UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

**FORM 10-KSB**

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2002

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the transition period from _________________ to _________________

Commission File Number:  **333-86830**

**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**                                                                                                                         

|Securities registered under Section 12(b) of the Act: |                                          
|----------------------------------------------------- | -----------------------------------------
|Title of each class                                   | Name of each exchange on which registered
|None                                                  | None                                     

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

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

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.     [X]

Issuer's revenues for its most recent fiscal year:  $112,061.

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to
the price at which the common equity was sold, or the average bid and asked price of such common equity, as of April 11,
2003 is not applicable because there is currently no market for our securities.

The number of shares outstanding of each of the issuer's classes of common equity as of April 11, 2003 was 2,810,535
shares

Documents incorporated by reference: None

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

**TABLE OF CONTENTS**



|         |                                                                                                                  | Page
|-------- | ---------------------------------------------------------------------------------------------------------------- | ----
|PART I   |                                                                                                                  |     
|ITEM 1.  | DESCRIPTION OF BUSINESS.                                                                                         | 3   
|ITEM 2.  | DESCRIPTION OF PROPERTY.                                                                                         | 19  
|ITEM 3.  | LEGAL PROCEEDINGS.                                                                                               | 19  
|ITEM 4.  | SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS.                                                             | 19  
|PART II  |                                                                                                                  |     
|ITEM 5.  | MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER
MATTERS.                                                        | 19  
|ITEM 6.  | MANAGEMENT'S DISCUSSION
AND ANALYSIS OR PLAN OF
OPERATION.                                                       | 22  
|ITEM 7.  | FINANCIAL STATEMENTS                                                                                             | 24  
|ITEM 8.  | CHANGES IN AND
DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.                            | 24  
|PART III |                                                                                                                  |     
|ITEM 9.  | DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND
CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT. | 24  
|ITEM 10. | EXECUTIVE COMPENSATION.                                                                                          | 25  
|ITEM 11. | SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.                                                  | 27  
|ITEM 12. | CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.                                                                  | 28  
|ITEM 13. | EXHIBITS AND REPORTS ON
FORM 8-K.                                                                                | 30  
|ITEM 14. | CONTROLS AND PROCEDURES                                                                                          | 31  

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS**

This report contains forward-looking statements that involve risks and uncertainties.  These forward-looking statements are
based on our current expectations, beliefs and assumptions.  When we use words such as "anticipates," "expects," "intends,"
"plans," "believes" or similar expressions, we are making forward-looking statements.  Our actual results could differ
materially from those anticipated in forward-looking statements.  Factors that might cause such differences include the risks
discussed in "Item 1.  Description of Business-Risk Factors" and in "Item 6. Management's Discussion and Analysis or
Plan of Operation," as well as those discussed elsewhere in this annual report.

We caution you not to place undue reliance on these forward-looking statements, which reflect our management's view
only as of the date of this annual report.  We will not update any forward-looking statement to reflect events or
circumstances after the date hereof or to reflect the occurrence of unanticipated events.

**PART I**

**ITEM 1.          DESCRIPTION OF BUSINESS**

**OUR BUSINESS**

We were organized as a Delaware corporation on March 6, 2000 under the name Primacide, Inc. to develop technologies
and products that disinfect, sanitize and clean surfaces.  On May 10, 2001, we changed our corporate name to Electric
Aquagenics Unlimited, Inc. We are the successor enterprise to another company, Primacide, LLC, which was founded by
certain of our founders in 1998.  We were organized with an insignificant carrying amount of the assets of Primacide, LLC.

Our business centers on the development, manufacture and marketing of equipment that uses water electrolysis to create
fluids that sanitize and clean surfaces. The electrolyzed fluids generated by our machines are environmentally sound and
are free from toxins and harmful residues associated with traditional chemically based disinfecting and cleaning agents. The
electrolyzed fluids generated by our machines are intended to replace many of the traditional methods used in commercial
and industrial disinfecting and cleaning.  The electrolyzed fluid generated by our machines has many consumer household
applications.

The electrolyzed fluids generated by our machines have been tested in laboratories and also used in commercial
applications.  Our electrolyzed fluids are used as a carpet-cleaning agent. In addition, we intend to expand the application of
the electrolyzed fluids to the sanitizing of poultry eggs and carcasses.  The electrolyzed fluids generated by our machines
have been tested and verified by independent laboratories including the Department of Microbiology, Brigham Young
University, Provo, Utah, and the Department of Poultry Science, University of Georgia, Atlanta, Georgia.

Our business operations originally focused on activities related to resell of water electrolyzing machines, but has evolved
into the business of improving water electrolyzing machines, discovering and testing new uses and applications for
electrolyzed water, and obtaining governmental approval for new applications for electrolyzed water.  We seek patent
protection, where feasible, for our new water electrolyzing machine designs and for applications of our electrolyzed fluids.
Our revenues in the past have been derived primarily from equipment sales, but we intend to derive most future equipment
related revenues from equipment leases and metering.  Metering is the process where we place and maintain machines at
commercial facilities, such as factories, and the facility is charged per unit of fluid used at a designated price.  We intend to
market our equipment nationally, and our consumer products nationally and internationally.

We currently fund our operations by a combination of revenues and outside funding.  Our products and technologies may
be used alone or in combination on various applications ranging from home to modern industry use in disinfecting,
sanitizing and cleaning surfaces and products.

**Products**

Our current focus is to sell electrolyzed fluid that is produced by our generators placed on-site at commercial
manufacturing facilities, particularly in the animal products sectors in need of high volumes of non-toxic sanitizing fluids.
The electrolyzed sanitizing fluids can be metered and the lessee of the generator will pay per unit of fluid drawn from the
generator or pay based on the number of units, such as eggs or animal carcasses, treated with our electrolyzed water
products. We have not yet placed generators at any commercial manufacturing facility, nor do we have any formal
arrangements to do so.  However, we intend to have generators placed in at least one commercial manufacturing facility in
the next 12 months.  We are in discussions with a manufacturer to place a generator, but not currently negotiating terms.
We do not expect our revenue levels of the past several quarters to increase greatly in the event we are unable to place
generators in manufacturing facilities.

Currently, our revenue producing products consist primarily of water electrolyzing machines, which we refer to as
generators.  We maintain an inventory of between approximately one and two-dozen of these generators ready for resale or
lease.  We currently have no contracts with any suppliers of water electrolyzing machines and do not intend to purchase any
water electrolyzing machines from third parties in the foreseeable future.  We have recently developed a
water-electrolyzing generator and assemble them with components supplied by third parties.  We intend to commence the
sale, lease or placement of these machines in manufacturing facilities in the coming twelve months. Our new generator
produces higher levels of electrolyzed water per hour than generators we previously sold. There are three basic models of
generators that we previously purchased from third party manufacturers.  A series of small residential generator models and
two larger commercial models, the P-2000 and the P-5000.  We also market cleaning cloths, but the sales from the cloths
are minimal.

* **Residential Generators**.  The residential generators produce a mild alkaline drinking water.  Some of the residential
generators also produce acidic fluid, Primacide A, that is capable of acting as a household disinfectant.  The price range of
the residential generators is from $600 to $2,000.

*** Commercial Generators**.  We generally lease our commercial generators, the P-2000 and the P-5000. However, some
units have been sold to Aqua Micron and Venturi Technologies, Inc. We warrant the commercial generators for repair and
part replacement for a period of three years. The P-5000 generator presently is priced at $25,000.  The P-2000 is presently
priced at $12,500.

*** Micro Fiber Cloths and Cleaning Tools**.  We market micro fiber cleaning cloths and tools to be used with its
sanitizing and cleaning fluids.  The cloths and tools remove bio-film and other microbe contaminants on surfaces ranging
from floors to skin.  The micro fibers are composed of 20-30% polyamine and 70-80% polyester.  The fibers are thin, flat
uniform ribbons.  During the manufacturing process, the fibers are etched or frayed to enhance the surface area and thereby,
the effectiveness of the cloth.   The micro fiber cloths, clean on the basis of physics rather than chemistry and when used in
combination with our sanitizing fluids, remove bacteria, molds and other microorganisms. Currently, our cleaning cloths
account for less than one percent of our revenues and we do not expect the cleaning cloths to exceed 5% of our revenues in
the foreseeable future.

Electrolyzed water can have varying strength and properties.  We have created products by researching and testing the
cleaning and sanitizing characteristics of electrolyzed water with varying electrical charges and pH levels.  We are able to
create new applications for electrolyzed water by setting our water electrolyzing machines to create electrolyzed water with
specific microorganism killing properties. Based on our testing and research we have created product formulas tailored with
certain properties. We adjust the water electrolyzing properties of water electrolyzing generators to create electrolyzed
water with differing properties.  Our customers use the electrolyzed water to perform cleaning and sanitizing functions. Our
current fluid formulas and their disinfectant and cleaning applications are as follows:

* **Primacide A**is a disinfecting and sanitizing fluid that kills bacteria, yeast, molds and viruses, including salmonella,
staphylococcus, and pseudomonas.  It is highly oxidative and acidic due to its pH of 2.4 and positive 1150 milivolt
electrical charge.  Primacide A can be applied to a wide variety of surfaces. Hands sprayed with Primacide A and then
wiped with a micro fiber cloth were found to have less residual bacteria and other microbes than hands cleaned using 62%
alcohol.  Tests performed by Aqua Micron L.C. indicate that Primacide A can be used to sanitize and wash meat carcasses,
strawberries, lettuce, cabbage, carrots and other vegetables.  Surfaces such as floors in hospital operating rooms, bench
tops, treatment tables, cutting boards and other surfaces can be effectively sanitized by cleaning with Primacide A. Over a
year ago, we submitted a provisional patent application to the United States Patent and Trademark Office to Primacide A
for uses other than use in the carpet cleaning process. Provisional patents do not by themselves result in, or lead to, a patent.
Provisional patents only establish patent application priority over some comparable inventions for which patent protection
may be subsequently sought. We recently applied to the U.S. Patent and Trademark Office for a utility patent relating to the
use of Primacide A to sanitize eggs.

*** Primacide B** is an alkaline detergent and cleaner.  Primacide B Alkali is a chemical substance that is soluble in water
and neutralizes acids.  Primacide B neutralizes acids, leaves no residue and, with a pH of 11.2 to 11.5, is very alkaline.  Its
alkaline nature and its negative 960-milivolt electrical charge result in a product that is effective in emulsifying oil and
grease.  Primacide B is primarily a cleaner with some bacteria killing properties, but is significantly slower and less
effective as bacteria killer than Primacide A. Over a year ago, we submitted a provisional patent application to the United
States Patent and Trademark Office to Primacide B for all uses. We recently applied to the U.S. Patent and Trademark
Office for a utility patent relating to Primacide A and Primacide B as a cleaner and sanitizer of all hard surfaces.

In addition to our generators and cloths, we intend to market a product called Primacide X that was developed by
American Biotech, Inc.  Primacide X's sanitizing properties are greatly enhanced when it is applied with an electro-static
mister developed by Max-Spray, Inc.  Primacide X is electrolyzed water containing pure silver particles that are energized
with a high voltage electrical charge. The charged silver particles interrupt the metabolism of living organisms that has the
effect of killing bacteria, spores and fungus. The silver particles can maintain their effectiveness for up to three years.  The
electro-static spray removes hydrogen bonds from the solution that allows the Primacide X and its silver particles to
penetrate fibers and membranes as small as those that make up standard office paper and envelopes.

Due to the inclusion of silver, a relatively expensive heavy metal, Primacide X is significantly more expensive to produce
than our other electrolyzed water products.  We did not develop the electro-static mister and did not develop Primacide X.
However, through an arrangement with American Biotech, Inc. and Max-Spray, Inc., we have negotiated to receive 33% of
the net proceeds from all sales of Primacide X that are generated by either American Biotech, Inc., Max-Spray, Inc., or us.
Our arrangement with American Biotech, Inc. and Max-Spray, Inc. has not been reduced to a written contract.  We expect
our portion of the revenues from the sale of Primacide X to be less than 5% of our net sales in the next 12 months.

We intend to develop other products by researching and testing the cleaning and sanitizing characteristics of electrolyzed
water with varying electrical charges and pH levels and marketing these products. The products will primarily be sold via
leased machines or metering. We intend to create products that can be used in the storage, processing and shipping of fruits,
vegetables and meat, and also health and beauty aids such as body care, body wipes, health care and medical equipment and
facilities, day care facilities, janitorial, yard care and golf course maintenance, pest and fungus control, swimming pool
maintenance, pharmaceutical production, waste management and culinary water systems.  However, we have not
commenced development for these products, and may never commence the development.  Substantial additional capital and
regulatory approval will be needed for us to effectively sell these products even if they are developed. Failure to secure
sufficient funding and receive regulatory approval for these products will hinder our ability to bring them to market and
would have a negative impact on our business.

**Marketing & Sales**

We intend to produce future revenue by initially pursuing the sale or lease of generators into the markets previously
described in this registration statement, namely, professional carpet cleaning, poultry industry, dairy farms, home carpet
and floor cleaning, food packaging and disaster cleanup and reconstruction.

In the foreseeable future, we expect to rely on our employees to market our products.  Gaylord Karren is currently involved
in marketing efforts and we intend to hire others to assist his efforts in the coming 12 months.

**Markets**

The cleaning and sanitation market is characterized by diverse products and multiple evolving product enhancements,
evolving industry standards and frequent new product introductions, and if we fail to enhance our existing products,
develop new and more technologically advanced products and successfully market these products, our result of operations
will suffer. We believe that our future success will depend, in part, on our continued ability to enhance our current products
and to introduce new products and features to meet changing customer requirements and evolving industry standards.  Our
present products are based on the use of electrolyzed water to kill bacteria, viruses and fungus.  Our competitors or we may
announce products that have the potential to shorten the life cycle of our products or replace them.  Such announcements
could cause customers not to buy our products or to defer decisions to buy our products.  In addition, products or
technologies developed by others could render our products or technologies non-competitive or obsolete.

The use of electrolyzed water to kill bacteria, viruses and fungus in agricultural, meat and cleaning and sanitizing
consumer product industries are relatively young and evolving markets.  Our future growth will depend on our ability to
predict the evolution of these markets and to successfully penetrate those markets. Because of the early stage of the
development of the electrolyzed water as a sanitizer market, the demand for, and market acceptance of, our products, is
subject to a high degree of uncertainty.  If market growth rates do not meet our expectations, or if we are unsuccessful in
identifying and penetrating those segments of the electrolyzed water as a sanitizer market which provide the greatest
opportunity for growth, our business would suffer.

We initially intend to focus our product development and marketing on the following market areas:

* Professional Carpet Cleaning.  The market for professional carpet care is large.  In March, 2001, we entered into a
five-year exclusive agreement with H20 AquaCare Franchising Systems, Inc. ("AquaCare"), which provides that
AquaCare's franchisees will lease our generators to produce Primacide B for use in their carpet cleaning businesses.
AquaCare's franchisees are required to lease only our generators during the five-year term of the agreement or any renewals
of the agreement. AquaCare is a developing stage company and is currently attempting to sell franchises with limited
success.

* Poultry Industry.  In March, 2001, under the direction of Dr. Scott Russell of the Department of Poultry Science,
University of Georgia, tests relative to the effectiveness of Primacide A in the cleaning and sanitizing chicken carcasses and
hatching eggs were completed.  These tests showed a 5-log pathogen reduction (100,000 count down to 1).

* Disaster Cleanup and Reconstruction.  This is a large industry that consists of home and  commercial cleanup and
reconstruction following disasters such as floods or fires.  Stone Fire and Flood Restoration, Inc. is in the disaster cleanup
and reconstruction business with offices located in Lindon, Utah.  Stone Fire and Flood Restoration uses our generators in
its Utah and Texas offices.

* Food Packaging.   We intend to explore applications for Primacide A as a sanitizer in seafood packing houses.  In
addition, we are being advised by Dr. Yen-Con Hung, Professor of Food Engineering at the University of Georgia
concerning a wide range of other applications, such as vegetable washing and surface sanitization, in the food packing
industry.  Dr. Hung is a recognized researcher in these areas.

* Grocery Store Meat Departments.  We are exploring applications for our electrolyzed fluids in meat departments of
grocery stores as cleaner and disinfectant on cutting surfaces where multiple products, such as beef, poultry and seafood are
cut and packaged and where cross contamination occurs.  Using our electrolyzed fluids, processing machinery and floor
surfaces can be cleaned and sanitized without the use of toxic chemicals. We are exploring applications for our electrolyzed
fluids in grocery store produce departments.

In the future we intend to develop electrolyzed water products with a variety of new industrial and consumer
applications.  However, we currently have no plans to do so.  In addition, substantial additional capital and regulatory
approval will be needed for us to effectively create, manufacture and sell such products.

**Manufacturing and Sources of Supply**

We intend to outsource the majority of electrolyzed water generator manufacture and assembly to third parties.  In the past,
outsourcing generator manufacture and assembly has enabled us to benefit from the manufacturing capabilities of those
who can accommodate significant increases in production volume as necessary.  However, we have no contracts with third
parties that have manufactured our electrolyzed water generators in the past and do not intend to enter into any long-term
contracts related to generator manufacture. We have no assurance that we can find alternative manufacturers in the event
we cannot negotiate reasonable terms with our present manufacturer.  Failure to find manufacturers to build our generators
would have a negative impact on our business.

**Distribution**

Currently, we coordinate the movement of goods from our headquarters.  In the past, we have taken custody of generators
after their manufacture by subcontractors and distributed them directly from our headquarters.  However, in the future, as
generator sales volume increases and our electrolyzed fluid product lines are launched, we intend to use a network of
resellers, consisting primarily of our employees and also third party distributors with established distribution channels to
assist with the marketing of our products.

**Competition**

There is broad competition in the market for disinfecting, sanitizing, and surface cleaning products. Many of our
competitors are extremely large, financially healthy companies, have substantial market share and name recognition, and
easy access to marketing outlets and capital markets.  Many of these companies are able to frequently update and expand
products and introduce new products, and diversify product offerings.  These other companies with substantially greater
financial, creative and marketing resources, and proven histories, may decide to enter and effectively compete in this
market, which could adversely affect our operations.

We believe our products are unique due to their effectiveness, price, and environmentally safe and non-toxic character.
Because of our unique products and potential marketing outlets there is a good possibility that it will be able to initially
capture a portion of this "niche" market for environmentally safe and non-toxic cleaning products.  However, other
companies with substantially greater financial, creative, and marketing resources, and proven histories, may enter into and
effectively compete in this market.

**Governmental Regulation**

Due to the fact that our products are sanitizing products and have applications related to food industries, existing
governmental regulation have potential effect on our new products.  We frequently will be required to get approval or
favorable designations from governmental agencies, such as the United States Food & Drug Administration, in order to
bring new products to market.  We believe that our current applications for electrolyzed water products are subject to
sections of the United States Code of Federal Regulations that contain the regulations created by the U.S. Food & Drug
Administration.  In many cases, we will seek designations from the Food & Drug Administration that deem our
electrolyzed water products among substances that are generally recognized as safe for specific applications, and therefore
do not require Food & Drug Administration approval.  The existence of potentially harmful substances, such as chlorine
dioxide, in our electrolyzed water products would require Food & Drug Administration approval.  In order to obtain
approval, we would need to satisfy regulators that our electrolyzed water products contained sufficiently low amounts of
such substances as to not be dangerous.  This process of obtaining Food & Drug Administration approval can be costly and
time consuming and would delay our ability to introduce our products into the market. We have not taken steps to obtain
approval for our products from the Food & Drug Administration because we do not believe it is required.

The active ingredient in our electrolyzed fluid Primacide A is hypochlorus acid.  The hypochlorus acid combined with the
oxidation-reduction potential of a positive 1,200 plus millivolts makes Primacide A an effective disinfectant.   We believe
the use of our electrolyzed fluids to sanitize eggs, and chicken carcasses in a chiller solution are generally recognized as
safe as indirect food substances.

We submitted a request to the Environmental Protection Agency to register our fluid commercial generator as a pesticide
device.  The Environmental Protection Agency concluded that our generators are not required to be registered with them. In
addition the Environmental Protection Agency does not require registration of our electrolyzed fluids Primacide A and
Primacide B when used by the lessee or purchaser of a generator on hard surfaces, fabrics, or carpets in their own
businesses.

**Research and Development**

The goal of our research and development activities is to continue the development and introduction of environmentally
safe products for our customers that resolve the limitations and dangers of chemical sanitizers and address new markets.
Our efforts are also focused on researching and testing the cleaning and sanitizing characteristics of electrolyzed water with
varying electrical charges and pH levels.  Our research focuses on the ability and range of efficacy of our electrolyzed water
to kill specific microorganisms.  We are attempting to develop new technologies, applications and products that will:

* Generate electrolyzed water that has a slower oxidation rate;

* Sanitize agricultural products, including chicken eggs and carcasses;

* Enhance current products for use in carpet cleaning;

* Sanitize and disinfect hard and soft surfaces;

Our research and development expenditures totaled $162,251 for the year ended December 31, 2002 and were
approximately $35,666 for fiscal years ended December 31, 2001.

**Trademarks**

The name Primacide is registered with the U.S. Patent and Trademark Office.  The names "Primacide A," "Primacide B,"
"Primacide X,"  "EAU," and Electric Aquagenics Unlimited are also our trademarks.

**Proprietary Rights**

****Our future success and ability to compete are dependent, in part, upon our proprietary technology.  We rely on patent, trade
secret, trademark and copyright law to protect our intellectual property.  We currently have no U.S. patents issued by the
U.S. Patent and Trademark Office.   Individuals associated with us have assigned to us rights to regular patent applications
submitted to the U.S. Patent and Trademark Office for the use of Primacide A in sanitizing chicken eggs, including eggs for
human consumption and hatching eggs and for the use of Primacide B in cleaning and sanitizing carpets and hard surfaces.
We will have full rights to the patents when they are granted. We have also filed with the U.S. Patent and Trademark Office
a provisional patent application for a new electrolyzed water generator that can regulate the pH of Primacide A and increase
its stability. In addition, we intend to seek patent protection on a electrolyzed water generator that we have recently
developed.  We cannot be sure that any patents will be issued pursuant to future patent applications or that patents issued to
us will not be invalidated, circumvented, challenged or licensed to others.  In addition, we cannot be sure that the rights
granted under any such patents will provide us with competitive advantages or that any patents issued to us will be
adequate to stop unauthorized third parties from copying our technology, designing around our patents or otherwise
obtaining and using our products, designs or other information.  In addition, we cannot be sure that others will not develop
technologies that are similar or superior to our technology.  Furthermore, we believe that factors such as the technological
and creative skills of our personnel, new product developments, product enhancements and marketing activities are just as
essential as the legal protection of proprietary rights to establishing and maintaining a competitive position.

In addition to seeking patent protection, we rely on non-patented trade secrets and know-how and proprietary technological
innovation and expertise, all of which are protected in part by confidentiality and invention assignment agreements with our
employees and consultants, and, whenever possible, our suppliers. We cannot make any assurances that these agreements
will not be breached, that we will have adequate remedies for any breach, or that our non-patented proprietary intellectual
property will not otherwise become known or independently discovered by competitors.  We also cannot make any
assurances that persons not bound by an invention assignment agreement will not develop relevant inventions.

Many participants in the sanitation and cleaning market have a significant number of patents and have frequently
demonstrated a readiness to commence litigation based on allegations of patent and other intellectual property
infringement.  We have not received notices relating to alleged infringement, but we cannot be sure whether future claims
will arise, nor whether such future claims can be resolved on commercially reasonable terms. Failure to resolve such claims
on such terms could result in a material adverse effect on our business, financial condition and results of operations.  We
expect that companies will increasingly be subject to infringement claims as the number of products and competitors in our
industry segment grows and the functionality of products in different industry segments overlaps.  Responding to such
claims, regardless of merit, could cause product shipment delays or require us to enter into royalty or licensing
arrangements to settle such claims.  Any such claims could also lead to time-consuming, protracted and costly litigation,
which would require significant expenditures of time, capital and other resources by our management.  Moreover, we
cannot be sure that any necessary royalty or licensing agreement will be available or that, if available, such agreement
could be obtained on commercially reasonable terms.

**Customers**

Historically, a substantial portion of our revenues has come from large purchases by a small number of customers.  If we
lose one or more of our key customers or experience a delay or cancellation of a significant order or a decrease in the level
of purchases from any of our key customers, our net revenues could decline and our operating results and business could be
harmed. During the twelve months that ended December 31, 2002, fewer than 30 customers accounted for all of our net
revenues.

The following is a list of some of our customers and end-users and representative applications of our products.

|**Customer/End-User**                                                                        | **Applications**                                                                                                      
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------
|*  H2O AquaCare Franchising Systems, Inc. 

* H2O AquaCare Utah, L.L.C.

* Dirt Free (Texas) | Use of Primacide B in the carpet cleaning process                                                                     
|* Stone Fire and Flood Restoration                                                           | Use of Primacide electrolyzed water to remove smoke odors
and mold from the inside of dwellings after structure fires.

**Employees**

We currently have no full-time employees.  Gaylord Karren is a consultant to us pursuant to a contract under which is paid
consulting fees of $5,000 per month.  See "Interest of Management and Others In Certain Transactions".  As our business
grows, we anticipate that we will need to employ additional salaried clerical staff and sales personnel.

**RISK FACTORS**

The risks and uncertainties described below are not the only ones that we face.  Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also adversely affect our business.  If any of the
following risks and uncertainties develop into actual events, our business, financial condition and results of operations
could be materially and adversely affected, and the trading price of our common stock could decline.

**RISK FACTORS RELATING** **TO OUR BUSINESS**

*** We cannot guarantee that we will continue as a going concern** **because we have not yet been successful in
establishing profitable operations.**

We have received a report from our independent auditors on our financial statements for fiscal years ended December 31,
2002 and 2001. The footnote to our financial statements list factors, including recurring losses since incorporation, that
raise substantial doubt about our ability to continue as a going concern.

*** It is difficult for investors to evaluate our likely future performance because we are an early stage company
without long operating history.**

Since our incorporation in March 2000, we have been engaged in start-up and development activities.  We have operated
at a loss, and losses are expected to continue.  We have little operating history upon which investors may base an evaluation
of our likely future performance.

*** We may not be able to successfully develop our business because our products and market are evolving.**

There can be no assurance that our business strategies will lead to any profits.  We face risks and uncertainties relating to
our ability to successfully implement our strategies. We face expenses and uncertainties related to operating with a little
known product, with an unproven business model, and a new and rapidly evolving market.  Our business model is based on
an expectation that demand for ecologically friendly disinfecting and cleaning products will increase materially.  However,
the demand may never materialize.

*** We have a history of losses, and we will need additional capital to continue our operations. If we are unable to
obtain additional capital, we will have to curtail our operations.**

As of this date, we have generated limited revenues and incurred significant losses.  As of December 31, 2002, we had an
accumulated deficit of approximately $1,330,655.  For the fiscal years ended December 31, 2002 and 2001, respectively,
our operating losses were $673,925 and $409,580, respectively.  We have never been profitable and continue to incur losses
from operations. We may never generate sufficient revenue, income and cash flows to support our operations.  We expect
to incur losses because we anticipate incurring significant expenses in connection with developing our generators and
products, expanding markets, and building brand awareness. Our future revenues could decline by reason of factors beyond
our control such as technological changes and developments, downturns in the economy and decreases in demand for
sanitizing electrolyzed fluid related products.  If we continue to incur losses, if our revenues decline or grow at a slower
rate, or if our expenses increase without commensurate increases in revenues, our operating results will suffer and the value
of common stock may decline.

*** Our management may not have adequate time and resources to conduct our distribution activities, which could
hinder our ability to sell products.**

Currently we do not use independent parties to distribute or place our generators.  We do not expect to use outside
distributors to market or sell our products in the next 12 months. We may not be able to sell our products effectively if our
management does not have adequate time and resources to conduct our distribution activities.  Moreover, as our sales grow,
the strain on our management to sell and distribute products may increase. In the event that we decide to retain distributors,
we may not be able to establish relationships with distributors.  In addition, we may incur additional costs and business
delays and interruptions in sourcing distributors.

*** We may need substantial additional funds that we may not be able to acquire.**

Our cash requirements may vary materially from those now planned because of results from marketing efforts,
relationships with suppliers, changes in the direction of our business strategy, competitive and technical advances for
electrolyzed water as a sanitizer. We may not be able to continue to improve or develop successful electrolyzed water
products. In addition, it may be more costly than anticipated to develop new products. We may incur costs necessary to
comply with governmental requirements.  For example, we may be required to get approval from the U.S. Food and Drug
Administration for our current or planned products.  We may require substantial additional funding for our operating
expenses and for marketing and sales programs. Adequate funds for these purposes may not be available when needed or on
acceptable terms.

*** It may be difficult to assess our future income performance as a number of factors may cause fluctuations in
operating results.**

We believe that period-to-period comparisons of our operating results are not a good indication of our future performance
because of variables, which include:

* Growth rate of the market for environmentally friendly sanitizing products;

* Our ability to attract and retain customers ;

* Our ability to upgrade, develop and maintain our systems and infrastructure;

* Amount and timing of operating costs and capital expenditures relating to business expansion and infrastructure;

* Delays in developing and introducing new products;

* Announcement, introduction and market acceptance of new or enhanced sanitizing products by competitors;

* Governmental regulation of our products by agencies such as FDA or EPA.

*** Failure to successfully develop and introduce new products would harm our business.**

Our future success depends in large part on our ability to develop new or enhanced uses for our products.  We may fail to
identify new product opportunities successfully or develop and timely bring new products to market. We may also
experience delays in completing development of enhancements to, and new versions of, our products. We may be unable to
develop or acquire marketable products in a timely manner. In addition, product innovations may not achieve the market
penetration or price stability necessary for profitability. As the market and technology related to environmentally friendly
sanitizing products grows, we may change our business model to take advantage of new business opportunities, including
business areas in which we do not have extensive experience. Failure to develop these or other businesses successfully,
would be harmful to our business.

*** We may be unable to protect our intellectual property and proprietary rights, which could harm our business.**

Our success depends in part upon our ability to protect our intellectual property. We rely on a combination of trade secret,
trademark, and contractual protection to establish and protect our proprietary rights.  We are also applying for patent
protection from the United States governments, but do not own patents on products that we intend to launch in the next 12
months.  We may enter into confidentiality agreements with employees and consultants involved in product development or
distribution.  Despite efforts to protect proprietary rights through confidentiality and license agreements, unauthorized
parties may attempt to copy or otherwise obtain and use our products or technology.  Precautions may not prevent
misappropriation or infringement of our intellectual property, or independent third-party development of competitive
products.

*** Our products are not patented which creates vulnerability to competitors.**

We have been assigned rights to applications submitted to the U.S. Patent and Trademark Office for a utility patent
relating to the use of our electrolyzed acidic fluid to sanitize eggs, and a second patent relating to the use of our
electrolyzed alkaline fluid to clean and sanitize carpets and hard surfaces. The active ingredient in the sanitizing fluids that
are created by our generator products is electrolyzed water that kills bacteria, viruses and molds shortly after contact.  We
did not create the concept of electrolyzed water as a sanitizer and cleaner and other companies may purchase machines to
create electrolyzed water or develop machines to create electrolyzed water and compete with us.  Such competition could
have a harmful effect on our business.

*** Convertible promissory notes and stock purchase warrants that we issued may subject us to liability under
Sections 5 and 12 of the Securities Act of 1933 if they are deemed unregistered securities sold without an exemption.**

Convertible promissory notes totaling approximately $82,214 along with warrants issued to Castle Arch Bridge Fund,
L.L.C. and Charles and Donna Bergh, following the filing of the original registration statement for our recent public stock
offering may not be deemed exempt transactions under Section 4(2) of the Securities Act of 1933 and, therefore, would
expose us to potential liability under Sections 5 and 12 of the Securities Act of 1933 and state blue sky laws.  Actions
disputing the legality of the issuance could be brought in state or federal courts by the SEC, state agencies or the security
holders.  Damages in the event the sale of the convertible promissory notes are held not to be exempt transactions could
include court ordered disgorgement of the $82,214 note proceeds, payment of interest to the holders of the securities for the
period we held the $82,214, and court fees and costs awarded to the holders of those securities.

**GENERAL RISKS RELATING TO THE SANITATION AND CLEANING INDUSTRIES.**

*** Competition from major companies may decrease our market share, net revenues and gross margins.**

Competition in the chemical based disinfecting and surface cleaning products market is intense, and we expect
competition to increase.  Companies such as SC Johnson, The Clorox Company, Dow and Procter & Gamble dominate the
market. It is possible that large companies that sell chemical based disinfecting and surface cleaning products could
develop sanitizers composed of electrolyzed fluids as the key ingredient.  Due to these potential competitors' extreme size
and financially health, they could use their substantial market share and name recognition, and easy access to marketing
outlets and capital markets to compete with us.  These companies have substantially greater financial, creative and
marketing resources, and proven histories, and may decide to enter and effectively compete in the electrolyzed fluid market,
which could adversely affect our business.

* **Competitors currently selling electrolyzed fluid based sanitation and cleaning products may decrease our
market share, net revenues and gross margins.**

Many of the companies that already sell electrolyzed fluid based sanitation and cleaning products are able to frequently
update and expand products and introduce new products and to diversify product offerings.  Many of these competitors are
large and financially strong, and include Hoshuzuki, Miox and Toyo.  We compete with these companies primarily in
developing electrolyzed fluid products and applications and obtaining customers. These companies have substantially
greater financial, creative and marketing resources, and proven histories, that could make it difficult to compete or maintain
customers in the electrolyzed fluid sanitizer market.

*** Our net revenues and gross margins will not improve if the market for environmentally friendly sanitizing
products does not develop.**

The market for environmentally friendly sanitizing products is new and evolving. As a result, demand and market
acceptance for our products is uncertain. If this new market fails to develop, develops more slowly than expected or
becomes saturated with competitors, or if our products do not achieve or sustain market acceptance, our business could be
harmed.

*** Our success will depend on growth in consumer acceptance of environmentally friendly sanitizing products as
an alternative to chemically based products.**

Factors that might influence market acceptance of our products over which we have little or no control include
development of alternative products or methods and willingness of consumers and businesses to use environmentally
friendly sanitizing products. Our success depends on the increasing demand for environmentally friendly disinfecting and
sanitizing products.  If such demand does not continue to increase, demand for our products will be limited and our
financial results will suffer.

**ADDITIONAL RISKS RELATED** **TO BUYING OUR STOCK**

*** Future sales of our common stock in the public market could adversely affect our stock price and our ability to
raise funds in new stock offerings.**

All of our 2,810,535 shares of common stock presently outstanding are "restricted securities" within the meaning of the
Securities Act of 1933.  In the event a public market for the common stock develops in the future, much of the stock may
be sold immediately, in reliance on Rule 144 adopted under the Securities Act. Investors should be aware that sales under
Rule 144 may result in a drop in the price of the stock in any market that may develop.

* **You may have difficulties trading and obtaining quotations on "penny stock" issues.**

Our shares of common stock are a "penny stock" as defined in the Securities Exchange Act of 1934, as amended.  We
intend for these shares to be traded in the over-the-counter market on the OTC Bulletin Board. As a result, even after a
public market for our common stock is established, our shareholders may find it more difficult to dispose of or obtain
accurate quotations as to the price of our shares. In addition, the "penny stock" rules adopted by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, make the sale of the shares of the common stock
subject to certain regulations, which impose sales practice requirements on broker-dealers. For example, broker-dealers
selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the
risks of investing in such securities. Furthermore, if the person purchasing the securities is someone other than an
accredited investor or an established customer of the broker-dealer, the broker-dealer must also approve the potential
customer's account by obtaining information concerning the customer's financial situation, investment experience and
investment objectives. The broker-dealer must also make a determination whether the transaction is suitable for the
customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected
to be capable of evaluating the risk of transactions in such securities. Accordingly, the Securities and Exchange
Commission rules may limit the number of potential purchasers of the shares of the common stock.

* **You may be subject to resale restrictions on transferring "penny stocks."**

Various state securities laws impose restrictions on transferring "penny stocks" and, as a result, the ability of investors in
our common stock to sell their shares of common stock may be impaired.  For example, the Utah Securities Commission
prohibits brokers from soliciting buyers for "penny stocks," which makes selling shares of "penny stocks" more difficult.

*** We may issue additional shares and dilute your ownership percentage.**

Our bylaws allow the board to issue common stock without shareholder approval.  Currently, our board is authorized to
issue a total of 50,000,000 shares of common stock of which less than 6% have been issued as of April 11, 2003.  If
additional funds are raised through the issuance of equity securities, the percentage of equity ownership of our existing
stockholders will be reduced.  In addition, holders of these equity securities may have rights, preferences or privileges
senior to those of the holders of our common stock.  If additional funds are raised through the issuance of debt securities,
we may incur significant interest charges, and these securities could also impose restrictions on our operations.  If
additional financing is not available when needed on terms favorable to us or at all, we will have to curtail our operations.

*** Due to our lack of assets, there will be no liquidation value if our business fails.**

We currently have no significant assets or equipment, nor do we plan to have any in the future.  In the event our business is
liquidated, investor money will have been spent on operations, and equipment with insignificant salvage value.

*** There will be a dilution effect on our shareholders if outstanding warrants to purchase our common stock are
exercised.**

Upon completion of our recent public stock offering, we intend to grant placement agents who sell securities in
correlation with the offering, for nominal consideration, warrants to purchase up to 2% of the common stock sold in the
offering at 125% of the per share offering price.  The issuance of the warrants to our placement agents and the underlying
common stock may be considered to be additional compensation to them. The existence of the placement agent warrants,
and warrants held by promissory note holders, and other outstanding warrants to acquire shares of our common stock could
adversely affect our ability to obtain future financing, and their exercise could further dilute the interest of investors
acquiring common stock in our recent public stock offering.  The price which we may receive for the common stock issued
upon exercise of such warrants, in many or all cases, will probably be less than the market price of the common stock at the
time such warrants are exercised.  The holders of the warrants might be expected to exercise them at a time when we
would, in all likelihood, be able to obtain needed capital by a new offering of our securities on terms more favorable than
those provided for by the warrants.

*** Inability to manage growth could hinder our success.**

We believe electrolyzed water as a sanitizer has broad applications and due to its non-toxic nature has advantages over
chemical based sanitizers. As a result, we believe that we have the ability to grow rapidly during the next few years.  In the
event we do grow rapidly, we will be in circumstances currently unfamiliar to us.  Our efforts to manage our production
and larger scale quality assurance efforts may not be successful or we may fail to satisfy large demand requirements on a
timely and/or cost-effective basis. A failure to manage our growth would have an adverse effect on our operations and
overall financial health.

**ITEM 2.       DESCRIPTION OF PROPERTY**

Our corporate headquarters are located at 1464 W. 40 S. Suite #200 Lindon, Utah 84042.  Our directors and officers act as
the management and sales force.  Current offices are adequate for present needs.  Office space is leased and will be
increased as we deem necessary.  We believe that it will not be difficult to find additional or alternative office space if
necessary in the foreseeable future.

**ITEM 3. LEGAL PROCEEDINGS**

William K. Sadleir, DeAnn Sadleir v. Electric Aquagenics Unlimited. On September 14, 2001, shareholder William K.
Sadleir and his wife DeAnn Sadleir, filed suit against us in the State of Utah, Third Judicial District Court in Salt Lake
City, Utah alleging that they never received confirmation in writing to confirm their investment into us and were unsure of
the nature of the investment.  We have sent them the stock certificate evidencing their investment that had been issued
around the time of their investment.  On October 15, 2002, the Sadleirs' amended their complaint and demanded the return
of their $50,000 investment, costs, and 12% interest and attorneys fees on the basis that they bought stock in an offering not
subject to any exemption that, therefore, should have been registered under the Utah Securities Act.  There has been no
disposition reached in the lawsuit as of April 11, 2003. We submitted a motion to dismiss their amended complaint on
November 12, 2002 on the basis that the offering in which they participated was a private offering and, therefore, the
transaction was exempt from the registration requirements of the Securities Act of 1933, as amended and the Utah
Securities Act.  A hearing and oral argument on the motion to dismiss is scheduled for May 2003. We estimate the motion
will be ruled on by the court within two weeks of the hearing.

We are not a party to any other material legal proceedings.

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

None.

**PART II**

**ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**

There currently is no public trading market for our common stock.  We intend to have a public trading market for our
securities in 2003 traded in the over-the-counter market and quoted on the OTC Bulletin Board.

As of April 11, 2003, there were approximately 2,810,535 shares of common stock issued and outstanding.

**Our Dividend Policy**

We anticipate that for the foreseeable future, earnings will be retained for the development of our business. Accordingly,
we do not anticipate paying dividends on the common stock in the foreseeable future. The payment of future dividends will
be at the sole discretion of our board of directors and will depend on our general business condition.

**Recent Sales of Unregistered Securities**

In the past three years, we issued and sold securities not registered under the Securities Act of 1933, as amended, as
follows:

(1) In connection with our founding, we issued and sold to our founders Merlin Baker, Gene Harkins, Gaylord Karren,
John Hopkins and Jim Stone 1,242,535 shares of our common stock for nominal consideration totaling approximately $116
in cash in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.

(2) In connection with our founding, we issued and sold to Red Rock Capital Consulting, 116,666 shares of our common
stock for a total of $100 in cash in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities
Act of 1933.

(3) In October 2000, we issued and sold to thirteen individuals, 400,000 shares of our common stock for a total of
$350,000 in cash in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.

(4) Between June and August 2001, we issued and sold to EOWORP, a limited liability company, owned by James Stone,
Gaylord Karren and John Hopkins, 100,200 shares of our common stock for a total of $100,200 in cash in reliance upon an
exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.

(5) In May 2001, we issued and sold to Robert Warwick, an individual, accredited investor, 25,000 shares of our common
stock for a total of $25,000 in cash in reliance upon an exemption from registration pursuant to Section 4(2) of the
Securities Act of 1933.

(6) Between June and August 2001, we issued and sold to Kirby D. Cochran, an accredited investor and one of our
directors 100,200 shares of our common stock for a total of $100,200 in cash in reliance upon an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933.

(7)  In December 2001, we issued a convertible promissory note in the principal amount of $211,000 to Castle Arch Bridge
Fund, L.L.C., in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.  The
note bears interest at 12% per annum and matures on June 3, 2002.  At any time, the lender may elect to convert the note
into a number of shares of our common stock determined by dividing the outstanding principal and interest on the note by
$1.00.  In the event we fail to meet our obligations under the convertible promissory note, the unpaid principal amount shall
immediately and without notice bear interest at the per annum rate of 5% in addition to the underlying 12% interest rate.
We have received written approval of the holder of the convertible promissory note, to extend principal repayment in
exchange for our issuance and sale of an additional 52,750 shares of our common stock at the price of $0.01 per share.

(8)   In May 2002, we issued and sold to Castle Arch Bridge Fund, L.L.C., pursuant to its exercise of stock purchase
warrants, 211,000 shares of our common stock for an aggregate price of $211 in cash in reliance upon an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933.

(9)  In June 2002, we issued a convertible promissory note in the principal amount of $29,214 to Castle Arch Bridge Fund,
L.L.C., in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.  The note
bears interest at 12% per annum and matures on December 17, 2002.  At any time, the lender may elect to convert the note
into that number of shares of our common stock determined by dividing the outstanding principal and interest on the note
by $1.00.  In the event we fail to meet our obligations under the convertible promissory note, the unpaid principal amount
shall immediately and without notice bear interest at the per annum rate of 5% in addition to the underlying 12% interest
rate.

(10) In correlation with the June 2002 convertible promissory note issued to Castle Arch Bridge Fund, L.L.C., we issued
stock purchase warrants allowing the lender to purchase 50,000 shares of our common stock at an exercise price of $0.50
per share. The warrants expire in June 2007.

(11)  In June 2002, we issued a convertible promissory note in the principal amount of $53,000 to Charles and Donna
Bergh in reliance upon an exemption from registration pursuant to Section 4(2) of the Securities Act of 1933.  The note
bears interest at 12% per annum and matures on December 17, 2002.  At any time, the lender may elect to convert the note
into that number of shares of our common stock determined by dividing the outstanding principal and interest on the note
by $1.00.  In correlation with the convertible promissory note, we issued stock purchase warrants allowing the lender to
purchase 100,000 shares of our common stock at an exercise price of $0.50 per share.

All the above securities issued to Castle Arch Bridge Fund, L.L.C., and Charles and Donna Bergh pursuant to Section 4(2)
of the Securities Act of 1933 were offered and sold in reliance on the exemption provided by Section 4(2) thereunder and
an appropriate legend was placed on the common stock and will be placed on shares issuable on conversion of each
convertible note unless registered under the Securities Act of 1933 prior to issuance. These notes were sold after this
registration statement was filed with the SEC, but prior to it being deemed effective.  There is a presumption that securities
sold during this interim period are not exempt transactions and therefore constitute the sale of an unregistered security not
subject to an exemption. However, this presumption may be rebutted.  We believe that the issuance of these notes to be
private transactions not involving any public offering and therefore exempt transactions under Section 4(2) of the Securities
Act of 1933.  Our belief is based on several factors.  First, Castle Arch Bridge Fund, L.L.C. and the Berghs are "accredited"
investors.  Second, as part owners of the Castle Arch Bridge Fund, the Berghs, along with Castle Arch Bridge Fund, had an
investment interest in us several months prior to the filing of our registration statement.  The June 2002 financing was a
follow-on financing from the parties' previous financing. Third, the two convertible promissory notes constitute only two
transactions by a very limited number of investors. Despite our belief to the contrary, in the event the issuance of these
securities are deemed non-exempt transactions, we may be subject to liability under Sections 5 and 12 of the Securities Act
of 1933, as amended, which would result in very negative potential impact on us. (See, the section entitled "Risk Factors").

**ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**

**Plan of Operations:**

We are a provider of sanitizing products that are free of toxins and harmful residues associated with traditional
chemically based disinfecting and cleaning agents.  Our products are intended to replace many of the traditional methods
used in commercial and industrial disinfecting and cleaning.  Our products also have many consumer household
applications. Our products have been tested in laboratories and also used in commercial applications.  The products will
range from carpet cleaning agents to products used for the sanitation of agricultural products, red meats and poultry.

**Results Of Operations**

(a)     Years Ended December 31, 2002 and December 31, 2001.

Revenues for the year ended December 31, 2002 decreased by $12,282 or 9.9% to $112,061 compared to revenues of
$124,343 for the Year ended December 31, 2001. The decrease in revenues was due to a relative decrease in generator sales
to carpet cleaning businesses, especially in the first quarter of 2002.  Generator sales to carpet cleaning businesses
improved in the second three-month period of 2002 compared to the first three-month period of 2002 and should remain
constant or increase in the coming 12 months.  In addition, we expect revenues from the sale of disinfectant products to
commence in the next 12 months.  The disinfectant products are being developed with the intention to target businesses in
the meat industry that require chemicals to disinfect their meat products and processing facilities.  Currently we have no
products or packaging designs.  A failure to develop products, bring them to market or obtain market acceptance will
negatively affect our revenue related projections.

Cost of sales decreased by $18,069 or 25.9% to $51,446 for the Year ended December 31, 2002 compared to cost of sales
of $69,515 for the Year ended December 31, 2001. The decrease in cost of sales was a result of decreased generator sales in
the Year ended December 31, 2002 compared to the comparative 2001 period. In addition, shares in the year ended
December 31, 2002 were strictly sales of our P-5000 models which are high margin units.

Research and development expenses for the Year ended December 31, 2002 were $162,251, an increase of $126,585 or
354.9% from expenses of $35,666 for the Year ended December 31, 2001.  The marked increase in research and
development expenses was due to internal development of electrolysis generator technology to be implemented in our
P-7000 generator. We expect relatively higher research and development expenses to continue in 2003 due to our internal
technology development efforts.

Sales and marketing expenses for the Year ended December 31, 2002 were $600, a decrease of $5,696 or 89.4% from sales
and marketing expenses of $5,696 for the Year ended December 31, 2001.  In 2003 we anticipate increased marketing
effort with more trade show activity and increased travel expenditure in future months.  This trend is expected to continue.

General and administrative costs were $189,383 for the Year ended December 31, 2002, a decrease of $17,3261 or 8.3%,
as compared to $206,644 for the Year ended December 31, 2001. This is primarily due to our former president Brian
Warren's salary of nearly $12,000 per month which was paid monthly during the Year ended December 31, 2001, but was
not paid in the Year ended December 31, 2002.

Interest and other expense net was $229,476 for the Year ended December 31, 2002, an increase of $106,752 or 87%, as
compared to $122,724 for the Year ended December 31, 2001. The increase was primarily due to interest, fees and
amortization of debt discount related to convertible promissory notes issued by Castle Arch Bridge Fund, L.L.C. in
December 2001 and June 2002 and Charles and Donna Bergh in June 2002. Interest for six months to June 1, 2002 was
paid upon the execution of the notes. Interest expenses related to the December 2001 convertible promissory note
re-commenced in June 2002 and will continue until such time as the note is repaid or converted to equity. Interest expenses
related to the June 2002 convertible promissory notes re-commenced in December 2002 and will continue until such time
as the note is repaid or converted to equity. All remaining debt discount associated with the notes has been fully amortized
in 2002.

Our net loss for the Year ended December 31, 2002 increased by $264,345, or 64.5%, to a net loss of ($673,925) from a
net loss of ($409,580) in the comparable Year ended December 31, 2001. The increased loss is the result of fewer sales,
increased research and development expenses, and financing costs during the Year ended December 31, 2002.

**Liquidity And Capital Resources**.

At December 31, 2002, we had cash and cash equivalents of $29,432, a decrease of $75,898 from $105,330 in cash on
hand at December 31, 2001.  We have continuing operating losses of $673,925 through the year ended December 31, 2002,
in addition to a net loss of $409,580 for the year ended December 31, 2001. We are currently attempting to raise
$2,000,000 through a registered offering of 1,000,000 shares of our common stock.  In the event the offering is sold and in
order to continue operations beyond the next twelve months, additional funding may be required. In addition, we will
require additional funding to finance growth and achieve our strategic objectives. Management is actively pursuing
additional sources of funding. In addition, management is also looking to increases in cash flows through increases in
revenue.

We received a series of financings in both December 2001 and June 2002, the net proceeds of which totaled $187,790 and
$118,720, respectively.  The December 2001 and June 2002 financings along with anticipated revenues are sufficient to
carry us through the first 3 months of 2003.  We will need to complete additional financings in 2003 in order to continue
operations. As stated above we need additional cash to support our investment in our business. If we do not raise sufficient
funds, we also 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 may include the issuance of
equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, inability to establish a public
market for our common stock, or once we have a market for our common stock, a subsequent decline in the trading price of
our common stock and the downturn in the U.S. stock and debt markets could make it more difficult for us to obtain
financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that
we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected
cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities,
stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of our common stock.

**ITEM 7. FINANCIAL STATEMENTS**

****Our consolidated financial statements and the independent auditors' report appear on pages F-1 through F-13 of this Report
and are incorporated into this Item 7 by reference.

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

None.

**PART III**

**ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT**

**Directors and Executive Officers**

The following table sets forth the names, age, and position of each of our directors and executive officers. Our bylaws
require at least five directors. We intend to hold a shareholder meeting in 2003 where we plan to have an additional three
directors added to our board of directors by vote of the shareholders.  We anticipate that shareholders of record one month
prior to meeting will have an opportunity to vote in the election of these directors.

|**Name and Address** | **Age** | **Position and Office Held**
|-------------------- | ------- | ----------------------------

|Gaylord Karren 

1464 W. 40 S. Suite #100

Lindon, UT 84042-1629 | 54 | President, Secretary Chief Executive
Officer, Chief Financial Officer, Chief
Accounting Officer, Chairman Of The
Board Of Directors
|---------------------------------------------------------------- | -- | -----------------------------------------------------------------------------------------------------------------------------------

|Gene Harkins

3760 S. Highland Dr. #500

Salt Lake City, UT 84106 | 53 | Chief Technology Officer, Director
|----------------------------------------------------------------- | -- | ----------------------------------

Gene Harkins and Gaylord Karren became officers and directors in connection with our organization in March 2000.  The
term of office of each officer and director is one year or until his successor is elected and qualified.

**Biographical Information**

Set forth below is biographical information for each officer and director.  No person other than officers and directors will
currently perform any of our management functions.

**Gene Harkins**

Gene Harkins is one of our co-founders, directors and our former president.  He is the founder of Mizutek International,
a water purification marketing company.  For the past five years, Mr. Harkins has been developing electrolyzed water
technology and applications and marketing water purification electrolyzing and purification machines. Mr. Harkins holds a
bachelors of science, master's degree and doctor of naturopathic studies from the Clayton College of Natural Health in
Birmingham, Alabama.

**Gaylord Karren**

Gaylord Karren is one of our co-founders, chairman of our board and our chief executive officer.  Prior to founding us,
Mr. Karren co-founded and managed Venturi Technologies, Inc., which up until the time of his resignation in February
2000, was the nation's largest independent and only publicly traded carpet cleaning company.  He was chairman and chief
executive officer of Venturi and its predecessors in interest from 1992 through February 2000.  Mr. Karren holds a bachelor
of science degree from Brigham Young University in finance and banking.

**Section 16(a) Beneficial Ownership Reporting Compliance**

****Section 16(a) of the Securities Exchange Act of 1934, as amended, and the regulations of the Securities and Exchange
Commission promulgated thereunder, require our directors, executive officers and persons who own more than 10% of a
registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and
Exchange Commission, and provide us with copies of such reports.  Based solely on a review of the copies of the reports
furnished to us, or written representations that no reports were required to be filed, we believe that during the fiscal year
ended December 31, 2002 all Section 16(a) filing requirements applicable to our directors, officers, and greater than 10%
beneficial owners were complied with.

**ITEM 10. EXECUTIVE COMPENSATION**

**Executive Compensation**

The following table sets forth all compensation awarded, earned or paid for services rendered in all capacities to us during
fiscal years 2000, 2001 and 2002 to:

* Each person who served as our chief executive officer during 2002

* Executive officers whose total annual salary and bonus in 2002 exceeded $100,000.

* Each director who received consulting fees from us during 2002.

**Summary Compensation Table**

|                                                                                                                                                                  |                  | **Annual Compensation (1)** | **Long Term
Compensation (1)**
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | --------------------------- | ------------------------------
|**Name and Principal
Position**                                                                                                                                   | **Year**         | **Salary ($) (4)**          | **Bonus ($)**                 
|Gaylord Karren

Vice president and
president, secretary,
chief executive officer,
chief financial officer,
chief accounting officer
and chairman of the
board (2) | 2002

2001

2000 | 78,405

19,250

30,000      | ---

--

---                  
|Gene Harkins

Chief technology
officer and director (3)                                                                                                           | 2002

2001

2000 | 2,000

11,250

30,000       | ---

--

---                  

(1) Amounts for fiscal years 2002, 2001 and 2000 reflect compensation awarded, earned or paid for services rendered in
all capacities to us.  $3,518 of the total compensation amounts disclosed above has not yet been paid. The deferred amounts
will be paid to the respective officers and directors at a future time.

(2) Mr. Karren served as one of our vice presidents from March 2000 until his resignation in October 2000, and currently
serves as our president, secretary, chief executive officer, chief financial officer, chief accounting officer and chairman of
the board.

(3) Mr. Harkins served as our president from May 2000 through his resignation in October 2000 Mr. Harkins currently
serves as our chief technology officer and has served as director since March 2000.

(4) All payments to Gaylord Karren and Gene Harkins booked as consulting fees.

**Significant Employees**

Except for our officers and directors, we have no significant employees.

**Option Grants**

We did not grant any options to our executive officers in the fiscal year ended December 31, 2002.

**Option Exercises and Year-End Option Values**

None of our executive officers held any options as of December 31, 2002.

**Employment Agreements**

None.

**ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**

The following table presents information about the beneficial ownership of our common stock as of April 11, 2003 by:

* each person or entity who is known by us to own beneficially more than 5% of the outstanding shares of our common
stock;

* each of our directors;

* each of our named executive officers;

* each of the persons who served as our chief executive officer during our fiscal year ended December 31, 2002; and

* all directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities, subject to community property laws, where applicable.  The
percentage of beneficial ownership is based on 2,810,535 shares of common stock outstanding as of April 11, 2003.

|**Name and Address of Beneficial
Owner**                                                          | **Number of Shares** **Beneficially
Owned** | **Percentage of Shares** **Outstanding (1)**
|------------------------------------------------------------------------------------------------- | ------------------------------------------- | --------------------------------------------
|Merlin Oakey Baker Family Living
Trust (2) 

3760 S. Highland Dr. #500

Salt Lake City, UT 84106  | 150,659                                     | 5.36%                                       
|Marian Johnson Baker Family Living
Trust (3)

3760 S. Highland Dr. #500

Salt Lake City, UT 87106 | 156,808                                     | 5.58%                                       
|Kirby D. Cochran  (4)

692 E. 1780 N.

Orem, UT 84097                                             | 407,467                                     | 14.50%                                      
|EOWORP, LLC (5)(6)(7)

2802 Flagstone

Garland, TX 75044                                          | 878,974                                     | 31.27%                                      
|Gene Harkins (8)

3760 S. Highland Dr. #500

Salt Lake City, UT 84106                             | 307,467                                     | 10.94%                                      
|All current directors and executive
officers as a group (4 persons)                               | 1,901,375                                   | 67.65%                                      

(1) Does not contemplate the purchase of shares offered herein.

(2) Merlin O. Baker, our former secretary and former director, has beneficial ownership of the Merlin Oakey Baker
Family Living Trust

(3) Merlin O. Baker, our former secretary and former director, has beneficial ownership of the Marian Johnson Baker
Family Living Trust

(4) Mr. Cochran a former member of our board of directors owns more than 5% of our common stock.

(5) Gaylord Karren our president, secretary, chief executive officer, chief financial officer, chief accounting officer and
chairman of the board owns 2.5% of EOWORP, LLC.

(6) John Hopkins a former member of our board of directors and former vice president owns 2.5% of EOWORP, LLC.

(7) Jim Stone, 1464 W. 40 S. Suite #300, Lindon UT 84042-1629 owns 95% of EOWORP, LLC.

(8) Gene Harkins is our chief technical officer and a member of our board of directors.

We are not aware of any arrangements that at a latter date may result in a change in our control.

**ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**

The following are certain transactions involving our officers, directors and shareholders owning more than 10% of our
outstanding stock. We believe that the terms of these transactions are at least as favorable to us as we would expect to
negotiate with unrelated third parties.

**Management and Consulting Fees**

****Between our founding in March 2000 and December 31, 2001, we paid management and legal fees totaling $201,550, as
follows: $49,250 to Gaylord Karren, and $41,250 to Gene Harkins, Merlin Baker, and John Hopkins, respectively.  Messrs.
Karren, Harkins, Baker and Hopkins are our shareholders and former or current officers and directors.  The management
and consulting fees were for services rendered to us in lieu of wages.  In addition to the amounts already paid and amounts
outstanding, additional fees are currently accruing in 2002.  We expect such management and legal fees to continue in the
foreseeable future.  In addition to consulting fees, we paid approximately $115,000 in total salary to Brian Warren who
served as our president from October 2000 to November 2001.

**Sale of Products to Affiliates of Shareholders**

In each of the past two years, we have made revenues from generator sales to carpet cleaning entities owned by certain of
our shareholders and former officers. During 2002, we made a gross profit of $30,138 on $50,000 in revenues from
generator sales to affiliates of our shareholders. During 2001, we made a gross profit of $23,410 on $61,388 in revenues
from generator sales to affiliates of our shareholders. These sales to affiliates of our shareholders constituted almost half of
our gross profits in 2001.

**Purchase of Products from Affiliates of Shareholders**

In 2000, we purchased generators for resale from Mizutek International, an entity owned by Gene Harkins, a founder,
shareholder, director and chief technical officer.  The amounts paid to Mizutek International for the generators totaled
$116,002.****We have not purchased any generators from Mr. Harkins since early 2000 and do not expect to purchase other
generators from Mr. Harkins in the future.

**Funding of Affiliate Entities**

Between our founding in March 2000 and December 31, 2001, we****funded some of the operating expenses of H2O
AquaCare Franchising Systems, Inc. Gaylord Karren, one of our officers and directors owns 1.4% of the common stock of
H2O AquaCare Franchising Systems, Inc., and Kirby D. Cochran, a beneficial owner of over 10% of our common stock,
owns 7.8% of the common stock of H2O AquaCare Franchising Systems.  We anticipate that H2O AquaCare Franchising
Systems, Inc. will purchase generators from us for use in its carpet cleaning businesses.  Currently, H2O AquaCare
Franchising Systems, Inc. owes us a net total of $70,635.

**Financing**

In December 2001, we obtained bridge loan funding from an affiliate of Kirby D. Cochran, who is a beneficial owner of
over 10% of our common stock.  The bridge loan was $211,000 bearing interest at 12.00% per annum, and due on June 3,
2002.  In conjunction with the funding, we issued stock purchase warrants as an inducement to obtaining the loan.  The
stock purchase warrants were exercised in May 2002 resulting in the purchase of 211,000 shares of our common stock for
$211.00.  We prepaid interest of $12,660 to the lender, which was deducted from the loan proceeds. Loan origination fees
were also paid out of loan proceeds. We have received written approval of the holder of the convertible promissory note, to
extend principal repayment in exchange for our issuance and sale of an additional 52,750 shares of our common stock at the
price of $0.01 per share.  The loan is convertible, in the sole discretion of the lender, into 211,000 shares of our common
stock at a conversion price of $1.00 per share.  Conversion of the debt into common stock will transpire immediately upon
written demand by the lender.

In June 2002, the same affiliate of Kirby D. Cochran lent us $29,214 at nearly identical terms to the December 2001 loan,
including 12% annual interest rate and 6 month term.  In correlation with the convertible promissory note, we issued stock
purchase warrants allowing the lender to purchase 50,000 shares of our common stock at an exercise price of $0.50 per
share.

**ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K**

(a)(1) Financial Statements

The following financial statements are incorporated by reference in Item 7 of this Report:

****

|                                                                                    | Page
|----------------------------------------------------------------------------------- | ----
|Independent Auditors' Report                                                        | F-1 
|Balance Sheets, December 31, 2002 and 2001                                          | F-2 
|Statements of Operations for years ended December 31,
2002 and 2001                 | F-3 
|Statements of Changes of Stockholder Equity for years
ended December, 2002 and 2001 | F-4 
|Statements of Cash Flow for years ended December, 2002
and 2001                     | F-5 
|Notes to Financial Statements                                                       | F-6 

(a)(2) Exhibits

|**Exhibit No.** | **Identification of Exhibit**                               
|--------------- | ------------------------------------------------------------
|1.1****         | Form of Underwriting Agreement                              
|1.3***          | Form of Selling Agreement                                   
|3.1**           | Articles of Incorporation                                   
|3.2**           | Certificate of Amendment of Certificate of Incorporation    
|3.3*            | Bylaws                                                      
|4.1****         | Form of Underwriter's Warrant with Nexcore Capital, Inc.    
|5.1**           | Opinion on Legality of Shares                               
|10.1**          | Gaylord Karren Consulting Contract                          
|10.2**          | Exclusivity Agreement                                       
|10.3**          | Convertible Promissory Note Dated December 2001--Castle
Arch
|10.4**          | Convertible Promissory Note Dated June 2002--Castle Arch    
|10.5**          | Convertible Promissory Note Dated June 2002--Bergh          
|24.1****        | Consent of Child & Co.                                      
|24.2**          | Consent of Counsel to Issuer (included in Exhibit 5)        
|99.1**          | Subscription Agreement                                      
|99.2***         | Proceeds Escrow Agreement                                   

* Filed as an exhibit to the registration statement on Form SB-2 filed with the Securities and Exchange Commission on
April 24, 2002.

** Filed as an exhibit to the registration statement on Form SB-2 filed with the Securities and Exchange Commission on
July 29, 2002.

*** Filed as an exhibit to the registration statement on Form SB-2 filed with the Securities and Exchange Commission on
January 8, 2003.

**** Filed as an exhibit to the registration statement on Form SB-2 filed with the Securities and Exchange Commission on
February 12, 2003.

(b)      Reports on Form 8-K

none.

**ITEM 14. CONTROLS AND PROCEDURES**

Gaylord Karren (the Company's principal executive officer and principal financial and accounting officer) has concluded,
based on his evaluation as of a date within 90 days prior to the date of the filing of this report, that the Company's
disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports filed or
submitted by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and include controls and procedures designed to ensure that
information required to be disclosed in such reports is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in the Company's internal controls or in other factors that could significantly affect these
controls subsequent to the date of such evaluation.

**SIGNATURES**

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on April 14, 2003.

**Electric Aquagenics Unlimited, Inc.**:

By:  /s/ Gaylord Karren

_______________________

**Gaylord Karren**

President, chief executive officer, principal financial officer, principal accounting officer, secretary, chairman of the board
of directors



In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date stated.

/s/ Gaylord Karren

_______________________

**Gaylord Karren**

President, chief executive officer, principal financial officer, principal accounting officer, secretary, chairman of the board
of directors

Date: 4/14/03

/s/ Gene Harkins

________________________

**Gene Harkins**

Director, chief technology officer

Date: 4/14/03**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO** **SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002**

In connection with the filing of this Form 10-KSB as filed with the  Securities and Exchange  Commission on the date
hereof (the "Report"),  the undersigned certifies, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002, that to the best knowledge of the undersigned:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material respects, the financial condition and result of
operations of the Company.

Date: April 14, 2003                                          By: /s/ Gaylord Karren

_____________________

Gaylord Karren , Chief Executive Officer, Chief Financial Officer

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002***

I, Gaylord Karren, certify that:

1. I have reviewed this annual report on Form 10-KSB of Electric Aquagenics Unlimited, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for,
the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes
in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: April 14, 2003.

/s/ Gaylord Karren

______________________

Gaylord Karren

President, chief executive officer,

principal financial officer, principal

accounting officer, secretary,

chairman of the board of directors

* Provide a separate certification for each principal executive officer and principal financial officer of the registrant. See
Rules 13a-14 and 15d-14. The required certification must be in the exact form set forth above.

__________________________________________________________________________________________________

**ELECTRIC AQUAGENICS UNLIMITED, INC.**

**Audited Financial Statements**

**December 31, 2002 and 2001**

**_________________________________________________________________________________________________**

**Electric  Aquagenics  Unlimited, Inc.**

**Financial Statements**

December 31, 2002

**Contents**

|Accountant's  Report                                    | 1
|------------------------------------------------------- | -
|Financial Statements                                    |  
|Balance Sheet                                           | 2
|Statements of Operations                                | 3
|Statements of Changes in Stockholders' Equity (deficit) | 4
|Statements of Cash Flows                                | 5
|Notes to Financial Statements                           | 6

_______________________________________________________________________________________________

Independent Accountants' Report

Board of Directors and Stockholders

Electric Aquagenics  Unlimited, Inc.

We have audited the balance sheet of Electric Aquagenics Unlimited, Inc. as of December 31, 2002, and the related
statements of operations, changes in stockholders' equity (deficit) and cash flows for the years ended December 31, 2002
and 2001.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Electric Aquagenics Unlimited, Inc. as of December 31, 2002, and the results of its operations and its cash flows for the
years ended December 31, 2002 and 2001, in conformity with accounting principles generally accepted in the United States
of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 7 to the financial statements, the Company has suffered significant net losses and accumulated
deficits in stockholders' equity since inception.  These factors raise substantial doubt about the Company's ability to meet
its obligations and to continue as a going concern. Management's plans in regard to these matters are described in Note 7.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Child, Sullivan & Company

Child, Sullivan & Company

Kaysville, Utah

March 19, 2003

-1-

______________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Balance Sheet**

**December 31, 2002**

|**ASSETS**                                                                                                       |            
|---------------------------------------------------------------------------------------------------------------- | -----------
|Current assets:                                                                                                  |            
|Cash                                                                                                             | $ 29,432   
|Accounts receivable                                                                                              | 25,000     
|Accounts receivable-related parties -(note 3)                                                                    | 120,635    
|Inventories                                                                                                      | 158,583    
|                                                                                                                 | _________  
|Total current assets                                                                                             | 333,650    
|Fixed assets:                                                                                                    |            
|Computers                                                                                                        | 18,944     
|Furniture & fixtures                                                                                             | 1,390      
|Machinery & equipment                                                                                            | 1,372      
|                                                                                                                 | _________  
|Total fixed assets                                                                                               | 21,706     
|Less accumulated depreciation                                                                                    | (15,480)   
|                                                                                                                 | _________  
|Net fixed assets                                                                                                 | 6,226      
|Other assets:                                                                                                    |            
|Deposits                                                                                                         | 2,052      
|                                                                                                                 | _________  
|Total other assets                                                                                               | 2,052      
|                                                                                                                 | _________  
|Total assets                                                                                                     | $ 341,928  
|                                                                                                                 | ========   
|**LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)**                                                               |            
|Current liabilities:                                                                                             |            
|Accounts payable and accrued expenses                                                                            | $ 104,927  
|Accounts payable-related parties - (note 3)                                                                      | 10,644     
|Accrued interest - related party loans - (note 3)                                                                | 34,097     
|Short-term notes - (note 4)                                                                                      | 45,700     
|Short-term notes-related parties - (notes 3 & 4)                                                                 | 26,200     
|Convertible bridge loan-related parties - (notes 3 & 4)                                                          | 236,000    
|Convertible bridge loan-other - (note 4)                                                                         | 50,000     
|Current portion of long-term debt - (note 4)                                                                     | 4,704      
|                                                                                                                 | _________  
|Total current liabilities                                                                                        | 512,272    
|Long-term debt:                                                                                                  |            
|Notes payable-less current portion - (note 4)                                                                    | 140,100    
|Stockholders equity (deficit) - (note 5):                                                                        |            
|Common stock, par value $ .0001 per share; 50,000,000
authorized shares; 2,810,535 shares issued and outstanding | 281        
|Additional paid in capital                                                                                       | 1,019,930  
|Accumulated deficit                                                                                              | (1,330,655)
|                                                                                                                 | _________  
|Total stockholders' equity (deficit)                                                                             | (310,444)  
|                                                                                                                 | _________  
|Total liabilities and stockholders' equity (deficit)                                                             | $ 341,928  
|                                                                                                                 | ========   

See notes to financial statements.

-2-

_______________________________________________________________________________________________

**Electric  Aquagenics Unlimited, Inc.**

**Statements of Operations**

****Years ended December 31,******
**2002**
**2001****Revenues**Regular sales
72,000
62,955Sales to affiliates and shareholders, net
of returns and discounts of $9,939 in
2002 and $5,060 in 2001 - note 3
40,061
61,388_________
_________Total sales
112,061
124,343Cost of goods sold
(51,446)
(69,515)_________
_________**Gross Profit**
60,615
54,828**Other Expenses**Other general and administrative
189,382
206,644Advertising
600
5,696Management, legal and consulting fees
paid to affiliates or shareholders - note
3
118,713
86,550Research and development
162,251
35,666Depreciation
6,618
6,128Rent-related party
27,500
1,000_________
_________Total other expenses
505,064
341,684_________
_________Net operating loss
(444,449)
(286,856)Other income (expense)Interest - related party - note 3
(162,533)
(122,724)Interest- other - notes 4 and 5
(66,943)
-_________
_________Net loss before income taxes
(673,925)
(409,580)Income tax (expense) benefit
-
-_________
_________$ (673,925)
$ (409,580)========
========Net loss per share
$ (.24)
$ (.16)========
========Weighted average shares outstanding
2,772,618
2,505,618========
========See notes to financial statements.

-3-

_________________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Statements of Changes in Stockholders' Equity (Deficit)**

****

**Common Stock**
**Additional Paid
in Capital**
**Accumulated
deficit**
**Total****Shares**
**Amount**Balance at January
1, 2001
2,374,135
$ 237
$ 499,863
$  (247,150)
$ 252,950Common stock
issued for cash
225,400
23
225,377
-
225,400Detachable
warrants issued for
bridge loan-related
party
-
-
105,500
-
105,500Issuance of debt
with beneficial
conversion
feature-related
party
-
-
105,000
-
105,000Net loss
-
-
-
(409,580)
(409,580)_________
_________
_________
_________
_________Balance at
December 31,
2001
2,599,535
260
935,740
(656,730)
279,270Exercise of
Common Stock
warrants
211,000
21
190
-
211Detachable
warrants issued for
bridge loan-related
party
-
-
14,000
-
14,000Detachable
warrants issued
with convertible
debt
-
-
28,000
-
28,000Issuance of debt
with beneficial
conversion
feature-related
party
-
-
14,000
-
14,000Issuance of debt
with beneficial
conversion feature
-
-
28,000
-
28,000Net loss -
December 31,
2002
-
-
-
(673,925)
(673,925)_________
_________
_________
_________
_________Balance at
December 31,
2002
2,810,535
$ 281
$ 1,019,930
$ (1,330,655)
$ (310,444)========
========
========
========
========See notes to financial statements.

-4-

_____________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Statements of Cash Flows**

****Years ended******
**December 31,**
**December 31,******
**2002**
**2001****Operating activities**Net loss
$ (673,925)
$ (409,580)Adjustments to reconcile net loss to net
cash provided by operating activities:Depreciation
6,618
6,128Allowance for doubtful accounts
-
(1,000)Amortization of debt discount (interest)
184,436
122,724Changes in operating assets and
liabilities:Accounts receivable
(25,000)
14,884Accounts receivable-related parties
(51,961)
(54,249)Inventories
51,446
(33,965)Prepaid rent
19,000
(19,000)Accounts payable and accrued
expenses
81,225
10,098Accounts payable- related parties
7,126
(4,082)Accrued interest - related party loans
34,097
-_________
_________Net cash used in operating activities
(366,938)
(368,042)**Investing activities**Increase in deposits
(500)
(1,552)Purchase of property, plant and
equipment
(375)
(1,382)_________
_________Net cash used in investing activities
(875)
(2,934)**Financing activities******Proceeds from short-term notes and
convertible loans
95,700
-Proceeds from convertible bridge
loans and short-term notes-related
parties
51,200
198,340Issuance of common stock for cash
211
225,400Proceeds from long-term debt
145,493
-Principle payments on long-term debt
(689)
-_________
_________Net cash provided by financing
activities
291,915
423,740_________
_________Net increase (decrease) in cash
(75,898)
52,764Cash at beginning of period
105,330
52,566_________
_________Cash at end of period
$ 29,432
$ 105,330========
========**Supplemental disclosure of non-cash
financing activities**Detachable warrants issued with
convertible loans
$ 42,000
$ 105,500========
========Issuance of debt with beneficial
conversion feature
$ 42,000
$ 105,000========
========Interest paid in cash
$ 5,311
$ -========
========See notes to financial statements.

-5-

_______________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements**

**December 31, 2002 and 2001**

**1. Significant Accounting Policies**

This summary of significant accounting policies of the Company is presented to assist in understanding the Company's
financial statements.  The financial statements and notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the financial statements.

**Business**

Electric Aquagenics Unlimited, Inc., (the Company) was incorporated on March 6, 2000 under the laws of the state of
Delaware and commenced operations in September, 2000.  On May 10, 2001, the Company changed its name from
Primacide, Inc. to Electric Aquagenics Unlimited, Inc. The Company markets and manufactures purification equipment
using technologies that sanitize and clean surfaces using water electrolysis.  These products are for commercial and
residential use, which the Company intends to market nationally.  The Company is a successor enterprise to another
company, Primacide, LLC, which was founded by certain of the Company's founders in 1998.  The Company was
organized with an insignificant carrying amount of the assets of Primacide, LLC.****

**Accounting Method**

The Company's financial statements are prepared using the accrual method of accounting.

**Inventories**

Inventories consist primarily of finished goods.  Cost is determined principally on the lower of first-in, first-out (FIFO) cost
or market.

**Property and Equipment**

Property, plant and equipment is stated at cost.  Depreciation is computed primarily using the straight-line method based on
estimated useful lives, which range from 5 to 7 years.

**Revenue Recognition**

The Company recognizes revenue from product sales upon receipt and acceptance by the customer, including sales to
affiliates.  The Company does not have any significant remaining obligations after customer has acknowledged receipt and
acceptance.

**Cash and Cash Equivalents**

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.  No cash was expended in 2002 or 2001 for interest or income
taxes.

**Estimates**

The preparation of financial statements in accordance with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts of assets and liabilities, as well as footnote disclosures included
in the financial statements and accompanying notes.  Actual results may differ from those estimates and such differences
may be material to the financial statements.  Estimates that may change significantly in the near term include debt discount
estimates, fair values of financial instruments, and contingencies.

-6-

_________________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements (continued)**

**December 31, 2002 and 2001**

**1.  Significant Accounting Policies (continued)**

**Credit Risk**

The Company's customers may be affected by changing economic conditions. Management believes that its credit review
procedures, and loss reserves (if any) have adequately provided for usual and customary credit-related losses.  The carrying
amount of trade receivables and other receivables approximates fair value.

**Research and Development**

The Company expenses the cost of research and development as incurred.  Research and development costs charged to
operations were $162,251 and $35,666 in 2002 and 2001, respectively.

**Advertising Costs**

The Company generally expenses advertising costs as incurred.  Advertising expenses included in selling expenses were
$600 and $5,696 for the periods ending 2002 and 2001, respectively.

**Earnings Per Share**

The Company adopted Statement of Financial Accounting Standard No. 128, "Earnings per Share" ("SFAS No. 128"),
which is effective for annual periods ending after December 15, 1997. Earnings per share (EPS) are computed based on the
weighted average number of shares actually outstanding.  No changes in the computation of diluted earnings per share
amounts are presented since warrants granted would have been anti-dilutive due to the Company's net reported loss (see
note 4).  Such warrants, totaling 361,000 shares at December 31, 2002 if exercised, could potentially dilute basic EPS in the
future.  In addition, the Company has entered into convertible debt agreements (see note 3) representing other potentially
dilutive securities totaling 286,000 shares, if converted.

December 31,
December 31,2002
2001Weighted average number of commonshares used
2,772,618
2,505,618========
========**Stock-Based Compensation**

The Company will account for employee stock option plans under the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and has adopted the disclosure only
provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123").  The Company accounts for equity instruments issued to non-employees in accordance with the provisions of SFAS
No. 123 and Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments that are Issued to Other than
Employees for Acquiring, or in Conjunction with Selling Goods and Services.

-7-

________________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements (continued)**

**December 31, 2002 and 2001**

**1. Significant Accounting Policies (continued)**

**Income Taxes**

The Company uses the liability approach to financial accounting and reporting for income taxes. The differences between
the financial statement and tax bases of assets and liabilities is determined annually.  Deferred income tax assets and
liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and
rates that apply to the period in which they are expected to affect taxable income.  Valuation allowances are established, if
necessary, to reduce deferred tax asset accounts to the amounts that will more likely than not be realized.  Income tax
expense is the current tax payable or refundable for the period, plus or minus the net change in the deferred tax asset and
liability accounts.

**2. Commitments and Contingencies**

The Company currently rents its facilities from an affiliate on a month-to-month basis for $2,500 per month.  In order to
secure what management felt was a beneficial lease rate, the Company prepaid its lease for the 19 months following
December 31, 2001 at $1,000 per month. Accordingly, prepaid rent (both long and short -term portions) had been recorded
as an asset to be amortized over the term of prepayment.  During 2002, the Company renegotiated the lease, maintaining its
month-to-month status but accelerating the prepaid portion of the lease, thus, fully amortizing the asset and requiring
commencement of the $2,500 per month payments.  Rent expense charged to operations was $27,500 and $1,000 for the
years ended December of 2002 and 2001, respectively.

The Company is a defendant in a lawsuit made by a shareholder demanding return of a $50,000 investment for which he
received shares.  The shareholder contends his investment was intended to be a debt instrument and is entitled to repayment
plus interest, costs and fees.  The Company is contesting the suit and is of the opinion it will prevail.  The Company had
sent a stock certificate evidencing the nature of the investment and filed a motion to dismiss the complaint.  The court has
not yet ruled on that motion.  Management estimates the impact on net losses reported by the Company would be minimal.

The Company has assumed a promissory note totaling $52,500 incurred by a predecessor entity against which an adversary
proceeding was brought by a debtor in bankruptcy.  The predecessor entity claims to have offsets of approximately $47,000
for the sale of equipment and repairs made to assets owned by the debtor, which effectively reduces the amount of liability
assumed.  The Company is attempting to settle for the difference of $5,500, which has been included in accounts payable.

The Company has entered into a licensing and royalty agreement with a university which conducts a substantial part of the
research and development for the Company.  The agreement calls for a one-time license fee payment of $10,000 upon
signing (June 18, 2002) and an additional $20,000 upon the Company's successful completion of a public offering.  Under
the agreement, the Company is also required to pay the greater of 5% of all licensed products sales or certain minimum
royalty payments beginning in year two of the contract up to $10,000 per year. Included in accounts payable is $20,000 due
upon signing, for the remainder of the initial license fee.

-8-

__________________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements (continued)**

**December 31, 2002 and 2001**

**3. Related Party Transactions**

The Company pays management fees to entities owned by shareholders for services rendered to the corporation in lieu of
wages.  During 2002 and 2001, these payments totaled $104,063 and $55,300, respectively, of which $3,518 was still
outstanding at December 31, 2001.

The Company sold products to affiliates or shareholders. Total sales to these entities and cost of sales for the periods ended
December 31, 2002 and 2001 are as follows:

**2002**
**2001**Sales
$ 50,000
$ 61,388Cost of sales
19,862
32,918_________
_________Gross profit
30,138
28,470Less discounts
9,939
5,060_________
_________$ 20,199
$ 23,410========
========Accounts receivable from related parties for product sales were $50,000 and $7,939 for 2002 and 2001, respectively.

The Company paid consulting fees to a shareholder totaling $20,000 during 2001.

The Company also paid legal fees to a shareholder for legal services rendered totaling $14,650 and $11,250 in 2002 and
2001, respectively, of which $10,644 was outstanding at December 31, 2002.

The Company paid $27,500 in rent to an affiliate in 2002 (see note 2), none of which was outstanding at December 31,
2002.

The Company funded some of the operating expenses of H2OAqua-Care Franchising Systems, an affiliated entity whose
future franchisees will be required to purchase product from the Company for use by its carpet cleaning businesses.  As of
December 31, 2001, the Company had financed a total of $60,735, all of which was outstanding at December 31, 2001.  An
additional $9,900 was advanced in 2002, leaving a total of $70,635 due at December 31, 2002.  The advances bear no
interest and are unsecured.

On December 4, 2001, the Company obtained bridge loan funding from an affiliate of a shareholder totaling $211,000,
bearing interest at 12.00% per annum, and due on June 3, 2002 (see note 4).  Additional debt discount related to the note for
detachable stock warrants and beneficial conversion features issued under the bridge loan agreement was recorded (see note
4).  In June 2002, the affiliate provided an additional $25,000 bridge loan funding which was also convertible to common
stock (see note 4).

Total amortization of debt discount charged to related party interest during 2002 arising from the issuance of warrants and
convertible debt with beneficial conversion features (see note 5) was $128,436 and $122,724 for the years ended December
31, 2002 and 2001, respectively.

In addition, the Company obtained an additional $26,200 in short-term financing from an affiliate (see note 4).  Interest
accrued on loans from affiliates totaled $34,097 at December 31, 2002.

-9-

_________________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements (continued)**

**December 31, 2002 and 2001**

**4. Debt Financing**

Short term notes and convertible bridge loans consists of the following at December 31, 2002:Short-term promissory notes to unrelated parties of $10,000
and $35,700, both bearing interest of 10% and due on May
30, 2003 and September 3, 2002, respectively, with no
monthly payments required.  The $10,000 loan is in default
but has been extended to June, 2003.
$ 45,700Short-term promissory note to related parties, bearing
interest of 10% and due September 30, 2002, no monthly
payments required.  The loan is in default but has been
extended to June of 2003.
$  26,200Convertible bridge loan payable to an unrelated individual
bearing interest at 12% and maturing on December 17, 2002
(see note 5).  The note is now due on demand. Substantial
debt discount related to the issuance of warrants with the
loan has been recorded and amortized in full as of
December 31, 2002 (see note 5).
$  50,000Convertible bridge loans payable to related parties, bearing
interest of 12% per annum and due on June 3, 2002 and
December 17, 2002.  The loans require an additional
interest charge of 5% if the loans go into default.  Upon
written approval, the parties may extend repayment in
exchange for the issuance of additional shares of common
stock at purchase prices of $.01 and $.10 per share.  As of
December 31, 2002, the parties to the loans had  agreed to
extend the loans through June 2003 for the purchase of one
block of 52,750 shares.  As of December 31, 2002, the
shares for the extensions had not yet been purchased.
Substantial discounts of debt related to the issuance of
warrants with the loan has been recorded and amortized in
full as of December 31, 2002 (see note 5).
$  236,000Long-term debt consists of two unsecured loans from
unrelated entities bearing interest at 21.927% per annum,
requiring payments of $1,500 per month (each) due October
2012.
$  144,804Less current portion
(4,704)_________$ 140,100Future maturities of long-term debt for the five years succeeding December 31, 2002 are as follows:2003
$ 4,7042004
5,8452005
7,2642006
9,0272007
11,218Thereafter
106,746_________$ 144,804========Management estimates the fair values of debt financing instruments are equal to or less than carrying amounts due to the
terms of their repayment.

-10-

______________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements (continued)**

**December 31, 2002 and 2001**

**5. Stockholders' Equity**

In December 2001, as consideration for making a $211,000 bridge loan, the Company issued 211,000 warrants to an
affiliate of a stockholder for the purchase of common stock at $ .001 per share, exercisable through December 3, 2006.
Because the warrants are detachable, the Company has recorded the fair value of the warrants as bridge loan debt discount
under Accounting Principles Board (APB) #14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase
Warrants."  The discount was amortized over the original life of the loan (six months) resulting in interest expense totaling
$100,436 and $17,724 in 2002 and 2001, respectively.  The loan payment terms were extended as described in note 4.  The
discount offsets the bridge loan payable.  The affiliate exercised the warrant in 2002 resulting in the issuance of 211,000
shares for $211.

In June 2002, the Company issued a convertible bridge loan with a face amount of $25,000 and a principal amount of
$29,214 (including prepaid interest and fees) to an affiliate (see note 4).  At any time, the lender may elect to convert the
note into that number of shares of common stock determined by dividing the outstanding principal and interest on the note
by $1.00.  In correlation with the convertible promissory note, the Company issued stock purchase warrants allowing the
lender to purchase 50,000 shares of common stock at an exercise price of $.50 per share.

In June 2002, the Company issued a convertible bridge loan with a face value of $50,000 and a principal amount of
$53,000 (including prepaid interest and fees) to individuals (see note 4). The note bears interest at 12% per annum and
originally matured on December 17, 2002.  At any time, the lender may elect to convert the note into the number of shares
of common stock determined by dividing the outstanding principal and interest on the note by $1.00.  In correlation with
the convertible promissory note, the Company issued stock purchase warrants allowing the lender to purchase 100,000
shares of common stock at an exercise price of $0.50 per share.

The warrants issued in connection with these loans are also detachable, and accordingly, the Company has recorded debt
discount equal to the value of the warrants granted of $42,000.  The discount is amortized over the life of the loans
resulting in total interest charge to operations of $42,000 for the year ended December 31, 2002.  The convertible loans are
collateralized with shares of Company stock.

The Company calculated the fair value of the warrants on the date of issuance using the Black-Scholes option pricing
model and the following assumptions: weighted average expected option term of 5 years; risk free interest rate of 4.39% at
December 31, 2002, expected dividend yield of zero percent, and an expected volatility of ranging from 160 % to 170% at
December 31, 2002.

The weighted average fair value of warrants granted was $1.00 per share and $.63 per share for the periods ended
December 31, 2001 and December 31, 2002, respectively.  The fair value of warrants results primarily from an extremely
low exercise price and from share prices of recent private placements of the Company's common stock at $1.00 per share.

-11-

____________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements (continued)**

**December 31, 2002 and 2001**

**5. Stockholders' Equity (continued)**

The Black-Scholes model used by the Company to calculate option and warrant values, as well as other currently accepted
option valuation models, were developed to estimate the fair value of freely tradable, fully transferable options without
vesting restrictions, which is significantly different from the Company's stock warrants. These models also require highly
subjective assumptions, including future stock price volatility and expected time until exercise, which greatly affect the
calculated values.  Accordingly, management believes that this model does not necessarily provide a reliable single
measure of the fair value of the Company's stock warrants.

As mentioned above, the convertible debt instruments issued in 2001 and 2002 are convertible to common stock at the rate
of $1.00 per share, using the "pre-discounted" face value of the debt instruments plus accrued interest as the basis for
computing the number of shares to be obtained upon conversion.  The "discounted" face value of the convertible debt
instruments is substantially less than the original face value resulting in beneficial conversion rates ranging from $0.50 per
share to $0.56 per share.  Accordingly, the Company has recorded additional interest of $42,000 during the year ending
December 31, 2002 and $105,000 during the year ended December 31, 2001, in accordance with EITF 98-5 "Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios."

**6. Income Taxes**

Deferred tax assets and liabilities arise from differences in tax and financial statement accounting methods for depreciation
and issuance of stock warrants.  Significant deferred tax assets also arise from net operating loss carryforwards.  Net
operating loss carryforwards for federal income tax     purposes total $1,141,041 at December 31, 2002 and expire 2020
through 2022.  The amount of, and ultimate realization of the benefits from the Company's operating loss carryforwards for
income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined.  Because of the uncertainty surrounding the realization of the loss
carryforwards, the Company has established a valuation allowance equal to tax effect of the loss carryforwards and,
therefore, no deferred tax asset has been recognized for the loss carryforwards.

The significant components of the deferred tax liability (asset) consists of the following:

**2002**
**2001**Depreciation
$ (246)
$ 2,602Debt discount amortization
(16,800)
(7,090)Net operating loss carryforward-tax
(456,416)
(216,204)Valuation allowance
473,462
220,692_________
_________$     -
$ -========
========-12-

_______________________________________________________________________________________________

**Electric Aquagenics Unlimited, Inc.**

**Notes to Financial Statements (continued)**

**December 31, 2002 and 2001**

**6. Income Taxes (continued)**

A reconciliation of income tax expense (benefit) to expected income taxes using statutory federal income tax rates:

**2002**
**2001**Income tax expense
(benefit) at statutory
rate of 35%
$  (235,874)
(35%)
$ (143,353)
(35%)Interest applicable to
beneficial conversion
feature
16,800
2%
42,000
10%State taxes, net of
federal benefit
(33,696)
(5%)
(20,479)
(5%)Change in valuation
allowance
252,770
38%
121,832
30%_________
_________
_________
_________$        -
0%
$ -
0%========
========
========
=========All significant components of net deferred tax liabilities and assets have been classified as long-term based on the
anticipated realization of the underlying assets and settlement of underlying liabilities in accordance with Financial
Accounting Standard 109 "Accounting for Income Taxes."

**Note 7 - Going Concern Considerations**

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles,
which contemplate continuation of the Company as a going concern. However, the Company has incurred losses since its
inception and has not yet been successful in establishing profitable operations. In addition, the Company is experiencing
cumulative deficits in retained earnings and equity.  These factors raise substantial doubt about the ability of the Company
to continue as a going concern.  The Company is currently seeking to break escrow on a substantial private placement of
equity financing, which, together with expected revenue generation and its existing working capital, the potential for
reducing overhead and payments to affiliates for consulting, and restructuring terms of payables (particularly those to
affiliates) is anticipated to be sufficient to meet the Company's projected working capital and cash requirements beyond
December 31, 2003.  However, the Company cannot guarantee that the private placement will close as expected.  In
addition, unanticipated costs and expenses or lower than anticipated revenues could require additional financing. To the
extent financing is not available, the Company may not be able to or may be delayed in being able to commercialize its
products and services. The Company will continue to evaluate its projected expenditures relative to its available cash and to
evaluate additional means of financing in order to satisfy its working capital and other cash requirements. The
accompanying financial statements do not reflect any adjustments that might result from the outcome of these uncertainties.

-13-

_____________________________________________________________________________________________****