**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-QSB**

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF            THE SECURITIES EXCHANGE ACT OF 1934

FOR            THE QUARTERLY PERIOD ENDED JANUARY 31, 2008

 

Commission File Number 333-106839

 

 

| **Essential Innovations Technology Corp.**                                                                    |
|---------------------------------------------------------------------------------------------------------------|
| (Exact name of small business issuer as specified in its                            charter)                  |
|                                                                                                          |
| **Nevada**                                                                                                    | **88-0492134** |
| (State or other jurisdiction of incorporation or                            organization)                     | (I.R.S. Employer Identification No.) |
|                                                                                                          |
| **114 West Magnolia Street, Suite                            400-142**

**Bellingham, WA 98225**              |
| (Address of principal executive offices)                                                                      |
|                                                                                                          |
| **360-392-3902**                                                                                              |
| (Issuer’s telephone number)                                                                             |
|                                                                                                          |
| **n/a**                                                                                                       |
| (Former name, former address and former fiscal year, if                            changed since last report) |

 

 

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.

| o | Yes |   | x | No |
|---|-----|--------|---|----|

 

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

| o | Yes |   | x | No |
|---|-----|--------|---|----|

 

State the number of shares outstanding of each of the issuer’s            classes of common equity, as of the latest practicable date:**As of March 17, 2008, the issuer had one class of common stock, with            a par value of $0.001, of which 48,258,210 shares were issued and            outstanding.**

 

Transitional Small Business Disclosure Format (Check one):

| o | Yes |   | x | No |
|---|-----|--------|---|----|

 

 

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**TABLE OF CONTENTS**

 

|    |   |                                                                                                    | Page   |
|---------|--------|---------------------------------------------------------------------------------------------------------|--------|
|    |   | **PART I—FINANCIAL INFORMATION**                                                                  |   |
|    |   |                                                                                                    |   |
| Item 1: |   | Financial Statements:                                                                                   |   |
|    |   | Unaudited Consolidated Balance Sheet as at January 31,                            2008                  | 3      |
|    |   | Unaudited Consolidated Statements of Operations for                            the                      |   |
|    |   | Three Months Ended January 31, 2008 and 2007                                                            | 4      |
|    |   | Unaudited Consolidated Statement of Stockholders’                            Equity (Deficit) and |   |
|    |   | Comprehensive Income (Loss) for the Three Months Ended                            January 31, 2008      | 5      |
|    |   | Unaudited Consolidated Statements of Cash Flows for                            the                      |   |
|    |   | Three Months Ended January 31, 2008 and 2007                                                            | 6      |
|    |   | Notes to Consolidated Financial Statements                                                              | 7      |
|    |   |                                                                                                    |   |
| Item 2: |   | Management’s Discussion and Analysis or Plan of                            Operation              | 14     |
|    |   |                                                                                                    |   |
| Item 3: |   | Controls and Procedures                                                                                 | 17     |
|    |   |                                                                                                    |   |
|    |   | **PART II—OTHER INFORMATION**                                                                     |   |
|    |   |                                                                                                    |   |
| Item 1: |   | Legal Proceedings                                                                                       | 18     |
|    |   |                                                                                                    |   |
| Item 2: |   | Unregistered Sales of Equity Securities and Use of                            Proceeds                  | 18     |
|    |   |                                                                                                    |   |
| Item 6: |   | Exhibits                                                                                                | 18     |
|    |   |                                                                                                    |   |
|    |   | Signatures                                                                                              | 19     |

 

 

2

 

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**PART I – FINANCIAL INFORMATION**

 

**ITEM 1. FINANCIAL STATEMENTS**

 

**ESSENTIAL INNOVATIONS TECHNOLOGY CORP.**

**Consolidated Balance Sheet**

**January 31, 2008**

**(Unaudited and in USD)**

 

| **Assets**                                                                       |                                                                                                   |                |             |
|----------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------|------------------|
| Current Assets                                                                   |                                                                                                   |                |
|                                                                             | Cash                                                                                                   | $                   | 21,992      |
|                                                                             | Accounts receivable, net                                                                               |                | 330,346     |
|                                                                             | Costs and estimated earnings in excess of billings on                            uncompleted contracts |                | 69          |
|                                                                             | Inventory                                                                                              |                | 191,956     |
|                                                                             | Prepaid expenses                                                                                       |                | 25,294      |
|                                                                             | Total current assets                                                                                   |                | 569,657     |
| Property and equipment, net                                                      |                                                                                                   | 76,230         |
| Deposits                                                                         |                                                                                                   | 13,348         |
| Intangible assets, net                                                           |                                                                                                   | 457,933        |
| Other assets                                                                     |                                                                                                   | 60,808         |
| **Total assets**                                                                 | **$**                                                                                                  | **1,177,976**  |
|                                                                             |                                                                                                   |                |
| **Liabilities and Stockholders’                            Deficit**       |                                                                                                   |                |
| Current Liabilities                                                              |                                                                                                   |                |
|                                                                             | Accounts payable                                                                                       | $                   | 1,266,905   |
|                                                                             | Accrued expenses                                                                                       |                | 330,980     |
|                                                                             | Accrued wages and payroll taxes                                                                        |                | 347,310     |
|                                                                             | Billings in excess of costs and estimated earnings on                            uncompleted contracts |                | 314         |
|                                                                             | Loans payable, related parties                                                                         |                | 87,437      |
|                                                                             | Due to shareholders                                                                                    |                | 251,700     |
|                                                                             | Current portion of long-term debt, net of unamortized                            discount of $205,485  |                | 1,541,584   |
|                                                                             | Total current liabilities                                                                              |                | 3,826,230   |
| Long-term Liabilities                                                            |                                                                                                   | --             |
|                                                                             | Total liabilities                                                                                      |                | 3,826,230   |
| Commitments and contingencies                                                    |                                                                                                   |                |
|                                                                             |                                                                                                   |                |
| Stockholders’ Deficit                                                      |                                                                                                   |                |
|                                                                             | Preferred stock                                                                                        |                |             |
|                                                                             | $0.001 par value, authorized 10,000,000                            shares                              |                |             |
|                                                                             | issued and outstanding nil shares                                                                      |                | --          |
|                                                                             | Common stock                                                                                           |                |             |
|                                                                             | $0.001 par value, authorized 100,000,000                            shares                             |                |             |
|                                                                             | issued and outstanding 46,311,012 shares                                                               |                | 46,311      |
|                                                                             | Additional paid-in capital                                                                             |                | 17,213,174  |
|                                                                             | Accumulated deficit                                                                                    |                | (19,926,668)     |
|                                                                             | Accumulated other comprehensive income                                                                 |                | 18,929      |
|                                                                             | Total stockholders’ deficit                                                                      |                | (2,648,254)      |
| **Total liabilities and stockholders’                            deficit** | **$**                                                                                                  | **1,177,976**  |

 

 

See            Notes to Consolidated Financial Statements.

 

3

 

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**ESSENTIAL INNOVATIONS TECHNOLOGY CORP.**

**Consolidated Statements of Operations**

**For the Three Months Ended January 31, 2008 and 2007**

**(Unaudited and in USD)**

 

|                                          | **Three months****ended****January 31,****2008** |             | **Three months****ended****January 31,****2007** |
|-----------------------------------------------|--------------------------------------------------|------------------|--------------------------------------------------|
| Revenue                                       | $                                                | 220,721     |                                             | $ | 717,622  |
| Cost of revenue                               |                                             | 50,085      |                                             |   | 544,677  |
| Gross profit                                  |                                             | 170,636     |                                             |   | 172,945  |
| Operating expenses:                           |                                             |             |                                             |   |   |
|                                          | General and administrative                       |             | 394,674                                     |   |   | 760,479  |
| Loss from operations                          |                                             | (224,038)        |                                             |   | (587,534) |
| Other income (expense):                       |                                             |             |                                             |   |   |
|                                          | Gain from sale of minority interest              |             |                                             |   |   |   |
|                                          | in subsidiary                                    |             | 98,226                                      |   |   | --  |
|                                          | Interest expense                                 |             | (51,812)                                         |   |   | (59,116) |
|                                          | Interest expense, related parties                |             | (2,082)                                          |   |   | (3,851) |
|                                          | Amortization of debt discount                    |             | (47,415)                                         |   |   | (47,415) |
|                                          | Financing costs, related parties                 |             | --                                          |   |   | (40,387) |
|                                          | Interest income                                  |             | 10                                          |   |   | 771  |
|                                          | Total other expense                         |             | (3,073)                                          |   |   | (149,998) |
| Net loss                                      | $                                                | (227,111)        |                                             | $ | (737,532) |
| Net loss per share - basic and diluted        | $                                                | (0.01)           |                                             | $ | (0.02) |
| Weighted average number of shares outstanding |                                             | 45,952,316  |                                             |   | 31,695,070  |

 

 

See            Notes to Consolidated Financial Statements.

 

4

 

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**ESSENTIAL INNOVATIONS TECHNOLOGY CORP.**

**Consolidated Statement of Stockholders’ Equity (Deficit) and            Comprehensive Income (Loss)**

**For the Three Months Ended            January** **31,            2008**

**(Unaudited and in USD)**

 

 

|                         |             |   |       |   |                |   | **Accumulated** |   |                      |
|------------------------------|------------------|--------|------------|--------|---------------------|--------|-----------------|--------|---------------------------|
|                         | **Common stock** |   |       |   |                |   | **other**       |   | **Total**                 |
|                         | **Number**       |   |       |   | **Additional**      |   | **Accumulated** |   | **comprehensive**         |   | **shareholders’** |
|                         | **of Shares**    |   | **Amount** |   | **paid-in capital** |   | **deficit**     |   | **income (loss)**         |   | **equity (deficit)** |
|                         |             |   |       |   |                |   |            |   |                      |   |   |
| Balance October 31, 2007     | 45,311,012       |   | $ 45,311   |   | $17,164,174         |   | $(19,699,557)   |   | $  69,239  |   | $(2,420,833)  |
|                         |             |   |       |   |                |   |            |   |                      |   |   |
| Net loss                     | --               |   | --         |   | --                  |   | (227,111)       |   | --                   |   | (227,111)  |
| Foreign currency translation | --               |   | --         |   | --                  |   | --         |   | (50,310)                  |   | (50,310) |
| Comprehensive loss           | --               |   | --         |   | --                  |   | --         |   | --                   |   | (277,421)  |
| Common stock and warrants    |             |   |       |   |                |   |            |   |                      |   |   |
| issued for cash received     | 1,000,000        |   | 1,000      |   | 49,000              |   | --         |   | --                   |   | 50,000   |
| Balance January 31, 2008     | 46,311,012       |   | $ 46,311   |   | $17,213,174         |   | $(19,926,668)   |   | $  18,929  |   | $(2,648,254)  |
|                         |             |   |       |   |                |   |            |   |                      |   |   |

 

 

See            Notes to Consolidated Financial Statements.

 

5

 

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**ESSENTIAL INNOVATIONS TECHNOLOGY CORP.**

**Consolidated Statements of Cash Flows**

**For the Three Months Ended            January** **31, 2008 and            2007**

**(Unaudited and in USD)**

 

|                                                                                            |                                                                                          |                                                                           | **Three months****ended****January 31,****2008**                                  |             | **Three months****ended****January 31,****2007** |
|-------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|------------------|--------------------------------------------------|
| Cash Flows from Operating Activities:                                                           |                                                                                          |                                                                           |                                                                              |
|                                                                                            | Net loss                                                                                      | $ (227,111)                                                               |                                                                              | $ (737,532) |
|                                                                                            | Adjustment to reconcile net loss to net cash provided by                            (used in) |                                                                           |                                                                              |             |
|                                                                                            | operating activities:                                                                         |                                                                           |                                                                              |             |
|                                                                                            |                                                                                          | Depreciation of property and equipment                                         | 5,684                                                                        |             | 22,537                                      |
|                                                                                            |                                                                                          | Amortization of debt discount                                                  | 47,415                                                                       |             | 47,415                                      |
|                                                                                            |                                                                                          | Gain on tenant inducements                                                     | --                                                                           |             | (8,752)                                          |
|                                                                                            |                                                                                          | Gain on sale of minority interest in                            subsidiary     | (98,226)                                                                          |             | --                                          |
|                                                                                            |                                                                                          | Common stock issued for services                                               | --                                                                           |             | 7,500                                       |
|                                                                                            |                                                                                          | Common stock issued to related parties for                            services | --                                                                           |             | 79,880                                      |
|                                                                                            |                                                                                          | Options issued for services                                                    | --                                                                           |             | 29,161                                      |
|                                                                                            |                                                                                          | Options issued to related parties for                            services      | --                                                                           |             | 16,309                                      |
|                                                                                            |                                                                                          | Warrants issued to related parties for                            services     | --                                                                           |             | 40,387                                      |
|                                                                                            |                                                                                          | Changes in assets and liabilities                                              |                                                                              |             |                                             |
|                                                                                            |                                                                                          | Accounts receivable                                                            | 87,930                                                                       |             | 37,191                                      |
|                                                                                            |                                                                                          | Costs and estimated earnings in excess of                            billings  | 10,269                                                                       |             | 38,722                                      |
|                                                                                            |                                                                                          | Inventory                                                                      | (29,756)                                                                          |             | 88,240                                      |
|                                                                                            |                                                                                          | Prepaid expenses and deposits                                                  | 8,277                                                                        |             | 47,879                                      |
|                                                                                            |                                                                                          | Accounts payable                                                               | 18,453                                                                       |             | 333,027                                     |
|                                                                                            |                                                                                          | Accrued expenses and wages                                                     | 161,322                                                                      |             | 158,189                                     |
|                                                                                            |                                                                                          | Billings in excess of costs and estimated                            earnings  | (49,690)                                                                          |             | (64,430)                                         |
|                                                                                            | Net cash provided by (used in) operating                            activities                | (65,433)                                                                       |                                                                              | 135,723     |
|                                                                                            |                                                                                          |                                                                           |                                                                              |
| Cash Flows from Investing Activities:                                                           |                                                                                          |                                                                           |                                                                              |
|                                                                                            | Proceeds from disposal of fixed assets                                                        | --                                                                        |                                                                              | 2,333       |
|                                                                                            | Purchase of property and equipment                                                            | (21,071)                                                                       |                                                                              | (192,516)        |
|                                                                                            | Net cash used in investing activities                                                         | (21,071)                                                                       |                                                                              | (190,183)        |
|                                                                                            |                                                                                          |                                                                           |                                                                              |
| Cash Flows from Financing Activities:                                                           |                                                                                          |                                                                           |                                                                              |
|                                                                                            | Issuance of common stock and warrants for                            cash                     | 50,000                                                                    |                                                                              | --          |
|                                                                                            | Proceeds from sale of minority interest in                            subsidiary              | 98,226                                                                    |                                                                              | --          |
|                                                                                            | Repayment of term loan                                                                        | --                                                                        |                                                                              | (58,029)         |
|                                                                                            | Tenant inducements received                                                                   | --                                                                        |                                                                              | 22,635      |
|                                                                                            | Advances from shareholders                                                                    | 31,867                                                                    |                                                                              | 32,971      |
|                                                                                            | Repayment of amounts due to shareholders                                                      | (35,982)                                                                       |                                                                              | --          |
|                                                                                            | Net cash provided by (used in) financing                            activities                | 144,111                                                                   |                                                                              | (2,423)          |
|                                                                                            |                                                                                          |                                                                           |                                                                              |
| Increase (decrease) in cash during the period                                                   | 57,607                                                                                   |                                                                           | (56,883)                                                                          |
| Foreign exchange effect on cash                                                                 | (50,310)                                                                                      |                                                                           | (7,736)                                                                           |
| Cash at beginning of the period                                                                 | 14,695                                                                                   |                                                                           | 76,543                                                                       |
| **Cash at end of the period**                                                                   | $    21,992                                                          |                                                                           | $    11,924                                              |
|                                                                                            |                                                                                          |                                                                           |                                                                              |
| **Supplementary Cash Flow                            Information:**                             |                                                                                          |                                                                           |                                                                              |
| Interest paid                                                                                   | $            --              |                                                                           | $            --  |
| Income taxes paid                                                                               | --                                                                                       |                                                                           | --                                                                           |
| Non-cash transactions:                                                                          |                                                                                          |                                                                           |                                                                              |
| Common shares issued to settle accounts payable and                            accrued expenses | --                                                                                       |                                                                           | 47,835                                                                       |
| Common stock and options issued to acquire distribution                            rights       | --                                                                                       |                                                                           | 25,064                                                                       |

 

 

See            Notes to Consolidated Financial Statements.

 

6

 

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**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**Note 1. Description of Business and Summary of Significant Accounting            Policies**

 

***Organization***

 

Essential Innovations Technology Corp. (the “Company”) was            incorporated under the laws of the state of Nevada on April 4, 2001. The            Company’s subsidiary, Essential Innovations Corporation (“EIC”), is            engaged in the manufacturing, installation, and distribution of the “EI Elemental            Heat Energy System” family of geo exchange heat products and technology in North            America, though its sales to date are primarily in western Canada. On March 6,            2006, the Company acquired all of the issued and outstanding shares of Pacific Geo            Exchange Inc. (“PGE”) and its wholly owned subsidiary, Earth Source Energy            Inc. (“ESE”), which is engaged in the design and installation of geo            exchange systems in western Canada. Effective February 1, 2005, the Company had            sales of its developed products and management determined that the Company had emerged            from the development stage.

 

***Future Operations***

 

The            Company’s consolidated financial statements have been prepared in conformity with            accounting principles generally accepted in the United States applicable to a going            concern which contemplates the realization of assets and liquidation of liabilities in            the normal course of business. The Company has not yet generated positive cash flows            from operations. It is the Company’s intention to raise additional equity to            finance the further development of a market for its products until positive cash flows            can be generated from its operations. However, there can be no assurance that such            additional funds will be available to the Company when required or on terms acceptable            to the Company. Such limitations could have a material adverse effect on the            Company’s business, financial condition, or operations, and these consolidated            financial statements do not include any adjustment that could result. Failure to obtain            sufficient additional funding would necessitate the Company to reduce or limit its            operating activities or even discontinue operations.

 

***Basis of Consolidation***

 

The            accompanying unaudited interim consolidated financial statements have been prepared in            accordance with generally accepted accounting principles for interim financial            information and with SEC instructions. Accordingly, they do not include all the            information and footnotes required by generally accepted accounting principles for            complete financial statements. The results of operations reflect interim adjustments,            all of which are of a normal recurring nature and which, in the opinion of management,            are necessary for a fair presentation of the results for such interim period. The            results reported in these interim consolidated financial statements should not be            regarded as necessarily indicative of results that may be expected for the entire year.            Certain information and note disclosure normally included in financial statements            prepared in accordance with generally accepted accounting principles have been            condensed or omitted pursuant to the Securities and Exchange Commission’s rules            and regulations. These unaudited interim consolidated financial statements should be            read in conjunction with the audited consolidated financial statements included in the            Company’s Annual Report on Form 10-KSB for the year ended October 31,            2007.

 

7

 

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These consolidated financial statements include the accounts of            Essential Innovations Technology Corp. and its wholly owned subsidiaries, EIC, PGE, and            ESE, as well as its majority-owned subsidiary, Essential Innovations Asia Limited            (“EIA”). All significant inter-company balances and transactions have been            eliminated.

 

***Cash***

 

Cash            consists of checking accounts held at financial institutions in Canada and Hong Kong.            At times, cash balances may exceed insured limits.

 

***Accounts Receivable***

 

Accounts receivable result primarily from installation contracts and the            sale of geothermal products and are recorded at their principal amounts. Receivables            are considered past due after 30 days. When necessary, the Company provides an            allowance for doubtful accounts that is based on a review of outstanding receivables,            historical collection information, and current economic conditions. There is an            allowance for doubtful accounts of $80,944 at January 31, 2008. Receivables are            generally unsecured. At January 31, 2008, two customers accounted for 30% of the            net accounts receivable balance.

 

As            of January 31, 2008, accounts receivable totaling $161,229 were in dispute by the            Company’s customers, and the Company has filed certain legal claims in an attempt            to recover those amounts. These factors have been considered in the Company’s            estimate of allowance for doubtful accounts.

 

***Inventory***

 

Inventory consists primarily of raw materials used in the manufacture of            geo exchange products, which are stated at the lower of cost (first-in, first-out            method) or market.

 

***Revenue Recognition***

 

Revenues from the sales of geo exchange products are recognized as the            sales are made, the price is fixed and determinable, collectibility is probable, and no            significant Company obligations with regard to the products remain.

 

Revenue from construction contracts are recognized on the            percentage-of-completion method, measured by the percentage of costs incurred to date            to estimated total costs for each contract. Because of the inherent uncertainties in            estimating costs, it is at least reasonably possible that the estimates used may change            in the near term. If estimated costs to complete long-term contracts indicate a loss,            provision is made in the current period for the total anticipated loss. The lives of            contracts entered into are typically twelve months or less, but performance may require            two construction seasons.

 

The            asset, “Costs and estimated earnings in excess of billings on uncompleted            contracts,” represents revenues recognized in advance of amounts billed.            Conversely, the liability, “Billings in excess of costs and estimated earnings on            uncompleted contracts,” represents amounts billed in advance of revenues            recognized.

 

8

 

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***Net Loss per Share***

 

Basic net loss per share is calculated by dividing the net loss            attributable to common shareholders by the weighted average number of common shares            outstanding in the period. Diluted loss per share takes into consideration common            shares outstanding (computed under basic loss per share) and potentially dilutive            securities. For the three-month periods ended January 31, 2008 and 2007,            outstanding stock options and warrants are antidilutive because of net losses, and as            such, their effect has not been included in the calculation of diluted net loss per            share.Common shares issuable are considered outstanding as of            the original approval date for purposes of earnings per share computations.

 

***Comprehensive Income (Loss)***

 

Statement of Financial Accounting Standards (“SFAS”) No. 130            establishes standards for reporting comprehensive income (loss) and its components in            financial statements. Other comprehensive income (loss), as defined, includes all            changes in equity (net assets) during a period from non-owner sources. To date, the            Company has not had any significant transactions that are required to be reported in            other comprehensive income (loss), except for foreign currency translation            adjustments.

 

***Foreign Operations and Currency Translation***

 

The            Company translates foreign assets and liabilities of its subsidiaries, other than those            denominated in U.S. dollars, at the rate of exchange at the balance sheet date.            Revenues and expenses are translated at the average rate of exchange throughout the            period. Gains or losses from these translations are reported as a separate component of            other comprehensive income (loss), until all or a part of the investment in the            subsidiaries is sold or liquidated. The translation adjustments do not recognize the            effect of income tax because the Company expects to reinvest the amounts indefinitely            in operations.

 

Transaction gains and losses that arise from exchange rate fluctuations            on transactions denominated in a currency other than the local functional currency are            included in general and administrative expenses.

 

***Use of Estimates***

 

The            preparation of consolidated financial statements in conformity with accounting            principles generally accepted in the United States requires management to make            estimates and assumptions that affect the reported amounts of assets and liabilities            and disclosures of contingent assets and liabilities at the date of the consolidated            financial statements and the reported amounts of revenues and expenses during the            fiscal year. The Company makes estimates for, among other items, percentage of            completion method of accounting for revenue from construction contracts, determination            of inventory at the lower of cost or market, useful lives for depreciation and            amortization, determination of future cash flows associated with impairment testing for            goodwill and long-lived assets, determination of the fair value of stock options and            warrants, determination of warranty accruals, and allowances for doubtful accounts. The            Company bases its estimates on historical experience, current conditions, and on other            assumptions that it believes to be reasonable under the circumstances. Actual results            could differ from those estimates and assumptions.

 

9

 

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**Note            2. Uncompleted Contracts**

 

Costs, estimated earnings, and billings on uncompleted contracts as of            January 31, 2008, are summarized as follows:

 

| Costs incurred on uncompleted contracts | $      | 96,100   |
|-----------------------------------------|--------|---------------|
| Estimated earnings                      |   | 105,079  |
|                                    |   | 201,179  |
| Billings to date                        |   | (201,424)     |
|                                    | $      | (245)         |

 

Included in the accompanying balance sheet under the following            captions:

 

| Costs and estimated earnings in excess of billings on                            uncompleted contracts | $      | 69  |
|--------------------------------------------------------------------------------------------------------|--------|----------|
| Billings in excess of costs and estimated earnings on                            uncompleted contracts |   | (314)    |
|                                                                                                   | $      | (245)    |

 

**Note            3. Property and Equipment, net**

 

Property and equipment consist of the following as of January 31,            2008:

 

| Office furniture and equipment | $      | 76,681    |
|--------------------------------|--------|----------------|
| Leasehold improvements         |   | 52,857    |
| Computer equipment             |   | 65,371    |
| Computer software              |   | 37,372    |
|                           |   | 232,281   |
| Less accumulated depreciation  |   | (156,051)      |
| Property and equipment, net    | $      | $ 76,230  |

 

**Note            4. Intangible Assets**

 

Intangible assets consist of the following as of January 31,            2008:

 

| Geo-site rights (finite-lived)           | $      | 458,595  |
|------------------------------------------|--------|---------------|
| Intellectual property (indefinite-lived) |   | 41,379   |
|                                     |   | 499,974  |
| Less accumulated amortization            |   | (42,041)      |
| Intangible assets, net                   | $      | 457,933  |

 

***Geo-Site Rights***

 

During 2005, the Company acquired the exclusive rights to provide a            geo-field operating lease and to supply its heating and cooling units to a new            residential subdivision in Westbank, British Columbia, for 225,000 shares of the            Company’s common stock with a fair value of $225,000 and options, with a fair            value of $47,468, exercisable until 2010, redeemable for 150,000 shares of the            Company’s common stock, 75,000 at $0.75 per share and 75,000 at $1.00 per share.            The Company guaranteed that the 225,000 shares of the Company’s common stock            would have an aggregate fair market value of at least $225,000 one year after issuance,            and if the aggregate fair market value is less than $225,000, the Company would issue            additional shares of common stock to make the aggregate value $225,000.

 

10

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The            225,000 shares issued in 2005 had an aggregate value of $112,500 and during 2006, the            Company issued an additional 225,000 shares of the Company’s common stock to make            up the deficit. The total cost of $434,987 will be amortized on a pro rata per-unit            basis as residential lots are sold. During the year ended October 31, 2007, $42,041 of            amortization was recognized. No additional amortization was recognized during the            period ended January 31, 2008, as no additional lots were sold during that            time.

 

***Intellectual Property***

             

The            Company acquired certain proprietary information that provides the basis for the            effective implementation and operation of the geo-utility business concept in return            for 75,000 fully paid and nonassessable shares of common stock with a fair value of            $30,000 and options to purchase 150,000 shares of common stock, 37,500 at $0.75 per            share and 37,500 at $1.00 per share exercisable until July 31, 2009, and 37,500 at            $1.25 per share and 37,500 at $1.50 per share exercisable until July 31, 2010.            These have been recorded at the fair value of $57,496. In addition, the vendor is            entitled to a royalty of 2.5% from gross revenue of geo-utility projects in which the            Company is directly involved and 0.5% of gross fees from geo-utility projects when the            Company provides project management. This intangible asset has an indefinite life. The            Company has not earned any gross revenue from geo-utility projects and, accordingly, no            royalty expense is included in the accompanying consolidated statements of operations.            Management evaluates the asset for impairment on at least an annual basis and recorded            an impairment loss of $41,378 during 2006. No further impairment occurred in 2007 or in            the first three months of 2008.

 

**Note 5. Related-Party Transactions and Balances**

 

***Loans Payable, Related Parties***

             

During 2003, a director and officer of the Company made an unsecured            loan to the Company in the amount of $30,600, due on demand, interest only payable            monthly at 8%, with the principal to be repaid in full on or before April 1, 2004.            In connection with this loan, options were granted which entitled the holder to            purchase 50,000 shares of common stock of the Company until 2012: 25,000 at $0.25 per            share and 25,000 at $0.50 per share. The fair value of the options of $37,978 was            recorded as interest expense during 2003. During 2004, the loan was extended and the            Company agreed to pay an additional $6,511 in refinancing costs. The balance remaining            at January 31, 2008, is $11,195.

 

During 2006, two related parties made unsecured loans to the Company            totaling $61,191, due September 30, 2006, with interest at 15%. The Company also            granted options to purchase 195,000 shares of common stock of the Company until 2011 at            $0.30 per share. The fair value of the warrants of $69,787 was recorded as interest            expense during 2006. The full amount of $61,191 remains due to these related parties at            January 31, 2008, as well as accrued interest in the amount of $12,764.

 

During 2007, a former officer of the acquired ESE subsidiary paid off            the balance of $15,051 of a finance loan on behalf of the Company. The Company has            accrued that amount for reimbursement of the former officer.

 

***Due to Shareholders***

             

Amounts due to shareholders in the amount of $251,700 at            January 31, 2008, are unsecured, without specific terms of repayment and are            non-interest-bearing.

 

11

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**Note            6. Term Loan**

 

During 2006, the Company arranged term financing of $2 million to            complete the acquisition of PGE and ESE. This loan is secured against all assets of the            Company and bears interest, payable monthly, at the rate of prime plus 3%, with a            minimum interest rate of 8%. During the first half of 2007, the principal repayments            were renegotiated and the new principal payments are $30,000 per month from May 2007 to            November 2007; $37,500 per month from December 2007 to May 2008; and $62,500 per month            from June 2008 until the loan is paid in full. In addition to the monthly payments, the            Company is required to pay 30% of annual positive cash flow as additional principal            payments. At January 31, 2008, the Company was delinquent in interest payments and            other fees of $85,148 and principal payments of $285,000. As a result of such default,            all amounts due under the term loan have been reclassified to current on the            accompanying consolidated balance sheet.

 

The            Company has recorded a discount against the loan based on the relative fair value of            related warrants to purchase 2,919,496 shares of common stock related to the $2 million            term loan in the amount of $960,000. As the lender has agreed not to hold more than            4.99% of the Company’s stock at any one time, only that portion of the debt            discount equivalent to the exercising of warrants that would equate to 4.99% of the            Company’s outstanding stock as of the date of funding was expensed as interest in            the amount of $391,000 in the accompanying statements of operations during 2006. The            balance of the debt discount is being amortized over 36 months, and related discount            amortization of $47,415 and $47,415 for the periods ended January 31, 2008 and 2007,            respectively, is included in the accompanying statements of operations.

 

The            following represents payments due under the term loan as renegotiated as if the default            had not occured:

 

|                                    | **Principal due** |      | **Less discount** |   | **Net** |
|-----------------------------------------|-------------------|-----------|-------------------|--------|---------|
| Delinquent amounts due                  | $                 | 285,000   |              | $      | --      |   | $ | 285,000 |
| February 2008 – January 2009      |              | 650,000   |              |   | 189,660 |   |   | 460,340 |
| February 2009 – January 2010      |              | 750,000   |              |   | 15,825  |   |   | 734,175 |
| February 2010                           |              | 57,110    |              |   | --      |   |   | 57,110 |
| Total term loan                         | $                 | 1,742,110 |              | $      | 205,485 |   |   | 1,536,625 |
| Plus amounts due under finance loans    |              |      |              |   |    |   |   | 4,959 |
| Total current portion of long-term debt |              |      |              |   |    |   | $ | 1,541,584 |

 

**Note 7. Share Capital**

 

***Preferred Stock***

 

The            Company’s authorized capital includes 10,000,000 shares of preferred stock of            $0.001 par value. The designation of rights including voting powers, preferences, and            restrictions shall be determined by the Board of Directors before the issuance of any            shares.

 

No            shares of preferred stock are issued and outstanding as of January 31,            2008.

 

***Common Stock***

 

During the three months ended January 31, 2008, the Company issued            1,000,000 shares of common stock of the Company and warrants to purchase 1,000,000            shares of common stock of the Company at $0.10 per share for total proceeds of $50,000.            The proceeds allocated to warrants based on their relative fair value were            $22,100.

 

12

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***Stock Purchase Warrants***

 

At            January 31, 2008, the Company had reserved shares of common stock for the            following outstanding warrants to purchase 17,682,724 shares of the            Company’s common stock:

 

| **Number of warrants** | **Exercise Price** | **Expiry** |
|------------------------|--------------------|------------|
|                   | 1,329,882          |       | $ 0.001 | 2050 |
|                   | 300,000            |       | 0.01 | 2011 |
|                   | 8,610,000          |       | 0.10 | 2012 |
|                   | 967,400            |       | 0.25 | 2011 |
|                   | 4,831,732          |       | 0.30 | 2011 |
|                   | 115,000            |       | 0.35 | 2010/2011 |
|                   | 791,250            |       | 0.40 | 2010/2011 |
|                   | 270,000            |       | 0.50 | 2010/2011 |
|                   | 317,460            |       | 0.63 | 2011 |
|                   | 75,000             |       | 0.75 | 2010 |
|                   | 75,000             |       | 1.00 | 2010 |
|                   | 17,682,724         |       |   |   |

 

**Note 8. Minority Interest – Sale of Subsidiary Common            Stock**

 

On            January 15, 2008, the Company sold a minority interest of 12.5% in its wholly owned            subsidiary EIA, for cash proceeds of $98,226, resulting in a gain of $98,226. At the            date of sale, liabilities of EIA exceeded its assets, therefore the amount of gain            recorded has been limited to the proceeds and no value was allocated to the minority            interest.

 

**Note 9. Stock-Based Compensation**

 

Although the Company does not have a formal stock option plan, it issues            stock options to directors, employees, advisors, and consultants. Stock options            generally have a four- to five-year contractual term, vest immediately, and have no            forfeiture provisions. No new options were granted during the three months ended            January 31, 2008.

 

The            following table summarizes stock options outstanding at January 31,            2008:

 

| **Exercise Price**        |   | **Number Outstanding****at January 31, 2008**                                           |   | **Average Remaining****Contractual Life****(Years)** |   | **Number****Exercisable at****January 31, 2008**                                        |
|---------------------------|--------|-----------------------------------------------------------------------------------------|--------|------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|
| $0.25                     |   | 389,750                                                                                 |   | 2.3                                                  |   | 389,750                                                                                 |
| 0.26                      |   | 75,000                                                                                  |   | 3.8                                                  |   | 75,000                                                                                  |
| 0.30                      |   | 2,279,887                                                                               |   | 3.3                                                  |   | 2,279,887                                                                               |
| 0.37                      |   | 90,000                                                                                  |   | 3.3                                                  |   | 90,000                                                                                  |
| 0.40                      |   | 125,000                                                                                 |   | 3.2                                                  |   | 125,000                                                                                 |
| 0.50                      |   | 1,237,250                                                                               |   | 2.9                                                  |   | 1,237,250                                                                               |
| 0.53                      |   | 1,250,000                                                                               |   | 3.3                                                  |   | 1,250,000                                                                               |
| 0.63                      |   | 250,000                                                                                 |   | 3.2                                                  |   | 250,000                                                                                 |
| 0.75                      |   | 1,835,500                                                                               |   | 3.8                                                  |   | 1,835,500                                                                               |
| 1.00                      |   | 3,101,250                                                                               |   | 2.6                                                  |   | 3,101,250                                                                               |
| 1.25                      |   | 87,500                                                                                  |   | 2.6                                                  |   | 87,500                                                                                  |
| 1.50                      |   | 282,500                                                                                 |   | 1.9                                                  |   | 282,500                                                                                 |
| 2.00                      |   | 16,250                                                                                  |   | 2.8                                                  |   | 16,250                                                                                  |
|                      |   | 11,019,887                                                                              |   |                                                 |   | 11,019,887                                                                              |
| Aggregate Intrinsic Value |   | $              -- |   |                                                 |   | $              -- |

 

 

13

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The            aggregate intrinsic value in the table above represents the total pretax intrinsic            value for all “in-the-money” options. At January 31, 2008, all outstanding            options had exercise prices greater than the Company’s closing stock price on            that day, so the aggregate intrinsic value of all outstanding and exercisable options            was $0 as of that day. The aggregate intrinsic value changes based on the fair market            value of the Company’s stock.

 

**Note 10. Segment Information**

 

The            Company views its operations in two lines of business – (1) manufacturing and (2)            geo exchange design and installation. Summarized financial information by segment for            the three months ended January 31, 2008 and 2007, as taken from the internal            management reports, is as follows:

 

|                                 | **Three Months****Ended****January** **31, 2008** |            |   | **Three Months****Ended****January** **31, 2007** |
|--------------------------------------|--------------------------------------------------------|-----------------|--------|--------------------------------------------------------|
|                                 |                                                   |
| Revenue                              |                                                   |            |   |                                                   |   |
| Manufacturing                        | $                                                      | 93,962     |   | $                                                      | 153,474  |
| Geo exchange design and installation |                                                   | 126,759    |   |                                                   | 564,148  |
|                                 | $                                                      | 220,721    |   | $                                                      | 717,622  |
| Loss                                 |                                                   |            |   |                                                   |   |
| Manufacturing                        | $                                                      | (149,670)       |   | $                                                      | (183,808) |
| Geo exchange design and installation |                                                   | (9,918)         |   |                                                   | (205,992) |
| Corporate                            |                                                   | (67,523)        |   |                                                   | (347,732) |
|                                 | $                                                      | (227,111)       |   | $                                                      | (737,532) |
| Assets                               |                                                   |            |   |                                                   |   |
| Manufacturing                        | $                                                      | 783,781    |   | $                                                      | 716,764  |
| Geo exchange design and installation |                                                   | 328,253    |   |                                                   | 3,048,683  |
| Corporate                            |                                                   | 65,942     |   |                                                   | 80,295  |
|                                 | $                                                      | 1,177,976  |   | $                                                      | 3,845,742  |

 

**Note 11. Subsequent Events**

 

Subsequent to January 31, 2008, the Company:

 

|   | **•** | Agreed to an amendment to its service agreement to                            provide a geo-field operating lease and to supply its heating and                            cooling units to a new residential subdivision in Westbank, British                            Columbia. The agreement was amended from a geo exchange mandated model                            to a geo exchange optional model, which means that buyers in the                            subdivision are now entitled to choose whether they want to utilize the                            geo exchange option provided by the Company. |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

|   | **•** | Entered into private placement agreements to issue a                            total of 1,947,198 shares of the Company’s common stock for cash                            of approximately $80,000. |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF            OPERATION**

 

The following discussion should be read in conjunction with the            accompanying condensed consolidated financial statements for the three-month periods            ended January 31, 2008 and 2007, and our annual report on Form 10-KSB for the year            ended October 31, 2007, including the financial statements and notes            thereto.

 

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**Forward-Looking Information May Prove Inaccurate**

 

This report contains statements about the future, sometimes referred to            as “forward-looking” statements. Forward-looking statements are typically            identified by the use of the words “believe,” “may,”            “could,” “should,” “expect,”            “anticipate,” “estimate,” “project,”            “propose,” “plan,” “intend,” and similar words and            expressions. Statements that describe our future strategic plans, goals, or objectives            are also forward-looking statements. We intend the forward-looking statements to be            covered by the safe harbor provisions for forward-looking statements contained in            Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange            Act of 1934.

 

Readers of this report are cautioned that any forward-looking            statements, including those regarding our management’s current beliefs,            expectations, anticipations, estimations, projections, proposals, plans, or intentions,            are not guarantees of future performance or results of events and involve risks and            uncertainties. The forward-looking information is based on present circumstances and on            our predictions respecting events that have not occurred, that may not occur, or that            may occur with different consequences from those now assumed or anticipated. Actual            events or results may differ materially from those discussed in the forward-looking            statements as a result of various factors. The forward-looking statements included in            this report are made only as of the date of this report. We are not obligated to update            such forward-looking statements to reflect subsequent events or            circumstances.

 

**Introduction**

 

Management believes that the most significant information related to our            financial condition relates to our focusing our attention on manufacturing of            geothermal heat exchange systems and redefining our efforts in relation to their design            and installation. As a result, our revenues, expenses, and net loss have been reduced            substantially. We expect our revised approach to offer more consultative geoexchange            project services as it relates to design and installation to continue, and we            anticipate that our focus on manufacturing will continue to improve our financial            performance. Management notes, however, that we still have substantial liabilities,            continue to incur a net loss, and will require substantial additional capital in order            to continue.

 

**Results of Operations**

 

***Comparison of the Three Months Ended January 31,            2008,***

***with the Three Months Ended January 31, 2007***

             

We had a net loss of $227,111, or $0.01 per share, for the three-month            period ended January 31, 2008, as compared with a net loss of $737,532, or $0.02 per            share, for the three-month period ended January 31, 2007. This reduction of our net            loss by approximately 69% is the result of our overall efforts to refocus our business            primarily on our manufacturing subsidiary. This refocus has included, among other            things, the sourcing of some of our key components via a new, less expensive supplier            chain. At the same time, we have redefined our efforts for our design and installation            services by now operating this portion of our business in much more of a consulting            role, rather than in the role of a traditional contracting business, which requires us            to carry far less internal overhead.

 

We have generated gross revenue of $220,721 with related costs of            revenue of $50,085 for the three months ended January 31, 2008, as compared to gross            revenues of $717,622 and costs of revenue of $544,677 for the three months ended            January 31, 2007. Along with a significant decrease in our net loss for the period,            there has also been a decrease in revenue as compared to the comparable period of the            prior year. This is due to the fact that as we have made necessary changes to the            internal operational focus of our organization to align with the business changes            described above, at the same time we had to slow down our active sales and project            cycles in order to properly facilitate and manage such positive changes to our            business.

 

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Our operating expenses for the three months ended January 31, 2008, were            $394,674, as compared to $760,479 for the comparable period in 2007, a decrease of 48%.            This reflects a substantial decrease in our internal overhead costs, primarily due to a            60% reduction in the number of human resources as compared to the prior year period.            Additionally, there was a reduction in stock-based compensation costs by $48,778 for            the three months ended January 31, 2008, as compared to the prior year            period.

 

**Liquidity and Capital Resources**

 

As of January 31, 2008, our current assets stood at $569,657, as            compared to $636,826 at October 31, 2007. This decrease in current assets was            primarily due to a decrease in accounts receivable outstanding. As of January 31, 2008,            our current liabilities were $3,826,230, as compared to $3,671,093 at October 31,            2007. This increase in current liabilities was primarily due to an increase in accrued            wages. We had no outstanding long-term liabilities at either January 31, 2008, or            October 31, 2007. Operating activities for the three months ended January 31,            2008, utilized cash flow of $65,433, as compared to providing operating cash of            $135,723 for the three months ended January 31, 2007. This change in cash (used in)            provided by operating activities was primarily a result of a much larger increase in            accounts payable in the prior year period, as well as $173,237 in non-cash expenses for            common stock, options, and warrants issued in the prior year period in lieu of            cash.

 

Net cash spent on investing activities was $21,071 during the three            months ended January 31, 2008, as compared to $190,183 during the three months            ended January 31, 2007, because we had spent more in the prior year period for fixed            assets associated with our revenue-producing activities.

 

Net cash of $141,111 was provided by financing activities during the            three months ended January 31, 2008, which includes $98,226 proceeds from the sale            of a minority interest in EIA, $50,000 from the sale of stock, and net repayments to            stockholders of $4,115, as compared to net cash of $2,423 used during the comparable            three months ended January 31, 2007, which was a result of $58,029 paid down on a term            loan, $22,635 received for tenant inducements, and advances from stockholders of            $32,971.

 

Our current balances of cash will not meet our working capital and            capital expenditure needs for the whole of the current year. Because we are not            currently generating sufficient cash to fund our operations, we will need to rely on            external financing to meet future capital and operating requirements. Any projections            of future cash needs and cash flows are subject to substantial uncertainty. Our capital            requirements depend upon several factors, including the rate of market acceptance, our            ability to get to production and generate revenues, our level of expenditures for            production, marketing, and sales, purchases of equipment, and other factors. We can            make no assurance that financing will be available in amounts or on terms acceptable to            us, if at all. Further, if we issue equity securities, stockholders may experience            additional dilution or the new equity securities may have rights, preferences, or            privileges senior to those of existing holders of common stock, and debt financing, if            available, may involve restrictive covenants that could restrict our operations or            finances. If we cannot raise funds, when needed, on acceptable terms, we may not be            able to continue our operations, grow market share, take advantage of future            opportunities, or respond to competitive pressures or unanticipated requirements, all            of which could negatively impact our business, operating results, and financial            condition.

 

16

 

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**ITEM 3. CONTROLS AND PROCEDURES**

 

We maintain disclosure controls and procedures that are designed to            ensure that information required to be disclosed by us in the reports that we file or            submit to the Securities and Exchange Commission under the Securities Exchange Act of            1934, as amended, is recorded, processed, summarized, and reported within the time            periods specified by the Securities and Exchange Commission’s rules and forms,            and that information is accumulated and communicated to our management, including our            principal executive and principal financial officers (whom we refer to in this periodic            report as our Certifying Officers), as appropriate to allow timely decisions regarding            required disclosure. Our management evaluated, with the participation of our Certifying            Officers, the effectiveness of our disclosure controls and procedures (as defined in            Rule 13a-15(e) under the Securities Exchange Act) as of January 31, 2008, pursuant to            Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our            Certifying Officers concluded that, as of January 31, 2008, our disclosure controls and            procedures were effective.

 

There were no changes in our internal control over financial reporting            that occurred during our most recently completed 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**

 

In February 2008, we filed a defense and a counterclaim to a            counterclaim filed against us and certain of our officers, in the suit our subsidiary,            Earth Source Energy, Inc., had filed against Lynn Mueller, Mark McCooey, and Free            Energy Solutions in the Supreme Court of British Columbia (SCBC Vancouver Registry No.            S074136). Our new claim is based on the expectation of recovery of a liquidated damage            contractually available to us of $500,000 CAD due to the fact that our prior            termination of Lynn Mueller was made with grounds for just cause.

 

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF            PROCEEDS**

 

In December 2007, we issued 1,000,000 shares of our common stock and            warrants to purchase an additional 1,000,000 shares of our common stock at an exercise            price of $0.10 per share to one purchaser for cash of $50,000, or $0.05 per share. The            purchaser was provided the opportunity to ask questions directly of our management. No            general solicitation was used and the recipient of the common stock acknowledged in            writing that the securities constituted restricted securities and consented to a            restrictive legend on the certificates to be issued. This transaction was made in            reliance on the exemption from registration in Section 4(2) of the Securities Act for            transactions not involving any public offering.

 

In February 2008, we issued an aggregate of 1,947,198 shares of common            stock to eight purchasers at prices ranging from $0.025 to $0.05 per share, for            aggregate proceeds of approximately $80,000. No general solicitation was used and the            transactions were negotiated directly with our executive officers. The recipients of            the common stock represented in writing that they were not residents of the United            States, acknowledged in writing that the securities constituted restricted securities,            and consented to a restrictive legend on the certificates to be issued. These            transactions were made in reliance on Regulation S.

 

17

 

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**ITEM 6. EXHIBITS**

 

|   | The following exhibits are filed as a part of this                            report: |
|--------|---------------------------------------------------------------------------------------|

 

| **Exhibit Number*** |   |  

**Title of Document**                                                                                                                                                                                                                                          |   |  

**Location** |
|---------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|
|                |   |                                                                                                                                                                                                                                                                   |   |                 |
| **Item 31**         |   | **Rule 13a-14(a)/15d-14(a)                            Certifications**                                                                                                                                                                                                 |   |                 |
| 31.01               |   | Certification of Principal Executive Officer and                            Principal Financial Officer Pursuant to Rule 13a-14                                                                                                                                        |   | Attached             |
|                |   |                                                                                                                                                                                                                                                                   |   |                 |
| **Item 32**         |   | **Section 1350 Certifications**                                                                                                                                                                                                                                        |   |                 |
| 32.01               |   | Certification Pursuant to 18 U.S.C. Section 1350, as                            Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                            (Chief Executive Officer and Chief Financial Officer)

                              |   | Attached             |

_______________

| **•** | All exhibits are numbered with the number preceding the                            decimal indicating the applicable SEC reference number in Item 601 and                            the number following the decimal indicating the sequence of the                            particular document. |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

**SIGNATURES**

 

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

 

|                 | Registrant                             |
|----------------------|----------------------------------------|
|                 |                                   |   |
|                 | ESSENTIAL INNOVATIONS TECHNOLOGY CORP. |
|                 |                                   |   |
|                 |                                   |   |
| Date: March 19, 2008 | By:                                    | /s/ Jason McDiarmid |
|                 |                                   | Jason McDiarmid, President and |
|                 |                                   | Chief Executive Officer and Chief Financial                            Officer |

 

 

19