February 10, 2006
VIA EDGAR
Mr. Rufus Decker
Accounting Branch Chief
Securities and Exchange Commission
Washington, D.C. 20549-7010
Re: Form 10-KSB for the Year Ended December 31, 2004
Forms 10-QSB for the quarters ended March 31, 2005,
June 30, 2005 and September 30, 2005
File No. 333-86830
Dear Mr. Decker:
This letter sets forth the responses of Electric Aquagenics Unlimited,
Inc. (the "Company") to the comments made in your December 28, 2005 letter. For
your convenience, we have repeated the staff's comments before each of our
responses.
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004
General
1. WHERE A COMMENT BELOW REQUESTS ADDITIONAL DISCLOSURES OR OTHER
REVISIONS TO BE MADE, PLEASE SHOW US IN YOUR SUPPLEMENTAL RESPONSE
WHAT THE REVISIONS WILL LOOK LIKE. WITH THE EXCEPTION OF THE
COMMENTS BELOW THAT SPECIFICALLY REQUEST AN AMENDMENT, ALL OTHER
REVISIONS MAY BE INCLUDED IN YOUR FUTURE FILINGS.
Unless an amendment is specifically requested in your letter, all
revisions requested will be included in the Company's future filings
with the Securities and Exchange Commission (the "SEC"), beginning
with its Report on Form 10-KSB for the year ended December 31, 2005
(the Company's "future filings").
2. THE COVER PAGE TO YOUR FORM 10-KSB STATES THAT YOU HAVE COMMON STOCK
REGISTERED UNDER SECTION 12(G) OF THE SECURITIES EXCHANGE ACT OF
1934. BASED UPON REVIEW OF YOUR FILING HISTORY, IT DOES NOT APPEAR
THAT YOU HAVE FILED A FORM 8-A AND THUS YOU HAVE NOT BEEN ASSIGNED A
FILE NUMBER OF A 1934 ACT REPORTING COMPANY. SINCE YOU HAVE
REGISTERED A CLASS OF SECURITIES UNDER SECTION 12(G), PLEASE FILE
THE REQUIRED FORM 8-A.
Mr. Rufus Decker
February 10, 2006
Page 2
The Company will file the required Form 8-A in the form attached to this
response.
ITEM 5-MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, PAGE 13
3. PLEASE DISCLOSE THE RANGE OF HIGH AND LOW BID INFORMATION FOR YOUR
COMMON STOCK FOR THE LAST TWO FISCAL YEARS. PLEASE ENSURE YOU MEET
ALL DISCLOSURE REQUIREMENTS OF ITEM 201(A)(L)(II) OF REGULATION S-B.
The Company will, in its future filings, disclose the range of high
and low bid information for its common stock for the most recent two
fiscal years, and will include a disclosure substantially as
follows:
Our common stock is traded on the Over-The-Counter Bulletin Board
("OTCBB") under the symbol "EAQU.OB)." Our shares are thinly traded,
with low average daily volume. This, coupled with a limited number
of market makers, impairs the liquidity of our common stock, not
only in the number of shares of common stock that can be bought and
sold, but also through possible delays in the timing of
transactions, and lower prices for our common stock than might
otherwise prevail. This could make it difficult for an investor to
sell shares of our common stock or to obtain a desired price.
Our common stock may be subject to the low-priced security, or so
called "penny stock," rules that impose additional sales practice
requirements on broker-dealers who sell such securities. The
Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure in connection with any trades involving a
stock defined as a "penny stock" (generally defined as, according to
recent regulations adopted by the U.S. Securities and Exchange
Commission, any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions), including the
delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated
therewith. The regulations governing low-priced or penny stocks
sometimes may limit the ability of broker-dealers to sell the
Company's common stock and thus, ultimately, the ability of the
investors to sell their securities in the secondary market. Prices
for the Company's shares will be determined in the marketplace and
may be influenced by many factors, including the depth and liquidity
of the market for the shares, the Company's results of operations,
what investors think of the Company, and general economic and market
conditions. Market fluctuations could have a material adverse impact
on the trading price of our shares.
The table below sets forth the high and low sales price for our
common stock as reported on the OTCBB for the Company's two most
recent fiscal years:
FISCAL YEAR ENDED HIGH LOW
---------------------------------- ------ -----
First Quarter
---------------------------------- ------ -----
Second Quarter
---------------------------------- ------ -----
Third Quarter
---------------------------------- ------ -----
Fourth Quarter
---------------------------------- ------ -----
Mr. Rufus Decker
February 10, 2006
Page 3
FISCAL YEAR ENDED
---------------------------------- ------ -----
First Quarter
---------------------------------- ------ -----
Second Quarter
---------------------------------- ------ -----
Third Quarter
---------------------------------- ------ -----
Fourth Quarter
---------------------------------- ------ -----
As the foregoing are over-the-counter market quotations, they
reflect inter-dealer prices, without retail markup, markdown, or
commissions, and may not represent actual transactions.
4. PLEASE DISCLOSE THE APPROXIMATE NUMBER OF HOLDERS OF RECORD OF YOUR
COMMON STOCK. SEE ITEM 201(B) OF REGULATION S-B.
The Company will, in its future filings, disclose the approximate
number of holders of record of its common stock in accordance with
Item 201(b) of Regulation S-B.
Supplementally, the Company advises the staff that, according to the
Company's transfer agent, as of December 31, 2004 the Company had
approximately 256 record holders of common stock, and as of February
6, 2006 the Company had approximately 448 record holders of common
stock.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, PAGE 13
5. PLEASE IDENTIFY AND DISCLOSE ALL OF YOUR CRITICAL ACCOUNTING
POLICIES AND ESTIMATES THAT ARE CRITICAL TO YOUR CONSOLIDATED
FINANCIAL STATEMENTS. YOUR DISCLOSURE SHOULD INCLUDE A DISCUSSION OF
THE MATERIAL ASSUMPTIONS YOU MADE IN ARRIVING AT THE CRITICAL
ESTIMATE AND TO ALSO ADVISE AN INVESTOR OF THE FINANCIAL STATEMENT
IMPACT IF ACTUAL RESULTS DIFFER FROM THE ESTIMATE MADE BY
MANAGEMENT. SEE THE SEC INTERPRETIVE RELEASE NO. 33-8350 AND SEC
OTHER RELEASE NO. 33-8040, WHICH YOU CAN FIND ON OUR WEBSITE AT
WWW.SEC.GOV.
The Company will, in its future filings, identify and disclose all
of its critical accounting policies and estimates critical to its
consolidated financial statements, in a disclosure substantially as
follows:
CRITICAL ACCOUNTING POLICIES AND ESTIMATES.
Our Management's Discussion and Analysis of Financial Condition and
Results of Operations section discusses our financial statements,
which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation
of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. On an
on-going basis, management evaluates its estimates and judgments,
including those related to revenue recognition, accrued expenses,
financing operations, and contingencies and litigation. Management
bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that
are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions. These accounting policies are described at relevant
sections in this discussion and analysis and in the notes to the
consolidated financial statements included in this report.
Mr. Rufus Decker
February 10, 2006
Page 4
6. PLEASE DISCUSS YOUR PURCHASE OF AQUAGEN INTERNATIONAL, INC. WITHIN
YOUR MD&A, AS THIS ACQUISITION APPEARS TO BE MATERIAL TO YOUR
BUSINESS.
The Company will, in its future filings, discuss its purchase of
Aquagen International, Inc. within the MD&A, by including a
disclosure substantially as follows:
In September 2005, we entered into a joint venture agreement with
Aquagen International, Inc., a Nevada corporation that had been in
business approximately ten years, to develop and market a bottled
drinking water that included Aquagen's proprietary stabilized oxygen
product as a principal ingredient; to develop other consumer
products jointly; and to cross market each other's products.
Aquagen's primary markets for its products at that time were health
food and neutracuetical stores. After operating under this joint
venture arrangement for several months, we determined that
transitioning from a joint venture relationship to our acquiring
Aquagen's assets would be beneficial to Aquagen and to our company.
Consequently, on December 31, 2004, the Company acquired
substantially all of the assets of Aquagen in exchange for
forgiveness of a $75,000 note owed to us by Aquagen, payment of
$125,000 cash, and issuance of 321,049 shares of our common stock to
Aquagen.
RESULTS OF OPERATIONS, PAGE 15
7. YOU DISCLOSE THAT THE DECREASE IN COST OF SALES IS ATTRIBUTABLE TO
THE RE-ALLOCATION OF TRUE INVENTORY COSTS RELATED TO THE PRIMACIDE
GENERATORS IN 2004 AGAINST INVENTORY REPRESENTING OLDER MODELS THAT
HAVE BEEN TECHNOLOGICALLY SUPERSEDED OR MODELS THAT HAVE BEEN USED
AS DEMO'S REQUIRING REPAIR. PLEASE TELL US WHAT YOU CONSIDER TO BE
TRUE INVENTORY COSTS. PLEASE TELL US THE AMOUNTS OF ITEMS THAT HAVE
BEEN RE-ALLOCATED, AND WHAT LINE ITEMS WERE IMPACTED BY THE
RE-ALLOCATION. IN ADDITION, IT IS UNCLEAR AS TO HOW YOU HAVE
ACCOUNTED FOR INVENTORY THAT HAS BEEN TECHNOLOGICALLY SUPERSEDED AND
THE DEMO'S REQUIRING REPAIR. PLEASE CLARIFY.
Our disclosure that the decrease in cost of sales is attributable to
the re-allocation of true inventory costs related to the Primacide
generators in 2004 is not totally accurate. A more accurate
statement would be that the decrease in cost of sales as a
percentage of total revenue is attributable to improved efficiencies
in the manufacture and assembly of equipment. These improved
efficiencies include such items batch processing, bulk purchasing,
better pricing from vendors, and design improvements. These improved
efficiencies have resulted in lower production costs per unit sold.
Mr. Rufus Decker
February 10, 2006
Page 5
8. PLEASE DISCUSS IN GREATER DETAIL THE BUSINESS REASONS FOR THE
CHANGES BETWEEN PERIODS IN GENERAL AND ADMINISTRATIVE EXPENSES. IN
DOING SO, PLEASE DISCLOSE THE AMOUNT OF EACH SIGNIFICANT CHANGE
BETWEEN PERIODS AND THE BUSINESS REASONS FOR IT. IN CIRCUMSTANCES
WHERE THERE IS MORE THAN ONE BUSINESS REASON FOR THE CHANGE, ATTEMPT
TO QUANTIFY THE INCREMENTAL IMPACT OF EACH INDIVIDUAL BUSINESS
REASONS DISCUSSED ON THE OVERALL CHANGE IN THE LINE ITEM. PLEASE
ALSO DISCUSS THE BUSINESS REASONS FOR THE CHANGES BETWEEN PERIODS IN
MARKETING AND PROMOTION EXPENSE, LOSS FROM EQUITY METHOD INVESTEE,
INTEREST EXPENSE AND INCOME, AND OTHER INCOME (EXPENSE). PLEASE SHOW
US WHAT YOUR REVISED MD&A FOR 2004 AS COMPARED TO 2003 WILL LOOK
LIKE. SEE ITEM 303(B) OF REGULATION S-B AND FINANCIAL REPORTING
CODIFICATION 501.04.
The Company will, in future filings, discuss in greater detail the
business reasons for the changes between periods in general and
administrative expenses. In its Annual Report on Form 10-KSB for the
year ended December 31, 2005, the MD&A will include a discussion of
2004 as compared to 2003 that will be substantially as follows:
The Company incurred total General and Administrative expenses of
$3,108,684 in 2004, a 331.1% increase over the $721,069 incurred in
2003. This increase was attributable to several factors. Between
2003 and 2004, the Company went from a company with no employees
that engaged primarily in research and product development to a
company with 30 full time employees, an expanding infrastructure and
growing sales.
In April 2004, the Company's board approved the issuance of a total
of 841,026 shares of common stock to the Company's management as
partial compensation for their efforts in founding and growing the
company during the previous three years. The shares had an estimated
value of approximately $1.50 per share, resulting in the company
incurring a non-recurring compensation expense in 2004 of
$1,261,540.
The Company's public relations expenses increased from zero in 2003
to $144,956 in 2004, primarily related to increased investor
relations expenses and several campaigns during 2004 to heighten
public awareness of the Company's products. The Company's travel and
entertainment expenses increased 175.8%, from $105,785 in 2003 to
$291,793 in 2004, reflecting the extensive travel by company
management and employees to negotiate and close several joint
venture arrangements, to raise capital through private placements of
common stock, and to introduce the Company's products to new
industries located throughout the nation.
The Company's accounting fees nearly doubled, from $54,870 in 2003
to $108,241 in 2004, as a result of the increasing complexity of the
Company's business and the change in independent audit firms during
2004. The Company's rent more than doubled, from $43,569 in 2003 to
$96,151 in 2004, primarily because of the opening during 2004 of a
manufacturing facility in Atlanta, Georgia.
Mr. Rufus Decker
February 10, 2006
Page 6
The Company's insurance expense increased from $6,503 in 2003 to
$85,442 in 2004. The increase in insurance expense is related to
expanding operations and to the fact that, at the request of the
independent directors, in 2004 the Company obtained a policy of
director and officer liability insurance.
LIQUIDITY AND CAPITAL RESOURCES, PAGE 16
9. PLEASE DISCUSS IN YOUR LIQUIDITY SECTION THE CHANGES IN YOUR
OPERATING, INVESTING, AND FINANCING CASH FLOWS AS DEPICTED IN YOUR
STATEMENT OF CASH FLOWS. SEE THE SEC INTERPRETIVE RELEASE NO.
33-8350.
The Company will, in future filings, discuss in the liquidity
section of its MD&A the changes in its operating, investing and
financing cash flows as depicted in its statement of cash flows.
Supplementally, the Company informs the staff that during the year
2004, our net loss of ($3,961,195) was offset by the non-cash
issuance of common stock for services and expenses of approximately
$1,600,000, depreciation of $51,231, and loss from our equity
investee of $107,800. In addition, we continued expanding our
operations and growing our inventory by ($455,516) to be able to
meet future and potential customer demands. As a result, we utilized
($2,680,465) in cash related to our operating activities. Similarly,
we invested approximately ($1,300,000) for the acquisition of
property and equipment to produce our products and for the strategic
investment in related water technology entities to enhance and
complement our products.
ITEM 8A - CONTROLS AND PROCEDURES, PAGE 18
10. PLEASE PERFORM AN EVALUATION OF THE EFFECTIVENESS OF THE DESIGN AND
OPERATION OF YOUR DISCLOSURE CONTROLS AND PROCEDURES AS OF THE END
OF THE PERIOD COVERED BY YOUR REPORT. SEE ITEM 307 OF REGULATION
S-B. PLEASE DISCLOSE YOUR CONCLUSIONS REGARDING YOUR EVALUATION IN
AN AMENDED FORM 10-KSB. PLEASE ALSO AMEND YOUR 2005 FORMS 10-QSB
ACCORDINGLY.
Mr. Gaylord M. Karren, the Company's principal executive officer and
principal financial officer, performed an evaluation of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures as of the end of the periods
covered by the Company's 2004 Annual Report on Form 10-KSB and the
Company's Quarterly reports for the first, second and third quarters
of 2005.
The Company will file an amendment to its Annual Report on Form
10-KSB for the period ended December 31, 2004 that will include the
following disclosure, and a similar disclosure will be included in
an amendment to its Quarterly Reports on Forms 10-QSB for the
periods ended March 31, 2005, June 30, 2005 and September 30, 2005,
and in the Company's future filings:
Mr. Rufus Decker
February 10, 2006
Page 7
ITEM 8A. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Based on his evaluation as of___________, Gaylord M. Karren, the
principal executive officer and principal financial officer of the
Company, has concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act) are effective to ensure that information
required to be disclosed by the Company in reports that the Company
files or submits under the Securities Exchange Act is recorded,
processed, summarized and reported within the time periods specified
in the rules and forms of the SEC.
(b) Changes in Internal Controls
There were no significant changes in the Company's internal controls
over financial reporting or in other factors that could
significantly affect these internal controls subsequent to the date
of their most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT, PAGE 19
11. PLEASE DISCLOSE IF YOU HAVE DESIGNATED A PERSON AS A FINANCIAL
EXPERT. SEE ITEM 401(E) OF REGULATION S-B.
The Company will, in its future filings, disclose if it has
designated a person as a financial expert.
Supplementally, the Company informs that staff that William J.
Warwick, Jr., an independent board member who is also a member of
the Company's audit committee, is an audit committee financial
expert as defined in Item 401(e)(2) of Regulation S-B promulgated by
the U.S. Securities and Exchange Commission.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, PAGE
22
12. PLEASE DISCLOSE YOUR EQUITY PLAN INFORMATION IN THE FORMAT REQUIRED
BY ITEM 201(D) OF REGULATION S-B.
The Company will, in future filings, disclose its equity plan
information in the format required by Item 201(d).
Supplementally, the Company includes the following equity plan
information for the year ended December 31, 2004:
Mr. Rufus Decker
February 10, 2006
Page 8
EQUITY COMPENSATION PLAN INFORMATION AS AT DECEMBER 31, 2004
------------------------------------ ---------------------- --------------------- ----------------------------
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON FUTURE ISSUANCE UNDER
EXERCISE OF WEIGHTED-AVERAGE EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, EXERCISE PRICE OF (EXCLUDING SECURITIES
WARRANTS AND RIGHTS OUTSTANDING REFLECTED IN COLUMN (A))
(A) OPTIONS, WARRANTS (C)
PLAN CATEGORY AND RIGHTS (B)
------------------------------------ ---------------------- --------------------- ----------------------------
Equity compensation plans approved None N/A N/A
by security holders
------------------------------------ ---------------------- --------------------- ----------------------------
Equity compensation plans not 927,231 $1.60 None
approved by security holders *
------------------------------------ ---------------------- --------------------- ----------------------------
Total 927,231 $1.60 None
------------------------------------ ---------------------- --------------------- ----------------------------
* Equity compensation plans not approved by security holders consist of
individually negotiated grants of options or warrants to consultants,
directors, suppliers, vendors and others who provide goods or services
to the Company, and grants of warrants to investors in connection with
limited private offerings of the Company's common stock.
ITEM 7 - FINANCIAL STATEMENTS
GENERAL
13. PLEASE TELL US WHETHER ANY OF YOUR PRODUCTS, SUCH AS AQUAGEN
PRODUCTS AND YOUR WATER ELECTROLYZING MACHINES, REPRESENT A SEPARATE
OPERATING SEGMENT AS DEFINED IN PARAGRAPH 10 OF SFAS 131. LF NOT,
PLEASE TELL US IN DETAIL WHY NOT. IF YOU BELIEVE THAT THEY EACH
REPRESENT AN OPERATING SEGMENT AND YOU MEET THE CRITERIA DISCUSSED
IN PARAGRAPH 17 OF THIS SFAS FOR AGGREGATION OF ALL OF THESE
OPERATING SEGMENTS INTO AND REPORTABLE SEGMENT, PROVIDE US WITH THE
ANALYSIS YOU PERFORMED IN REACHING THIS CONCLUSION. IF AFTER
REASSESSING THE CRITERIA IN SPAS 131, YOU NOW BELIEVE THAT MORE THAN
ONE REPORTABLE SEGMENT EXISTS, REVISE YOUR FINANCIAL STATEMENTS
ACCORDINGLY. PLEASE ALSO REFER TO QUESTIONS 7 AND 8 OF THE FASB
STAFF IMPLEMENTATION GUIDE FOR SFAS 131.
During the year ended December 31, 2004, the Company was primarily
engaged in researching and developing possible products and methods
and in refining its business plan. During that period, the Company
had limited sales and revenue, all of which were from the sale of
electrolyzed oxidative water generators. Although the Company had
begun to explore consumer products and other market channels during
the 2004 fiscal year, its business had not yet differentiated into
those areas and its financial reporting was therefore aggregated
together. The Company's acquisition of Aquagen, which marked the
Company's serious entry into the consumer goods market, did not
occur until December 31, 2004. Consequently, the operating results
of consumer goods were not separately reported during the year ended
December 31, 2004 pursuant to SFAS 141, P. 49. It is the Company's
position that a separate operating segment as defined in P. 10 of
SFAS 131 did not exist at the time.
During fiscal year 2005, the Company began the process of
differentiating its business into separate markets, and during that
year management began regularly reviewing and making resource
decisions based on separate operating segments in the areas of 1)
Agriculture processing; 2) Protein processing; and, 3) Consumer
products. The Company will consider creating separate operating
segments pursuant to SFAS 131 for the fiscal year ended December 31,
2005. The Company respectfully submits that SFAS 131 should not be
applied retroactively to previous interim information, since
comparative information for the prior year was not available.
Mr. Rufus Decker
February 10, 2006
Page 9
14. PLEASE PROVIDE THE ENTERPRISE WIDE DISCLOSURES REQUIRED BY
PARAGRAPHS 37 AND 38 OF SFAS 131.
As noted in our response to comment no. 13 above, the results of
operations of Aquagen were not included as of December 31, 2004, and
did not constitute a separate operating segment at that time. Thus,
the corresponding disclosures under SFAS 131 would not have applied
at the time.
The Company will make the disclosures required by SFAS 131 in its
Future Filings.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, PAGE F-3.
15. THE INTRODUCTORY PARAGRAPH IN THE AUDIT REPORT INCLUDES THE
FOLLOWING SENTENCES;
o WE HAVE AUDITED THE ACCOMPANYING CONSOLIDATED BALANCE SHEET OF
AS OF~, AND THE RELATED CONSOLIDATED STATEMENTS OF OPERATIONS,
STOCKHOLDERS' EQUITY, AND CASH FLOWS FOR THE YEAR THEN ENDED.
o THE CONSOLIDATED FINANCIAL STATEMENTS OF AS OF DECEMBER 31,
2003 WERE AUDITED BY OTHER AUDITORS WHOSE REPORT DATED MARCH
30, 2004, EXPRESSED AN UNQUALIFIED OPINION.
PLEASE MAKE ARRANGEMENTS WITH YOUR AUDITORS TO HAVE THEM REVISE
THESE SENTENCES TO ENSURE THAT BOTH THE NAME OF THE COMPANY, AS WELL
AS THE RELATED TIME PERIOD BEING AUDITED, AS APPLICABLE, ARE
INCLUDED. PLEASE INCLUDE THIS REVISED AUDITOR'S REPORT IN YOUR
AMENDED FORM 10-KSB. SEE SAS 58 FOR EXAMPLES OF AUDIT REPORTS
We have amended our Form 10-KSB as appropriate to include the
original report that inadvertently omitted the above information
upon submission as per your comment. The original report received by
the Company, and the report that will be included in the Company's
amended Form 10-KSB, read as follows:
Mr. Rufus Decker
February 10, 2006
Page 10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
April 13, 2005
To the Stockholders of
Electric Aquagenics Unlimited, Inc.
Lindon, Utah
We have audited the accompanying consolidated balance sheet of Electric
Aquagenics Unlimited, Inc. as of December 31, 2004, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. 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 audit. The consolidated financial statements of Electric
Aquagenics Unlimited, Inc. as of December 31, 2003 were audited by other
auditors whose report dated March 30, 2004, expressed an unqualified opinion.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstance, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Electric
Aquagenics Unlimited, Inc. as of December 31, 2004, and the results of its
operations and its cash flows for the year then ended 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 12 to the
financial statements, the Company has significant losses from operations which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are described in Note 12. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Hall & Company
HALL & COMPANY
Irvine, California
Mr. Rufus Decker
February 10, 2006
Page 11
CONSOLIDATED BALANCE SHEET, PAGE F-4
16. PLEASE DISCLOSE THE AMOUNT OF YOUR ALLOWANCE FOR DOUBTFUL ACCOUNTS
ON THE FACE OF THE BALANCE SHEET OR IN A FOOTNOTE.
As of December 31, 2004, the Company had not allocated any amount
for doubtful accounts. The accounts receivable represented a limited
number of large sales to franchisees of Zerorez Franchising Systems,
Inc., and management is of the opinion that there is a very high
probability of payment of those accounts.
NOTE 1 - BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES, PAGE F-8
GENERAL
17. PLEASE DISCLOSE THE TYPES OF EXPENSES THAT YOU INCLUDE IN THE COST
OF GOODS SOLD LINE ITEM AND THE TYPES OF EXPENSES THAT YOU INCLUDE
IN GENERAL AND ADMINISTRATIVE EXPENSES LINE ITEM. PLEASE ALSO
DISCLOSE WHETHER YOU INCLUDE INBOUND FREIGHT CHARGES, PURCHASING AND
RECEIVING COSTS, INSPECTION COSTS, WAREHOUSING COSTS, INTERNAL
TRANSFER COSTS, AND THE OTHER COSTS OF YOUR DISTRIBUTION NETWORK IN
THE COST OF GOODS SOLD LINE ITEM. WITH THE EXCEPTION OF WAREHOUSING
COSTS, IF YOU CURRENTLY EXCLUDE A PORTION OF THESE COSTS FROM COST
OF GOODS SOLD, PLEASE DISCLOSE:
o IN A FOOTNOTE THE LINE ITEMS THAT THESE EXCLUDED COSTS ARE
INCLUDED IN AND THE AMOUNTS INCLUDED IN EACH LINE ITEM FOR
EACH PERIOD PRESENTED, AND
o IN MD&A THAT YOUR GROSS MARGINS MAY NOT BE COMPARABLE TO THOSE
OF OTHER ENTITIES, SINCE SOME ENTITIES INCLUDE ALL OF THE
COSTS RELATED TO THEIR DISTRIBUTION NETWORK IN COST OF GOODS
SOLD AND OTHERS LIKE YOU EXCLUDE A PORTION OF THEM FROM GROSS
MARGIN, INCLUDING THEM INSTEAD IN A LINE ITEM, SUCH AS GENERAL
AND ADMINISTRATIVE EXPENSES.
We will include in future filings a disclosure of the types of
expenses that we include in the cost of goods sold line item and the
types of expenses that we include in the general and administrative
expenses line item, including whether we include costs of our
distribution network in our cost of goods sold line item.
Supplementally, we advise the staff that we include the following
types of expenses in the cost of goods sold line item:
Raw materials
Direct labor
Incoming freight
Subcontractor expenses related to manufacture of items for resale
Purchasing and receiving costs
Inspection costs
Mr. Rufus Decker
February 10, 2006
Page 12
We include the following types of expenses in the general and
administrative expenses line item:
Administrative and supervisor salaries
Warehousing costs
Outbound shipping
INVENTORY, PAGE F-8
18. PLEASE DISCLOSE YOUR MAJOR CLASSES OF INVENTORY, SUCH AS RAW
MATERIALS, WORK IN PROCESS AND FINISHED GOODS, AS WELL AS THE
CORRESPONDING AMOUNTS IN EACH CLASS.
The Company will, in future filings, disclose its major classes of
inventory. Supplementally, the Company informs the staff that its
major classes of inventory for the fiscal year ended December 31,
2004 were as follows:
Inventory Category Balance as of 12/31/2004
------------------ ------------------------
Raw Materials $159,111
Work-In-Process $ 24,500
Finished Goods $319,705
--------
Total $503,316
ADVERTISING COSTS, PAGE F-8
19. PLEASE DISCLOSE THE TOTAL AMOUNT CHARGED TO ADVERTISING EXPENSE. SEC
PARAGRAPH 49 OF SOP 93-7.
The Company will, in future filings, disclose the total amount
charged to advertising expense. Supplementally, the Company informs
the staff that the total amount charged to advertising expense for
the year ended December 31, 2004 was $14,986.
GOODWILL, PAGE F-9
20. PLEASE PROVIDE US WITH A QUANTITATIVE ANALYSIS PERFORMED IN
ACCORDANCE WITH PARAGRAPHS 19 AND 20 OF SFAS 142 SUPPORTING YOUR
CONCLUSION THAT GOODWILL WAS NOT IMPAIRED AS OF DECEMBER 31, 2004.
PLEASE IDENTIFY EACH OF THE SIGNIFICANT ASSUMPTIONS USED IN YOUR
ANALYSIS AND EXPLAIN THE BASIS FOR EACH SUCH ASSUMPTION. PLEASE
FURTHER NOTE THAT SFAS 142 DOES NOT REQUIRE IMPAIRMENT TO BE
PERMANENT AS A CONDITION OF RECOGNITION.
In connection with the acquisition of Aquagen International, Inc.,
the Company recorded goodwill in the amount of approximately
$160,000. This amount represented the excess of the value of the net
assets acquired over the fair value of the 321,429 shares of the
Company's common stock as of the date of the transaction plus the
liabilities assumed, after allocation of the purchase price to other
intangible assets.
Mr. Rufus Decker
February 10, 2006
Page 13
The Company performed its test for impairment during its 2004 audit
and in conjunction with the filing of Form 10-KSB by comparing the
fair value of its then wholly owned subsidiary, Aquagen, with its
carrying amount, including goodwill. Due to the recent purchase of
the reporting unit and using comparable performance measurements,
the Company determined that the fair value of Aquagen exceeded its
carrying amount at the time and goodwill was therefore not
considered impaired.
Since the acquisition of Aquagen, the Company believes Aquagen's
fair value has increased and there were no events or circumstances
that would more likely than not reduce the fair value below its
carrying amount. The Company will complete its annual impairment
test again during the current year end audit for 2005, which is the
similar time frame as the prior year in accordance with SFAS 142.
EARNINGS PER SHARE, PAGE F-10
21. PLEASE DISCLOSE THE NUMBER OF ANTIDILUTIVE SHARES BY EACH TYPE OF
SECURITY. SEE PARAGRAPH 40(C) OF SFAS 128.
The Company will, in future filings, disclose the number of
antidilutive shares by each type of security. Supplementally, the
Company informs the staff that as of December 31, 2004, the latest
date for which earnings per share was calculated, it did not have
any antidilutive shares outstanding.
22. PLEASE DISCLOSE HOW YOU ARE TREATING THE RESTRICTED SHARES YOU HAVE
ISSUED IN COMPUTING BOTH YOUR BASIC AND DILUTED EARNINGS PER SHARE.
SEE PARAGRAPHS 10 AND 13 OF SFAS 128.
The Company will, in future filings, disclose how it is treating the
restricted shares it has issued in computing both its basic and
diluted earnings per share. Supplementally, the Company informs the
staff that as of December 31, 2004, the latest date for which
earnings per share was calculated, it did not have outstanding any
contingently issuable shares, as defined in paragraph 10 of SFAS
128.
NOTE 4 - PATENTS. TRADEMARKS AND INTELLECTUAL PROPERTY, F-12
23. YOU HAVE DETERMINED THAT THE INTANGIBLE ASSETS ACQUIRED IN THE
PURCHASE OF AQUAGEN INTERNATIONAL, INC. ARE NOT SUBJECT TO
AMORTIZATION. PLEASE TELL US HOW YOU DETERMINED THAT THESE ASSETS
HAVE AN INDEFINITE LIFE.
The Company determined that the intangible assets acquired in the
purchase of Aquagen International, Inc. are not subject to
amortization based upon the guidance contained in SFAS 142, P. 11,
and Appendix A related thereto.
Specifically, in acquiring the intangible assets, the Company
reviewed all pertinent factors detailed in SFAS 142 and determined
that there were no legal, contractual, competitive, economic or
other factors that would limit the useful life of the intangible
assets.
Mr. Rufus Decker
February 10, 2006
Page 14
Also, the Company has continually used the intangible assets since
the date of the acquisition, and expects to continue to use the
intangible assets indefinitely in the manufacture and production of
its products since there are competitive markets, health trends, and
brand extension opportunities that will generate cash flows from the
intangible assets for the foreseeable future.
The Company tested for impairment of these assets in accordance with
P. 17 of SFAS 142.
NOTE 6 - ACQUISITION OF BUSINESS, PAGE F-13
24. GIVEN THE PURCHASE PRICE AND AMOUNT OF ASSETS ACQUIRED, IT IS NOT
CLEAR WHY AUDITED FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL
INFORMATION WERE NOT PREVIOUSLY PROVIDED IN A FORM 8-K FOR AQUAGEN
INTERNATIONAL, INC. PLEASE FILE A FORM 8-K WITH THE REQUIRED
INFORMATION. OTHERWISE, PLEASE PROVIDE US WITH YOUR SIGNIFICANCE
TESTS UNDER RULE 310(C)(2) OF REGULATION S-B FOR EACH PERIOD
PRESENTED, DEMONSTRATING THAT THESE FINANCIAL STATEMENTS ARE NOT
REQUIRED.
The Company's effective date of the acquisition of Aquagen's assets
was December 31, 2004. Consequently, the balance sheet of Aquagen
for the year ended December 31, 2004 was included in the
consolidated financial statements of the Company, and the Company's
consolidated financial statements, including Aquagen's balance sheet
information, were audited as reported in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 2004. A separate
audited balance sheet of the acquired business was not considered
required by the Company pursuant to Rule 310(c)(3)(ii) of Regulation
S-B since the Company's most recent audited balance sheet was for a
date after the acquisition was consummated.
The Company will file a Form 8-K that will contain the pro forma
financial information specified in Rule 301(d) of Regulation S-B.
NOTE 7 - RELATED PARTY TRANSACTION, PAGE F-13
SALES TO AFFILIATE, PAGE F-13
25. PLEASE TELL US HOW MUCH OF YOUR ACCOUNTS RECEIVABLE RELATED TO
TRANSACTIONS WITH AFFILIATES IN THE AMOUNT OF $319,340 HAS BEEN
SUBSEQUENTLY COLLECTED. HAVE ANY OF THESE AMOUNTS BEEN WRITTEN OFF
OR RESERVED FOR?
The accounts receivable related to transactions with affiliates
were, subsequent to the end of the third quarter of 2005, converted
to long term notes receivable, secured by equipment. The following
table sets forth the amount that has been subsequently collected.
None of the amounts owed have been written off or reserved for,
since management believes the amounts owed will be paid.
Notes Receivable related to affiliates as of Dec 31, 2004 $ 319,340
Collected since Dec 31, 2004 16,681
----------
Balance owing as of Feb 3, 2006 $ 302,659
Mr. Rufus Decker
February 10, 2006
Page 15
NOTE 9 - COMMON STOCK, PAGE F-14
26. FOR EACH ISSUANCE OF WARRANTS, PLEASE DISCLOSE THE FAIR VALUE OF THE
WARRANTS AT THE DATE OF ISSUANCE, AND THE REASONS FOR ISSUANCE.
PLEASE ALSO DISCLOSE WHETHER YOU USED THE BLACK-SCHOLES MODEL FOR
YOUR ISSUANCES OF WARRANTS TO NON-EMPLOYEES, INCLUDING THE
ASSUMPTIONS YOU USED.
The Company will, in its future filings, disclose the fair value of
warrants at the date of issuance and whether the Company used the
Black-Scholes model for its issuances of warrants to non-employees,
including the assumptions used.
EXHIBIT 31 - CERTIFICATIONS
27. DISCLOSURE CONTROLS AND PROCEDURES ARE NOW DEFINED IN EXCHANGE ACT
RULE 13A-15(E) AND 15D-15(E). SEE SEC RELEASE 33-8238, WHICH BECAME
EFFECTIVE AUGUST 14, 2003. PLEASE FILE AN AMENDMENT TO YOUR FORM
10-KSB TO INCLUDE CERTIFICATIONS THAT CONFORM TO THE FORMAT PROVIDED
IN ITEM 601(B)(31) OF REGULATION S-B AND REFER TO THE APPROPRIATE
LOCATIONS FOR THE DEFINITIONS. PLEASE ALSO AMEND YOUR 2005 FORMS
10-QSB ACCORDINGLY. IN DOING SO, PLEASE REFILE THE FORMS 10-KSB AND
10-QSB IN THEIR ENTITY, ALONG WITH THE UPDATED CERTIFICATIONS.
The Company will file an amendment to its Annual Report on Form
10-KSB for the period ended December 31, 2004 and an amendment to it
Quarterly Reports on Forms 10-QSB for the periods ended March 31,
2005, June 30, 2005 and September 30, 2005. These amendments will
include revised and updated certifications in the form set forth
below:
CERTIFICATION
I, Gaylord M. Karren, certify that:
1. I have reviewed this annual/quarterly report on Form ________ of Electric
Aquagenics Unlimited, Inc. (the "registrant");
2. Based on my knowledge, this annual/quarterly 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/quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual/quarterly 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/quarterly report;
Mr. Rufus Decker
February 10, 2006
Page 16
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and I have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to me by others within those entities, particularly during the
period in which this annual/quarterly report is being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under
my supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report my conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
d) disclosed in this report any change n the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the small
business issuer's internal control over financial reporting.
5. I have disclosed, based on my most recent evaluation of internal controls
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing
the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: ___________
Mr. Rufus Decker
February 10, 2006
Page 17
- ----------------------------------
Name: Gaylord M. Karren
Title: Chief Executive Officer
Chief Financial Officer
FORM 10-QSB FOR THE PERIOD ENDED JUNE 30, 2005
GENERAL
28. PLEASE ADDRESS THE ABOVE COMMENTS IN YOUR INTERIM FILINGS AS WELL.
The Company will address the above comments in its future filings.
EXHIBIT 32.1 - CERTIFICATION
29. YOUR CURRENT EXHIBIT 32.1 CERTIFICATION IS FOR THE FISCAL QUARTER
ENDED MARCH 31, 2005. PLEASE APPROPRIATELY INCLUDE A CERTIFICATION
FOR THE FISCAL QUARTER ENDED JUNE 30, 2005. IN DOING SO, PLEASE
REFILE THE FORM 10-QSB IN ITS ENTIRETY, ALONG WITH THE UPDATED
CERTIFICATIONS.
The Company will file an amendment to its Quarterly Report on Form
10-QSB for the period ended June 30, 2005 that will include a
revised and updated Exhibit 32.1 Certification in the following
form:
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 Quarterly Report of Electric Aquagenics Unlimited,
Inc. (the "Company") on Form 10-QSB/A for the period ended June 30, 2005 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Gaylord M. Karren, Chief Executive Officer and Chief Financial
Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of my knowledge:
(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 results of operations
of the Company.
Mr. Rufus Decker
February 10, 2006
Page 18
DATE: _____________
___________________________________
Gaylord M. Karren
Chief Executive Officer
Chief Financial Officer
Electric Aquagenics Unlimited, Inc.
FORM 10-QSB FOR THE PERIOD ENDED SEPTEMBER 30, 2005
30. PLEASE EXPLAIN TO US HOW IT IS APPROPRIATE THAT YOU DO NOT HAVE ANY
MARKETING AND PROMOTION EXPENSES FOR THE NINE MONTHS ENDED SEPTEMBER
30, 2004, GIVEN THAT YOU HAD $553,220 FOR THE YEAR ENDED DECEMBER
31, 2004. DID ALL OF THESE EXPENSES OCCUR IN THE FOURTH QUARTER OF
2004? PLEASE CLARIFY.
During the fourth quarter of 2004, the Company reclassified its
marketing and promotion expenses separately due to their
significance as determined by the Company's recently engaged
auditors at the time, Hall & Company, as opposed to the
classification maintained by the Company's predecessor auditor,
Child, Sullivan & Company.
NOTE 6 - SENIOR CONVERTIBLE DEBT
31. REGARDING YOUR ISSUANCE OF CONVERTIBLE DEBT, PLEASE PROVIDE US WITH
THE ASSUMPTIONS YOU USED IN DETERMINING YOUR ACCOUNTING TREATMENT,
AS WELL AS THE RELATED COMPUTATIONS. PLEASE ALSO TELL US WHAT
ACCOUNTING LITERATURE YOU REFERENCED IN SUPPORTING YOUR CONCLUSION.
The Company recorded the issuance of its convertible debt at its
face amount since it cannot be converted immediately. The Company
also evaluated the considerations of EITF 98-5 and 00-27 and noted
that the convertible debt does not have any nondetachable conversion
features that would be deemed to be beneficial at the issuance date,
and noted further that the shares are convertible at a variable
conversion price subsequent to that date.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
32. PLEASE TELL US HOW YOU DETERMINED IT WAS APPROPRIATE TO IMMEDIATELY
RECOGNIZE AS REVENUES THE $1,000,000 YOU RECEIVED PER YOUR LICENSE
AGREEMENT, INCLUDING THE ACCOUNTING LITERATURE THAT YOU CITED. DO
YOU HAVE ANY CONTINUING INVOLVEMENT IN THE LICENSE AGREEMENT, AND IF
SO, TO WHAT EXTENT?
Mr. Rufus Decker
February 10, 2006
Page 19
In September, 2005, the Company entered into the license agreement
with Water Sciences. Pursuant to the Agreement, Water Sciences paid
to the Company a non-refundable license fee of $1 million in
exchange for (a) an exclusive license to commercialize the Company's
technology in specific parts of the world, (b) the exclusive right
and license to use the Company's trademarks in connection with the
promotion, marketing and sale of products within these areas, and
(c) the appointment of Water Science as the Company's exclusive
distributor of the Company's products in those areas. The license
agreement is, according to its own terms, perpetual and without a
fixed term. Pursuant to the terms of the agreement, the Company
received the full cash payment of $1 million prior to the end of
September 2005. Accordingly, the Company recorded its revenue from
the transaction in the third quarter of 2005 since the rights had
completely transferred to Water Sciences and the $1million
consideration had been received in full by the Company during the
quarter ended September 30, 2005. The Company has no conditional or
continual obligations with respect to the license agreement.
In connection with our responses, the Company acknowledges:
o The company is responsible for the adequacy and accuracy of
the disclosure in their filings;
o Staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission form taking any
action with respect to the filing; and
o The company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Please send copies of any future correspondence to the Company's outside
counsel, Randy K. Johnson at Kirton &McConkie, 60 E. South Temple, Suite 1800,
Salt Lake City, Utah 84111; telephone: (801) 323-5963; fax: (801) 321-4893;
e-mail: rkjohnson@kmclaw.com.
Very truly yours,
Electric Aquagenics Unlimited, Inc.
/s/Gaylord M. Karren
Gaylord M. Karren
Chief Executive Officer
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------------
ELECTRIC AQUAGENICS UNLIMITED, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 87-0654478
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification Number)
1464 WEST 40 SOUTH, SUITE 200
LINDON, UTAH 84042
(Address of principal executive offices) (Zip Code)
If this form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), please check the following box [ ]
If this form relates to the registration of a class of securities pursuant to
Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), please check the following box [X]
Securities Act registration statement file number to which this form relates:
333-86830
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.0001 per share
- --------------------------------------------------------------------------------
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
A description of the Common Stock to be registered hereunder is contained
in the section entitled "Description of Securities: in the Prospectus included
in the Registrant's Form S-1 Registration Statement, No. 333-86830, as amended
from time to time (the "1933 Act Registration Statement"), initially filed with
the Securities and Exchange Commission on April 24, 2002, and is incorporated
herein by reference.
ITEM 2. EXHIBITS.
Each of the following exhibits to this registration statement has been
filed as an exhibit to the 1933 Act Registration Statement, as amended, and is
incorporated herein by reference.
Exhibit Number Description
3.1 Certificate of Incorporation of the Registrant
3.2 Amended Certificate of Incorporation of the Registrant
3.3 Bylaws of the Registrant
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and
Exchange Act of 1934, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned hereunto duly authorized.
ELECTRIC AQUAGENICS UNLIMTED, INC.
Date: By:
--------------------------------
Name: Gaylord M. Karren
Title: Chief Executive Officer