10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2007

or

 o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

000-51807

(Commission File No.)

EAU TECHNOLOGIES, 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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

As of November 13, 2007, the Registrant had 15,107,113 shares of Common Stock, $0.0001 par value outstanding.

EAU TECHNOLOGIES, INC.

QUARTERLY REPORT ON FORM 10-QSB

September 30, 2007

INDEX

		Page
PART I. FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Balance Sheets - September 30, 2007 and December 31, 2006	3
	Statements of Operations - Three and Nine months ended September 30, 2007 and 2006	5
	Statement of Stockholders’ Equity (Deficit)	7
	Statements of Cash Flows - Nine months ended September 30, 2007 and 2006	8
	Notes to Financial Statements	10
ITEM 2.	Management's Discussion and Analysis or Plan of Operation	16
ITEM 3.	Controls and Procedures	23
PART II. OTHER INFORMATION
ITEM 1.	Legal Proceedings	24
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
ITEM 3.	Defaults Upon Senior Securities	24
ITEM 4.	Submission of matters to Vote of Security Holders	24
ITEM 5.	Other Information	24
ITEM 6.	Exhibits	25
SIGNATURES		26

2

EAU TECHNOLOGIES, INC.

BALANCE SHEETS

ASSETS

	September 30,		December 31,
	2007		2006
CURRENT ASSETS	(Unaudited)		(Audited)
Cash and cash equivalents	$	309,914	$	206,094
Accounts receivable, net		121,497		134,225
Accounts receivable - related party, net		44,424		219,479
Prepaid expense		11,778		15,641
Inventory, net		2,499,817		2,502,263
Total current assets		2,987,430		3,077,702
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $198,486 and $406,919		228,055		633,477
PROPERTY AND EQUIPMENT - held for sale, net of
accumulated depreciation of $382,044 and $0		316,064		-
OTHER ASSETS
Deposits		30,474		27,344
Restricted cash		240,000		-
Intellectual property		51,959		1,191,238
Intellectual property - held for sale		1,146,668		-
Total other assets		1,469,101		1,218,582
Total assets	$	5,000,650	$	4,929,761

See notes to financial statements.

3

EAU TECHNOLOGIES, INC.

BALANCE SHEETS (Continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

	September 30,			December 31,
	2007			2006
CURRENT LIABILITIES	(Unaudited)			(Audited)
Accounts payable	$	375,087		$	738,666
Accrued expenses		476,995			560,166
Warranty reserve		102,362			102,362
Advance - related party		2,000,000			-
Advance deposits on machine orders - related party		697,500			697,500
Advance deposits on product orders		17,230			-
Deposit on sale of consumer division		100,000			-
Current portion of long-term debt		19,841			17,778
Senior convertible note payable - related party, current portion		2,041,667			-
Total current liabilities		5,830,682			2,116,472
LONG TERM LIABILITIES
Long term debt, net of current portion		62,356			79,424
Senior convertible note payable - related party, net of discounts of $958,333 and $1,708,333, net of current portion		-			1,291,667
Deferred licensing revenue - related party		591,667			741,667
Derivative liability - related party		7,186,926			4,639,312
Total long term liabilities		7,840,949			6,752,070
Total Liabilities		13,671,631			8,868,542
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, $.0001 par value; 50,000,000 shares authorized; 13,567,187 and 12,313,341 issued and outstanding, respectively		1,357			1,232
Additional paid in capital		32,958,157			27,151,279
Accumulated deficit		(41,630,495	)		(31,091,292	)
Total stockholders’ equity (deficit)		(8,670,981	)		(3,938,781	)
Total liabilities and stockholders’ equity (deficit)	$	5,000,650		$	4,929,761

See notes to financial statements.

4

EAU TECHNOLOGIES, INC.

UNAUDITED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
NET SALES - RELATED PARTY	$	44,893		$	490,415		$	354,127		$	1,198,634
NET SALES		351,982			288,322			772,330			683,443
TOTAL SALES		396,875			778,737			1,126,457			1,882,077
COST OF GOODS SOLD		146,772			512,854			461,270			1,193,907
GROSS PROFIT		250,103			265,883			665,187			688,170
OPERATING EXPENSES
Depreciation and amortization		59,795			54,709			176,347			160,559
Research and development		66,768			50,329			149,243			119,665
General and administrative		1,193,528			1,289,315			7,537,255			5,935,935
Total operating expenses		1,320,091			1,394,353			7,862,845			6,216,159
LOSS BEFORE OTHER INCOME (EXPENSE)		(1,069,988	)		(1,128,470	)		(7,197,658	)		(5,527,989	)
OTHER INCOME (EXPENSE)
Interest expense		(279,255	)		(282,909	)		(847,822	)		(866,704	)
Interest income		3,378			3,708			14,109			16,942
Gain (Loss) on derivative liability		147,713			29,792			(2,547,615	)		688,702
Other income (expense)		(1,100	)		13,923			39,783			29,075
Total other income (expense)		(129,264	)		(235,486	)		(3,341,545	)		(131,985	)
LOSS BEFORE PROVISION FOR INCOME TAXES		(1,199,252	)		(1,363,956	)		(10,539,203	)		(5,659,974	)
PROVISION FOR INCOME TAXES		-			-			-			-
LOSS FROM CONTINUING OPERATIONS		(1,199,252	)		(1,363,956	)		(10,539,203	)		(5,659,974	)

See notes to financial statements.

5

EAU TECHNOLOGIES, INC.

UNAUDITED STATEMENTS OF OPERATIONS (continued)

DISCONTINUED OPERATIONS:
Income from operations of discontinued operations (Net of $0 in income taxes)		-			12,154			-			28,248
(Loss) on disposal of discontinued operations (Net of $0 in income taxes)		-			(50	)		-			(50	)
GAIN FROM DISCONTINUED OPERATIONS		-			12,104			-			28,198
NET LOSS	$	(1,199,252	)	$	(1,351,852	)	$	(10,539,203	)	$	(5,631,776	)
NET LOSS PER SHARE CONTINUING OPERATIONS	$	(0.09	)	$	(0.12	)	$	(0.78	)	$	(0.55	)
NET INCOME PER SHARE DISCONTINUED OPERATIONS	$	0.00		$	0.00		$	0.00		$	0.00
WEIGHTED AVERAGE OF SHARES OUTSTANDING		13,567,187			11,085,691			13,478,401			10,319,928

See notes to financial statements.

6

EAU TECHNOLOGIES, INC.

UNAUDITED STATEMENT OF STOCKHOLDERS’ EQUITY(DEFICIT)

	COMMON STOCK				ADDITIONAL PAID IN		ACCUMULATED
	SHARES		AMOUNT		CAPITAL		DEFICIT			TOTAL
Balance, December 31, 2006		12,313,341	$	1,232	$	27,151,279	$	(31,091,292	)	$	(3,938,781	)
Issuance of 1,153,846 shares for cash of $1,500,000 (unaudited)		1,153,846		115		1,499,885		-			1,500,000
Issuance and vesting of options and warrants for services (unaudited)		-		-		282,119		-			282,119
Issuance of warrants to Water Sciences (See Note 5) (unaudited)		-		-		3,974,884		-			3,974,884
Issuance 100,000 shares for cash of $50,000 or $0.50 per share due to exercise of warrants (unaudited)		100,000		10		49,990		-			50,000
Net loss for the Nine months ended September 30, 2007 (unaudited)		-		-		-		(10,539,203	)		(10,539,203	)
Balance, September 30, 2007 (unaudited)		13,567,187	$	1,357	$	32,958,157	$	(41,630,495	)	$	(8,670,981	)

See notes to financial statements.

7

EAU TECHNOLOGIES, INC.

UNAUDITED STATEMENTS OF CASH FLOWS

	For the Nine Months Ended September 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(10,539,203	)	$	(5,631,776	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		176,347			160,559
Bad debt expense		-			13,197
Common stock issued for services		-			197,809
Warrants and options granted		4,257,003			1,059,142
Discount of note payable		750,000			750,000
Loss on disposal of discontinued operations		-			50
Loss on disposal of assets		1,816			72,736
Gain on settlement of debt		-			(14,597	)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		12,728			(14,553	)
(Increase) decrease in accounts receivable - related party		175,055			(453,373	)
(Increase) in pre-paid expense		3,863			-
Decrease (increase) in inventory		2,446			(411,936	)
(Increase) decrease in deposits		(3,130	)		(11,169	)
(Increase) in restricted cash		(240,000	)		-
Increase (decrease) in accounts payable		(360,536	)		(588,879	)
Increase (decrease) in accrued expenses		(83,171	)		151,910
Increase (decrease) in warranty reserve		-			5,562
Increase in advance deposits on machine orders - related party		-			697,500
Increase in advance deposits on product orders		17,230			-
(Decrease) in deferred revenue		(150,000	)		(150,000	)
Increase (decrease) in derivative liability		2,547,614			(688,702	)
Net cash used in operating activities		(3,431,938	)		(4,856,520	)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment		(91,848	)		(46,238	)
Investments		-			452,559
Payments received from notes receivable		-			13,877
Payments received from notes receivable - related party		-			24,206
Deposits received on assets held for sale		100,000			-
Intellectual property disbursements		(7,389	)		(18,518	)
Net cash provided (used) in investing activities		763			425,886
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable		(15,005	)		(24,844	)
Advances for purpose of exercising warrants - related party		2,000,000			-
Proceeds from issuance of common stock - related party		1,500,000			4,000,497
Proceeds from issuance of common stock		50,000			-
Net cash provided by financing activities		3,534,995			3,975,653
NET INCREASE (DECREASE) IN CASH		103,820			(454,981	)
CASH and cash equivalents, beginning of period		206,094			681,348
CASH and cash equivalents, end of period	$	309,914		$	226,367

See notes to financial statements.

8

EAU TECHNOLOGIES, INC.

UNAUDITED STATEMENTS OF CASH FLOWS

(Continued)

	Nine Months Ended September 30,
	2007		2006
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	30,232	$	49,283
Income Taxes	$	-	$	-
Supplemental Disclosures of Non-cash Investing and Financing Activities:
Common stock issued for services	$	-	$	197,809
Warrants and stock options granted	$	4,257,003	$	1,059,142

See notes to financial statements.

9

EAU TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 - BASIS OF PRESENTATION

The accompanying condensed financial statements were prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In management’s opinion all necessary adjustments, which consist primarily of normal recurring adjustments, to the financial statements have been made to present fairly the financial position and results of operations and cash flows. The results of operations for the respective periods presented are not necessarily indicative of the results for the respective complete years. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2006.

NOTE 2 - RESTRICTED CASH

In November 2006 the Company entered into an employment agreement with Wade Bradley, the Company’s CEO. Pursuant to the agreement the Company deposited $240,000 with an escrow agent in January 2007. The Company has recognized this amount as restricted cash on the Company’s financial statements.

NOTE 3 - INVENTORIES

The composition of inventories is as follows at:

	September 30, 2007			December 31, 2006
Finished goods	$	996,858		$	543,336
Raw materials		1,919,094			2,375,062
Allowance for obsolete inventory		(416,135	)		(416,135	)
	$	2,499,817		$	2,502,263

NOTE 4 - SENIOR CONVERTIBLE DEBT AND DERIVATIVE LIABIILTY

In September 2005, the Company entered into a Senior Convertible Note with Mr. Peter Ullrich, currently a member of the Board of Directors, in exchange for $3,000,000. Pursuant to the debt agreement, the note accrues interest at the rate of 3% per annum and is due, principal and interest together, on September 16, 2008. No principal or interest payments need to be paid during the loan period. The note may be converted into 1,000,000 shares of the Company’s $0.0001 par value common stock prior to the maturity date, and at any time, by the holder at a price per share equal to $3.00 per share, subject to certain other conversion adjustments. In connection with the issuance of the Note, the Company also granted a three year warrant to purchase up to two (2) million shares of the Company’s $0.0001 par value common stock for a purchase price of $2.76 per share. The exercise price of these warrants is to be adjusted if the Company should issue stock for less than the original exercise price.

In May 2007, the Company entered into a termination agreement related to the cancellation and reissuance of the existing warrants (“Original Warrants”) to purchase a total of 8.4 million shares of $0.0001 par value common stock of the Company, at a price of $2.76 per share, held by Water Science. The Company granted to Water Science replacement warrants to purchase 8.4 million shares of common stock at a price of $1.30 per share, with an expiration date of May 9, 2010. The Company has a right to require Water Science to exercise warrants for up to 3,230,769 shares; the Company may exercise the put right from time to time, but not more often than once per month.

10

EAU TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 4 - SENIOR CONVERTIBLE DEBT AND DERIVATIVE LIABIILTY (continued)

Because of the feature wherein the conversion price is reset if shares are issued at a price less than the fixed conversion price, and pursuant to EITF 00-19, the Company accounts for the feature as a derivative liability with changes in fair value being recorded in the income statement. The fair value of the derivative liability is estimated using the Black-Scholes pricing model, with the following assumptions at September 30, 2007: risk-free interest rate of 4.0% to 4.6%, expected dividend yield of zero, expected life of between 1.2 and 3 years and expected volatility of 71.08% to 72.07. As of September 30, 2007, the value of the derivative liability is $7,186,926.

NOTE 5 - RELATED PARTY TRANSACTIONS

Sales to Affiliates - Water Science, who has exclusive rights to sell our products in Central and South America, is a major shareholder of the Company. Water Science is controlled by Peter Ullrich, who was appointed to the Company’s Board of Directors in April 2007. Water Science by agreement may purchase machinery from the Company at cost plus 25 percent. During the three and nine months ended September 30, 2007, the Company sold approximately $44,893 and $354,127 in products and services related to the installation and maintenance of machines to Water Science and related entities, respectively. During the three and nine months ended September 30, 2006, the Company sold approximately $490,415 and $1,198,634 in products to Water Science and entities related to Water Science, respectively. Further, the Company has received and recorded $697,500 in advance deposits from Water Science on machine orders at September 30, 2007.

Senior Note Payable - In September 2005, the Company entered into a Senior Convertible Note with Water Science in exchange for $3,000,000 (see Note 3). For the nine months ended September 30, 2007, the Company recognized $67,500 in interest expense related to the Senior Note. The Company also recognized $750,000 in interest expense due to the discount of this note and the beneficial conversion feature. (See Note 4)

In May 2007, the Company entered into a termination agreement related to the cancellation and reissuance of the existing warrants (“Original Warrants”) to purchase a total of 8.4 million shares of $0.0001 par value common stock of the Company, at a price of $2.76 per share, held by Water Science. The Company granted to Water Science replacement warrants to purchase 8.4 million shares of common stock at a price of $1.30 per share, with an expiration date of May 9, 2010. The Company has a right to require Water Science to exercise warrants for up to 3,230,769 shares; the Company may exercise the put right from time to time, but not more often than once per month.

Licensing Fee - In September 2005, the Company received $1,000,000 in exchange for providing Water Science exclusive licensing and distribution rights for a five-year term for a specified market area. The agreement provides termination rights by Water Sciences and a pro rata refund of the fee. The Company recognizes the fee on a pro rata basis over the life of the agreement. The Company recognized $150,000 for the nine months ended September 30, 2007.

11

EAU TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 5 - RELATED PARTY TRANSACTIONS (continued)

Amended Licensing Agreement - On January 10, 2007, the Company entered into an Amended and Restated License Agreement (the “Amended License Agreement”) with Zerorez Franchising Systems, Inc., a Nevada corporation (“Zerorez”). Zerorez is an affiliated entity having similar shareholders and who was founded by the same individuals who founded the Company. John Hopkins, William Warwick and Jay Potter are shareholders of Zerorez. Mr. Hopkins is also a board member and franchisee of Zerorez. Until January 2007, Mr. Hopkins was a director of the Company. Messrs. Warwick and Potter are directors of the Company. The Company has had a license agreement with Zerorez since March, 2001, as disclosed in the Company’s previous reports as filed with the SEC. As revised, the Amended License Agreement provides a licensing arrangement whereby Zerorez and its franchisees may use the Company’s equipment and technology to produce electrolyzed fluids for use in carpet cleaning and related applications, at rates that are set forth in the agreement. The Amended License Agreement has a term of five years with automatic renewal clauses for three additional five-year terms. Generally, neither party may terminate the agreement unless there is a breach by, or consent from, the other party. During the nine months ended September 30, 2007, Zerorez paid $0 to the Company under the agreement.

Escrow Arrangement with Chief Executive Officer - In October 2006, the Company entered into an escrow agreement with the Chief Executive Officer. Pursuant to the escrow agreement, to secure the Company’s obligation to make the Severance Payment, the Company is required to deposit, at its election, either (1) cash in the amount of $240,000 or (2) an irrevocable letter of credit with a face amount of $240,000, with an agreed upon escrow agent who shall hold such funds (or letter of credit) in escrow. In January 2007, the Company deposited $240,000 in cash with an escrow agent. The escrow agreement provides different scenarios upon which either the Company or the Chief Executive Officer shall be entitled to interest on the escrowed funds.

Advances from Related Party - In April 2007, Water Science advanced $1,000,000 to the Company. In June 2007 and August 2007, Water Science advanced an additional $1,000,000 to the Company. These advances were used to exercise warrants in October 2007, see Note 10.

NOTE 6 - CAPITAL STOCK

In May 2007, the Company issued 100,000 shares of common stock for $50,000, or $0.50 per share, to an individual upon the exercising of warrants.

In May 2007, the Company entered into a termination agreement related to the cancellation and reissuance of the existing warrants (“Original Warrants”) to purchase a total of 8.4 million shares of $0.0001 par value common stock of the Company, at a price of $2.76 per share, held by Water Science. The Company granted to Water Science replacement warrants to purchase 8.4 million shares of common stock at a price of $1.30 per share, with an expiration date of May 9, 2010. The Company has a right to require Water Science to exercise warrants for up to 3,230,769 shares; the Company may exercise the put right from time to time, but not more often than once per month.

On October 25, 2006, the Company entered into a stock purchase agreement with Peter F. Ullrich, a shareholder of the Company, whereby Mr. Ullrich agreed to purchase a total of 2,307,692 newly issued shares of $0.0001 par value common stock of the Company for a purchase price of $1.30 per share in a private transaction, for total consideration of $3,000,000. Under the terms of the agreement, Mr. Ullrich purchased 1,153,846 shares on October 25, 2006 and the remaining 1,153,846 shares on January 2, 2007.

12

EAU TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 7 - GOING CONCERN

The Company has incurred significant losses and has had negative cash flows from operations. As a result, at September 30, 2007, the Company has had a high level of equity financing transactions and additional financing will be required by the Company to fund its future activities and to support its operations. Management is seeking to obtain sufficient funding for its operations through either debt or equity financing. However, there is no assurance that the Company will be able to obtain additional financing. Furthermore, there is no assurance that rapid technological changes, changing customer needs and evolving industry standards will enable the Company to introduce new products and services on a continual and timely basis so that profitable operations can be attained. The Company’s ability to achieve and maintain profitability and positive cash flows is dependent upon its ability to achieve positive sales and profit margins and control operating expenses. Management plans to mitigate its losses in the near term through the further development and marketing of its trademarks, brand and product offerings.

Our auditors have issued their Independent Registered Public Accountants’ Report on the Company's consolidated financial statements for the fiscal year ended December 31, 2006 with an explanatory paragraph regarding the Company's ability to continue as a going concern. The consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and satisfaction of liabilities in the ordinary course of business. However, as a result of recurring operating losses, such realization of assets and satisfaction of liabilities are subject to uncertainty, which raises substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 8 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Stock Based-Compensation Expense

On January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS 123(R)”) which requires the measurement and recognition of compensation expense for all share-based payments to employees and directors including employee stock options  and stock purchases related to the Company’s employee stock option and award plans based on estimated fair values. SFAS 123(R) supersedes the Company’s previous accounting under Accounting Principles Board Option No. 25, “Accounting for Stock Issued to Employees” (“APB25”) for periods beginning in fiscal 2006. In March 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107 (“SAB 107”) relating to SFAS 123(R). The Company has applied the provisions of SAB 107 in its adoption of SFAS 123(R).

The Company adopted SFAS 123(R) using the modified prospective transition method, which requires the application of the accounting standard as of January 1, 2006, the first day of the Company’s fiscal year 2006. The Company’s financial statements as of and for the three and nine month period ended September 30, 2007 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, the Company’s financial statements for the prior year have not been restated to reflect, and do not include, the impact of SFAS 123(R). Stock-based compensation expense recognized under SFAS 123(R) for the nine month period ended September 30, 2007 and 2006 was $282,119 and $599,590, respectively, related to employee stock options issued and vesting during the period.

13

EAU TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 8 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Basic and Fully Diluted Loss Per Share

Basic and Fully Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period.

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2007			2006			2007			2006
Net Loss (numerator)	$	(1,199,252	)	$	(1,351,852	)	$	(10,539,203	)	$	(5,631,776	)
Shares (denominator)		13,567,187			11,085,691			13,478,401			10,319,928
Per share amount	$	(0.09	)	$	(0.12	)	$	(0.78	)	$	(0.55	)

The Company’s outstanding stock options have been excluded from the basic net loss per share calculation for the three and nine month period ended September 30, 2007 and 2006, because they are anti-dilutive.

The following table is a summary of the status of the warrants and options granted for the nine months ended September 30, 2007:

	Number of Options and Warrants			Weighted Average Exercise Price
Outstanding at beginning of period		11,925,793		$	2.57
Granted		8,400,000			1.30
Exercised		(100,000	)		0.50
Forfeited		(8,445,000	)		2.76
Expired		(463,251	)		3.00
Outstanding at end of period		11,317,542		$	1.51

A summary of the status of the warrants outstanding at September 30, 2007 is presented below:

	Warrants Outstanding						Warrants Exercisable
Range of Exercise Prices	Number Outstanding		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$.01-.50		685,000		2.4 years	$	0.02		685,000	$	0.02
1.00-1.99		9,215,000		2.6 years		1.31		8,815,000		1.31
2.00-2.99		575,000		3.4 years		2.70		575,000		2.70
3.00-3.99		324,166		6.0 years		3.43		324,166		3.43
4.00-4.99		255,000		2.0 years		4.00		255,000		4.00
5.00-5.50		263,376		2.2 years		5.15		263,376		5.15
$.01-5.50		11,317,542		2.7 years	$	1.51		10,917,542	$	1.52

14

EAU TECHNOLOGIES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 8 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

The fair value of each warrant granted is estimated on the date granted using the Black-Scholes pricing model, with the following assumptions for warrants issued in 2007: risk-free interest rate of between 4.6% and 4.99%, expected dividend yield of zero, expected lives of 3 and 5 years and expected volatility of between 59.76 % and 89.54 %.

NOTE 9 - SALE OF DIVISION

In March 2007, the Company signed a non-binding Letter of Intent with an unrelated third party to explore the possible sale of the Company’s Consumer Products division. In accordance with SFAS 144, the related assets, which consist of property and equipment and intellectual property, have been reclassified as held-for-sale. In August 2007, the Company signed a Purchase Agreement with the party to close in thirty (30) days. While the closing did not take place as scheduled, we are currently in negotiations to complete the transaction and anticipate closing in November 2007. As of September 30, 2007, the party had paid $100,000 in non-refundable earnest money. The party deposited an additional $100,000 in non-refundable deposits, subsequent to September 30, 2007.

NOTE 10 - SUBSEQUENT EVENTS

In October 2007, Water Science exercised a portion of its warrants at an exercise price of $1.30 per share and the Company issued 1,538,463 shares of common stock. The shares were issued in exchange for the advances made to the Company in the amount of $2,000,000.

In October 2007, Water Science advanced the Company $500,000.

On October 31, 2007, the Board of Directors of the Company appointed Karl Hellman and J. Leo Montgomery as members of the Board of Directors (the “Board”). Mr. Montgomery will serve as Non-Executive Chairman of the Board. The Board also appointed Mr. Hellman as a member of the Compensation Committee and appointed Mr. Montgomery as a member of the Audit Committee.

In October and November 2007, under the terms of our purchase agreement for the sale of the consumer division and extension agreements, the potential purchaser deposited non-refundable deposits of $100,000 with the Company (see Note 9).

In November, the Company entered into a new employment agreement with an officer of the Company, Doug Kindred. Mr. Kindred will serve as the Company’s Chief Technology Officer. The agreement provides a base salary of $176,589 per year and options to purchase up to 530,000 shares of common stock in the Company, which vest over four (4) years. The term of the contract is for three (3) years with an automatic renewal for a one year term.

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Item 2.Management's Discussion and Analysis or Plan of Operation

The following discussion and analysis provides information, which management believes is relevant to an assessment and understanding of the Company’s condensed results of operations and financial condition. The discussion should be read in conjunction with the financial statements included in our annual report on Form 10-KSB, and notes thereto.

Overview

EAU TECHNOLOGIES, INC., previously known as Electric Aquagenics Unlimited, Inc. (referred to herein sometimes as “EAU,” “we,” “us,” or the “Company”), is in the business of developing, manufacturing and marketing equipment that uses water electrolysis to create fluids. These fluids have various commercial applications and may be used in commercial food processing organic or conventional agricultural products that clean, disinfect, remediate, hydrate and moisturize. The processes for which these fluids may be used are referred to in this prospectus as the “EOW Technology.” For example, we believe that our food and agricultural treatment products potentially may be used to systemically treat all facets and phases of the food chain, from soil to animal feed to meat processing. Our products would accomplish this by eliminating dangerous and unhealthy pathogens from the food chain with organically based and highly effective solutions. We make the claim that our products are “non-toxic”. We can do this because at the levels we employ our technology, our studies both internal as well as through third parties show no toxicity. We are conducting further studies so we can make more specific claims in the future. We also develop, manufacture and market consumer products that support a healthy lifestyle, such as our Perfect Empowered Drinking Water™ and Perfect Oxygenated Essentials™ products. EAU has entered into an agreement for the sale of this division. At the levels employed, the fluids and products are safe for the environment and non-toxic. Our fluids and products also do not contain or leave harmful residues often associated with chemical-based supplements and disinfecting and cleaning agents. The electrolyzed fluids created by the EOW Technology (referred to herein sometimes as the “EO Fluids” or “Empowered Water^TM”) generated by our patented and patent pending specialized equipment currently replace many of the traditional products used in commercial, industrial and residential disinfecting and cleaning.

We have identified the following industries for early stage sales and marketing focus: 1) dairy production and processing, 2) meat and poultry processing, 3) environmental remediation and 4) agricultural grow-out and processing (“Primary Markets”). As of the date of this Report, the Company was focused on these markets because we believe that for each of these markets we have a competitive advantage and/or can provide an attractive value-added proposition. To penetrate these markets, EAU is conducting trials that will lead to partnerships with industry leaders who can assist in rolling the technology out on a large scale. EAU has other channels that we have and are continuing to service and generate revenues from. We will continue to do such into the future, however at this time EAU is not putting any significant effort into developing growth in those markets until we have seen significant traction in our defined early stage sales and marketing channels. EAU has seen success in marketing its Empowered Water™ products in the consumer products industry, but doesn’t feel that this is our core competency. EAU has entered into an agreement for the sale of this division.

We have obtained patent protection on two separate facets of electrolyzed fluids as well as the water generating technology. The facets for which we have obtained patent protection are how the fluids are used and how they are stabilized for use in different applications. Additionally, we have patents pending on poultry processing, and we have filed several provisional patent pending applications to protect new processes and products. Previously, we generated our revenues primarily from equipment sales to the carpet and living surfaces industries, and some consumer product sales. In 2006, we saw our first sales in the agriculture segment. All of these sales were made to Water Science, LLC, a company set up primarily to market Empowered Water™ in Latin America. Currently we are seeking to expand those markets as well as introducing what we have learned in those markets to the United States. We will continue to seek to derive future EOW Technology revenues from recurring fees we charge to customers based on per-unit or per-gallon of fluid used after equipment has been installed. Additionally, we will seek to introduce our technology to meat and poultry processing by leveraging the development and trials that we conducted in the United States into installations.

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We have shipped and installed five of the nine units ordered from Water Sciences, LLC. The units have been installed in Holland, Ecuador, Costa Rica, Mexico and Colombia. Shipment dates and locations of the remaining units have yet to be determined by Water Sciences. Water Sciences is currently using Empowered Water™ fluids in various agricultural channels.

We are currently installed in four Whole Foods Market (WFM) stores in the South Region. These stores are using the Empowered Water™ in three areas of the store: floral, fresh cut produce and leafy vegetable rinse area. In January 2007, the Company entered into an amended exclusive licensing and product supplier agreement with Zerorez Franchising Systems, Inc. (Zerorez), a previously affiliated entity, to provide Zerorez with its Primacide water solutions and water generator for its carpet cleaning franchisees. The Company has sold Empowered Water™ generators to over 30 franchises. The Company is committed to sell to Zerorez the Primacide B water generator over the next 5 years under the agreement, ending on December 31, 2011. The agreement allows for the automatic renewal of the agreement for three (3) terms of five year terms, unless both parties agree to the cancellation of the agreement.

In May 2007, we signed an agreement with a small dairy plant whereby the dairy has agreed to lease our equipment and pay a royalty for the technology beginning in August 2007. The Company has been testing our equipment in this facility for over one year. While the amounts for this agreement are not significant, the Company believes that this agreement will serve as a model for expanding its presence in the dairy industry. Since then, we have also signed agreements with multiple other dairies to install our equipment and begin testing our equipment at their facilities. We are currently in trials on two large farms in different regions of the Country. We anticipate having two to four additional dairies installed in their prospective trial phases and performing by the end of the year. . This trial phase can last anywhere from one month to four months.

On October 31, 2007, the Board of Directors of the Company appointed Karl Hellman and J. Leo Montgomery as members of the Board of Directors (the “Board”). Mr. Montgomery will serve as Non-Executive Chairman of the Board. The Board also appointed Mr. Hellman as a member of the Compensation Committee and appointed Mr. Montgomery as a member of the Audit Committee.

In November, the Company entered into a new employment agreement with an officer of the Company, Doug Kindred. Mr. Kindred will serve as the Company’s Chief Technology Officer. The agreement provides a base salary of $176,589 per year and options to purchase up to 530,000 shares of common stock in the Company, which vest over four (4) years. The term of the contract is for three (3) years with an automatic renewal for a one year term.

Our operations are currently funded by a combination of revenues and capital funding.

Financial Position and Results of Operations

The following discussion should be read in conjunction with selected financial data and the financial statements and notes to financial statements.

Financial Position

The Company had $309,914 in cash as of September 30, 2007, compared to $206,094 at December 31, 2006. We also had $240,000 in restricted cash related to an escrow agreement. Our working capital as of September 30, 2007 was $(2,843,252) compared to $961,230 at December 31, 2006. The majority of the change in working capital is due to the reclassification of the Senior Note form long term debt to a current liability as it is now due within one year. In addition to the senior note, the change is also due to the advances made to the Company in anticipation of exercising warrants (which occured in October 2007) The Company has received and recorded $697,500 in advance deposits from Water Science on machine orders at September 30, 2007. This will be reduced as the Company delivers machines on order to Water Science, a related party. Water Science, who has exclusive rights to sell our products in Central and South America is also an affiliate of the Company, by agreement may purchase machinery from us at cost plus 25 percent. These deliveries are targeted to occur during the second half of 2007. Long term debt decreased $1,371,091 at December 31, 2006 to $62,356 at September 30, 2007, or $1,308,735. The decrease is a result of the reclassification of the Senior Note Payable as previously discussed. At September 30, 2007, our stockholders’ deficit was $8,670,981. The majority of the decrease is from the recording of the expenses related to the issuance of warrants, as discussed later.

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Summary of select balance sheet information follows:

	September 30, 2007		December 31, 2006
Balance Sheet Data:	(Unaudited)
Cash and Cash Equivalents	$	309,914	$	206,094
Total Current Assets		2,987,430		3,077,702
Total Assets		5,000,650		4,929,761
Total Current Liabilities		5,830,682		2,116,472
Long Term Debt		62,356		1,371,091
Total liabilities and stockholders’ equity	$	5,000,650	$	4,929,761

Results of Operations for the Three months ended September 30, 2007 and 2006

Revenues and Net Income

The Company had total revenues of $396,875 for the three months ended September 30, 2007, which represents a decrease of 49% from the $778,737 in total revenues for the same period one year earlier. Net loss for the three months ended September 30, 2007 was $1,199,252, or a loss of $0.09 per share, compared with a net loss of $1,351,852, or $0.12 per share for the same period in 2006. The current quarter net loss includes $279,255 in interest expense, compared to $282,909 in 2006. The majority of the interest expense is related to the senior note payable entered into in September 2005.

General and Administrative Expenses

The Company’s general and administrative expenses totaled $1,193,528 during the three months ended September 30, 2007, compared to $1,289,315 during the three months ended September 30, 2006, for a decrease of $95,787, or 7%. General and Administrative expense for 2007 consisted primarily of expense related to payroll and other compensation expense ($579,464), legal and professional fees ($204,309) and travel related expenses ($82,805). The Company has implemented tighter controls to reduce its general and administrative expenses by reducing any unnecessary expenses, reducing payroll expense and challenging all of its expenditures.

Research and Development

Research and development expenses incurred during the three month period ended September 30, 2007 increased $16,439 or 33%, from $50,329 in 2006 to $66,768 in 2007. It is anticipated that the Company’s research and development expenditures will vary over the next months due to research it intends to continue in the agriculture poultry and dairy markets. While the Company will continue to conduct research to improve its products and their performance, it believes it has developed proven products that have commercial value in its targeted markets.

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Summary of select income statement information follows:

	Three months ended September 30,
	2007		2006		Better (Worse)			Percent Change
Revenue, net	$	396,875	$	778,737	$	(381,862	)		49	%
Gross profit		250,103		265,883		(15,780	)		6	%
Loss before other income		1,069,988		1,128,470		58,482			5	%
Net loss		1,199,252		1,351,852		152,600			11	%
Loss per share		0.09		0.12		0.03			25	%

Results of Operations for the Nine months ended September 30, 2007 and 2006

Revenues and Net Income

The Company had total revenues of $1,126,457 for the nine months ended September 30, 2007, which represents a decrease of 40% from the $1,822,077 in total revenues for the same period one year earlier. 12%, or $234,619, of the total revenues for the nine months ended September 30, 2006 was from products unrelated to the Company’s core technology. In an effort to streamline our corporate focus and our business plan, the Company is no longer marketing products that are not directly related to its core competencies, which is the development of Empowered Water™ technologies.

Net loss for the nine months ended September 30, 2007 was $10,539,203, or a loss of $0.78 per share, compared with a net loss of $5,631,776, or $0.55 per share for the same period in 2006. The majority of the increased net loss is a result of the cancellation and issuance of warrants as part of a financing agreement entered into in May 2007. In connection with the new financing agreement, the Company recognized a net change in the derivative liability of $2,547,615, which directly impacted the income statement. Our loss before other income/expense was $7,197,658 for the nine months ended September 30, 2007 as compared with $5,527,989 for the comparable period in 2006.

General and Administrative Expenses

The Company’s general and administrative expenses totaled $7,537,255 during the nine months ended September 30, 2007, compared to $5,935,935 during the nine months ended September 30, 2006, for an increase of $1,601,320, or 27%. General and Administrative expense for 2007 consisted primarily of expenses related to the issuance of warrants ($3,974,884), payroll and other compensation expense ($1,578,622), legal and professional fees ($647,208), travel related expenses ($227,331) and rent ($164,526). The Company continues to strive to reduce its general and administrative expenses by reducing any unnecessary expenses and challenging all of its expenditures.

Research and Development

Research and development expenses incurred during the nine month period ended September 30, 2007 increased $29,578 or 25%, from $119,665 in 2006 to $149,243 in 2007. It is anticipated that the Company’s research and development expenditures will continue at approximately this same level or a little higher due to research it intends to continue in the agriculture, poultry and dairy markets. While the Company will continue to conduct research to improve its products and their performance, it believes it has developed proven products that have commercial value in its targeted markets.

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Summary of select income statement information follows:

	Nine months ended
	September 30,
	2007		2006		Better (Worse)			Percent Change
Revenue, net	$	1,126,457	$	1,882,077	$	(755,620	)		40	%
Gross profit		665,187		688,170		(22,983	)		3	%
Loss before other income		7,197,658		5,527,989		(1,669,669	)		30	%
Net loss		10,539,203		5,631,776		(4,907,427	)		87	%
Loss per share		0.78		0.55		(0.23	)		42	%

Liquidity and Capital Resources

At September 30, 2007, we had cash and cash equivalents of $309,914, compared to $206,094 at December 31, 2006. We have had continuing losses of $10,539,203 for the nine months ended September 30, 2007, compared with losses of $5,631,776 or the nine months ended September 30, 2006. The net loss per share for the period ending September 30, 2007 was $0.78 compared to a loss of $0.55 per share for the same period in 2006. The increase in losses is primarily attributable to the warrants issued in the financing agreement previously discussed.

Net cash used in operating activities in the nine month period ended September 30, 2007 was $3,431,938, a 30% decrease, compared to $4,856,520 for the same period in 2006. The primary uses of cash were an increase in restricted cash of $240,000, a decrease in accrued expenses of $83,171 and a decrease in accounts payable of $360,536.

At September 30, 2007, the Company’s inventory was $2,449,817, compared to $2,502,263 on hand at December 31, 2006. The Company is in the process of building machines for Water Science, LLC, a related party, and for dairy projects for expected deliveries in the second half of 2007. The Company has maintained its inventory at approximately the same levels as that of December 31, 2006.

The operating outflow of cash was reduced by the Company issuing warrants and stock options in lieu of cash during the quarter of $282,119 and the issuance of warrants as part of the financing agreement of $3,974,884. The Company adopted SFAS 123(R), effective January 1, 2006, and now expenses stock options given to employees. The Company recognized a non-cash increase from the discounting of the Company’s note payable to Water Science, LLC of $750,000. (See Note 4 to the Company’s unaudited financial statements.) Further, the Company recognized a non-cash increase in the derivative liability of $2,547,614, due to the change in the Black-Scholes value of the liability.

Cash flows from investing activities provided the Company $763 during the period ended September 30, 2007 as compared to a cash inflow of $425,886 for the same period in 2006. During 2007, the cash flows consisted of $100,000 received by the Company as a deposit on assets held for sale, $91,848 used to purchase equipment and investments in intellectual property and patents of $7,389. This compares to $452,886 net cash received from the sale of our investment in Equilease, $38,083 net cash received from notes receivables, $46,238 used to purchase equipment and $18,518 used to invest in intellectual property and patents for the comparable period in 2006.

Cash flows from financing activities provided the Company $3,534,995 and $3,975,653 for the nine months ended September 30, 2007 and 2006, respectively. This is primarily a result of the Company’s continued sales of its common stock and capital raising activities to fund operations. The Company raised $1,550,000 and $4,000,247 from the sale of stock for the nine months ended September 30, 2007 and 2006, respectively, and received $2,000,000 in advances by a related party. This amount was offset by payments made on notes payable in the amount of $15,005 and $24,844 in 2007 and 2006, respectively.

20

In March 2007, the Company signed a non-binding Letter of Intent with an unrelated third party to explore the possible sale of the Company’s Consumer Products division. In accordance with SFAS 144, the related assets, which consist of property and equipment and intellectual property, have been reclassified as held-for-sale. In August 2007, the Company signed a Purchase Agreement with the party to close in thirty (30) days. While the closing did not take place as scheduled, we are currently in negotiations to complete the transaction and anticipate closing in November 2007. As of September 30, 2007, the party had paid $100,000 in non-refundable earnest money. The party deposited an additional $100,000 in non-refundable deposits, subsequent to September 30, 2007.

Our working capital requirements for the foreseeable future will vary based upon a number of factors, including, our timing in the implementation of our business plan, our growth rate and the level of our revenues. In April 2007, we received a $1 million advance from Water Science. In May 2007, we entered into an agreement to cancel and re-issue certain warrants to Water Science. As part of the agreement, the Company has a right to require Water Science to exercise warrants for up to 3,230,769 shares at $1.30 per share; the Company may exercise the put right from time to time, but not more often than once per month. We also received cash advances of $500,000 each in June, August and October. The advances from April, June and August were used to exercise 1,538,463 of the warrants associated with the put rights. We have no commitments to fund any future capital expenditures. We expect that our current assets, along with cash generated from anticipated revenues and funds from our put right, will not provide us with sufficient funding for the next twelve months. However, if we are able to expand our sale of EO machines as anticipated, we may need significant additional working capital to fund that expansion. In addition, the Company continues to experience negative cash flow from operations. If the Company is unable to generate positive cash flow, the ability of the Company to continue as a going concern is in substantial doubt.

If the Company does not raise sufficient funds in the future, we may not be able to fund expansion, take advantage of future opportunities, meet our existing debt obligations or respond to competitive pressures or unanticipated requirements.

Future financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, 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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and our discussion and analysis of our financial condition and results of operations require us to make judgments, assumptions and estimates that affect the amounts reported in our financial statements and accompanying notes.  Note 1 of the notes to consolidated financial statements in Part II, Item 7 of the Company’s Annual Report on Form 10-KSB, dated December 31, 2006, describes the significant accounting policies and methods used in preparation of our consolidated financial statements.  We base our estimates on historical experience, current trends, future projections, and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.  Actual results may differ from these estimates. 

21

Recent Accounting Pronouncements

In March 2006, the FASB issued SFAS No. 156 “Accounting for Servicing of Financial Assets, an amendment of FASB No. 140,” which modifies the accounting for and reporting of servicing asset and servicing liabilities. This statement is effective as of the beginning of our first fiscal year that begins after September 15, 2006. SFAS No. 156 is not currently applicable to the Company and, we believe that the adoption of SFAS No. 156 will not have a material impact on our results of operations.

In June 2006, the FASB issued Financial Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109.” FIN 48 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company adopted FIN 48 for the first quarter of 2007. The adoption of FIN 48 did not have an impact on our results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” that provides guidance for using fair value to measure assets and liabilities. Under SFAS 157, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. SFAS 157 establishes a fair value hierarchy that prioritizes the information used to develop the assumptions that market participants would use when pricing the asset or liability. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data. In addition, SFAS 157 requires that fair value measurements be separately disclosed by level within the fair value hierarchy. This standard will be effective for financial statements issued for fiscal periods beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the impact of applying the various provisions of SFAS 157.

Inflation

We do not expect the impact of inflation on operations to be significant.

Precious Metals

Raw materials used by the Company in the EO Machines include a number of precious metals and minerals. Prices of these materials can be volatile and the Company has no fixed price contracts or arrangements. The Company ordinarily does not attempt to hedge the price risk of its raw materials. Commercial deposits of certain metals that are required for the alloys used in the EO Machines are found in only a few parts of the world, and for certain materials only single sources are readily available. The availability and prices of these metals and other materials may be influenced by private or governmental cartels, changes in world politics, unstable governments in exporting nations, production interruptions, inflation and other factors. Although the Company has not experienced significant shortages of its supplies and raw materials, there can be no assurance that such shortages will not occur in the future. Any such shortages or prices fluctuations could have a material adverse effect on the Company.

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Forward-Looking Statements

All forward-looking statements contained herein are deemed by the Company to be covered by and to qualify for the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995. Prospective shareholders should understand that several factors govern whether any forward-looking statement contained herein will be or can be achieved. Any one of those factors could cause actual results to differ materially from those projected herein. These forward-looking statements include plans and objectives of management for future operations, including plans and objectives relating to the products and the future economic performance of the Company. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, future business decisions, and the time and money required to successfully complete development projects, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of those assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in any of the forward-looking statements contained herein will be realized. Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, risks associated with successfully developing our business in evolving markets, our need for additional capital, our continuing operating losses, the ability of our management to conduct distribution activities and sell products, possible failure to successfully develop new products, vulnerability to competitors due to lack of patents on our products, and other risk factors listed in our annual report on Form 10-KSB for the year ended December 31, 2006 and our other SEC reports. Based on actual experience and business development, the Company may alter its marketing, capital expenditure plans or other budgets, which may in turn affect the results of operations. In light of the significant uncertainties inherent in the forward-looking statements included therein, the inclusion of any such statement should not be regarded as a representation by the Company or any other person that the objectives or plans will be achieved.

Item 3. Controls and Procedures

The Company has evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the issuer’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of September 30, 2007, pursuant to Exchange Act Rule 15d-15. Based upon that evaluation, the principal executive and financial officers concluded that the Company’s disclosure controls and procedures were not effective at the reasonable assurance level.

Management has engaged a local accounting firm to assist the Company in reviewing, documenting and testing our significant controls and procedures. We anticipate completing this project by the end of 2007.

Management also determined that certain stock options and warrants granted for services may not have been properly treated for tax withholding. Management is reviewing all granted options and warrants with professional tax accountants to resolve this matter.

The Company’s management does not expect that its disclosure controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdown can occur because of simple error or mistake.

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There have been no significant changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, or other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation.

PART II - OTHER INFORMATION

Item 1.Legal Proceedings

None

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

In October 2007, Water Science exercised a portion of its warrants at an exercise price of $1.30 per share and the Company issued 1,538,463 shares of common stock. The shares were issued in exchange for the advances made to the Company in the amount of $2,000,000.

In May 2007, the Company issued 100,000 shares of common stock for $50,000, or $0.50 per share, to an individual upon the exercising of warrants.

In May 2007, the Company entered into a termination agreement related to the cancellation and reissuance of the existing warrants (“Original Warrants”) to purchase a total of 8.4 million shares of $0.0001 par value common stock of the Company, at a price of $2.76 per share, held by Water Science. The Company granted to Water Science replacement warrants to purchase 8.4 million shares of common stock at a price of $1.30 per share, with an expiration date of May 9, 2010. The Company has a right to require Water Science to exercise warrants for up to 3,230,769 shares; the Company may exercise the put right from time to time, but not more often than once per month. The sale of the securities was exempt from registration with the Securities and Exchange Commission under Section 4(2) of the Securities Act of 1933 (the “Act”) and Rule 506 of Regulation D promulgated thereunder, in that Water Science is an accredited investor and the placement occurred without general solicitation.

Item 3.Defaults Upon Senior Securities

None

Item 4.Submission of matters to Vote of Security Holders

There were no matters submitted to a vote of stockholders during the third quarter of 2007.

Item 5. Other Information

The Annual Meeting of Stockholders will be held at the following place and time: Courtyard Marriott Buckhead, located at 3332 Peachtree Road NE, Atlanta, Georgia 30326, on Thursday, December 6, 2007 at 7:30 a.m. The Company mailed its proxy statement to stockholders on November 5, 2007. All stockholder proposals were required to be received by the Company by November 5, 2007, in order to be considered timely. If such stockholder proposals are not timely received, proxy holders will have discretionary voting authority with regard to any such shareholder proposals that may come before the Annual Meeting.

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Item 6.Exhibits and Reports on Form 8-K

EXHIBIT NO.	DESCRIPTION OF EXHIBIT
3(i).1	Articles of Incorporation (Incorporated by reference from registration statement on Form SB-1 filed with the SEC on July 29, 2002 (File No. 333-86830)
3(i).2	Certificate of Amendment of Certificate of Incorporation (Incorporated by reference from registration statement on Form SB-1 filed with the Securities and Exchange Commission on July 29, 2002 (File No. 333-86830)
3(i).3	Certificate of Amendment of Certificate of Incorporation (Incorporated by reference from current report on Form 8-K filed with the Securities and Exchange Commission on January 17, 2007)
3(ii).1	Amended and Restated Bylaws (Incorporated by reference from current report on Form Form 8-K filed with the Securities and Exchange Commission on September 12, 2007 (File No. 333-86830).
10.1	Agreement for Purchase and Sale of Assets dated as of August 13, 2007 between the Company and Perfect Water & Essentials, LLC (“PWE”) (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated August 22, 2007)
10.2	Closing Date Extension Agreement for Purchase and Sale of Assets dated as of September 27, 2007 between the Company and Perfect Water & Essentials, LLC (“PWE”) (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated September 27, 2007)
10.3	Form of Employment Agreement dated as of November 8, 2007 with Doug Kindred (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated November 8, 2007)
10.4	Form of Option Agreement dated as of November 8, 2007 with Doug Kindred (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated November 8, 2007)
31.1	Certification by Wade R. Bradley under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Brian D. Heinhold under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Wade R. Bradley pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Brian D. Heinhold pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

25

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant cause this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 14, 2007

EAU TECHNOLOGIES, INC.
By:	/s/ Wade R. Bradley
	Wade R. Bradley
	Chief Executive Officer (Principal Executive Officer)

By:	/s/ Brian D. Heinhold
	Brian D. Heinhold
	Chief Financial Officer (Principal Financial Officer)

26

EX-31

Exhibit 31.1

CERTIFICATION

I, Wade R. Bradley, certify that:

1. I have reviewed this report on Form 10-QSB of EAU Technologies, Inc.;

2. Based on my knowledge, this 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 report;

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

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

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our 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

c)   Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer'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 small business issuer's internal control over financial reporting.

Date: November 14, 2007	By:	/s/ Wade R. Bradley
		Wade R. Bradley Chief Executive Officer (Principal Executive Officer)

EX-31

Exhibit 31.2

CERTIFICATION

I, Brian D. Heinhold, certify that:

1. I have reviewed this report on Form 10-QSB of EAU Technologies, Inc.;

2. Based on my knowledge, this 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 report;

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

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

a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)   Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our 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

c)   Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer'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 small business issuer's internal control over financial reporting.

Date: November 14, 2007	By:	/s/ Brian D. Heinhold
		Brian D. Heinhold Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32.1

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 EAU Technologies, Inc. (the “Company”) on Form 10-QSB for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Wade R. Bradley, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 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.

Date: November 14, 2007	By:	/s/ Wade R. Bradley
		Wade R. Bradley Chief Executive Officer EAU Technologies, Inc.

EX-32

Exhibit 32.2

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 EAU Technologies, Inc. (the “Company”) on Form 10-QSB for the period ended September 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian D. Heinhold, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 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.

Date: November 14, 2007	By:	/s/ Brian D. Heinhold
		Brian D. Heinhold Chief Financial Officer EAU Technologies, Inc

.