US Dollars)

(Unaudited)

F-1

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AQUA SOCIETY, INC.INTERIM CONSOLIDATED BALANCE SHEETS 
  June 30, 2006 and September 30, 2005 
  (Stated in US Dollars) 
  (Unaudited)

|                                                        |   | June 30,    |   |   | September 30, |  
|------------------------------------------------------- | - | ----------- | - | - | ------------- | -
|                                                        |   | 2006        |   |   | 2005          |  
|                                                        |   |             |   |   |               |  
|**ASSETS**                                              |  
|                                                        |   |             |   |   |               |  
|Current                                                 |   |             |   |   |               |  
|Cash                                                    | $ | 30,334      |   | $ | 658,949       |  
|Accounts receivable                                     |   | 247,730     |   |   | 732,618       |  
|Government value added tax receivable                   |   | 356,268     |   |   | 64,639        |  
|Inventory                                               |   | 334,386     |   |   | 323,631       |  
|Loans receivable  Note 6                               |   | 69,802      |   |   | 60,212        |  
|                                                        |   |             |   |   |               |  
|                                                        |   | 1,038,520   |   |   | 1,840,049     |  
|Investment  Note 4                                     |   | 1           |   |   | 1             |  
|Patents                                                 |   | 191,397     |   |   | 192,782       |  
|Equipment                                               |   | 61,182      |   |   | 95,712        |  
|                                                        |   |             |   |   |               |  
|                                                        | $ | 1,291,100   |   | $ | 2,128,544     |  
|                                                        |   |             |   |   |               |  
|LIABILITIES                                             |  
|                                                        |   |             |   |   |               |  
|Current                                                 |   |             |   |   |               |  
|Accounts payable and accrued liabilities 
      Note 5 | $ | 700,821     |   | $ | 290,636       |  
|Current portion of loans payable
       Notes 5 and 7  |   | 1,692,025   |   |   | 96,339        |  
|                                                        |   |             |   |   |               |  
|                                                        |   | 2,392,846   |   |   | 386,975       |  
|Loans payable  Notes 5 and 7                           |   | -           |   |   | 1,278,263     |  
|                                                        |   |             |   |   |               |  
|                                                        |   | 2,392,846   |   |   | 1,665,238     |  
|                                                        |   |             |   |   |               |  
|STOCKHOLDERS EQUITY (DEFICIENCY)                       |  
|                                                        |   |             |   |   |               |  
|Common stock, $0.001 par value  Notes 8, 9 and 10      |   |             |   |   |               |  
|300,000,000 shares authorized                           |   |             |   |   |               |  
|118,178,323 shares issued and outstanding               |   |             |   |   |               |  
|(September 30, 2005:
      115,771,988)                 |   | 118,179     |   |   | 115,773       |  
|Additional paid-in capital                              |   | 28,609,612  |   |   | 26,308,690    |  
|Accumulated other comprehensive gain                    |   | 62,702      |   |   | 88,597        |  
|Accumulated deficit                                     |   | (29,892,239 | ) |   | (26,049,754   | )
|                                                        |   |             |   |   |               |  
|                                                        |   | (1,101,746  | ) |   | 463,306       |  
|                                                        |   |             |   |   |               |  
|                                                        | $ | 1,291,100   |   | $ | 2,128,544     |  

SEE ACCOMPANYING NOTES

F-2

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AQUA SOCIETY, INC.INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS 
  for the three and nine months ended June 30, 2006 and 2005 
  (Stated in US Dollars) 
  (Unaudited)

|                                                 |   | Three months ended |   |   | Nine months ended |  
|------------------------------------------------ | - | ------------------ | - | - | ----------------- | -
|                                                 |   | June 30,           |   |   | June 30,          |  
|                                                 |   | 2006               |   |   | 2005              |  
|                                                 |   |                    |   |   |                   |  
|Revenue                                          | $ | 273,301            |   | $ | 601,068           |  
|Less: cost of goods sold                         |   | 339,480            |   |   | 372,751           |  
|                                                 |   |                    |   |   |                   |  
|                                                 |   | (66,179            | ) |   | 228,317           |  
|General and administrative expenses:             |   |                    |   |   |                   |  
|Accounting and audit fees                        |   | 94,555             |   | $ | 26,795            |  
|Advertising and promotion                        |   | 435,912            |   |   | 106,759           |  
|Amortization                                     |   | 25,956             |   |   | 3,058             |  
|Bad debts                                        |   | 635                |   |   | -                 |  
|Bank charges and interest                        |   | 160                |   |   | 12,012            |  
|Consulting fees                                  |   | 14,451             |   |   | 74,441            |  
|Development costs  Note 5                       |   | 435,811            |   |   | 19,613            |  
|Filing fees                                      |   | 1,061              |   |   | 456               |  
|Interest expense                                 |   | 19,292             |   |   | -                 |  
|Legal fees  Note 5                              |   | 21,573             |   |   | 3,056             |  
|Management fees  Note 5                         |   | 123,043            |   |   | 175,415           |  
|Office and miscellaneous                         |   | 71,491             |   |   | 15,363            |  
|Rent                                             |   | 36,735             |   |   | 33,812            |  
|Salaries and benefits                            |   | 164,160            |   |   | 64,638            |  
|Stock-based compensation  Note 8                |   | -                  |   |   | -                 |  
|Transfer agent                                   |   | 301                |   |   | 629               |  
|Travel  Note 5                                  |   | 59,143             |   |   | 9,928             |  
|                                                 |   |                    |   |   |                   |  
|                                                 |   | (1,504,279         | ) |   | (545,975          | )
|                                                 |   |                    |   |   |                   |  
|Net loss for the period before other items       |   | (1,570,458         | ) |   | (317,658          | )
|Other items:                                     |   |                    |   |   |                   |  
|Interest income                                  |   | 132                |   |   | -                 |  
|Write down of patents                            |   | (97                | ) |   | -                 |  
|Write down of investment and loan  Note
      4 |   | (687               | ) |   | -                 |  
|                                                 |   |                    |   |   |                   |  
|Net loss for the period                          |   | (1,571,110         | ) |   | (317,658          | )
|                                                 |   |                    |   |   |                   |  
|Other comprehensive loss                         |   |                    |   |   |                   |  
|Foreign currency adjustment                      |   | (7,474             | ) |   | (29,814           | )
|                                                 |   |                    |   |   |                   |  
|Comprehensive loss for the period                | $ | (1,578,584         | ) | $ | (347,472          | )
|                                                 |   |                    |   |   |                   |  
|Basic loss per share                             | $ | (0.01              | ) | $ | (0.00             | )
|                                                 |   |                    |   |   |                   |  
|Weighted average number of shares outstanding    |   | 116,779,590        |   |   | 114,465,292       |  

SEE ACCOMPANYING NOTES

F-3

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AQUA SOCIETY, INC.INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 
  for the nine months ended June 30, 2006 and 2005 
  (Stated in US Dollars) 
  (Unaudited)

|                                                   |   | 2006       |   |   | 2005        |  
|-------------------------------------------------- | - | ---------- | - | - | ----------- | -
|                                                   |   |            |   |   |             |  
|Cash flows used in Operating Activities            |   |            |   |   |             |  
|Net loss for the period                            | $ | (3,842,485 | ) | $ | (23,982,914 | )
|Items not affecting cash:                          |   |            |   |   |             |  
|Amortization                                       |   | 43,803     |   |   | 8,334       |  
|Stock-based
      compensation                     |   | -          |   |   | 22,480,000  |  
|Write-down of patents                              |   | 9,188      |   |   | -           |  
|Write-down
      of investment and loan receivable |   | 65,312     |   |   | -           |  
|Changes in non-cash working capital items:         |   |            |   |   |             |  
|Accounts
      receivable                          |   | 499,247    |   |   | (702,848    | )
|Government value added
      tax receivable        |   | (279,702   | ) |   | 8,963       |  
|Inventory                                          |   | 2,759      |   |   | (82,279     | )
|Accounts payable and
      accrued liabilities     |   | 388,222    |   |   | 315,144     |  
|                                                   |   |            |   |   |             |  
|                                                   |   | (3,113,656 | ) |   | (1,955,600  | )
|                                                   |   |            |   |   |             |  
|Cash flows used in Investing Activities            |   |            |   |   |             |  
|Investment                                         |   | (15,999    | ) |   | (32,186     | )
|Cash acquired in investment in TMR GmbH            |   | 15,999     |   |   | -           |  
|Patents                                            |   | (194       | ) |   | (176,141    | )
|Due from related party                             |   | -          |   |   | 6,202       |  
|Equipment purchases                                |   | (6,478     | ) |   | (55,741     | )
|Increase in loans receivable                       |   | (72,146    | ) |   | (357,151    | )
|                                                   |   |            |   |   |             |  
|                                                   |   | (78,818    | ) |   | (615,017    | )
|                                                   |   |            |   |   |             |  
|Cash flows from Financing Activities               |   |            |   |   |             |  
|Issuance of common stock
      for cash            |   | 2,303,328  |   |   | 3,623,597   |  
|Increase in loans payable                          |   | 251,361    |   |   | 1,604,445   |  
|                                                   |   |            |   |   |             |  
|                                                   |   | 2,554,689  |   |   | 5,228,042   |  
|                                                   |   |            |   |   |             |  
|Effect of exchange rates on cash                   |   | 9,170      |   |   | (26,145     | )
|                                                   |   |            |   |   |             |  
|Increase (decrease) in cash during the period      |   | (628,615   | ) |   | 2,631,280   |  
|                                                   |   |            |   |   |             |  
|Cash, beginning of the period                      |   | 658,949    |   |   | 6,713       |  
|                                                   |   |            |   |   |             |  
|Cash, end of the period                            | $ | 30,334     |   | $ | 2,637,993   |  
|                                                   |   |            |   |   |             |  
|Non-cash Transaction  Note 9                      |   |            |   |   |             |  

SEE ACCOMPANYING NOTES

F-4

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AQUASOCIETY,INC. 
  INTERIM STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY) 
  for the period May 13, 2004 (Date of Inception) to June 30, 2006 
  (Stated in US Dollars) 
  (Unaudited )

|                                | Common
      Stock |   |   |           |   |   |            |  | Accumulated      |   |   |               |   |   |                   |  
|------------------------------- | ------------------ | - | - | --------- | - | - | ---------- |  | ---------------- | - | - | ------------- | - | - | ----------------- | -
|                                |                    |   |   |           |   |   | Additional |  |                  |   |   |               |   |   | Other             |  
|                                |                    |   |   |           |   |   | Paid-in    |  | Special Warrants |   |   | Comprehensive |   |   | Accumulated       |  
|                                | Number             |   |   | Par Value |   |   | Capital    |  | Number           |   |   | Amount        |   |   | Gain
      (Loss) |  
|                                |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|Capital stock issued for cash   | 1                  |   | $ | 31,042    |   | $ | -          |  | -                |   | $ | -             |   | $ | -                 |  
|Contribution of assets          | -                  |   |   | -         |   |   | 25,056     |  | -                |   |   | -             |   |   | -                 |  
|Pursuant to the acquisition     |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|of Aqua Society GmbH            | 10,000,000         |   |   | 10,000    |   |   | -          |  | 34,000,000       |   |   | 34,000        |   |   | -                 |  
|Exchange of shares              | (1                 | ) |   | (31,042   | ) |   | -          |  | -                |   |   | -             |   |   | -                 |  
|Outstanding shares of Company   |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|prior to acquisition            | 69,908,000         |   |   | 69,908    |   |   | -          |  | -                |   |   | -             |   |   | -                 |  
|Unrealized loss on translation  | -                  |   |   | -         |   |   | -          |  | -                |   |   | -             |   |   | (997              | )
|Net loss for the period         | -                  |   |   | -         |   |   | -          |  | -                |   |   | -             |   |   | -                 |  
|                                |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|Balance, September 30, 2004     | 79,908,000         |   |   | 79,908    |   |   | 25,056     |  | 34,000,000       |   |   | 34,000        |   |   | (997              | )
|Issued for cash:                |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|Pursuant to private placement   |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|- at $2.40                      | 416,666            |   |   | 417       |   |   | 999,583    |  | -                |   |   | -             |   |   | -                 |  
|- at $1.98                      | 1,232,322          |   |   | 1,233     |   |   | 2,438,766  |  | -                |   |   | -             |   |   | -                 |  
|Pursuant to exercise of options |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|- at $1.70                      | 215,000            |   |   | 215       |   |   | 365,285    |  | -                |   |   | -             |   |   | -                 |  
|Conversion of special warrants  | 34,000,000         |   |   | 34,000    |   |   | -          |  | (34,000,000      | ) |   | (34,000       | ) |   | -                 |  
|Stock-based compensation        | -                  |   |   | -         |   |   | 22,480,000 |  | -                |   |   | -             |   |   | -                 |  
|Unrealized gain on translation  | -                  |   |   | -         |   |   | -          |  | -                |   |   | -             |   |   | 89,594            |  
|Net loss for the year           | -                  |   |   | -         |   |   | -          |  | -                |   |   | -             |   |   | -                 |  
|                                |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|Balance, September 30, 2005     | 115,771,988        |   |   | 115,773   |   |   | 26,308,690 |  | -                |   |   | -             |   |   | 88,597            |  
|Pursuant to private placement   |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|- at $1.04                      | 1,160,960          |   |   | 1,161     |   |   | 1,206,237  |  | -                |   |   | -             |   |   | -                 |  
|- at $0.88                      | 1,245,375          |   |   | 1,245     |   |   | 1,094,685  |  | -                |   |   | -             |   |   | -                 |  
|Unrealized gain on translation  | -                  |   |   | -         |   |   | -          |  | -                |   |   | -             |   |   | (25,895           | )
|Net loss for the period         | -                  |   |   | -         |   |   | -          |  | -                |   |   | -             |   |   | -                 |  
|                                |                    |   |   |           |   |   |            |  |                  |   |   |               |   |   |                   |  
|Balance, June 30, 2006          | 118,178,323        |   | $ | 118,179   |   | $ | 28,609,612 |  | -                |   | $ | -             |   | $ | 62,702            |  

SEE ACCOMPANYING NOTES

F-5

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AQUA SOCIETY, INC.NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS 
  June 30, 2006 
  (Stated in US Dollars) 
  (Unaudited)

|Note 1 | Interim Reporting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | While information presented
        in the accompanying interim financial statements is unaudited, it includes
        all adjustments, which are, in the opinion of management, necessary to
        present fairly the financial position, results of operations and cash
        flows for the interim period presented. All adjustments are of a normal
        recurring nature. It is suggested that these interim financial statements
        be read in conjunction with the Companys September 30, 2005 audited
        consolidated financial statements. Operating results from the period ended
        June 30, 2006 are not necessarily indicative of the results that can be
        expected for the year ending September 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Note 2 | Nature and Continuance of
        Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | These financial statements have
        been prepared in accordance with generally accepted accounting principles
        applicable to a going concern, which assumes that the Company will be
        able to meet its obligations and continue its operations for the next
        twelve months. Realization values may be substantially different from
        carrying values as shown and these financial statements do not give effect
        to adjustments that would be necessary to the carrying values and classification
        of assets and liabilities should the Company be unable to continue as
        a going concern. At June 30, 2006, the Company had not yet achieved profitable
        operations, has accumulated losses of $29,892,239 since its inception,
        has a working capital deficiency of $1,354,326 and expects to incur further
        losses in the development of its business, all of which casts substantial
        doubt about the Companys ability to continue as a going concern.
        The Companys ability to continue as a going concern is dependent
        upon its ability to generate future profitable operations and/or to obtain
        the necessary financing to meet its obligations and repay its liabilities
        arising from normal business operations when they come due. Management
        has no formal plan in place to address this concern but considers that
        the Company will be able to obtain additional funds by equity financing
        and/or related party advances, however there is no assurance of additional
        funding being available.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Note 3 | Significant Accounting Policy- Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | The consolidated financial statements
        include the accounts of the Company, its 51% interest in TMR GmbH, a German
        limited company, and its wholly owned subsidiary, Aqua Society GmbH, a
        German limited liability company. All inter-company transactions have
        been eliminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-6

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Aqua Society, Inc. 
  Notes to the Interim Consolidated Financial Statements 
  June 30, 2006 
  (Stated in US Dollars)  Page 2
  (Unaudited)

|Note 4 | Business Acquisition                                                                                                                                                 
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                      
|       | i)                                                                                                                                                                   
|       |                                                                                                                                                                      
|       |                                                                                                                                                                      
|       |                                                                                                                                                                      
|       | ii)                                                                                                                                                                  
|       |                                                                                                                                                                      
|Note 5 | Related Party Transactions Notes 8 and 10                                                                                                                           
|       |                                                                                                                                                                      
|       | The Company incurred
        the following amounts charged by a law firm of which a former director
        of the Company is a partner and directors of the Company:

| |                   |   | Three months ended |  |   | Nine months ended | 
| | ----------------- | - | ------------------ |  | - | ----------------- | 
| |                   |   | June 30,           |  |   | June 30,          | 
| |                   |   | 2006               |  |   | 2005              | 
| |                   |   |                    |  |   |                   | 
| | Development costs | $ | 85,040             |  | $ | 233,905           | 
| | Legal fees        |   | -                  |  |   | -                 | 
| | Management fees   |   | 123,043            |  |   | 54,437            | 
| | Travel            |   | 1,819              |  |   | -                 | 
| |                   |   |                    |  |   |                   | 
| |                   | $ | 209,902            |  | $ | 288,342           | 

Included in accounts payable and accrued
  liabilities is $20,916 (September 30, 2005: $20,916) due to a former director
  of the Company and $97,172 (September 30, 2005: $Nil) due to directors of the
  Company. These amounts are unsecured, non-interest bearing and have no specific
  terms for repayment.

Included in loans payable is $1,399,447
  (September 30, 2005: $1,187,668) due to a law firm of which a former director
  of the Company is a partner.

F-7

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Aqua Society, Inc. 
  Notes to the Interim Consolidated Financial Statements 
  June 30, 2006 
  (Stated in US Dollars)  Page 3
  (Unaudited)

|Note 6 | Loans Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The loan receivable bears interest
        at 7.5% per annum, is secured by tax refund entitlements and accounts
        receivable and is repayable within one year.                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Note 7 | Loans Payable Note
        5                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | Of the total outstanding at June
        30, 2006, $663,798 (September 30, 2005: $758,553) of the loans payable
        bear interest at 7.5% per annum, are secured by accounts receivable of
        Aqua Society GmbH (the Companys wholly-owned subsidiary) and are
        repayable within one year and $735,650 (September 30, 2005: $640,380)
        bear no interest, are secured by accounts receivable of Aqua Society GmbH
        and are repayable within one year.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Note 8 | Capital Stock Notes
        9 and 10                                                                                                                                                                                                                                                                                                                                                                                                                                              
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | On December 6, 2004, the Company
        increased its authorized common stock to 300,000,000 common shares at
        $0.001 par value.                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | Commitments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | Share Purchase Options                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | The Company has a share purchase
        option plan, which authorizes the board of directors to grant shares as
        incentive share purchase options to directors, officers, consultants and
        employees. The exercise price of the options is determined by the fair
        market value of the shares at the closing price on the date of the grant.                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       | A summary of the status of the
        stock option plan as of June 30, 2006 and changes during the period is
        presented below:                                                                                                                                                                                                                                                                                                                                             

| |                                                                 |  |            |   |   | Weighted       | 
| | --------------------------------------------------------------- |  | ---------- | - | - | -------------- | 
| |                                                                 |  |            |   |   | Average        | 
| |                                                                 |  | Shares     |   |   | Exercise Price | 
| |                                                                 |  |            |   |   |                | 
| | Options outstanding at September 30, 2004                       |  | -          |   |   | -              | 
| | Granted                                                         |  | 10,000,000 |   | $ | 1.70           | 
| | Exercised                                                       |  | (215,000   | ) | $ | 1.70           | 
| |                                                                 |  |            |   |   |                | 
| | Options outstanding and exercisable at September
      30, 2005 |  |            |   |   |                | 
| | and June 30, 2006                                               |  | 9,785,000  |   | $ | 1.70           | 

At June 30, 2006, 9,785,000 share purchase
  options were outstanding to directors, employees and consultants entitling the
  holders thereof the right to purchase one common share of the Company at $1.70
  per share for each option held. These share purchase options expire on October
  15, 2009.

F-8

---

Aqua Society, Inc. 
  Notes to the Interim Consolidated Financial Statements 
  June 30, 2006 
  (Stated in US Dollars)  Page 4
  (Unaudited)

|Note 8 | Capital Stock Notes 9 and 10 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | Commitments (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | Share Purchase Options  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | Accordingly, using the Black-Scholes
        option pricing model, the stock options granted during the nine months
        ended June 30, 2005 to consultants were marked to fair value through charges
        to the statements of operations and additional paid-in capital. Total
        stock- based compensation for stock options granted to consultants and
        non-employees recognized during the period ended June 30, 2005, was $22,480,000.
        This amount was recorded in the statements of operations as stock-based
        compensation and in the balance sheets as additional paid-in capital.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | The Compensation charge associated
        with directors and employees options in the amount of $5,620,000
        was not recognized in the financial statements, but included in the pro
        forma amounts below.                                                                                                                                                                                                                                                                                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | The fair value of the stock-based
        compensation was determined using the Black-Scholes option pricing model
        with the following assumptions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | Expected dividend yield                 | 0.0%   
| | --------------------------------------- | -------
| | Expected volatility                     | 117%   
| | Risk-free interest rate                 | 4%     
| | Weighted average expected term in years | 5 years

The Black-Scholes option-pricing model
  requires the input of highly subjective assumptions including the expected price
  volatility. Changes in the subjective input assumptions can materially affect
  the fair value estimate and therefore the Black-Scholes model does not necessarily
  provide a reliable single measure of the fair value of the Companys share
  purchase options.

Had compensation cost associated with
  directors and employee options been determined based on fair value at
  the grant date, pro forma loss and loss per share would have been as follows:

| |                                   |   | Nine months |  
| | --------------------------------- | - | ----------- | -
| |                                   |   | Ended       |  
| |                                   |   | June 30,    |  
| |                                   |   | 2005        |  
| |                                   |   |             |  
| | Comprehensive loss for the period | $ | (23,991,180 | )
| | Pro forma compensation cost       |   | (5,620,000  | )
| |                                   |   |             |  
| | Pro forma net loss for the period | $ | (29,611,180 | )
| |                                   |   |             |  
| | Pro forma net loss per share      | $ | (0.28       | )

F-9

---

Aqua Society, Inc. 
  Notes to the Interim Consolidated Financial Statements 
  June 30, 2006 
  (Stated in US Dollars)  Page 5
  (Unaudited)

|Note 8  | Capital Stock Notes 9 and 10 
      (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Commitments (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Share Purchase Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | As at June 30, 2006, a total
        of 4,055,323 share purchase warrants were outstanding of which 416,666
        warrants entitle the holders thereof the right to purchase 416,666 common
        shares at $2.40 per share until October 18, 2006, 1,232,322 warrants entitle
        the holders thereof the right to purchase 1,232,322 common shares at $1.98
        per share until June 24, 2006, 1,160,960 warrants entitle the holders
        thereof the right to purchase 1,160,960 common shares at $1.30 per share
        until February 23, 2008 and 1,245,375 warrants entitle the holders thereof
        the right to purchase 1,245,375 common shares at $1.10 per share until
        June 15, 2008.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 9  | Non-cash Transaction                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | Investing and financing activities
        that do not have an impact on current cash flows are excluded from the
        statements of cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | During the nine months ended
        June 30, 2005, the Company issued 34,000,000 common shares pursuant to
        the conversion of 34,000,000 special warrants for no additional consideration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | This transaction has been excluded
        from the statements of cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Note 10 | Commitments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

| | i) | Lease Contracts
| | -- | ---------------
| |    |                
| |    | a)             

F-10

---

Aqua Society, Inc. 
  Notes to the Interim Consolidated Financial Statements 
  June 30, 2006 
  (Stated in US Dollars)  Page 6
  (Unaudited)

|Note 10 | Commitments (contd)
|------- | ---------------------

| | i) | Lease Contracts  (contd)
| | -- | --------------------------
| |    |                           
| |    | b)                        
| |    |                           
| |    |                           

September 30, 2006
      $
      26,8132007
      
      81,1652008
      
      12,175$
      120,153


| | ii) | Management/Consulting Contracts
| | --- | -------------------------------
| |     |                                
| |     | a)                             
| |     |                                
| |     | b)                             
| |     |                                
| |     | c)                             
| |     |                                
| |     | d)                             

F-11

---

Aqua Society, Inc. 
  Notes to the Interim Consolidated Financial Statements 
  June 30, 2006 
  (Stated in US Dollars)  Page 7
  (Unaudited)

|Note 10 | Commitments (contd)
|------- | ---------------------

| | ii) | Management/Consulting Contracts  (contd)
| | --- | ------------------------------------------
| |     |                                           
| |     | e)                                        
| |     |                                           
| |     | f)                                        
| |     |                                           
| |     | g)                                        
| |     |                                           
| |     | h)                                        
| |     |                                           
| |     | i)                                        
| |     |                                           
| |     | j)                                        
| |     |                                           
| |     | k)                                        

F-12

---

Aqua Society, Inc. 
  Notes to the Interim Consolidated Financial Statements 
  June 30, 2006 
  (Stated in US Dollars)  Page 8
  (Unaudited)

|Note 10 | Commitments (contd)
|------- | ---------------------

| | iii) | Sponsorship Agreement                                                                                                                                                                                                                                                                                                                                             
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                   
| |      | By an agreement dated March 29, 2005, the Company agreed
        to pay EUR6,000 (US$7,529) per month for exclusive sponsorship of a professional
        soccer club. The contract was effective April 1, 2005 to June 30, 2006
        but was automatically extended for one year as three months notice
        of cancellation was not given by the Company.

|Note 11 | Comparative Figures                                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                      
|        | Certain of the June 30, 2005,
        comparative figures have been reclassified to conform with the presentation
        used in the current period.

F-13

---

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.

Cautionary Statement Regarding Forward-Looking
Statements

Certain statements contained in this Quarterly Report
constitute "forward-looking statements". These statements, identified by words
such as plan, "anticipate," "believe," "estimate," "should," "expect" and
similar expressions include our expectations and objectives regarding our future
financial position, operating results and business strategy. These statements
reflect the current views of management with respect to future events and are
subject to risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks and
uncertainties include those set forth under the caption "Management's Discussion
and Analysis or Plan of Operation" and elsewhere in this Quarterly Report. We do
not intend to update the forward-looking information to reflect actual results
or changes in the factors affecting such forward-looking information. We advise
you to carefully review the reports and documents we file from time to time with
the United States Securities and Exchange Commission (the SEC), particularly
our Annual Reports on Form 10-KSB and our Current Reports on Form 8-K.

As used in this Quarterly Report, the terms "we", "us", "our",
the Company and Aqua Society mean Aqua Society, Inc. unless otherwise
indicated. All dollar amounts in this Quarterly Report are in U.S. dollars
unless otherwise stated.

INTRODUCTION

The following discussion and analysis summarizes our plan of
operation for the next twelve months, our results of operations for the nine
month period ended June 30, 2006 and changes in our financial condition from
September 30, 2005. This discussion should be read in conjunction with the
Managements Discussion and Analysis or Plan of Operation included in our Annual
Report on Form 10-KSB for the year ended September 30, 2005.

Recent Corporate Developments

The following significant corporate developments have occurred
since the end of our second fiscal quarter on March 31, 2006:

|1. | In February, 2006, we entered into an agreement with
      Sportfive GmbH & Co. KG, a sports management company representing
      heavyweight boxer, Wladamir Klitschko, to act as a sponsor of the
      heavyweight title fight between Mr. Klitschko and Chris Byrd. The fight
      took place on April 22, 2006 at the SAP Arena in Mannheim, Germany.
      Pursuant to our agreement with Sportfive, our logo appeared at various
      places around the ring and on various merchandise related to the fight,
      including the floor and the four corners of the ring, the press kit, and a
      full page inclusion in the official magazine for the fight. In
      consideration for these rights, we agreed to pay Sportfive EUR 175,000
      (approximately $211,000) and related production costs of approximately EUR
      64,000 (approximately $77,000), with VAT of 16% payable on both.                                                                                                                                                                                                                                                                                                                                         
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2. | We completed a private placement with a corporate
      investor for 1,245,375 units at a price of $0.88 per unit for total
      proceeds of $1,095,930 (approximately EUR 900,000). Each unit was
      comprised of one share of our common stock and one share purchase warrant.
      Each share purchase warrant l entitles the holder to purchase one
      additional share of our common stock at a price of $1.10 per share for a
      period of two years from the date of closing. We had previously announced
      that this private placement had been negotiated for 1,044,863 units at a
      subscription price of $1.04 per unit, with a share purchase warrant
      exercise price of $1.30 per share. The terms of this private placement
      were revised in order to reflect changes to the market price of our common
      stock and changes in foreign exchange rates. The subscribed for units were
      issued effective June 8, 2006 pursuant to the provisions of Regulation S
      on the basis that the offering does not involve a distribution in the
      United States and that the investor is not a U.S. person as defined in
      Regulation S. No underwriting discounts or commissions were
    involved.

3

---

|3. | In March, 2006, we received an order from Loick AG for a
      waste heat power generation system based on our Yellow Box product. Loick
      is a company based in Dorsten, Germany, that specializes in the
      development and production of renewable resource products such as
      bioplastics and biogas energy systems. The ordered unit is to be used to
      generate electricity from the waste heat generated by one of Loicks
      existing biogas power generators. The biogas systems produced by Loick are
      used to supply electricity to the public grid in Germany. The price of the
      unit ordered is EUR 295,000 (approximately $370,000) and is payable in
      instalments, with the final instalment payable upon the successful
      installation of the ordered unit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | The unit ordered by Loick is to be customized to the
      particular biogas generator to which it will be installed. Loick is
      currently installing a new motor onto the biogas generator. As such, the
      design and construction of the ordered waste heat power generation system
      is being delayed until Loick has completed the installation of the new
      motor. As of the date we filed this Quarterly Report, Loick had still not
      finished installing the motor. Loick has informed us that they expect to
      complete the installation of this motor during the Summer of 2006. We have
      no control over Loicks installation of this motor and, as a result, we
      can provide no assurances when construction of the unit ordered by Loick
      will begin. Once construction has begun, we expect that it will take us
      approximately 3 months to complete. However there are no assurances that
      we will be able to complete the construction of this unit within the
      expected time frame or that, once construction has been completed, that
      the unit will function as expected.                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4. | In April, 2006, we announced that we had formed a joint
      venture with Loick AG and ODAS OHG, a company based in Dorsten, Germany,
      that specializes in the supply of plant based biomass raw materials. The
      joint venture entity, known as TMR GmbH, was formed to develop, build,
      distribute and manage renewable energy facilities. We own 51% of the joint
      venture entity, with Loick and ODAS each owning 23.5% of the joint venture
      entity. The remaining 2% is owned by an unrelated individual who has
      granted TMR the right to use certain technical processes that may be
      incorporated into its renewable energy facilities. We are working with
      Loick and ODAS to develop a business plan for TMR, however no specific
      time frame has been set with respect to TMR.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|5. | In April, 2006, we announced that we had received an
      order from More Power Energie GmbH (MPE). MPE has ordered a combined
      heat and power plant that is to be used to convert the waste heat from a
      biogas power plant into electricity. MPE intends to connect the ordered
      unit to a biogas power plant owned by a third party operator. The price of
      the ordered unit is EUR 322,000 (approximately $404,000).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | Specifications on the heat energy to be used were
      recently delivered by MPE. As such, we have now begun construction on the
      ordered unit. Construction is expected to take approximately 3 months to
      complete. However, there are no assurances that we will be able to
      complete the construction of this unit within the time frame estimated. In
      addition, even if we are able to complete construction of the ordered
      unit, there are no assurances that, once installed, it will function as
      expected.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|6. | In April, 2006, we announced that we had received an
      order to install Aquamission combined air- conditioning and drinking water
      supply systems to a residential complex to be constructed in Hyderabad,
      India by North East Developers and Real Estates (North East Developers).
      The Aquamissions to be supplied are also to be fitted with our Yellow Box
      products. The value of this order is expected to be approximately EUR
      560,000 (approximately $703,000), however this amount is based upon
      quotations that we have provided to North East Developers and may not be
      indicative of any actual amounts realized as a result of this order. In
      particular, schematics of the residential complex have not been finalized
      and construction of the complex has not yet begun. North East Developers
      has tentatively scheduled construction to begin in January, 2007. However
      we have no control over the construction of the residential complex. As
      such, there is no assurance that the actual units to be delivered will be
      those set out in the order. In addition, payment will be dependent upon
      the successful installation of the units ordered. There are no assurances
      that we will be able to successfully install the ordered units, or that,
      once installed, those units will function as
expected.

4

---

|7. | In December, 2005, we had installed a Thermomobile unit
      onto a Ford Transit to be used for marketing purposes. We had been working
      with a Ford dealership in Dusseldorf, Germany to market the
      Thermomobile/Ford Transit in an effort to generate consumer sales of the
      Thermomobile. However, we were unable to reach an agreement with the Ford
      dealership on a consumer price for the unit. As such, we are no longer
      pursuing our co-operative efforts with the Ford dealership. We now intend
      to use the Thermomobile/Ford Transit unit as part of our marketing efforts
      in the Benelux countries.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|8. | During the nine month period ended June 30, 2006, we sold
      a 13.1% interest in UFI-TEC GmbH for proceeds of EUR 10,072 (approximately
      $12,237). As a result we now own only 19.9% of
UFI-TEC.                                                                                                                                                                                                                                                                                                                                                                                                                                               

We had previously disclosed in our Annual Report for the year
ended September 30, 2005 that we were in the process of formalizing the transfer
to us of title to certain patent pending technologies. The inventors of these
technologies (the Inventors) include Hubert Hamm, a managing director of our
wholly owned subsidiary, Aqua Society GmbH, and Dr. Erwin Oser, a member of our
Board of Directors. Transfer of title to the patent pending technologies has not
yet occurred and we are currently in negotiations with the Inventors regarding
the transfer of title or exclusive rights to these technologies and the patent
applications filed in respect of those technologies.

PLAN OF OPERATION

During the next twelve months, we will focus (1) on the design
and construction of the units ordered from us; (2) on further developing the
market for our products; and (3) on continuing to develop and improve our
products. Specifically, our plan of operation for the next twelve months
involves the following:

|1. | Design and Construction of Ordered
      Units:During the next twelve months, we will work on the
      design and construction of the waste heat power generation, Aquamission
      and Thermomobile units for which we have received orders:
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                
|   | (a)                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                
|   | (b)                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                
|   | (c)                                                                                                                                                                                                                                            

5

---

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | deliver the ordered unit until the Summer or Fall
        of 2006. There have been significant and ongoing delays in the construction
        and delivery of the Aquamission unit ordered by Kal-Tec and there are
        no assurances that we will be able to complete construction of the ordered
        unit within the time frame estimated. In addition, because of these delays,
        in the opinion of our management, there exists a substantial doubt that
        Kal-Tec will accept delivery of the ordered Aquamission even if construction
        is completed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | We have an agreement with BS Technik GmbH (BS
        Technik) for the delivery of 15 Thermomobile units of varying sizes.
        In August of 2005, we reported that BS Technik had agreed to allow us
        to delay delivery of the Thermomobile units ordered by them. These units
        are currently under construction and are expected to be delivered sometime
        in 2006. There have been significant and ongoing delays in the construction
        and delivery of the Thermomobile units ordered by BS Technik and there
        are no assurances that we will be able to complete construction of the
        ordered units within the estimated time frame. Because of these delays,
        even though BS Technik agreed in August of 2005 to allow us to delay delivery,
        in the opinion of our management, there exists a substantial doubt that
        BS Technik will continue to accept delivery of the ordered Thermomobile
        units even if construction is completed.                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|2. | Market Development Activities:Over the next twelve months we intend to do the following in an effort
        continue developing a market for our products and services:                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | We are currently building a show model Yellow Box unit.
        It is expected that this unit will be ready in the late Summer or early
        Autumn of 2006. Once construction is complete, we intend to hold a press
        conference at which we will conduct a demonstration of the Yellow Box
        for members of the media and industry representatives. We hope to conduct
        this demonstration in September or October of 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | We are also in the process of setting up a wholly owned
        subsidiary in the Netherlands, through which we will seek to promote all
        of our products in the Benelux countries (Belgium, the Netherlands
        and Luxemberg). The office for this subsidiary will be located in Zevenaar,
        near Arnhem in the east of the Netherlands.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | We will continue to attempt to market the Aquamission
        combined air-conditioning and drinking water product in geographic locations
        with high ambient temperatures and relative humidity but without readily
        available sources of fresh water, such as the Persian Gulf and the Middle
        East. Three demonstration models of the Aquamission are currently on location
        in the Middle East. One of these models is currently out of order and
        will require repairs. Although these units have been on location in the
        Middle East since early 2005, we have not yet been successful in generating
        any sales through these demonstration models. We are currently seeking
        alternative venues to display these units.
      We will continue to try and generate sales in the Middle
        East using these demonstration models. However we have no specific time
        frame for this and there are no assurances that we will be able to generate
        any sales in the Middle East. We have a fourth demonstration model that
        we intend to ship to India where we plan to conduct demonstrations of
        the Aquamission. We are currently in negotiations for the location at
        which the demonstration model will be installed.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In addition to these activities, we will
        also seek to increase brand awareness through various advertising activities
        and sponsorships. In April, 2006, we acted as a sponsor of the heavyweight
        title fight between Wladamir Klitschko and Chris Byrd. As a result, our
        brand name and logo were prominently displayed throughout the boxing match.
        We also currently act as the sponsor of SV Erzhausen, a Fourth League
        German soccer club, to whom we pay EUR 6,000 (approximately $7,500) per
        month. We are currently exploring other advertising and sponsorship opportunities.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3. | Product Development Activities:During the next twelve months, we will also continue to work on further
        developing and improving our existing products in an effort to increase
        their marketability. As                                                                                                                                                                                                                                                                                                                                                                                                                       

6

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part of these efforts, we are
attempting to develop and build renewable energy facilities that utilize our
Yellow Box technology in combination with biogas power generators through TMR
GmbH, our joint venture operation with Loick and ODAS OHG. We are currently
working with Loick and ODAS to develop a business plan for TMR. No specific time
frame has been set with respect to our plans for TMR.

With respect to our Aquamission product, we had previously been
working to upgrade the taste of the water produced by the Aquamission to
mineral water quality. However, we have re-assessed this project and we no
longer intend to proceed with this development.

In addition to the above activities, we expect to continue to
offer HVAC&R, water purification and waste water treatment consulting
services. We had previously announced that we had received a request from Alstom
Marine to submit a bid to supply and install an advanced waste water treatment
facility onboard a passenger cruise ship. However, we have not received any
correspondence from Alstom Marine in quite some time. As a result, we feel that
it is questionable whether Alstom Marine is still interested in our
services.

We anticipate spending approximately $2,000,000 in pursuing our
plan of operation over the next twelve months. As of June 30, 2006, the date of
our most recently available financial statements, we had a working capital
deficit of $1,354,326. As such, we do not have sufficient working capital to
meet our expected needs over the next twelve months. Although we have recently
begun to earn revenues, we have not yet earned a net profit and we do not expect
to achieve profitability in the near future as we expect to continue to incur
substantial product development, marketing and operating expenses. We are likely
to continue to need substantial additional financing in order to implement our
plan of operation. Our management expects that any additional financing that we
obtain will likely be in the form of equity financing as our management does not
expect sufficient debt financing to be available to us at this stage of our
business.

Our actual expenditures and business plan may differ from the
one stated above. Our Board of Directors may decide not to pursue this plan. In
addition, we may modify the plan based on available financing.

RESULTS OF OPERATIONS

Third Quarter and Nine Months Summary

|                   |   | Third Quarter Ended June 30 |   |   | Nine Months Ended June 30 |  
|------------------ | - | --------------------------- | - | - | ------------------------- | -
|                   |   |                             |   |   |                           |  
|                   |   |                             |   |   |                           |  
|                   |   | 2006                        |   |   | 2005                      |  
|Revenue            | $ | 273,301                     |   | $ | 601,068                   |  
|Cost of Goods Sold |   | (339,480                    | ) |   | (372,751                  | )
|General and        |   | (1,504,279                  | ) |   | (545,975                  | )
|Administrative     |   |                             |   |   |                           |  
|Expenses           |   |                             |   |   |                           |  
|Other Items        |   | (652                        | ) |   | --                        |  
|Net Loss           | $ | (1,571,110                  | ) | $ | (317,658                  | )

Revenues

We have only recently begun to earn revenues from our
operations and, as a result, we are unable to accurately forecast future
revenues. Readers are cautioned that our past operating results may not be
indicative of future performance.

The revenues that we earned during the nine month period ended
June 30, 2006 were earned from services that we provided in connection with
HVAC&R and energy optimizing activities in respect of refrigerating plants
used in mining and tunneling activities.

7

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Although we have received orders for our Thermomobile,
Aquamission and Yellow Box products, we have not yet earned any revenues from
the sale of those products, and there are no assurances that we will be able
earn such revenues in the future.

Operating Costs and Expenses

Our operating expenses for the quarterly period ended June 30,
2006 consisted of the following:

|                          |   | Third Quarter Ended June 30 |   |   | Nine Months Ended June 30 |  
|------------------------- | - | --------------------------- | - | - | ------------------------- | -
|                          |   |                             |   |   |                           |  
|                          |   |                             |   |   |                           |  
|                          |   | 2006                        |   |   | 2005                      |  
|Accounting and audit fees | $ | 94,555                      |   | $ | 26,795                    |  
|Advertising and promotion |   | 435,912                     |   |   | 106,759                   |  
|Amortization              |   | 25,956                      |   |   | 3,058                     |  
|Bad debts                 |   | 635                         |   |   | --                        |  
|Bank charges and interest |   | 160                         |   |   | 12,012                    |  
|Consulting fees           |   | 14,451                      |   |   | 74,441                    |  
|Development costs         |   | 435,811                     |   |   | 19,613                    |  
|Filing fees               |   | 1,061                       |   |   | 456                       |  
|Interest expense          |   | 19,292                      |   |   | --                        |  
|Legal fees                |   | 21,573                      |   |   | 3,056                     |  
|Management fees           |   | 123,043                     |   |   | 175,415                   |  
|Office and miscellaneous  |   | 71,491                      |   |   | 15,363                    |  
|Rent                      |   | 36,735                      |   |   | 33,812                    |  
|Salaries and benefits     |   | 164,160                     |   |   | 64,638                    |  
|Stock-based               |   | --                          |   |   | --                        |  
|compensation              |   |                             |   |   |                           |  
|Transfer agent            |   | 301                         |   |   | 629                       |  
|Travel                    |   | 59,143                      |   |   | 9,928                     |  
|Total General and         | $ | (1,504,279                  | ) | $ | (545,975                  | )
|Administrative Expenses   |   |                             |   |   |                           |  

The difference between our total general and administrative
expenses for the nine month periods ended June 30, 2006 and 2005 is largely
attributable to the $22,480,000 we recorded in 2005 on account of stock based
compensation. During the nine month period ended June 30, 2005, we issued a
total of 10,000,000 options pursuant to our 2004 Stock Incentive Plan. These
options were recorded as stock based compensation at fair value, determined in
accordance with the Black-Scholes option pricing model. Less stock based
compensation, our general and administrative expenses for the nine months ended
June 30, 2005 totaled $1,731,231, being $2,452,482 less than our total general
and administrative expenses for the nine month period ended June 30, 2006.

The majority of our individual expense items increased
significantly when compared to the same period in 2005. These increases are
largely a result of our increased operations. We expect that our operating
activities will continue to increase over the course of the current fiscal year
as we intend to begin focusing on the marketing of our products and
technologies. In addition, we expect that we will continue our ongoing research
and development activities. As such, we expect that our operating expenses will
also continue to increase at a significant rate.

The largest component of our expenses for the three and nine
month periods ended June 30, 2006 is development costs incurred in connection
with our ongoing research and development activities. Included in

8

---

development costs for the nine months ended June 30, 2006 is
$492,827 charged to us by a director of the Company. These amounts were incurred
by the director while conducting research and development work on our products
and technologies, and were reimbursed by us.

Our advertising and promotion expenses have also increased
significantly over the amounts spent during the three and nine month periods
ended June 30, 2005. We expect our advertising and promotion expenses to
continue to increase in the foreseeable future as we intend to concentrate more
on marketing our business, products and technologies.

We incurred management fees of $640,939 during the nine months
ended June 30, 2006. The majority of these fees were for amounts charged under a
management consulting contract with Stamm & Lang Rechtsanwalte, a German law
firm of which Achim Stamm, our former Chief Financial Officer, Secretary,
Treasurer and a former director, is a partner. Also included in management fees
are amounts charged under a management consulting contract with Hubert Hamm, a
managing director of Aqua GmbH, and the lead consultant for research and
development for Aqua GmbHs HVAC&R department.

We recognized bad debt expenses in the amount of $60,342 during
  the nine months ended June 30, 2006, relating to amounts owing for services
  and products supplied by us. We also wrote down loans receivable of $77,549
  from UFI-TEC GmbH, a company in which we currently own a 19.9% interest.

**LIQUIDITY AND CAPITAL RESOURCES**

|Working Capital                   |   |                        |   |   |                    |   |  |                       | 
|--------------------------------- | - | ---------------------- | - | - | ------------------ | - |  | --------------------- | 
|                                  |   |                        |   |   | At                 |   |  | Percentage            | 
|                                  |   | At
      June 30, 2006 |   |   | September 30, 2005 |   |  | Increase / (Decrease) | 
|Current Assets                    | $ | 1,038,520              |   | $ | 1,840,049          |   |  | (43.6)%               | 
|Current Liabilities               |   | (2,392,846             | ) |   | (386,975           | ) |  | 518.3%                | 
|Working Capital Surplus (Deficit) | $ | (1,354,326             | ) | $ | 1,453,074          |   |  | (193.2)%              | 

Included in current liabilities are a total of $1,399,447
payable to a law firm of which, Achim Stamm, one of our former officers and
directors, is a partner.

|Cash Flows                                          |   |                           |   |   |            |  
|--------------------------------------------------- | - | ------------------------- | - | - | ---------- | -
|                                                    |   | Nine Months Ended June 30 |  
|                                                    |   | 2006                      |   |   | 2005       |  
|Cash Flows used in Operating Activities             | $ | (3,113,656                | ) | $ | (1,955,600 | )
|Cash Flows used in Investing Activities             |   | (78,818                   | ) |   | (615,017   | )
|Cash Flows from Financing Activities                |   | 2,554,689                 |   |   | 5,228,042  |  
|Effects of Foreign Exchange Rates                   |   | 9,170                     |   |   | (26,145    | )
|Net Increase (Decrease) in Cash During
      Period | $ | (628,615                  | ) | $ | 2,631,280  |  

As at June 30, 2006 we had cash of $30,334 and a working
capital deficit of $1,354,326. Our management believes that we will require
substantial additional financing in the next few months in order to pursue our
current plan of operation. We do not have any additional financing arrangements
in place, and there are no assurances that we will be able to acquire sufficient
financing when needed. If we are unable to acquire sufficient financing when
needed, we will scale back our plan of operation as necessary. We expect that
any additional financing that we obtain will likely be in the form of equity
financing as sufficient debt financing is not expected to be available to us at
this stage of our business.

Although we have recently begun to earn revenues, we have not
yet achieved profitability. We anticipate that we will continue to incur losses
for the foreseeable future, as we expect to incur substantial product
development, marketing and operating expenses in implementing our plan of
operation. Our future financial

9

---

results are uncertain due to a number of factors, many of which
are outside of our control. These factors include, but are not limited to:

|(a) | our ability to commercially market our Thermomobile and
      Aquamission products;                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                              
|(b) | our ability to develop a commercially marketable Yellow
      Box product;                                                   
|    |                                                                                                                              
|(c) | our ability to raise additional capital necessary to
      implement our business strategy and plan of operation;            
|    |                                                                                                                              
|(d) | our ability to compete with other existing technologies;
      and                                                           
|    |                                                                                                                              
|(e) | the success of any marketing and promotional campaign
      which we conduct for our products once development is
  complete.

The financial statements accompanying this Quarterly Report
contemplate our continuation as a going concern. However, we have not yet
achieved profitable operations, have accumulated losses of $29,892,239 since our
inception and we expect to continue to incur substantial losses in the
foreseeable future as we continue to develop our business. As a result, our
auditors stated in their report for our fiscal year ended September 30, 2005
that a substantial doubt exists as to our ability to continue as a going
concern.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to our stockholders.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with
generally accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.

We have identified certain accounting policies, described
below, that are most important to the portrayal of our current financial
condition and results of operations. Our significant accounting policies are
disclosed in Note 3 to the interim financial statements included in this
Quarterly Report.

Principles of Consolidation

The consolidated financial statements include the accounts of
Aqua Society, Inc., our 51% interest in TMR GmbH, a German limited liability
company, and our wholly owned subsidiary, Aqua GmbH, a German limited liability
company. All inter-company transactions have been eliminated.

Foreign Currency Translation

Our functional currency is United States dollars. Our
subsidiary, Aqua GmbH, uses the Euro as its functional currency. Accordingly,
assets and liabilities of Aqua GmbH are translated into US dollars at the
exchange rate in effect at the balance sheet date and capital accounts are
translated at historical rates. Income statement accounts are translated at the
average rates of exchange prevailing during the period. Translation adjustments
arising from the use of differing exchange rates from period to period are
included in the Accumulated Other Comprehensive Gain/(Loss) account in
Stockholders Equity.

10

---

Transactions undertaken in currencies other than the functional
currency of the entity are translated using the exchange rate in effect as of
the transaction date. Any exchange gains and losses would be included in the
Statement of Operations.

RISKS AND UNCERTAINTIES

Need For Financing

We do not have sufficient financial resources to meet the
expected costs of our plan of operation and current liabilities over the next
twelve months. We have not yet achieved profitability and we anticipate that we
will continue to incur substantial losses in the foreseeable future. We are
likely to continue to need substantial additional financing in order to
implement our long term business plan. We currently do not have any financing
arrangements in place and there is no assurance that we will be able to acquire
sufficient financing on terms acceptable to us or at all. If financing is not
available or obtainable, our ability to meet our financial obligations and
pursue our plan of operation will be substantially limited and investors may
lose a substantial portion or all of their investment

Limited Operating History, Risks Of A New Business
Venture

We are still in the process of developing our business and we
do not expect to achieve profitability in the near future. We have only recently
begun to earn revenues. Readers are cautioned that our past results may not be
indicative of future performance.

Potential investors should be aware of the difficulties
normally encountered by a new enterprise and the high rate of failure of such
enterprises. The potential for future success must be considered in light of the
problems, expenses, difficulties complications and delays encountered in
connection with the development of a business in the area in which we intend to
operate and in connection with the formation and commencement of operations of a
new business in general. These include, but are not limited to, unanticipated
problems relating to research and development programs, marketing, approvals by
government agencies, competition and additional costs and expenses that may
exceed current estimates. There is no history upon which to base any assumption
as to the likelihood that we will prove successful, and there can be no
assurance that we will ever achieve profitable operations.

If We Are Unable To Achieve Market Acceptance For Our
Products, We Will Be Unable To Build Our Business

To date, we have completed technical development of our Yellow
Box, Thermomobile and Aquamission products; however, we have received only a
limited number of confirmed orders for these products. Our future success will
depend upon the acceptance of the Thermomobile and Aquamission products, and
other products that we develop, by the respective industries in which we intend
to market those products. Achieving such acceptance will require significant
investments in research and development and market development. Our technologies
and products may not achieve widespread acceptance, which could limit our
ability to develop and expand our business. The technologies upon which our
products and services are based are relatively new and are evolving.
Accordingly, in order to achieve commercial acceptance, we will have to educate
prospective clients about the uses and benefits of our products. If these
efforts fail, or if our products do not achieve commercial acceptance, our
business could be harmed.

Although we have received orders for Aquamission, Thermomobile
and waste heat power generation units, we continue to experience significant
delays in our ability to construct and deliver ordered units as scheduled. If we
continue to experience significant delays in our ability to deliver ordered
units, our ability to develop a market for our products will be limited.

In addition, there are no assurances that we will be able to
manufacture our products at a reasonable cost. Even if we are able to
manufacture these products at a reasonable cost, there is no assurance that the
price of our products will not be excessive, precluding the product from
generating sufficient consumer or market acceptance.

11

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Even If We Are Able To Develop A Commercial Market For Our
Products, We May Not Have The Ability To Meet The Demand For Those
Products

We intend to complete the construction of the Aquamission,
Thermomobile and waste heat power generation units ordered from us at our
facilities located in Herten, Germany and Fernthal, Germany. However, the size
of these facilities is limited and, should we be able to develop a commercial
market for these products, of which there is no assurance, we may not be able to
manufacture these products at a rate that is quick enough to meet or sustain
large scale market demand.

We intend to seek supply contracts and/or joint
venture/licensing agreements with independent manufacturing companies to
manufacture our products on a large scale basis, however we have not yet entered
into any such contracts or agreements and there is no assurance that we will be
able to negotiate any such contracts or agreements.

Our Operations May Be Subject to Extensive Government
Regulation

Our operations may be subject to extensive government
regulations in the United States, Europe and elsewhere. In order to sell our
products, we may have to satisfy numerous mandatory procedures, regulations, and
safety standards established by international, federal and state regulatory
agencies. There can be no assurance that we can successfully comply with all
present or future government regulations.

Risks of International Business Operations

Although we are incorporated in the United States, the majority
of our operating activities are conducted in Germany. Furthermore, we intend to
target markets for our products in the Persian Gulf and other developing parts
of the world, such as Africa. As such, a significant portion of our business
depends upon our ability to establish and maintain successful relationships with
businesses and governments located outside of the United States. If we are
unable to establish and maintain such relationships, we may not be able to
implement our business plan or plan of operations. In addition, we face risks
related to conducting international business operations, including the risks of
changing economic conditions and political instability, which could have a
materially adverse affect on our business plan.

Rapid Technological Changes In Our Industry Could Make Our
Products Obsolete

The industry in which we intend to compete is characterized by
rapid technological change and intense competition. New technologies, products
and industry standards will develop at a rapid pace which could make our planned
products obsolete. Our future success will depend upon our ability to develop
and introduce product enhancements to address the needs of our customers.
Material delays in introducing product enhancements may cause customers to
forego purchases of our products and purchase those of competitors.

Asserting And Defending Intellectual Property Rights May
Impact Results Of Operations

The success of our business may depend on our ability to
successfully defend our intellectual property rights. Future litigation may have
a material impact on our financial condition even if we are successful in
developing and marketing products. We may not be successful in defending or
asserting our intellectual property rights.

An adverse outcome in any litigation or interference proceeding
could subject us to significant liabilities to third parties and require us to
cease using the technology that is at issue or to license the technology from
third parties. In addition, a finding that any of our intellectual property
rights are invalid could allow our competitors to more easily and
cost-effectively compete. Thus, an unfavorable outcome in any patent litigation
or interference proceeding could have a material adverse effect on our business,
financial condition or results of operations.

12

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The cost to us of any patent litigation or interference
proceeding could be substantial. Uncertainties resulting from the initiation and
continuation of patent litigation or interference proceedings could have a
material adverse effect on our ability to compete in the marketplace. Patent
litigation and interference proceedings could also absorb significant management
time.

We May Be Subject To Product Liability Lawsuits

We may be subject to product liability claims. Such claims may
absorb significant management time and could degrade our reputation and the
marketability of our products. If product liability claims are made with respect
to our products, we may need to recall the implicated product which could have a
material adverse effect on our business, financial condition and results of
operations. In addition, although we may maintain product liability insurance,
we cannot be sure that such insurance will be adequate to cover potential
product liability lawsuits. Insurance is expensive and in the future may not be
available on acceptable terms, if at all. If a successful product liability
claim or series of claims exceeds insurance coverage, it could have a material
adverse effect on our business, financial condition and results of
operations.

Dependence On Key Personnel

Our success will largely depend on the performance of our
directors and officers. Our success will also depend on our ability to attract
and retain highly skilled technical, research, management, regulatory
compliance, sales and marketing personnel. Competition for such personnel is
intense. The loss of the services of such personnel or the inability to attract
and retain other key personnel could impair the development of our business,
operating results and financial condition.

If We Are Late In Filing Any Of Our Annual Or Quarterly
Reports During The Next Two Years, Our Common Stock May Become Ineligible For
Quotation On The OTC Bulletin Board, Which Would Negatively Affect The Market
For Our Shares And Our Ability To Obtain Additional Financing.

On November 16, 2005, the SEC approved certain changes to NASD
Rule 6530. As amended, NASD Rule 6530 provides that OTC Bulletin Board (OTCBB)
issuers who are late in filing their annual or quarterly reports three times
within a 24-month period will be ineligible for quotation on the OTCBB. In order
to regain eligibility under this rule, the issuer would need to timely file all
of its annual and quarterly reports due in a one year period. The amended NASD
Rule 6530 does not apply to annual or quarterly reports for periods ended before
October 1, 2005.

From time to time, we have been late in filing our quarterly
and annual reports. If we are late in filing our annual or quarterly reports
three times within a 24-month period, we may become ineligible for quotation on
the OTCBB, which would negatively affect the market for our common stock. In
addition, if our common stock is no longer eligible for quotation on the OTCBB,
it may become more difficult for us to obtain additional equity financing as
shares of our common stock will be less attractive to potential investors.

ITEM 3. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our
management, including our principal executive officer and principal financial
officer, we have evaluated the effectiveness of our disclosure controls and
procedures as required by Exchange Act Rule 13a-15(b) as of the end of the
period covered by this report. Based on that evaluation, our principal executive
officer and principal financial officer has concluded that our disclosure
controls and procedures were not effective as we have failed to timely file our
periodic reports with the SEC on a number of occasions during the past two
fiscal years.

We are attempting to improve our disclosure controls and
procedures in an effort to ensure that the information required to be disclosed
is internally communicated and publicly reported within the time periods
specified in the SECs rules and forms. In particular, we intend to engage
outside consultants to assist us in the preparation of our accounting records
and financial statements and will attempt to increase internal accountability
and to clearly define internal communication channels in an effort to remedy the
deficiencies identified by our principal executive officer and principal
financial officer.

13

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By working with our external consultants and our principal
independent accountants, our management believes that the financial statements
and the other information presented in this Quarterly Report are materially
correct.

There were no changes in our internal control over financial
reporting during the last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

14

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PART II - OTHER INFORMATION

|ITEM 1. | LEGAL PROCEEDINGS.
|------- | ------------------

None.

|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND
      USE OF PROCEEDS.
|------- | ------------------------------------------------------------------

Since our fiscal quarter ended March 31, 2006, we have engaged
in the unregistered sales of equity securities described in Item 2 of Part I of
this Quarterly Report under the heading Recent Corporate Developments.

|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.                          
|------- | ----------------------------------------------------------
|        |                                                           
|None.   |                                                           
|        |                                                           
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS.
|        |                                                           
|None.   |                                                           
|        |                                                           
|ITEM 5. | OTHER INFORMATION.                                        
|        |                                                           
|None.   |                                                           
|        |                                                           
|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K.                         

|Exhibit |                                                                                                                                                                                                  
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description of Exhibit                                                                                                                                                                           
|3.1     | Restated Articles of Incorporation
        filed with the Nevada Secretary of State effective December 27, 2004.(4)                                                                              
|        |                                                                                                                                                                                                  
|3.2     | Bylaws, effective March 2,
        2000.(1)                                                                                                                                                      
|        |                                                                                                                                                                                                  
|10.1    | Share Purchase Agreement between
        Water-Capital-Holding Ltd., V G Tech, Inc., Aqua Society GmbH and Steve
        Livingston, dated for reference September 3, 2004.(2)                   
|        |                                                                                                                                                                                                  
|10.2    | Agreement and Deed of Transfer
        between Water-Capital-Holding Ltd. and V G Tech, Inc. dated for reference
        September 22, 2004.(2)                                                  
|        |                                                                                                                                                                                                  
|10.3    | Certified Translation of a
        Notarial Deed executed by Uwe Diestel and Aqua Society GmbH dated November
        30, 2004 regarding the purchase and sale of an interest in UFI-TEC GmbH.(4)
|        |                                                                                                                                                                                                  
|10.4    | 2004 Stock Incentive Plan.(3)                                                                                                                                                                    
|        |                                                                                                                                                                                                  
|10.5    | Marketing & Promotion
        Agreement between Aqua Society GmbH, Sesam Business Consultancy and Moosa
        Abu Aisha.(5)                                                                    
|        |                                                                                                                                                                                                  
|10.6    | Management Consulting Contract
        between Aqua Society GmbH and Stamm & Lang Rechtsanwelte, executed
        December 13, 2004.(6)                                                          
|        |                                                                                                                                                                                                  
|10.7    | Supplementary Agreement between
        Aqua Society GmbH and Stamm & Lang Rechtsanwelte, dated September
        30, 2005.(7)                                                                   
|        |                                                                                                                                                                                                  
|10.8    | Sales Agency Agreement between
        Aqua Society GmbH and Technical Supplies Center, Ltd. dated September
        5, 2005. (6)                                                                
|        |                                                                                                                                                                                                  
|14.1    | Code of Ethics.(4)                                                                                                                                                                               

15

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|Exhibit |                                                                                                                                                           
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description of Exhibit                                                                                                                                    
|        |                                                                                                                                                           
|31.1    | Certification
        of Chief Executive Officer and Chief Financial Officer as adopted pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002.
|        |                                                                                                                                                           
|32.1    | Certification
        of Chief Executive Officer and Chief Financial Officer as adopted pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002.

|(1) | Filed as an exhibit to our Registration Statement on
        Form 10-SB originally filed with the SEC on January 29, 2003, as amended.
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|(2) | Filed as an exhibit to our Current Report on Form 8-K
        filed with the SEC on September 10, 2004.                               
|(3) | Filed as an exhibit to our Registration Statement on
        Form S-8, filed with the SEC on January 12, 2005.                        
|(4) | Filed as an exhibit to our Annual Report on Form 10-KSB,
        filed with the SEC on January 20, 2005.                              
|(5) | Filed as an exhibit to our Quarterly Report on Form
        10-QSB, filed with the SEC on August 23, 2005.                            
|(6) | Filed as an exhibit to our Annual Report on Form 10-KSB,
        filed with the SEC on January 18, 2006.                              
|(7) | Filed as an exhibit to our Amended Annual Report on
        Form 10-KSB, filed with the SEC on February 3, 2006.                      

REPORTS ON FORM 8-K

Since our fiscal quarter ended March 31, 2006, we have filed
the following Current Reports on Form 8-K:

Date of Report on Form 8-K
      (YYYY/MM/DD)
    Date of Filing with the SEC
      (YYYY/MM/DD)
    Description of the Form 8-K2006/03/22
    2006/04/07
    Amendment to Form 8-K filed
          on March 28, 2006 enclosing the confirmation of Achim Stamm that there
          were no disagreements between him and the ompany with respect to his
          departure as an officer and director of the Company.


16

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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.

|      | AQUA SOCIETY, INC.                                                  
|----- | --------------------------------------------------------------------
|      |                                                                     
|      |                                                                     
|      |                                                                     
|      |                                                                     
|By:   | /s/
      Petrus Lodestijn                                          
|      | PETRUS LODESTIJN                                                    
|      | President, Chief Executive Officer and Chief Financial
      Officer
|      | (Principal Executive Officer and Principal Accounting
      Officer)
|      |                                                                     
|Date: | August
      21, 2006                                               

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