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 September 30,
2008





 ̈  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)





(843)
390-2500


(Registrant’s
telephone number, including area code)





Copies of Communications to:


Stoecklein
Law Group


Emerald
Plaza


402 West
Broadway


Suite
690


San
Diego, CA 92101


(619)
704-1310


Fax (619)
704-0556





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 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 November 5,
2008, was 78,130,467 shares.





PART I –
FINANCIAL INFORMATION





Item 1.
Financial Statements.





Integrated
      Environmental Technologies, Ltd.Condensed
      Consolidated Balance SheetsSeptember
      30,
            
            
            December
      31,2008
            
            
            2007Assets
            
            Unaudited
            
            
            AuditedCurrent
      Assets:Cash
            
            $
            52,256
            
            
            $
            72,334Accounts
      receivable
            
            
            70,415
            
            
            
            49,184Inventory
            
            
            262,048
            
            
            
            309,634Prepaid
      expenses
            
            
            38,206
            
            
            
            5,942Total
      current assets
            
            
            422,925
            
            
            
            437,094Equipment
            
            
            13,045
            
            
            
            13,045Accumulated
      depreciation
            
            
            (10,131
            )
            
            
            (8,552
            )Total
      building and equipment
            
            
            2,914
            
            
            
            4,493$
            425,839
            
            
            $
            441,587Liabilities
      and Shareholders' Equity (Deficit)Current
      liabilities:Accounts
      payable
            
            $
            72,130
            
            
            $
            91,817Accrued
      expenses
            
            
            36,037
            
            
            
            96,374Notes
      payable
            
            
            96,652
            
            
            
            98,300Convertible
      notes
            
            
            437,868
            
            
            
            -Total
      current liabilities
            
            
            642,687
            
            
            
            286,491Convertible
      notes
            
            
            -
            
            
            
            288,306Shareholders'
      Equity (Deficit)Common
      stock 200,000,000 shares authorizedpar
      value $.001, 78,100,467 and 68,070,467 shares
              issued
      and outstanding at September 30, 2008
              and
      December 31, 2007
            
            
            78,100
            
            
            
            68,010Stock
      bought not issued, 30,000 and 120,000 shares
              at
      September 30, 2008 and December 31, 2007
            
            
            30
            
            
            
            120Paid-in
      capital
            
            
            7,714,387
            
            
            
            6,783,315Retained
      earnings (deficit)
            
            
            (8,009,365
            )
            
            
            (6,984,655
            )Total
      shareholders' equity (deficit)
            
            
            (216,848
            )
            
            
            (133,210
            )Total
      liabilities and shareholders' equity (deficit)
            
            $
            425,839
            
            
            $
            441,587See
      notes to condensed consolidated financial statements.





2





Integrated
      Environmental Technologies, Ltd.Condensed
      Consolidated Statements of OperationsUnauditedNine
      Months Ended September 30,
            
            Three
      Months Ended September 30,2008
            
            2007
            
            2008
            
            2007Sales
            
            $
            399,064
            
            $
            410,640
            
            $
            154,897
            
            $
            215,067Cost
      of sales
            
            
            156,958
            
            
            164,804
            
            
            71,439
            
            
            69,432Gross
      profit
            
            
            242,106
            
            
            245,836
            
            
            83,458
            
            
            145,635Professional
      and administrative fees
            
            
            206,554
            
            
            515,937
            
            
            51,407
            
            
            61,888Salary
            
            
            476,027
            
            
            584,138
            
            
            156,641
            
            
            195,443Depreciation
      and amortization
            
            
            1,579
            
            
            1,710
            
            
            439
            
            
            570Office
      & miscellaneous expense
            
            
            293,487
            
            
            314,831
            
            
            111,797
            
            
            86,549Bad
      debt expense
            
            
            37,841
            
            
            -
            
            
            95
            
            
            -Total
      operating expenses
            
            
            1,015,488
            
            
            1,416,616
            
            
            320,379
            
            
            344,450Loss
      from operations
            
            
            (773,382)
            
            
            (1,170,780)
            
            
            (236,921)
            
            
            (198,815)Other
      income (expense):Finance
      fees
            
            
            (44,654)
            
            
            -
            
            
            (17,914)
            
            
            -Interest
      expense
            
            
            (206,675)
            
            
            (303,364)
            
            
            (76,881)
            
            
            (50,627)Total
      other income (expense)
            
            
            (251,329)
            
            
            (303,364)
            
            
            (94,795)
            
            
            (50,627)Net
      loss
            
            $
            (1,024,711)
            
            $
            (1,474,144)
            
            $
            (331,716)
            
            $
            (249,442)Weighted
      average shares outstanding
            
            
            71,250,905
            
            
            54,422,792
            
            
            75,086,989
            
            
            62,532,014Net
      loss per share basic and diluted
            
            $
            (0.01)
            
            $
            (0.03)
            
            $
            (0.00)
            
            $
            (0.00)See
      notes to condensed consolidated financial
  statements.





3


Integrated
      Environmental Technologies, Ltd.Condensed
      Consolidated Statements of Cash FlowsUnauditedNine
      Months EndedSeptember
      30,2008
            
            
            2007Cash
      flows from operating activities:Net
      loss
            
            $
            (1,024,711
            )
            
            $
            (1,474,144
            )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
      and amortization
            
            
            1,579
            
            
            
            1,710Accretion
      of interest on convertible notes
            
            
            149,562
            
            
            
            77,034Stock
      and options issued for loan or interest costs
            
            
            -
            
            
            
            2,620Stock,
      options and warrants issued for services
            
            
            41,072
            
            
            
            477,665Beneficial
      Conversion
            
            
            -
            
            
            
            79,830Changes
      in operating assets and liabilities:Cash,
      restricted
            
            
            -
            
            
            
            50,000Accounts
      receivable
            
            
            (21,231
            )
            
            
            (75,429
            )Inventory
            
            
            47,586
            
            
            
            (68,531
            )Deposits
      and prepaids
            
            
            (32,264
            )
            
            
            (19,467
            )Accounts
      payable
            
            
            (19,687
            )
            
            
            (63,984
            )Accrued
      expenses
            
            
            (60,336
            )
            
            
            (45,864
            )Cash
      used in operating activities
            
            
            (918,430
            )
            
            
            (1,058,560
            )Cash
      flows from financing activities:Notes
      payable, net
            
            
            (1,648
            )
            
            
            (60,685
            )Proceeds
      from exercise of warrants
            
            
            -
            
            
            
            293,750Proceeds
      from sale of convertible notes
            
            
            -
            
            
            
            124,461Proceeds
      from the sale of common stock
            
            
            900,000
            
            
            
            739,539Cash
      provided by financing activities
            
            
            898,352
            
            
            
            1,097,065Decrease
      in cash
            
            
            (20,078
            )
            
            
            38,505Cash
      beginning of period
            
            
            72,334
            
            
            
            22,187Cash
      end of period
            
            $
            52,256
            
            
            $
            60,692Supplemental
      disclosure of cash flow information:Cash
      paid for interest
            
            $
            62,916
            
            
            $
            34,214Cash
      paid for income taxes
            
            $
            -
            
            
            $
            -Non-cash
      financing activities:Stock
      and warrants issued for services
            
            $
            22,654
            
            
            $
            554,645Notes
      converted to stock
            
            $
            -
            
            
            $
            69,712See
      notes to condensed consolidated financial statements.








4
 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,
2007.





The
financial statements include our 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 affects 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 September 30, 2008:





Note
      payable, unsecured, bearing interest at a rate of 10% per annum; unable to
      locate lender.
            $          50,000Note
      payable, unsecured, non-interest bearing; unable to locate
      lender
            25,000Notes
      payable, unsecured, with a variable interest rate, and monthly principal
      and interest payments (see Note 7).
            21,652$          96,652





On July
15, 2008, we entered into a Promissory Note Agreement with The Morton Fishman
Revocable Trust.  Pursuant to the agreement, Mr. Fishman agreed to
loan the Company $150,000 at an interest rate of 16% per annum, due on or before
August 27, 2008.  The Company agreed to pay administration and legal
fees of $12,000, which were deducted from the net proceeds of the
loan.  Further, we agreed to issue warrants to purchase up to 200,000
shares of our common stock at a strike price of $0.05 per share, which expire
July 15, 2010.  The note agreement allowed for a one-time extension of
45 days for an additional fee of $5,000.  The loan was repaid in full
on August 27, 2008.





5
 Integrated
Environmental Technologies, Ltd.
 Notes
to Condensed Consolidated Financial Statements


Note
4 - Convertible notes payable





As of
September 30, 2008, we had convertible loans totaling $501,000, accruing
interest at a rate of 10% per annum payable semi-annually and maturing on
January 2, 2009.  We accrete interest between the date of issuance of
the units and the maturity date for the convertible notes to reflect the
difference between what was received for the notes and what will be paid at
maturity.  As of the nine-month periods ended September 30, 2008 and
2007, we had expensed interest of $149,562 and $58,575,
respectively.  At September 30, 2008, we had $63,132 of un-accreted
interest which will be expensed in fiscal 2008.





Note
5 – Common stock





On July
18, 2008, we issued 30,000 previously authorized shares of common stock for
services.





On June
20, 2007, the Company entered into a Stock Acquisition Agreement with Benchmark
Performance Group, Inc. (“Benchmark”).  Pursuant to the agreement,
Benchmark agreed to purchase 35,000,000 shares of common stock for a total
purchase price of $3,500,000 or $0.10 per share.  On June 27, 2007,
5,000,000 shares were issued pursuant to the agreement for cash proceeds of
$188,000 and the conversion of $312,000 that was a deposit for equipment to be
purchased, for a total of $500,000.  On October 31, 2007, an
additional 5,000,000 shares were issued pursuant to the agreement.  On
May 19, 2008, concurrent with the receipt by us of $500,000, the Company issued
an additional 5,000,000 shares of our common stock.  On August 26,
2008, the Company entered into an addendum to the Stock Acquisition Agreement,
by which IET and Benchmark agreed to an acceleration of the fifth installment
for a reduced price of $400,000.  This amount was received by us on
August 27, 2008, resulting in total proceeds received to date of
$1,900,000.  The Company issued 5,000,000 shares of our common stock
on September 18, 2008 in consideration of receipt of the expedited fifth
installment.





The
remaining 15,000,000 shares will be issued pursuant to the agreement under the
terms as follows:  (1) Benchmark will issue a payment in the amount of
$500,000 on or before April 30, 2009.  Upon receipt of this payment,
the Company will cause to be issued 5,000,000 shares of common
stock.  Upon issuance of each 10,000,000 shares, the Company will
initiate a registration of the shares; (2) on or before October 31, 2009,
Benchmark will issue final payment in the amount of $1,000,000.  Upon
receipt, the Company will cause to be issued 10,000,000 shares of common stock
and initiate a final registration for the remaining unregistered
shares.





Pursuant
to the Agreement, Benchmark shall have the right to maintain an equity position
in the Company equal to the equity position it would own upon the issuance of
all shares due under the agreement.  If at any time during the
Anti-Dilution Period, the Company were to issue any shares of common stock which
would impair the equity position of Benchmark, then the Company shall issue a
warrant to purchase shares of common stock at an exercise price of $0.10 per
share, which would upon exercise, reinstate their equity
position.  The warrants will be exercisable at any time through
October 31, 2009.





6
 Integrated
Environmental Technologies, Ltd.
 Notes
to Condensed Consolidated Financial Statements


In
addition, Benchmark can acquire additional shares of common stock whereby the
purchase would give Benchmark 51% of the Company’s total outstanding
equity.  Benchmark will be able to purchase these additional shares at
any time through October 31, 2009, at an exercise price equal to the weighted
average per share price of common stock over the 22 trading days prior plus a
15% per share control premium to the date we receive written notice of their
desire to make this purchase.





Note
6 – Options and warrants





A summary
of stock options and warrants is as follows:





Options
            
            
            Average
              Price
            
            
            Warrants
            
            
            Average
              PriceOutstanding  1/1/08
            
            
            1,075,000
            
            
            $
            0.116
            
            
            
            5,204,000
            
            
            $
            0.25Granted
            
            
            -
            
            
            
            -
            
            
            
            500,000
            
            
            
            0.15Cancelled
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Exercised
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding
      09/30/08
            
            
            1,075,000
            
            
            $
            0.116
            
            
            
            5,704,000
            
            
            $
            0.24





Note
7 – Related-party transactions





We have
consulting agreements with a shareholder and a Director requiring payments of
$2,500 per month for each.  Additionally, on August 26, 2008, we
entered into a consulting agreement with another shareholder for a period of six
months for compensation of $5,000 per month.  As of September 30, we
recorded $55,000 in consulting fee expense.





We have
employment agreements with two of our executives whereby we have agreed to
annual compensation in the amount of $240,000.  As of September 30,
2008, the future minimum payments are as follows:





Related-party
      compensation requirements2008
            
            $
            60,0002009
            
            
            240,0002010
            
            
            240,0002011
            
            
            240,000Total
            
            $
            780,000








On August
17, 2006, the Company received an unsecured loan of $25,000 from a shareholder
at a variable interest rate.  As of September 30, 2008, the remaining
principal balance of the note is $21,652.





We
borrowed $16,000 on January 18, 2008 for working capital from an officer of the
company.  Interest on the loan was $1,000.  The loan and
interest were repaid on January 25, 2008.


7
 Integrated
Environmental Technologies, Ltd.
 Notes
to Condensed Consolidated Financial Statements


On April
16, 2008, the Company entered into a loan agreement with a corporate
officer.  Pursuant to the loan agreement, the Company promised to
repay the principal amount of $9,000 plus a flat interest of
$500.  The loan and interest were repaid on May 13, 2008.





On June
18, 2008, we borrowed $50,000 from a shareholder.  Pursuant to the
loan agreement, the Company agreed to repay the principal and a flat interest
fee of $2,500 by July 5, 2008.  On July 3, the Company entered into an
agreement to extend the due date through August 5, 2008 in exchange for the
refurbishment of a FEM-model piece of equipment at no cost for labor or
materials.  $30,000 was paid toward this loan on July 16, 2008,
$12,500 was repaid on August 7, 2008, and the balance of $10,000 was repaid on
August 27, 2008.





On August
14, 2008, we borrowed $5,000 from an officer of the company.  There
was no interest on the loan.  $4,000 was paid toward the loan on
August 20, 2008, and the balance of $1,000 was repaid on August 27,
2008.





On August
14, 2008, we borrowed $10,000 from a shareholder.  There was no
interest on the loan.  On August 27, 2008, we paid $7,500 toward the
loan.  The $2,500 loan balance was repaid on September 5,
2008.





Note 8 – Commitments and
Contingencies





On August
22, 2006, we entered into a supply agreement with Aquastel, Inc., wherein
Aquastel agreed to supply us with C-50 and C-100 cells on an exclusive basis in
the United States.  The term of the agreement is for 3 years,
terminating on August 22, 2009.  At the end of the term, the parties
will attempt to renegotiate in good faith to extend the agreement.





On June
20, 2007, in connection with the Stock Acquisition Agreement with Benchmark, we
entered into an Exclusive License and Distribution Agreement, wherein we granted
the exclusive, world-wide right, license and authority to market, manufacture,
sell and distribute EcaFlo® fluids and solutions for use in Oilfield
Applications to Benchmark Energy Products.  The agreement provides for
special pricing of equipment to Benchmark and per gallon technology fees, paid
to IET on the EcaFlo® fluids sold by Benchmark, for a five-year period
consistent with the license period.





Note 9 – Subsequent
events





On
October 17, 2008, we issued 30,000 previously authorized shares of common stock
for services.











8


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:





o
            our
      current lack of working capital;




o
            implementation
      of our business plan within the oil and gas industry with
      Benchmark;




o
            increased
      competitive pressures from existing competitors and new
      entrants;




o
            increases
      in interest rates or our cost of borrowing or a default under any material
      debt agreements;




o
            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;




o
            substantial
      dilution to our stockholders as the result of the issuance of our common
      stock in exchange for debt and/or equity financing, including additional
      shares to Benchmark;




o
            potential
      change in control upon completion of the Benchmark
    agreements;




o
            deterioration
      in general or regional economic
conditions;




o
            adverse
      state or federal legislation or regulation that increases the costs of
      compliance, or adverse findings by a regulator with respect to existing
      operations;




o
            changes
      in U.S. GAAP or in the legal, regulatory and legislative environments in
      the markets in which we operate;




o
            loss
      of customers or sales weakness;




9


o
            excessive
      product failure and related warranty
expenses;




o
            inability
      to achieve future sales levels or other operating
  results;




o
            the
      unavailability of funds for capital expenditures and/or general working
      capital; and




o
            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 “Item 1A. Risk Factors”
in this document and in our Annual Report on Form 10-K for the year ended
December 31, 2007.





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 100%-owned subsidiary, IET, Inc., unless otherwise expressly stated
or the context otherwise requires.





OVERVIEW
AND OUTLOOK





Integrated
Environmental Technologies, Ltd. is a manufacturing company that designs and
builds equipment incorporating innovative technologies which are focused on the
enhancement of the environment and the health, safety, and well-being of current
and future generations.  Our EcaFlo® Division designs, manufactures,
markets, sells, and installs proprietary Electro-Chemical Activation (ECA)
equipment in the United States and throughout the world.  The
Essential Oils Division offers a cost-effective, safe, efficient and superior
method of obtaining bioactive compounds and oils from plants.





We
evolved from a development-stage company to an income-generating original
equipment manufacturing company.  We have focused our attentions on
several critical issues:





·
            Raising
      equity capital;


·
            Developing
      our ability to construct EcaFlo®
equipment;


·
            Developing
      and enhancing our testing protocol with researchers at Coastal Carolina
      University, and independent companies
      and laboratories;


·
            Developing
      a relationship and entering into an agreement with
    Benchmark;


·
            Researching
      market application areas and identifying and establishing distributorship
      agreements;


·
            Continuing
      to develop and maintain relationships with university and independent
      laboratories for research assistance on EcaFlo® applications;
      and


·
            Furthering
      the process of building a brand identity and sales track record through
      the appearance at various trade and professional shows and
      conferences.


10


We have
incurred losses since inception.  For the nine months ended September
30, 2008, we had a net loss of $1,024,711 as compared to a net loss of
$1,474,144 for the nine months ended September 30, 2007.  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 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 for oilfield operations
with our industry partner and licensee, Benchmark Energy Products, we anticipate
experiencing positive cash flows from operations in future
quarters.  Debt borrowings may be considered from time to time if
needed.





On June 20, 2007, we executed a Stock
Acquisition Agreement with Benchmark Performance Group, Inc.
(“Benchmark”).  Pursuant to the Stock Acquisition Agreement, Benchmark
agreed to purchase 35,000,000 shares of our common stock for a total purchase
price of $3,500,000 (“Purchase Price”) or $0.10 per share.  The
purchase price will be paid in seven (7) installments over a period of 30
months.  On August 26, 2008, we executed an addendum to the investment
agreement and contract with Benchmark, wherein we agreed that as a result of an
economic down-turn, it is in the best interest of the Company and Benchmark to
make the fifth installment payment early and prior to October 31, 2008 as
previously agreed in the original investment agreement.  As
consideration for the acceleration of the fifth installment, we reduced the
payment amount to $400,000 from $500,000.  As of September 30, 2008,
we have received five installments for a total of $1,900,000.  From
the remaining sixth and seventh installments we anticipate receiving a total of
$1,500,000 ($500,000 in April 2009 and $1,000,000 in October 2009).





In connection with the Stock
Acquisition Agreement, we entered into an Exclusive License and Distribution
Agreement with Benchmark, wherein we granted the exclusive, world-wide right,
license and authority to market, sell and distribute for use in the manufacture
of fluids and solutions in Oilfield Applications to Benchmark.





Recent
Developments





On August 18, 2008, we received our
product registration for EcaFlo® Anolyte from the United States Environmental
Protection Agency (“EPA”).  This registration process has been
completed in order to make important marketing and efficacy claims about our
EcaFlo® Anolyte product and its ability to be used as a high-level (hospital)
disinfection/antimicrobial product.  Additionally, other business
models are now allowed because this registration permits the distribution of
EcaFlo® Anolyte by container, as well as for use onsite where
produced.  The US EPA has conducted thorough investigations of the
scientific data relative to EcaFlo® Anolyte, as well as requiring a full battery
of independent, yet Company-sponsored, lab testing which was performed by
fully-certified, EPA-approved labs.  Based on the results of this
extensive research, we have been granted our registration of EcaFlo®
Anolyte.  This product is a highly effective, “green” biocide that may
be used for hard-surface disinfection for many applications, including medical,
dental, veterinary, schools, gyms and sports equipment; bacteria control for
food safety; oil and gas; water treatment; and infection control.  A
copy of the press release we issued in reference to the above is attached hereto
as exhibit 99.1.


11


On
September 10, 2008, we issued a press release announcing that we continue to
sell EcaFlo® equipment to a leading North Carolina-based supplier of janitorial
and sanitation products and solutions primarily involved in supplying state,
county and local governments with disinfecting and sanitizing
products.  A copy of the press release is attached hereto as exhibit
99.2.





On September 24, 2008, we issued
another press release announcing the sale of additional EcaFlo® equipment to two
new customers representing interests in new market areas.  One company
is promoting the use of EcaFlo® equipment and solutions in agricultural
industry, for use in livestock area surface disinfection.  The other
company plans to use the EcaFlo® equipment to produce solutions to effectively
treat biofilm build-up and various other agricultural applications, such as
veterinary clinics and dairy processing facilities that require thorough and
dependable hard surface disinfection.  A copy the press release is
attached hereto as exhibit 99.3.





Results
of Operations for the Three Months Ended September 30, 2008 and
2007





The
following table summarizes selected items from the statement of operations at
September 30, 2008 compared to September 30, 2007.





SALES
AND COST OF GOODS SOLD:





Three
      Months Ended
              September
      30,
            
            
            Increase
      (Decrease)2008
            
            
            2007
            
            
            $
            
            
            
            %Sales
            
            $
            154,897
            
            
            $
            215,067
            
            
            $
            (60,170
            )
            
            
            (28
            %)Cost
      of Goods Sold
            
            
            71,439
            
            
            
            69,432
            
            
            
            2,007
            
            
            
            3
            %Gross
      Profit
            
            
            83,458
            
            
            
            145,635
            
            
            
            (62,177
            )
            
            
            (43
            %)Gross
      Profit Percentage of Sales
            
            
            54
            %
            
            
            68
            %
            
            
            --
            
            
            
            (14
            %)





Sales





Our sales
for the three months ended September 30, 2008 were $154,897 compared to sales of
$215,067 in the three months ended September 30, 2007.  This resulted
in a decrease in sales of $60,160, or 28%, from the same period a year
ago.  Sales of EcaFlo® equipment and solutions were severely impaired
during the period of time that the U.S. Environmental Protection Agency (EPA)
was studying, reviewing and making determinations about our product and the
requirement for an EPA product registration for “EcaFlo® Anolyte.”  By
law, we were required to restrict our marketing claims and to cause no
distribution of our product to occur other than on-site generation and
usage.  On August 18, 2008 we received our product registration for
EcaFlo® Anolyte from the EPA.  We fully expect sales of our EcaFlo®
equipment and solutions to expand rapidly from the receipt of our product
registration number.





12


According
to our oilfield distributor and industry partner, Benchmark Energy Products,
Benchmark continues to market “Excelyte”TM (Benchmark’s product name for EcaFlo®
Anolyte), to the oil and gas industry,but the industry, which is
resistant to change, continues to use several “old technology” biocides
developed during the past 30 years.  Benchmark has spent significant
time and resources educating the industry about the benefits of ExcelyteTM vs.
the older biocides.  Testing has been conducted to confirm that the
biocide most widely used in the industry today is ineffective with current well
treatment practices and industry attempts to utilize increasingly poorer quality
water.  Benchmark has engaged a highly regarded oil and gas industry
biotechnology laboratory as an independent “expert” to help Benchmark mount a
“turnaround” in industry thinking concerning the dynamic required for biocides
to be effective with current well stimulation practices.  The findings
reported by this laboratory have validated that ExcelyteTM outperforms all other
biocides for the oil and gas industry, with the single largest benefit for the
oil and gas industry being that ExcelyteTM is the first totally “green”
biocide.





In
addition, Benchmark and the Company have extended the deadline for fixing the
minimum technology fees payable to the Company under the Exclusive License and
Distribution Agreement while a major pumping services company, which has
expressed an interest in obtaining some level of exclusivity, completes its
laboratory analysis and field testing of anolyte. The analysis and testing is
expected to be completed in the last quarter of 2008 or the first of
2009.





Cost
of goods sold / Gross profit percentage of sales





Our cost of goods sold for the three
months ended September 30, 2008 was $71,439, an increase of $2,007, or 3% from
$69,432 for the three months ended September 30, 2007.  The increase
in our cost of goods sold is as a result of moderate price increases in regular
inventory and some extraordinary expenses for products sold into
Canada.  We are continuing to update and upgrade our product line and
we closely monitor the cost of all of our products.  We believe the
cost of sales will increase slightly less as a percentage of sales when we have
additional sales.





Gross
profit margins decreased by 14% from the prior fiscal quarter due to a lack of
EcaFlo® equipment sales, since our pricing structure allows for more profit on
equipment sales than on replacement parts and laboratory testing
supplies.





13


EXPENSES:





Three
      Months Ended
              September
      30,
            
            
            Increase
      (Decrease)2008
            
            
            2007
            
            
            $
            
            
            
            %Expenses:Professional
      and
              administrative
      fees
            
            $
            51,407
            
            
            $
            61,888
            
            
            $
            (10,481
            )
            
            
            (17
            %)Salary
            
            
            156,641
            
            
            
            195,443
            
            
            
            (38,802
            )
            
            
            (20
            %)Depreciation
      and amortization
            
            
            439
            
            
            
            570
            
            
            
            (131
            )
            
            
            (23
            %)Office
      and miscellaneous expense
            
            
            111,797
            
            
            
            86,549
            
            
            
            25,248
            
            
            
            29
            %Bad
      debt expense
            
            
            95
            
            
            
            -
            
            
            
            95
            
            
            
            -Total
      operating expenses
            
            
            320,379
            
            
            
            344,450
            
            
            
            (24,071
            )
            
            
            (7
            %)(Loss)
      from operations
            
            
            (236,921
            )
            
            
            (198,815
            )
            
            
            38,106
            
            
            
            19
            %Other
      income (expense):Finance
      fees
            
            
            (17,914
            )
            
            
            -
            
            
            
            17,914
            
            
            
            -Interest
      expense
            
            
            (76,881
            )
            
            
            (50,627
            )
            
            
            26,254
            
            
            
            52
            %Total
      other income (expense)
            
            
            (94,795
            )
            
            
            (50,627
            )
            
            
            44,168
            
            
            
            87
            %Net
      (loss)
            
            $
            (331,716
            )
            
            $
            (249,442
            )
            
            $
            82,274
            
            
            
            33
            %





Professional
and Administrative Fees





Professional
and administrative fees for the three months ended September 30, 2008 were
$51,407, a decrease of $10,481, or 17%, from $61,888 for the three months ended
September 30, 2007.  The decrease in professional and administrative
fees was the result of reducing costs associated with outside professional
services and consultants while maintaining strong levels of support to meet the
company’s developing business.  Whenever possible, we are trying to
reduce 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 months
ended September 30, 2008 was $156,641, a decrease of $38,802, or 20%, from
$195,443 for the three months ended September 30, 2007.  The decrease
in salary expenses was the result of decreasing hourly employee payroll expenses
and reducing our engineering staff, while accomplishing the production necessary
for meeting the company’s sales of equipment.  We expect salary
expense to increase in the future as the Company grows and as sales volume
increases.  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 months ended September 30, 2008 were
$439, a decrease of $131, or 23%, from $570 for the three months ended September
30, 2007.  At this point in time, we anticipate our depreciation
expenses to remain fairly steady.


14


Office
and Miscellaneous





Office and miscellaneous expenses for
the three months ended September 30, 2008 were $111,797, an increase of $25,248,
from $86,549 for the three months ended September 30, 2007.  The
increase in office and miscellaneous expenses was as a result of an increase in
costs associated with expenses such as equipment rental and health insurance, as
well as replacing some out-of-date office equipment.





Bad
Debt





We did
not incur bad debt expense during the three months ended September 30, 2007 as
compared to $95 being expensed during the three months ended September 30,
2008.  We have historically had limited write-offs as the result of
bad debts.  It is our policy to evaluate our customers’
creditworthiness prior to the sale of our products.





(Loss)
from Operations





The loss from operations for the three
months ended September 30, 2008 was $236,921, versus a loss from operations of
$198,815 for the three months ended September 30, 2007, a change in loss from
operations of $38,106.  The increase in the loss from operations in
the third quarter of 2008 was the result of expenses incurred in
inventory.





Finance
Fees and Interest Expense





Finance fees and interest expense for
the three months ended September 30, 2008 were $94,795, as compared to $50,627
for the same period in 2007.  Our finance fees and interest expense in
2008 were higher because of an increase in loans requiring interest
payments.





Net
(Loss)





Our net
loss for the three months ended September 30, 2008 was $331,716, an increase of
$82,274, or 32%, from $249,442 for the three months ended September 30,
2007.  We continue to have a net loss and believe the loss will be
reduced and profitability will be attained in future quarters as the sales of
our products increase.





Results
of Operations for the Nine Months Ended September 30, 2008 and 2007





The
following table summarizes selected items from the statement of operations at
September 30, 2008 compared to September 30, 2007.





15


SALES
AND COST OF GOODS SOLD:





Nine
      Months Ended
              September
      30,
            
            
            Increase
      (Decrease)2008
            
            
            2007
            
            
            $
            
            
            
            %Sales
            
            $
            399,064
            
            
            $
            410,640
            
            
            $
            (11,576
            )
            
            
            (3
            %)Cost
      of Goods Sold
            
            
            156,958
            
            
            
            164,804
            
            
            
            (7,846
            )
            
            
            (5
            %)Gross
      Profit
            
            
            242,106
            
            
            
            245,836
            
            
            
            (3,730
            )
            
            
            (2
            %)Gross
      Profit Percentage of Sales
            
            
            61
            %
            
            
            60
            %
            
            
            --
            
            
            
            1
            %





Sales





Our sales
for the nine months ended September 30, 2008 were $399,064 compared to sales of
$410,640 in the nine months ended September 30, 2007.  This resulted
in a decrease in sales of $11,576, or 3%, from the same period a year
ago.  Sales of EcaFlo® equipment and solutions were severely impaired
during the period of time that the U.S. Environmental Protection Agency (EPA)
was studying, reviewing and making determinations about our product and the
requirement for an EPA product registration for “EcaFlo® Anolyte.”  By
law, we were required to restrict our marketing claims and to cause no
distribution of our product to occur other than on-site generation and
usage.  On August 18, 2008 we received our product registration for
EcaFlo® Anolyte from the EPA.  We fully expect sales of our EcaFlo®
equipment and solutions to expand rapidly from the receipt of our product
registration number.





According
to our oilfield distributor and industry partner, Benchmark Energy Products,
Benchmark continues to market “Excelyte”TM (Benchmark’s product name for EcaFlo®
Anolyte), to the oil and gas industry,but the industry, which is
resistant to change, continues to use several “old technology” biocides
developed during the past 30 years.  Benchmark has spent significant
time and resources educating the industry about the benefits of ExcelyteTM vs.
the older biocides.  Testing has been conducted to confirm that the
biocide most widely used in the industry today is ineffective with current well
treatment practices and industry attempts to utilize increasingly poorer quality
water.  Benchmark has engaged a highly regarded oil and gas industry
biotechnology laboratory as an independent “expert” to help Benchmark mount a
“turnaround” in industry thinking concerning the dynamic required for biocides
to be effective with current well stimulation practices.  The findings
reported by this laboratory have validated that ExcelyteTM outperforms all other
biocides for the oil and gas industry, with the single largest benefit for the
oil and gas industry being that ExcelyteTM is the first totally “green”
biocide.





In
addition, Benchmark and the Company have extended the deadline for fixing the
minimum technology fees payable to the Company under the Exclusive License and
Distribution Agreement while a major pumping services company, which has
expressed an interest in obtaining some level of exclusivity, completes its
laboratory analysis and field testing of anolyte. The analysis and testing is
expected to be completed in the last quarter of 2008 or the first of
2009.





16


Cost
of goods sold / Gross profit percentage of sales





Our cost of goods sold for the nine
months ended September 30, 2008 was $156,958, a decrease of $7,846, or 5%, from
$164,804 for the nine months ended September 30, 2007.  Our cost of
goods sold was higher in 2007 due to our FEM-3 cell replacement
program.  We are continuing to update and upgrade our product line and
we closely monitor the cost of all of our products.  We believe the
cost of sales will increase slightly less as a percentage of sales when we have
additional sales.  Gross profit margins increased by 1% from the prior
fiscal quarter because of the product mix of our sales and the decreased need
for conversions associated with our FEM-3 cell replacement program.





EXPENSES:





Nine
      Months Ended
              September
      30,
            
            
            Increase
      (Decrease)2008
            
            
            2007
            
            
            $
            
            
            
            %Expenses:Professional
      and
              Administrative
      fees
            
            $
            206,554
            
            
            $
            515,937
            
            
            $
            (309,383
            )
            
            
            (60
            %)Salary
            
            
            476,027
            
            
            
            584,138
            
            
            
            (108,111
            )
            
            
            (19
            %)Depreciation
      and amortization
            
            
            1,579
            
            
            
            1,710
            
            
            
            (131
            )
            
            
            (8
            %)Office
      and miscellaneous expense
            
            
            293,487
            
            
            
            314,831
            
            
            
            (21,344
            )
            
            
            (7
            %)Bad
      debt expense
            
            
            37,841
            
            
            
            -
            
            
            
            37,841
            
            
            
            -Total
      operating expenses
            
            
            1,015,488
            
            
            
            1,416,616
            
            
            
            (401,128
            )
            
            
            (28
            %)(Loss)
      from operations
            
            
            (773,382
            )
            
            
            (1,170,780
            )
            
            
            (397,398
            )
            
            
            (34
            %)Other
      income (expense):Finance
      fees
            
            
            (44,654
            )
            
            
            -
            
            
            
            44,654
            
            
            
            -Interest
      expense
            
            
            (206,675
            )
            
            
            (303,364
            )
            
            
            (96,689
            )
            
            
            (32
            %)Total
      other expense
            
            
            (251,329
            )
            
            
            (303,364
            )
            
            
            (52,035
            )
            
            
            (18
            %)Net
      (loss)
            
            $
            (1,024,711
            )
            
            $
            (1,474,144
            )
            
            $
            (449,433
            )
            
            
            (30
            %)





Professional
and Administrative Fees





Professional
and administrative fees for the nine months ended September 30, 2008 were
$206,554, a decrease of $309,383, or 60%, from $515,937 for the nine months
ended September 30, 2007.  The decrease in professional and
administrative fees was the result of reducing costs associated with outside
professional services and consultants while maintaining strong levels of support
to meet the company’s developing business.  Whenever possible, we are
trying to reduce outside consultants, but we will still need some assistance for
areas of our business in which we do not have sufficient in-house
expertise.





17


Salary
Expenses





Salary expenses for the nine months
ended September 30, 2008 was $476,027, a decrease of $108,111, or 19%, from
$584,138 for the nine months ended September 30, 2007.  The decrease
in salary expenses was the result of decreasing hourly employee payroll expenses
and reducing our engineering staff, while accomplishing the production necessary
for meeting the company’s sales of equipment.  We expect salary
expense to increase in the future as the Company grows and as sales volume
increases.  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 nine months ended September 30, 2008 and 2007
were $1,579 and $1,710.  At this point in time we anticipate our
depreciation expenses to remain stable.





Office
and Miscellaneous





Office and miscellaneous expenses for
the nine months ended September 30, 2008 were $293,487, a decrease of $21,344,
from $314,831 for the nine months ended September 30, 2007.  Office
and miscellaneous expenses were higher in 2007 due to some one-time equipment
purchases made during that period of time.





Bad
Debt





We did
not incur bad debt expense during the nine months ended September 30, 2007 as
compared to $37,841 being expensed during the nine months ended September 30,
2008.  We have historically had limited write-offs as the result of
bad debts.  It is our policy to evaluate our customers’
creditworthiness prior to the sale of our products.





(Loss)
from Operations





The loss from operations for the nine
months ended September 30, 2008 was $773,382, versus a loss from operations of
$1,170,780 for the nine months ended September 30, 2007, a change in loss from
operations of $397,398.  The decrease in the loss from operations in
the third quarter of 2008 was the result of an increase in sales and a decrease
in professional and administrative fees and salary expenses.





Finance
Fees and Interest Expense





Finance fees and interest expense for
the nine months ended September 30, 2008 were $251,329 as compared to $303,264
for the same period in 2007.  Our finance fees and interest expense in
2007 were high because of temporary working capital loans that had high interest
rates and fees.





18


Net
(Loss)





Our net
loss for the nine months ended September 30, 2008 was $1,024,711, a decrease of
$449,433, or 30%, from $1,474,144 for the nine months ended September 30,
2007.  We continue to have a net loss and believe the loss will be
reduced and profitability will be attained in future quarters as the sales of
our products increase.





Operation
Plan





The
technology that drives our short-term and long-term plans is electro-chemical
activation (ECA), which is the center point of our EcaFlo®
technology.  Our plan of operation focuses on continuing the process
of commercialization of EcaFlo®equipment
and EcaFlo® solutions, known as anolyte and catholyte.





Our direct attention continues to be
focused on providing our EcaFlo® devices to the markets at-hand:  oil
and gas industry, food safety and agricultural applications, storm-water
treatment, water and wastewater treatment, and other hard surface
sanitation opportunities.  In many cases, clinical and laboratory
testing and research have now moved to field trials by
end-users.  Anticipated positive results in field testing should
result in increased sales in future quarters.





Liquidity
and Capital Resources





The
following table summarizes total current assets, total current liabilities and
working capital at September 30, 2008 compared to December 31,
2007.





September
      30,
              2008
            December
      31,
              2007
            Increase
      / (Decrease)$
            %Current
      Assets
            $422,925
            $437,094
            $(14,169)
            (3%)Current
      Liabilities
            642,687
            286,491
            356,196
            124%Working
      Capital (deficit)
            $(219,762)
            $150,603
            $370,365
            246%





Liquidity
is a measure of a company’s ability to meet potential cash
requirements.  We have historically met our capital requirements
through the issuance of stock, by borrowings, and through sales-generated
revenue.  In the future, we anticipate we will be able to provide the
necessary liquidity we need by the revenues generated from the sales of our
products and the incremental equity investment, by contract from Benchmark
Performance Group, Inc.  We will continue to consider financing
opportunities with strategic industry partners outside of the oil and gas
industry.





As of
September 30, 2008, we continue to use traditional and/or debt financing, in
addition to sales-generated revenue, to provide the capital we need to run the
business.  In the future, we need 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.


19


On June
20, 2007, we entered into an investment agreement and contract with Benchmark
Performance Group, Inc.  The contract provides for an equity
investment of $3,500,000 over a period of 30 months in 7 installments and for
technology fees paid to IET per gallon of EcaFlo® fluids sold by Benchmark
within the oil and gas industry.  On August 26, 2008, we executed an
addendum to the investment agreement and contract with Benchmark, wherein we
agreed that as a result of an economic down-turn, it is in the best interest of
the Company and Benchmark to make the fifth installment payment early and prior
to October 31, 2008 as previously agreed in the original investment
agreement.  As consideration for the acceleration of the fifth
installment, we reduced the payment amount to $400,000 from
$500,000.  As of September 30, 2008, we have received five
installments for a total of $1,900,000.  From the remaining sixth and
seventh installments we will receive a total of $1,500,000 ($500,000 in April
2009 and $1,000,000 in October 2009).  A copy of the addendum is
attached hereto as exhibit 10.21.





Financing.  On
August 17, 2006, the Company received an unsecured loan of $25,000 from Robert
Lucas, at an interest rate of 19.99% per annum.  Pursuant to the note
agreement, the Company agreed to issue 100,000 shares of common stock as a loan
fee.  On April 3, 2007, the shares were issued.  As of
September 30, 2008, the remaining principal balance of the note is
$21,652.





On June 18, 2008, we entered into a
loan agreement with a stockholder of the Company for the principal amount of
$50,000.  Pursuant to the loan agreement, we agreed to repay the
principal amount plus a flat interest fee of $2,500 by July 5,
2008.  On July 16, 2008 and August 7, 2008, we paid $30,000 and
$12,500 toward the loan and the remaining balance of $10,000 was repaid on
August 27, 2008.





On July 15, 2008, we entered into a
promissory note with The Morton Fishman Revocable Trust for the principal amount
of $150,000.  In consideration for the loan, we agreed to pay The
Morton Fishman Revocable Trust, from the proceeds of the loan, $10,000 in
administration fees and $2,000 in legal fees associated with the
transaction.  In addition, we agreed to issue warrants to purchase
200,000 shares of our common stock, exercisable for $0.05 per share and expiring
2 years from issuance (on 7/15/10).  Pursuant to the promissory note,
we promised to pay The Morton Fishman Revocable Trust the principal sum of
$150,000 together with interest of 16% per annum on or before August 27,
2008.  The note may be extended for an additional 45 days from August
27, 2008 by notifying The Morton Fishman Revocable Trust in writing and paying
$5,000 and interest due through August 27, 2008. The loan was repaid in full on
August 27, 2008.





On August
14, 2008, we entered into a loan agreement with an officer of the company for
the principal amount of $5,000.  There was no interest on the
loan.  On August 20, 2008, we paid $4,000 toward the loan and the
balance of $1,000 was repaid on August 27, 2008.





On August 14, 2008, we entered into a
loan agreement with a stockholder of the Company for the principal amount of
$10,000. There was no interest on the loan. On August 27, 2008, we paid $7,500
toward the loan and the balance of $2,500 was repaid on September 5,
2008.





20


Satisfaction
of our cash obligations for the next 12 months.





As of
September 30, 2008, our cash balance was $52,256.  Our plan for
satisfying our cash requirements for the next twelve months is through
sales-generated income, proceeds from our stock acquisition agreement with
Benchmark, additional sales of our common stock, third-party financing, and/or
traditional bank financing.  We intend to make appropriate plans to
insure sources of additional capital in the future to fund growth and expansion,
and may consider additional equity or debt financing or credit
facilities.





Since
inception, we have financed cash flow requirements through debt financing and
the issuance of common stock for cash and services.  As we continue to
expand operational activities, we may continue to experience net negative cash
flows from operations, pending receipt of sales or development fees, and will be
required to obtain additional financing to fund operations through common stock
offerings and debt borrowings, giving consideration to loans and working
diligently to move sales ahead to the extent necessary to provide working
capital.





We may
continue to incur operating losses over the majority or some portion of the next
twelve months.  Our lack of operating history makes predictions of
future operating results difficult to ascertain.  Our prospects must
be considered in light of the risks, expenses, and difficulties frequently
encountered by companies in their early stage of development, particularly
companies in new and rapidly evolving technology markets.  Such risks
include, but are not limited to, an evolving and unpredictable business model
and the management of growth.  To address these risks we must, among
other things, implement and successfully execute our business and marketing
strategy, continue to develop and upgrade technology and products, respond to
competitive developments, and continue to attract, retain and motivate qualified
personnel.  There can be no assurance that we will be successful in
addressing such risks, and the failure to do so can have a material adverse
effect on our business prospects, financial condition and results of
operations.





As a
result of our cash requirements and our lack of working capital, although not
anticipated, we may continue to issue stock in exchange for loans and/or equity,
which may have a substantial dilutive impact on our existing
stockholders.





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.  The Company’s ability to continue
as a going concern is dependent on attaining profitable
operations.  The Company's 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 its 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 the Company be
unable to continue existence.





21


Summary
of product and research and development that we have accomplished and that we
will continue to perform for the term of our plan.





EcaFlo®
Division





As a
result of positive laboratory test results from the Water Quality Lab at Coastal
Carolina University, in combination with internal profit margin comparisons
between prototype EcaFlo® devices, and utilizing a reputable United States
source of electrolytic cells and their respective markets, we have been able to
make decisions regarding market entry with our own specifically designed and
engineered devices. Our engineering department has worked with AquaStel, our new
supplier, in order to develop prototype EcaFlo® equipment that features the
larger volume cells. Equipment design and construction of several EcaFlo®
models (C-101, C-102 and C-104) is complete and pricing has been developed to
reflect the upgrades we have made in our equipment.  Vital testing
results have significantly improved our ability to complete our goals ahead of
time and enter our markets with specific EcaFlo® devices with a firm confidence
level, in addition to allowing us the opportunity to modify existing EcaFlo®
equipment to meet customer demand.





Current
research initiatives are centered on providing specific water quality regulatory
agencies with reports that will serve to quell any question that may arise
regarding the potential of negative impact on the environment (i.e.: estuary)
associated with the use of EcaFlo® anolyte and catholyte solutions. We are
finding that, through the use of test data and technical expertise, we are able
to better educate environmental regulators and gain their support and
endorsement for certain ECA applications within the storm water treatment arena,
the petroleum industry, and with food and beverage safety control agencies. At
petroleum industry trade shows, our marketing and sales department personnel
presented test results showing potential customers that aliquots of petroleum
well “frac” waters treated with EcaFlo® device-generated anolyte solution showed
bacterial kill in less than 5 minutes. Furthering that data, our approach is to
point out that the use of EcaFlo® solutions to obtain these successful results
can eliminate the need for voluminous regulatory compliance paperwork and the
higher cost associated with the use of traditional biocidal chemicals that are
currently used to treat “frac” water.





We are
continuing our research to identify opportunities where we can provide our
innovative technology in value-added services within the food and beverage
production and processing industry, medical and healthcare markets, the
hospitality industry, as well as in homeland defense applications.





We are
continuing to work together with Coastal Carolina University, as well as
independent laboratories and other universities associated with several of our
customers’ specific research requirements, to develop a more comprehensive
approach to documenting test results that pertain to the use of EcaFlo®solutions
in a plethora of applications.





Further
research and development efforts will be implemented with our strategic
university partners, going concerns within the oil and gas and food safety
industries, and with nationally-accredited research labs. We view research and
development as an integral portion of our product development plan and will use
the measurable outcomes from research projects as catalysts for market
development. The results of this research guide us in determining what to
further implement into our EcaFlo® equipment designs.


22


On May 7,
2008, we announced that as a result of two invitations to showcase our equipment
at the Chemical Biological Incident Response Force’s Indian Head Base
(Maryland), our EcaFlo® equipment and solutions were accepted to be listed on
the United States Department of Homeland Security’s website.





The United States Environmental
Protection Agency (“EPA”) has conducted thorough investigations of the
scientific data relative to EcaFlo® Anolyte product, as well as requiring a full
battery of independent, yet Company-sponsored, lab testing which was performed
by fully-certified, EPA-approved labs.  Based on the results of this
extensive research, we were granted our registration of EcaFlo® Anolyte on
August 18, 2008.  This product is a highly effective, “green” biocide
that may be used for hard-surface disinfection for many applications, including
medical, dental, veterinary, schools, gyms and sports equipment; bacteria
control for food safety; oil and gas; water treatment; and infection
control.  This registration process has been completed in order to
make important marketing and efficacy claims about our EcaFlo® Anolyte product
and its ability to be used as a high-level (hospital) disinfection/antimicrobial
product.  Additionally, other business models are now allowed because
this registration permits the distribution of EcaFlo® Anolyte by container, as
well as for use onsite where produced.  A copy of the press release we
issued in reference to the above is attached hereto as exhibit 99.1. In
addition, we have concluded further testing on another specific MRSA-“family”
strain of bacteria to present to the EPA for consideration for adding another
specific claim to our already extensive list of product registration label
claims.





Benchmark
along with a service company are concluding thorough oilfield bacteria testing
in a third-party, independent lab and field testing of ExcelyteTM to ascertain
specific comparison data between ExcelyteTM and traditionally-used oilfield
chemicals.  The results of this testing will pinpoint specific uses
for ExcelyteTM beyond the use for frac waters, which expands the known oilfield
market through additional applications.





Significant
changes in the number of employees.





We
currently employ 8 full-time, permanent employees. These employees are engaged
in management, marketing and sales, engineering, production and administrative
services. 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.





Consultants





CBG Advanced Studies, Inc. On
September 7, 2007, we entered into a consulting agreement with CBG Advanced
Studies, Inc. (“CBG”), wherein CBG agreed to assist the Company in developing
appropriate and effective market penetration plans relative to the use of our
EcaFlo® equipment and solutions within U.S. military and civilian
decontamination market areas. The term of the agreement began on September 7,
2007 and terminated on August 31, 2008. We agreed to compensate CBG with 30,000
shares of our restricted common stock on a quarterly basis and $2,000 per month
for the first three (3) months, and to pay for mutually agreed upon travel and
expenses incurred in the performance of the agreement.





23


Duke Van
Kalken.On June 30, 2008, we entered into a contractor
agreement with Duke Van Kalken, President of Aquastel, for a period of one year.
Mr. Van Kalken will provide assistance to the Company with marketing and sales,
and will be paid a commission on equipment sales as compensation.





United Capital Group,
Inc.  On August 26, 2008, we entered into a consulting
agreement with United Capital Group, Inc., wherein United Capital Group, Inc.
agreed to provide the Company with investor and public relations services. The
term of the agreement began on August 26, 2008 and will terminate on February
26, 2009. We agreed to compensate United Capital, Inc. with $5,000 upon
execution of the agreement and a monthly fee of $5,000 commencing on September
26, 2008 and payable on the 26th of each
successive month thereafter during the term of the agreement.





Exclusive License and
Distribution Agreement





On June
20, 2007, in connection with the Stock Acquisition Agreement with Benchmark, we
entered into an Exclusive License and Distribution Agreement, wherein we granted
the exclusive, worldwide right, license, and authority to market, manufacture,
sell and distribute EcaFlo® fluids and solutions for use in Oilfield
Applications to Benchmark Energy Products. The agreement provides for special
pricing of equipment to Benchmark and per-gallon technology fees, paid to IET on
the EcaFlo® fluids sold by Benchmark, for a five-year period consistent with the
license period.





Benchmark
and the Company have extended the deadline for fixing the minimum technology
fees payable to the Company under the Exclusive License and Distribution
Agreement while a major pumping services company, which has expressed an
interest in obtaining some level of exclusivity, completes its laboratory
analysis and field testing of anolyte. The analysis and testing is expected to
be completed in the last quarter of 2008 or the first of 2009.





Supply Agreement with D2W2,
LLC





On June 6, 2008, we entered into a
supply agreement with D2W2, LLC, wherein D2W2 agreed to purchase our products
(certain electro-chemical activation equipment) for resale. The term of the
agreement commenced on June 6, 2008 and will continue for two years and shall
automatically renew for a full five year term provided satisfactory marketing,
testing and sales progress is made by D2W2, and, shall continue thereafter, year
to year, upon the same terms and conditions, unless either party notifies the
other that it wishes to renegotiate or terminate.





Exclusive Supply Agreement
with Aquastel, Inc.





On August 22, 2006, we entered into a
supply agreement with Aquastel, Inc., wherein Aquastel agreed to supply us with
C-50 and C-100 cells on an exclusive basis in the United States.  The
term of the agreement is for 3 years, terminating on August 22,
2009.  At the end of the term, the parties will attempt to renegotiate
in good faith to extend the agreement.





24


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.  We are in discussions with Benchmark relative to the fact that
Benchmark’s own trucking group prefers to pick up the EcaFlo® equipment that is
ordered and paid for, in order to deliver the equipment to their own
locations.  We believe that the sale has occurred when the equipment
is on our loading dock awaiting pick-up by Benchmark, but will obtain written
resolution before future sales are recorded in this manner.





Off-Balance
Sheet Arrangements.





As of
September 30, 2008, 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, 2007 and 2006, our three largest customers represented 52%,
11%, and 7%, and 35%, 16%, and 14% 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 collectibility 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.





25


Item
4. 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.





26


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 September 30, 2008, 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.





We
have minimal operating history, which raises substantial doubt 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, the continuation of payments
      from Benchmark pursuant to our agreement 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 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,
now that we are commencing production in the EcaFlo® Division.





As
we move forward in production stage business operations, even with our good
faith efforts, potential investors have a high possibility of losing their
investment.





27


Due to
the intrinsic nature of our business, we expect to see growth in competition and
the development of new and improved technologies within the realm of
electro-chemical activation processes and products.  While we will
always keep a close eye on technological advancement in these areas, management
forecasts are not necessarily indicative of our ability to compete with newer
technology, as it may develop.  Management forecasts should not be
relied upon as an indication of future performance.  While management
believes its estimates of projected occurrences and events are within the
timetable of its business plan, our actual results may differ substantially from
those that are currently anticipated.





We
will need additional capital in the future to finance our planned growth, which
we may not be able to raise or it may only be available on terms unfavorable to
us or our stockholders, which may result in our inability to fund our working
capital requirements and harm our operational results.





Based on our current proposed plans and
assumptions, we anticipate that we will need additional capital to fund our
operations.  Furthermore, the commercialization expenses of our
EcaFlo® Division will be substantial, i.e., in excess of the amount of cash that
we currently have.  Accordingly, we will have to (i) obtain additional
debt or equity financing in order to fund the further development of our
products and working capital needs, and/or (ii) enter into a strategic alliance
with a larger company to provide our required funding.  As a result of
our low-priced stock, and our continuous need for additional capital, we may
consider issuing significant amounts of our common stock in exchange for either
debt or equity.  The continued issuance of our common stock would have
a substantial dilutive impact on our current stockholders.  If we are
unable to obtain additional equity or debt financing, we may be forced to
terminate operations.





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.





28


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 you may be unable to sell at or near ask
prices or at all if you need to liquidate your 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, early-stage 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 you 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.





We
are subject to significant competition from large, well-funded
companies.





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 of 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 CEO, president and
chairman.  The loss of Mr. Prince, whose knowledge, leadership and
technical expertise upon which we rely, would harm our ability to execute our
business plan.





29


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 his 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 Mr. Prince.  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 of directors 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.





Pursuant
to the Stock Acquisition Agreement with Benchmark, we agreed that throughout the
period commencing with the closing date and ending October 31, 2009, Benchmark
shall have the right and ability to maintain an equity position in the Company
equal to the equity position it would own upon the issuance of shares to it
following payment of the seventh installment if, between the date of closing and
the date of such payment and issuance of shares, we were to issue no additional
shares of our common stock (approximately 40.61%) to any other
party.  If we default pursuant to the anti-dilution language in the
agreement (considered a “Warrant Right Event”) then we will be obligated to
issue to Benchmark a warrant entitling it to purchase, at $0.10 per share, such
additional number of shares of our common stock as would, upon exercise, make
Benchmark the holder of the same total percentage of all our outstanding equity
securities as it held prior to the Warrant Right Event. The warrants will be
exercisable at any time through October 31, 2009.





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.





Our
internal controls may be inadequate, which could cause our financial reporting
to be unreliable and lead to misinformation being disseminated to the
public.




30


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 and
directors 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,
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 one late
filing reported by FINRA.





31


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





On July 15, 2008, we agreed to issue
warrants to purchase 200,000 shares of our common stock, exercisable for $0.05
per share and will expire 2 years from issuance to The Morton Fishman Revocable
Trust pursuant to the promissory executed on July 15, 2008.  We
believe that the issuance of the warrants was exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2).  The recipient of
the warrants was afforded an opportunity for effective access to files and
records of the Company that contained the relevant information needed to make
its investment decision, including the Company’s financial statements and 34 Act
reports.  We reasonably believe that the recipient, immediately prior
to issuing the warrants, had such knowledge and experience in our financial and
business matters that it was capable of evaluating the merits and risks of its
investment.  The recipient had the opportunity to speak with our
president and directors on several occasions prior to its investment
decision.





On July
18, 2008, we issued 30,000 shares of our restricted common stock to Gerald H.
Turley pursuant to his consulting agreement dated September 7,
2007.  We believe that the issuance of the shares was exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2).  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 its
investment decision, including the Company’s financial statements and 34 Act
reports.  We reasonably believe that the recipient, immediately prior
to issuing the shares, had such knowledge and experience in our financial and
business matters that he was capable of evaluating the merits and risks of its
investment.  The recipient had the opportunity to speak with our
president and directors on several occasions prior to his investment
decision.





On
September 18, 2008, we issued 5,000,000 shares of our common stock to Benchmark
Performance Group, Inc., pursuant to our Stock Acquisition Agreement dated June
20, 2007.  We believe that the issuance of the shares was exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933 by virtue of Section 4(2).  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 its
investment decision, including the Company’s financial statements and 34 Act
reports.  We reasonably believe that the recipient, immediately prior
to issuing the shares, had such knowledge and experience in our financial and
business matters that it was capable of evaluating the merits and risks of its
investment.  The recipient had the opportunity to speak with our
president and directors on several occasions prior to its investment
decision.





32


Subsequent
Issuance





On
October 20, 2008, we issued 30,000 shares of our restricted common stock to
Gerald H. Turley pursuant to his consulting agreement dated September 7,
2007.  We believe that the issuance of the shares was exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2).  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 its
investment decision, including the Company’s financial statements and 34 Act
reports.  We reasonably believe that the recipient, immediately prior
to issuing the shares, had such knowledge and experience in our financial and
business matters that he was capable of evaluating the merits and risks of its
investment.  The recipient had the opportunity to speak with our
president and directors on several occasions prior to his investment
decision.





Issuer
Purchases of Equity Securities





The Company did not repurchase any of
its equity securities during the quarter ended September 30, 2008.





Item
3.                      
Defaults Upon Senior Securities.





None.





Item
4.                      
Submission of Matters to a Vote of Security Holders.





We did not submit any matters to a vote
of our security holders during the third quarter of 2008.





Item
5.                      
Other Information.





None.





33


Item
6.                      
Exhibits.





Exhibits





Incorporated
      by referenceExhibit
              number
            
            Exhibit
      description
            
            Filed
              herewith
            
            Form
            
            Period
              ending
            
            Exhibit
      No.
            
            Filing
              date10.21
            
            Addendum
      No. 1 to Stock Acquisition Agreement (June 20, 2007) dated August 26,
      2008.
            
            X31
            
            Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act
            
            X32
            
            Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act
            
            X99.1
            
            Press
      Release dated August 20, 2008 – IET Receives US EPA Product
      Registration
            
            X99.2
            
            Press
      Release dated September 10, 2008 – IET Targets MRSA (Staph) Infections in
      Schools with “Green” Biocide
            
            X99.3
            
            Press
      Release dated September 24, 2008 – IET Builds Sales into New
      Markets
            
            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:
November 13, 2008





34