UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549





FORM 10-Q/A


(Amendment No. 1)





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


For the quarterly period ended September 30, 2010





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




Commission file number 000-26309





INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.


(Exact name of registrant as specified in its charter)





Nevada
98-0200471(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)





4235 Commerce StreetLittle River, South Carolina

29566(Address of principal executive offices)

(Zip Code)





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





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





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





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





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





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





The number of shares of common stock, $0.001 par value, outstanding on October 12, 2010 were 105,329,893 shares.





EXPLANATORY NOTE





Integrated Environmental Technologies, Ltd. (the “Company”) is filing this Amendment No. 1 (this “Amendment”) to its quarterly report on Form 10-Q for the quarter ended September 30, 2010 filed with the Securities and Exchange Commission (“SEC”) on November 15, 2010 (the “Original Report”) to restate its unaudited condensed consolidated balance sheet as of September 30, 2010 and the related condensed consolidated statements of operations and cash flows for the three and nine months ended September 30, 2010 under Item 1 and to amend Item 2 and Item 4T of Part I of the Original Report as set forth herein.





The Company previously determined that the sale of certain equipment was incorrectly recognized as revenue during the quarter ended September 30, 2010.  This resulted in an overstatement of sales of $100,000, an overstatement of cost of goods sold of $25,127, an overstatement of accounts receivable of $100,000 and an understatement of inventory of $25,127.  The Company disclosed the need to restate the condensed consolidated financial statements for the quarter ended September 30, 2010 on Form 8-K filed with the SEC on March 28, 2011.





The effect of the condensed consolidated financial statement adjustments related to the restatement of our previously reported unaudited condensed consolidated balance sheet as of September 30, 2010 and the related condensed consolidated statements of operations and cash flows for the three and nine months ended September 30, 2010 are summarized in “Part I – Item 1.  Financial Statements” and “Notes to Condensed Consolidated Financial Statements - Note 10” included in this Amendment.





As previously disclosed in the Company’s current report on Form 8-K filed on March 28, 2011, after discussions between the Company and the Company’s independent registered public accounting firm, the Company concluded that the previously issued unaudited condensed consolidated financial statements included in the Original Report should be restated.  Accordingly, the unaudited condensed consolidated financial statements included in the Original Report should no longer be relied upon.





In addition, due to these reporting inaccuracies, the Board of Directors of the Company determined that the Company’s controls and procedures as of the end of the period covered by this report were not effective.





This Amendment should be read in conjunction with the Original Report.  Except as specifically noted above, this Amendment does not modify or update disclosures in the Original Report.  Accordingly, this Amendment does not reflect events occurring after the filing of the Original Report or modify or update any related or other disclosures.







PART I – FINANCIAL INFORMATION




Item 1. Financial Statements.





Integrated Environmental Technologies, Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)  September 30,


December 31,2010


2009(Restated)AssetsCurrent Assets:Cash

$
68,319


$
819,611Accounts receivable


263,933



111,375Inventory


217,607



82,910Prepaid expenses


17,351



20,256Total current assets


567,210



1,034,152Building


328,589



-Equipment


28,371



20,445Accumulated depreciation


(15,975
)


(11,597
)Total building and equipment


340,985



8,848$
908,195


$
1,043,000LiabilitiesCurrent liabilities:Accounts payable

$
212,446


$
112,057Accrued expenses


93,913



189,386Notes payable


250,000



98,300Convertible notes


383,432



489,000Total current liabilities


939,791



888,743Shareholders' Equity (Deficit)Preferred stock 50,000,000 shares authorized; par value $.001; 0 shares issued and outstanding


-



-Common stock 200,000,000 shares authorized; par value $.001, 105,329,893 and 94,533,467 shares issued and outstanding at September 30, 2010 and December 31, 2009


105,330



94,533Common stock bought not issued, 0 and 6,264,329 shares  at September 30, 2010 and December 31, 2009


-



6,264Paid-in capital


12,498,011



11,384,911Retained earnings (deficit)


(12,634,937
)


(11,331,451
)Total shareholders' equity (deficit)


(31,596
)


154,257Total liabilities and shareholders' equity (deficit)

$
908,195


$
1,043,000





See notes to condensed consolidated financial statements.


1


Integrated Environmental Technologies, Ltd.


Condensed Consolidated Statements of Operations


(Unaudited)





For The Nine Months Ended

September 30,


For The Three Months Ended

September 30,2010


2009


2010


2009(Restated)





(Restated)Sales

$
712,365


$
107,495


$
72,116


$
71,758Cost of sales


237,137



42,120



27,681



24,707Gross profit


475,228



65,375



44,435



47,051Professional and administrative fees


523,061



265,601



198,289



103,508Salary


614,719



454,988



196,162



158,126Depreciation and amortization


4,377



867



2,030



(748
)Office & miscellaneous expense


413,835



302,368



131,857



99,065Bad debt expense


2,706



1,230



-



1,200Total operating expenses


1,558,698



1,025,054



528,338



361,151Loss from operations


(1,083,470
)


(959,679
)


(483,903
)


(314,100
)Other income (expense):Interest expense


(220,016
)


(475,466
)


(122,620
)


(233,534
)Total other income (expense)


(220,016
)


(475,466
)


(122,620
)


(233,534
)Net loss

$
(1,303,486
)

$
(1,435,145
)

$
(606,523
)

$
(547,634
)Weighted average shares outstanding


103,799,884



81,757,217



105,279,141



83,198,158Net loss per share basic and diluted

$
(0.01
)

$
(0.02
)

$
(0.01
)

$
(0.01
)





See notes to condensed consolidated financial statements.


2


Integrated Environmental Technologies, Ltd.


Condensed Consolidated Statements of Cash Flows


(Unaudited)





For The Nine Months

Ended September 30,2010


2009(Restated)Cash flows from operating activities:Net loss

$
(1,303,486
)

$
(1,435,145
)Adjustments to reconcile net loss to net cashused in operating activities:Depreciation and amortization


4,377



867Stock and warrants issued for services and loan costs


353,517



377,219Stock issued to employees and directors for services


117,000



-Accretion of interest


21,657



-Changes in operating assets and liabilities:Accounts receivable


(152,557
)


(50,536
)Inventory


(134,697
)


(6,821
)Deposits and prepaids


2,904



29,619Accounts payable


100,389



(16,633
)Accrued expenses


(88,782
)


49,594Cash used in operating activities


(1,079,678
)


(1,051,836
)Cash flows from investing activities:Purchase of building improvements and equipment


(336,514
)


-Cash used in investing activities


(336,514
)


-Cash flows from financing activities:Proceeds from the sale of common stock


63,880



515,000Proceeds on notes payable, net


175,000



840,000Proceeds (payments) on convertible debentures


211,270



(9,000
)Proceeds from the exercise of warrants and options


214,750



-Cash provided by financing activities


664,900



1,346,000Increase (decrease) in cash


(751,292
)


294,166Cash beginning of period


819,611



33,357Cash end of period

$
68,319


$
327,523Supplemental disclosure of cash flow information:Cash paid for interest

$
63,242


$
77,545Cash paid for income taxes

$
-


$
-Non-cash financing activities:Stock and warrants issued for services and loan costs

$
470,517


$
377,219Notes and interest converted to stock

$
326,651


$
-





See notes to condensed consolidated financial statements.


3


Integrated Environmental Technologies, Ltd.


Notes to Condensed Consolidated Financial Statements





Note 1 – Basis of presentation





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





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





Note 2 - Going concern





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





Note 3 - Notes payable





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





Note payable, secured by personal property of the Company, bearing interest at base margin rate plus 3.25% per annum, due November 1, 2010.  The due date was subsequently extended to May 1, 2011.  (See Note 9.)

$
250,000$
250,000





Note 4 - Convertible notes payable





During the quarter ended September 30, 2010, a total of $27,000 in convertible debentures, plus accrued but unpaid interest to date, was converted to shares of the Company’s common stock at a conversion rate of $0.40 per share.





On September 10, 2010, we entered into a convertible note and Exchange Agreement for $167,339 with a Lender that purchased from certain debenture holders a total of $164,500 in convertible debentures, plus accrued (but unpaid) interest, thereby correcting our default position on the previous 10% debentures.  This convertible note matures on September 2, 2011, and will accrue interest at a rate of 10% per annum.  The per share conversion price shall be the lesser of a) $0.40 and b) 80% of the average of the three lowest daily volume-weighted average sale prices for the Common Stock (VWAPs) during the twenty consecutive trading days immediately preceding the date on which the Holder elects to convert all or part of the Note.  We had a beneficial conversion totaling $41,835, which will accrete into interest of the one-year term of the note.  At September 30, 2010, we accreted $2,292 to interest.





As of September 30, 2010, we have 10% convertible debentures totaling $25,000, and 8% convertible debentures totaling $250,000.  The 8% notes mature on April 7, 2011, and have a $0.60 conversion-to-common-stock rate through maturity.  The 8% debentures include a total of 250,000 detachable warrants and, with respect to such securities, we have allocated the proceeds received based on the fair market value of each of the instruments.  The discount on the convertible debt totaled $38,730, and we are accreting interest between the dates of sale of the convertible notes to maturity.  As of September 30, 2010, we had accreted interest of $19,365, and un-accreted interest of $19,365.


4





Note 5 – Common stock





First Quarter 2010




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





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





In the quarter ended March 31, 2010, a total of 123,214 restricted shares were issued through a cashless exercise of 150,000 warrants, thereby using 26,786 warrants to satisfy the exercise price.





In the quarter ended March 31, 2010, we authorized the issuance of a total of 450,000 shares of restricted common stock to certain employees as contract compensation or as bonus in lieu of cash compensation, and to directors as compensation for attendance of board meetings.  The expense was $117,000, which represented the fair market value of the shares on the date the awards were made.





In the quarter ended March 31, 2010, a note and accrued interest totaling $26,685 were converted into 106,740 shares of restricted common stock at a conversion rate of $0.25 per share.





In the quarter ended March 31, 2010, certain note holders converted $272,500 of principal amounts due under their debenture agreements at a conversion rate of $0.25 per share for 1,090,000 restricted shares of our common stock.





Second Quarter 2010




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


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





In the quarter ended June 30, 2010, we issued 200,000 restricted shares in connection with a consulting agreement.  The value of the shares was $61,800, which will be expensed over the one-year term of the agreement.





Third Quarter 2010




In the quarter ended September 30, 2010, certain holders of our 10% convertible debt converted $27,466 of principal and interest at a conversion rate of $0.40 per share for 68,665 restricted shares of our common stock.





On September 30, 2010, the Board approved the 2010 Stock Incentive Plan, which includes a total of 10,000,000 shares of common stock, issuable in the form of incentive options, non-qualified options and restricted common stock to employees, board members, and service providers.


5





Note 6 – Options and warrants





A summary of stock options and warrants is as follows:





Options


Average

Price


Warrants


Average

PriceOutstanding  1/1/2010


1,075,000


$
0.11



17,379,582


$
0.12Granted


-



-



2,495,000



0.45Cancelled


-



-



-



-Exercised


25,000



0.11



2,520,000



0.10Outstanding 9/30/2010


1,050,000


$
0.11



17,354,582


$
0.17





First Quarter 2010




In the quarter ended March 31, 2010, we issued, to a non-affiliate, warrants to purchase 225,000 restricted shares of common stock at $0.28 per share, issued in connection with consulting services. The value of the services was $35,818 which will be expensed over the one-year period of the consulting agreement. The amount expensed as professional fees in the three and nine months ended September 30, 2010 was $8,954 and $20,893, respectively.





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





Second Quarter 2010




In the quarter ended June 30, 2010, we issued warrants to purchase 400,000 restricted shares of common stock at $0.30 per share, issued to a non-affiliate in connection with consulting services. The value of the services was $86,848, which will be expensed over the one-year period of the consulting agreement.  We expensed as professional fees $21,713 and $43,425, respectively, for the three and nine months ended September 30, 2010.





In the quarter ended June 30, 2010, we issued warrants to purchase 150,000 restricted shares of common stock at $0.60 per share through December 31, 2010, or at $1.00 per share from January 1, 2011 through December 31, 2011.  These warrants were issued to a non-affiliate in connection with our borrowings.  The value of the warrants was $29,664, which will be expensed over one year.  For the three and nine months ended September 30, 2010, we expensed $7,416 and $14,832, respectively, as loan fees.





In the quarter ended June 30, 2010, we granted, to four non-affiliates, warrants to purchase a total of 250,000 restricted shares of common stock exercisable at $0.75 through December 31, 2010, or at $1.20 per share through December 31, 2011.  These warrants were issued in connection with the sale of our 8% convertible debentures.  We allocated the proceeds we received using the values of the warrants and convertible notes.  The value assigned to these warrants was $38,730.





In the quarter ended June 30, 2010, we granted warrants to purchase 100,000 restricted shares of common stock to a non-affiliate in connection with a consulting agreement.  The warrants are exercisable at $1.00 per share through December 31, 2011.  The fair market value of the warrants was $16,000, which we will expense over the six-month term of the agreement.  For the three and nine months ended September 30, 2010, we expensed $8,000 and $9,333, respectively.


6





Third Quarter 2010




In the quarter ended September 30, 2010, we granted, to three non-affiliates, warrants to purchase a total of 800,000 restricted shares of common stock in connection with consulting agreements.  A total of 600,000 of the warrants are exercisable at $0.50 per share and 200,000 warrants are exercisable for $1.00 per share, all expiring on December 31, 2011.  The fair market value of the warrants was $127,588, which we will expense over the six-month terms of the agreements.  For the quarter ended September 30, 2010, we expensed $63,794.





In the quarter ended September 30, 2010, we granted warrants to purchase 270,000 restricted shares of our common stock at $0.10 per share.  These warrants were issued to a non-affiliate in connection with a loan agreement which was executed in 2009.  The warrants expire on December 31, 2011.  The fair market value of the warrants was $86,602, which was expensed in the quarter ended September 30, 2010.





Note 7 – Related-party transactions





We had a consulting agreement with a shareholder requiring payments of $3,000 per month.  On March 1, 2010, the term and scope of the agreement were revised, and compensation was increased to $6,000 per month.  On May 19, 2010, we executed an addendum whereby compensation was decreased to $4,500 per month.  As of September 30, 2010, we have recorded $39,000 in consulting fee expense.





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





Related-party salary requirements2010


60,0002011


240,000Thereafter


60,000Total

$
360,000





Note 8 – Commitments and Contingencies





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





Note 9 – Subsequent events





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


7





On October 7, 2010, a warrant to purchase 1,000,000 restricted shares at a price of $0.10 per share, for a total purchase price of $100,000, was exercised.  The 1,000,000 restricted shares were issued on October 18, 2010.





On October 11, 2010, a portion of the 10% convertible note and accrued interest totaling $20,170 was converted into 100,950 shares of restricted common stock at a conversion rate of $0.1998 per share.  The shares were issued on October 14, 2010.





On October 15, 2010, a portion of the 10% convertible note and accrued interest totaling $40,383.56 was converted into 207,521 shares of restricted common stock at a conversion rate of $0.1946 per share.  The shares were issued on October 19, 2010.





On October 29, 2010, the Lender associated with our Promissory Note Agreement dated April 12, 2010 agreed to extend the term of the agreement to May 1, 2011.  All other terms and conditions shall remain in full force and effect during this extension in term.





On November 4, 2010, the Company entered into a Non-Exclusive Independent Sales Representative Agreement, whereby we granted to a Representative the authority to solicit orders within certain specific markets, for compensation of $3,200 per month.  The Company agreed to pay a cash commission of 7% of each sale, whether during the three-month term of the agreement or within one year of its termination.  Further, for each piece of equipment sold, this agreement authorizes the issuance to the Representative of warrants to purchase 20,000 restricted shares of the Company’s common stock, exercisable at $0.50 per share and expiring on December 31, 2011.





Note 10 - Restatement of Prior Period Financial Statements





The Company previously determined that the sale of certain equipment was incorrectly recognized as revenue during the quarter ended September 30, 2010.  This resulted in an overstatement of sales of $100,000, an overstatement of cost of goods sold of $25,127, an overstatement of accounts receivable of $100,000 and an understatement of inventory of $25,127.





The table below presents the effect of the condensed consolidated financial statement adjustments related to the restatement of our previously reported unaudited condensed consolidated balance sheet as of September 30, 2010 and the related condensed consolidated statements of operations and cash flows for the three and nine months ended September 30, 2010.





As Originally

Filed


Correction


As RestatedBalance sheet at September 30, 2010:Assets:Accounts receivable

$
363,933


$
(100,000
)

$
263,933Inventory


192,480



25,127



217,607Shareholders’ Equity (Deficit):Retained earnings (deficit):


(12,560,064
)


74,873



(12,634,937
)Statement of operations for the three months

ended September 30, 2010:Sales

$
172,116


$
(100,000
)

$
72,116Cost of sales


52,808



( 25,127
)


27,681Gross profit


119,308



( 74,873
)


44,435Net loss


(531,650
)


(74,873
)


(606,523
)Statement of operations for the nine months

ended September 30, 2010:Sales

$
812,365


$
(100,000
)

$
712,365Cost of sales


262,264



( 25,127
)


237,137Gross profit


550,101



( 74,873
)


475,228Net loss


(1,228,613
)


(74,873
)


(1,303,486
)Statement of cash flows for the nine months

ended September 30, 2010:Net loss

$
(1,228,613
)

$
(74,873
)

$
(1,303,486
)Changes in operating assets and liabilities:Accounts receivable


(252,557
)


100,000



(152,557
)Inventory


(109,570
)


(25,127
)


(134,697
)




8




FORWARD-LOOKING STATEMENTS




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




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




Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to:




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


o
implementation of our business plan within the oil and gas industry with our distributor, Benchmark; and/or within the food processing industry with our dealer, D2W2; and/or continued entry and subsequent sales into other markets;


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;


o
potential change in control upon completion of financing agreements, if any;


o
deterioration in general or regional economic conditions;


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


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


o
loss of customers or sales weakness;


o
excessive product failure and related warranty expenses;


o
inability to achieve future sales levels or other operating results; 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 “Part II, Other Information, Item 1A, Risk Factors” in this document and in our Annual Report on Form 10-K for the year ended December 31, 2009.


9





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





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





OVERVIEW AND OUTLOOK





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





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




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





We have analyzed our current sales strategies and have maintained a high level of focus on developing specific commercial interest and substantial market potential for our EcaFlo® solutions:





·
EcaFlo® Anolyte – a strong oxidizing solution formed from naturally occurring elements that kills unwanted microorganisms and pathogens, and


·
EcaFlo® Catholyte – an anti-oxidizing, mildly alkaline solution ideal for use as a degreaser, cleaner, and detergent.


10





We continue to work on the final commercialization plan for our products in the oil and gas industry.  Our recently completed manufacturing facility expansion has been fully tested to determine its readiness to fulfill anticipated orders; the expansion has allowed us to significantly increase our production capabilities with a much-improved quality assurance regime.  The combination of the demand for natural gas, rubbing up against environmental concerns regarding “fracking” fluids permeating ground-water tables and water supplies, is providing the impetus in our monetizing this technology.  Our oil and gas industry distributor, Benchmark Energy Products, LLC, is producing EcaFlo® solutions custom-made to answer the needs of the oil and gas markets through an Exclusive License and Distribution Agreement.  Recently we announced that the EPA-registered product, Excelyte® (Benchmark’s brand name for EcaFlo® Anolyte), was successfully utilized in a number of gas well fracturing treatments.  The primary use of Excelyte® is to eliminate oilfield bacteria in water employed in oil and gas wells.  The national “roll out” of this product is expected to occur within the fourth quarter.





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





After several years of product and market development, we are seeing strong demand for our current generation equipment from commercial users in multiple industries, including oil and gas and fresh food packaging.  We have explored the potential need for larger volume equipment to increase capacities of EcaFlo® solutions for certain in-plant industrial uses and have concluded that, in many instances, an “industrial EcaFlo® model” is an economic benefit to the customer.  Accordingly, design and development of these units are underway.  A global fresh food packager is moving forward, under contract with us, in implementing the use of EcaFlo® Anolyte as a hard-surface disinfectant within its facilities prior to making a major capital investment in changing the systems currently used for product sanitation in order to integrate the use of EcaFlo® Anolyte into this process.





We have incurred losses since inception.  For the quarter ended September 30, 2010, we had a net loss of $631,650 and for the year ended December 31, 2009, we had a net loss of $2,798,404.  Our ability to proceed with our plan of operation has continuously been a function of our ability to increase revenues and raise sufficient capital to continue our operations.





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


11




Currently, management is focused on:


-
developing entry into specific vertical markets with new distribution networks and personnel (new market facilitation consultants and manufacturers’ representatives);


-
working closely with a consultant who is assisting us in gaining valuable public awareness from a world-renowned environmentalist;


-
obtaining a patent on our “EC” electrolytic cell in order to further secure the Company’s ability to manufacture the most reliable, high-volume producing, pH-neutral anolyte product, IET’s EcaFlo® Anolyte;


-
continuing to make improvements to the Company’s EPA product registration “master label” to include the addition of certain microorganisms and a change to “shelf life” verbiage, and working with State environmental regulators to insure that EcaFlo® is appropriately registered in key areas; and


-
finalizing negotiations of contract terms within the two largest market areas served by IET’s key distributors, Benchmark and D2W2.




Demonstration of EcaFlo® fluid solutions in an in-plant sanitation system, to “prove positive” the efficacy and ease of use, is the final step to commercialization in a major food processing application.  Risk of failure in this demonstration has been mitigated by carefully developed protocols and implementation.  Entry into new markets, through a proven distribution vehicle, will serve to expand our markets and provide acceptance of EcaFlo® Anolyte as the preferred “green” disinfectant that replaces traditional, hazardous disinfectant chemicals.  Meetings and contract negotiations are likely to result in future material events for the Company.





IET continues to focus on educating consumers and the investing public about the differences between “cleaning,” “sanitizing” and “disinfecting”, and how those classifications relate to the development of commercial markets for EcaFlo® solutions.  As we seek and obtain modifications to our EPA product registration “master label,” we open more doors for the use of EcaFlo® Anolyte in different areas.  In the unlikely event that our proposed changes are not accepted, our current EPA product registration (EPA Registration No. 82341-1) affords us the ability to continue to serve the oil and gas industry, as well as food processing, hard-surface disinfection, and many other applications.




2010 Annual Meeting





Our 2010 Annual Meeting was held September 30, 2010 in Cherry Grove, South Carolina.  At the meeting, the following proposals were considered and approved by the vote of a quorum of shareholders voting in person or by proxy:





1.
Amending our Amended and Restated Articles of Incorporation and our By-laws to modify the staggered terms of our Board of Directors;


2.
Electing five directors of our Company to serve in staggered terms;


3.
Amending our Amended and Restated Articles of Incorporation to authorize 50,000,000 shares of blank preferred stock, par value $0.001 per share;


4.
Approving our Company’s 2010 Stock Incentive Plan; and


5.
Ratifying the appointment of Weaver & Martin, LLC as our independent auditors for the fiscal year ending December 31, 2010.


12





Results of Operations for the Three and Nine Months Ended September 30, 2010 and 2009





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





SALES AND COST OF SALES:


Three Months

Ended

September 30,


Increase/(Decrease)


Nine Months

Ended

September 30,


Increase/(Decrease)2010


2009





$

%


2010



2009





$

%Sales and Licensing Fees

$
72,116


$
71,758


$
358



1
%

$
712,365


$
107,495


$
604,870



563
%Cost of Sales


27,681



24,707



2,974



12
%


237,137



42,120



195,017



463
%Gross Profit


44,435



47,051



(2,616
)


(6
% )


475,228



65,375



409,853



627
%Gross Profit Percentage of Sales


62
%


66
%


-



(4
%)


67
%


61
%


-



6
%





Sales




Our sales for the three and nine months ended September 30, 2010 were $72,116 and $712,365, an increase of $358, or 1%, from sales of $71,758 in the three months ended September 30, 2009, and an increase of $604,870, or 563 %, from sales of $107,495 for the nine months ended September 30, 2009.  The increase in sales was as a result of finalizing conclusive agreements with distributors, and continuing to develop opportunities in targeted markets.





As of September 30, 2010, we have approximately $950,000 in potential sales under negotiation.  Economic uncertainty has contributed to delays in closure on several pending sales.





Cost of sales/Gross profit percentage of sales




Our cost of sales for the three and nine months ended September 30, 2010 was $27,681 and $237,137, respectively, an increase of $2,974, or 12%, from $24,707 for the three months ended September 30, 2009, and an increase of $195,017, or 463%, from $42,120 for the nine months ended September 30, 2009.  The increase in our cost of sales is as a result of an increase in sales for this period.  The cost of sales did increase less as a percentage of sales, and we anticipate this trend to continue as sales volumes increase.  We are continuing to update and upgrade our product line and we closely monitor the costs of all of our products.





As of the three months ended September 30, 2010, our gross profit margins decreased by 4%, and as of the nine months ended September 30, 2010, our gross profit margins increased by 6%.  We anticipate that this margin will continue to increase in the future as equipment sales increase.


13





EXPENSES:





Three Months Ended

September 30,


Increase/(Decrease)


Nine Months Ended

September 30,


Increase/(Decrease)2010


2009





$

%


2010



2009





$

%Expenses:Professional and administrative fees

$
198,289


$
103,508


$
94,781



92
%

$
523,061


$
265,601


$
257,460



97
%Salary


196,162



158,126



38,036



24
%


614,719



454,988



159,731



35
%Depreciation and Amortization


2,030



(748
)


2,778



371
%


4,377



867



3,510



405
%Office and miscellaneous expense


131,857



99,065



32,792



33
%


413,835



302,368



111,467



37
%Bad debt expense


-



1,200



(1,200
)


(100
%)


2,706



1,230



1,476



120
%Total Expenses


528,338



361,151



167,187



46
%


1,558,698



1,025,054



533,644



52
%Loss from operations


(483,903
)


(314,100
)


169,803



54
%


(1,083,470
)


(959,679
)


123,791



13
%Other income

(expense):Interest expense


(122,620
)


(233,534
)


(110,914
)


(47
%)


(220,016
)


(475,466
)


(255,450
)


(54
%)Total other income (expense)


(122,620
)


(233,534
)


(110,914
)


(47
%)


(220,016
)


(475,466
)


(255,450
)


(54
%)Net loss

$
(606,523
)

$
(547,634
)

$
58,889



11
%

$
(1,303,486
)

$
(1,435,145
)

$
(131,659
)


(9
%)





Professional and Administrative Fees





Professional and administrative fees for the three and nine months ended September 30, 2010 were $198,289 and $523,061, respectively, an increase of $94,781, or 92%, from $103,508 for the three months ended September 30, 2009 and an increase of $257,460, or 97%, from $265,601 for the nine months ended September 30, 2009.  The increase in professional and administrative fees was the result of utilizing the services of financial consultants to assist us in developing plans for financings and for assistance with market awareness of our company’s progress.  Historically, we have endeavored to reduce the use of outside consultants; however, we recognize that entry into certain markets will be expedited if we receive some assistance for areas of our business development.  This assistance is best provided by supporters of IET’s goals who have a relationship with decision-makers within target markets.





Salary Expenses




Salary expenses for the three and nine months ended September 30, 2010 were $196,162 and $614,719, respectively, an increase of $38,036, or 24%, from $158,126 for the three months ended September 30, 2009 and an increase of $159,731 or 35% from $454,988 for the nine months ended September 30, 2009.  The increase in salary expenses was the result of the addition of four new members to our production staff and one administrative employee, as well as the issuance of stock compensation to board members and certain employees pursuant to the terms of contractual agreements for 2008 and 2009.  We expect salary expense to increase in the future as the Company grows and as sales volumes increase.  We may need to continue issuing stock and stock options in exchange for services and adequate personnel compensation.


14





Depreciation and Amortization Expenses





Depreciation and amortization expenses for the three and nine months ended September 30, 2010 were $2,030 and $4,377, respectively,an increase of $2,778 or 371% from ($748) for the three months ended September 30, 2009 and an increase of $3,510 or 405% from $867 for the nine months ended September 30, 2009.  The increase in depreciation expenses was the result of the purchase of additional depreciable equipment and recent building improvements.





Office and Miscellaneous Expenses




Office and miscellaneous expenses for the three and nine months ended September 30, 2010 were $131,857 and $413,835, respectively, an increase of $32,792 or 33%, from $99,065 for the three months ended September 30, 2009 and an increase of $111,467 or 37% from $302,368 for the nine months ended September 30, 2009.  The increase in office and miscellaneous expenses was primarily the result of an increase in expenses necessary to meet the demand of our increased sales volume, such as engineering supplies and freight costs; an increase in travel associated with sales calls, attendance at conferences, and equipment commissioning; and an increase in expenses related to licenses and permits, including registrations and certifications.





Bad Debt Expenses





Bad debt expenses for the three and nine months ended September 30, 2010 were $0 and $2,706, respectively,a decrease of $1,200 or 100% from the three months ended September 30, 2009, and an increase of $1,476, or 120%, from $1,230 for the nine months ended September 30, 2009.  The only bad debt expense we have incurred this year to date was as a result of one of our former vendors not delivering a portion of the services for which we pre-paid.  We have historically had limited write-offs as the result of bad debts.  We continually evaluate the creditworthiness of our customers and typically require a deposit of 50% of the total purchase price with each EcaFlo® equipment order.  We evaluate the collectability of accounts receivable regularly and it is our policy to record an allowance when the results of the evaluation indicate an increased risk related to the customer's ability to meet their financial obligations.





Loss from Operations





The loss from operations for the three and nine months ended September 30, 2010 was $509,030 and $1,108,597, respectively, an increase of $194,930, or 62 %, from $314,100 for the three months ended September 30, 2009 and an increase of $148,918 or 16% from $959,679 for the nine months ended September 30, 2009.  The increase in the loss from operations was the result of an increase in expenses during this period, primarily due to the Company’s utilization of the services of outside consultants and costs associated with conducting our Annual Meeting of Shareholders.




15




Interest Expense




Interest expense for the three and nine months ended September 30, 2010 was $122,620 and $220,016, respectively, a decrease of $110,914, or 47%, from $233,534 for the three months ended September 30, 2009 and a decrease of $255,450, or 54%, from $475,466 for the nine months ended September 30, 2009.  The decrease in interest expense was as a result of having paid off a number of our convertible debentures and temporary working capital loans which were accruing interest in 2009.





Net Loss





Our net loss for the three and nine months ended September 30, 2010 was $631,650 and $1,328,613, respectively, an increase of $84,016, or 15%, from $547,634 for the three months ended September 30, 2009 and a decrease of $106,352 or 7% from $1,435,145 for the nine months ended September 30, 2009.  We continue to have a net loss but believe the loss will be reduced and profitability will be attained in future quarters as the sales of our products continue to increase.





Liquidity and Capital Resources





The following table summarizes total current assets, total current liabilities and working capital at September 30, 2010 compared to December 31, 2009.




September 30,

December 31,

Increase / (Decrease)2010

2009

$

%Current Assets

$
567,210

$
1,034,152

$
(466,942
)

(45%
)Current Liabilities

$
939,791

$
888,743

$
51,048


6
%Working Capital

$
(372,581
)
$
145,409

$
(517,990
)

(356%
)




Current assets for the nine months ended September 30, 2010 were $567,210, a decrease of $466,942, or 45%, from $1,034,152 at December 31, 2009.  Current liabilities for the same period were $939,791, an increase of $51,048, or 6%, from $888,743 for the year ended December 31, 2009.  The decrease in current assets and increase in current liabilities were due to an increase in expenses, which resulted in a decreased cash balance and increase in accounts payable for this period.





Funding of our new facility expansion caused a significant decrease in our cash position for this period, but has allowed us to quadruple our manufacturing production capacities.  We anticipate that this will translate into increased revenue in future quarters.  Additionally, we continue to anticipate an increase in employees in the next twelve months as we add assembly personnel, shipping and receiving personnel and additional administrative support personnel.





At September 30, 2010, our cash balance was $68,319.  Coupled with pending conversions and receipt of funds associated with our accounts receivable, we believe that our cash on hand will be sufficient to meet our capital and operating requirements for at least the next quarter.  Our future capital requirements, however, will depend on numerous factors, including without limitation, potential acquisitions and/or joint ventures, private sales of our stock and future results of operations.


16





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





As of September 30, 2010, we had convertible loans totaling $442,339.  $250,000 of these convertible notes are accruing interest at a rate of 8% per annum payable semi-annually, and are due April 7, 2011.  The remaining $192,339 in convertible notes are accruing interest at a rate of 10% per annum, and are due September 10, 2011.





Going Concern





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





Critical Accounting Policies and Estimates





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





Revenue Recognition





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





Off-Balance Sheet Arrangements





As of September 30, 2010, we did not have any off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.


17





Item 4. Controls and Procedures.





Evaluation of Disclosure Controls and Procedures





Our former Chief Executive Officer and Principal Financial Officer, William E. Prince, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report.  Based on that evaluation, Mr. Prince concluded that our disclosure controls and procedures were effective in timely alerting him to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings and in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  During the review of the circumstances surrounding the amendment of this report, the Board of Directors of the Company determined that the Company’s controls and procedures were not effective for the quarter ended September 30, 2010 due to the lack of sufficient internal resources.  Accordingly, effective May 22, 2011, the Company hired a Chief Financial Officer experienced in public company accounting and reporting.





Changes in Internal Control Over Financial Reporting





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


18





PART II – OTHER INFORMATION





Item 6. Exhibits.





Exhibits





Incorporated by ReferenceExhibit

No.

Exhibit Description

Filed

Herewith

Form

Period

Ended

Exhibit

No.

Filing

Date3(i)(h)

Articles of Incorporation of Integrated Environmental Technologies, Ltd.



8-K

2/18/08

3(i)(h)

3/10/083(ii)(c)

Bylaws of Integrated Environmental Technologies, Ltd., a Nevada corporation



8-K

2/18/08

3(ii)(c)

3/10/083(ii)(d)

Amendments to Amended and Restated Articles of Incorporation and By-laws



8-K

9/30/10

(d)(i),(ii),

(iii)(iv)

10/6/1031

Certification pursuant to Section 302 of the Sarbanes-Oxley Act

X32

Certification pursuant to Section 906 of the Sarbanes-Oxley Act

X




19


SIGNATURES





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





DATE:
INTEGRATED ENVIRONMENTALTECHNOLOGIES, LTD.August 15, 2011
By:
/s/ David R. LaVanceDavid R. LaVancePresident and Chief Executive Officer





August 15, 2011
By:
/s/ Thomas S. GiffordThomas S. GiffordExecutive Vice President,Chief Financial Officer and Secretary




20