Integrated Environmental Technologies 10-Q/A 2008 Q2 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q/A

Amendment No. 1

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

For the quarterly period ended June 30, 2008

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

Commission file number 000-26309

INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.

(Exact name of registrant as specified in its charter)

Nevada	98-0200471
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4235 Commerce Street

Little River, South Carolina 29566

(Address of principal executive offices)

(843) 390-2500

(Registrant’s telephone number, including area code)

Copies of Communications to:

Stoecklein Law Group

Emerald Plaza

402 West Broadway

Suite 690

San Diego, CA 92101

(619) 704-1310

Fax (619) 704-0556

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x    No ¨

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

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

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

Yes ¨    No x

The number of shares of Common Stock, $0.001 par value, outstanding on July 21, 2008, was 73,100,467 shares.

*EXPLANATORY NOTE – The Registrant is amending this Form 10-Q to revise certain language in Item 4 Controls and Procedures and to revise certain language in Exhibit 31. No changes were made to the financial statements or other disclosures in the Form 10-Q for the quarter ended June 30, 2008.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

Integrated Environmental Technologies, Ltd.

Condensed Consolidated Balance Sheet

	June 30,			December 31,
	2008			2007
Assets	Unaudited			Audited
Current Assets:
Cash	$	24,956		$	72,334
Accounts receivable		52,367			49,184
Inventory		292,596			309,634
Prepaid expenses		10,942			5,942
Total current assets		380,861			437,094
Equipment		13,045			13,045
Accumulated depreciation		(9,692	)		(8,552	)
Total building and equipment		3,353			4,493
	$	384,214		$	441,587
Liabilities and Shareholders' Equity (Deficit)
Current liabilities:
Accounts payable	$	116,220		$	91,817
Accrued expenses		31,054			96,374
Notes payable		148,300			98,300
Convertible notes		382,044			-
Total current liabilities		677,618			286,491
Convertible notes		-			288,306
Shareholders' Equity (Deficit)
Common stock 200,000,000 shares authorized
par value $.001, 73,070,467 and 68,070,467 shares issued
and outstanding at June 30, 2008 and December 31, 2007		73,070			68,010
Stock bought not issued, 60,000 and 120,000 shares
at June 30, 2008 and December 31, 2007		60			120
Paid-in capital		7,311,414			6,783,315
Retained earnings (deficit)		(7,677,948	)		(6,984,655	)
Total shareholders' equity (deficit)		(293,404	)		(133,210	)
Total liabilities and shareholders' equity (deficit)	$	384,214		$	441,587

See notes to condensed consolidated financial statements

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Integrated Environmental Technologies, Ltd.

Condensed Consolidated Statement of Operations

Unaudited

	Six Months Ended June 30,						Three Months Ended June 30,
	2008			2007			2008			2007
Sales	$	244,167		$	195,572		$	1,347		$	118,289
Cost of sales		85,819			95,372			1,086			45,801
Gross profit		158,348			100,200			261			72,488
Professional and administrative fees		155,147			454,048			73,706			320,620
Salary		319,386			388,695			125,174			153,387
Depreciation and amortization		1,140			1,140			570			570
Office & miscellaneous expense		181,689			228,283			108,073			92,061
Bad debt expense		37,746			-			-			-
Total operating expenses		695,108			1,072,166			307,523			566,638
Loss from operations		(536,760	)		(971,966	)		(307,262	)		(494,150	)
Other income (expense):
Finance fees		(26,740	)		-			(21,740	)		-
Interest expense		(129,794	)		(252,737	)		(67,510	)		(213,172	)
Total other income (expense)		(156,534	)		(252,737	)		(89,250	)		(213,172	)
Net loss	$	(693,294	)	$	(1,224,703	)	$	(396,512	)	$	(707,322	)
Weighted average shares outstanding		69,311,786			51,918,350			70,493,104			50,474,665
Net loss per share basic and diluted	$	(0.01	)	$	(0.02	)	$	(0.01	)	$	(0.01	)

See notes to condensed consolidated financial statements

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Integrated Environmental Technologies, Ltd.

Condensed Consolidated Statement of Cash Flows

Unaudited

	Six Months Ended
	June 30,
	2008			2007
Cash flows from operating activities:
Net loss	$	(693,294	)	$	(1,224,703	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		1,140			1,140
Accretion of interest on convertible notes		93,738			41,495
Stock, options and warrants issued for services		33,098			468,790
Beneficial Conversion		-			78,600
Changes in operating assets and liabilities:
Cash, restricted		-			50,000
Accounts receivable		(3,183	)		(108,638	)
Notes Receivable		-			(20,000	)
Inventory		17,038			(94,321	)
Deposits and prepaids		(5,000	)		-
Accounts payable		24,403			15,932
Accrued expenses		(65,318	)		(14,465	)
Cash used in operating activities		(597,378	)		(806,170	)
Cash flows from financing activities:
Proceeds from notes payable		50,000			14,317
Proceeds from exercise of warrants		-			237,500
Proceeds from sale of convertible notes		-			114,438
Proceeds from the sale of common stock		500,000			724,562
Cash provided by financing activities		550,000			1,090,817
Decrease in cash		(47,378	)		284,647
Cash beginning of period		72,334			22,187
Cash end of period	$	24,956		$	306,834
Supplemental disclosure of cash flow information:
Cash paid for interest	$	37,012		$	34,214
Cash paid for income taxes	$	-		$	-
Non-cash financing activities:
Stock and warrants issued for services	$	16,740		$	482,941

See notes to condensed consolidated financial statements

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Integrated Environmental Technologies, Ltd.

Notes to Condensed Consolidated Financial Statements

Note 1 – Basis of presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and reflect all adjustments which, in the opinion of management, are necessary for a fair presentation.  All such adjustments are of a normal recurring nature.  The results of operations for the interim period are not necessarily indicative of the results to be expected for a full year.  Certain amounts in the prior year statements have been reclassified to conform to the current year presentations.  The statements should be read in conjunction with the financial statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2007.

The financial statements include our wholly-owned subsidiary.  All significant inter-company transactions and balances have been eliminated.

Note 2 - Going concern

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

Note 3 - Notes payable

Notes payable consisted of the following at June 30, 2008:

Note payable, unsecured, with a flat interest of $2,500 (see Note 7).	$	50,000
Note payable, unsecured, bearing interest at a rate of 10% per annum, unable to locate lender.		50,000
Note payable, unsecured, non-interest bearing, unable to locate lender		25,000
Notes payable, unsecured, bearing interest at rate of 19.99% per annum, with monthly principal and interest payments (see Note 7).		23,300
	$	148,300

Note 4 - Convertible notes payable

As of June 30, 2008, we had convertible loans totaling $501,000, accruing interest at a rate of 10% per annum payable semi-annually and maturing on January 2, 2009.  We accrete interest between the date of issuance of the units and the maturity date for the convertible notes to reflect the difference between what was received for the notes and what will be paid at maturity.  As of the six month period ended June 30, 2008 and 2007, we had expensed interest of $93,738 and $41,495 respectively.  At June 30, 2008 we had $118,956 of un-accreted interest which will be expensed in fiscal 2008.

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Integrated Environmental Technologies, Ltd.

Notes to Condensed Consolidated Financial Statements

On April 23, 2008, we entered into a Securities Purchase Agreement with AD Capital, LLC, wherein we agreed to sell and AD Capital agreed to purchase up to an aggregate of $150,000 in principal amount of debentures.  Pursuant to the agreement, we issued 150,000 warrants exercisable at $0.05 per share, expiring in five years (4/23/13) and 150,000 warrants exercisable at $0.25 per share, expiring in five years (4/23/13).  The warrants and $10,000 were issued to AD Capital as payment in full for fees associated with the convertible debenture in the amount of $150,000.  The convertible debenture was convertible by AD Capital only in the event of default by the Company in repayment of the $150,000 on or before June 25, 2008, plus 10% interest.  On May 5, 2008, we repaid the $150,000 to AD Capital; therefore the convertible debenture is null and void.  AD Capital retains the 150,000 $0.05 warrants and the 150,000 $0.25 warrants as agreed.  The value of the warrants was calculated as $16,740 and this was recorded as a loan fee expense.

Note 5 – Common stock

On June 20, 2007, the Company entered into a Stock Acquisition Agreement with Benchmark Performance Group, Inc. (“Benchmark”).  Pursuant to the agreement, Benchmark agreed to purchase 35,000,000 shares of common stock for a total purchase price of $3,500,000 or $0.10 per share.  On June 27, 2007, 5,000,000 shares were issued pursuant to the agreement for cash proceeds of $188,000 and the conversion of $312,000 that was a deposit for equipment to be purchased, for a total of $500,000.  On October 31, 2007, an additional 5,000,000 shares were issued pursuant to the agreement.  On May 19, 2008, concurrent with the receipt by us of $500,000, the Company issued an additional 5,000,000 shares of our common stock, resulting in total proceeds received to date of $1,500,000.  The remaining 20,000,000 shares will be issued pursuant to the agreement under the terms as follows:  (1) Benchmark will issue two equal payments in the amount of $500,000 on or before October 31, 2008 and April 30, 2009.  Upon receipt of each payment, the Company will cause to be issued 5,000,000 shares of common stock.  Upon issuance of each 10,000,000 shares, the Company will initiate a registration of the shares; (2) on or before October 31, 2009, Benchmark will issue final payment in the amount of $1,000,000.  Upon receipt, the Company will cause to be issued 10,000,000 shares of common stock and initiate a final registration for the remaining unregistered shares.

Pursuant to the Agreement, Benchmark shall have the right to maintain an equity position in the Company equal to the equity position it would own upon the issuance of all shares due under the agreement.  If at any time during the Anti-Dilution Period, the Company were to issue any shares of common stock which would impair the equity position of Benchmark, then the Company shall issue a warrant to purchase shares of common stock at an exercise price of $0.10 per share, which would upon exercise, reinstate their equity position.  The warrants will be exercisable at any time through October 31, 2009.

In addition, Benchmark can acquire additional shares of common stock whereby the purchase would give Benchmark 51% of the Company’s total outstanding equity.  Benchmark will be able to purchase these additional shares at any time through October 31, 2009, at an exercise price equal to the weighted average per share price of common stock over the 22 trading days prior plus a 15% per share control premium to the date we receive written notice of their desire to make this purchase.

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Integrated Environmental Technologies, Ltd.

Notes to Condensed Consolidated Financial Statements

Note 6 – Options and warrants

A summary of stock options and warrants is as follows:

	Options		Average Price		Warrants		Average Price
Outstanding  1/1/07		1,075,000	$	0.116		5,204,000	$	0.25
Granted		-		-		300,000-		0.25
Cancelled		-		-		-		-
Exercised		-		-		-		-
Outstanding 06/30/08		1,075,000	$	0.116		5,504,000	$	0.25

Note 7 – Related-party transactions

We have consulting agreements with a shareholder and a Director requiring payments of $2,500 per month for each.  As of June 30, we recorded $30,000 in consulting fee expense.

We have employment agreements with two of our executives whereby we have agreed to annual compensation in the amount of $240,000.  As of June 30, 2008, the future minimum payments are as follows:

Related-party compensation requirements
2008	$	120,000
2009		240,000
2010		240,000
2011		240,000
Total	$	840,000

On August 17, 2006, the Company received an unsecured loan of $25,000 from a shareholder at an interest rate of 19.99% per annum.  As of June 30, 2008, the remaining principal balance of the note is $23,300.

We borrowed $16,000 on January 18, 2008 for working capital from an officer of the company.  Interest on the loan was $1,000.  The loan and interest were repaid on January 25, 2008.

On April 16, 2008, the Company entered into a loan agreement with a corporate officer.  Pursuant to the loan agreement, the Company promised to repay the principal amount of $9,000 plus a flat interest of $500.  The loan and interest were repaid on May 13, 2008.

On June 18, 2008, we borrowed $50,000 from a shareholder.  Pursuant to the loan agreement, the Company agreed to repay the principal and a flat interest fee of $2,500 by July 5, 2008.  $30,000 was subsequently paid toward this loan on July 16, 2008.

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Integrated Environmental Technologies, Ltd.

Notes to Condensed Consolidated Financial Statements

Note 8 – Commitments and contingencies

On August 22, 2006, we entered into a supply agreement with Aquastel, Inc., wherein Aquastel agreed to supply us with C-50 and C-100 cells on an exclusive basis in the United States.  The term of the agreement is for 3 years, terminating on August 22, 2009.  At the end of the term, the parties will attempt to renegotiate in good faith to extend the agreement.

On June 20, 2007, in connection with the Stock Acquisition Agreement with Benchmark, we entered into an Exclusive License and Distribution Agreement, wherein we granted the exclusive, world-wide right, license and authority to market, manufacture, sell and distribute EcaFlo® fluids and solutions for use in Oilfield Applications to Benchmark Energy Products.  The agreement provides for special pricing of equipment to Benchmark and per gallon technology fees, paid to IET on the EcaFlo® fluids sold by Benchmark, for a five-year period consistent with the license period.

Note 9 – Subsequent events

On July 15, 2008, we entered into a Promissory Note Agreement with The Morton Fishman Revocable Trust.  Pursuant to the agreement, Mr. Fishman has agreed to loan the Company $150,000 at an interest rate of 16% per annum, due on or before August 27, 2008.  The Company agreed to pay administration and legal fees of $12,000, which were deducted from the net proceeds of the loan.  Further, we agreed to issue warrants to purchase up to 200,000 shares of our common stock at a strike price of $0.05 per share, which expire July 15, 2010.  The note agreement allows for a one-time extension of 45 days for an additional fee of $5,000.

On July 18, 2008, we issued 30,000 previously authorized shares of common stock for services.

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FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may”, “could”, “estimate”, “intend”, “continue”, “believe”, “expect” or “anticipate” or other similar words.  These forward-looking statements present our estimates and assumptions only as of the date of this report.  Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.

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

o   our current lack of working capital;

o   implementation of our business plan within the oil and gas industry with Benchmark;

o   increased competitive pressures from existing competitors and new entrants;

o   increases in interest rates or our cost of borrowing or a default under any material debt agreements;

o   the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain;

o   substantial dilution to our stockholders as the result of the issuance of our common stock in exchange for debt and/or equity financing, including additional shares to Benchmark;

o   potential change in control upon completion of the Benchmark agreements;

o   deterioration in general or regional economic conditions;

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

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

o   loss of customers or sales weakness;

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o   excessive product failure and related warranty expenses;

o   inability to achieve future sales levels or other operating results;

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

o   operational inefficiencies in distribution or other systems.

For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Item 1A. Risk Factors” in this document and in our Annual Report on Form 10-K for the year ended December 31, 2007.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this quarterly report.  References in the following discussion and throughout this quarterly report to “we”, “our”, “us”, “IET”, “the Company”, and similar terms refer to Integrated Environmental Technologies, Ltd. and its 100%-owned subsidiary, IET, Inc., unless otherwise expressly stated or the context otherwise requires.

OVERVIEW AND OUTLOOK

Integrated Environmental Technologies, Ltd. is a manufacturing company that designs and builds equipment incorporating innovative technologies which are focused on the enhancement of the environment and the health, safety, and well-being of current and future generations.  Our EcaFlo® Division designs, manufactures, markets, sells, and installs proprietary Electro-Chemical Activation (ECA) equipment in the United States and throughout the world.  The Essential Oils Division offers a cost-effective, safe, efficient and superior method of obtaining bioactive compounds and oils from plants.

We evolved from a development-stage company to an income-generating original equipment manufacturing company.  We have focused our attentions on several critical issues:

·   Raising equity capital;

·   Developing our ability to construct EcaFlo® equipment;

·   Developing and enhancing our testing protocol with researchers at Coastal Carolina University, and independent companies and laboratories;

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

·   Researching market application areas and identifying and establishing distributorship agreements;

·   Continuing to develop and maintain relationships with university and independent laboratories for research assistance on EcaFlo® applications; and

·   Furthering the process of building a brand identity and sales track record through the appearance at various trade and professional shows and conferences.

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We have incurred losses since inception.  For the six months ended June 30, 2008, we had a net loss of $693,294 as compared to a net loss of $1,224,703 for the six months ended June 30, 2007.  Our ability to proceed with our plan of operation has continuously been a function of our ability to increase revenues and raise sufficient capital to continue our operations.

Management intends to closely monitor the costs associated with the production of EcaFlo®devices in an attempt to minimize capital shortages.  As we continue to expand operational activities and execute our business plan for oilfield operations with our industry partner and licensee, Benchmark Energy Products, we anticipate experiencing positive cash flows from operations in future quarters.  Debt borrowings may be considered from time to time if needed.

On June 20, 2007, we executed a Stock Acquisition Agreement with Benchmark Performance Group, Inc. (“Benchmark”).  Pursuant to the Stock Acquisition Agreement, Benchmark agreed to purchase 35,000,000 shares of our common stock for a total purchase price of $3,500,000 (“Purchase Price”) or $0.10 per share.  The purchase price will be paid in seven (7) installments over a period of 30 months.  As of June 30, 2008, four installments ($1,500,000) have been paid.

In connection with the Stock Acquisition Agreement, we entered into an Exclusive License and Distribution Agreement with Benchmark, wherein we granted the exclusive, world-wide right, license and authority to market, sell and distribute for use in the manufacture of fluids and solutions in Oilfield Applications to Benchmark.

Results of Operations for the Three Months Ended June 30, 2008 and 2007

The following table summarizes selected items from the statement of operations at June 30, 2008 compared to June 30, 2007.

SALES AND COST OF GOODS SOLD:

	Three Months Ended June 30,						Increase (Decrease)
	2008			2007			$			%
Sales	$	1,347		$	118,289		$	(116,942	)	(98.9	%)
Cost of Goods Sold		1,086			45,801			(44,715	)	(97.6	%)
Gross Profit		261			72,488			(72,227	)	(99.6	%)
Gross Profit Percentage of Sales		19	%		61	%		--		(42	%)

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Sales

Our sales for the three months ended June 30, 2008 were $1,347 compared to sales of $118,289 in the three months ended June 30, 2007.  This resulted in a decrease in sales of $116,942, or 98.9%, from the same period a year ago.  Sales of EcaFlo® equipment and solutions have been severely impaired during the period of time that the U.S. Environmental Protection Agency (EPA) has been studying, reviewing and making determinations about our product and the requirement for an EPA product registration for “EcaFlo® Anolyte.”  By law, we have been required to restrict our marketing claims and to cause no distribution of our product to occur other than on-site generation and usage.  In addition, U.S. Statutes have prohibited us from making any public announcements regarding the registration process, or that it was occurring.  As of July 14, 2008, as written in a comprehensive letter to us from the Director of the EPA’s Antimicrobial Division, we have been notified that the EPA has agreed to expedite the review of our product and that the anticipated Agency completion date is August 18, 2008.  We fully expect sales of our EcaFlo® equipment and solutions to expand rapidly upon final receipt of our product registration number.  We know of no further data required by the EPA to complete the product registration process.  According to our oilfield distributor and industry partner, Benchmark Energy Products, Benchmark continues to market “Excelyte”™ (Benchmark’s product name for EcaFlo® Anolyte), to the oil and gas industry, but the industry, which is resistant to change, continues to use several “old technology” biocides developed during the past 30 years.  Benchmark has spent significant time and resources educating the industry about the benefits of Excelyte™ vs. the older biocides.  Testing has been conducted to confirm that the biocide most widely used in the industry today is ineffective with current well treatment practices and industry attempts to utilize increasingly poorer quality water.  Benchmark has engaged a highly regarded oil and gas industry biotechnology laboratory as an independent “expert” to help Benchmark mount a “turnaround” in industry thinking concerning the dynamic required for biocides to be effective with current well stimulation practices.  The findings reported by this laboratory have validated that Excelyte™ outperforms all other biocides for the oil and gas industry, with the single largest benefit for the oil and gas industry being that Excelyte™ is the first totally “green” biocide.

Cost of goods sold / Gross profit percentage of sales

Our cost of goods sold for the three months ended June 30, 2008 was $1,086, a decrease of $44,715, or 97.6% from $45,801 for the three months ended June 30, 2007.  The decrease in our cost of goods sold is as a direct result of a lack of EcaFlo® equipment sales.  We are continuing to update and upgrade our product line and we closely monitor the cost of all of our products.  We believe the cost of sales will increase slightly less as a percentage of sales when we have additional sales.  Gross profit margins decreased by 42% from the prior fiscal quarter due to a lack of EcaFlo® equipment sales, since our pricing structure allows for more profit on equipment sales than on replacement parts and laboratory testing supplies.

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EXPENSES:

	Three Months Ended June 30,						Increase (Decrease)
	2008			2007			$			%
Expenses:
Professional and Administrative fees	$	73,706		$	320,620		$	(246,914	)	(77	%)
Salary		125,174			153,387			(28,213	)	(18	%)
Depreciation and amortization		570			570			-		-
Office and miscellaneous expense		108,073			92,061			16,012		17	%
Total operating expenses		307,523			566,638			(259,115	)	(46	%)
(Loss) from operations		(307,262	)		(494,150	)		(186,888	)	(38	%)
Other income (expense):
Finance fees		(21,740	)		-			21,740		-
Interest expense		(67,510	)		(213,172	)		(145,662	)	(68	%)
Total other income (expense)		(89,250	)		(213,172	)		(123,922	)	(58	%)
Net (loss)	$	(396,512	)	$	(707,322	)	$	(310,810	)	(44	%)

Professional and Administrative Fees

Professional and administrative fees for the three months ended June 30, 2008 were $73,706, a decrease of $246,914, or 77%, from $320,620 for the three months ended June 30, 2007.  The decrease in professional and administrative fees was the result of reducing costs associated with outside professional services and consultants while maintaining strong levels of support to meet the company’s developing business.  Whenever possible, we are trying to reduce outside consultants, but we will still need some assistance for areas of our business in which we do not have sufficient in-house expertise.

Salary Expenses

Salary expenses for the three months ended June 30, 2008 was $125,174, a decrease of $28,213, or 18%, from $153,387 for the three months ended June 30, 2007.  The decrease in salary expenses was the result of decreasing hourly employee payroll expenses and reducing our engineering staff, while accomplishing the production necessary for meeting the company’s sales of equipment.  We expect salary expense to increase in the future as the Company grows and as sales volume increases.  We may need to continue issuing stock and stock options in exchange for services and adequate personnel compensation.

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Depreciation and Amortization Expenses

Depreciation and amortization expenses for both of the three months ended June 30, 2008 and 2007 were $570.  At this point in time, we anticipate our depreciation expenses to remain stable.

Office and Miscellaneous

Office and miscellaneous expenses for the three months ended June 30, 2008 were $108,073, an increase of $16,012, from $92,061 for the three months ended June 30, 2007.  The increase in office and miscellaneous expenses was as a result of an increase in costs associated with expenses such as equipment rental and health insurance, as well as replacing some out-of-date office equipment.

(Loss) from Operations

The loss from operations for the three months ended June 30, 2008 was $307,262, versus a loss from operations of $494,150 for the three months ended June 30, 2007, a change in loss from operations of $186,888.  The decrease in the loss from operations in the second quarter of 2008 was the result of reducing payroll and inventory expenses, and our ability to produce EcaFlo® equipment more efficiently.

Finance Fees and Interest Expense

Finance fees and interest expense for the three months ended June 30, 2008 were $89,250, as compared to $213,172 for the same period in 2007.  Our finance fees and interest expense in 2008 were lower because of a decrease in loans requiring interest payments.

Net (Loss)

Our net loss for the three months ended June 30, 2008 was $396,512, a decrease of $310,810, or 44%, from $707,322 for the three months ended June 30, 2007.  We continue to have a net loss and believe the loss will be reduced and profitability will be attained in future quarters as the sales of our products increase.

Results of Operations for the Six Months Ended June 30, 2008 and 2007

The following table summarizes selected items from the statement of operations at June 30, 2008 compared to June 30, 2007.

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SALES AND COST OF GOODS SOLD:

	Six Months Ended June 30,						Increase (Decrease)
	2008			2007			$			%
Sales	$	244,167		$	195,572		$	48,595		25	%
Cost of Goods Sold		85,819			95,372			(9,553	)	(10	%)
Gross Profit		158,348			100,200			58,148		58	%
Gross Profit Percentage of Sales		65	%		51	%		--		14	%

Sales

Our sales for the six months ended June 30, 2008 were $244,167 compared to sales of $195,572 in the six months ended June 30, 2007.  This resulted in an increase in sales of $48,595, or 25%, from the same period a year ago.  Sales of EcaFlo® equipment and solutions have been severely impaired during the period of time that the U.S. Environmental Protection Agency (EPA) has been studying, reviewing and making determinations about our product and the requirement for an EPA product registration for “EcaFlo® Anolyte.”  By law, we have been required to restrict our marketing claims and to cause no distribution of our product to occur other than on-site generation and usage.  In addition, U.S. Statutes have prohibited us from making any public announcements regarding the registration process, or that it was occurring.  As of July 14, 2008, as written in a comprehensive letter to us from the Director of the EPA’s Antimicrobial Division, we have been notified that the EPA has agreed to expedite the review of our product and that the anticipated Agency completion date is August 18, 2008.  We fully expect sales of our EcaFlo® equipment and solutions to expand rapidly upon final receipt of our product registration number.  We know of no further data required by the EPA to complete the product registration process.According to our oilfield distributor and industry partner, Benchmark Energy Products, Benchmark continues to market “Excelyte”™ (Benchmark’s product name for EcaFlo® Anolyte), to the oil and gas industry, but the industry, which is resistant to change, continues to use several “old technology” biocides developed during the past 30 years.  Benchmark has spent significant time and resources educating the industry about the benefits of Excelyte™ vs. the older biocides.  Testing has been conducted to confirm that the biocide most widely used in the industry today is ineffective with current well treatment practices and industry attempts to utilize increasingly poorer quality water.  Benchmark has engaged a highly regarded oil and gas industry biotechnology laboratory as an independent “expert” to help Benchmark mount a “turnaround” in industry thinking concerning the dynamic required for biocides to be effective with current well stimulation practices.  The findings reported by this laboratory have validated that Excelyte™ outperforms all other biocides for the oil and gas industry, with the single largest benefit for the oil and gas industry being that Excelyte™ is the first totally “green” biocide.

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Cost of goods sold / Gross profit percentage of sales

Our cost of goods sold for the six months ended June 30, 2008 was $85,819, a decrease of $9,553, or 10%, from $95,372 for the six months ended June 30, 2007.  Our cost of goods sold was higher in 2007 due to our FEM-3 cell replacement program.  We are continuing to update and upgrade our product line and we closely monitor the cost of all of our products.  We believe the cost of sales will increase slightly less as a percentage of sales when we have additional sales.  Gross profit margins increased by 14% from the prior fiscal quarter because of the product mix of our sales and the decreased need for conversions associated with our FEM-3 cell replacement program.

EXPENSES:

	Six Months Ended June 30,						Increase (Decrease)
	2008			2007			$			%
Expenses:
Professional and Administrative fees	$	155,147		$	454,048		$	(298,901	)	(66	%)
Salary		319,386			388,695			(69,309	)	(18	%)
Depreciation and amortization		1,140			1,140			-		-
Office and miscellaneous expense		181,689			228,283			(46,594	)	(20	%)
Bad debt expense		37,746			-			37,746		-
Total operating expenses		695,108			1,072,166			(377,058	)	(35	%)
(Loss) from operations		(536,760	)		(971,966	)		(435,206	)	(45	%)
Other income (expense):
Finance fees		(26,740	)		-			26,740		-
Interest expense		(129,794	)		(252,737	)		(122,943	)	(49	%)
Total other expense		(156,534	)		(252,737	)		(96,203	)	(38	%)
Net (loss)	$	(693,294	)	$	(1,224,703	)	$	(531,409	)	(43	%)

Professional and Administrative Fees

Professional and administrative fees for the six months ended June 30, 2008 were $155,147, a decrease of $298,901, or 66%, from $454,048 for the six months ended June 30, 2007.  The decrease in professional and administrative fees was the result of reducing costs associated with outside professional services and consultants while maintaining strong levels of support to meet the company’s developing business.  Whenever possible, we are trying to reduce outside consultants, but we will still need some assistance for areas of our business in which we do not have sufficient in-house expertise..

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Salary Expenses

Salary expenses for the six months ended June 30, 2008 was $319,386, a decrease of $69,309, or 18%, from $388,695 for the six months ended June 30, 2007.  The decrease in salary expenses was the result of decreasing hourly employee payroll expenses and reducing our engineering staff, while accomplishing the production necessary for meeting the company’s sales of equipment.  We expect salary expense to increase in the future as the Company grows and as sales volume increases.  We may need to continue issuing stock and stock options in exchange for services and adequate personnel compensation.

Depreciation and Amortization Expenses

Depreciation and amortization expenses for both of the six months ended June 30, 2008 and 2007 were $1,140.  At this point in time we anticipate our depreciation expenses to remain stable.

Office and Miscellaneous

Office and miscellaneous expenses for the six months ended June 30, 2008 were $181,689, a decrease of $46,594, from $228,283 for the six months ended June 30, 2007.  Office and miscellaneous expenses were higher in 2007 due to some one-time equipment purchases made during that period of time.

Bad Debt

We did not incur bad debt expense during the six months ended June 30, 2007 as compared to $37,746 being expensed during the six months ended June 30, 2008.  We have historically had limited write-offs as the result of bad debts.  It is our policy to evaluate our customers’ creditworthiness prior to the sale of our products.

(Loss) from Operations

The loss from operations for the six months ended June 30, 2008 was $536,760, versus a loss from operations of $971,966 for the six months ended June 30, 2007, a change in loss from operations of $435,206.  The decrease in the loss from operations in the second quarter of 2008 was the result of an increase in sales and a decrease in professional and administrative fees and salary expenses.

Finance Fees and Interest Expense

Finance fees and interest expense for the six months ended June 30, 2008 were $156,534 as compared to $252,737 for the same period in 2007.  Our finance fees and interest expense in 2007 were high because of temporary working capital loans that had high interest rates and fees.

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Net (Loss)

Our net loss for the six months ended June 30, 2008 was $693,294, a decrease of $531,409, or 43%, from $1,224,703 for the six months ended June 30, 2007.  We continue to have a net loss and believe the loss will be reduced and profitability will be attained in future quarters as the sales of our products increase.

Operation Plan

The technology that drives our short-term and long-term plans is electro-chemical activation (ECA), which is the center point of our EcaFlo® technology.  Our plan of operation focuses on continuing the process of commercialization of EcaFlo®equipment and EcaFlo® solutions, known as anolyte and catholyte.

Our direct attention continues to be focused on providing our EcaFlo® devices to the markets at-hand:  oil and gas industry, food safety and agricultural applications, storm-water treatment, water and wastewater treatment, and other hard surface sanitation opportunities.  In many cases, clinical and laboratory testing and research have now moved to field trials by end-users.  Anticipated positive results in field testing should result in increased sales in future quarters.

Liquidity and Capital Resources

The following table summarizes total current assets, total current liabilities and working capital at June 30, 2008 compared to December 31, 2007.

	June 30,			December 31,		Increase / (Decrease)
	2008			2007		$			%
Current Assets	$	380,861		$	437,094	$	(56,233	)		(13	%)
Current Liabilities		677,618			286,491		(391,127	)		(137	%)
Working Capital (deficit)	$	(296,757	)	$	150,603	$	447,360			297	%

Liquidity is a measure of a company’s ability to meet potential cash requirements.  We have historically met our capital requirements through the issuance of stock, by borrowings, and through sales-generated revenue.  In the future, we anticipate we will be able to provide the necessary liquidity we need by the revenues generated from the sales of our products and the incremental equity investment, by contract from Benchmark Performance Group, Inc.  We will continue to consider financing opportunities with strategic industry partners outside of the oil and gas industry.

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As of June 30, 2008, we continue to use traditional and/or debt financing, in addition to sales-generated revenue, to provide the capital we need to run the business.  In the future, we need to generate enough revenues from the sales of our products in order for us to not have to sell additional stock or obtain additional loans.

On June 20, 2007, we entered into an investment agreement and contract with Benchmark Performance Group, Inc.  The contract provides for an equity investment of $3,500,000 over a period of 30 months and for technology fees paid to IET per gallon of EcaFlo® fluids sold by Benchmark within the oil and gas industry.  As, of June 30, 2008, we have received the fourth installment of $500,000 for a total of $1,500,000 of the $3,500,000 equity investment.

Financing.  On August 17, 2006, the Company received an unsecured loan of $25,000 from Robert Lucas, at an interest rate of 19.99% per annum.  Pursuant to the note agreement, the Company agreed to issue 100,000 shares of common stock as a loan fee.  On April 3, 2007, the shares were issued.  As of June 30, 2008, the remaining principal balance of the note is $23,300.

We borrowed $16,000 on January 18, 2008 for working capital from an officer of the company.  Interest on the loan was $1,000.  The loan and interest were repaid on January 25, 2008.

On April 16, 2008, we entered into a loan agreement with an officer of the company for the principal amount of $9,000.  In addition, we agreed to pay a flat fee of $500 as interest consideration.  The principal and interest were repaid in full on May 13, 2008.

On April 23, 2008, we entered into a Securities Purchase Agreement with AD Capital, LLC, wherein we agreed to sell and AD Capital agreed to purchase up to an aggregate of $150,000 in principal amount of debentures.  Pursuant to the agreement, we issued 150,000 warrants exercisable at $0.05 per share, expiring in five years (4/23/13) and 150,000 warrants exercisable at $0.25 per share, expiring in five years (4/23/13).  The warrants and $10,000 were issued to AD Capital as payment in full for fees associated with the convertible debenture in the amount of $150,000.  The debenture was convertible by AD Capital only in the event of default by the Company in repayment of the $150,000 on or before June 25, 2008.  On May 5, 2008, we repaid the $150,000 to AD Capital; therefore the convertible debenture is null and void.  AD Capital retains the warrants as agreed.

On June 18, 2008, we entered into a loan agreement with a stockholder of the Company for the principal amount of $50,000.  Pursuant to the loan agreement, we agreed to repay the principal amount plus a flat interest fee of $2,500 by July 5, 2008.  On July 16, 2008 and August 7, 2008, we paid $30,000 and $12,500 toward the loan, respectively.

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On July 15, 2008, we entered into a promissory note with The Morton Fishman Revocable Trust for the principal amount of $150,000.  In consideration for the loan, we agreed to pay The Morton Fishman Revocable Trust, from the proceeds of the loan, $10,000 in administration fees and $2,000 in legal fees associated with the transaction.  In addition, we agreed to issue warrants to purchase 200,000 shares of our common stock, exercisable for $0.05 per share and expiring 2 years from issuance (on 7/15/10).  Pursuant to the promissory note, we promised to pay The Morton Fishman Revocable Trust the principal sum of $150,000 together with interest of 16% per annum on or before August 27, 2008.  The note may be extended for an additional 45 days from August 27, 2008 by notifying The Morton Fishman Revocable Trust in writing and paying $5,000 and interest due through August 27, 2008.

Satisfaction of our cash obligations for the next 12 months.

As of June 30, 2008, our cash balance was $24,956.  Our plan for satisfying our cash requirements for the next twelve months is through sales-generated income, proceeds from our stock acquisition agreement with Benchmark, additional sales of our common stock, third-party financing, and/or traditional bank financing.  We intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion, and may consider additional equity or debt financing or credit facilities.

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

We may continue to incur operating losses over the majority or some portion of the next twelve months.  Our lack of operating history makes predictions of future operating results difficult to ascertain.  Our prospects must be considered in light of the risks, expenses, and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving technology markets.  Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth.  To address these risks we must, among other things, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and continue to attract, retain and motivate qualified personnel.  There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.

As a result of our cash requirements and our lack of working capital, although not anticipated, we may continue to issue stock in exchange for loans and/or equity, which may have a substantial dilutive impact on our existing stockholders.

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Going Concern

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

Summary of product and research and development that we have accomplished and that we will continue to perform for the term of our plan.

EcaFlo® Division

As a result of positive laboratory test results from the Water Quality Lab at Coastal Carolina University, in combination with internal profit margin comparisons between prototype EcaFlo® devices, and utilizing a reputable United States source of electrolytic cells and their respective markets, we have been able to make decisions regarding market entry with our own specifically designed and engineered devices.  Our engineering department has worked with AquaStel, our new supplier, in order to develop prototype EcaFlo® equipment that features the larger volume cells.  Equipment design and construction of several EcaFlo® models (C-101, C-102 and C-104) is complete and pricing has been developed to reflect the upgrades we have made in our equipment.  Vital testing results have significantly improved our ability to complete our goals ahead of time and enter our markets with specific EcaFlo® devices with a firm confidence level, in addition to allowing us the opportunity to modify existing EcaFlo® equipment to meet customer demand.

Current research initiatives are centered on providing specific water quality regulatory agencies with reports that will serve to quell any question that may arise regarding the potential of negative impact on the environment (i.e.: estuary) associated with the use of EcaFlo® anolyte and catholyte solutions.  We are finding that, through the use of test data and technical expertise, we are able to better educate environmental regulators and gain their support and endorsement for certain ECA applications within the storm water treatment arena, the petroleum industry, and with food and beverage safety control agencies.  At petroleum industry trade shows, our marketing and sales department personnel presented test results showing potential customers that aliquots of petroleum well “frac” waters treated with EcaFlo® device-generated anolyte solution showed bacterial kill in less than 5 minutes.  Furthering that data, our approach is to point out that the use of EcaFlo® solutions to obtain these successful results can eliminate the need for voluminous regulatory compliance paperwork and the higher cost associated with the use of traditional biocidal chemicals that are currently used to treat “frac” water.

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We are continuing our research to identify opportunities where we can provide our innovative technology in value-added services within the food and beverage production and processing industry, medical and healthcare markets, the hospitality industry, as well as in homeland defense applications.

We are continuing to work together with Coastal Carolina University, as well as independent laboratories and other universities associated with several of our customers’ specific research requirements, to develop a more comprehensive approach to documenting test results that pertain to the use of EcaFlo®solutions in a plethora of applications.

Further research and development efforts will be implemented with our strategic university partners, going concerns within the oil and gas and food safety industries, and with nationally-accredited research labs.  We view research and development as an integral portion of our product development plan and will use the measurable outcomes from research projects as catalysts for market development.  The results of this research guide us in determining what to further implement into our EcaFlo® equipment designs.

On May 7, 2008, we announced that as a result of two invitations to showcase our equipment at the Chemical Biological Incident Response Force’s Indian Head Base (Maryland), our EcaFlo® equipment and solutions were accepted to be listed on the United States Department of Homeland Security’s website.

Significant changes in the number of employees.

We currently employ 9 full-time, permanent employees.  These employees are engaged in management, marketing and sales, engineering, production and administrative services.  We continue to anticipate an increase in employees in the next twelve months as we add assembly personnel, shipping and receiving personnel and additional administrative support personnel.

Consultants

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

CBG Advanced Studies, Inc. On September 7, 2007, we entered into a consulting agreement with CBG Advanced Studies, Inc. (“CBG”), wherein CBG agreed to assist the Company in developing appropriate and effective market penetration plans relative to the use of our EcaFlo® equipment and solutions within U.S. military and civilian decontamination market areas.  The term of the agreement began on September 7, 2007 and will terminate on August 31, 2008.  We agreed to compensate CBG with 30,000 shares of our restricted common stock on a

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quarterly basis and $2,000 per month for the first three (3) months, and to pay for mutually agreed upon travel and expenses incurred in the performance of the agreement.

TEN Associates, LLC.  On March 3, 2008, we entered into a consulting agreement with TENAssociates, LLC (Tom Nelson), wherein TENAssociates agreed to provide the Company with investor relations services.  The term of the agreement began on March 3, 2008 and  terminated on June 3, 2008.  We agreed to compensate TENAssociates with $3,000 per month for the three months.

Duke Van Kalken.  On June 30, 2008, we entered into a contractor agreement with Duke Van Kalken, President of Aquastel, for a period of one year.  Mr. Van Kalken will provide assistance to the Company with marketing and sales, and will be paid a commission on equipment sales as compensation.

Exclusive License and Distribution Agreement

On June 20, 2007, in connection with the Stock Acquisition Agreement with Benchmark, we entered into an Exclusive License and Distribution Agreement, wherein we granted the exclusive, worldwide right, license, and authority to market, manufacture, sell and distribute EcaFlo® fluids and solutions for use in Oilfield Applications to Benchmark Energy Products. The agreement provides for special pricing of equipment to Benchmark and per-gallon technology fees, paid to IET on the EcaFlo® fluids sold by Benchmark, for a five-year period consistent with the license period.

Supply Agreement with D2W2, LLC

On June 6, 2008, we entered into a supply agreement with D2W2, LLC, wherein D2W2 agreed to purchase our products (certain electro-chemical activation equipment) for resale. The term of the agreement commenced on June 6, 2008 and will continue for two years and shall automatically renew for a full five year term provided satisfactory marketing, testing and sales progress is made by D2W2, and, shall continue thereafter, year to year, upon the same terms and conditions, unless either party notifies the other that it wishes to renegotiate or terminate.

Exclusive Supply Agreement with Aquastel, Inc.

On August 22, 2006, we entered into a supply agreement with Aquastel, Inc., wherein Aquastel agreed to supply us with C-50 and C-100 cells on an exclusive basis in the United States.  The term of the agreement is for 3 years, terminating on August 22, 2009.  At the end of the term, the parties will attempt to renegotiate in good faith to extend the agreement.

Critical Accounting Policies and Estimates

Our discussion of financial conditions and results of operations is based upon the information reported in our financial statements.  The preparation of these statements requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities at the date of our

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financial statements.  We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time.  Actual results may vary from our estimates due to changes in circumstances, weather, politics, global economics, mechanical problems, general business conditions and other factors.  Our significant estimates are related to the valuation of warrants and options.

Revenue Recognition

We recognize sales revenue when title passes and all significant risks of ownership change, which occurs either upon shipment or delivery based on contractual terms.  We are in discussions with Benchmark relative to the fact that Benchmark’s own trucking group prefers to pick up the EcaFlo® equipment that is ordered and paid for, in order to deliver the equipment to their own locations.  We believe that the sale has occurred when the equipment is on our loading dock awaiting pick-up by Benchmark, but will obtain written resolution before future sales are recorded in this manner.

Off-Balance Sheet Arrangements.

As of June 30, 2008, we did not have any off-balance sheet arrangements that had or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Concentration of Credit Risk

We sell products to customers in diversified industries and geographical regions.  During the years ended December 31, 2007 and 2006, our three largest customers represented 52%, 11%, and 7%, and 35%, 16%, and 14% of sales, respectively.  We continually evaluate the creditworthiness of our customers and typically require a deposit of 50% of the total purchase price with each EcaFlo® equipment order.

We evaluate the collectibility of accounts receivable regularly and it is our policy to record an allowance when the results of the evaluation indicate an increased risk related to the customer's ability to meet their financial obligations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Principal Financial Officer, William E. Prince, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report.  Based on that evaluation, Mr. Prince concluded that our disclosure

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controls and procedures are effective in timely alerting him to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings and in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

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

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to any material legal proceedings.

Item 1A. Risk Factors.

FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS

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

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

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

As a result of our deficiency in working capital at June 30, 2008, our auditors have included a paragraph in their report regarding substantial doubt about our ability to continue as a going concern.  Our plans in this regard are to seek additional funding through sales-generated revenue, future equity private placements with traditional financing firms and/or with an industry partner, or debt facilities.

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

We have a limited operating history.  However, our management team has extensive experience in project development and managing corporate assets.  A highly successful professional who brings more than three decades of business development experience to us from the environmental engineering industry heads our marketing and sales department.  The Company’s engineering department is headed by a former member of the military, who has expertise that centers on the primary mechanical and electrical aspects of our technologies.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a business in our intended industries.  Outside of the high levels of expertise noted above and our concentrated effort to be the leading provider in our industries, there is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably.

Our future operating results will depend upon many factors, including:

·   The continuation of our efforts to raise adequate working capital through equity investment, traditional financing, the continuation of payments from Benchmark pursuant to our agreement and the generation of sales revenues;

·   The continued success of lab and field testing that supports the development of our EcaFlo® technology product lines;

·   Demand for our EcaFlo® equipment and solutions;

·   The level of our competition;

·   Our ability to maintain key management and technical support staff, and to attract more employees with similar characteristics; and

·   The continuation of our efforts to efficiently develop products to commercialize while maintaining quality and controlling costs.

To achieve profitable operations, we must successfully act on the factors stated above, along with continually developing ways to enhance our production efforts, now that we are commencing production in the EcaFlo® Division.

As we move forward in production stage business operations, even with our good faith efforts, potential investors have a high possibility of losing their investment.

Due to the intrinsic nature of our business, we expect to see growth in competition and the development of new and improved technologies within the realm of electro-chemical activation processes and products.  While we will always keep a close eye on technological advancement in these areas, management forecasts are not necessarily indicative of our ability to compete with newer technology, as it may develop.  Management forecasts should not be relied upon as an indication of future performance.  While management believes its estimates of projected occurrences and events are within the timetable of its business plan, our actual results may differ substantially from those that are currently anticipated.

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

Based on our current proposed plans and assumptions, we anticipate that we will need additional capital to fund our operations.  Furthermore, the commercialization expenses of our EcaFlo® Division will be substantial, i.e., in excess of the amount of cash that we currently have.  Accordingly, we will have to (i) obtain additional debt or equity financing in order to fund the further development of our products and working capital needs, and/or (ii) enter into a strategic alliance with a larger company to provide our required funding.  As a result of our low-priced stock, and our continuous need for additional capital, we may consider issuing significant amounts of our common stock in exchange for either debt or equity.  The continued issuance of our common stock would have a substantial dilutive impact on our current stockholders.  If we are unable to obtain additional equity or debt financing, we may be forced to terminate operations.

Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.

Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock.  Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10.  Those rules require broker-dealers, before effecting transactions in any penny stock, to:

·   Deliver to the customer, and obtain a written receipt for, a disclosure document;

·   Disclose certain price information about the stock;

·   Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;

·   Send monthly statements to customers with market and price information about the penny stock; and

·   In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.

Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities.  These additional procedures could also limit our ability to raise additional capital in the future.

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Our stock is thinly traded; as a result you may be unable to sell at or near ask prices or at all if you need to liquidate your shares.

The shares of our common stock have historically been thinly-traded on the OTC Bulletin Board, meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent.  This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, early-stage company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.  As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  We cannot give you any assurance that a broader or more active public trading market for our common shares will develop or be sustained, or that current trading levels will be sustained.  Due to these conditions, we can give investors no assurance that they will be able to sell their shares at or near ask prices or at all if they need money or otherwise desire to liquidate their shares.

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

The industries we intend to compete in are characterized by intense competition and rapid and significant technological advancements.  Many companies, research institutions and universities are working in a number of areas similar to our primary fields of interest to develop new products, some of which may be similar and/or competitive to our products.  Furthermore, many companies are engaged in the development of water “purifying” products of which may be similar and/or competitive to our products and technology.  Most of the companies with which we compete have substantially greater financial, technical, manufacturing, marketing, distribution and other resources than us.

We are highly dependent on William E. Prince, our CEO, president and chairman.  The loss of Mr. Prince, whose knowledge, leadership and technical expertise upon which we rely, would harm our ability to execute our business plan.

Our success depends heavily upon the continued contributions of William E. Prince, whose knowledge, leadership and technical expertise would be difficult to replace, and on our ability to retain and attract technical and professional staff.  If we were to lose his services, our ability to execute our business plan would be harmed and we may be forced to cease operations until such time as we could hire a suitable replacement for Mr. Prince.  We also have other key employees who manage our operations and perform critical engineering and design functions, as well as direct the overall marketing and sales of our products.  If we were to lose their services, senior management would be required to expend time and energy to replace and train their replacements.  To the extent that we are smaller than our competitors and have fewer resources, we may not be able to attract the sufficient number and quality of staff.

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Potential issuance of additional common stock could dilute existing stockholders.

We are authorized to issue up to 200,000,000 shares of common stock.  To the extent of such authorization, our board of directors has the ability, without seeking stockholder approval, to issue additional shares of common stock in the future for such consideration as the board of directors may consider sufficient.  We may seek additional equity financing, which if sought or obtained may result in additional shares of our common stock being issued.

Pursuant to the Stock Acquisition Agreement with Benchmark, we agreed that throughout the period commencing with the closing date and ending October 31, 2009, Benchmark shall have the right and ability to maintain an equity position in the Company equal to the equity position it would own upon the issuance of shares to it following payment of the seventh installment if, between the date of closing and the date of such payment and issuance of shares, we were to issue no additional shares of our common stock (approximately 40.61%) to any other party.  If we default pursuant to the anti-dilution language in the agreement (considered a “Warrant Right Event”) then we will be obligated to issue to Benchmark a warrant entitling it to purchase, at $0.10 per share, such additional number of shares of our common stock as would, upon exercise, make Benchmark the holder of the same total percentage of all our outstanding equity securities as it held prior to the Warrant Right Event. The warrants will be exercisable at any time through October 31, 2009.

The issuance of additional common stock in the future will reduce the proportionate ownership and voting power of the common stock held by our existing stockholders.

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

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

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We have a limited number of personnel that are required to perform various roles and duties as well as be responsible for monitoring and ensuring compliance with our internal control procedures.  As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.  Investors relying upon this misinformation may make an uninformed investment decision.

If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

Companies trading on the OTC Bulletin Board, such as us, generally must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board.  More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission.  Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period, then we will be ineligible for quotation on the OTC Bulletin Board.  As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.  As of the date of this filing, we have one late filing reported by FINRA.

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

On April 23, 2008, we issued to AD Capital, LLC 150,000 warrants exercisable at $0.05 per share, expiring in five years (4/23/13) and 150,000 warrants exercisable at $0.25 per share, expiring in five years (4/23/13) pursuant to the Securities Purchase Agreement dated April 23, 2008.  We believe that the issuance of the warrants was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).  The recipient of the warrants was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make its investment decision, including the Company’s financial statements and 34 Act reports.  We reasonably believe that the recipient, immediately prior to issuing the warrants, had such knowledge and experience in our financial and business matters that it was capable of evaluating the merits and risks of its investment.  The recipient had the opportunity to speak with our president and directors on several occasions prior to its investment decision.

On May 19, 2008, we issued 5,000,000 shares of our common stock to Benchmark Performance Group, Inc., pursuant to our Stock Acquisition Agreement dated June 20, 2007.  We believe that the issuance of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).  The recipient of the shares was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make its investment decision, including the Company’s financial statements and 34 Act reports.  We reasonably believe that the recipient,

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immediately prior to issuing the shares, had such knowledge and experience in our financial and business matters that it was capable of evaluating the merits and risks of its investment.  The recipient had the opportunity to speak with our president and directors on several occasions prior to its investment decision.

Subsequent Issuances

On July 15, 2008, we agreed to issue warrants to purchase 200,000 shares of our common stock, exercisable for $0.05 per share and will expire 2 years from issuance to The Morton Fishman Revocable Trust pursuant to the promissory executed on July 15, 2008.  We believe that the issuance of the warrants was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).  The recipient of the warrants was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make its investment decision, including the Company’s financial statements and 34 Act reports.  We reasonably believe that the recipient, immediately prior to issuing the warrants, had such knowledge and experience in our financial and business matters that it was capable of evaluating the merits and risks of its investment.  The recipient had the opportunity to speak with our president and directors on several occasions prior to its investment decision.

On July 18, 2008, we issued 30,000 shares of our restricted common stock to Gerald H. Turley pursuant to his consulting agreement dated September 7, 2007.  We believe that the issuance of the shares was exempt from the registration and prospectus delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).  The recipient of the shares was afforded an opportunity for effective access to files and records of the Company that contained the relevant information needed to make its investment decision, including the Company’s financial statements and 34 Act reports.  We reasonably believe that the recipient, immediately prior to issuing the shares, had such knowledge and experience in our financial and business matters that he was capable of evaluating the merits and risks of its investment.  The recipient had the opportunity to speak with our president and directors on several occasions prior to his investment decision.

Issuer Purchases of Equity Securities

The Company did not repurchase any of its equity securities during the quarter ended June 30, 2008.

Item 3. Defaults Upon Senior Securities.

None.

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

We did not submit any matters to a vote of our security holders during the second quarter of 2008.

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Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits

			Incorporated by reference
Exhibit number	Exhibit description	Filed herewith	Form	Period ending	Exhibit No.	Filing date
2(a)	Agreement and Plan of Merger between Coronado Explorations Ltd and Naturol, Inc.		8-K		2(a)	10/25/01
2(b)	Amendment No. 1 to the Agreement and Plan of Merger between Coronado Explorations Ltd and Naturol, Inc.		8-K		2(b)	1/25/02
2(c)	Agreement and Plan of Merger and Reincorporation		8-K		2(c)	3/10/08
3(i)(a)	Certificate of Incorporation of Coronado Explorations Ltd. – Dated February 2, 1999		10SB12G		2(a)	6/9/99
3(i)(b)	Amended and Restated Articles of Incorporation of Coronado Explorations Ltd. – Dated May 20, 1999		10SB12G		2(b)	6/9/99
3(i)(c)	Certificate of Amendment of Certificate of Incorporation of Coronado Explorations Ltd. – Dated October 5, 2000		10-KSB	1/31/02	3(i)(c)	4/30/02
3(i)(d)	Articles of Incorporation of Naturol, Inc. – Dated June 9, 2001		10-KSB	1/31/02	3(i)(d)	4/30/02
3(i)(e)	Certificate of Amendment to Articles of Incorporation of I.E.T., Inc.		10-QSB	6/30/04	3	8/23/04
3(i)(f)	Certificate of Amendment of Certificate of Incorporation of Naturol Holdings Ltd. – Dated May 5, 2004		10-QSB	3/31/04	3(i)	5/14/04
3(i)(g)	Certificate of Merger between Coronado Subsidiary Corp. and Naturol, Inc. – Dated January 14, 2001		8-K		3(i)(g)	1/25/02
3(i)(h)	Articles of Incorporation of Integrated Environmental Technologies, Ltd. – Dated January 11, 2008		8-K		3(i)(h)	3/10/08
3(i)(i)	Articles of Merger of Integrated Environmental Technologies, Ltd., Nevada corporation and Integrated Environmental Technologies, Ltd., Delaware corporation – Dated February 15, 2008 (Nevada)		8-K		3(i)(j)	3/10/08
3(i)(j)	Certificate of Merger of Integrated Environmental Technologies, Ltd., Nevada corporation and Integrated Environmental Technologies, Ltd., Delaware corporation – Dated February 18, 2008 (Delaware)		8-K		3(i)(j)	3/10/08
3(ii)(a)	Bylaws of Coronado Explorations Ltd. – Dated February 9, 2001		8-K		3(ii)(e)	1/25/02

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			Incorporated by reference
Exhibit number	Exhibit description	Filed herewith	Form	Period ending	Exhibit No.	Filing date
3(ii)(b)	Bylaws of Naturol, Inc. – Dated June 9, 2001		10-KSB	1/31/02	3(ii)(f)	4/30/02
3(ii)(c)	Bylaws of Integrated Environmental Technologies, Ltd., a Nevada corporation – Dated January 11, 2008		8-K		3(ii)(c)	3/10/08
10.1	License Agreement among Integrated Environmental Technologies Ltd., Electro-Chemical Technologies Ltd. and Laboratory of Electrotechnology Ltd. – Dated September 4, 2003		10-QSB	9/30/03	10.8	11/19/03
10.2	Supply Agreement – Dated September 4, 2003		10-QSB	9/30/03	10.9	11/19/03
10.3	Letter Agreement between SPDG Naturol Ltd. and Integrated Environmental Technologies Ltd. – Dated October 14, 2003		10-QSB	9/30/03	10.10	11/19/03
10.4	Collaborative Agreement with Integrated Environmental Technologies Ltd. and Coastal Carolina University – Dated December 11, 2003		8-K		10.2	1/08/04
10.5	Contract of Sale – JMW Investments – Dated January 2, 2004		8-K		10.1	3/1/04
10.6	Consultant and Employee Stock Compensation Plan – Dated January 21, 2004		S-8		10.3	1/22/04
10.7	Letter of Intent with Pentagon Technical Services – Dated June 15, 2004		10-QSB	6/30/04	10	8/23/04
10.8	Amendment to License and Supply Agreement with Electro-Chemical Technologies		10-QSB	9/30/04	10	11/12/04
10.9	Consulting Agreement of Joseph Schmidt, dated November 18, 2004.		8-K		10.1	1/07/05
10.10	Letter Amending Joseph Schmidt’s Consulting Agreement.		8-K		10.2	1/07/05
10.11	Consulting Agreement of XXR Consulting, Inc., dated December 8, 2004.		8-K		10.3	1/07/05
10.12	Employment Agreement of William E. Prince, dated January 3, 2005.		8-K		10.4	1/07/05
10.13	Employment Agreement of Marion Sofield – January 3, 2005		8-K		10.5	1/07/05
10.14	Addendum to Marion Sofield’s Employment Agreement – Dated February 28, 2005		10-KSB	12/31/04	10.6	3/30/05
10.15	Employment Agreement of Steve Johnson – Dated February 10, 2005		10-KSB	12/31/04	10.7	3/30/05
10.16	DaVinci-Franklin Fund I, LLC – Dated April 1, 2005		8-K		10.1	4/13/05
10.17	Agreement with Red River Capital Partners dated June 14, 2006		10-QSB	6/30/06	10	8/14/06

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			Incorporated by reference
Exhibit number	Exhibit description	Filed herewith	Form	Period ending	Exhibit No.	Filing date
10.18	Stock Acquisition Agreement dated June 20, 2007		8-K		10.1	8/21/07
10.19	Exclusive License and Distribution Agreement dated June 20, 2007		8-K		10.2	8/21/07
10.20	Registration Rights Agreement dated June 21, 2007		8-K		10.3	8/21/07
16	Letter of Andersen, Andersen & Strong, L.C. regarding change in certifying accountant – Dated April 18, 2002		8-K		16	4/26/02
31	Certification pursuant to Section 302 of the Sarbanes-Oxley Act	X
32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act	X

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.

(Registrant)

By: /s/ William Prince_____________________                                                                          

      William E. Prince, Chief Executive Officer

And Principal Financial Officer (On behalf of

      the registrant and as principal accounting

      officer)

Date: September 18, 2008

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