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 JULY 31, 2007 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. x Yes o 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 September 7, 2007, the issuer had one class of
common stock, with a par value of $0.001, of which 43,753,190 shares were
issued and outstanding. Transitional Small Business Disclosure Format (Check
one): o Yes     x No
     TABLE
OF CONTENTS

PagePART
 IFINANCIAL INFORMATIONItem 1:
Financial
 Statements:Unaudited
 Consolidated Balance Sheet as at July 31, 2007

3Unaudited
 Consolidated Statements of Operations for the Three and Nine Months Ended
 July 31, 2007 and 2006

4Unaudited
 Consolidated Statement of Stockholders Deficiency and Comprehensive Loss for
 the Nine Months Ended July 31, 2007

5Unaudited
 Consolidated Statement of Cash Flows for the Nine Months Ended July 31, 2007
 and 2006

6Notes
 to Consolidated Financial Statements

8Item 2:
Managements
 Discussion and Analysis or Plan of Operation

16Item 3:
Controls
 and Procedures

18PART IIOTHER
 INFORMATIONItem 1:
Legal
 Proceedings

19Item 2:
Unregistered
 Sales of Equity Securities and Use of Proceeds

19Item 5:
Other
 Information

20Item 6:
Exhibits

20Signatures

202

PART
IFINANCIAL INFORMATION

Item 1. Financial Statements

ESSENTIAL INNOVATIONS TECHNOLOGY
CORP.

Consolidated Balance Sheet
(Expressed in United States dollars)
July 31, 2007
(unaudited)

AssetsCurrent assets:Cash

$
218,688Accounts receivable,
 net


464,320Costs and estimated
 earnings in excess of billings on uncompleted contracts


5,741Inventory


183,991Prepaid expenses


61,399Total current assets


934,139Property and
 equipment, net


95,103Deposits


12,848Intangible
 assets


507,313Revenue
 producing assets under construction


37,677Total assets

$
1,587,080Liabilities and Stockholders DeficitCurrent
 liabilities:Accounts payable

$
1,179,387Accrued expenses


388,685Accrued wages


8,551Accrued payroll taxes


274,327Billings in excess of
 costs and estimated earnings on uncompleted contracts


35,905Loans payable, related
 parties


72,386Due to shareholders


138,098Current portion of long
 term debt


395,452Total current
 liabilities


2,492,791Long term
 liabilities:Term loan, net of
 discount


1,072,155Finance loans


699Total
 liabilities


3,565,645Stockholders
 DeficitPreferred 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 43,753,190
 shares


43,752Additional paid
 in capital


17,154,640Accumulated
 deficit


(19,170,434
)Accumulated
 other comprehensive loss


(5,823
)Total stockholders
 deficit


(1,977,865
)Total liabilities and stockholders deficit

$
1,587,780See accompanying notes to consolidated financial statements.

3

ESSENTIAL INNOVATIONS TECHNOLOGY CORP.Consolidated Statements of Operations(Expressed in United States dollars)For the three and nine months ended July 31, 2007 and 2006(unaudited)Three months
 ended July 31,
 2007

Three months
 ended July 31,
 2006

Nine months
 ended July 31,
 2007

Nine months
 ended July 31,
 2006Revenue


$
1,015,312



$
857,330



$
2,396,257



$
1,537,020Cost of Revenue



768,051




644,522




1,817,227




1,119,339Gross Profit



247,261




212,808




579,030




417,681Expenses:General and
administrative



465,323




1,032,911




1,754,056




5,606,804Impairment loss













2,033,948




465,323




1,032,911




3,788,004




5,606,804(218,062
)



(820,103
)



(3,208,974
)



(5,189,123
)Other income and
expense:Interest expense



(57,717
)



(71,695
)



(174,866
)



(111,402
)Interest expense, related
parties



(2,125
)



(580
)



(8,056
)



(1,660
)Amortization of debt
discount



(47,415
)



(47,415
)



(142,245
)



(470,025
)Financing costs













(3,911
)



(270,423
)Financing costs, related
parties








(26,987
)



(40,387
)



(26,987
)Interest income



20




527




791




2,643(107,237
)



(146,150
)



(368,674
)



(877,854
)Net Loss for the
period


$
(325,299
)


$
(966,253
)


$
(3,577,648
)


$
(6,066,977
)Net Loss per share - basic and
diluted


$
(0.01
)


$
(0.04
)


$
(0.10
)


$
(0.26
)Weighted average number of shares
 outstanding



39,040,794




27,372,003




35,193,858




22,974,384See accompanying notes to consolidated
financial statements.

4

ESSENTIAL INNOVATIONS TECHNOLOGY CORP.

Consolidated Statement of Stockholders Deficiency and
Comprehensive Loss
(Expressed in United States dollars)
For the nine months ended July 31, 2007
(unaudited)

Common stock

Additional
 paid-in
 capital

Accumulated
 deficit

Accumu-
 lated other
 compre-
 hensive loss

Total
 stockholders
 deficiencyNumber of
Shares

AmountBalance October 31,
2006

31,247,886

$
31,247

$
16,006,205

$
(15,592,786
)

$
(18,638
)


$
426,028Loss for the period










(3,577,648
)







(3,577,648
)Foreign currency
translation














12,815




12,815Comprehensive loss



















(3,564,833
)Common stock and warrants issued
for cash receivedthree months
ended July 31, 2007

7,560,000


7,560


370,440











378,000Common stock issued to related
parties for services receivedthree months
ended January 31, 2007

319,520


320


79,560











79,880three months
ended July 31, 2007

3,946,400


3,946


489,354











493,300Common stock issued to settle
account payables and accrued expensesthree months
ended January 31, 2007

214,040


214


47,621











47,835Common stock issued for services
receivedthree months
ended January 31, 2007

25,000


25


7,475











7,500three months
ended July 31, 2007

390,344


390


48,403











48,793Common stock issued for
rightsthree months
ended January 31, 2007

50,000


50


14,950











15,000Options issued to related
parties for services receivedthree months
ended January 31, 2007







16,309











16,309Options issued for services
receivedthree months
ended January 31, 2007







29,161











29,161Options issued for
rightsthree months
ended January 31, 2007







10,064











10,064Warrants issued to related
parties for services receivedthree months
ended January 31, 2007







40,387











40,387Warrants issued for
financingsthree months
ended April 30, 2007







3,911











3,911Financing costs







(9,200
)










(9,200
)Balance July 31, 2007

43,753,190

$
43,752

$
17,154,640

$
(19,170,434
)

$
(5,823
)


$
(1,977,865
)See
accompanying notes to consolidated financial statements.

5

ESSENTIAL INNOVATIONS TECHNOLOGY CORP.Consolidated
 Statement of Cash Flows(Expressed
 in United States dollars)For the
 nine months ended July 31, 2007 and 2006(unaudited)Nine months ended 
 July 31, 2007

Nine months ended 
 July 31, 2006Cash
 provided by (used in):Operating:Net loss for
the period


$
(3,577,648
)


$
(6,066,977
)Adjustment to
reconcile net loss for the period to net cash used in
 operating activities:Depreciation of
property and equipment



61,459




22,554Amortization of
intangible assets








41,563Amortization of
debt discount



142,245




470,025Gain on tenant
inducements



(25,830
)



(7,733
)Common stock
issued for services



56,293




543,616Common stock
issued to related parties for services



573,180




1,101,329Options issued
for services



29,161




253,510Options issued
to related parties for services



16,309




1,170,600Warrants issued
for financings



3,911




270,423Warrants issued
to related parties for services



40,387




446,311Warrants issued
in settlement of loans and consulting fees








47,360Impairment
charge



2,033,948




Foreign
exchange on loan payable








5,770Changes in
assets and liabilitiesAccounts
receivable



232,974




55,957Cost and
estimated earnings in excess of billings



97,242




Inventory



60,988




(74,626
)Prepaid
expenses



57,535




(57,666
)Accounts
payable



16,776




171,207Accrued
expenses and wages



141,884




471,815Billings in
excess of costs and estimated earnings



(211,398
)



(191,846
)Net cash used
in operating activities



(250,584
)



(1,326,808
)Investing:Purchase of
property and equipment, net



8,480




(50,263
)Deposits








(22,291
)Additional
costs of revenue producing assets, net



(14,680
)



Cash component
to acquire subsidiaries








(952,897
)Net cash used
in investing activities



(6,200
)



(1,025,451
)Financing:Issuance of
common stock



378,000




872,513Proceeds
received from exercise of options








6,250Proceeds of
term loan








2,000,000Proceeds of
short term loan








258,000Repayment of
short term loan








(258,000
)Payout of
subsidiary loans on acquisition








(548,900
)Repayment of
term loan



(58,029
)



(12,500
)Financing
costs



(9,200
)



Tenant
inducements received



22,635




Advances from
shareholders



62,242




134,858Repayment of
finance loans



(12,039
)



(4,249
)Repayment of
loan payable








(30,450
)Net cash
provided by financing activities



383,609




2,417,522Increase in cash during
 the period



126,825




65,263Foreign exchange effect on
 cash



15,320




(17,759
)Cash at beginning of the
 period



76,543




2,307Cash at
 end of the period


$
218,688



$
49,811See
accompanying notes to consolidated financial statements.

6

ESSENTIAL
INNOVATIONS TECHNOLOGY CORP.

Consolidated Statement of Cash Flows (continued)
(Expressed in United States dollars)
For the nine months ended July 31, 2007 and 2006
(unaudited)

Supplementary Information:

2007

2006Interest
paid

$
182,922

$
113,062Income taxes
paid





Non-cash
transactions:Common shares
issued to settle accrued wages and consulting fees





185,685Common shares
issued for geo-site rights





225Common shares
issued to acquire subsidiaries





504,132Warrants issued
to secure term loan





960,000Common shares
issued to related parties to repay loans and advances





133,323Common shares
issued to repay loans and consulting fees





66,000Common shares
issued for acquisition of automobile





15,339Common shares
issued to settle accounts payable and accrued expenses


47,835


Common shares
issued for rights


15,000


Options issued
for rights


10,064


See accompanying notes to consolidated financial statements.


7

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, 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., and its wholly
owned subsidiary, Earth Source Energy Inc., which is engaged in the design and
installation of geo exchange systems in western Canada. Until January 31, 2005,
the Company was in the development stage and substantially all of the Companys
efforts had been directed towards product and distribution chain development
primarily in western Canada. Effective as of February 1, 2005, the Company had
sales of these 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
significant 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 significant 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 reduce or limit its
operating activities.

Basis of Consolidation

The
accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, with the instructions to Form 10-QSB and with
Regulation S-B. 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, 2006.

These
consolidated financial statements include the accounts of Essential Innovations
Technology Corp. and its wholly owned subsidiaries, Essential Innovations Asia
Limited, Essential Innovations Corporation, Pacific Geo Exchange Inc., and
Earth Source Energy Inc. All significant inter-company balances and
transactions have been eliminated.

8

Cash

Cash consists
of checking accounts held at financial institutions in the United States,
Canada, and Hong Kong.

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 $68,045 at July 31,
2007. Receivables are generally unsecured.

Accounting for Construction Contracts

Revenues 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. This method is used because management considers total cost
to be the best available measure of progress on contracts. 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.

Goodwill

Goodwill arose
upon the acquisition of Pacific Geo Exchange Inc. and represents the excess of
cost of acquisition over the fair value of the identifiable assets acquired
less liabilities assumed. The Companys policy is to review the carrying value
of goodwill on at least an annual basis and between annual tests if indicators
of potential impairment exist and record any impairment at that time.

During the
nine months ended July 31, 2007, the Company reorganized the operations of its
Pacific Geo Exchange subsidiary, which was acquired in March 2006. In the
opinion of the Companys management, the value of the goodwill recorded upon
the acquisition of the subsidiary has been eroded and the Company has recorded
a non-cash impairment charge of $2,033,948 against operations representing a
write-off of all goodwill.

Intangible Assets

Intangible
assets consist of geo-site rights, intellectual property, and option rights
agreements. Intangible assets with definite lives or bases for productivity are
recorded at cost and are amortized over the expected life of the asset.
Intangible assets with indefinite lives are not amortized but are evaluated
periodically for impairment. Management tests intangible assets for impairment
at least annually.

9

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.

Revenues from
design and installation contracts are recognized on the percent 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 a contract indicate a loss based
on management analysis, provision is made in the current period for the total
anticipated loss. The lives of these contracts are typically twelve months or
less, but performance may occur in different fiscal years.

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. The potentially dilutive equity instruments outstanding are
anti-dilutive due to the Companys losses. Common shares issuable are
considered outstanding as of the original approval date for purposes of
earnings per share computations.

Comprehensive 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.

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. Actual results may differ from those
estimates.

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 year. 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.

10

Note 2. Uncompleted Contracts

Costs,
estimated earnings, and billings on uncompleted contracts are summarized as
follows:

Costs
 incurred on uncompleted contracts
 
 $
 541,467Estimated
 earnings
 
 
 468,7651,010,232Billings to
 date
 
 
 (980,068
 )$
 (30,164
 )Included in the accompanying
balance sheet under the following captions:Costs and
 estimated earnings in excess of billings on uncompleted contracts
 
 $
 5,741Billings in
 excess of costs and estimated earnings on uncompleted contracts
 
 
 (35,905
 )$
 (30,164
 )Note 3. Intangible Assets

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. The total cost of $392,080 will be
amortized on a pro rata per-unit basis as residential units are sold. As of
July 31, 2007, no amortization has been incurred.

Intellectual Property

In 2005 the
Company acquired certain proprietary information that provides the basis for
the effective implementation and operation of the geo-utility business concept
by issuing common stock and options. 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. The Company has not earned any gross revenue from geo-utility
projects and, accordingly, no royalty expense is included in these consolidated
financial statements. This intangible asset has an indefinite life. Management
evaluates the asset for impairment on at least an annual basis and recorded an
impairment loss of $41,378 during the fourth quarter of 2006.

Option Rights Agreement

During 2005,
the Company obtained the exclusive rights to acquire a new technology within
the geothermal heating and cooling and any other heating, ventilating, and air
conditioning related application from a director of the Company and his
partner, who is the father of the Companys Chief Executive Officer. This
agreement was modified in April 2006 to reduce the cost to exercise the option.
The Company paid for this option by issuing 50,000 fully paid and
non-assessable shares of its common stock, with a fair value of $25,000 and
options to acquire 50,000 shares of the Companys common stock at a price of
$0.75 per share exercisable for five years. These have been recorded at the
fair value of $55,156. The Company has determined not to exercise this option,
which expires in September 2007. The cost has been amortized in full.

11

Technology Agreement

During the
nine months ended July 31, 2007, the Company entered into an agreement for the
exclusive rights to distribute and use certain proprietary technology processes
for the installation of geo exchange systems. The Company paid for these
exclusive rights by the issuing of 50,000 fully paid and non-assessable shares
of its common stock, with a fair value of $15,000, and options to acquire
50,000 shares of the Companys common stock at a price of $0.50 per share
exercisable for five years. These options have been recorded at the fair value
of $10,064. In addition, the agreement calls for the payment of royalties of
18% of the overall project value on commercial or institutional projects and
10% of the overall project value on residential projects.

Note 4. 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, payable monthly as to interest only 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 entitle 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 July 31, 2007, 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.

Due to Shareholders

Amounts due to
shareholders at July 31, 2007, are unsecured, without specific terms of
repayment and non-interest-bearing. The balance remaining due at July 31, 2007,
is $138,098.

Other Related Party Transactions


 During the
 nine months ended July 31, 2007 and 2006, the Company incurred consulting
 fees and related expenses to a company controlled by an officer and director
 of the Company in the amount of $102,500 and $112,500, respectively. During
 the nine months ended July 31, 2007, $102,500 was converted into 770,000
 shares of common stock. In addition, warrants to purchase 50,000 shares of
 common stock of the Company at $0.25 per share until 2011 were also issued as
 part of one of the conversions. The balance owing as at July 31, 2007, is
 nil.
 During the
 nine months ended July 31, 2007, certain management and directors of the
 Company converted $450,300 of accrued wages into 3,417,400 shares of common
 stock of the Company. In addition, warrants to purchase 191,000 shares of
 common stock of the Company at $0.25 per share until 2011, valued at $32,007,
 were also issued as part of the conversion. No gain or loss was recorded on
 these conversions.12

Note 5.
Term Loan

During 2006,
the Company arranged term financing of $2 million to complete the acquisition
of Pacific Geo Exchange Inc. and Earth Source Energy Inc.  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 six months ended April 30, 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 July 31, 2007,
the Company was delinquent in interest payments of $33,209 and principal
payments of $90,000.

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 has been expensed as interest in the amount of
$391,000 in these financial statements.
The balance of the debt discount is being amortized over 36 months, and
related interest expense of $148,579 for the nine months ended July 31, 2007,
is included in these consolidated financial statements.

The following
represents payments due under the term loan as renegotiated:

Principal due

Less discount

NetJuly 31,
  2008


$
560,000



$
189,660



$
370,340July 31,
  2009



750,000




110,655




639,345July 31,
  2010



432,110









432,110$
1,742,110



$
300,315



$
1,441,795Note 6.
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 July 31, 2007.

Common Stock

During the
nine months ended July 31, 2007, the Company:


Issued
  7,560,000 shares of common stock of the Company and warrants to purchase
  7,560,000 shares of common stock of the Company at $0.10 per share for total
  proceeds of $378,000.  The proceeds
  allocated to warrants were $157,500.
Issued
  244,520 shares of common stock of the Company and warrants to purchase 241,000
  shares of common stock of the Company at $0.25 per share to related parties
  for services with a fair value of $61,130.
Issued
  3,946,400 shares of common stock of the Company at $0.125 per share to
  related parties for services with a fair value of $493,300.
Issued
  60,000 shares of common stock of the Company in settlement of $15,000 of
  amounts owing to a consultant.
Issued
  20,270 shares of common stock of the Company for payment of services received
  with a fair value of $6,081.13


Issued
  75,000 shares of common stock of the Company to employees for services with a
  fair value of $18,750.
Issued
  25,000 shares of common stock to a consultant for services received with a
  fair value of $7,500.
Issued
  390,344 shares of common stock to consultants for services received with a
  fair value of $48,793.
Issued
  50,000 shares of common stock of the Company as part consideration for a
  third party to provide the Company with an agreement for exclusive rights to
  its technology.
Issued
  133,770 shares of common stock of the Company in settlement of $26,754 of
  amounts owing to a supplier.Stock Purchase Warrants

At July 31,
2007, the Company had outstanding warrants to purchase 18,272,338 shares of the
Companys common stock as follows:

Number of warrants

Exercise Price

Expiry100,000


$0.35

200775,000


0.75

201075,000


1.00

2010417,500


0.40

2010270,000


0.50

2010967,400


0.25

20114,831,732


0.30

201115,000


0.35

2011373,750


0.40

2011317,460


0.63

20117,610,000


0.10

2012300,000


0.01

20112,919,496


0.001

2050At July 31,
2007, 18,272,338 shares of common stock were reserved.

Note 7.
Stock-Based Compensation

Although the
Company does not have a formal stock option plan, during the nine months ended
July 31, 2007, the Company issued stock options to directors, employees,
advisors, and consultants.

A summary of
the Companys stock options is as follows:

Number of
  Options

Weighted
  Average
  Exercise PriceOutstanding
  at October 31, 2006


10,744,887



$0.63Options issued
to employees


75,000



0.25Options issued
to consultants


150,000



0.67Options issued
for exclusive rights


50,000



0.50Outstanding
  at July 31, 2007


11,019,887



0.6314

The following
table summarizes stock options outstanding at July 31, 2007:

Exercise Price

Number Outstanding
  at July 31, 2007

Average Remaining
  Contractual Life
  (Years)

Number
  Exercisable at
  July 31, 2007$0.25


389,750


0.74

389,7500.26


75,000


4.25

75,0000.30


2,279,887


3.71

2,279,8870.37


90,000


3.75

90,0000.40


125,000


3.60

125,0000.50


1,237,250


2.92

1,237,2500.53


1,250,000


3.75

1,250,0000.63


250,000


3.67

250,0000.75


1,835,500


4.20

1,835,5001.00


3,063,750


2.99

3,063,7501.25


87,500


3.11

87,5001.50


320,000


2.62

320,0002.00


16,250


3.08

16,25011,019,887




11,019,887The fair value
of each option granted is estimated at the date of grant using the
Black-Scholes option-pricing model.  The
assumptions used in calculating the fair value of the options granted were
risk-free interest rate of 5.0%, a 4 to 5-year expected life, a dividend yield
of 0.0%, and a stock price volatility factor of 50% to 163%.

Note 8.
Subsequent Events

Subsequent to July 31, 2007,
the Company received notice from the holder of 2,919,496 warrants, with an
exercise price of $0.001 per share, that it would like to exercise 1,589,614
warrants, on a cashless basis, for 1,557,822 shares of common stock of the
Company.  These shares will be issued as
soon as reasonably practicable in accordance with the Companys standard procedures.

15

Note 9. Segmented Information

The Company
views its operations in two businesses  manufacturing and geo exchange design
and installation. Summarized financial information by segment for the three and
nine months ended July 31, 2007 and 2006, as taken from the internal management
reports, is as follows:

Three
 months ended July 31,

Nine
 months ended July 312007

2006

2007

2006RevenueManufacturing

$
118,680

$
113,857

$
302,066

$
277,843Design and
installation


896,632


743,473


2,094,191


1,259,177$
1,015,312

$
857,330

$
2,396,257

$
1,537,020LossManufacturing

$
(78,608
)
$
(156,802
)
$
(339,795
)
$
(615,709
)Design and
installation


(40,844
)

14,355


(2,433,877
)

9,095Corporate


(205,847
)

(823,806
)

(803,976
)

(5,460,363
)$
(325,299
)
$
(966,253
)
$
(3,577,648
)
$
(6,066,977
)AssetsManufacturing

$
776,400Design and
installation


727,791Corporate


82,889$
1,587,080Item 2. Managements Discussion and Analysis
or Plan of Operation

The
following discussion should be read in conjunction with the accompanying
condensed unaudited consolidated financial statements for the three- and
nine-month periods ended July 31, 2007 and 2006, and our annual report on Form
10-KSB for the year ended October 31, 2006, including the financial statements
and notes thereto.

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.

16

Introduction

Management
believes the most significant features of our financial condition is that our
working capital deficiency continues to increase and that we have renegotiated
the principal repayment schedule of our term loan, which delayed principal
payments to May 2007 and reduced principal payments extending the total
repayment term; however, we have not made any principal payments and, as of
September 7, 2007, are delinquent in principal payments totaling $120,000 and
interest payments totaling $50,086. Our payment obligations under this term
loan, which are currently $30,000 per month and escalate to $62,500 a month in
June 2008, make it more difficult for us to meet our working capital
requirements, as does the requirement that we pay 30% of our annual positive
cash flow, if any, as additional principal payments.

We
have significantly reduced operating costs through the restructuring of our
subsidiary, Earth Source Energy, which has seen a significant reduction in the
number of employees and the use of more subcontractors to provide services to
our clients. This restructuring has necessitated a review of the carrying value
of the goodwill associated with the acquisition of Earth Source Energy and we
have charged operations with a non-cash impairment loss of $2,033,948.

Results of Operations

Comparison of the
 Three and Nine Months Ended July 31, 2007,
 with the Three and Nine Months Ended July 31, 2006We
have generated gross revenue of $2,396,257 and $1,015,312 with related costs of
revenue of $1,817,227 and $768,051 in the nine- and three-month periods ended
July 31, 2007, respectively, as compared to gross revenues of $1,537,020 and
$857,330 and costs of revenue of $1,119,339 and $644,522 for the nine and three
months ended July 31, 2006, respectively. This is primarily due to our
inclusion of Earth Source Energy Inc. for the full nine and three months ended
July 31, 2007, whereas the comparative periods ended July 31, 2006, only
included Earth Source for the period of ownership being March 7, 2006, to July
31, 2006.

Our
operating expenses for the nine and three months ended July 31, 2007, were
$1,754,056 and $465,323, as compared to $5,606,804 and $1,032,911 for the
comparable periods in 2006, a decrease of 69% and 55% respectively. This
reflects a reduction of investor relations costs of $nil for each of the nine
and three months ended July 31, 2007, as compared to $732,317 and $108,503 for
the nine and three months ended July 31, 2006, respectively; a reduction of
financing costs related to financings to $3,911 for each of the nine and three
months ended July 31, 2007, as compared to $998,317 and $126,987 for the nine
and three months ended July 31, 2006, respectively; and a reduction to $48,778
and $nil for the nine and three months ended July 31, 2007, as compared to
$1,436,507 and $1,057,694 for the nine and three months ended July 31, 2006,
respectively, for employee option and stock costs pursuant to SFAS 123(R).
During the nine months ended July 31, 2007, we have recorded an impairment loss
related to the write-off of goodwill related to the acquisition of Earth Source
Energy of $2,033,948.

Overall,
we sustained a net loss of $325,299 and $3,577,648 for the three- and
nine-month periods ended July 31, 2007, respectively, as compared to net losses
of $966,253 and $6,066,977 in the corresponding periods of the preceding year.

We
had 12 full-time employees as of July 31, 2007, as compared to 32 full-time
employees at July 31, 2006.

17

Liquidity and Capital Resources

As
of July 31, 2007, our current assets stood at $934,139, as compared to $1,240,733
at October 31, 2006. As of July 31, 2007, our current liabilities were
$2,492,791, as compared to $2,759,806 at October 31, 2006. As at July 31,
2007, our long-term liabilities were $1,072,854, as compared to $771,293 at
October 31, 2006. Operating activities had a net cash outflow of $250,584 for
the nine months ended July 31, 2007, as compared to net cash outflow of
$1,326,808 for the nine months ended July 31, 2006.

Net
cash spent on investing activities was $6,200 for the nine months ended July
31, 2007, as compared to $1,025,451 during the nine months ended July 31, 2006.
Included in investing activities for the nine months ended July 31, 2007, is
net proceeds of $35,872 from the revenue producing assets whereas the nine
months ended July 31, 2006, included the cash component of $952,897 for
acquisition of subsidiaries.

Net
cash of $383,609 provided by financing activities during the nine months ended
July 31, 2007, consists of proceeds of cash received for subscriptions of shares
in the amount of $378,000; net advances from shareholders of $62,242; less
repayment of term loan and finance loans of $70,068. This is compared to net
cash of $2,417,522 during the comparable period ending July 31, 2006, which
consisted of proceeds from the term loan of $2 million; the issuance of common
stock for $872,513; net advances from stockholders of $134,858; less repayment
of financial obligations of Pacific Geo Exchange Inc in the amount of $548,900.

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.

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 July 31, 2007, pursuant to
Rule 13a-15(b) under the Securities Exchange Act. Based upon that
evaluation, our Certifying Officers concluded that, as of July 31, 2007, our
disclosure controls and procedures were effective.

18

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

On
July 6, 2007, our subsidiary, Earth Source Energy Inc, filed a lawsuit in the
Supreme Court of British Columbia against Groundlink Systems Ltd., Barry
Kosturos, and Ian Hopper. Kosturos and Hopper were employees of Earth Source
when they formed Groundlink Systems with the express intent of performing
installation and servicing of geoexchange systems directly in competition with
Earth Source despite noncompetition covenants in their employment agreements
with Earth Source. The suit alleges that the defendants appropriated
proprietary information belonging to Earth Source, solicited Earth Sources
customers, and made false statements concerning Earth Sources continued
viability. Earth Sources lawsuit seeks unspecified monetary damages, return of
its proprietary information, and an injunction prohibiting defendants from
using its confidential and proprietary information and soliciting the business
of its customers.

On
July 16, 2007, our subsidiary, Earth Source Energy Inc, filed a lawsuit in the
Supreme Court of British Columbia against Lynn Mueller, Mark McCooey, and Free
Energy Solutions, Inc. The suit alleges that Mueller, a former vice president
of Earth Source, and McCooey, a former consultant to Earth Source, breached
their noncompetition agreements with Earth Source and their fiduciary
obligations to it, either wrongfully or dishonestly assisted by Free Energy
Solutions. Earth Sources lawsuit seeks unspecified monetary damages, a return
of its proprietary information, and an injunction prohibiting defendants from
using its confidential and proprietary information and soliciting the business
of its customers.

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

In
May 2007, we agreed to issue an aggregate of 7,560,000 shares of our common
stock to three purchasers for $378,000, or $0.05 per share. No general
solicitation was used and the transaction was 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.

In
July 2007, we issued an aggregate of 3,946,400 shares of our common stock to
certain management in payment of accrued wages and fees in the amount of
$493,300, or $0.125 per share. At the same time, we issued an aggregate of
250,400 shares of our common stock to certain consultants in payment of accrued
fees in the amount of $31,293, or $0.125 per share. 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. An additional
140,000 shares of our common stock were issued to our consultant who is a
resident of the United States in payment of accrued fees in the amount of
$17,500, or $0.125 per share. No general solicitation was used and the
transaction was negotiated directly with our executive officers. The consultant
acknowledged in writing that the securities were 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 of 1933 for transactions not involving a public
offering.

19

Item 5. Other Information

In
May 2007, we agreed to issue an aggregate of 7,560,000 shares of our common
stock, and in July 2007, we issued an additional 4,336,500 shares of our common
stock. See Part II, Item 2: Unregistered Sales of Equity Securities.

Item 6. Exhibits

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

Exhibit 
 Number*

Title of Document

LocationItem 31

Rule
 13a-14(a)/15d-14(a) Certifications31.01

Certification of Principal
 Executive Officer Pursuant to Rule 13a-14

Attached31.02

Certification of Principal
 Financial Officer Pursuant to Rule 13a-14

AttachedItem 32

Section
 1350 Certifications32.01

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)

Attached32.02

Certification Pursuant to
 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
 Sarbanes-Oxley Act of 2002 (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.

RegistrantESSENTIAL INNOVATIONS TECHNOLOGY CORP.Date: September 7, 2007
By:
/s/ Jason McDiarmidJason McDiarmid, President andChief Executive OfficerDate: September 7, 2007
By:
/s/ Kenneth G.C. TelfordKenneth G.C. TelfordChief Financial Officer20