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 endedMarch 31, 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

402 West Broadway, Suite 400

San Diego, CA 92101

(619) 595-4882

Fax (619) 595-4883



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 May 8, 2007, was 51,185,383 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



|                                               |                                                                                          | March 31,       | December 31,  
|---------------------------------------------- | ---------------------------------------------------------------------------------------- | --------------- | --------------
|                                               |                                                                                          | 2007            | 2006          
|                                               |                                                                                          | (Unaudited)     | Audited       
|Assets                                         |                                                                                          |                
|Current Assets:                                |                                                                                          |                
|                                               | Cash                                                                                     | $        19,581 | $       22,187
|                                               | Cash, restricted                                                                         | 50,000          | 50,000        
|                                               | Accounts receivable                                                                      | 3,740           | 4,282         
|                                               | Inventory                                                                                | 147,872         | 170,940       
|                                               | Deposits and prepaid assets                                                              | 5,942           | 5,942         
|                                               |                                                                                          |                 |               
|                                               | Total current assets                                                                     | 227,135         | 253,351       
|                                               |                                                                                          |                 |               
|Equipment                                      | 13,045                                                                                   | 13,045         
|Accumulated depreciation                       | (6,842)                                                                                  | (6,272)        
|                                               |                                                                                          |                 |               
|                                               | Total equipment                                                                          | 6,203           | 6,773         
|                                               |                                                                                          |                 |               
|                                               |                                                                                          | $     233,338   | $     260,124 
|Liabilities and Shareholders' Equity (Deficit) |                                                                                          |                
|Current liabilities:                           |                                                                                          |                
|                                               | Accounts payable                                                                         | $     217,748   | $     175,158 
|                                               | Accrued liabilities                                                                      | 319,183         | 173,780       
|                                               | Notes payable                                                                            | 381,983         | 274,783       
|                                               |                                                                                          |                 |               
|                                               | Total current liabilities                                                                | 918,914         | 623,721       
|                                               |                                                                                          |                 |               
|Convertible notes                              | 49,320                                                                                   | 38,510         
|                                               |                                                                                          |                 |               
|Shareholders' Equity (Deficit)                 |                                                                                          |                
|                                               | Common stock 200,000,000 shares authorized                                               |                 |               
|                                               | par value $0.001, 50,542,383 and 47,142,383 shares issued and                            |                
|                                               | outstanding at 3/31/07 and 12/31/06, respectively                                        | 50,542          | 47,142        
|                                               | Stock bought not issued 393,000 and 268,000 shares at 3/31/07 and 12/31/06, respectively | 393             | 268           
|                                               | Paid-in capital                                                                          | 5,003,325       | 4,584,956     
|                                               | Unamortized cost of stock & warrants issued for consulting                               | (237,302)       | -             
|                                               | Retained earnings (deficit)                                                              | (5,551,854)     | (5,034,473)   
|                                               |                                                                                          |                 |               
|                                               | Total shareholders' equity (deficit)                                                     | (734,896)       | (402,107)     
|                                               |                                                                                          |                 |               
|                                               | Total liabilities and shareholders' equity (deficit)                                     | $     233,338   | $     260,124 



See notes to condensed consolidated financial statements



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Integrated Environmental Technologies, Ltd.

Condensed Consolidated Statement of Operations

Unaudited



Three Months Ended
March 31,2007
        2006Sales
        $        77,283
        $     112,976Cost of sales
        49,571
        37,682Gross profit
        27,712
        75,294Professional fees
        133,428
        146,101Salary
        235,308
        134,618Depreciation and amortization
        570
        2,354Office & miscellaneous expense
        136,222
        105,116505,528
        388,189Loss from operations
        (477,816)
        (312,895)Other income (expense):Interest income
        -
        418Interest expense
        (39,565)
        (4,602)(39,565)
        (4,184)Net loss
        $    (517,381)
        $   (317,079)Net loss per share basic and diluted
        $           (0.01)
        $          (0.01)Weighted average shares outstanding
        49,014,939
        35,281,126




See notes to condensed consolidated financial statements



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Integrated Environmental Technologies, Ltd.

Condensed Consolidated Statement of Cash Flows

Unaudited



Three Months Ended
March 31,2007
        2006Cash flows from operating activities:Net loss
        $    (517,381)
        $   (317,079)Adjustments to reconcile net loss to net cashused in operating activities -Depreciation and amortization
        570
        1,924Accretion of interest on convertible notes
        10,810
        -Stock issued for loan or interest costs
        800
        -Stock, options and warrants issued for services
        170,792
        36,188Beneficial conversion
        -
        515Changes in operating assets and liabilities:Cash, restricted
        -
        50,000Accounts receivable
        542
        (13,642)Inventory
        23,068
        8,199Deposits and prepaid assets
        -
        (22,390)Accounts payable
        42,590
        121,965Accrued liabilities
        145,403
        (7,651)Cash used in operating activities
        (122,806)
        (141,971)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
        107,200
        -Proceeds from the sale of common stock
        13,000
        125,000Cash provided by financing activities
        120,200
        125,000Decrease in cash
        (2,606)
        (18,621)Cash beginning of period
        22,187
        122,870Cash end of period
        $        19,581
        $     104,249Supplemental disclosure of cash flow information:Cash paid for interest
        $          2,067
        $         1,795Cash paid for income taxes
        -
        -Noncash financing activities:Stock and warrants issued for services
        $     408,894
        $                  -




See notes to condensed consolidated financial statements



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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements



Note 1 - Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-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

We borrowed $25,000 from an individual on January 23, 2007 at an interest rate of 12% due on February 6, 2007.  The note is convertible into 400,000 of our shares if it is not repaid.  The note is in default.



We borrowed $40,000 on January 31, 2007 from an individual at an interest rate of 12%.  There is a dispute over the timing of the attempted repayment of this loan.



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 is owed if the loan is not repaid.  We issued 800,000 shares of our stock to be held by our stock registrar as collateral for this loan. This loan was subsequently repaid on April 20, 2007.



We borrowed $2,200 from William Prince, our CEO at an interest rate of 18% due March 27, 2007.  This loan was not repaid as of March 31, 2007.



Note 4  Common stock and warrants

We sold 130,000 shares of our stock on March 26, 2007 to a shareholder for $13,000.  The stock was not issued at March 31, 2007 and we have recorded $130 that represents the par value as stock bought or earned not issued.



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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements



We issued 2,000,000 shares of our stock to United Capital Group in connection with consulting services on February 1, 2007.  The value of the services was $100,000 and the period of the consulting agreement was from February 1, 2007 through September 30, 2007.  Professional fee expense will be recognized over the period of the contract and for the period ended March 31, 2007 we recognized $28,572 as professional fee expense.



We had 5,000 shares that were not issued at December 31, 2006 that were cancelled during the quarter.



Our Board approved on March 12, 2007 5,000,000 Series D Warrants.



We issued 1,000,000 Series D warrants on March 13, 2007 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 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.  Professional fee expense will be recognized over the term of the agreement (March 13, 2007 through June 30, 2007) and for the period ended March 31, 2007 we recognized $20,339 as professional fee expense.



We issued 1,200,000 Series D warrants on March 23, 2007 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%.  Professional fee expense will be recognized over the term of the agreement (March 23, 2007 through June 30, 2007) and for the period ended March 31, 2007 we recognized $5,543 as professional fee expense.  These warrants were subsequently cancelled May 2, 2007, pursuant to
the cancellation of the Agreement.



Our Board granted 750,000 options to Officers and 325,000 options to employees on March 23, 2007.  The fair market value of the options based on the Black Scholes model is $116,738 using the following assumptions Strike Price $0.11 and $0.12; Stock Price $0.11; Volatility 226%; Term 4.75 years; Dividend Yield 0%; Interest Rate 4.48%.  The cost was included as salary expense.



At March 31, 2007, we had the following options and warrants outstanding:



C Warrants-
        6,000,000 to purchase stock at $0.25 per shareD Warrants-
        2,200,000 to purchase stock at $0.10 per shareOther Warrants-
        100,000 to purchase stock at $0.23 per share50,000 to purchase stock at $0.20 per shareOptions
        325,000 to purchase stock at $0.10 per share750,000 to purchase stock at $0.11 per share






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Integrated Environmental Technologies, Ltd.

Notes To Condensed Consolidated Financial Statements



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 March 31, 2007 was $27,413.



Note 6- Subsequent Events

We issued 393,000 shares subsequent to the end of the quarter that were recorded as unissued at March 31, 2007.  Pursuant to a loan agreement we issued 250,000 penalty shares subsequent to March 31, 2007.



In April 2007 we sold 150 units consisting of $75,000 in convertible debentures (conversion price of $0.40, convertible until January 2, 2009), 450,000 shares of common stock and 300,000 Series C warrants ($0.25 per shares exercisable until December 31, 2008) for $75,000.  In connection with the sale of the units we had a fee of $3,750.  The fee was paid with shares of our common stock and the price used to value the shares was our closing price on the day the shares were earned.



On May 2, 2007, 800,000 shares of our stock was returned to us and cancelled as it was collateral for a $40,000 loan that was repaid.



We cancelled the consulting agreement with Ace Trading and Joel Brownstein and cancelled the 1,200,000 Series D warrants that were issued to them.





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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
        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
        substantial dilution to our stockholders as the result of the issuance of our common stock in exchange for debt and/or equity financing;


o
        potential change in control upon completion of financing agreements;


o
        deterioration in general or regional economic conditions;


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


o
        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.




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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 a two-division income-generating technology company.  We have focused our attentions on several critical issues:




        Raising equity capital;



        Developing our abilities to construct the equipment required for our EcaFlo® Division;



        Developing and enhancing our testing protocol with Coastal Carolina University in regards to our EcaFlo® technology;



        Developing a relationship with Clemson University to produce testing assistance with our Essential Oils Extraction Division and research assistance on the agricultural side of the EcaFlo® Division; and



        Commencing the process of developing a brand identity and sales campaign through the appearance at various trade shows.




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.



We have incurred losses since inception.  For the three months ended March 31, 2007, we had a net loss of $517,381 as compared to a net loss of $317,079 for the three months ended March 31, 2006.



Management intends to closely monitor the costs associated with the production of EcaFlo®devices in an attempt to minimize capital shortages.  As we continue to expand operational activities, we anticipate experiencing negative cash flows from operations, and we may be required to fund operations from debt borrowings or continued equity sales.



There can be no assurance that subsequent financing would be available, or if it is available, that it would be on acceptable terms.  If additional financing is not available or is not available on acceptable terms, or we are unable to arrange a suitable strategic opportunity, we



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will be in significant financial jeopardy and we may be unable to continue our operations at current levels without significant changes to our business plan.

Results of Operations for the Three Months Ended March 31, 2007 and 2006.



The following table summarizes selected items from the statement of operations at March 31, 2007 compared to March 31, 2006.



SALES AND COST OF GOODS SOLD:



Three Months Ended
March 31,
        
        Increase (Decrease)2007
        
        2006
        
        $
        
        %Sales
        
        $ 77,283
        
        $112,976
        
        $ (35,693)
        
        (32%)Cost of Goods Sold
        
        49,571
        
        37,682
        
        11,889
        
        32%Gross Profit
        
        27,712
        
        75,294
        
        (47,582)
        
        (63%)Gross Profit Percentage of Sales
        
        36%
        
        67%
        
        --
        
        (31%)




Sales



Our sales for the three months ended March 31, 2007 were $77,283 compared to sales of $112,976 in the three months ended March 31, 2007.  This resulted in a decrease in sales of $35,693, or 32%, 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 quarters of fiscal 2007.



Cost of goods sold / Gross profit percentage of sales



Our cost of goods sold for the three months ended March 31, 2007 was $49,571, an increase of $11,889, or 32% from $37,682 for the three months ended March 31, 2006.  Our cost of goods sold will increase as our sales increase.  We are continuing to update and upgrade our product line and we closely monitor the cost of all of our products.  We believe the cost of sales will increase slightly less as a percentage of sales when we have additional sales.  Gross profit margins decreased from the prior fiscal year
because of the product mix of our sales.



EXPENSES:



Three Months Ended
March 31,
        Increase (Decrease)2007
        2006
        $
        %Expenses:Professional fees
        $133,428
        $146,101
        $(12,673)
        (9%)Salary
        235,308
        134,618
        100,690
        75%






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Depreciation and amortization
        570
        2,354
        (1,784)
        (76%)Office and miscellaneous
        136,222
        105,116
        31,106
        30%Total operating expenses
        505,528
        388,189
        117,339
        30%Loss from operations
        (477,816)
        (312,895)
        164,921
        53%Other income (expense):Interest income
        -
        418
        (418)
        --Interest expense
        (39,565)
        (4,602)
        34,963
        760%Total other expense
        (39,565)
        (4,184)
        35,381
        846%Net loss
        $ (517,381)
        $(317,079)
        $200,302
        63%




Professional Fees



Professional fees for the three months ended March 31, 2007 were $133,428, a decrease of $12,673, or 9%, from $146,101 for the three months ended March 31, 2006.  The decrease in professional fees was the result of less reliance on consultants.  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.



Salary Expenses



Salary expenses for the three months ended March 31, 2007 was $235,308, an increase of $100,690, or 75%, from $134,618 for the three months ended March 31, 2006.  The increase in salary expenses was the result of non-cash expenses related to stock options granted to employees.  We expect salary expense to increase in the future as the Company grows and as sales volume increases.  Further, as long as our lack of working capital continues, we may need to continue issuing stock and stock options in exchange for services.



Depreciation and Amortization Expenses



Depreciation and amortization expenses for the three months ended March 31, 2007 was $570, a decrease of $1,784, or 76%, from $2,354 for the three months ended March 31, 2006.  Depreciation and amortization expenses decreased because we are no longer amortizing a license fee.



Office and Miscellaneous



Office and miscellaneous expenses for the three months ended March 31, 2007 was $136,222, an increase of $31,106, from $105,116 for the three months ended March 31, 2006.  The increase in office and miscellaneous expenses was as a result of additional costs related to rent and increased overhead.



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Loss from Operations



The loss from operations for the three months ended March 31, 2007 was $477,816, versus a loss from operations of $312,895 for the three months ended March 31, 2006, a change in loss from operations of $164,921.  The increase in the loss from operations in 2007 was the result of additional operating expenses as compared to 2006.



Interest Expense



Interest expense for the three months ended March 31, 2007 were $39,565 as compared to $4,602 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 March 31, 2007 was $517,381, an increase of $200,302, or 63%, from $317,079 for the three months ended March 31, 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® Division.  Our plan of operation focuses on continuing the process of commercialization of EcaFlo®equipment and EcaFlo® solutions, known as anolyte and catholyte.



Our direct attention continues to be focused on providing our EcaFlo® devices to the markets at-hand:  oil and gas industry, food safety and agricultural applications, storm-water treatment, wastewater treatment, and other food/beverage sanitation opportunities.



Liquidity and Capital Resources



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



March 31,
2007
        December 31,
2006
        Increase / (Decrease)$
        %Current Assets
        $       227,135
        $       253,351
        $    (26,216)
        (10%)Current Liabilities
        $       918,914
        $       623,721
        $     295,193
        47%


Working Capital (deficit)
        $    (691,779)
        $     (370,370)
        $     321,409
        87%




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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, however, if we do not generate sufficient sales revenues we will continue to finance our operations through equity and/or debt financings with traditional financial or industry partners.



As of March 31, 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.  Further, we are currently in discussions for substantial equity financing, however, there can be no assurance we will complete a transaction.



Financing.On August 15, 2006, we entered into a Promissory Note with Defense Technology Systems, Inc. for the principal amount of $50,000.  Pursuant to the note we promised to pay to the order of Defense Technology Systems, Inc. the sum of $50,000 together with interest thereon at 10% per annum on any unpaid balance.  According to the note the outstanding principal and accrued but unpaid interest was due and payable on September 30, 2006.  The note has been extended to a date to be determined, due to note-holders non-performance on a financing contract with the Company and the Companys inability to reach, by phone or e-mail, the note holder.



Pursuant to the business agreement dated August 15, 2006 with Robert Lucas, Mr. Lucas loaned us $25,000, which we agreed to repay as certain convertible debentures are sold.  The note is still valid and the Company is paying interest while continuing to place debentures.  The interest is approximately 18%.  We also agreed to issue 100,000 shares of our common stock if we did not repay the loan in 90 days.  As of the date of the report, the loan was not repaid in full and on April 3, 2007, we issued the 100,000 shares to Mr. Lucas.



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 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.  The note balance remained unpaid as of March 31, 2007.



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



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per month on March 21, 2007.  We also agreed to issue 2,500,000 shares of our restricted common stock to DaVinci as collateral (as of the date of this filing the 2,500,000 shares have not been issued).  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.  As of the date of this filing the principal sum and interest have not been repaid.  In addition, we are in default in our monthly payments of interest, and subject to forfeiture of 2,500,000 share of common stock which constitutes collateral for the loan with DaVinci.



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.  As of the date of this filing, the principal sum and interest have not been repaid.



On January 30, 2007, we entered into a promissory note with Sherri Hotton for the principal amount of $40,000.  As of the date of this filing there is a dispute over the timing of the attempted repayment of this loan.



On February 7, 2007 and March 12, 2007, we entered into a loan agreements with 3GC, Ltd. for the principal amounts of $10,000 and $40,000.  Pursuant to the loan agreements, we promised to pay 3GC, Ltd. the principal sum of $10,000 on or before April 6, 2007 and the principal sum of $40,000 plus a flat interest rate of $1,000 on or before April 12, 2007.  Additionally, we agreed to issue 200,000 shares of our common stock to 3GC, Ltd. if we did not repay the entire loan amount of $41,000 by April 12, 2007.  As of April 30, 2007, the principal amounts and interest were repaid to 3GC, Ltd. and as of the date of this report we have not issued the 200,000 shares to 3GC, Ltd.



On February 26, 2007 and March 5, 2007, we entered into loan agreements with William E. Prince, President of the Company, for the principal amounts of $2,000 and $200.  Pursuant to the loan agreements we promised to pay Mr. Prince the principal sum of $2,000 on or before March 27, 2007 and the principal amount of $200 on or before March 30, 2007.  Interest accrued at a rate of 18% per annum.  Mr. Prince was repaid $200 on May 7, 2007.  As of this date, no interest has been paid.



Satisfaction of our cash obligations for the next 12 months.



As of March 31, 2007, our cash balance was $19,581.  Our plan for satisfying our cash requirements for the next twelve months is through additional sales of our common stock, third-party financing, potential strategic investments 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.





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



We anticipate incurring operating losses over the majority 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 revenues, we anticipate continuing 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.  The Company received $80,000 in government funding from its Phase I USDA SBIR grant during 2006 and has made application for a Phase II grant from the same program in the amount of $350,000, which, if awarded to the Company, would offset many research costs.  Management intends to use 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®



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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.



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, which has contracted with us as a manufacturers representative/sales and distribution agent.



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.



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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.



On February 14, 2007, we announced that Yates Petroleum Company, of Artesia, New Mexico, has purchased additional EcaFlo® equipment due to successes realized in the fall of 2005.



On March 22, 2007, we announced that we have developed the most advanced EcaFlo® system ever designed and sold.  We also announced that our new Command and Control EcaFlo® system meets the requirements of a specific market area customers order for precision monitoring, automated responses and consistent properties of the environmentally-responsible biocide solutions produced by the equipment.



On April 4, 2007, we announced that our wholly-owned subsidiary, I.E.T., Inc., has entered into a sales contract with Benchmark Energy Products, L.P. for over $300,000 dollars of EcaFlo® equipment.



On April 25, 2007, we announced that we entered into an exclusive agreement for our proprietary EcaFlo® devices and EcaFlo® fluids with Benchmark Energy Products, L.P.



Significant changes in the number of employees.



We currently employ 9 full-time, permanent, employees; 1 full-time, temporary employee; 3 part-time, temporary employees (research assistants and technicians), 1 special projects consultant (EGR International, LLC), 1 scientific and ECA consultant and 1 sales representative organization (Pentagon Technical Services).  The 9 full-time employees are engaged in management, marketing and sales, engineering, production and administrative services; our part-time employees are within our production department or are performing research activities; and one of our consultants provides technical/scientific support to the 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.



Consultants



Valgene L. Dunham, Ph.D.On July 1, 2006, we executed a consulting agreement with Valgene L. Dunham, Ph.D., a Director of the Company, wherein Dr. Dunham agreed to serve as our Science, Research and Administrative Consultant.  We agreed to compensate Dr. Dunham with $2,500 per month, paid at the beginning of each month.  The term of the agreement was for six (6) months, terminating on December 31, 2006.  On January 1, 2007, we entered into a new consulting agreement with Dr. Dunham with the same terms set forth above.  The agreement will terminate on June 30, 2007.



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EGR International, Ltd.On September 1, 2006, we entered into an Independent Marketing Contractor Agreement with EGR International, Ltd., wherein EGR agreed to work together with the Companys President and CEO and Executive Vice President of Operations for special project development.  The term of the agreement commenced on September 1, 2006 and terminated on December 31, 2006.  We agreed to pay EGR $2,500 per month and in addition we agreed to issue 5,000 shares of our common stock as an incentive for completion of certain pre-determined goals, on a quarterly basis.  As of the date of this report, we did not issue any stock to EGR pursuant to this agreement.  On January 1, 2007, we entered into a new Independent Marketing Contractor Agreement with EGR with the same terms set forth above.  The term of the agreement will terminate on June 30, 2007.



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).



Gary J. Grieco.On March 13, 2007, we entered into a consulting agreement with Gary J. Grieco, wherein Mr. Grieco agreed to continue the development of legal and proper stock sales for the Company.  The term of the agreement began on January 1, 2007 and will terminate on June 30, 2007.  We agreed to compensate Mr. Grieco with $2,500 per month, 600,000 shares of our restricted common stock (issued on March 15, 2007), 1,000,000 Series D Warrants to purchase shares of our restricted common stock at $0.10 per share, exercisable until December 31, 2007, and pay for travel and expenses incurred in the performance of the agreement.



Peter Gianoukas and Joel Brownstein.On March 22, 2007, we entered into a consulting agreement with Messrs. Gianoukas and Brownstein, wherein Messrs. Gianoukas and Brownstein agreed to provide the Company with expertise in the matter of raising capital for the Company.  The term of the agreement began on March 22, 2007 and was to terminate on June 22, 2007.  This agreement was cancelled on May 1,
2007.



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.



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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 record a specific reserve for bad debts to reduce a related receivable when we believe an amount is not collectible.  We do not have any reserves for bad debt at March 31, 2007.



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 March 31, 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



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.



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



We have a limited operating history.  However, our management team has extensive experience in project development and managing corporate assets.  A highly successful professional who brings more than three decades of business development experience to us from the environmental engineering industry heads our marketing and sales department.  The Companys engineering department is 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 they 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.



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



Based on our current proposed plans and assumptions, we anticipate that we will need additional capital to fund our operations.  Furthermore, the commercialization expenses of our EcaFlo® Division will be substantial, i.e., in excess of the amount of cash that we currently have.  Accordingly, we will have to (i) obtain additional debt or equity financing in order to fund the further development of our products and working capital needs, and/or (ii) enter into a strategic alliance with a larger company to provide our required funding.  As a result of our low-priced stock, and our continuous need for additional capital, we 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



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came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early stage company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.  As a consequence, there may be periods of several days or more when trading activity in our shares is
minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  We cannot give you any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.  Due to these conditions, we can give investors no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their shares.



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



The industries we intend to compete in are characterized by intense competition and rapid and significant technological advancements.  Many companies, research institutions and universities are working in a number of areas similar to our primary fields of interest to develop new products, some of which may be similar and/or competitive to our products.  Furthermore, many companies are engaged in the development of water purifying products and methods for extracting oil from botanicals 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 currently seeking additional equity



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and/or debt financing, which 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.



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, NASD 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.





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Item 3. Controls and Procedures.



We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods.  As of the end of the period covered by this report, William E. Prince, our Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15.  Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, Mr. Prince concluded that our disclosure controls and procedures are effective in timely alerting him to material information required to be included in our periodic SEC filings.



It should be noted, however, that no matter how well designed and operated, a control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.  Because of these and other inherent limitations of control systems (including faulty judgments in decision making or breakdowns resulting from simple errors or mistakes), there can be no assurance that any design will succeed in achieving its stated goals under all potential conditions.  Additionally, controls can be circumvented by individual acts, collusion or by management override of the controls in place.



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 February 2, 2007, we issued 2,000,000 shares of our restricted common stock to United Capital Group, Inc. pursuant to its consulting agreement dated January 29, 2007.  We believe that the issuance of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).The recipient of the shares was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make its investment decision, including the Companys financial statements and 34 Act reports.  We reasonably believe that the recipient, immediately prior to issuing the shares, had such knowledge and experience in our financial and business matters that it was capable of evaluating the merits and risks of its investment.  The recipient had the opportunity to speak with our president and directors on several occasions prior to its investment decision.





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Pursuant to a loan agreement with 3GC, Ltd./Gary Grieco dated March 12, 2007, we issued 800,000 shares of our restricted common stock to Peter and Doris Gianoukas on March 12, 2007 to be held as collateral and delivered to an escrow account held by the Gianoukas attorney as instructed by 3GC, Ltd.  On May 2, 2007, we cancelled the 800,000 shares being held as collateral because we repaid the loan in full.



Pursuant to Gary Griecos consulting agreement dated March 13, 2007, we issued 600,000 shares of our restricted common stock to Mr. Grieco on March 15, 2007 and 1,000,000 Series D Warrants to purchase shares of our restricted common stock at $0.10 per share, exercisable until December 31, 2007.  We believe that the issuance of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).The recipient of the shares was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make its investment decision, including the Companys financial statements and 34 Act reports. We reasonably believe that the recipient, immediately prior to issuing the shares, had such knowledge and
experience in our financial and business matters that he was capable of evaluating the merits and risks of its investment.  The recipient had the opportunity to speak with our president and directors on several occasions prior to his investment decision.



On March 23, 2007, we issued 600,000 Series D Warrants to Joel Brownstein and 600,000 Series D Warrants to Ace Trading Company for introducing the Company to the attention of brokers, dealers and the investing public.  The warrants are exercisable at $0.10 per share and expire on December 31, 2007.  On May 2, 2007, we cancelled the total 1,200,000 Series D Warrants pursuant to the termination of the March 23, 2007 Service Agreement.



On March 26, 2007, we granted a total of 1,075,000 options to purchase shares of our restricted common stock for a five-year period (expire on December 31, 2011) to the following employees and directors:



Name
        Title
        Number of Options & Purchase PriceWilliam E. Prince
        Employee & Director
        500,000 at $0.12Marion C. Sofield
        Employee & Director
        250,000 at $0.12S. Larry Jones
        Employee
        100,000 at $0.11Stuart A. Emmons
        Employee
        100,000 at $0.11Sheryl Marsh
        Employee
        75,000 at $0.11Valgene Dunham
        Director
        25,000 at $0.11James C. Pate
        Director
        25,000 at $0.11




We believe that the grant of the options 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 options were granted directly by us and did not involve a public
offering or general solicitation. The recipients of the options 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



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reasonably believed that the recipients, immediately prior to the grant of the options, 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 have the opportunity to speak with our management prior to their investment decision.



On March 30, 2007, we sold a total of 130,000 shares of our restricted common stock to Gary Grieco, an accredited investor, for a total purchase price of $13,000, all of which was paid in cash.  The 130,000 shares were issued on April 11, 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 sold 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 sale 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 their investment. The recipients had the opportunity to speak with our management on several occasions prior to his investment decision.  There were no commissions paid on the issuance and sale of the shares.



Subsequent Issuances



On April 3, 2007, we issued 100,000 shares of our restricted common stock to Robert Lucas pursuant to Mr. Lucas business agreement dated August 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 his investment. The recipient had the
opportunity to speak with our president and directors on several occasions prior to his investment decision.



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 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.





26



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On April 3, 2007, we issued a total of 163,000 shares of our restricted common stock as contract compensation in lieu of salary to the following employees:



Name
        Number of SharesWilliam E. Prince
        100,000Marion C. Sofield
        50,000S. Larry Jones
        10,000Stuart Emmons
        3,000




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) 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.



In April 2007, we sold 150 units consisting of 150 10% Convertible Debentures (conversion price of $0.40, convertible until January 2, 2009), 450,000 shares of common stock and 300,000 Series C Warrants ($0.25 per share, exercisable until December 31, 2008) to 3 accredited investors for a total purchase price of $75,000.  As of the date of this report the 450,000 shares of common stock 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 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.



27



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Issuer Purchases of Equity Securities



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



Item 3.
        Defaults Upon Senior Securities.




As of March 31, 2007, we were in default on the following loans or notes:




Payee
        Due Date
        Amount Due
        Conversion RateDefense Technology Systems, Inc.
        September 30, 2006
        $50,000
        n/aRobert Lucas
        April 2007 (1)
        $25,000
        n/aMichael Burstein
        December 15, 2006
        $55,000
        n/aDaVinci-Franklin Fund I, LLC
        March 21, 2007
        $75,000
        n/aEdward Marucci
        February 6, 2007
        $25,000
        $0.05Sherri Hutton
        February 2007
        $40,000
        $0.05


(1)
        We agreed to repay the loan to Mr. Lucas as certain convertible debentures were sold.  In April 2007 we sold convertible debentures and as of the date of this report the loan to Mr. Lucas remains unpaid.




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
date2(a)
        
        Agreement and Plan of Merger between Coronado Explorations Ltd and Naturol, Inc.
        
        
        
        8-K
        
        
        
        2(a)
        
        10/25/01






28



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2(b)
        
        Amendment No. 1 to the Agreement and Plan of Merger between Coronado Explorations Ltd and Naturol, Inc.
        
        
        
        8-K
        
        
        
        2(b)
        
        1/25/023(i)(a)
        
        Certificate of Incorporation of Coronado Explorations Ltd.  Dated February 2, 1999
        
        
        
        10SB12G
        
        
        
        2(a)
        
        6/9/993(i)(b)
        
        Amended and Restated Articles of Incorporation of Coronado Explorations Ltd.  Dated May 20, 1999
        
        
        
        10SB12G
        
        
        
        2(b)
        
        6/9/993(i)(c)
        
        Certificate of Amendment of Certificate of Incorporation of Coronado Explorations Ltd.  Dated October 5, 2000
        
        
        
        10-KSB
        
        1/31/02
        
        3(i)(c)
        
        4/30/023(i)(d)
        
        Articles of Incorporation of Naturol, Inc.  Dated June 9, 2001
        
        
        
        10-KSB
        
        1/31/02
        
        3(i)(d)
        
        4/30/023(i)(e)
        
        Certificate of Amendment to Articles of Incorporation of I.E.T., Inc.
        
        
        
        10-QSB
        
        6/30/04
        
        3
        
        8/23/043(i)(f)
        
        Certificate of Amendment of Certificate of Incorporation of Naturol Holdings Ltd.  Dated May 5, 2004
        
        
        
        10-QSB
        
        3/31/04
        
        3(i)
        
        5/14/043(i)(g)
        
        Certificate of Merger between Coronado Subsidiary Corp. and Naturol, Inc.  Dated January 14, 2001
        
        
        
        8-K
        
        
        
        3(i)(g)
        
        1/25/023(ii)(a)
        
        Bylaws of Coronado Explorations Ltd.  Dated February 9, 2001
        
        
        
        8-K
        
        
        
        3(ii)(e)
        
        1/25/023(ii)(b)
        
        Bylaws of Naturol, Inc.  Dated June 9, 2001
        
        
        
        10-KSB
        
        1/31/02
        
        3(ii)(f)
        
        4/30/0210.1
        
        License Agreement among Integrated Environmental Technologies Ltd., Electro-Chemical Technologies Ltd. and Laboratory of Electrotechnology Ltd.  Dated September 4, 2003
        
        
        
        10-QSB
        
        9/30/03
        
        10.8
        
        11/19/0310.2
        
        Supply Agreement  Dated September 4, 2003
        
        
        
        10-QSB
        
        9/30/03
        
        10.9
        
        11/19/0310.3
        
        Letter Agreement between SPDG Naturol Ltd. and Integrated Environmental Technologies Ltd.  Dated October 14, 2003
        
        
        
        10-QSB
        
        9/30/03
        
        10.10
        
        11/19/0310.4
        
        Collaborative Agreement with Integrated Environmental Technologies Ltd. and Coastal Carolina University  Dated December 11, 2003
        
        
        
        8-K
        
        
        
        10.2
        
        1/08/0410.5
        
        Contract of Sale  JMW Investments  Dated January 2, 2004
        
        
        
        8-K
        
        
        
        10.1
        
        3/1/0410.6
        
        Consultant and Employee Stock Compensation Plan  Dated January 21, 2004
        
        
        
        S-8
        
        
        
        10.3
        
        1/22/0410.7
        
        Letter of Intent with Pentagon Technical Services  Dated June 15, 2004
        
        
        
        10-QSB
        
        6/30/04
        
        10
        
        8/23/0410.8
        
        Amendment to License and Supply Agreement with Electro-Chemical Technologies
        
        
        
        10-QSB
        
        9/30/04
        
        10
        
        11/12/0410.9
        
        Consulting Agreement of Joseph Schmidt, dated November 18, 2004.
        
        
        
        8-K
        
        
        
        10.1
        
        1/07/05






29



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10.10
        
        Letter Amending Joseph Schmidts Consulting Agreement.
        
        
        
        8-K
        
        
        
        10.2
        
        1/07/0510.11
        
        Consulting Agreement of XXR Consulting, Inc., dated December 8, 2004.
        
        
        
        8-K
        
        
        
        10.3
        
        1/07/0510.12
        
        Employment Agreement of William E. Prince, dated January 3, 2005.
        
        
        
        8-K
        
        
        
        10.4
        
        1/07/0510.13
        
        Employment Agreement of Marion Sofield  January 3, 2005
        
        
        
        8-K
        
        
        
        10.5
        
        1/07/0510.14
        
        Addendum to Marion Sofields Employment Agreement  Dated February 28, 2005
        
        
        
        10-KSB
        
        12/31/04
        
        10.6
        
        3/30/0510.15
        
        Employment Agreement of Steve Johnson  Dated February 10, 2005
        
        
        
        10-KSB
        
        12/31/04
        
        10.7
        
        3/30/0510.16
        
        DaVinci-Franklin Fund I, LLC  Dated April 1, 2005
        
        
        
        8-K
        
        
        
        10.1
        
        4/13/0510.17
        
        Agreement with Red River Capital Partners dated June 14, 2006
        
        
        
        10-QSB
        
        6/30/06
        
        10
        
        8/14/0616
        
        Letter of Andersen, Andersen & Strong, L.C. regarding change in certifying accountant  Dated April 18, 2002.
        
        
        
        8-K
        
        
        
        16
        
        4/26/0231
        
        Certification pursuant to Section 302 of the Sarbanes-Oxley Act
        
        X32
        
        Certification pursuant to Section 906 of the Sarbanes-Oxley Act
        
        X99.1
        
        Press Release dated April 25, 2007
        
        X






30



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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: May 21, 2007



31