Earthblock 10QSB 2008 Q1 Quarterly report (small business)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED September 30, 2007

Commission File #000-31935

EARTHBLOCK TECHNOLOGIES, INC.

(Exact name of small business issuer as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

65-0729440 

(IRS Employer Identification Number)

2637 Erie Avenue, Suite 207, Cincinnati, OH 45208

(Address of principal executive offices) (Zip Code)

(513)533-1220

(Registrant’s telephone no., including area code)

Indicate by check mark whether the registrant (1) has 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 [ ]

Title of Class Number of Shares Outstanding:Common Stock, par value $.001 per share 101,965,018 outstanding as of November 15, 2007.  Preferred Stock, par value $.001 per share two (2) outstanding as of November 15, 2007.

Documents Incorporated by Reference: None

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EARTHBLOCK TECHNOLOGIES, INC.

FORM 10-QSB

Table of Contents

PART I-- FINANCIAL INFORMATION	3
Item 1-- Financial Statements	3
Item 2-- Management's Discussion and Analysis or Plan of Operation	17
Item 3-- Controls and Procedures	20
PART II-- OTHER INFORMATION	21
Item 2-- Changes in Securities and Use of Proceeds	21
Item 6-- Exhibits and Reports on Form 8-K	21
SIGNATURES	22

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Part I - Financial Information

    Item 1 Financial Statements

Pollard-Kelley Auditing Services, Inc.
Auditing Services	4500 Rockside Road, Suite 450 Independence OH  44131 330-836-2558

Report of Independent Certified Public Accountants

Board of Directors

EarthBlock Technologies, Inc. and Subsidiary

We have reviewed the accompanying consolidated balance sheets of EarthBlock Technologies, Inc. and Subsidiary as of September 30, 2007 and the related consolidated statements of income, stockholders’ equity, and cash flows for the three-month and nine-month periods ended September 30, 2007.  These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board.  A review of interim financial statements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit in accordance with the standards of the Public Company Accounting Oversight Board, the object of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in notes to the financial statements, the Company has negative working capital, negative cash flows from operations and recurring operating losses which raises substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in the notes to the financial statements.  These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles accepted in the United States of America.

We have previously audited, in accordance auditing standards generally accepted in the United States of America, the consolidated balance sheet of EarthBlock Technologies, Inc. and Subsidiary (A Development Stage Company) and the related statements of income, retained earnings, and cash flows for the year then ended; and in our report dated March 29, 2007, we expressed an subject to opinion on those consolidated financial statements.  In our opinion, subject to the uncertainty of a going concern, the information set forth in the accompanying consolidated balance sheet as of December 31, 2006 and the related statements of income, retained earnings, and cash flows for the year then ended, in all material respects.

Pollard-Kelley Auditing Services, Inc.

/S/ Pollard-Kelley Auditing Services, Inc.

November 15, 2007

Independence, Ohio

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EarthBlock Technologies, Inc and Subsidiary
CONSOLIDATED BALANCE SHEET
September 30, 2007 and December 31, 2006
	2007			2006
ASSETS
Current Assets
Cash and cash equivalents	$	(7,928	)	$	333
Inventory		186,065			180,000
Total Current Assets		178,137			180,333
Fixed Assets
Computers		9,402			9,402
Less: Accumulated depreciation		(5,748	)		(4,428	)
		3,654			4,974
Total Assets	$	181,791		$	185,307
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdrafts	$	-		$	-
Notes payable		478,070			537,500
Accounts payable		129,286			130,653
Advances on home sales		160,000			-
Accrued salaries		587,387			609,655
Accrued payroll taxes		12,644			12,644
Accrued interest		146,117			134,374
Total Current Liabilities		1,513,504			1,424,826
Stockholders' Equity
Preferred stock		-			-
Common stock		101,965			92,465
Additional contributed capital		1,753,858			1,698,358
Deficit accumulated during the
development stage		(3,187,536	)		(3,030,342	)
Subscriptions receivable		-			-
		(1,331,713	)		(1,239,519	)
Total Liabilities and Stockholders' Equity	$	181,791		$	185,307
See accompanying notes to financial statements.

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EarthBlock Technologies, Inc and Subsidiary
CONSOLIDATED STATEMENT OF OPERATIONS
For the Quarter Ending September 30, 2007 and the Year Ended December 31, 2006
	Quarter			Year to			Year to
	Ending			Date			Date
	September 30, 2007			2007			2006
Revenues	$	-		$	202,900		$	-
Cost of Sales
Direct cost of sales		17,405			222,672			156,931
Gross Profit		(17,405	)		(19,772	)		(156,931	)
Expenses
Office		2,421			11,304			21,179
Depreciation		440			1,320			1,759
Interest		11,425			34,302			45,699
Licensor expenses		-			-			-
Professional fees		2,455			73,246			766,875
Rent		2,010			6,182			13,776
Salaries		-			-			420,008
Travel		2,465			11,068			21,695
		21,216			137,422			1,290,991
Net Loss	$	(38,621	)	$	(157,194	)	$	(1,447,922	)
Loss per share	$	(0.00	)	$	(0.00	)
Average shares outstanding		101,965,018			98,520,574
See accompanying notes to financial statements.

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EarthBlock Technologies, Inc and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Quarter Ending September 30, 2007 and the Year Ended December 31, 2006
									Additional
	Preferred Stock				Common Stock				Contributed		Retained
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance December 31, 2005		-		-		49,815,018		49,815		380,008		(1,582,420	)		(1,152,597	)
Share sales		-		-		7,000,000		7,000		28,000		-			35,000
Shares for services		2		-		24,250,000		24,250		839,750		-			864,000
Shares issued inconnection
with certain Notes payable		-		-		11,400,000		11,400		330,600		-			342,000
Sale and experation of
warrants		-		-		-		-		120,000		-			120,000
Net Loss		-		-		-		-		-		(1,447,922	)		(1,447,922	)
Balance December 31, 2006		2		-		92,465,018		92,465		1,698,358		(3,030,342	)		(1,239,519	)
Shares for services		-		-		4,500,000		4,500		40,500		-			45,000
Net loss		-		-		-		-		-		(63,138	)		(63,138	)
Balance March 31, 2007		2		-		96,965,018		96,965		1,738,858		(3,093,480	)		(1,257,657	)
Shares for services		-		-		5,000,000		5,000		15,000		-			20,000
Net loss		-		-		-		-		-		(55,435	)		(55,435	)
Balance June 30, 2007		2		-		101,965,018		101,965		1,753,858		(3,148,915	)		(1,293,092	)
Net loss		-		-		-		-		-		(38,621	)		(38,621	)
Balance September 30, 2007		2	$	-		101,965,018	$	101,965	$	1,753,858	$	(3,187,536	)	$	(1,331,713	)
See accompanying notes to financial statements.

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EarthBlock Technologies, Inc and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Quarter Ending September 30, 2007 and the Year Ended December 31, 2006
	Quarter			Year to			Year to
	Ending			Date			Date
	September 30, 2007			2007			2006
Cash Flows from Operating Activities
Net Loss	$	(38,621	)	$	(157,194	)	$	(1,447,922	)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization		440			1,320			1,759
Stock for services		-			65,000			1,206,000
(Increase) in Inventory		(59,670	)		(6,065	)		(180,000	)
Increase in Accounts payable		6,239			(1,368	)		27,745
Increase in Advances on home sales		20,000			160,000
Increase in Accrued salaries		832			(22,268	)		(93,785	)
Increase in Payroll taxes		-			-			12,644
Increase in Accrued interest		11,425			11,743			45,699
Net Cash (Used) by Operating Activities		(59,355	)		51,168			(427,860	)
Cash Flows from Investing Activities		-			-			-
Cash Flows from Financing Activities
Increase in Notes payable		571			60,571			277,500
Payments  on Notes payable		-			(120,000	)		-
Sale of Warrants		-			-			120,000
Sale of Common stock		-			-			35,000
Cash Flows Provided by Financing Activities		571			(59,429	)		432,500
Net Increase in Cash and Cash Equivalents		(58,784	)		(8,261	)		4,640
Cash and Cash Equivalents - Beginning		50,856			333			(4,307	)
Cash and Cash Equivalents - Ending	$	(7,928	)	$	(7,928	)	$	333
See accompanying notes to financial statements.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

History:

The Company is a Nevada corporation incorporated on February 19, 1997, and is a reporting company with the Securities and Exchange Commission.  It changed its name from L.L. Brown International, Inc. to Terra Block International Inc. on February 19, 2003.

On February 14, 2003 the Company entered into a Share Exchange Agreement with Terra Block Consolidated, Inc.  The agreement provides for 100% of the shares of Terra Block Consolidated, Inc. to be acquired by the Company in exchange for shares of common stock of the Company, with the total issued and outstanding shares of the Company immediately after the closing and a 2 to 1 reverse split, of 10,000,018.  The Company’s former subsidiary, LLBA has been spun off, leaving Terra Block Consolidated, Inc. as the sole operating subsidiary of the Company after effecting the agreement.  The new combination also assumed $100,660 of accounts payable.  The combination was accounted for as a reverse merger whereby the acquired company is treated as the acquiring company for accounting purposes.

Terra Block Consolidated, Inc. was incorporated in Nevada on May 30, 2002 and engages in the manufacture, distribution and application of technologically advanced building products through a licensing arrangement with Terra Block, Inc.  Terra Block Consolidated, Inc. has the exclusive right to make, have made, use and sell Terra Block, Inc.’s products anywhere in the world.  Terra Block, Inc. is a related party of Terra Block International, Inc. as a shareholder.  The license agreements provide Terra Block Consolidated, Inc. the rights to all patented technologies, trade secret materials, copyrights, trademarks and all intellectual property of Terra Block Inc. The license is valid until terminated by Terra Block Consolidated, Inc. with 30 days advance written notice to Terra Block, Inc. or by Terra Block, Inc., if there is a material breach of the licensing agreement by Terra Block Consolidated, Inc.  Under this agreement, Terra Block Consolidated, Inc. has the exclusive right to buy the license patent rights for $10,000,000.  This agreement was terminated January 10, 2005.

On January 21, 2004, the Company entered into a Stock Purchase Agreement with an individual to sell 3,600,000 shares of common stock for $250,000.  The purchaser also, is to receive redeemable common stock purchase warrants to acquire 1,000,000 shares of common stock at an exercise price of $.10 per share until January 20, 2009.  In addition, 1,500,000 shares of common stock were issued as a commission in connection with this stock sale.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

On August 10, 2004, the Company issued 1,250,000 shares of common stock as compensation.  The shares were valued at par value.

On October 4, 2004, the Company issued 300,000 shares of common stock as prepaid interest.  The shares were valued at par value.

On October 29 and December 16, 2004, the Company entered into two stock subscription agreements with the same party.  The agreements sold 10,000,000 shares of common stock at $125,000.  At June 30, 2005 there is $0 due the Company from this transaction.

On December 16, 2004, the Company sold 1,200,000 shares of common stock for $15,000.

On February 11, 2005, the Company changed it name to EarthBlock Technologies, Inc.

On June 8, 2005, the Company sold 4,000,000 shares of common stock for $10,000.

On February 16, 2006, the Company sold 4,000,000 shares of common stock for $20,000.

On February 21, 2006, the Company issued 2,500,000 shares of common stock for services.  The shares issued were valued at the market value of the stock on date of issue, total value $87,500.

On March 29, 2006, the Company sold 1,500,000 shares of common stock for $7,500.

On March 30, 2006, the Company sold 1,500,000 shares of common stock for $7,500.

On April 26, 2006, the Company issued 2,500,000 shares of common stock for services.  The shares issued were valued at the market value of the stock on date of issue, total value $300,000.

On May 9, 2006, the Company issued 2,000,000 shares of common stock for services.  The shares issued were valued at the market value of the stock on date of issue, total value $120,000.

On June 27, 2006, the Company issued 1,250,000 shares of common stock for services.  The shares issued were valued at the market value of the stock on date of issue, total value $37,500.

On June 27, 2006, the Company issued 11,400,000 shares of common stock to two note holders to stay their calling due the note.  No formal agreement was signed.  The shares issued were valued at the market value of the stock on date of issue, total value $342,000.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

Septemebr 30, 2007

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

On August 1, 2006, the Company issued 2,000,000 shares of common stock to two individuals for services.  The shares were valued at the market price of the stock on the date of the issue, total value $44,000.

On August 23, 2006, the Company issued 10,000,000 shares of common stock to three individuals for services.  The shares were valued at the market price of the stock on the date of issue, total value $235,000.

On December 7, 2006, the Company issued 4,000,000 shares of common stock to an individual for services.  The shares were valued at the market price of the stock on the date of issue, total value $40,000.

On January 10, 2007, the Company issued 4,500,000 shares of common stock to an individual for services.  The shares were valued at the market price of the stock on the date of issue, total value $45,000.

On June 27, 2007, the Company issued 5,000,000 shares of common stock to an individual for services.  The shares were valued at the market price on the date of issue, total value $20,000.

Basis of Consolidation:

The accompanying consolidated financial statements include the accounts of EarthBlock Technologies, Inc. and Terra Block Consolidated, Inc.  All significant inter-company accounts and transactions, if any, have been eliminated in consolidation.

Cash and Cash Equivalents:

For the purposes of the Statement of Cash Flows, the Company considers all short-term debt securities to be cash equivalents.

Cash paid during the period for:

	2007		2006
Interest	$	0	$	0
Income taxes	$	0	$	0

Income Taxes:

The Company accounts for income taxes under a method, which requires a company to recognize deferred tax assets and liabilities for the expected future tax consequences of

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

events that have been recognized in a company’s financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statements carrying amounts and tax basis of assets and liabilities using enacted tax rates.  The Company presently prepares its tax return on the cash basis and its financial statements on the accrual basis.  No deferred tax assets or liabilities have been recognized at this time, since the Company has shown losses for both tax and financial reporting.  The Company’s net operating loss carry forward at September 30, 2007 is approximately $3,030,000.

Use of Estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

Development Stage:

The Company elected to exit the development stage during the second quarter of 2007 with the sale of its first two earth compacted homes.

NOTE 2 – NOTES PAYABLE

Terra Block Consolidated, Inc.’s Notes Payable:

On October 15, 2002 the Company entered into a loan agreement with an individual to borrow $15,000.  The terms of the agreement called for the principal sum of $15,000 to be paid on or before November 15, 2002 and an additional interest amount of $15,000 to be paid on April 15, 2003.  The note is unsecured.  A payment of $7,500 was made on February 3, 2004. The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2007 and December 31, 2006 was $7,500 plus accrued interest.

On October 21, 2002 the Company entered into a loan agreement with an individual to borrow $10,000.  The terms of the agreement called for the principal sum of $10,000 to be paid within 45 days, and an additional interest amount of $10,000 to be paid within 180 days.  The note is unsecured.  A payment of $5,000 was made on February 3, 2004.  The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2007 and December 31, 2006 was $5,000 plus accrued interest.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

Septemebr 30, 2007

NOTE 2 – NOTES PAYABLE – CONTINUED

On December 19, 2002 the Company entered into a loan agreement with an individual to borrow $10,000.  The terms of the agreement called for the principal sum of $10,000 to be paid on or before April 15, 2003 plus interest of $2,000.  In the event that the principal has not been repaid by April 30, 2003, additional interest is owed equal to $200 per month thereafter. In addition 10,000 shares of common stock will be delivered as additional consideration.  The note is unsecured.  In addition to the issue of common stock, a payment of $5,000 was made on February 3, 2004.  The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2007 and December 31, 2006 was $5,000 plus accrued interest.

On December 19, 2002 the Company entered into a loan agreement with an individual to borrow $10,000.  The terms of the agreement called for the principal sum of $10,000 to be paid on or before April 15, 2003 plus interest of $2,000.  In the event that the principal has not been repaid by April 30, 2003, additional interest is owed equal to $200 per month thereafter. In addition 10,000 shares of common stock will be delivered as additional consideration.  The note is unsecured.  In addition to the issue of common stock, a payment of $5,000 was made on February 3, 2004.  The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2007 and December 31, 2006 was $5,000 plus accrued interest.

On December 20, 2002 the Company entered into a loan agreement with an individual to borrow $10,000.  The terms of the agreement called for the principal sum of $10,000 to be paid on or before March 20, 2003 plus interest of $2,000.  The note is unsecured.  A payment of $5,000 was made on February 3, 2004.  The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2007 and December 31, 2006 was $5,000 plus accrued interest.

On December 23, 2002 the Company entered into a loan agreement with an individual to borrow $5,000.  The terms of the agreement called for the principal sum of $5,000 to be paid on or before April 23, 2003 plus interest of $1,000.  The note is unsecured.  A payment of $2,500 was made on February 3, 2004.  The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2007 and December 31, 2006 was $2,500 plus accrued interest.

On January 15, 2003 the Company entered into a loan agreement with an individual to borrow $20,000.  The terms of the agreement called for the principal sum of $20,000 to be paid on or before April 30, 2003 plus interest of $4,000.   In the event that the

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 2 – NOTES PAYABLE – CONTINUED

principal has not been repaid by April 30, 2003, additional interest is owed equal to $400 per month thereafter.  In addition 20,000 shares of common stock will be delivered as additional consideration. The note is unsecured.  In addition to the issue of common stock, a payment of $10,000 was made on February 3, 2004.  The Company is in default under this agreement. The lender has not made formal demand for payment to date.  The balance on this note at September 30, 2007 and December 31, 2006 was $10,000 plus accrued interest.

On March 14, 2003 the Company entered into a loan agreement with an individual to borrow $10,000.  The terms of the agreement called for the principal sum of $10,000 to be paid on or before July 14, 2003 plus interest of $2,000.  The note is unsecured.  A payment of $5,000 was made on February 3, 2004.  The Company is in default under this agreement. The lender has not made formal demand for payment to date. The balance due on this note at September 30, 2007 and December 31, 2006 was $5,000 plus accrued interest.

EarthBlock Technologies, Inc.’s Notes Payable:

On October 6, 2003 the Company entered into a loan agreement with an individual to borrow $20,000 at 10% interest due October 6, 2004.  In addition 50,000 shares of common stock will be delivered as additional consideration. The note is unsecured. The Company has issued the common stock required under this agreement.  The balance on this note at September 30, 2007 and December 31, 2006 was $20,000 plus accrued interest.

On October 6, 2003 the Company entered into a loan agreement with an investment consortium to borrow $12,500 at 10% interest due October 6, 2004.  In addition 200,000 shares of common stock will be delivered as additional consideration. The note is unsecured. The Company has issued the common stock required under this agreement.  The balance on this note at September 30, 2007 and December 31, 2006 was $0 and $12,500 plus accrued interest, respectively.

On October 6, 2003 the Company entered into a loan agreement with an individual to borrow $12,500 at 10% interest due October 6, 2004. The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $0 and $12,500 plus accrued interest, respectively.

On April 30, 2004 the Company entered into a loan agreement with an Investment Company to borrow $100,000 at 10% interest due December 31, 2004. The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $100,000 plus accrued interest.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 2 – NOTES PAYABLE – CONTINUED

On July 13, 2004 the Company entered into a loan agreement with an Investment Company to borrow $20,000 at 10% interest due January 15, 2005. The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $0 and $20,000 plus accrued interest, respectively.

On August 23, 2005 the Company entered into a loan agreement with an individual to borrow $35,000 at 12% interest due February 23, 2006.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $35,000 plus accrued interest.

On August 23, 2005 the Company entered into a loan agreement with an Investment Company to borrow $15,000 at 12% interest due February 23, 2006.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2007 was $15,000 plus accrued interest.

On June 29, 2006, the Company entered into a loan agreement with an individual to borrow $209,000 at 12% interest due June 29, 2007.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $185,000 and $209,000 plus accrued interest, respectively.

On July 5, 2006, the Company entered into a loan agreement with an individual to borrow $24,000 at 12% interest due July 5, 2007.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $0 and $24,000 plus accrued interest, respectively.

On July 20, 2006, the Company entered into a loan agreement with an individual to borrow $7,000 at 12% interest due July 20, 2007.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $5,000 and $7,000 accrued interest, respectively.

On August 4 2006, the Company entered into a loan agreement with an individual to borrow $22,500 at 12% interest due August 4, 2007.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $0 and $22,500 plus accrued interest, respectively.

On August 17, 2006, the Company entered into a loan agreement with an individual to borrow $15,000 at 12% interest due August 17, 2007.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $0 and $15,000 plus accrued interest, respectively.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 2 – NOTES PAYABLE – CONTINUED

On May 4, 2007, the Company entered into a loan agreement with an investment company to borrow $60,000 at 12% interest due May 4, 2008.  The note is unsecured.  The balance on this note at September 30, 2007 and December 31, 2006 was $60,000 and $0 plus accrued interest, respectively.

All notes except those dated May 4, 2007 or later  are in default, payment was not made on notes stated due dates.  The Company has not received any notices of default.

NOTE 3 – STOCKHOLDERS’ EQUITY

Preferred Stock

At September 30, 2007 and December 31, 2006, the Company had 10,000,000 shares authorized of convertible preferred stock with a par value of $0.001 per share.  Additional terms and conditions of the stock are to be set by the board of directors of the Company at the time of issue.  On February 7, 2006, the Company established a Series A Preferred stock, consisting of two shares authorized and outstanding.  The shares have no dividend rights, no liquidating preference, no conversion rights and no redemption rights.  However, the two shares voting in aggregate, to vote on all shareholder matters equal to 60% of the total common share voting. There were 2 shares outstanding at June 30, 2007 December 31, 2006 respectively.

Common Stock

At December 31, 2006 the Company had 100,000,000 shares authorized common stock with a par value of $0.001 per share.  On June 21, 2007, the Company increased the authorized shares to 2,000,000,000 shares with a par value of $0.001 per share.  There were 101,965,018 and 92,465,018 shares outstanding at September 30, 2007 and December 31, 2006 respectively.

Warrants

On May 4, May 9, and June 22, 2006, the Company sold 1,000,000 Class A Warrants for $17,500.  Total Class A Warrants sold were 3,000,000 for a total raised of $52,500.  Class A Warrants exercise at a price equal to the average weighted price for the lowest eight days of the proceeding 20 trading days multiplied by 70% per share, with a minimum exercise price of $.007 and a maximum exercise price equal to the greater of $.025 or 50% of the computed price.  Class A Warrants vest monthly and shall expire 90 days from the day first vested.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 3 – STOCKHOLDERS’ EQUITY – CONTINUED

On July 17 2006, the Company sold 1,000,000 Class A Warrants for $17,500.  Class A Warrants exercise at a price equal to the average weighted price for the lowest eight days of the proceeding 20 trading days multiplied by 70% per share, with a minimum exercise price of $.007 and a maximum exercise price equal to the greater of $.025 or 50% of the computed price.  Class A Warrants vest monthly and shall expire 90 days from the day first vested.

On August 23, 2006, the Company sold 10,000,000 Class A Warrants for $50,000.  Class A Warrants exercise at a price equal to the average weighted price for the lowest eight days of the proceeding 20 trading days multiplied by 70% per share, with a minimum exercise price of $.007 and a maximum exercise price equal to the greater of $.025 or 50% of the computed price.  Class A Warrants vest monthly and shall expire 90 days from the day first vested.

All warrants were exercised as of December 31, 2006.

NOTE 4 – COMMITMENTS

The Company rents its present shared office space on a month to month basis. The Company expects to continue on that basis in 2006.  Rent expense through September 30, 2007 and December 31, 2006 was $6,182 and $13,776 respectively.

NOTE 5 – DERIVATIVE LIABILITY ARRISING FROM WARRANTS

The Company accounts for debt with embedded conversion features and warrant issues in accordance with EITF 98-5: Accounting for convertible securities with beneficial conversion features or contingency adjustable conversion and EITF No. 00-27: Application of issue No 98-5 to certain convertible instruments.  Conversion features determined to be beneficial to the holder are valued at fair value and recorded to additional paid in capital.  The Company determines the fair value to be ascribed to the detachable warrants issued with the convertible debentures utilizing the Black-Scholes method.  Any discount derived from determining the fair value to the debenture conversion features and warrants is amortized to financing cost over the life of the debenture.  The unamortized costs if any, upon the conversion of the warrants is expensed to financing cost on a pro rata basis over the life of the warrant.

Debt issue with the variable conversion features are considered to be embedded derivatives and are accountable in accordance with FASB 133; Accounting for Derivative Instruments and Hedging Activities.  The fairs value of the embedded derivative is recorded to derivative liability.  This liability is required to be marked each reporting period.  The resulting discount on the debt is amortized to interest expense over the life of the related debt.

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EarthBlock Technologies, Inc. and Subsidiary

NOTES TO FINANCIAL STATEMENTS

September 30, 2007

NOTE 6 – RELATED PARTIES

The Company owed its officers who are also shareholders $587,387 and $609,655 in accrued wages at September 30, 2007 and December 31, 2006 respectively.  There are no other amounts due to or from these shareholder officers.

NOTE 7 – GOING CONCERN

The Company has not generated significant revenues or profits to date.  This factor among others raises considerable doubt the Company will be able to continue as a going concern.  The Company’s continuation as a going concern depends upon its ability to generate sufficient cash flow to conduct its operations and its ability to obtain additional sources of capital and financing.  The accompanying consolidated financial statements do not include any adjustments that may result from the outcome of this uncertainty.  Managements plans to relieve these problems by continuing to raise working capital either through stock sales or loans.

Item 2. Management’s Discussion and Analysis of Financial Condition or Plan of Operation 

The following discussion should be read in conjunction with our unaudited interim financial statements and related notes thereto included in this quarterly report and in our audited financial statements and Management’s Discussion And Analysis of Financial Condition or Plan of Operation (“MD&A”) contained in our Form 10-KSB for the year ended December 31, 2005. Certain statements in the following MD&A are forward looking statements. Words such as “expects”, “anticipates”, “estimates” and similar expressions are intended to identify forward looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

GENERAL

DESCRIPTION OF BUSINESS

EarthBlock Technologies, Inc. a Nevada Corporation was formerly Terra Block International, Inc., having been renamed effective February 11, 2005, (the “Company” or “EarthBlock”) was formerly L.L. Brown International, Inc. (“L.L. Brown”). L.L. Brown was originally incorporated as Smart Industries, Inc. on February 19, 1997. On February 14, 2003, L.L. Brown entered into a Share Exchange Agreement with Terra Block Consolidated. The Agreement provides for 100% of the shares of Terra Block Consolidated to be acquired by L.L. Brown in exchange for shares of common stock of L.L. Brown; for the establishment of a new Board of Directors consisting of Terra Block Consolidated directors; and, with total issued and outstanding common shares of the Company immediately after the closing of 10,000,000. The Company’s former subsidiary, LLBA has been spun off, leaving Terra Block Consolidated as the sole operating subsidiary of the Company after effecting the Agreement.

INTRODUCTION

EarthBlock Technologies, Inc. uses compressed earth blocks in its building system to construct a variety of structures both commercial and residential, including warehouses, office buildings, outbuildings, retail stores, various types of walls and residences from expensive custom homes to low income housing.

The construction method is simple; utilizing properly mixed soil compressed into dense, non-fired, uniform building blocks at the building site. The blocks don’t require curing and are stacked on a proper foundation using thin slurry between each layer. A comprehensive bonding takes place between the blocks and results in a block-to-block bond, not a block-to-mortar bond as in concrete hollow block construction. This comprehensive bonding results in a monolithic structure and a block-to-block strength with very high shearing strength. Completed walls require a bond beam on top before the roof is installed. Completed walls receive a stucco finish. The system is fast, a single machine can produce over 3,800 blocks per day and wall construction can be completed with unskilled labor.

The blocks are strong having compressive strength between 1,000 - 1,600 psi without any additives. Building codes in the United States require a non-fired masonry block to have a compressive strength of 300 psi.

The Company’s goal is to become the leading provider of durable, structurally sound, low cost, and environmentally friendly, residential and commercial buildings in the world.

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COMPRESSED EARTH BLOCK CONSTRUCTION

The Company’s building system makes possible the large-scale construction of low cost, affordable, energy-efficient homes as well as a variety of commercial structures. EarthBlock’s suppliers have perfected machines that convert our most abundant raw material (common soil) into one of our most needed building components. These portable machines convert ordinary earth on a building site, into rock-hard, durable blocks, used in construction. The machine can be towed to a site by a normal pick-up truck or SUV. It takes the soil, which is already there in abundance and converts it into strong, stable building blocks. There is no material cost and no freight expense. The system utilizes low skilled labor to construct the walls and it’s fast as the blocks do not require curing.

The Company uses these blocks to build structures that have the following characteristics:

- The raw material - dirt - is readily available at the job site.

- No expensive additives required

- Skilled labor is not required for construction. Blocks are simply plumbed and stacked which reduces labor cost significantly.

- Excellent thermal performance, reducing heating and cooling costs.

- Low maintenance.

- Long lasting and durable.

- Non-toxic- materials are completely natural and don't out-gas toxic chemicals.

- Sound resistant.

- Fire resistant - earthen walls don't burn.

- Insect resistant - the walls are solid and very dense, discouraging insects.

- Very strong - highly resistant to extreme wind conditions as found in hurricanes and tornadoes.

- The monolithic walls and concrete bond beam create a structure very resistant to earthquakes.

CERTAIN RISK FACTORS

GOING CONCERN RISK

We have had and could have losses, deficits and deficiencies in liquidity, which could impair our ability to continue as a going concern.

In Note # 7 to our consolidated financial statements, our independent auditors have indicated that certain factors raise substantial doubt about our ability to continue as a going concern.

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The ability of the Company to continue as a going concern is dependent upon generating sufficient cash flow to conduct operations and obtaining additional capital and financing. Any financing activity is likely to result in significant dilution to current shareholders.

The Company’s strategic plan for dealing with its insufficient cash flow is currently being developed, and may include additional private placements of the Company’s common stock, the abandonment of unprofitable projects and the exchange of common stock for settlement of vendor accounts. There can be no assurance that any of the plans developed by the Company will produce cash flows sufficient to overcome current liquidity problems.

The Company’s long-term viability as a going concern is dependent on certain key factors, as follows:

- The Company’s ability to obtain adequate sources of outside financing.

- The Company’s ability to ultimately achieve adequate profitability and cash flows necessary to sustain continuing operations.

IMPLEMENTATION OF BUSINESS STRATEGY DEPENDENT ON ADDITIONAL FINANCING

The Company’s management and auditor have raised grave concerns relative to the Company’s financial ability to continue as a going concern. Management is and has been actively seeking solutions to the Company’s current financial dilemma and lack of adequate working capital and will continue to do so. However, unless the Company can find a solution to this problem, management will be facing a likelihood of selling the Company, shutting down operations, or declaring bankruptcy.

In search of a solution, the Company is actively pursuing alliances, mergers, licensing arrangements and joint venture relationships, including entities in which current management has an ownership interest, which will allow the Company to continue operation. Any business relationship entered into will likely result in significant dilution of ownership to the shareholders with no assurance of successful continuation of the business of the Company. Any such transactions may lead to changes in control, changes in future plans and ultimately the Company no longer trading on the NASDAQ Bulletin Board.

Further, as the Company requires working capital, sources of such capital may have onerous requirements which will likely result in significant dilution and further indebtedness. The company may be required to reverse or forward split its stock in order to satisfy a potential investor, and may likely increase the number of its authorized shares providing a potential for additional dilution.

GOVERNMENTAL REGULATION

We are subject to general business regulations, including Federal and state construction, environmental and hazardous material handling regulations. In other countries in which we operate, we may be subject to additional regulations as well.

NEW PROJECTS.

The Company may undertake one or more new projects worldwide without limitation. Management may fail to accurately gauge conditions prior to undertaking a new project, and therefore may not achieve anticipated results from a new project. If this were to occur, the Company may experience lower cash flow from operations. To the extent that the Company incurs debt to finance a portion of the capital costs of a new project, the cash flow from the new project may be inadequate to cover the debt service.

WEATHER CONDITIONS

Due to the fact that a substantial portion of our revenues may be derived from construction operations, our business operations, revenues and operating income could be negatively affected by weather phenomenon such as but not limited to, hurricanes, monsoon rain seasons, droughts, excessive heat, wind-storms etc. Such weather phenomena could interfere with operations and disrupt delivery schedules and revenue streams. In addition, occurrences like those described above could negatively impact our customer’s ability to pay us, or interfere with financing operations within a specific region.

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INTERNATIONAL

Foreign sales are expected to account for a portion of sales and revenue. Sales of products and services obtained outside the United States are typically negotiated, invoiced and paid in local currency. Changes in exchange rates may also adversely affect the ability of customers to purchase the Company’s products. Economic instability may have an adverse effect on the Company’s foreign sales. In addition, the Company’s international business strategy may require it to make significant investments outside of the United States.

FORWARD-LOOKING INFORMATION

The statements contained herein and other information contained in this report maybe based, in part, on management’s estimates, projections, plans and judgments. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. In this report, the words “anticipates”, “believes”, “expects”, “intends”, “future”, “plans”, “targets” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on the forward-looking statements contained herein. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that may arise after the date hereof. Additionally, these statements are based on certain assumptions that may prove to be erroneous and are subject to certain risks including, but not limited to, The Company’s dependence on limited cash resources, its dependence on certain key personnel within the Company, and its ability to raise additional capital. There are many companies participating in the building industry, many with resources greater than the Company. Greater competition for profitable operations can increase prices and make it more difficult to develop project at reasonable multiples of cash flow. The Company believes that it will be able to compete in this environment and will be able to find attractive investments; however, it is not possible to predict competition or the effect this will have on the Company’s operations. The Company’s operations are also significantly affected by factors, which are outside the control of the Company, including environmental and governmental regulations, as well as weather in the area of the Company’s operations. Accordingly, actual results may differ, possibly materially, from the predictions contained herein.

Item 3. Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective.

No change in our internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 

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PART II

Pursuant to the Instructions on Part II of the Form 10-QSB, Items 1, 3 and 5 are omitted.

Item 2. Changes in Securities

None

Item 6 —Exhibits and Reports on Form 8-K

(A) Exhibits

Exhibit 31.1  — Certification of Chief Executive Officer of EarthBlock Technologies, Inc. required by Rule 13a — 14(1) or Rule 15d — 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2  — Certification of Chief Financial Officer of EarthBlock Technologies, Inc. required by Rule 13a — 14(1) or Rule 15d — 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 — Certification of Chief Executive Officer of EarthBlock Technologies, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

Exhibit 32.2 — Certification of Chief Financial Officer of EarthBlock Technologies, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

(B) Reports on Form 8-K

None

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SIGNATURES

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

November 15, 2007
	EARTHBLOCK TECHNOLOGIES, INC. BY: /s/ Gregory A. Pitner Gregory A. Pitner CEO and Chairman

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