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EX-32 - INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.v193563_ex32.htm
EX-31 - INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.v193563_ex31.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2010

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-26309

INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.
(Exact name of registrant as specified in its charter)

Nevada
98-0200471
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

4235 Commerce Street
   
Little River, South Carolina
 
29566
(Address of principal executive offices)
 
(Zip Code)

(843) 390-2500
(Registrant’s telephone number, including area code)

Copies of Communications to:
Alfred V. Greco, PLLC
199 Main Street, Suite 706
White Plains NY  10601
(914) 682-3030
Fax (914) 682-3030

Indicate by check mark whether the registrant (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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ¨    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨
Accelerated filer  ¨
   
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)
Smaller reporting company  x

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

The number of shares of Common Stock, $0.001 par value, outstanding on June 30, 2010, was 105,261,228 shares.
 

 
 
PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
Integrated Environmental Technologies, Ltd.
Condensed Consolidated Balance Sheets
 
   
  June 30, 
   
  December 31, 
 
   
  2010 
   
  2009 
 
Assets:                
Current Assets:
               
Cash
  $ 349,003     $ 819,611  
Accounts receivable
    498,950       111,375  
Inventory
    199,716       82,910  
Prepaid expenses
    8,481       20,256  
                 
  Total current assets
    1,056,150       1,034,152  
                 
Building
    223,244       -  
Equipment
    28,371       20,445  
Accumulated depreciation
    (13,945 )     (11,597 )
              -  
  Total building and equipment
    237,670       8,848  
                 
    $ 1,293,820     $ 1,043,000  
Liabilities and Shareholders' Equity (Deficit)
               
Current liabilities:
               
Accounts payable
  $ 154,723     $ 112,057  
Accrued expenses
    146,498       189,386  
Notes payable
    250,000       98,300  
Convertible notes
    437,453       489,000  
                 
  Total current liabilities
    988,674       888,743  
                 
Shareholders' Equity (Deficit)
               
Common stock 200,000,000 shares authorized
               
par value $.001, 105,261,228 and 94,533,467 shares issued
               
and outstanding at June 30, 2010 and December 31, 2009
    105,261       94,533  
Stock bought not issued, 0 and 6,264,329 shares
               
at June 30, 2010 and December 31, 2009
    -       6,264  
Paid-in capital
    12,228,300       11,384,911  
Retained earnings (deficit)
    (12,028,415 )     (11,331,451 )
                 
  Total shareholders' equity (deficit)
    305,146       154,257  
  Total liabilities and shareholders' equity (deficit)
  $ 1,293,820     $ 1,043,000  
 
See notes to condensed consolidated financial statements.
 

 
Integrated Environmental Technologies, Ltd.
Condensed Consolidated Statements of Operations
Unaudited
 
   
For The Six Months Ended
June 30,
   
For The Three Months Ended
June 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Sales
  $ 610,621     $ 35,736     $ 543,402     $ 783  
Licensing Fees
    29,628       -       28,910       -  
Total Revenue
    640,249       35,736       572,312       783  
Cost of sales
    209,456       17,412       176,095       530  
                                 
Gross profit
    430,793       18,324       396,217       253  
                                 
Professional and administrative fees
    324,772       162,093       195,195       79,910  
Salary
    418,556       296,862       154,932       133,904  
Depreciation and amortization
    2,347       1,615       1,400       1,223  
Office & miscellaneous expense
    281,979       203,303       190,533       84,384  
Bad debt expense
    2,706       30       -       -  
                                 
Total operating expenses
    1,030,360       663,904       542,060       299,421  
                                 
Loss from operations
    (599,567 )     (645,580 )     (145,843 )     (299,168 )
                                 
Other income (expense):
                               
Finance fees
    (62,754 )     (178,491 )     (9,916 )     (118,002 )
Interest expense
    (34,642 )     (63,441 )     (26,389 )     (39,082 )
Total other income (expense)
    (97,396 )     (241,932 )     (36,305 )     (157,084 )
                                 
Net loss
  $ (696,963 )   $ (887,511 )   $ (182,148 )   $ (456,252 )
                                 
                                 
Weighted average shares outstanding
    103,047,996       81,374,213       104,779,295       83,664,511  
Net loss per share basic and diluted
  $ (0.01 )   $ (0.01 )   $ (0.00 )   $ (0.01 )
 
See notes to condensed consolidated financial statements.
 

 
Integrated Environmental Technologies, Ltd.
 
Condensed Consolidated Statements of Cash Flows
 
Unaudited
 
       
   
For The Six Months Ended June 30,
 
   
2010
   
2009
 
Cash flows from operating activities:
           
Net loss
  $ (696,963 )   $ (887,511 )
Adjustments to reconcile net loss to net cash
               
  used in operating activities:
               
    Depreciation and amortization
    2,347       1,615  
    Stock and warrants issued for loan or interest costs
    160,423       -  
     Stock and warrants issued to employees and
       directors for services
    117,000       178,491  
         Accretion of interest
    9,682       -  
         Other
    -       (3,109 )
Changes in operating assets and liabilities:
               
Accounts receivable
    (387,575 )     (762 )
Inventory
    (116,806 )     (1,809 )
Deposits and prepaids
    11,776       24,579  
Accounts payable
    42,666       (5,897 )
Accrued expenses
    (42,890 )     24,801  
Cash used in operating activities
    (900,340 )     (669,603 )
                 
Cash flows from investing activities:
               
Purchase of building improvements and equipment
    (231,168 )     -  
Cash used in investing activities
    (231,168 )     -  
                 
Cash flows from financing activities:
               
Proceeds from the sale of common stock and warrants
    59,880       505,000  
Payment on notes payable, net
    175,000       175,000  
Payments on convertible debentures
    -       (4,000 )
Proceeds from convertible debt
    211,270       -  
Proceeds from the exercise of warrants and options
    214,750       -  
Cash provided by financing activities
    660,900       676,000  
                 
Increase (decrease) in cash
    (470,608 )     6,397  
Cash beginning of period
    819,611       33,357  
Cash end of period
  $ 349,003     $ 39,754  
                 
Supplemental disclosure of cash flow information:
               
Cash paid for interest
  $ 34,642     $ 47,054  
Cash paid for income taxes
  $ -     $ -  
                 
Non-cash financing activities:
               
Stock and warrants issued to employees and directors
   for services
  $ 117,000     $ 178,491  
Stock and warrants issued for loan and interest costs
  $ 160,423     $ -  
Stock issued for convertible notes
  $ 295,800     $ -  

See notes to condensed consolidated financial statements.
 

 
Integrated Environmental Technologies, Ltd.
Notes to Condensed Consolidated Financial Statements
 
Note 1 – Basis of presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation.  All such adjustments are of a normal recurring nature.  The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.  Certain amounts in the prior year statements have been reclassified to conform to the current year presentations.  The statements should be read in conjunction with the financial statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2009.

The financial statements include the Company’s wholly-owned subsidiary.  All significant inter-company transactions and balances have been eliminated.

Note 2 - Going concern

The accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.  Our ability to continue as a going concern is dependent upon attaining profitable operations.  We may consider using borrowings and security sales to mitigate the effects of our cash position; however, no assurance can be given that debt or equity financing, if and when required, will be available.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should we be unable to continue in existence.

Note 3 - Notes payable

Notes payable consisted of the following at June 30, 2010:

Note payable, secured, bearing interest at base margin rate plus 3.25%   per annum.
  $ 250,000  
    $ 250,000  

Note 4 - Convertible notes payable

As of June 30, 2010, we have 10% convertible notes totaling $216,500.  We have extended the original maturity date of January 2, 2009 for these notes, and will continue to accrue interest at a rate of 10% per annum, payable semi-annually, until the notes are paid.  These notes are currently in default.

On April 8, 2010, the Board authorized the offering of a maximum aggregate amount of $750,000 in 8% annual interest convertible debentures with detachable Series “IE” warrants.  The instruments mature on April 7, 2011, and have a $0.60 conversion-to-common-stock rate through maturity.  The warrants are exercisable at $0.75 per share through December 31, 2010, or at $1.20 per share from January 1, 2011 through December 31, 2011.  In the quarter ended June 30, 2010, we sold 5 units consisting of $250,000 of 8% Convertible Debentures, 50,000 warrants (exercisable at $0.75 per share through December 31, 2011), and 200,000 Series “IE” Warrants, for a total purchase price of $252,500.  We allocated the proceeds from the sale of the instruments based on the fair value of each of the instruments sold.  The value assigned to the notes was $211,270, and the value assigned to the warrants was $41,230.  We will accrete additional interest over the period of the sale to maturity of the notes.   In the quarter ended June 30, 2010, we accreted interest of $9,682, and will accrete $29,048 in future periods.
 

 
Integrated Environmental Technologies, Ltd.
Notes to Condensed Consolidated Financial Statements

Note 5 – Common stock

In the quarter ended March 31, 2010, we sold a total of 180,000 shares for a total purchase price of $18,000.  

In the quarter ended March 31, 2010, warrants and options were exercised for a total purchase price of $16,100, which resulted in 160,000 shares issued. 

On January 20, 2010, 123,214 warrants were issued through a cashless exercise of 150,000 warrants, thereby using the 26,786 remaining warrant shares to satisfy the exercise price.

On January 21, 2010, we authorized the issuance of a total of 450,000 shares of restricted common stock to certain employees as contract compensation or as bonus in lieu of cash compensation, and to directors as compensation for attendance of board meetings.  These shares were issued on February 2, 2010.  The expense was $117,000, which represented the fair market value of the shares on the date the awards were made.
 
On March 5, 2010, a note and accrued interest totaling $26,685 were converted into 106,740 shares of restricted common stock at a conversion rate of $0.25 per share.  The shares were issued on March 11, 2010.

In the quarter ended March 31, 2010, certain note holders converted $272,500 of principal amounts due under their debenture agreements at a conversion rate of $0.25 per share of common stock.  The 1,090,000 shares were issued on February 25, 2010 and April 15, 2010.

In the quarter ended June 30, 2010, 68,478 shares were issued by a cashless exercise of warrants to purchase 150,000 shares for $0.25 per share, thereby using the 81,522 remaining warrant shares to satisfy the exercise price.  The 68,478 shares were issued on April 26, 2010.

In the quarter ended June 30, 2010, warrants and options were exercised for a total purchase price of $198,650, which resulted in the issuance of 2,085,000 shares. 

On April 16, 2010, we issued 200,000 shares in connection with a consulting agreement.  The value of the shares was $61,800, which will be expensed over the one-year term of the agreement.  These shares were issued on April 26, 2010.  
 

 
Integrated Environmental Technologies, Ltd.
Notes to Condensed Consolidated Financial Statements

Note 6 – Options and warrants

A summary of stock options and warrants is as follows:

   
Options
   
Average
Price
   
Warrants
   
Average
Price
 
Outstanding  1/1/2010
    1,075,000     $ 0.11       17,379,582     $ 0.12  
  Granted
    -       -       1,425,000       0.41  
  Cancelled
    -       -       -       -  
  Exercised
    25,000       0.11       2,520,000       .10  
Outstanding 6/30/2010
    1,050,000     $ 0.11       16,284,582     $ 0.15  

On February 25, 2010, we issued 225,000 warrants to purchase restricted shares of common stock at $0.28 per share, issued in connection with consulting services.  The value of the services was $35,818 which will be expensed over the one-year period of the consulting agreement.  The amount expensed as professional fees in the three and six months ended June 30, 2010 was $8,622 and $11,939, respectively.

On March 5, 2010, we granted 300,000 warrants to purchase restricted shares of common stock at $0.10 per share, issued in connection with our borrowings.  We expensed as loan costs $52,838 in the period ended March 31, 2010.

On April 1, 2010, we issued 400,000 warrants to purchase restricted shares of common stock at $0.30 per share, issued in connection with consulting services.  The value of the services was $86,848, which will be expensed over the one-year period of the consulting agreement.  For the quarter ended June 30, 2010, we expensed $21,712 as professional fees.

On April 8, 2010, we issued 150,000 warrants to purchase restricted shares of common stock at $0.60 per share through December 31, 2010, or at $1.00 per share from January 1, 2011 through December 31, 2011.  These warrants were issued in connection with our borrowings (see Note 5).  The value of the warrants was $29,664, which will be expensed over one year.  For the quarter ended June 30, 2010, we expensed $7,416 as loan fees.

On April 16, 2010, we granted 250,000 warrants to purchase restricted shares of common stock in connection with the sale of our convertible debentures (see Note 4).

On June 17, 2010, we granted 100,000 warrants to purchase restricted shares of common stock in connection with a New Market Facilitation Consulting Agreement.  Pursuant to this agreement, the Consultant agreed to perform services relative to the introduction of the Company and its products into identified new market areas.  The warrants are exercisable at $1.00 per share through December 31, 2011.  The fair market value of the warrants was $16,000, which we will expense over the six-month term of the agreement.  In the quarter ended June 30, 2010, we expensed $1,333 as loan fees.
 

 
Integrated Environmental Technologies, Ltd.
Notes to Condensed Consolidated Financial Statements

The fair market value of the warrants was determined using the Black-Scholes model with the following weighted average assumptions:  Strike Price $0.34; Stock Price $0.30; Term 1.7 years; Dividend Yield 0%; Volatility 155%; and Interest Rate 0.9%.

Note 7 – Related-party transactions

We had a consulting agreement with a shareholder requiring payments of $3,000 per month.  On March 1, 2010, the term and scope of the agreement were revised, and compensation was increased to $6,000 per month.  On May 19, 2010, we executed an addendum whereby compensation was decreased to $4,500 per month.  As of June 30, 2010, we have recorded $30,000 in consulting fee expense.

We have employment agreements with two of our executives through March 30, 2012, whereby we agreed to annual compensation in the amount of $240,000.  As of June 30, 2010, the future minimum payments are as follows:

Related-party compensation requirements
 
2010
    120,000  
2011
    240,000  
Thereafter
    60,000  
Total
  $ 420,000  

Note 8 – Commitments and Contingencies

We entered into a lease agreement for our premises on January 1, 2006 for a three-year term.  In January 2009, we agreed to renew the lease for a term of five years for $71,291 per year.  The renewal term shall be upon the same covenants, conditions, and provisions as provided in the original lease.

Note 9 – Subsequent events

We have evaluated all subsequent events, and have determined that the following events require disclosure in these financial statements.

In July and August, 2010, we entered into New Market Facilitation Consulting Agreements for four markets, wherein the Consultants agreed to perform services relative to the introduction of the Company and its products into identified new market areas for the purpose of facilitating productive discussions and sales opportunities.  The term of the agreements is six months, which may be renewed.  We agreed to compensate the Consultants with a total of 800,000 warrants to purchase shares of our restricted common stock for consideration of $0.005 per warrant.  600,000 of the warrants are exercisable at $0.50 per share and the remaining 200,000 warrants are exercisable for $1.00 per share, all expiring on December 31, 2011.  The agreements further allow for the issuance of a second tranche of incentive-based warrants, based upon the Consultant securing orders valued at $200,000 or greater of the Company’s products into identified new markets, with a minimum of 50% down payment received with said orders.  The amount, purchase price, and exercise price of the warrants are to be determined upon an initial order, but the exercise price is to be set at a value of no less than 125% greater than the market value of our common stock on the trading day preceding our receipt of the sales order and down payment.
 

 
Integrated Environmental Technologies, Ltd.
Notes to Condensed Consolidated Financial Statements

On July 23, 2010, we granted 270,000 warrants to purchase restricted shares of our common stock at $0.10 per share.  These warrants were issued to correct an administrative error associated with a loan agreement which was executed in 2009, and expire on December 31, 2011.
 

 
FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may”, “could”, “estimate”, “intend”, “continue”, “believe”, “expect” or “anticipate” or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report.  Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. Additionally, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 most likely do not apply to our forward-looking statements as a result of being a penny stock issuer. You should, however, consult further disclosures we make in future filing of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to:
 
·  
the unavailability of funds for capital expenditures and/or general working capital;
   
·  
implementation of our business plan within the oil and gas industry with our distributor, Benchmark; and/or within the food processing industry with our dealer, D2W2; and/or continued entry and subsequent sales into other markets;
   
·  
increased competitive pressures from existing competitors and new entrants;
   
·  
increases in interest rates or our cost of borrowing or a default under any material debt agreements;
   
·  
the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;
   
·  
substantial dilution to our stockholders as the result of the issuance of our common stock in exchange for debt and/or equity financing;
   
·  
potential change in control upon completion of financing agreements, if any;
   
·  
deterioration in general or regional economic conditions;
   
·  
adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
   
·  
changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
   
·  
loss of customers or sales weakness;
   
·  
excessive product failure and related warranty expenses;
   
·  
inability to achieve future sales levels or other operating results; and
   
·  
operational inefficiencies in distribution or other systems.
 

 
For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Part II, Other Information, Item 1A, Risk Factors” in this document and in our Annual Report on Form 10-K for the year ended December 31, 2009.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this quarterly report. References in the following discussion and throughout this quarterly report to “we”, “our”, “us”, “IET”, “the Company”, and similar terms refer to Integrated Environmental Technologies, Ltd. and its wholly-owned subsidiary, IET, Inc., unless otherwise expressly stated or the context otherwise requires.

OVERVIEW AND OUTLOOK

Integrated Environmental Technologies, Ltd. is a life sciences-focused technology company that commercializes innovative technologies which are focused on the enhancement of the environment and the health, safety, and well-being of current and future generations.  Our wholly-owned subsidiary, IET, Inc., designs, manufactures, markets, sells, installs, and supports our proprietary EcaFlo® equipment, featuring electro-chemical activation (“ECA”) technology, in the United States and throughout the world.

The core of our business is the commercialization of ECA technology.  ECA technology is a process of passing a diluted saline solution and ordinary water through an electrolytic cell in order to generate, by electrochemical energy conversion, environmentally-responsible, highly-active, meta-stable solutions which possess electron-donor or electron-acceptor properties known as Catholytes and Anolytes.

Our equipment and the solutions our equipment produces remain the focus of our revenue strategy.  We produce and sell ECA equipment and related supplies under the EcaFlo® trade name, including three models of EcaFlo® equipment:  C-101, C-102 and C-104.  These pieces of equipment generate varying volumes of the hospital-level disinfectant trademarked EcaFlo® Anolyte.  Our business model primarily calls for the sale of EcaFlo® equipment, at contract prices, to existing, reputable, successful industry leaders within different markets (i.e.:  Benchmark – Oil and Gas; D2W2 – Food Processing).  While we profit from sales of EcaFlo® equipment, there are costs of goods sold and general and administrative costs associated with these sales.  Our plan also calls for technology fees to be paid to us on the EcaFlo® fluid solutions that are generated by our distributors and sold to their customers.  The fees are at reasonable rates on a per-gallon-sold basis and have absolutely no cost to us.  These technology fees are a sustaining revenue source and will build as we sell and install each piece of EcaFlo® equipment.  In addition to establishing a solid distribution network, we occasionally make sales directly to customers, on a limited basis, in order to effect initial penetration into some lucrative markets.

 


Our solutions have developed strong commercial interest and substantial market potential:

·  
EcaFlo® Anolyte – a strong oxidizing solution formed from naturally occurring elements that kills unwanted microorganisms and pathogens, and
·  
EcaFlo® Catholyte – an anti-oxidizing, mildly alkaline solution ideal for use as a degreaser, cleaner, and detergent.

We are highly focused on commercialization of our products in the oil and gas industry.  We have recently completed expansion of our manufacturing facility in order to increase production capabilities.  The combination of demand for gas, rubbing up against environmental concerns regarding “fracking” fluids permeating ground-water tables and water supplies, is providing the impetus in our monetizing this technology.  Our oil and gas industry distributor, Benchmark Energy Products, LLC, is producing EcaFlo® solutions tailor-made to answer the needs of the oil and gas markets through an Exclusive License and Distribution Agreement.  Recently we announced that the EPA-registered product, Excelyte® (Benchmark’s brand name for EcaFlo® Anolyte), was successfully utilized in a number of gas well fracturing treatments.  The primary use of Excelyte® is to eliminate oilfield bacteria in water employed in oil and gas wells.

EcaFlo® Anolyte, an EPA-registered product, could conceivably replace all applications for chlorine-related antimicrobials from an efficacy and efficiency standpoint.  Our commercialization of this product is premised upon the compelling economics, given the low cost to produce Anolyte and the environmentally friendly nature of the product.  The product can be as much as 100 times more effective than the bleach solutions traditionally used to mitigate pathogens in food processing, water disinfection, and fungicidal control.  The product quickly destroys microorganisms and pathogens on fruits, vegetables, and processing equipment without leaving a harmful residue.

After several years of product and market development, we are seeing strong demand for our current generation equipment from commercial users in multiple industries, including oil and gas and fresh food packaging.  We are exploring the potential need for larger volume equipment to increase capacities of EcaFlo® solutions for certain in-plant industrial uses.  A global fresh food packager has expressed interest in implementing the use of EcaFlo® Anolyte as a hard-surface disinfectant within its facilities prior to making a major capital investment in changing the systems currently used for product sanitation in order to integrate the use of EcaFlo® Anolyte into this process.

We have incurred losses since inception.  For the quarter ended June 30, 2010, we had a net loss of $696,963 and for the year ended December 31, 2009, we had a net loss of $2,798,404.  Our ability to proceed with our plan of operation has continuously been a function of our ability to increase revenues and raise sufficient capital to continue our operations.

Management intends to continue to closely monitor the costs associated with the production of EcaFlo® devices in an attempt to minimize capital shortages.  As we continue to expand operational activities and execute our business plan, we anticipate experiencing positive cash flows from operations in future quarters.  Debt borrowings may be considered from time to time, if needed.
 


Currently, management is focused on:
 
-  
finalizing processes for technology fee reporting and billing for oil and gas applications;
-  
developing entry into specific vertical markets with new distribution networks and personnel;
-  
making changes to the Company’s EPA product registration “master label” to include the addition of certain microorganisms and a change to “shelf life” verbiage; and
-  
finalizing negotiations of contract terms within the two largest market areas served by IET’s key distributors, Benchmark and D2W2.

Obtaining a patent on our “EC” electrolytic cell will further secure the Company’s ability to manufacture the most reliable, high-volume producing, pH neutral anolyte product, IET’s EcaFlo® Anolyte.  Demonstration of EcaFlo® fluid solutions in an in-plant sanitation system, to “prove positive” the efficacy and ease of use, is the final step to commercialization in a major food processing application.  Risk of failure in this demonstration has been mitigated by carefully developed protocols and implementation.  Entry into new markets, through a proven distribution vehicle, will serve to expand our markets and provide acceptance of EcaFlo® Anolyte as the preferred “green” disinfectant that replaces traditional, hazardous disinfectant chemicals.  IET continues to focus on educating consumers and the investing public about the differences between “cleaning,” “sanitizing” and “disinfecting”, and how those classifications relate to the development of commercial markets for EcaFlo® solutions.  As we seek and obtain modifications to our EPA product registration “master label,” we open more doors for the use of EcaFlo® Anolyte in different areas.  In the unlikely event that our proposed changes are not accepted, our current EPA product registration (EPA Registration No. 82341-1) affords us the ability to continue to serve the oil and gas industry, as well as food processing, hard-surface disinfection, and many other applications.  Meetings and contract negotiations could result in future material events for IET.

Results of Operations for the Three and Six Months Ended June 30, 2010 and 2009

The following table summarizes selected items from the statement of operations at June 30, 2010 compared to June 30, 2009.

SALES AND COST OF SALES:
 
Three Months
Ended June 30,
   
Increase/
(Decrease)
   
Six Months
Ended June 30,
   
Increase/
(Decrease)
 
   
2010
   
2009
   
 $
     
%
   
2010
   
2009
   
 $
     
%
 
                                                     
Sales and Licensing Fees
  $ 572,312     $ 783     $ 571,529       72,992 %   $ 640,249     $ 35,736     $ 604,513       1,692 %
                                                                 
Cost of Sales
    176,095       530       175,565       33,125 %     209,456       17,412       192,044       1,103 %
                                                                 
Gross Profit
    396,217       253       395,964       156,508 %     430,793       18,324       412,469       2,251 %
                                                                 
Gross Profit Percentage of Sales
    69 %     32 %       --       37 %     67 %     51 %       --       16 %
 

 
Sales

Our sales for the three and six months ended June 30, 2010 were $572,312 and $640,249, an increase of $571,529, or 72,992%, from sales of $783 in the three months ended June 30, 2009, and an increase of $604,513, or 1,692%, from sales of $35,736 for the six months ended June 30, 2009.  The increase in sales was as a result of finalizing conclusive agreements with distributors, and continuing to develop opportunities in targeted markets.

During the second quarter of 2010, equipment orders and technology fee billings have continued to increase.  We currently have pending sales of approximately $900,000.

Cost of sales / Gross profit percentage of sales

Our cost of sales for the three and six months ended June 30, 2010 was $176,095 and $209,456, an increase of $175,565, or 33,125%, from $530 for the three months ended June 30, 2009, and an increase of $192,044, or 1,103%, from $17,412 for the six months ended June 30, 2009.  The increase in our cost of sales is as a result of an increase in sales for this period.  The cost of sales did increase less as a percentage of sales, and we anticipate this trend to continue as sales volumes increase.  We are continuing to update and upgrade our product line and we closely monitor the costs of all of our products.

As of the three and six months ended June 30, 2010, our gross profit margins increased 37% to 69%, as compared to 32% from the three months ended June 30, 2009, and increased 16% to 67%, from 51% for the six months ended June 30, 2009.  We anticipate that this margin will continue to increase in the future as equipment sales increase.

EXPENSES:

   
Three Months Ended
June 30,
   
Increase/(Decrease)
   
Six Months Ended
June 30,
   
Increase/(Decrease)
 
   
2010
   
2009
   
 $
     
%
   
2010
   
2009
   
 $
     
%
 
Expenses:
                                                   
Professional and administrative fees
  $ 195,195     $ 79,910     $ 115,285       144 %   $ 324,772     $ 162,093     $ 162,679       100 %
Salary
    154,932       133,904       21,028       16 %     418,556       296,862       121,694       41 %
Depreciation and amortization
    1,400       1,223       177       14 %     2,347       1,615       732       45 %
Office and miscellaneous expense
      190,533         84,384         106,149       126 %       281,979         203,303         78,676       39 %
    Bad debt expense
    -       -       -       -       2,706       30       2,676       8,920 %
          Total Expenses
    542,060       299,421       242,639       81 %     1,030,360       663,904       366,456       55 %
                                                                 
(Loss) from operations
    (145,843 )     (299,168 )     (153,325 )     (51 %)     (599,567 )     (645,580 )     (46,013 )     (7 %)
                                                                 
Other income (expense):
                                                               
     Finance fees
    (9,916 )     (118,002 )     (108,086 )     (92 %)     (62,754 )     (178,491 )     (115,737 )     (65 %)
     Interest expense
    (26,389 )     (39,082 )     (12,693 )     (32 %)     (34,642 )     (63,441 )     (28,799 )     (45 %)
Total other income (expense)
    (36,305 )     (157,084 )     (120,779 )     (77 %)     (97,396 )     (241,932 )     (144,536 )     (60 %)
                                                                 
Net (loss)
  $ (182,148 )   $ (456,252 )   $ (274,104 )     (60 %)   $ (696,963 )   $ (887,511 )   $ (190,548 )     (21 %)
 

 
Professional and Administrative Fees

Professional and administrative fees for the three and six months ended June 30, 2010 were $195,195 and $324,772, an increase of $115,285, or 144%, from $79,910 for the three months ended June 30, 2009 and an increase of $162,679, or 100%, from $162,093 for the six months ended June 30, 2009.  The increase in professional and administrative fees was the result of utilizing the services of financial consultants to assist us in developing plans for financings and for assistance with market awareness of our company’s progress.  Whenever possible, we are trying to reduce the use of outside consultants, but we will still need some assistance for areas of our business in which we do not have sufficient in-house expertise.

Salary Expenses

Salary expenses for the three and six months ended June 30, 2010 were $154,932 and $418,556, an increase of $21,028, or 16%, from $133,904 for the three months ended June 30, 2009 and an increase of $121,694 or 41% from $296,862 for the six months ended June 30, 2009.  The increase in salary expenses was the result of additions to our engineering, production, and administrative staff, as well as the issuance of stock compensation to board members and certain employees pursuant to the terms of contractual agreements.  We expect salary expense to increase in the future as the Company grows and as sales volumes increase.  We may need to continue issuing stock and stock options in exchange for services and adequate personnel compensation.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for the three and six months ended June 30, 2010 were $1,400 and $2,347, an increase of $177 or 14% from $1,223 for the three months ended June 30, 2009 and an increase of $732 or 45% from $1,615 for the six months ended June 30, 2009.  The increase in depreciation expenses was the result of the purchase of additional depreciable equipment and recent building improvements.

Office and Miscellaneous Expenses

Office and miscellaneous expenses for the three and six months ended June 30, 2010 were $190,533 and $281,979, an increase of $106,149 or 126%, from $84,384 for the three months ended June 30, 2009 and an increase of $78,676 or 39% from $203,303 for the six months ended June 30, 2009.  The increase in office and miscellaneous expenses was primarily the result of an increase in engineering supplies necessary to meet the demand of our increased sales volume.

Bad Debt Expenses

Bad debt expense for the three months ended June 30, 2010 and June 30, 2009 was $0.  Bad debt expense for the six months ended June 30, 2010 was $2,706, an increase of $2,676 from $30 for the six months ended June 30, 2009.  The increase in bad debt expenses was as a result of one of our former vendors not delivering a portion of the services for which we pre-paid.  We have historically had limited write-offs as the result of bad debts.  We continually evaluate the creditworthiness of our customers and typically require a deposit of 50% of the total purchase price with each EcaFlo® equipment order.  We evaluate the collectability of accounts receivable regularly and it is our policy to record an allowance when the results of the evaluation indicate an increased risk related to the customer's ability to meet their financial obligations.
 


Loss from Operations

The loss from operations for the three and six months ended June 30, 2010 was $145,843 and $599,567, a decrease of $153,325, or 51%, from $299,168 for the three months ended June 30, 2009 and a decrease of $46,013 or 7% from $645,580 for the six months ended June 30, 2009.  The decrease in the loss from operations was the result of our increased sales volume.

Finance Fees

Finance fees for the three and six months ended June 30, 2010 were $9,916 and $62,754, a decrease of $108,086, or 92%, from $118,002 for the three months ended June 30, 2009 and a decrease of $115,737, or 65%, from $178,491 for the six months ended June 30, 2009.  The decrease in finance fees was due to a decrease in temporary working capital loans needed during this time.

Interest Expense

Interest expense for the three and six months ended June 30, 2010 was $26,389 and $34,642, a decrease of $12,693, or 32%, from $39,082 for the three months ended June 30, 2009 and a decrease of $28,799, or 45%, from $63,441 for the six months ended June 30, 2009.  The decrease in interest expense was as a result of having paid off a number of our convertible debentures and temporary working capital loans which were accruing interest in 2009.

Net Loss

Our net loss for the three and six months ended June 30, 2010 was $182,148 and $696,963, a decrease of $274,104, or 60%, from $456,252 for the three months ended June 30, 2009 and a decrease of $190,548 or 21% from $887,511 for the six months ended June 30, 2009.  We continue to have a net loss but believe the loss will be reduced and profitability will be attained in future quarters as the sales of our products continue to increase.

Liquidity and Capital Resources

The following table summarizes total current assets, total current liabilities and working capital at June 30, 2010 compared to December 31, 2009.
 
   
 June
   
 December
   
Increase / (Decrease)
 
   
30,  2010
   
31, 2009
   
$
   
%
 
                         
Current Assets
  $ 1,056,150     $ 1,034,152     $ 21,998       2 %
                                 
Current Liabilities
    988,674       888,743     $ 99,931       11 %
                                 
Working Capital
  $ 67,476     $ 145,409     $ (77,933 )     (54 %)

Current assets for the six months ended June 30, 2010 were $1,056,150, an increase of $21,998, or 2%, from $1,034,152 at December 31, 2009.  The increase in current assets was as a result of an increase in our accounts receivable and inventory for this period.  Current liabilities for the same period were $988,674, an increase of $99,931, or 11%, from $888,743 for the year ended December 31, 2009.  This increase was due to an increase in notes payable for this period.
 


At June 30, 2010, our cash balance was $349,003.  We believe that our cash on hand will be sufficient to meet our capital and operating requirements for at least the next quarter.  Our future capital requirements, however, will depend on numerous factors, including without limitation, potential acquisitions and/or joint ventures, purchases of our stock and future results of operations.

In addition to sales-generated revenue, we continue to use traditional and/or debt financing, to provide the capital we need to run the business.  In the future, we plan to generate enough revenues from the sales of our products in order for us to not have to sell additional stock or obtain additional loans.

To meet the backlog for IET’s EcaFlo® equipment, we have completed a facility expansion in order to quadruple the production capacities for manufacturing.  Additionally, we continue to anticipate an increase in employees in the next twelve months as we add assembly personnel, shipping and receiving personnel and additional administrative support personnel.

As of June 30, 2010, we had convertible loans totaling $466,500.  $216,500 of these loans are accruing interest at a rate of 10% per annum payable semi-annually.  We extended the original maturity date of January 2, 2009, and will continue to accrue interest at a rate of 10% per annum until the notes are paid.  These notes are currently in default.  The remaining $250,000 in convertible notes are accruing interest at a rate of 8% per annum payable semi-annually, and are due April 7, 2011.

Going Concern

The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern.  Our ability to continue as a going concern is dependent on attaining profitable operations.  Our cash position may be inadequate to pay all of the costs associated with testing, production and marketing of products.  Management will consider borrowings and security sales to mitigate the effects of our cash position; however, no assurance can be given that debt or equity financing, if and when required, will be available.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should we be unable to continue existence.

Critical Accounting Policies and Estimates

Our discussion of financial conditions and results of operations is based upon the information reported in our financial statements.  The preparation of these statements requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities at the date of our financial statements.  We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time.  Actual results may vary from our estimates due to changes in circumstances, weather, politics, global economics, mechanical problems, general business conditions and other factors.  Our significant estimates are related to the valuation of warrants and options.
 


Revenue Recognition

We recognize sales revenue when title passes and all significant risks of ownership change, which occurs either upon shipment or delivery based on contractual terms.  In the case where a customer prefers to make its own shipping arrangements, we consider that the sale has occurred when the equipment is crated and on our loading dock awaiting pick-up.

Off-Balance Sheet Arrangements

As of June 30, 2010, we did not have any off-balance sheet arrangements that had 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 are material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Concentration of Credit Risk

We sell products to customers in diversified industries and geographical regions.  During the years ended December 31, 2009 and 2008, three of our customers represented 26%, 24%, and 12% and 41%, 16%, and 12% of sales, respectively.  We continually evaluate the creditworthiness of our customers and typically require a deposit of 50% of the total purchase price with each EcaFlo® equipment order.

We evaluate the collectability of accounts receivable regularly and it is our policy to record an allowance when the results of the evaluation indicate an increased risk related to the customer's ability to meet their financial obligations.  As of December 31, 2009 and 2008, there was no reserve for bad debts.

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Principal Financial Officer, William E. Prince, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report.  Based on that evaluation, Mr. Prince concluded that our disclosure controls and procedures are effective in timely alerting him to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings and in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 


Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to any material legal proceedings.

Item 1A. Risk Factors.

FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS

We are required to make accounting estimates and judgments in preparing our consolidated financial statements.

In preparing our consolidated financial statements in accordance with accounting principles generally accepted in the United States, we make certain estimates and assumptions that affect the accounting for and recognition of assets, liabilities, revenues and expenses.  These estimates and assumptions must be made because certain information that is used in the preparation of our consolidated financial statements is dependent on future events, or cannot be calculated with a high degree of precision from data available.  In some cases, these estimates are particularly difficult to determine and we must exercise significant judgment.  The estimates and the assumptions having the greatest amount of uncertainty, subjectivity and complexity are related to our accounting for bad debts, returns and allowances, warranty and repair costs, derivatives, and asset impairments.  Actual results could differ materially from the estimates and assumptions that we use, which could have a material adverse effect on our financial condition and results of operations.

Our auditor’s report reflects the fact that without realization of additional capital, it would be unlikely for us to continue as a going concern.

As a result of our deficiency in working capital at December 31, 2009 and June 30, 2010, our auditors have included a paragraph in their report regarding substantial doubt about our ability to continue as a going concern.  Our plans in this regard are to seek additional funding through sales-generated revenue, future equity private placements with traditional financing firms and/or with an industry partner, or debt facilities.  Our most critical tool in addressing deficiencies in working capital while we transition to profitability will continue to be our ability to manage cash flow.  Our goal is to reduce the need for debt or equity financing, and trend toward operating from revenue from the sales of our equipment and receipt of technology fees.

We have minimal operating history, which raises concern as to our ability to successfully develop profitable business operations.

We have a limited operating history.  However, our management team has extensive experience in project development and managing corporate assets.  A highly successful professional who brings more than three decades of business development experience to us from the environmental engineering industry heads our marketing and sales department.  The Company’s engineering department is headed by a former member of the military, who has expertise that centers on the primary mechanical and electrical aspects of our technologies.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in our intended industries.  Outside of the high levels of expertise noted above and our concentrated effort to be the leading provider in our industries, there is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably.
 


Our future operating results will depend upon many factors, including:

·  
The continuation of our efforts to raise adequate working capital through equity investment, traditional financing, and the generation of sales revenues;
   
·  
The continued success of lab and field testing that supports the development of our EcaFlo® technology product lines;
   
·  
Demand for our EcaFlo® equipment and solutions;
   
·  
The level and intensity of our competition;
   
·  
Our ability to maintain key management and technical support staff, and to attract more employees with similar characteristics; and
   
·  
The continuation of our efforts to efficiently develop products to commercialize while maintaining quality and controlling costs.

To achieve profitable operations, we must successfully act on the factors stated above, along with continually developing ways to enhance our production efforts.


The industries we intend to compete in are characterized by intense competition and rapid and significant technological advancements.  Many companies, research institutions and universities are working in a number of areas similar to our primary fields of interest to develop new products, some of which may be similar and/or competitive to our products.  Furthermore, many companies are engaged in the development of water “purifying” products which may be similar and/or competitive to our products and technology.  Most of the companies with which we compete have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than us.

We are highly dependent on William E. Prince, our Chief Executive Officer, President and Chairman, and other key employees.  The loss of Mr. Prince or those employees, upon whose knowledge, leadership and technical expertise we rely, would harm our ability to execute our business plan.

Our success depends heavily upon the continued contributions of William E. Prince, whose knowledge, leadership and technical expertise would be difficult to replace, and on our ability to retain and attract technical and professional staff.  If we were to lose Mr. Prince’s services, our ability to execute our business plan would be harmed and we may be forced to cease operations until such time as we could hire a suitable replacement for him.  We also have other key employees who manage our operations and perform critical engineering and design functions, as well as direct the overall marketing and sales of our products.  If we were to lose their services, senior management would be required to expend time and energy to replace and train their replacements.  To the extent that we are smaller than our competitors and have fewer resources, we may not be able to attract the sufficient number and quality of staff.
 


Potential issuance of additional common stock could dilute existing stockholders.

We are authorized to issue up to 200,000,000 shares of common stock.  To the extent of such authorization, our board of directors has the ability, without seeking stockholder approval, to issue additional shares of common stock in the future for such consideration as the board may consider sufficient.  We may seek additional equity financing, which if sought or obtained may result in additional shares of our common stock being issued.  The issuance of additional common stock in the future will reduce the proportionate ownership and voting power of the common stock held by our existing stockholders.

Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock.  Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10.  Those rules require broker-dealers, before effecting transactions in any penny stock, to:
      
·  
Deliver to the customer, and obtain a written receipt for, a disclosure document;
·  
Disclose certain price information about the stock;
·  
Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
·  
Send monthly statements to customers with market and price information about the penny stock; and
·  
In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.
      
Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities.  These additional procedures could also limit our ability to raise additional capital in the future.

Our stock is thinly traded; as a result, investors may be unable to sell at or near ask prices or at all if they need to liquidate their shares.

The shares of our common stock have historically been thinly-traded on the OTC Bulletin Board, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent.  This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.  As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  We cannot give any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.  Due to these conditions, we can give investors no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their shares.
 


Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, 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 and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
We have a limited number of personnel that are required to perform various roles and duties as well as be responsible for monitoring and ensuring compliance with our internal control procedures.  As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.  Investors relying upon this misinformation may make an uninformed investment decision.

If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, generally must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board.  More specifically, the Financial Industry Regulatory Authority (“FINRA”) has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission.  Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period, then we will be ineligible for quotation on the OTC Bulletin Board.  As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.  As of the date of this filing, we have not had any late filings reported by FINRA within the last two years.
 



Stock Issuances Pursuant to Convertible Notes and Debenture Agreements

On April 15, 2010, we issued 128,000 shares of our restricted common stock to certain debenture holders pursuant to their conversion of $32,000 of principal amounts due under their debenture agreements, at a conversion rate of $0.25 per share, on March 1, 2010.

We believe that the issuance of the above shares is exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decisions, including the financial statements and 34 Act reports.  We reasonably believed that the recipients, immediately prior to their conversion of the notes, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investments.  The recipients had the opportunity to speak with our management on several occasions prior to their investment decisions.

Stock Issuances Pursuant to Consulting Agreements

On April 26, 2010, we issued 200,000 shares of our restricted common stock to 3CD Consulting, LLC, pursuant to the receipt of $200, as per the terms of our April 1, 2010 consulting agreement which allows for the purchase of the 200,000 shares at a price of $0.001 per share.

We believe that the issuance of the above shares is exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The recipient of the shares was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports.  We reasonably believed that the recipient, immediately prior to the issuance of the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment.  The recipient had the opportunity to speak with our management on several occasions prior to their investment decision.

Stock Issuances Pursuant to the Exercise of Options and Warrants

On April 7, 2010, a warrant holder exercised 68,478 warrants through a cashless exercise by tendering to us its warrant to purchase 150,000 shares, thereby using the 81,522 remaining warrant shares to satisfy the exercise price.  The 68,478 shares were issued on April 26, 2010.

On April 8, 2010, a warrant holder exercised 200,000 warrants at a price of $0.05 per share for a total purchase price of $10,000, all of which was paid in cash.  The 200,000 shares were issued on April 26, 2010.
 


On April 12, 2010, a warrant holder exercised 530,000 warrants at a price of $0.10 per share for a total purchase price of $53,000, all of which was paid in cash.  The 530,000 shares were issued on April 15, 2010.

On April 15, 2010, a warrant holder exercised 500,000 warrants at a price of $0.10 per share for a total purchase price of $50,000.  The 500,000 shares were issued on April 26, 2010.

On April 30, 2010, a warrant holder exercised 500,000 warrants at a price of $0.10 per share for a total purchase price of $50,000, all of which was paid in cash.  The 500,000 shares were issued on May 12, 2010.

On May 12, 2010, a warrant holder exercised 200,000 warrants at a price of $0.10 per share for a total purchase price of $20,000, all of which was paid in cash.  The 200,000 shares were issued on May 17, 2010. 

On May 28, 2010, a warrant holder exercised 140,000 warrants at a price of $0.10 per share for a total purchase price of $14,000, all of which was paid in cash.  The 140,000 shares were issued on June 21, 2010. 

On June 7, 2010, an option holder exercised 15,000 options at a price of $0.11 per share for a total purchase price of $1,650, all of which was paid in cash.  The 15,000 shares were issued on June 10, 2010.

We believe that the issuance of the above shares is exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decisions, including the financial statements and 34 Act reports.  We reasonably believed that the recipients, immediately prior to the issuance of the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investments.  The recipients had the opportunity to speak with our management on several occasions prior to their investment decisions.

Warrant Issuances

On April 1, 2010, we issued 400,000 warrants to purchase shares of our restricted common stock to 3CD Consulting, LLC pursuant to its consulting agreement.  The warrants are exercisable at $0.30 per share and expire on December 31, 2011.

On April 12, 2010, pursuant to a promissory note, we issued 150,000 warrants to purchase shares of our restricted common stock.  The warrants are exercisable at $0.60 per share through December 31, 2010, or for $1.00 per share from January 1, 2011 through June 30, 2011.

On April 16, 2010, in connection with the sale of four units of an 8% debenture instrument, we sold 200,000 warrants to purchase shares of our restricted common stock for $2,000.  The warrants are exercisable at $0.75 per share through December 31, 2010, or for $1.20 per share from January 1, 2011 through December 31, 2011.
 


On April 16, 2010, in connection with the sale of one unit of an 8% debenture instrument, we sold 50,000 warrants to purchase shares of our restricted common stock for $500.  The warrants are exercisable at $0.75 per share through December 31, 2011.

On June 17, 2010, we issued 100,000 warrants to purchase shares of our restricted common stock for consideration of $0.005 per warrant, pursuant to a consulting agreement.  The warrants are exercisable at $1.00 per share and expire on December 31, 2011.

We believe that the issuance of the above warrants is exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The recipients of the warrants were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decisions, including the financial statements and 34 Act reports.  We reasonably believed that the recipients, immediately prior to the issuance of the warrants, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investments.  The recipients had the opportunity to speak with our management on several occasions prior to their investment decisions.

Subsequent Issuances

Warrant Issuances

On July 12, 2010, we issued 400,000 warrants to purchase shares of our restricted common stock for consideration of $0.005 per warrant, pursuant to a consulting agreement.  200,000 of the warrants are exercisable at $0.50 per share and the remaining 200,000 warrants are exercisable for $1.00 per share, all expiring on December 31, 2011.

On July 16, 2010, we issued 300,000 warrants to purchase shares of our restricted common stock for consideration of $0.005 per warrant, pursuant to a consulting agreement.  The warrants are exercisable at $0.50 per share and expire on December 31, 2011.

On July 23, 2010, we issued 270,000 warrants to purchase restricted shares of our common stock at $0.10 per share.  These warrants were issued to correct an administrative error associated with a loan agreement which was executed in 2009, and expire on December 31, 2011.

On August 5, 2010, we issued 100,000 warrants to purchase shares of our restricted common stock for consideration of $0.005 per warrant, pursuant to a consulting agreement.  The warrants are exercisable at $0.50 per share and expire on December 31, 2011.

We believe that the issuance of the above warrants is exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The recipients of the warrants were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decisions, including the financial statements and 34 Act reports.  We reasonably believed that the recipients, immediately prior to the issuance of the warrants, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investments.  The recipients had the opportunity to speak with our management on several occasions prior to their investment decisions.
 


Issuer Purchases of Equity Securities

The Company did not repurchase any of its equity securities during the quarter ended June 30, 2010.

Item 5. Other Information.

None.
 

 
Item 6. Exhibits.

Exhibits

           
Incorporated by reference
Exhibit
number
 
 
Exhibit description
 
Filed
herewith
 
 
Form
 
Period
ending
 
Exhibit
No.
 
Filing
date
2(a)
 
Agreement and Plan of Merger between Coronado Explorations Ltd and Naturol, Inc.
     
8-K
     
2(a)
 
10/25/01
                         
2(b)
 
Amendment No. 1 to the Agreement and Plan of Merger between Coronado Explorations Ltd and Naturol, Inc.
     
8-K
     
2(b)
 
1/25/02
                         
2(c)
 
Agreement and Plan of Merger and Reincorporation
     
8-K
     
2(c)
 
3/10/08
                         
3(i)(a)
 
Certificate of Incorporation of Coronado Explorations Ltd. – Dated February 2, 1999
     
10SB12G
     
2(a)
 
6/9/99
                         
3(i)(b)
 
Amended and Restated Articles of Incorporation of Coronado Explorations Ltd. – Dated May 20, 1999
     
10SB12G
     
2(b)
 
6/9/99
                         
3(i)(c)
 
Certificate of Amendment of Certificate of Incorporation of Coronado Explorations Ltd. – Dated October 5, 2000
     
10-KSB
 
1/31/02
 
3(i)(c)
 
4/30/02
                         
3(i)(d)
 
Articles of Incorporation of Naturol, Inc. – Dated June 9, 2001
     
10-KSB
 
1/31/02
 
3(i)(d)
 
4/30/02
                         
3(i)(e)
 
Certificate of Amendment to Articles of Incorporation of I.E.T., Inc.
     
10-QSB
 
6/30/04
 
3
 
8/23/04
                         
3(i)(f)
 
Certificate of Amendment of Certificate of Incorporation of Naturol Holdings Ltd. – Dated May 5, 2004
     
10-QSB
 
3/31/04
 
3(i)
 
5/14/04
                         
3(i)(g)
 
Certificate of Merger between Coronado Subsidiary Corp. and Naturol, Inc. – Dated January 14, 2001
     
8-K
     
3(i)(g)
 
1/25/02
                         
3(i)(h)
 
Articles of Incorporation of Integrated Environmental Technologies, Ltd. – Dated January 11, 2008
     
8-K
     
3(i)(h)
 
3/10/08
 

 
           
Incorporated by reference
Exhibit
number
 
Exhibit description
 
Filed
herewith
   
Form
 
Period
ending
 
Exhibit
No.
 
Filing
date
                         
3(i)(i)
 
Articles of Merger of Integrated Environmental Technologies, Ltd., Nevada corporation and Integrated Environmental Technologies, Ltd., Delaware corporation – Dated February 15, 2008 (Nevada)
     
8-K
     
3(i)(j)
 
3/10/08
                         
3(i)(j)
 
Certificate of Merger of Integrated Environmental Technologies, Ltd., Nevada corporation and Integrated Environmental Technologies, Ltd., Delaware corporation – Dated February 18, 2008 (Delaware)
     
8-K
     
3(i)(j)
 
3/10/08
                         
3(ii)(a)
 
Bylaws of Coronado Explorations Ltd. – Dated February 9, 2001
     
8-K
     
3(ii)(e)
 
1/25/02
                         
3(ii)(b)
 
Bylaws of Naturol, Inc. – Dated June 9, 2001
     
10-KSB
 
1/31/02
 
3(ii)(f)
 
4/30/02
                         
3(ii)(c)
 
Bylaws of Integrated Environmental Technologies, Ltd., a Nevada corporation – Dated January 11, 2008
     
8-K
     
3(ii)(c)
 
3/10/08
                         
                         
10.12
 
Employment Agreement of William E. Prince, dated January 3, 2005.
     
8-K
     
10.4
 
1/07/05
                         
10.13
 
Employment Agreement of Marion Sofield – January 3, 2005
     
8-K
     
10.5
 
1/07/05
                         
10.14
 
Addendum to Marion Sofield’s Employment Agreement – Dated February 28, 2005
     
10-KSB
 
12/31/04
 
10.6
 
3/30/05
                         
10.18
 
Stock Acquisition Agreement dated June 20, 2007
     
8-K
     
10.1
 
8/21/07
                         
10.19
 
Exclusive License and Distribution Agreement dated June 20, 2007
     
8-K
     
10.2
 
8/21/07
                         
31
 
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
 
X
               
                         
32
 
Certification pursuant to Section 906 of the Sarbanes-Oxley Act
 
X
               
                         



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.
(Registrant)
       
           
           
By:
/s/ William E. Prince
     
 
William E. Prince, Chief Executive Officer
     
  and Principal Financial Officer (on behalf of the
registrant and as Principal Accounting Officer)
     

Date:  August 13, 2010