UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549



FORM 10-QSB



xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



For the quarterly period endedSeptember 30, 2007



oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Commission file number000-26309



INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.

(Exact name of small business issuer as specified in its charter)



Delaware
        98-0200471(State or other jurisdiction of incorporation or organization)
        (IRS Employer Identification No.)




4235 Commerce Street

Little River, South Carolina 29566

(Address of principal executive offices)



(843) 390-2500

(Issuers telephone number)



Copies of Communications to:

Stoecklein Law Group

MacArthur Court

4695 MacArthur Court

Eleventh Floor

Newport Beach, CA 92660

(949) 798-5690

Fax (949) 258-5112



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesxNoo



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YesoNox



The number of shares of Common Stock, $0.001 par value, outstanding on November 6, 2007, was 68,010,467 shares.



Transitional Small Business Disclosure Format (check one):
        Yeso
        Nox






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PART I  FINANCIAL INFORMATION



Item 1. Financial Statements.



Integrated Environmental Technologies, Ltd.

Condensed Consolidated Balance Sheets



September 30,
        
        December 31,2007
        
        2006(unaudited)
        
        AuditedAssetsCurrent Assets:Cash
        
        
        
        $          60,692
        
        $          22,187Cash, restricted
        
        
        
        -
        
        50,000Accounts receivable
        
        
        
        79,711
        
        4,282Inventory
        
        
        
        239,471
        
        170,940Deposits and prepaid assets
        
        
        
        25,409
        
        5,942Total current assets
        
        
        
        405,283
        
        253,351Equipment
        
        
        
        13,045
        
        13,045Accumulated depreciation
        
        
        
        (7,982)
        
        (6,272)Total building and equipment
        
        
        
        5,063
        
        6,773$        410,346
        
        $       260,124Liabilities and Shareholders' (Deficit)Current liabilities:Accounts payable
        
        
        
        $          53,873
        
        $       175,158Accrued liabilities
        
        
        
        125,023
        
        173,780Notes payable
        
        
        
        149,100
        
        274,783Total current liabilities
        
        
        
        327,996
        
        623,721Convertible notes
        
        
        
        248,771
        
        38,510Shareholders' Equity (Deficit)Common stock 200,000,000 shares authorizedpar value $.001, 63,010,467 and 47,142,383 shares issuedand outstanding at 9/30/07 and 12/31/06
        
        63,010
        
        47,142Stock bought not issued, 0 and 268,000 sharesat 9/30/07 and 12/31/06
        
        
        
        120
        
        268Paid-in capital
        
        
        
        6,306,733
        
        4,584,956Unamortized cost of stock & warrants issued for consulting
        
        (27,668)
        
        -Retained earnings (deficit)
        
        
        
        (6,508,616)
        
        (5,034,473)Total shareholders' equity (deficit)
        
        
        
        (166,421)
        
        (402,107)Total liabilities and shareholders' equity (deficit)
        
        $        410,346
        
        $       260,124






See notes to condensed consolidated financial statements



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Integrated Environmental Technologies, Ltd.

Condensed Consolidated Statement of Operations

(unaudited)



Nine Months Ended September 30,
        
        Three  Months Ended September 30,2007
        
        2006
        
        2007
        
        2006Sales
        
        
        
        $        410,640
        
        $       299,299
        
        $      215,067
        
        $             66,929Cost of sales
        
        
        
        164,804
        
        155,593
        
        69,432
        
        41,174Gross profit
        
        
        
        245,836
        
        143,706
        
        145,635
        
        25,755Expenses:Professional and administrative fees
        
        
        
        515,937
        
        368,284
        
        61,888
        
        113,438Salaries
        
        
        
        584,138
        
        459,693
        
        195,443
        
        197,301Depreciation and amortization
        
        
        
        1,710
        
        6,201
        
        570
        
        1,924Office & miscellaneous expense
        
        
        
        314,830
        
        430,573
        
        86,549
        
        197,478Total operating expenses
        
        
        
        1,416,615
        
        1,264,751
        
        344,450
        
        510,141Net operating (loss)
        
        
        
        (1,170,779)
        
        (1,121,045)
        
        (198,815)
        
        (484,386)Other income (expense):Interest income
        
        
        
        -
        
        862
        
        -
        
        -Interest expense
        
        
        
        (303,364)
        
        (15,183)
        
        (50,627)
        
        (8,687)Total other income (expense)
        
        
        
        (303,364)
        
        (14,321)
        
        (50,627)
        
        (8,687)Net (loss)
        
        
        
        $   (1,474,143)
        
        $   (1,135,366)
        
        $     (249,442)
        
        $          (493,073)Net (loss) per share basic and diluted
        
        
        
        $             (0.03)
        
        $             (0.03)
        
        $            (0.00)
        
        $                (0.01)Weighted average shares outstanding
        
        
        
        54,422,702
        
        36,563,494
        
        62,532,014
        
        40,959,482






See notes to condensed consolidated financial statements



3



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Integrated Environmental Technologies, Ltd.

Condensed Consolidated Statement of Cash Flows

(unaudited)



Nine Months Ended September 30,2007
        
        2006Cash flows from operating activities:Net (loss)
        
        
        
        $   (1,474,144)
        
        $   (1,135,366)Adjustments to reconcile net (loss) to net cashused in operating activities -Depreciation and amortization
        
        
        
        1,710
        
        6,201Accretion of interest on convertible notes
        
        77,034
        
        -Stock issued for loan or interest costs
        
        2,620
        
        -Stock, options and warrants issued for services
        
        477,665
        
        100,319Termination of license agreement
        
        
        -
        
        59,322Beneficial conversion
        
        
        
        79,830
        
        -Changes in operating assets and liabilities:Cash, restricted
        
        
        
        50,000
        
        -Accounts receivable
        
        
        
        (75,429)
        
        (8,807)Inventory
        
        
        
        (68,531)
        
        6,878Deposits and prepaid assets
        
        
        
        (19,467)
        
        31,371Accounts payable
        
        
        
        (63,984)
        
        138,846Accrued liabilities
        
        
        
        (45,864)
        
        5,103Customer deposits
        
        
        
        -
        
        48,917Cash used in operating activities
        
        
        
        (1,058,560)
        
        (747,216)Cash flows from investing activities:Purchase of building and equipment
        
        
        -
        
        (1,650)Cash (used) in investing activities
        
        
        
        -
        
        (1,650)Cash flows from financing activities:Note payable, net
        
        
        
        (60,685)
        
        125,085Proceeds from the exercising of warrants
        
        293,750
        
        22,300Proceeds from the sale of convertible notes
        
        124,461
        
        27,700Proceeds from the sale of common stock
        
        739,539
        
        483,667Cash provided by financing activities
        
        
        1,097,065
        
        658,752Decrease in cash
        
        
        
        38,505
        
        (90,114)Cash beginning of period
        
        
        
        22,187
        
        122,870Cash end of period
        
        
        
        $          60,692
        
        $          32,756Supplemental disclosure of cash flow information:Cash paid for interest
        
        
        
        $          34,214
        
        $            1,795Cash paid for income taxes
        
        
        
        -
        
        -Non-cash financing activities:Stock and warrants issued for services
        
        $        554,645
        
        $       126,885Notes converted to stock
        
        
        
        $          69,712
        
        $          56,165






See notes to condensed consolidated financial statements



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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements

(unaudited)





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-QSB 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-KSB for the year ended December 31, 2006.



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 based on the development of products that can be sold.  We intend to use 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



On September 27, 2006, we borrowed $50,000 from a shareholder.  On November 16, 2006, we entered into a renewal loan agreement with the shareholder, whereby we issued 510,590 shares of common stock as satisfaction of penalties to date on the loan.  This new agreement established a due date of December 15, 2006, and included a $2,000 per month penalty for each month thereafter that the loan remained unpaid.  As of September 30, 2007, $5,000 interest had been paid.  On November 2, 2007, we paid $70,000 as payment in full of the principal loan amount and penalties.



We borrowed $25,000 from an individual on January 23, 2007 at an interest rate of 12% due on February 6, 2007.  The note was convertible into 400,000 of our shares if it was not repaid by the due date.  On July 12, 2007, we issued 537,500 shares of common stock as payment in full for the principal and accrued interest in the amount of $1,984.



We borrowed $40,000 on January 31, 2007 from an individual at an interest rate of 12%.  There was a dispute over the timing of the attempted repayment of this loan.  On July 12, 2007, we issued 1,070,900 shares of common stock as payment in full for the principal and accrued interest in the amount of $2,728.



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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements

(unaudited)



We borrowed $40,000 on March 12, 2007 from 3GC, Ltd., a shareholder, at an interest rate of 30%, due April 12, 2007.  A penalty of 200,000 of our shares was owed if the loan was not repaid.  We issued 800,000 shares of our stock to be held by a third party to secure a loan 3GC owed to an unaffiliated third party as collateral.  This loan was repaid on April 20, 2007.  A stop was placed on the collateral shares, and they will be cancelled when they are returned; however, there is currently a dispute with the person who was issued the shares as to the validity of issuance and the return of the shares.



Note 4  Common stock and warrants



On March 26, 2007, we authorized the issuance of 130,000 shares of our common stock for cash totaling $13,000.  The shares were issued on April 11, 2007.



On February 1, 2007, we issued 2,000,000 shares of our common stock to United Capital Group in connection with consulting services. As of September 30, 2007, we have recorded professional fees in the amount of $100,000, the value of the services received.



On March 12, 2007, our Board approved 5,000,000 Series D Warrants.



On March 13, 2007, we issued 1,000,000 Series D warrants to 3GC, Ltd. with an exercise price of $0.10 per share for consulting services.  The warrants expire on December 31, 2007.  The fair market value of the warrants based on the Black-Scholes model is $57,162 using the following assumptions:  Strike Price $0.10; Stock Price $0.11; Volatility 151%; Term .75 of a year; Dividend Yield 0%; Interest Rate 4.48%.  We also issued 600,000 shares of our common stock to 3GC, Ltd. in connection with the consulting agreement.  The value of the stock based on the closing price of our stock on the day of the contract was $66,000.  As of September 30, 2007, we recorded $123,162 in professional fees.



On March 23, 2007, we issued 1,200,000 Series D warrants to Ace Trading and Joel Brownstein with an exercise price of $0.10 per share for consulting services.  The warrants expire on December 31, 2007.  The fair market value of the warrants based on the Black-Scholes model is $68,594 using the following assumptions:  Strike Price $0.10; Stock Price $0.11; Volatility 151%; Term .75 of a year; Dividend Yield 0%; Interest Rate 4.48%.  As of September 30, 2007, we have recorded professional fee expense in the amount of $68,594.  These warrants were subsequently cancelled May 2, 2007, pursuant to the cancellation of the Agreement.



On April 3, 2007, we issued 250,000 shares of our restricted common stock to DaVinci-Franklin Fund I, LLC pursuant to its note agreement as liquidated damages for the failure to repay the loan within 90 days from the December 21, 2006 origination date.  We recorded a loan interest expense in the amount of $55,000 as of September 30, 2007.



On April 3, 2007, we issued a total of 263,000 shares of our restricted common stock that was unissued at the beginning of the year.



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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements

(unaudited)



During the nine-month period ended September 30, 2007, we sold 702 units consisting of 10% Convertible Debentures (conversion price of $0.40, convertible until January 2, 2009), 2,106,000 shares of common stock and 1,404,000 Series C Warrants ($0.25 per share, exercisable until December 31, 2008) for a total purchase price of $351,000.  We allocated the proceeds from the units between the convertible note, common stock and warrant based on the fair market value of each instrument.  The allocation was $102,081 to convertible notes, $184,924 to common stock and $63,995 to warrants.  We will accrete interest between the date of sale of the units to maturity for the convertible notes to reflect the difference between what we received for the notes and what we will pay at maturity.  At September 30, 2007, we had accreted additional interest of $58,575 and had unaccreted interest of $190,350.  We had
a beneficial conversion on the convertible notes based on the conversion price and the price of our stock at the date of sale.  The expense of the beneficial conversion was $73,000.



On May 29, 2007, we entered into a consulting agreement with John Sanders.  The period of the agreement is for 1 year.  We agreed to pay Mr. Sanders by issuing 50 units consisting of 50 10% Convertible Debentures (conversion price of $0.40, convertible until January 2, 2009), 150,000 shares of common stock and 100,000 Series C Warrants ($0.25 per share, exercisable until December 31, 2008).  These units were issued June 28, 2007.  The value assigned to the instruments was based on the fair market value of each and consisted of $8,766 for the convertible notes, $12,097 for the stock and $4,137 for the warrants.  At September 30, 2007, we had accreted additional interest of $3,060 and had unaccreted interest of $13,174.  We had a beneficial conversion and that expense was $5,600.  We are amortizing the cost of the services over the next year and expensed $8,332 during the period ended September
30, 2007 and have unamortized cost of consulting services of $16,668.



We entered into a consulting agreement with Mr. Joel Brown and Mr. Peter Gianoukas which was cancelled by us in the second quarter.  We issued 7,813 shares to each person and recorded a consulting expense of $2,813 based on the fair market value of our shares on the date of the agreement.



On June 20, 2007, we 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 our common stock for a total purchase price of $3,500,000 or $0.10 per share.  On June 27, 2007, we issued 5,000,000 shares pursuant to the agreement for cash of $188,000 and the conversion of $312,000 that was a deposit for equipment to be purchased for a total of $500,000.  The remaining 30,000,000 shares will be issued pursuant to the agreement terms as follows:  (1) Benchmark will pay four equal installments in the amount of $500,000 every six months beginning on or before October 31, 2007 and continuing through April 30, 2009.  Upon receipt of each payment we will cause to be issued 5,000,000 shares of our common stock.  Upon issuance of each 10,000,000 shares, we 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 of the final payment, we will cause to be issued 10,000,000 shares of our common stock and initiate a final registration for the remaining unregistered shares.



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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements

(unaudited)



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, we issue any shares of our common stock which would impair the equity position of Benchmark, then we shall issue a warrant to purchase shares of our 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.



In addition, Benchmark can acquire from us additional shares of our common stock whereby the purchase would give Benchmark 51% of our 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 our 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.



On July 31, 2007, we issued 573,000 shares of our common stock as payment for accrued professional fees in the amount of $57,300.



On August 9, 2007, we issued 22,058 shares of our common stock for services.  As of September 30, 2007, we recorded professional fees of $2,426.



On September 7, 2007, we entered into a consulting agreement with CBG Advanced Studies (CBG).  The term of the agreement is one year.  We agreed to pay CBG $2,000 per month for the first three months of the agreement.  We also agreed to additional compensation of 120,000 shares of restricted common stock, to be earned quarterly in 30,000 share increments. As of September 30, 2007, we recorded professional fees of $3,000 and unamortized shares issued for services of $11,000.



On May 30, 2007, our board of directors authorized an offer to the Series C Warrant Holders wherein they would be entitled to exercise up to 3,000,000 Series C Warrants for $0.125 (50% discount in original exercise price) per share with notification of intent by June 18, 2007.  2,350,000 series C options were exercised at a price of $0.125 per share.



At September 30, 2007, we had the following options and warrants outstanding:



C Warrants-
        4,804,000 to purchase stock at $0.25 per shareD Warrants-
        1,000,000 to purchase stock at $0.10 per shareOther Warrants-
        50,000 to purchase stock at $0.20 per shareOptions
        325,000 to purchase stock at $0.11 per share750,000 to purchase stock at $0.12 per share








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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements

(unaudited)



Note 5-Related-party transactions



We have consulting agreements with a shareholder and a Director with payments of $2,500 a month for each person.  Some of our borrowings are from shareholders and interest accrued on loans from shareholders for the period ended September 30, 2007 was approximately $51,000.



On May 30, 2007, we entered into an amended employment agreement with two of our executives whereby the original terms were extended from December 9, 2009 to March 30, 2012.  Further, the agreement increased the Executives annual compensation from $72,000 to $110,000 and $74,400 to $130,000.  As of September 30, 2007, the future minimum payments are as follows:



Related-party compensation requirements2007
        $
        66,0002008
        
        240,0002009
        
        240,000Thereafter
        
        300,000Total
        $
        846,000




Note 6- Commitments and contingencies



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.



On September 7, 2007, we entered into a consulting agreement with CBG Advanced Studies, Inc., 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 will terminate on August 31, 2008.  We agreed to compensate CBG with 30,000 shares of our restricted common stock on a quarterly basis, $2,000 per month for the first three (3) months, and pay for mutually agreement upon travel and expenses incurred in the performance of the agreement.



Note 7- Subsequent events



On September 27, 2006, we borrowed $50,000 from a shareholder.  On November 16, 2006, we entered into a renewal loan agreement with the same shareholder, whereby we issued 510,590 shares of common stock as satisfaction of penalties to date on the loan.  This new agreement established a due date of December 15, 2006, and included a $2,000 per month penalty for each month thereafter that the loan remained unpaid.  As of September 30, 2007, $5,000 interest had



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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements

(unaudited)



been paid.  On November 2, 2007, we paid $70,000 as payment in full of the principal loan amount and penalties.



On October 31, 2007, we authorized the issuance of 5,000,000 shares of our common stock for cash of $500,000 pursuant to the Benchmark Stock Acquisition Agreement entered into on June 20, 2007.



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FORWARD-LOOKING STATEMENTS



This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  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.



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;




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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;


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 Factors That May Affect Our Results of Operations in this document and in our Annual Report on Form 10-KSB for the year ended December 31, 2006.



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



Throughout this Report references to we, our, us, IET, the Company, and similar terms refer to Integrated Environmental Technologies, Ltd. and its 100% owned subsidiary I.E.T., Inc.



OVERVIEW AND OUTLOOK



Integrated Environmental Technologies, Ltd. has 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 abilities to construct EcaFlo® equipment;



        Developing and enhancing our testing protocol with Coastal Carolina University, Clemson University, and independent laboratories;


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



        Developing a relationship with Clemson University for research assistance on the agricultural side of the 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.




We have incurred losses since inception.  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



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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.  As of the date of this filing three installments ($1,000,000) have been paid.



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 solution for use in Oilfield Applications to Benchmark.



Results of Operations for the Three Months Ended September 30, 2007 and 2006



The following table summarizes selected items from the statement of operations at September 30, 2007 compared to September 30, 2006.



SALES AND COST OF GOODS SOLD:



Three Months Ended
September 30,
        
        Increase (Decrease)2007
        
        2006
        
        $
        
        %Sales
        
        $215,067
        
        $66,929
        
        $148,138
        
        221%Cost of Goods Sold
        
        69,432
        
        41,174
        
        28,258
        
        69%Gross Profit
        
        145,635
        
        25,755
        
        119,880
        
        465%Gross Profit Percentage of Sales
        
        68%
        
        38%
        
        --
        
        30%




Sales



Our sales for the three months ended September 30, 2007 were $215,067 compared to sales of $66,929 in the three months ended September 30, 2006.  This resulted in an increase in sales of $148,138, or 221%, from the same period a year ago.  We believe that our products are gaining recognition in the marketplace which will result in increased sales for the remaining quarter of fiscal 2007.  Oilfield industry sales should increase in future quarters as a result of our recent agreement with Benchmark.



Cost of goods sold / Gross profit percentage of sales



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Our cost of goods sold for the three months ended September 30, 2007 was $69,432, an increase of $28,258, or 69% from $41,174 for the three months ended September 30, 2006.  The increase in our cost of goods sold is as a result of having additional sales of EcaFlo® equipment during this period of time.  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 30% from the prior fiscal quarter because of the product mix of our sales and our FEM-3 cell replacement program.



EXPENSES:



Three Months Ended
September 30,
        Increase (Decrease)2007
        2006
        $
        %Expenses:Professional and
Administrative fees
        $61,888
        $113,438
        $(51,550)
        (45%)Salary
        195,443
        197,301
        (1,858)
        (1%)Depreciation and amortization
        570
        1,924
        (1,354)
        (70%)Office and miscellaneous
        86,548
        197,478
        (110,930)
        (56%)Total operating expenses
        344,450
        510,141
        (165,691)
        (32%)Loss from operations
        (198,815)
        (484,386)
        (285,571)
        (59%)Other income (expense):Interest income
        -
        -
        -
        --Interest expense
        (50,627)
        (8,687)
        41,940
        483%Total other expense
        (50,627)
        (8,687)
        41,940
        483%Net loss
        $(249,442)
        $(493,073)
        $(243,631)
        (49%)




Professional and Administrative Fees



Professional and administrative fees for the three months ended September 30, 2007 were $61,888, a decrease of $51,550, or 45%, from $113,438 for the three months ended September 30, 2006.  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 as we do not have sufficient in-house expertise for areas of our business.



Salary Expenses



Salary expenses for the three months ended September 30, 2007 was $195,443, a decrease of $1,858, or 1%, from $197,301 for the three months ended September 30, 2006.  The



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decrease in salary expenses was the result of decreasing hourly employee payroll expenses 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, 2007 was $570, a decrease of $1,354, or 70%, from $1,924 for the three months ended September 30, 2006.



Office and Miscellaneous



Office and miscellaneous expenses for the three months ended September 30, 2007 was $86,548, a decrease of $110,930, from $197,478 for the three months ended September 30, 2006.  The decrease in office and miscellaneous expenses was as a result of having well-stocked our office and the lack of need for one-time equipment purchases during this period of time.



(Loss) from Operations



The loss from operations for the three months ended September 30, 2007 was $198,815, versus a loss from operations of $484,386 for the three months ended September 30, 2006, a change in loss from operations of $285,571.  The decrease in the loss from operations in the third quarter of 2007 was the result of an increase in sales and our ability to produce EcaFlo® equipment more efficiently.



Interest Expense



Interest expense for the three months ended September 30, 2007 was $50,627 as compared to $8,687 for the same period in 2006.  Our interest expense in 2007 was high because of temporary working capital loans that had high interest rates and fees.



Net (Loss)



Our net loss for the three months ended September 30, 2007 was $249,442, a decrease of $243,631, or 49%, from $493,073 for the three months ended September 30, 2006.  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, 2007 and 2006



The following table summarizes selected items from the statement of operations at September 30, 2007 compared to September 30, 2006.





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SALES AND COST OF GOODS SOLD:



Nine Months Ended
September 30,
        
        Increase (Decrease)2007
        
        2006
        
        $
        
        %Sales
        
        $410,640
        
        $299,299
        
        $111,341
        
        37%Cost of Goods Sold
        
        164,804
        
        155,593
        
        9,211
        
        6%Gross Profit
        
        245,836
        
        143,706
        
        102,129
        
        71%Gross Profit Percentage of Sales
        
        60%
        
        48%
        
        --
        
        12%




Sales



Our sales for the nine months ended September 30, 2007 were $410,639 compared to sales of $299,299 in the nine months ended September 30, 2006.  This resulted in an increase in sales of $111,341, or 37%, from the same period a year ago.  We believe that our products are gaining recognition in the marketplace which may result in increased sales for the remaining quarters of fiscal 2007.  Oilfield industry sales should increase in future quarters as a result of our recent agreement with Benchmark.



Cost of goods sold / Gross profit percentage of sales



Our cost of goods sold for the nine months ended September 30, 2007 was $164,804, an increase of $9,211, or 6% from $155,593 for the nine months ended September 30, 2006.  The increase in cost of goods sold was as a result of our FEM replacement program, and increased sales.  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 goods sold will continue to increase slightly less as a percentage of sales with additional sales.  Gross profit margins decreased from the prior fiscal year because of the product mix of our sales and our FEM-3 cell replacement program.











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EXPENSES:



Nine Months Ended
September 30,
        Increase (Decrease)2007
        2006
        $
        %Expenses:Professional and administrative fees
        $515,937
        $368,284
        $147,653
        40%Salary
        584,138
        459,693
        124,445
        27%Depreciation and amortization
        1,710
        6,201
        (4,491)
        (72%)Office and miscellaneous
        314,830
        430,573
        (115,743)
        (27%)Total operating expenses
        1,416,615
        1,264,751
        151,864
        12%Loss from operations
        (1,170,779)
        (1,121,045)
        49,735
        4%Other income (expense):Interest income
        -
        862
        (862)
        --Interest expense
        (303,364)
        (15,183)
        288,181
        --Total other expense
        (303,364)
        (14,321)
        289,043
        --Net loss
        $(1,474,143)
        $(1,135,366)
        $338,777
        30%




Professional and Administrative Fees



Professional and administrative fees for the nine months ended September 30, 2007 were $515,937, an increase of $147,653, or 40%, from $368,284 for the nine months ended September 30, 2006.  The increase in professional and administrative fees was the result of the increased number and amounts of consulting contracts.  Whenever possible, we have and will continue to reduce outside consultants but we will still need some assistance as we do not have sufficient in-house expertise to handle all aspects of our business.



Salary Expenses



Salary expenses for the nine months ended September 30, 2007 were $584,138, an increase of $124,445, or 27%, from $459,693 for the nine months ended September 30, 2006.  The increase in salary expenses was the result of employing additional personnel and expanded hours worked.  We expect salary expense to increase in the future as the Company grows and as sales volume increases.  In addition, we have increased the salaries payable to our executives.



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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, 2007 were $1,710, a decrease of $4,491, or 72%, from $6,201 for the nine months ended September 30, 2006.  Depreciation and amortization expenses decreased because we are no longer amortizing a license fee.



Office and Miscellaneous



Office and miscellaneous expenses for the nine months ended September 30, 2007 were $314,830, a decrease of $115,743, from $430,573 for the nine months ended September 30, 2006.  The decrease in office and miscellaneous expenses was a result of having well-stocked our office and the lack of need for one-time equipment purchases during this period of time.



(Loss) from Operations



The loss from operations for the nine months ended September 30, 2007 was $1,170,779, versus a loss from operations of $1,121,045 for the nine months ended September 30, 2006, an increase in loss from operations of $49,734.  The increase in the loss from operations in 2007 was the result of additional operating expenses as compared to 2006.  A significant portion of this increase is directly related to replacing FEM-3s with C-100 cells in our new EcaFlo® equipment.



Interest Expense



Interest expense for the nine months ended September 30, 2007 was $303,364 as compared to $15,183 for the same period in 2006.  Our interest expense in 2007 was high because of temporary working capital loans that had high interest rates and fees.



Net (Loss)



Our net loss for the nine months ended September 30, 2007 was $1,474,143, an increase of $338,777 or 30%, from $1,135,366 for the nine months ended September 30, 2006.  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.



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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, wastewater treatment, and other hard surface sanitation opportunities.



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, wastewater treatment, and other hard surface sanitation opportunities.

Liquidity and Capital Resources



The following table summarizes total current assets, total current liabilities and working capital at September 30, 2007 compared to December 31, 2006.



September 30,
2007
        December 31,
2006
        Increase / (Decrease)$
        %Current Assets
        $405,283
        $        253,351
        $151,932
        60%Current Liabilities
        $327,996
        $        623,721
        $(295,725)
        (47%)Working Capital (deficit)
        $77,287
        $     (370,370)
        $447,657
        --




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 and by borrowings.  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, 2007, we continue to use equity sales and debt financing 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.  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 and for technology fees, paid to IET per gallon of EcaFlo® fluids sold by Benchmark within the oil and gas industry.  As of the date of this filing we have received $1,000,000 of the $3,500,000 equity investment.



Financing.  On September 27, 2006, we entered into a loan agreement with Michael Burstein for the principal amount of $50,000.  Pursuant to the loan agreement we promised to pay Mr. Burstein the sum of $50,000 plus interest of $5,000 within 14 days of September 27, 2006.  We agreed to issue 1,000,000 shares to Mr. Burstein as a late payment penalty if the note was not paid in 30 days.  On November 17, 2006, the parties renewed the loan agreement wherein Mr. Burstein agreed to accept 510,590 shares of our common stock and $5,000 as complete and full satisfaction of penalties associated with our non-performance on the loan agreement.  We further agreed to pay Mr. Burstein $55,000 on or before close of business on



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December 15, 2006.  We also agreed to pay an additional $2,000 for each or any 30-day period for which the loan balance remains outstanding.  On November 2, 2007, we paid $70,000 to Mr. Burstein as payment in full of principal loan amount and penalties.



On December 21, 2006, we entered into a loan agreement with DaVinci-Franklin Fund I, LLC for the principal amount of $75,000.  Pursuant to the loan agreement we promised to pay to the order of DaVinci-Franklin Fund I, LLC the principal sum of $75,000 plus interest of $5,000 per month on March 21, 2007.  We also agreed to issue 2,500,000 shares of our restricted common stock to DaVinci as collateral (issued on July 12, 2007).  The loan agreement had a provision wherein if we did not repay the principal sum plus interest on March 21, 2007, we agreed to issue 250,000 shares of common stock as liquidated damages.  We issued the 250,000 shares on April 3, 2007.  On August 22, 2007, the note was paid in full and on August 28, 2007, the 2,500,000 collateral shares were cancelled.



On January 23, 2007, we entered into a promissory note with Edward Marucci for the principal amount of $25,000.  Pursuant to the promissory note, we promised to pay Mr. Marucci the principal sum of $25,000 together with interest of 12% per annum on the maturity date of February 6, 2007.  We did not repay the note when due; consequently the interest rate increased to eighteen percent (18%) per annum.  Mr. Marucci may at his option convert any amounts owing under the promissory note into shares of our common stock at the rate of one share for each $0.05 of indebtedness converted.  On July 12, 2007, we issued 537,500 shares of our restricted common stock to Mr. Marucci to satisfy the promissory note in full.



On January 30, 2007, we entered into a promissory note with Sherri Hotton for the principal amount of $40,000.  On July 12, 2007, we issued 1,070,900 shares of our restricted common stock to Ms. Hotton to satisfy the promissory note in full.



Satisfaction of our cash obligations for the next 12 months.



As of September 30, 2007, our cash balance was $60,692.  Our plan for satisfying our cash requirements for the next twelve months is primarily from our agreement with Benchmark, through additional sales of our common stock, third-party financing, and/or traditional bank financing.  We anticipate sales-generated income during that same period of time, but do not anticipate generating sufficient amounts of revenues to meet our working capital requirements.  Consequently, we intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion through 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.



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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 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.



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, utilizing the recently secured new 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.  Due to securing a new source of electrolytic cells for our EcaFlo® equipment, 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 building on several EcaFlo® models 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.



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On January 24, 2006, we issued a press release announcing that we entered into a two-year supply agreement for our EcaFlo® devices with Layne Christensen Company, a water services provider.  On January 26, 2006, we sold our first EcaFlo® Model 080 to Layne Christensen.



Current research initiatives are centered on providing specific water quality regulatory agencies with toxicity testing 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 ECA 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 were able to present test results showing potential customers that aliquots of petroleum well frac waters that were treated with a 1% EcaFlo® device-generated anolyte solution showed total
bacteria kill in less than 10 minutes.  Furthering that data, our approach is to point out that these kinds of results eliminate the need for voluminous regulatory compliance paperwork to be submitted, in addition to costing less than the use of traditional biocidal chemicals that are currently put into frac water.  The oil and gas industry market continues to develop as a result of our strategic alliance with Pentagon Technical Services, a small consulting firm with ties into this industry.



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 and Clemson University, as well as 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®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.



Significant changes in the number of employees.



We currently employ 10 full-time, permanent, employees; 1 part-time employee (research assistant and technician), 1 special projects consultant (EGR International, LLC), 1 scientific and ECA consultant.  The 10 full-time employees are engaged in management, marketing and sales, engineering, production and administrative services; our part-time employee is within our production department; and one of our consultants provides technical/scientific support to the



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EcaFlo® Division of our Company.  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.



Amended Employment Agreements



William E. Prince.On May 30, 2007, we executed an amended employment agreement with our President and CEO, William E. Prince, wherein we extended the termination date from December 31, 2009 to March 30, 2012.  Additionally, we increased Mr. Princes annual salary from $74,400 to $130,000, which shall be paid in equal, bi-weekly installments retroactive to April 1, 2007.



Marion C. Sofield.On May 30, 2007, we executed an amended employment agreement with our Executive Vice President, Marion C. Sofield, wherein we extended the termination date from December 31, 2009 to March 30, 2012.  Additionally, we increased Ms. Sofields annual salary from $72,000 to $110,000, which shall be paid in equal, bi-weekly installments retroactive to April 1, 2007.



Consultants



United Capital Group, Inc.On January 29, 2007, we entered into a consulting agreement with United Capital Group, Inc., wherein United Capital agreed to provide the Company with services of an advisory or consultative nature to provide a plan for various investor and public relations services.  The term of the agreement is for six months terminating on August 29, 2007.  We agreed to compensate United Capital with 2,000,000 shares of our common stock with registration rights (issued on February 2, 2007).



John Sanders.On May 29, 2007, we entered into a consulting agreement with John Sanders, wherein Mr. Sanders agreed to assist the Company with corporate development in order to enhance the Companys shareholder value.  The term of the agreement began on May 29, 2007 and will terminate on May 28, 2008.  We agreed to pay Mr. Sanders the equivalent of $2,500 per month by issuing 50 units of our 10% convertible debenture (includes 150,000 restricted shares of common stock and 100,000 Series C Warrants, exercisable at $0.25 per share through December 31, 2008) and pay for mutually agreed upon travel and expenses incurred in the performance of the agreement.  The 50 units were issued to Mr. Sanders on June 28, 2007.



CBG Advanced Studies, Inc.On September 7, 2007, we entered into a consulting agreement with CBG Advanced Studies, Inc., 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 will terminate on August 31, 2008.  We agreed to compensate CBG with 30,000 shares of our restricted common stock on a quarterly basis, $2,000 per month for the first three (3) months, and pay for mutually agreement upon travel and expenses incurred in the performance of the agreement.



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Pentagon Technical Services, Inc.We entered into a Representative Agreement with Pentagon Technical Services, Inc. on August 1, 2005.Due to conflicts with the Benchmark Exclusive License and Distribution Agreement, our agreement with Pentagon was terminated on July 31, 2007.  However, discussions are ongoing with Pentagon and Benchmark, seeking to reach an agreement that will effectively benefit all parties in advancing the technology.





Supply Agreement with Layne Christensen Company



On January 19, 2006, we entered into a supply agreement with Layne Christensen Company, wherein Layne agreed to purchase our products (certain water treatment equipment) for resale to its customers.  The term of the agreement commenced on January 19, 2006 and will terminate on December 31, 2007.



Sales Contract



On March 16, 2007, we executed a sales contract with Benchmark Energy Products, LP, wherein we agreed to sell and Benchmark agreed to purchase six (6) EcaFlo® Model C104 units for a total purchase price of $312,000.  We received a deposit of $312,000 that was subsequently used for the purchase of shares of our stock.



Critical Accounting Policies and Estimates



Our discussion of financial condition 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.



Concentration of Credit Risk



We sell products to customers in diversified industries and geographical regions.  In 2006, three customers represented 35%, 16% and 14% of our revenues, respectively and in 2005 three customers represented 46%, 28% and 19% of our revenues, respectively.  We continually evaluate the creditworthiness of our customers.  We typically require 40-50% deposit with an EcaFlo® equipment order and we have not required collateral other than deposits.



We evaluate the collectibility of accounts receivable on a combination of factors.  Our policies require us to record a specific reserve if we become aware of anything that would cause us to question a specific customers inability to meet their financial obligations to us.  We will



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record a specific reserve for bad debts to reduce a related receivable when we believe an amount is not collectible.



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.



Off-Balance Sheet Arrangements.



As of September 30, 2007, 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.



FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS



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



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



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



As a result of our deficiency in working capital at December 31, 2006, 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 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.



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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 staffed by former military personnel and an experienced mechanical engineer who have expertise that center 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 and the generation of sales revenues;



        The continued success of lab 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, alone or with others, 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.



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.



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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 anticipate issuing significant amounts of our common stock in exchange for either debt or equity.  This continued issuance of our common stock will have a substantial dilutive impact on our current stockholders.  If we are unable to obtain additional equity or debt
financing, in the near future, 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.




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



27



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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.



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 are not currently seeking additional equity financing, which if sought our or obtained may result in additional shares of our common stock being issued.  The issuance of additional common stock in the future will reduce the proportionate ownership and voting power of the common stock held by our existing stockholders.



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



Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management 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 no late filings reported by FINRA.



Item 3. 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-



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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.



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.




None.




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



On May 30, 2007, our board of directors authorized an offer to the Series C Warrant Holders wherein they would be entitled to exercise up to 3,000,000 Series C Warrants for $0.125 (50% discount in original exercise price) per share with notification of intent to exercise by June 18, 2007.  On July 13, 2007, 16 Series C Warrant Holders exercised 2,250,000 Series C warrants at a price of $0.125 per share for a total purchase price of $281,250.  The 2,250,000 shares were issued on July 13, 2007.  Subsequently, another Series "C" Warrant Holder exercised 100,000 Series "C" warrants at a price of $0.125 per share for a total purchase price of $12,500.  The 100,000 shares were issued on August 27, 2007.  We believe that the issuance and sale of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act
of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The shares were issued directly by us and did not involve a public offering or general solicitation.  The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports.  We reasonably believed that the recipients, immediately prior to the issuance of the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment.  The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.



On July 3, 2007, we sold 50 units consisting of 50 10% Convertible Debentures (conversion price of $0.40, convertible until January 2, 2009), 150,000 shares of common stock and 100,000 Series C Warrants ($0.25 per share, exercisable until December 31, 2008) to 1 accredited investor for a total purchase price of $25,000.  As of the date of this filing the 150,000 shares have not been issued.  We believe that the issuance and sale of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The shares were issued directly by us and did not involve a public offering or general solicitation.  The recipient of the shares was afforded an opportunity for effective access to files and records of the Company that contained the relevant



30



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information needed to make his investment decision, including the financial statements and 34 Act reports.  We reasonably believe that the recipient, immediately prior to the issuance of the shares, had such knowledge and experience in our financial and business matters that he was capable of evaluating the merits and risks of his investment.  The recipient had the opportunity to speak with our management on several occasions prior to his investment decision.



On July 12, 2007, we issued 537,500 shares of our restricted common stock to Edward Marucci pursuant to the conversion of Mr. Maruccis promissory note dated January 23, 2007 to satisfy the note in full.  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.



On July 12, 2007, we issued 1,070,900 shares of our restricted common stock to Sherri Hotton pursuant to the conversion of Ms. Hottons promissory note dated January 30, 2007 to satisfy the note in full.  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.



On July 12, 2007, we issued 2,500,000 shares of our restricted common stock to DaVinci-Franklin Fund to be held as collateral in accordance with the December 21, 2006 note agreement.  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.  On August 28, 2007, the 2,500,000 shares were cancelled.



On July 27, 2007, we issued 573,000 shares of common stock to Stoecklein Law Group for services rendered to the Company.  The shares issued were registered in a Registration Statement on Form S-8 filed on July 23, 2007.



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On August 22, 2007, we issued 150,000 shares of common stock to Suzy Fleming in accordance with a Debenture Agreement dated May 15, 2006.  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.



On August 23, 2007, we issued 11,029 shares of our restricted common stock to Joel Brownstein and 15, 625 shares of our restricted common stock to Peter Gianoukas as final and complete compensation pursuant to their consulting agreement dated March 22, 2007.  We believe that the issuance of the shares to Joel Brownstein and Peter Gianoukas was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2) and Regulation D Rule 506.  The shares were issued directly by us and did not involve a public offering or general solicitation.  The recipients of the shares were afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make their investment decision, including the financial statements and 34 Act reports.  We reasonably believe that the recipients,
immediately prior to the issuance of the shares, had such knowledge and experience in our financial and business matters that they were capable of evaluating the merits and risks of their investment.  The recipients had the opportunity to speak with our management on several occasions prior to their investment decision.



Subsequent Issuances



On November 2, 2007, we issued 5,000,000 shares of common stock to Benchmark Performance Group Inc. pursuant to the Stock Acquisition Agreement dated June 20, 2007, for cash totaling $500,000.  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.



Issuer Purchases of Equity Securities



The Company did not repurchase any of its equity securities during the quarter covered by this report.



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Item 3.
        Defaults Upon Senior Securities.




None.




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




None.






Item 5.
        Other Information.




None.




Item 6.
        Exhibits and Reports on Form 8-K.




Exhibits



Incorporated by referenceExhibit
number
        
        Exhibit description
        
        Filed
herewith
        
        Form
        
        Period
ending
        
        Exhibit No.
        
        Filing
date10.18
        
        Stock Acquisition Agreement dated June 20, 2007
        
        
        
        8-K
        
        
        
        10.1
        
        8/21/0710.19
        
        Exclusive License and Distribution Agreement dated June 20, 2007
        
        
        
        8-K
        
        
        
        10.2
        
        8/21/0710.20
        
        Registration Rights Agreement dated June 21, 2007
        
        
        
        8-K
        
        
        
        10.3
        
        8/21/0731
        
        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 on Exclusive Agreement with Benchmark, dated April 25, 2007
        
        
        
        10-QSB
        
        3/31/07
        
        99.1
        
        5/21/07


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 19, 2007





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