Essential Innovations Technology (ESIV) 10-Q 2014 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended January 31, 2014
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ___________ to ___________
Commission File Number 000-10822
Essential Innovations Technology Corp.
(Exact name of registrant as specified in its charter)
Nevada		88-0492134
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
15/F, Radio City
505-511 Hennessy Road, Causeway Bay, Hong Kong
(Address of principal executive offices)		(Zip Code)
+852 2910-7828
(Registrant’s telephone number)
n/a
(Former name, former address and former fiscal year, if changed since last report)

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.

þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an 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 o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company þ

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

o Yes þ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  As of March 17, 2014, the issuer had one class of common stock, with a par value of $0.001, of which 23,452,445 shares were issued and outstanding.

TABLE OF CONTENTS

		Page
	PART I—FINANCIAL INFORMATION
Item 1:	Financial Statements:
	Unaudited Balance Sheets as at January 31, 2014, and
	October 31, 2013	3
	Unaudited Statements of Operations for the
	Three Months Ended January 31, 2014 and 2013	4
	and for the period from commencement of development stage, November 1,
	2009, to January 31, 2014
	Unaudited Statements of Cash Flows for the
	Three Months Ended January 31, 2014 and 2013	5
	and for the period from commencement of development stage, November 1,
	2009, to January 31, 2014
	Notes to Financial Statements (Unaudited)	6
Item 2:	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations	10
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	12
Item 4:	Controls and Procedures	12
	PART II—OTHER INFORMATION
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 5:	Other Events	12
Item 6:	Exhibits	12
	Signatures	13

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PART I—FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

ESSENTIAL INNOVATIONS TECHNOLOGY CORP
(a development stage enterprise)
Balance Sheets
January 31, 2014 and October 31, 2013
(unaudited)
	January 31,			October 31,
	2014			2013
Assets
Current assets:
Cash	$	4,217			82,424
Total current assets		4,217			82,424
Total assets	$	4,217			82,424
Liabilities and Stockholders' Deficiency
Current liabilities:
Accounts payable	$	371,544			372,872
Accrued expenses		70,000			82,500
Accrued compensation		10,000			10,000
Amounts due to stockholders		35,763			49,570
Current portion of long term debt		491,299			491,299
Total current liabilities		978,606			1,006,241
Stockholders' Deficiency
Preferred stock:
$0.001 par value, authorized 10,000,000 shares,
issued and outstanding  nil shares (2013 - nil)		-			-
Common stock:
$0.001 par value, authorized 500,000,000 shares,
issued and outstanding 23,452,445 shares (2013 - 23,452,445)		23,453			23,453
Additional paid-in capital		3,186,940			3,186,940
Accumulated deficit		(1,849,309	)		(1,849,309	)
Deficit accumulated during development stage		(2,335,473	)		(2,284,901	)
Total stockholders' deficiency		(974,389	)		(923,817	)
Total liabilities and stockholders' deficiency	$	4,217			82,424
See accompanying notes to financial statements

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ESSENTIAL INNOVATIONS TECHNOLOGY CORP
(a development stage enterprise)
Statements of Operations
For the Three Months Ended January 31, 2014 and 2013 and for the period
from commencement of development stage, November 1, 2009,
to January 31, 2014
(unaudited)
	Three months ended January 31, 2014			Three months ended January 31, 2013			cumulative from commencement of development stage, November 1, 2009, to January 31, 2014
Revenue	$	-		$	-		$	-
Expenses:
General and administrative		44,187			79,636			787,696
Marketing		-			-			1,280,838
Impairment loss		-			-			260,068
Total operating expenses		44,187			79,636			2,328,602
Loss from operations		(44,187	)		(79,636	)		(2,328,602	)
Interest expense		(6,385	)		(6,443	)		(109,164	)
Gain on debt forgiveness		-			-			102,293
Net Loss	$	(50,572	)	$	(86,079	)	$	(2,335,473	)
Net loss per share
Basic and diluted net loss per share	$	(0.00	)	$	(0.00	)
Weighted average number of shares outstanding
Basic and diluted		23,452,445			17,332,445
See accompanying notes to financial statements

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ESSENTIAL INNOVATIONS TECHNOLOGY CORP
(a development stage enterprise)
Statements of Cash Flows
For the Three Months Ended January 31, 2014 and 2013 and for the period
from commencement of development stage, November 1, 2009,
to January 31, 2014
(unaudited)
	Three months ended January 31, 2014			Three months ended January 31, 2013			cumulative from commencement of development stage, November 1, 2009, to January 31, 2014
Cash flows from operating activities:
Net loss	$	(50,572	)	$	(86,079	)	$	(2,335,473	)
Impairment loss		-			-			260,068
Adjustments to reconcile net loss for the period to
net cash used in operating activities:
Common stock issued to related parties for services received		-			-			150,000
Common stock issued for services received		-			-			1,355,300
Options issued for services received		-						39,838
Gain on forgiveness of debt		-			-			(102,293	)
Changes in assets and liabilities:
Accounts payable		(1,328	)		17,237			12,014
Accrued expenses		(12,500	)		13,750			130,000
Accrued compensation		-			25,787			289,787
Net cash used in operating activities		(64,400	)		(29,305	)		(200,759	)
Cash (used) provided by financing activities:
Proceeds received for common stock		-			-			147,500
Advances from stockholders, net		(13,807	)		29,365			57,476
Net cash (used) provided by financing activities		(13,807	)		29,365			204,976
(Decrease) increase in cash during the period		(78,207	)		60			4,217
Cash at beginning of the period		82,424			146			-
Cash at end of the period	$	4,217		$	206		$	4,217
See accompanying notes to financial statements.

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ESSENTIAL INNOVATIONS TECHNOLOGY CORP
(a development stage enterprise)
Statements of Cash Flows (continued)
For the Three Months Ended January 31, 2014 and 2013 and for the period
from commencement of development stage, November 1, 2009,
to January 31, 2014
(unaudited)
Supplementary Information:
	Three months ended January 31, 2014		Three months ended January 31, 2013		cumulative from commencement of development stage, November 1, 2009, to January 31, 2014
Cash paid for:
Income taxes	$	-	$	-	$	-
Interest	$	-	$	-	$	-
Non-cash transactions:
Common stock issued for settlement of amounts owing	$	-	$	-	$	184,341
Common stock issued for settlement of accrued remuneration		-		-		1,055,925
Intellectual property acquired for common stock, options
and committment for future cash payments		-		-		260,068
See accompanying notes to financial statements.

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NOTES TO FINANCIAL STATEMENTS

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

Organization

The company has secured exclusive distribution rights to represent equipment manufactured by one of China's top HVAC (heating, ventilation and air conditioning) manufacturers, Mammoth China, for the countries of the Philippines, Dubai and the UAE. Such products and technologies represented include, geothermal and water source heat pumps, commercial roof top units, fan coils and variable air volume systems.In addition, the Company is endeavoring to facilitate the establishment of an internationally recognized industry association (IGSHPA – the International Ground Source Heat Pump Association), in each of these countries to enhance certain product reputation and credibility. The Company furthermore continues with development and testing of the unique and disruptive 'Eximius Technologies' to which it owns the exclusive worldwide rights.

Development Stage

The Company is devoting substantially all of its efforts on establishing the business and principal operations have not commenced. All losses accumulated since inception of the development stage have been considered as part of the Company’s development stage activities.

The Company re- entered the development stage effective November 1, 2009.

Interim Period Financial Statements

The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the Securities and Exchange Commission’s instructions.  Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements.  The results of operations reflect interim adjustments, all of which are of a normal recurring nature and, in the opinion of management, are necessary for a fair presentation of the results for such interim period.  The results reported in these interim financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year.  Certain information and note disclosure normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations.  These unaudited interim financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report for the year ended October 31, 2013,as filed with the Securities and Exchange Commission on February 13, 2014.

Going Concern

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

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Basis of presentation 

These financial statements have been prepared in accordance accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Comprehensive Income (Loss)

The Company has no components of other comprehensive income (loss) and accordingly, no statement of comprehensive income (loss) is included in the accompanying financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the fiscal year. The Company bases its estimates on historical experience, current conditions and on other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.

Financial Instruments

The Company has the following financial instruments: cash, accounts payable, accrued expenses and compensation,  and amounts due to stockholders. The carrying value of these financial instruments approximates their fair value due to their liquidity or their short-term nature.

Recent Accounting Pronouncements

The Company reviews recently adopted and proposed accounting standards on a continual basis.   The Company does not expect any new accounting pronouncements will have  a material impact on the Company’s financial position, results of operations, or cash flows.

Note 2. Term Loan

The foreclosure of the Company’s operations and assets relating to the business of manufacture, sales and installation of geo exchange heat products and technology on March 27, 2009 were in satisfaction of $2,413,070 owing to a secured lender. The Company still owes $491,299 to a secured lender.  By agreement, the secured lender has agreed that there will be no further interest, penalties or fees charged and that the Company has until March 31, 2014 to negotiate a settlement of this debt with the secured lender. The debt is secured by a charge over all the assets of the Company.

Note 3. Related-Party Transactions and Balances

During the three months ended January 31, 2014 and 2013 stockholders of the Company advanced $4,420 and $29,365, respectively and were repaid $18,227 and $nil, respectively. The balance owing as at January 31, 2014 of $35,763 is included in advances due to stockholders.

An entity, related by common ownership to two shareholders of the Company, has provided consulting services in the amount of $7,500 and $15,000 during the respective three months ended January 31, 2014 and 2013. The balance owing as at January 31, 2014 of $70,000 is included in accrued expenses

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Note 4. Share Capital

Preferred Stock

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

No shares of preferred stock are issued and outstanding as of January 31, 2014 and 2013.

Common Stock

The Company is authorized to issue 500,000,000 shares of common stock, par value of $0.001.

No shares were issued during the three months ended January 31, 2014.

For additional details of stock issuances prior to the three months ended January 31, 2014 please see the Form 10-K for the fiscal year ended October 31, 2013 filed with the Securities Exchange Commission on February 13, 2014.

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 ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the accompanying unaudited financial statements for the three month periods ended January 31, 2014 and 2013, and for the period from commencement of development stage, November 1, 2009, to January 31, 2014 and our annual report on Form 10-K for the year ended October 31, 2013, including the financial statements and notes thereto.

Forward-Looking Information May Prove Inaccurate

This report contains statements about the future, sometimes referred to as “forward-looking” statements.  Forward-looking statements are typically identified by the use of the words “believe,” “may,” “could,” “should,” “expect,” “anticipate,” “estimate,” “project,” “propose,” “plan,” “intend,” and similar words and expressions.  Statements that describe our future strategic plans, goals, or objectives are also forward-looking statements.

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

Introduction

During the three month periods ended January 31, 2014 the Company continued efforts to create business opportunities in markets for which is has secured exclusive distribution rights to represent equipment manufactured by one of China's top heating, ventilation, and air conditioning (“HVAC”) manufacturers, Mammoth China (Shanghai) Zheijiang Ltd. These countries include the Philippines, Dubai and the UAE.

In making such active efforts, the Company continues to seek to provide potential clients, primarily in the commercial and residential construction industry, with design consulting services that can employ highly innovative energy system implementation practices. Company expertise includes an internalized process of planning, designing, engineering, equipment specifying and financial system operational modeling that will ultimately provide long-term economic advantages and overall environmental sustainability. The Company continues to undertake direct dialogue with land developers and government organizations that have knowledge of our high-level of expertise and successful track record in the sector and that are seeking specifically to apply and deploy renewables and green technologies in their projects.

During the quarter ended January 31, 2014, the Company began negotiations with a construction management company in the Philippines interested in working in conjunction with the Company to sell, market and install the Mammoth technologies in the Philippine marketplace.  This company also has business activities in the Middle East, in particular, in Dubai, such that discussions and negotiations with this organization have included the potential for future working activities in such markets as well.  At present this construction management company is undergoing due diligence of the Mammoth product offering represented by the Company, while at the same time is conducting its own assessment of the overall market opportunity in the Philippines for the sales and installation of the HVAC equipment within the product line.

The Company believes these on-going negotiations could result in a formalized working relationship being announced in Q2 or Q3 of this fiscal year.

During Q1, the Company’s sole officer and director t received an invitation to speak at a large HVAC conference in country of India in February 2014, ACREX, 2014 held in New Delhi.  As such, in furtherance of continuing to make the greatest efforts possible to promote the overall expertise of the Company in particular in the specific industry field of Geothermal heating and cooling systems, the company CEO conducted a highly attended and well-received 3 hour presentation at the conference in late February 2014.  The Company now has been presented a number of different project opportunities in India in which design consulting and equipment supply opportunities exist.

Throughout the remainder of the fiscal year, the Company intends to continue to develop relationships it has made and the ensuing associated project and business opportunities in both current and new target markets throughout the Asian and Middle-Eastern marketplaces.

10

Results of Operations

Comparison of the Three Months Ended January 31, 2014,

with the Three Months Ended January 31, 2013

We had no gross revenue for the three month periods ended January 31, 2014 and 2013.

Our general and administrative expenses from continuing operations for the three months ended January 31, 2014, were $44,187 as compared to $79,636 for the comparable period ended January 31, 2013.  The decrease is primarily due a reduction in consulting services.

Overall, we have a net loss of $50,572 for the three months ended January 31, 2014, as compared to a net loss of $86,079 in the corresponding three months of the preceding year.

Liquidity and Capital Resources

As of January 31, 2014, our current assets were $4,217, as compared to $82,424 at October 31, 2013.  As of January 31, 2014, our current liabilities were $978,606, as compared to $1,006,241 at October 31, 2013.

Operating activities used net cash of $64,400 for the three months ended January 31, 2014, as compared to use of $29,305 for the three months ended January 31, 2013.

Net cash of $13,807 was used by financing activities during the three months ended January 31, 2014, as compared to $29,365 net cash provided by financing activities during the comparable three months ended January 31, 2013.

Management intends to renegotiate the terms of the long-term debt with the holder prior to March 31, 2014.

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

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ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this quarterly report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.  Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officers (our “Certifying Officers”) , as appropriate, to allow timely decisions regarding required disclosure.  Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of January 31, 2014, pursuant to Rule 13a-15(b) under the Exchange Act.  Based upon that evaluation, our Certifying Officers concluded that, as of January 31, 2014, our disclosure controls and procedures were not effective.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended January 31, 2014, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

       PART II—OTHER INFORMATION

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

Not applicable

ITEM 5.  OTHER EVENTS

Not applicable

ITEM 6.  EXHIBITS

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

Exhibit Number*	Title of Document	Location
Item 31	Rule 13a-14(a)/15d-14(a) Certifications
31.01	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14	Attached
Item 32	Section 1350 Certifications
32.01	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer) and (Chief Financial Officer)	Attached
Item 101	Interactive Data File
101	Interactive Data File	Attached

_______________

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

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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.

	Registrant
	ESSENTIAL INNOVATIONS TECHNOLOGY CORP.
March 17, 2014	By:	/s/ JASON MCDIARMID
		JASON MCDIARMID
		President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director
		(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

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