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 June 30, 2005
 
 or
 
 o
              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
        August 5, 2005, the Registrant had 8,026,359 shares
        of
        Common Stock, $0.0001 par value outstanding.
 
 
  
 
 
  PART
        I -
        FINANCIAL INFORMATION
 **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 *CONSOLIDATED
        BALANCE SHEET*
 (Unaudited)
 
 **JUNE
        30, 2005**
  ASSETSCURRENT
                    ASSETSCash
                    and cash equivalents
                
                $
                212,396Accounts
                    receivable, net
                
                
                156,165Receivables
                    from affiliate
                
                
                431,291Inventory
                
                
                2,263,681Total
                    current assets
                
                
                3,063,533PROPERTY
                    AND EQUIPMENT, net of accumulated depreciation of
                    $180,811
                
                
                910,473OTHER
                    ASSETSPatents,
                    trademarks and intellectual property
                
                
                1,030,800Investments
                
                
                807,075Goodwill
                
                
                160,259Deposits
                
                
                5,758Total
                    assets
                
                $
                5,977,898LIABILITIES
                    AND STOCKHOLDERS’ EQUITYCURRENT
                    LIABILITIESAccounts
                    payable and accrued expenses
                
                $
                1,681,489Notes
                    payable
                
                
                177,900Current
                    portion of long-term debt
                
                
                43,660Total
                    current liabilities
                
                
                1,903,049LONG
                    TERM DEBT,net
                    of current portion
                
                
                215,341STOCKHOLDERS’
                    EQUITYCommon
                    stock, $.0001 par value; 50,000,000 shares authorized;
                  7,308,061issued and outstanding
                
                
                731Additional
                    paid in capital
                
                
                11,436,566Stock
                    issuance obligation
                
                
                1,125,000Accumulated
                    deficit
                
                
                (8,702,789
                )Total
                    stockholders’ equity
                
                
                3,859,508Total
                    liabilities and stockholders’ equity
                
                $
                5,977,898
 See
          accompanying notes to consolidated financial statements.
  -2-
   **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 *CONSOLIDATED
        STATEMENTS OF OPERATIONS*
 (Unaudited)
 
 ***THREE
        AND SIX MONTHS ENDED*** **JUNE
        30, 2005 AND 2004**
  **Three
                    Months Ended**
                
                
                **Six
                    Months Ended****2005**
                
                
                **2004**
                
                
                **2005**
                
                
                **2004**NET
                    SALES
                
                $
                128,467
                
                $
                100,000
                
                $
                216,347
                
                $
                175,000COST
                    OF GOODS SOLD
                
                
                29,940
                
                
                33,600
                
                
                53,115
                
                
                56,100GROSS
                    PROFIT
                
                
                98,527
                
                
                66,400
                
                
                163,232
                
                
                118,900OPERATING
                    EXPENSESMarketing
                    and promotion
                
                
                332,727
                
                
                203,797
                
                
                537,691
                
                
                726,950Research
                    and development
                
                
                56,180
                
                
                118,361
                
                
                356,069
                
                
                272,151General
                    and administrative
                
                
                985,642
                
                
                1,399,851
                
                
                2,273,232
                
                
                1,519,871Total
                    operating expenses
                
                
                1,374,549
                
                
                1,722,009
                
                
                3,166,992
                
                
                2,518,972LOSS
                    FROM OPERATIONS
                
                
                (1,276,022
                )
                
                (1,655,609
                )
                
                (3,003,760
                )
                
                (2,400,072
                )OTHER
                    INCOME (EXPENSE)Loss
                    from equity method investee
                
                
                ---
                
                
                ---
                
                
                (27,000
                )
                
                ---Interest
                    expense
                
                
                (15,880
                )
                
                (74,227
                )
                
                (29,269
                )
                
                (83,623
                )Interest
                    income
                
                
                10,107
                
                
                ---
                
                
                25,806
                
                
                2,532Other
                    income (expense)
                
                
                496,776
                
                
                ---
                
                
                497,774
                
                
                ---Total
                    other income (expense)
                
                
                491,003
                
                
                (74,227
                )
                
                467,311
                
                
                (81,091
                )LOSS
                    BEFORE PROVISIONFOR
                    INCOME TAXES
                
                
                (785,019
                )
                
                (1,729,836
                )
                
                (2,536,449
                )
                
                (2,481,163
                )PROVISION
                    FOR INCOME TAXES
                
                
                ---
                
                
                ---
                
                
                ---
                
                
                ---NET
                    LOSS
                
                $
                (785,019
                )
                $
                (1,729,836
                )
                $
                (2,536,449
                )
                $
                (2,481,163
                )NET
                    LOSS PER SHARE
                
                $
                (0.11
                )
                $
                (0.41
                )
                $
                (0.37
                )
                $
                (0.48
                )WEIGHTED
                    AVERAGE OFSHARES
                    OUTSTANDING
                
                
                7,154,761
                
                
                4,145,628
                
                
                6,924,650
                
                
                5,177,272
 
 See
            accompanying notes to consolidated financial statements.
 -3-
 
 **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 *CONSOLIDATED
        STATEMENTS OF CASH FLOWS*
 (Unaudited)
 
 ***SIX
        MONTHS ENDED*** **JUNE
        30, 2005 AND 2004** ****
 
 
 
 **2005**
              
              **2004**CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (2,536,449
              )
              $
              (2,481,163
              )Adjustments
                  to reconcile net loss to net cashused
                  in operating activities:Depreciation
              
              
              67,750
              
              
              12,731Common
                  stock issued for expenses
              
              
              ---
              
              
              75,985Common
                  stock issued for services
              
              
              ---
              
              
              1,517,415Loss
                  from equity method investee
              
              
              27,000
              
              
              ---Gain
                  on sale of equity method investee
              
              
              (466,800
              )
              
              ---Changes
                  in operating assets and liabilities:(Increase)
                  decrease in accounts receivable
              
              
              27,846
              
              
              (1,409
              )(Increase)
                  in receivables from affiliates
              
              
              (111,951
              )
              
              (33,165
              )(Increase)
                  in inventory
              
              
              (1,760,365
              )
              
              (70,348
              )Increase
                  (decrease) in accounts payable
              
              
              1,393,650
              
              
              (81,898
              )Increase
                  (decrease) in accrued expenses
              
              
              (23,412
              )
              
              (8,845
              )Net
                  cash from operating activities
              
              
              (3,382,731
              )
              
              (1,070,697
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESAcquisition
                  of property and equipment
              
              
              (440,360
              )
              
              (20,083
              )Investments
              
              
              (253,556
              )
              
              (272,500
              )Proceeds
                  from sale of equity method investee
              
              
              718,000
              
              
              ---Net
                  cash from investing activities
              
              
              24,084
              
              
              (292,583
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESPayments
                  on notes payable
              
              
              ---
              
              
              (122,130
              )Payments
                  on long term debt
              
              
              (32,896
              )
              
              (5,958
              )Proceeds
                  from issuance of common stock
              
              
              3,221,050
              
              
              1,700,000Net
                  cash from financing activities
              
              
              3,188,154
              
              
              1,571,912NET
                  INCREASE (DECREASE) IN CASH
              
              
              (170,493
              )
              
              208,632CASH
                  and cash equivalents, beginning of period
              
              
              382,889
              
              
              593,175CASH
                  and cash equivalents, end of period
              
              $
              212,396
              
              $
              801,807
 
 See
          accompanying notes to consolidated financial statements.
  -4-
  **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 ***NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS***
 
 **JUNE
        30, 2005**
 
 
 **NOTE
        1 - BASIS OF PRESENTATION**
  The
        accompanying consolidated financial statements as of June 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 June 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.
 
 -5-
 **ELECTRIC
        AQUAGENICS UNLIMITED, INC.**
 
 ***NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS***
 
 **JUNE
        30, 2005**
 
 
 
 **NOTE
        4** **- COMMON STOCK**
 
  In
        February 2005, the Company successfully completed a 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 are included as part of an investment unit (the ‘unit”) consisting of two
        (2) shares of common stock plus one (1) warrant exercisable at $5.50. Each
        unit
        is priced at $7.00. As of June 30, 2005 under this offering, the Company
        had
        received proceeds of $536,550, net of offering costs of approximately $64,000
        plus placement agent warrants of 73,800 shares.
 
 **NOTE
        5** **- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION**
 
 For
        the
        six months ended June 30, 2005, the Company paid cash for the
        following:
 
 Interest
              
              $
              14,382Income
                  taxes
              
              $
              ---
 
 **NOTE
        6** **- 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 June
        30,
        2005, the Company had paid $88,000 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 Shelbyville, 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 undertake to complete a definitive commercial agreement regarding
        the continued use of the EOW system.
  -6-
 **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 free from toxins and harmful residues associated
        with
        chemical based disinfecting and cleaning agents. The electrolyzed fluids
        (the **“** EO
        Fluids” marketed as “Empowered Water TM ”
        fluids)
        generated by our equipment will replace many of the traditional products
        used in
        commercial, industrial and residential disinfecting and cleaning.
  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 during the week of June 27 th .
        Listeners to the radio program can purchase the Zero PlusTM Hand Sanitizer either
        through a call center or online via the Zero PlusTM website. We have contracted
        with two call centers, O’Currence (located in Salt Lake City, Utah) and
        Convergys (located in Ogden, Utah) to receive telephone calls from the Sean
        Hannity radio show and sell the Zero PlusTM Hand Sanitizer over the telephone. We
        intend to measure the results at the conclusion of the contract period and
        either continue the marketing campaign for another thirteen week period,
        market
        other of our products through the Sean Hannity radio show (or other radio
        shows)
        or elect not to pursue further radio advertising.
  In
        May,
        2005, we established an in-house sales department to sell the Aquagen products
        to the health care industry. We contracted with MarkEd Solutions, a private
        firm
        that consults with companies to increase sales in the health and natural
        food
        stores, to set up our in-house sales department. We hired two employees to
        operate the sales department. We believe that our in-house sales department
        will
        generate significant sales over the course of the next three quarters. We
        also
        plan to expand the market for our Aquagen ® products
        and to develop other personal use products, such as skin care products,
        periodontal products and a fungicide product. We also intend to continue
        to
        develop and market commercial and residential cleaning products, such as
        a
        bottled surface cleaning product
  -7-
 In
        May
        2005, we entered into an agreement with a regional health care company to
        install our generators in three of its health care facilities. The generators
        will manufacture EO Fluids that its hospitals will use for cleaning and
        disinfecting. EAU and its customer are creating a program, with specific
        protocols and purposes that will allow the customer to place our generators
        in
        all of its facilities throughout the intermountain regional area. When completed
        we believe that this program will have application in other health care
        facilities, hospitals, clinics, assisted living centers and retirement
        homes.
 
 In
        April
        2005, we sold one of our P-35 generators to produce EO Fluids for Esmeralda
        Farms, a 30-year old world-wide company based in Miami, Florida. The EO Fluids
        will be used to clean and disinfect flowers and floral products grown or
        produced by Esmeralda. Esmeralda currently owns large floral farms in Ecuador,
        Peru, Costa Rica and Columbia. Esmeralda is the only South American importer
        that sells floral products produced by its wholly owned and operated farms
        in
        Colombia, Ecuador, Costa Rica and Peru. The headquarters in Miami directs
        the
        world-wide sales and marketing of its flowers to wholesalers in the U.S.
        and
        Canada. European distribution is handled by its subsidiary company in Holland.
        We are assisting in integrating our fluid generator into Esmeralda’s Ecuador
        plant. We believe that a successful transition from Esmeralda’s traditional
        cleaning and disinfecting methods to our innovative use of EO Fluids to clean
        and disinfect Esmeralda’ flowers will result in sales to other Esmeralda
        facilities as well as other floral farms world wide.
 
 In
        June,
        2005, we entered into an agreement with Tyson Foods, Inc. to test our generator
        and EO Fluids in its Shelbyville, Tennessee poultry processing plant.
        Installation of our generator began in July 2005, and we anticipate that
        the
        test will last approximately three months. At the end of the test period,
        assuming that the EO Fluids and the generators that produce them achieve
        a
        successful result for Tyson, we will undertake to complete a definitive
        commercial agreement with Tyson regarding the installation of our generators
        and
        the use of our Empowered Water TM Generator, EO Fluids and protectants in its poultry plants located throughout
        the United States and Canada.
 
 In
        the
        past our revenues have been derived primarily from equipment sales to
        franchisees of our affiliated surface cleaning company and from our
        Aquagen ® oxygen
        supplement products. However, we are continuing to work on diversifying into
        other high demand areas such as poultry processing, consumer products and
        grocery produce spraying systems, and we are beginning to generate limited
        revenues in those areas. As we move into those areas, we hope to develop
        a model
        whereby we derive revenue from a combination of equipment leases, metering,
        piecing and entering into distributorships and joint ventures with various
        specific industry leading companies. Piecing is the process in which we place
        and maintain machines at commercial facilities, such as processing plants,
        and
        the facility is charged per unit of product processed at a designated price.
 
 Our
        operations are currently funded by a combination of revenues and capital
        funding.
 
 -8-
 **Results
        of Operations**
 
 The
        following discussion should be read in conjunction with selected financial
        data
        and the financial statements and notes to financial statements.
 
 **Selected
        Financial Information**
 
 Six
                    months endedJune 30,2005
              
              2004Revenue,
                  net
              
              $
              216,347
              
              $
              175,000Gross
                  profit (loss)
              
              
              163,232
              
              
              118,900Operating
                  (loss)
              
              
              (3,003,760
              )
              
              (2,400,072
              )Other
                  income (expense)
              
              
              467,311
              
              
              (81,091
              )Net
                  income (loss)
              
              
              (2,536,449
              )
              
              (2,481,163
              )
 
 
 June
                  30,
                2005
              
              December
                  31,
                2004Balance
                  Sheet Data:Cash
                  and Cash Equivalents
              
              $
              212,396
              
              $
              382,889Total
                  Current Assets
              
              
              3,063,533
              
              
              1,389,556Total
                  Assets
              
              
              5,977,898
              
              
              3,906,959Total
                  Current Liabilities
              
              
              1,903,049
              
              
              370,792Long
                  Term Debt
              
              
              215,341
              
              
              233,337Total
                  stockholders’ equity
              
              $
              3,859,508
              
              $
              3,302,830
 
 **Discussion**
 
 The
        Company had total revenues of $216,347 for the six months ended June 30,
        2005,
        which represents an increase of $41,347, or 23.6%, from the $175,000 in total
        revenues for the same period one year earlier. A portion of the revenue
        generated during the period comes from the sale of bottled drinking water,
        known
        as *Perfect
        Empowered Drinking Water* TM,
        and
        our *Zero+* TM
        hand
        sanitizer. Management believes that it will begin generating significant
        revenues from its bottled drinking water and hand sanitizer sales, and from
        its
        other consumer products and, possibly, from its poultry processing plant
        operations during the next few quarters, beginning with the third and fourth
        quarters of 2005.
 
 The
        Company’s cost of goods declined 5.3%, from $56,100 in the first half of 2004 to
        $53,115 in the same period of 2005, despite the fact that the Company recognized
        higher revenue during the same period of 2005. This is partially attributable
        to
        the fact that the Company enjoys higher profit margins in its bottled drinking
        water and other consumer products, and that revenue from those products just
        began to be generated during the second quarter of 2005.
 
 -9-
 Research
        and development expenses incurred in the first six months of 2005 were 30.8%
        higher than those expenses incurred during the same period one year earlier.
        This increase is attributable to several factors, including the Company’s
        continued development activity of higher capacity EO generators, the conducting
        of beta testing in the supermarket area, activities undertaken to refine
        the
        production of the Company’s bottled drinking water, and the Company’s increased
        activities in the poultry processing industry. It is anticipated that the
        Company’s research and development expenditures will continue at approximately
        the same level during the third quarter of 2005.
 
 The
        Company’s general and administrative expenses totaled $2,273,232 during the six
        months ended June 30, 2005, compared to $1,519,871 during the same period
        of
        2004. This 49.6% increase in general and administrative expenses is attributable
        to several factors, including the hiring of several personnel, including
        some
        management level employees, the building and set-up costs associated with
        the
        company’s drinking water bottling plant, increased travel costs associated with
        increased activity in the poultry and grocery industries, and ramp-up and
        startup costs incurred in connection with the Company’s consumer products. The
        Company anticipates that its general and administrative expenses will remain
        fairly constant during the next several quarters, while the Company anticipates
        that its total revenues during such period will increase substantially.
 
 The
        Company’s revenue from operations has remained fairly level over the last few
        quarters, with most of the Company’s revenues coming from sales of its equipment
        to franchisees of Zerorez Franchising Systems, Inc., an affiliate of the
        Company
        that is in the business of offering carpet cleaning franchises to the public.
        We
        expect that revenue from the sale of our fluid generators to Zerorez franchisees
        will continue to increase as Zerorez more actively promotes selling franchises
        domestically. In addition, during the quarter ended June 30, 2005, we began
        generating revenue from the sale of our Aquagen oxygen supplement products
        and
        our new drinking water product.
 
 We
        have
        successfully installed our equipment in two poultry processing plants, and
        we
        should begin generating revenue from those plants in the near future. We
        are
        continuing to actively market our equipment to the poultry processing industry,
        and we anticipate that revenue generated by that industry segment will represent
        a significant addition to our total revenue in future years.
 
 In
        February, 2005, we completed development of our new advanced C-Series
        Electrolyzed Oxidative Pathogen Reduction System that is capable of producing
        any multiple of 4,000 gallons of electrolyzed oxidative water per hour. This
        increased capacity allows us to scale and customize flow volumes to support
        several different commercial applications, including poultry processing,
        beef
        processing and other high volume food processing facilities.
 
 In
        March
        2005 we entered into a manufacturing agreement with a third party to manufacture
        some of our product line. Previously, all equipment was manufactured in-house
        in
        our Kennesaw, Georgia facility. However, as we have begun to receive orders
        for
        our larger capacity equipment, we have made the determination to outsource
        most
        of our manufacturing to assure a constant supply of our equipment.
 
 In
        April
        2005, we launched our new bottled drinking water product, known as “Perfect
        Empowered Drinking Water TM .”
        As of
        June 30, 2005, our Perfect Water product is being sold in approximately 60
        grocery stores, including stores owned or operated by large grocery operators
        such as Associated Foods and the Kroeger Company. Kroeger owns over 4,000
        retail
        operations. Our Perfect Empowered Drinking Water TM is also
        sold in various other outlets, making it available for retail sale in
        approximately 140 outlets as of August 2005. We are aggressively expanding
        our
        market for this product, and we anticipate entering into additional distribution
        agreements with owners or operators of multiple outlets during the fourth
        quarter of 2005. We anticipate that our drinking water revenues will eventually
        become a significant portion of our total revenue.
 
 -10-
 In
        April
        2005, we completed a beta installation of our Empowered Water TM Pathogen
        Intervention System at a supermarket in Georgia. The system, which was jointly
        developed with KES Science and Technology located in Kennesaw, Georgia, is
        designed to spray our specially treated EO Fluid on produce and floral products
        in the store. Tests have shown that spraying fruits, vegetables and floral
        products with our EO Fluid dramatically increases the freshness and shelf
        life
        of such products.
 
 
 **Liquidity
        And Capital Resources**
  At
        June
        30, 2005, we had cash and cash equivalents of $212,396, compared to $801,807
        on
        the same date one year earlier, and $382,889 at December 31, 2004. At June
        30,
        2005, the Company’s inventory was $2,263,681, representing an increase of 350%
        from the $503,316 on hand at December 31, 2004 and an 1,800% increase over
        the
        $119,148 on hand at June 30, 2004. This substantial inventory buildup is
        primarily a result of the Company’s anticipated sales of bottled drinking water
        during the second and third quarter of 2005 and the anticipated increase
        in
        orders of equipment for the poultry processing industry.
 
 The
        Company’s Other Income increased 569% from the three month period ended June 30,
        2004 to the same period in 2005, from $74,277 during the second quarter of
        2004
        to $496,776 during the second quarter of 2005. Most of this increase is
        attributable to the sale in April 2005 of all of the Company’s capital stock in
        Biofilm Strategies Corporation to an unrelated third party for a total sales
        price of $718,000. The Company recognized a gain of $466,800 on that sale.
 
 On
        or
        about June 8, 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
        June
        30, 2005, the Company had raised gross proceeds of $536,550 in the private
        offering, of which a total of approximately $64,386 was owing, but unpaid,
        to
        the placement agent in commissions and fees. The Company also granted to
        the
        placement agent five (5) year warrants to purchase a total of 73,800 shares
        of
        the Company’s common stock at an initial exercise price of $5.50 per
        share.
 
 Assuming
        this private offering is fully subscribed, the proceeds should be sufficient
        to
        fund our continuing operations at their current level through at least the
        end
        of 2005. Management recognizes that additional funding will be required to
        finance growth and to achieve our strategic objectives. Management is actively
        pursuing additional sources of funding. In addition, management is expecting
        an
        increase in cash flows through anticipated 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.
 
 
 -11-
 
 **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
        6.**  **Exhibits
        and Reports on Form 8-K**
 
 (a)
              Exhibits.
 
 31.1
              Rule
                  302 Certification of Chief Executive Officer and Chief Financial
                  Officer
 32.1
                906
                    Certification of Chief Executive Officer and Chief Financial
                    Officer
  (b)
              Reports
                  on Form 8-K.
 
 During
        the quarter ended June 30,
        2005, we filed with the Securities and Exchange Commission Current Reports
        on
        Form 8-K as follows:
 
 (i)
        On
        April 29, 2005, we filed a Current Report on Form 8-K regarding the sale
        of all
        of our capital stock in Biofilm Strategies Corporation for a total sales
        price
        of $718,000.
 
 (ii)
        On
        May 6, 2005, we filed a Current Report on Form 8-K regarding the sale of
        850,000
        unregistered shares of the Company’s $0.0001 par value common stock in a private
        offering pursuant to Rule 506 promulgated under the Securities Act of 1933
        for
        an offering price of $3.50 per share.
 
 (iii)
        On
        June 14, 2005, we filed a Current Report on Form 8-K regarding our entry
        into a
        memorandum of understanding with Tyson Foods, Inc. relating to the installation
        and trial of an antimicrobial system in Tyson’s poultry processing plant in
        Shelbyville, Tennessee.
 
 
 -12-
 
  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 August 15, 2005.
  ELECTRIC
                AQUAGENICS UNLIMITED,INC.By:
              /s/ Gaylord
                M. KarrenGaylord
                  M. Karren
                Chief
                  Executive Officer
                Principal
                  Executive Officer and
                Principal
                  Financial Officer
 
  -13-