UNITED
        STATES
  S ECURITIES
        AND E XCHANGE C OMMISSION
  Washington,
        D.C. 20549
 
 FORM
        10-QSB
 
 
 (X)
              Quarterly
                  report pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934 for the quarterly period ended September 30, 2005
 
 or
 
 (
                  )
              Transition
                  report pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934.
 
 333-86830
 
 (Commission
          File No.)
  **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 (name
        of
        small business issuer in its charter)
  Delaware
              87-0654478(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)1464
                  W. 40 S. Suite #200, Lindon, Utah
              84042-1629(Address
                  of principal executive offices)
              (Zip
                  Code)
  Issuer’s
          telephone number: (801) 443-1031
 As
        of
        November 11, 2005, the Registrant had 8,415,774 shares
        of
        Common Stock, $0.0001 par value outstanding.
 
 
   PART
        I -
        FINANCIAL INFORMATION
 
 **Item
        1. Financial Statements**
 
 **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 *CONSOLIDATED
        BALANCE SHEET*
 (Unaudited)
 
 ***SEPTEMBER
        30, 2005***
  ASSETS
 CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              2,693,766Accounts
                  receivable, net
              
              
              194,618Receivables
                  from affiliate
              
              
              439,679Inventory
              
              
              2,466,798Total
                  current assets
              
              
              5,794,861PROPERTY
                  AND EQUIPMENT, net ofaccumulated
                  depreciation of $217,311
              
              
              898,922OTHER
                  ASSETSPatents,
                  trademarks and intellectual property
              
              
              1,044,754Investments
              
              
              907,075Goodwill
              
              
              160,259Deposits
              
              
              4,258Total
                  assets
              
              $
              8,810,129
  LIABILITIES
        AND STOCKHOLDERS’ EQUITY
 CURRENT
                  LIABILITIESAccounts
                  payable and accrued expenses
              
              $445,476Notes
                  payable
              
              84,571Current
                  portion of long-term debt
              
              47,500Total
                  current liabilities
              
              
              577,547LONG
                  TERM DEBT,net
                  of current portion
              
              
              214,428SENIOR
                  CONVERTIBLE DEBT
              
              
              3,000,000STOCKHOLDERS’
                  EQUITYCommon
                  stock, $.0001 par value; 50,000,000 shares authorized;
                8,050,961issued and outstanding
              
              
              805Additional
                  paid in capital
              
              
              14,842,679Accumulated
                  deficit
              
              
              (9,825,330
              )Total
                  stockholders’ equity
              
              
              5,018,154Total
                  liabilities and stockholders’ equity
              
              $
              8,810,129
  See
              accompanying notes to consolidated financial statements.
  **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 *CONSOLIDATED
        STATEMENTS OF OPERATIONS*
 (Unaudited)
 
 ***THREE
        AND NINE MONTHS ENDED*** **SEPTEMBER
        30, 2005 AND 2004**
 
 
 **THREE
                    MONTHS ENDED**
                
                
                **NINE
                    MONTHS ENDED****2005**
                
                
                **2004**
                
                
                **2005**
                
                
                **2004**REVENUESProduct
                    sales
                
                $
                274,442
                
                $
                150,420
                
                $
                490,789
                
                $
                325,420Licensing
                    fee
                
                
                1,000,000
                
                
                ---
                
                
                1,000,000
                
                
                ---Net
                    revenues
                
                
                1,274,442
                
                
                150,420
                
                
                1,490,789
                
                
                325,420COST
                    OF GOODS SOLD
                
                
                104,059
                
                
                26,240
                
                
                157,174
                
                
                82,340GROSS
                    PROFIT
                
                
                1,170,383
                
                
                124,180
                
                
                1,333,615
                
                
                243,080OPERATING
                    EXPENSESMarketing
                    and promotion
                
                
                562,095
                
                
                ---
                
                
                1,099,786
                
                
                ---Research
                    and development
                
                
                140,552
                
                
                28,358
                
                
                496,621
                
                
                300,508General
                    and administrative
                
                
                1,567,068
                
                
                940,665
                
                
                3,840,300
                
                
                3,191,258Total
                    operating expenses
                
                
                2,269,715
                
                
                969,023
                
                
                5,436,707
                
                
                3,491,766LOSS
                    FROM OPERATIONS
                
                
                (1,099,332
                )
                
                (844,843
                )
                
                (4,103,092
                )
                
                (3,248,686
                )OTHER
                    INCOME (EXPENSE)Loss
                    from equity method investee
                
                
                ---
                
                
                ---
                
                
                (27,000
                )
                
                ---Interest
                    expense
                
                
                (24,637
                )
                
                (50
                )
                
                (53,906
                )
                
                (83,932
                )Interest
                    income
                
                
                12,699
                
                
                2,718
                
                
                38,505
                
                
                5,347Other
                    income (expense)
                
                
                (11,271
                )
                
                39,962
                
                
                486,503
                
                
                43,730Total
                    other income (expense)
                
                
                (23,209
                )
                
                42,630
                
                
                444,102
                
                
                (34,855
                )LOSS
                    BEFORE PROVISION FOR TAXES
                
                
                (1,122,541
                )
                
                (802,213
                )
                
                (3,658,990
                )
                
                (3,283,541
                )PROVISION
                    FOR INCOME TAXES
                
                
                ---
                
                
                ---
                
                
                ---
                
                
                ---NET
                    LOSS
                
                $
                (1,122,541
                )
                $
                (802,213
                )
                $
                (3,658,990
                )
                $
                (3,283,541
                )NET
                    LOSS PER SHARE
                
                $
                (0.15
                )
                $
                (0.13
                )
                $
                (0.50
                )
                $
                (0.60
                )WEIGHTED
                    AVERAGE OF SHARES OUTSTANDING
                
                
                7,679,500
                
                
                6,052,655
                
                
                7,299,700
                
                
                5,494,909
 
  See
              accompanying notes to consolidated financial statements.
  **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 *CONSOLIDATED
        STATEMENTS OF CASH FLOWS*
 (Unaudited)
 
 ***NINE
        MONTHS ENDED*** **SEPTEMBER
        30, 2005 AND 2004** ****
 
 
 
 **2005**
              
              **2004**CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (3,658,990
              )
              $
              (3,283,541
              )Adjustments
                  to reconcile net loss to net cash
                used
                  in operating activities:Depreciation
              
              
              104,250
              
              
              31,231Common
                  stock issued for services
              
              
              ---
              
              
              1,517,415Gain
                  on sale of equity method investee
              
              
              (466,800
              )
              
              ---Loss
                  from equity method investee
              
              
              27,000
              
              
              ---Changes
                  in operating assets and liabilities:(Increase)
                  decrease in accounts receivable
              
              
              (10,607
              )
              
              25,000(Increase)
                  decrease in receivables from affiliates
              
              
              (120,339
              )
              
              76,377(Increase)
                  decrease in inventory
              
              
              (1,963,482
              )
              
              (204,010
              )(Increase)
                  decrease in deposits
              
              
              1,500
              
              
              (4,021
              )Increase
                  (decrease) in accounts payable and accrued expenses
              
              
              133,244
              
              
              (112,645
              )Net
                  cash used in operating activities
              
              
              (5,954,224
              )
              
              (1,954,194
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESAcquisition
                  of property and equipment
              
              
              (325,460
              )
              
              (156,027
              )Investments
              
              
              (353,907
              )
              
              (820,449
              )Proceeds
                  from sale of equity method investee
              
              
              718,000
              
              
              ---Net
                  cash used in investing activities
              
              
              (38,633
              )
              
              (976,476
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESPayments
                  on notes payable
              
              
              (58,907
              )
              
              (264,758
              )Payments
                  on long term debt
              
              
              (15,069
              )
              
              (22,796
              )Proceeds
                  from issuance of senior convertible debt
              
              
              3,000,000
              
              
              1,700,000Proceeds
                  from issuance of common stock
              
              
              5,377,710
              
              
              2,687,176Net
                  cash provided by financing activities
              
              
              8,303,734
              
              
              4,099,622NET
                  INCREASE IN CASH
              
              
              2,310,877
              
              
              1,168,952CASH
                  and CASH EQUIVALENTS, beginning of period
              
              
              382,889
              
              
              593,175CASH
                  and CASH EQUIVALENTS, end of period
              
              $
              2,693,766
              
              $
              1,762,127
 
  See
              accompanying notes to consolidated financial statements.
    
  **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 ***NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS***
 
 **SEPTEMBER
        30, 2005**
 
 **NOTE
        1 - BASIS OF PRESENTATION**
  The
        accompanying consolidated financial statements as of September 30, 2005 and
        2004
        were prepared by the Company without audit pursuant to the rules and regulations
        of the Securities and Exchange Commission (SEC). Certain information and
        footnote disclosures normally included in financial statements prepared in
        accordance with accounting principles generally accepted in the United States
        of
        America have been condensed or omitted pursuant to such rules and regulations.
        In management’s opinion that all necessary adjustments, which consist primarily
        of normal recurring adjustments, to the financial statements have been made
        to
        present fairly the financial position and results of operations and cash
        flows.
        The results of operations for the respective periods presented are not
        necessarily indicative of the results for the respective complete years.
        The
        Company has previously filed with the SEC an annual report on Form 10-KSB
        which
        included audited financial statements for the two years ended December 31,
        2004.
        It is suggested that the financial statements contained in this filing be
        read
        in conjunction with the statements and notes thereto contained in the Company’s
        10-KSB filing.
 
 **NOTE** **2** **- PRINCIPLES OF CONSOLIDATION**
 
 The
        accompanying consolidated financial statements include the accounts of Electric
        Aquagenics Unlimited, Inc.  and
        its
        wholly owned subsidiaries Equilease, Inc. and Aquagen International, Inc.
        (collectively, the “Company”). All significant intercompany accounts and
        transactions have been eliminated, if any.
 
 **NOTE
        3** **- GOING CONCERN**
 During
        the current period, the Company incurred significant losses and a negative
        cash
        flow from operations. As a result, at September 30, 2005, the Company had
        a high
        level of equity financing transactions and additional financing will be required
        by the Company to fund its future activities and to support its operations.
        However, there is no assurance that the Company will be able to obtain
        additional financing. Furthermore, there is no assurance that rapid
        technological changes, changing customer needs and evolving industry standards
        will enable the Company to introduce new products and services on a continual
        and timely basis so that profitable operations can be attained. The Company’s
        ability to achieve and maintain profitability and positive cash flows is
        dependent upon its ability to increase sales and profit margins and control
        operating expenses. Management plans to mitigate its losses in the near term
        through the further development and marketing of its trademarks, brand and
        product offerings.
 
 **NOTE
        4** **- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION**
 
 For
        the
        nine months ended September 30, 2005, the Company paid cash for the
        following:
 
 Interest
              $
                  30,019Income
                taxes
              $---
 
 
 
  
  **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 ***NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS***
 
 **SEPTEMBER
        30, 2005**
 
 
 **NOTE
        5** **- COMMON STOCK**
  In
        February 2005, the Company successfully completed additional private placement
        offering of $2,975,000 for 850,000 shares of its common stock at $3.50 per
        share. Under this offering, the Company received proceeds of $2,630,600,
        net of
        offering costs of approximately $344,000 plus placement agent warrants of
        73,800
        shares.
 
 In
        June
        2005, the Company initiated a private placement offering of $7,000,000 for
        the
        equivalent of 2,000,000 shares of its common stock at $3.50 per share. The
        shares were included as part of an investment unit (the “Unit”) consisting of
        two (2) share of common stock plus one (1) warrant exercisable at $5.50.
        Each
        unit is priced at $7.00. As of September 30, 2005, the Company had received
        proceeds of approximately $2,300,000, net of offering cost of approximately
        $300,000.
 
 **NOTE
        6** **- SENIOR CONVERTIBLE DEBT**
 
 In
        September 2005, the Company entered into a Senior Convertible Note with a
        third
        party in exchange for $3,000,000. Pursuant to the debt agreement, the note
        accrues interest at the rate of 3% per annum and is due, principal and interest
        together, on September 16, 2008. This note may be converted prior to the
        maturity date, and at any time, by the holder at a price per share equal
        to
        $3.00 per share, subject to certain other conversion adjustments.
 
 **NOTE
        7** **- COMMITMENTS AND CONTINGENCIES**
 
 In
        May
        2005, the Company entered into a thirteen (13) week radio advertising campaign
        with ABC Radio Networks to advertise one of its products on a nationally
        syndicated show. Under the contract, the Company is required to pay $572,000,
        or
        $44,000 per week which includes agency commissions of $85,800. As of September
        30, 2005, the Company had paid $440,000 on this contract.
 
 In
        June
        2005, the Company entered into an agreement with Tyson Foods, Inc. (“Tyson”) to
        install an electrolyzed oxidative water (“EOW”) system into Tyson’s poultry
        processing plant in Tennessee. Under the memorandum of understanding, the
        Company’s EOW system will be used as a trial for research and development to
        evaluate the efficacy of EOW in pathogen management on raw poultry products
        and
        with the supervision of the USDA/FSIS personnel. The trial will be conducted
        at
        no charge to Tyson, but should results be successful, the parties will then
        undertake to complete a definitive commercial agreement regarding the continued
        use of the EOW system.
 
 In
        September 2005, the Company granted an exclusive license and distribution
        agreement with a third party in exchange for $1,000,000 and future royalty
        payments. Per the agreement, the licensee was granted the exclusive right
        to
        commercialize and exploit the Company’s low-cost, non-toxic electrolyzed
        oxidative fluids used for cleaning, disinfection, remediation and hydration
        and
        to manufacture, distribute and sell the products to certain territories within
        Central and South America. Royalty payments under the agreement range from
        2% -
        5% depending on the annual sales volume of the licensee. This agreement
        automatically renews and shall remain in effect unless sooner terminated
        by the
        Company or licensee.
 
  
   **Item
        2.**  **Management's Discussion and Analysis or Plan of Operation**
 
 ***All
        forward-looking statements contained herein are deemed by the Company to
        be
        covered by and to qualify for the safe harbor protection provided by the
        Private
        Securities Litigation Reform Act of 1995. Prospective shareholders should
        understand that several factors govern whether any forward-looking statement
        contained herein will be or can be achieved. Any one of those factors could
        cause actual results to differ materially from those projected herein. These
        forward-looking statements include plans and objectives of management for
        future
        operations, including plans and objectives relating to the products and the
        future economic performance of the Company. Assumptions relating to the
        foregoing involve judgments with respect to, among other things, future
        economic, competitive and market conditions, future business decisions, and
        the
        time and money required to successfully complete development projects, all
        of
        which are difficult or impossible to predict accurately and many of which
        are
        beyond the control of the Company. Although the Company believes that the
        assumptions underlying the forward-looking statements contained herein are
        reasonable, any of those assumptions could prove inaccurate and, therefore,
        there can be no assurance that the results contemplated in any of the
        forward-looking statements contained herein will be realized. Based on actual
        experience and business development, the company may alter its marketing,
        capital expenditure plans or other budgets, which may in turn affect the
        company’s results of operations. In light of the significant uncertainties
        inherent in the forward-looking statements included therein, the inclusion
        of
        any such statement should not be regarded as a representation by the Company
        or
        any other person that the objectives or plans of the company will be
        achieved.***
 
 We
        are in
        the business of developing, manufacturing and marketing equipment that uses
        water electrolysis to create fluids that clean, disinfect, remediate, and
        hydrate. We also develop, manufacture and market consumer products that support
        a healthy lifestyle. The fluids generated by equipment that we manufacture
        are
        environmentally safe and non toxic and free from harmful residues associated
        with chemical based disinfecting and cleaning agents. The electrolyzed fluids
        created by the EOW system (referred to herein sometimes as the **“** EO
        Fluids” or “Empowered Water TM ”
        fluids”) generated by our equipment will replace many of the traditional
        products used in commercial, industrial and residential disinfecting and
        cleaning.
  **Consumer
        Products**
  Our
        consumer products currently consist of Aquagen ® oxygen
        supplement and wellness products sold primarily through the health food and
        nutraceutical markets, and Perfect Empowered Drinking WaterTM, a drinking water
        that we bottle at a newly constructed bottling facility located at our corporate
        offices, and the Zero Plus Hand Sanitizer. In May 2005, we entered into a
        thirteen week radio advertising campaign with ABC Radio to advertise our
        Zero
        PlusTM Hand Sanitizer product on the nationally syndicated Sean Hannity Show. The
        advertisements began running at the end of May 2005, and continued through
        the
        beginning of September 2005. In connection with the radio advertising, we
        entered into an arrangement with a local call center to handle radio orders.
        The
        Company did not receive enough orders from the radio advertising to merit
        a
        renewal of the advertising campaign.
  In
        May
        2005, we established an in-house sales department to sell the
        Aquagen ® products
        to the health and natural food products industries. We contracted with a
        private
        company that consults with companies to increase sales in the health and
        natural
        food stores, to set up our in-house sales department. We recently hired two
        employees to operate the sales department, and this in-house sales department
        is
        in full operation as of September 30, 2005.
  
 During
        the third quarter 2005, the Company began to implement a branding change
        involving our Aquagen ® products. Those products will now be branded under the name “Perfect Oxygenated
        TherapyTM Products.” The proprietary name Aquagen ® will
        remain on the labels and will be described as the “science” behind the “Perfect”
        brand of oxygenated products. Our other current Aquagen ® products
        will bear similar “Perfect” brand names. The Company determined that it would be
        more cost effective and efficient to brand all of its consumer products under
        the same name.
  We
        also
        plan to expand the market for our “Perfect Oxygenated Therapy” products and to
        develop other oxygen based personal use products, such as skin care products,
        periodontal products and a fungicide product.
  April
        2005, we launched our new bottled drinking water product, known as “Perfect
        Empowered Drinking Water TM .”
        As of
        September 30, 2005, our Perfect Water product is being sold in approximately
        140
        grocery stores, including stores owned or operated by large national or regional
        grocery operators. Our Perfect Empowered Drinking WaterTM is also sold in various
        other outlets, and will be available for retail sale in approximately 200
        outlets, including grocery stores, by November 2005. We will continue to
        expand
        our market for this product aggressively, and we anticipate entering into
        additional distribution agreements with owners or operators of multiple outlets
        during the fourth quarter of 2005. We are pleased with the growing revenues
        from
        Perfect Water and anticipate that our drinking water revenues will be a
        significant portion of our total revenue in the future.
  In
        addition to our existing consumer product line, we intend to continue to
        develop
        and market commercial and residential cleaning products, such as a bottled
        surface cleaning products that clean, protect and disinfect.
  **EO
        Products**
  On
        September 16, 2005, we entered into an Exclusive License and Distribution
        Agreement (the “Agreement”) with Water Science, LLC, a Florida limited liability
        company. Pursuant to the Agreement, Water Science paid to us a license fee
        of $1
        million in exchange for (a) an exclusive license to commercialize and exploit
        our EO systems and EO Fluids in the Latin America countries of Mexico,
        Guatemala, Bolivia, Paraguay, Chile, Honduras, El Salvador, Nicaragua, Brazil,
        Costa Rica, Suriname, Panama, Colombia, Venezuela, Guyana, French Guyana,
        Ecuador, Peru, Uruguay, Argentina and Belize (the “Territory”), (b) the
        exclusive right and license to use our trademarks in connection with the
        promotion, marketing and sale of our EO technology and products within the
        Territory, and (c) the appointment of Water Science as our exclusive distributor
        of our EO systems and attendant technology and products within the Territory.
   On
        September 16, 2005, Water Science also invested $3,000,000 in the Company
        as
        convertible senior secured debt. Pursuant to that investment, the Company
        issued
        to Water Science a senior secured convertible promissory note in the principal
        amount of $3 million (the “Note”). The maturity date of the Note is September
        16, 2008, and the Note is secured by a senior lien upon all of our assets.
        The
        Note is convertible into one million shares of our $0.0001 par value common
        stock at an initial conversion price of $3.00 per share.
  In
        connection with the issuance of the Note, we granted to Water Science a three
        year warrant to purchase up to 2 million shares of our $0.0001 par value
        common
        stock for a purchase price of $2.76 per share. We also entered into a
        Registration Rights agreement, whereby we agreed to register shares that
        underlie the Note and the warrant.
 
 
 
 In
        June
        2005, we entered into an agreement with Tyson Foods, Inc. to test our EOW
        system
        and EO Fluids in its Shelbyville, Tennessee poultry processing plant.
        Installation of our EOW system began in July 2005, and as of September 30,
        2005,
        our EOW system equipment was completely installed in Tyson’s Shelbyville
        processing plant. Initial testing has been favorable, particularly with respect
        to the use of EO Fluids to kill salmonella
        on the processed poultry. Testing at the Shelbyville plant is continuing,
        and we
        expect testing to be completed by mid December 2005. Once the testing is
        completed, we will begin the required USDA testing and plant application
        approval phase for “Online Reprocessing,” a term used in the poultry processing
        industry relative to governmental processing approvals.
 
 
   **Selected
        Financial Information**
 
  
 Nine
                  months endedSeptember
                  30,2005
              
              2004Revenue,
                  net
              
              $
              1,490,789
              
              $
              325,420Gross
                  profit (loss)
              
              
              1,333,615
              
              
              243,080Total
                  Operating Expense
              
              
              5,436,707
              
              
              3,491,766Operating
                  (loss)
              
              
              (4,103,092
              )
              
              (3,248,686
              )Other
                  income (expense)
              
              
              444,102
              
              
              (34,855
              )Net
                  income (loss)
              
              
              (3,658,990
              )
              
              (3,283,541
              )
 
 
 September
                  30,
                2005
              
              December
                  31,
                2004Balance
                  Sheet Data:Cash
                  and Cash Equivalents
              
              $
              2,693,766
              
              $
              382,889Total
                  Current Assets
              
              
              5,794,86
              
              
              1,389,556Total
                  Assets
              
              
              8,810,129
              
              
              3,906,959Total
                  Current Liabilities
              
              
              577,547
              
              
              370,792Long
                  Term Debt
              
              
              214,428
              
              
              233,337Senior
                  Convertible Debt
              
              
              3,000,000
              
              
              0Total
                  stockholders’ equity
              
              $
              5,018,154
              
              $
              3,302,830
 
 **Results
        of Operations**
 
 The
        following discussion should be read in conjunction with selected financial
        data
        and the financial statements and notes to financial statements.
 
 The
        Company’s total revenues for the quarter ended September 30, 2005 totaled
        $1,274,442, an increase of 747.3% over the $150,420 in total revenues for
        the
        same period in 2004. For the first nine months of 2005, the Company’s total
        revenues increased to $1,490,789, representing an increase of $1,165,369,
        or
        358.1%, from the $325,420 in total revenues for the same period one year
        earlier. The increase in revenues in the third quarter of 2005 is attributable
        primarily to the Company’s receipt of a one time $1,000,000 license fee payment
        by Water Sciences in exchange for a license of some of the Company’s technology
        for use and exploitation in certain Latin America countries.
 
 Revenues
        from product sales increased 82.5% in the third quarter of 2005 when compared
        to
        the same period one year earlier, from $150,420 in third quarter of 2004
        to
        $274.442 in the third quarter of 2005. Likewise, revenues from product sales
        during the first nine months of 2005 increased 50.8% over the revenues from
        product sales during the same period in 2004, from $325,420 in the first
        nine
        months of 2004 to $490,789 in the first nine months of 2005. The increase
        in
        revenues from product sales is due primarily to increased sales of the Company’s
        line of consumer products, particularly drinking water and hand sanitizer.
        Some
        of the increase in sales of consumer products can be attributable to the
        nationally syndicated radio advertising by the Company with respect to its
        hand
        sanitizer product. Management has determined that the sales generated by
        the
        radio advertising campaign were below anticipated revenues, and the advertising
        program will not be renewed.
 
 
 With
        respect to its product sales, the Company’s cost of goods increased as a
        percentage of sales from 17.4% in the first quarter of 2004 to 37.9% in the
        first quarter of 2005. This increase is more a function of the cost of goods
        being lower than anticipated during the first quarter of 2004 than the cost
        of
        goods increasing during 2005.
 
 Research
        and development expenses incurred in the first three months of 2005 were
        395.6%
        higher than those expenses incurred during the same period one year earlier,
        having increased from $28,358 in the first quarter of 2004 to $140,552 in
        the
        first quarter of 2005. This increase is primarily attributable to the increased
        research and development that has gone into the design, installation and
        testing
        of EOW equipment in Tyson’s Shelbyville poultry processing plant, and in the
        continued development of new consumer products. It is anticipated that, as
        the
        testing is completed at the Shelbyville plant, the research and development
        expenses will decrease from their level in the third quarter of 2005.
 
 The
        Company’s general and administrative expenses totaled $1,567,068 during the
        three months ended September 30, 2005, compared to $940,665 during the same
        period of 2004. This 66.6% increase in general and administrative expenses
        is
        attributable to several factors, primary of which has been the hiring of
        several
        management personnel, including senior marketing and technical individuals,
        as
        well as the expenses associated with the negotiation and closing of the license
        and investment transaction with Water Science in September 2005.
  **Liquidity
        And Capital Resources**
  At
        September 30, 2005, we had cash and cash equivalents of $2,693,766, compared
        to
        $382,889 at December 31, 2004. The increase in cash is attributable to the
        Company’s receipt during the third quarter of 2005 of a $1,000,000 license fee
        and $3,000,000 in subordinated debt proceeds. In addition, in June 2005,
        the
        Company commenced a private placement offering to sell 1,000,000 units to
        accredited investors. Each unit consisted of two shares of common stock and
        one
        warrant to purchase a share of common stock, exercisable through December
        31,
        2006 at an exercise price of $5.50 per share. Through September 30, 2005,
        the
        Company raised proceeds $2,247,012, net of offering costs of approximately
        $279,138. The Company also granted to the placement agent five (5) year warrants
        to purchase a total of 78,885 shares of the Company’s common stock at an initial
        exercise price of $5.50 per share. On September 14, 2005, the Company lowered
        the exercise price of all warrants under the offering to $3.17.
 
 Management
        recognizes that additional funding will be required to finance growth and
        to
        achieve our strategic objectives. Management is actively pursuing additional
        sources of equity and/or funding. In addition, management is expecting an
        increase in cash flows through continued increases in revenue.
 
 
 If
        we do
        not raise sufficient funds in the future, we may not be able to fund expansion,
        take advantage of future opportunities, meet our existing debt obligations
        or
        respond to competitive pressures or unanticipated requirements. Financing
        transactions in the future may include the issuance of equity or debt
        securities, obtaining credit facilities, or other financing mechanisms. The
        Company may also consider additional grants of licensing arrangements to
        allow
        third parties to develop and sell the Company’s technologies in other parts of
        the world.
 
 **Item
        3. Controls and Procedures**
 
 Within
        the ninety (90) day period prior to the date of this report, the Company
        carried
        out an evaluation, under the supervision and with the participation of the
        Company’s management, including the principal executive officer and principal
        financial officer, of the effectiveness of t h e
        design
        and operation of the Company’s disclosure controls and procedures pursuant to
        the Exchange Act Rule 13a-14. Based upon that evaluation, the Company’s
        principal executive officer and principal financial officer concluded that
        the
        Company’s disclosure controls and procedures are effective in timely alerting
        them to material information relating to the Company required to be included
        in
        the Company’s periodic SEC filings. It should be noted that the design of any
        system of controls is based in part upon certain assumptions about the
        likelihood of future events, and there can be no assurance that any design
        will
        succeed in achieving its stated goals under all potential future conditions,
        regardless of how remote.
 
 There
        have been no significant changes
        in the Company’s internal controls or in other factors which could significantly
        affect internal controls subsequent to the date the Company carried out its
        evaluation.
 
 **PART
        II - OTHER INFORMATION**
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds**
 
 On
        September 1, 2005, the Company issued 321,429 shares of its restricted $0.0001
        par value common stock to Aquagen International, Inc. in exchange for all
        of the
        assets of Aquagen International, Inc., pursuant to the terms of Amendment
        No. 1
        to the Agreement and Plan of Acquisition between Aquagen International, Inc.
        and
        Electric Aquagenics Unlimited, Inc. in
        a
        transaction exempt from registration under Section 4(2) of the Securities
        Act of
        1933 and Rule 506 promulgated thereunder.
 
 On
        July
        21, 2005, the Company issued 17,986 shares of its restricted $0.0001 par
        value
        common stock to Mel Gulbranson in exchange for cash in the amount of $1.85
        per
        share pursuant to the exercise of a warrant in a transaction exempt from
        registration under Section 4(2) of the Securities Act of 1933. The proceeds
        from
        the sale of the securities were used by the Company for general working
        capital.
 
 **Item
        4. Submission of Matters to a Vote of Security Holders**
 
 The
        Company held its Annual Meeting of Stockholders on September 30, 2005. The
        holders of 4,154,011 (51.7%) of the Company’s 8,026,359 outstanding shares as of
        the record date were present at the meeting in person or by proxy. The only
        matters submitted to a vote of shareholders were (i) the election of five
        (5)
        directors, (ii) the adoption of a 2005 Stock Incentive Plan and the allocation
        of 1,000,000 shares of the Company’s common stock to the Plan, and (iii)
        ratification of the appointment of Hall & Company as the Company’s
        independent registered public accountants for the year ending December 31,
        2005.
        The stockholders elected the following individuals to serve on the Company’s
        Board of Directors until the next annual meeting of stockholders or until
        their
        successors are duly elected and qualified:
 
 
 Name
                  of Nominee
              
              Votes
                  For
              
              Votes
                  Withheld or AgainstGaylord
                  M. Karren
              
              4,126,111
              
              27,900John
                  Hopkins
              
              4,118,969
              
              35,042Jay
                  S. Potter
              
              4,125,969
              
              28,042William
                  J. Warwick
              
              4,125,969
              
              28,042Robert
                  L. Rowley
              
              4,125,969
              
              28,042
 
 With
        respect to the proposal to adopt the 2005 Stock Incentive Plan and the
        allocation of 1,000,000 shares of the Company’s common stock to the Plan,
        3,163,635 shares voted for the proposal, 66,589 shares voted against the
        proposal, and 145,918 shares abstained from voting on the proposal.
 
 With
        respect to the proposal to ratify
        the appointment of Hall & Company as the Company’s independent registered
        public accountants for the year ending December 31, 2005, a total of 4,079,855
        shares voted for the proposal, 14,814 shares voted against the proposal,
        and
        59,342 shares abstained from voting on the proposal.
 
 **Item
        6.**  **Exhibits
        and Reports on Form 8-K**
 
 (a)
            Exhibits. 
 10.1
              Amendment
                  No. 1 to the Agreement and Plan of Acquisition Between Aquagen
                  International, Inc. and Electric Aquagenics Unlimited, Inc., dated
                  September 1, 2005
 
 31.1
              Rule
                  302 Certification of Chief Executive Officer and Chief Financial
                  Officer
  32.1
              Rule
                  906 Certification of Chief Executive Officer and Chief Financial
                  Officer
  
 (b)
            Reports
                on Form 8-K. 
 During
        the quarter ended September 30, 2005, we filed with the Securities and Exchange
        Commission Current Reports on Form 8-K as follows:
 
 (i)  On
        July
        5, 2005, we filed a Current Report on Form 8-K regarding an agreement with
        Schneider Foods, one of Canada’s largest producers of premium quality food
        products, to install the Company’s Empowered Water TM Pathogen
        Intervention System in one of Schneider Foods poultry processing facilities
        located in St. Mary’s, Ontario, Canada.
 
 (ii)  On
        August
        11, 2005, we filed a Current Report on Form 8-K announcing that the beta
        installation of our Empowered Water TM pathogen
        intervention system at a supermarket operated by Whole Foods Market, Inc.
        in
        Atlanta, Georgia in April 2005 resulted in our first receipt of a first purchase
        order from a customer in the grocery industry to purchase our Empowered
        Water TM pathogen
        intervention system.
 
 (iii)  On
        September 22, 2005, we filed a Current Report on Form 8-K, reporting our
        entry
        into an Exclusive License and Distribution Agreement with, and our sale of
        convertible senior secured debt securities to, Water Science, LLC, a Florida
        limited liability company.
 
 
  
   SIGNATURES
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, the Registrant has duly caused this report to be signed on its behalf
        by
        the undersigned; thereunto duly authorized, on November 14, 2005.
   ELECTRIC
                  AQUAGENICS UNLIMITED, INC.By:
              /s/ Gaylord
                M. KarrenGaylord
                M. KarrenPrincipal
                  Executive Officer andPrincipal
                Financial Officer