ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
Our main production facility is located at 4235 Commerce Street in the Strand Industrial Park, Little River, South Carolina. The building is approximately 12,000 square feet and is located on two lots. We agreed to lease this facility commencing on January 1, 2006 for a period of three (3) years with annual rent of $73,791 in 2006 and $71,291 in 2007 and 2008.
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our annual meeting of stockholders on December 21, 2007. Business conducted at the meeting included the following proposals:
1.
To approve the reincorporation by merger of IET into a newly-formed, wholly-owned Nevada subsidiary that would survive the merger. This merger was intended to change IET’s state of incorporation from Delaware to Nevada;
2.
To approve an amendment to IET’s governing documents to establish a classified Board of Directors with staggered terms;
3.
To elect a new Board of Directors for IET, to serve in staggered terms or until their successors have been elected and qualified (the nominations were for William E. Prince, E. Wayne Kinsey, III, David N. Harry, Marion C. Sofield, and Dr. Valgene Dunham);
4.
To reaffirm the appointment of Weaver & Martin, LLC as IET’s independent auditors for the next year.
Each share of Common Stock was entitled to one vote. Only stockholders of record at the close of business on November 6, 2007, were entitled to vote. The number of outstanding shares at the time was 68,010,467 held by approximately 163 stockholders. The required quorum of stockholders was present at this meeting.
Votes to change the domicile of the Company from Delaware to Nevada:
Proposal 1
For
Against
Withheld or Broker Non-Votes
Change of Domicile
35,904,984
41,833
32,063,650
Votes to approve an amendment to the Company's governing documents to establish a classified Board of Directors with staggered terms:
Proposal 2
For
Against
Withheld or Broker Non-Votes
Approval of a Classified Board
35,514,674
432,143
32,063,650
Votes on the election of a new director were as follows:
Director
For
Against
Withheld or Broker Non-Votes
William E. Prince
49,426,701
18,583,766
E. Wayne Kinsey III
49,397,344
18,613,123
David N. Harry
49,397,314
18,613,153
Marion C. Sofield
49,404,264
18,606,203
Dr. Valgene Dunham
49,445,394
18,565,073
PART II
ITEM 5.
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
Our Common Stock is traded in the over-the-counter securities market through the Financial Industry Regulatory Authority ("FINRA") Automated Quotation Bulletin Board System, under the symbol “IEVM”. We have been eligible to participate in the OTC Bulletin Board since July 19, 2000 under the trading symbol “NTUH”. On June 4, 2004, our trading symbol changed in conjunction with our name change. The following table sets forth the quarterly high and low bid prices for our Common Stock during our last two fiscal years, as reported by a Quarterly Trade and Quote Summary Report of the OTC Bulletin Board. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
Holders of Common Stock
As of March 24, 2008, we had approximately 152 stockholders of record of the 68,070,467 shares outstanding. The closing bid stock price on March 24, 2007 was $0.08.
Dividends
The Board of Directors has not declared any dividends due to the following reasons:
1.
The Company has not yet adopted a policy regarding payment of dividends;
2.
The Company does not have any money to pay dividends at this time;
3.
The declaration of a cash dividend would result in an impairment of future working capital; and
4.
The Board of Directors will not approve the issuance of a stock dividend.
Securities Authorized for Issuance under Equity Compensation Plans
2002 Stock Option Plan
The following description applies to the stock option plan which we adopted in July of 2002; As of December 31, 2007, 1,075,000 options have been granted under this plan.
We have reserved for issuance an aggregate of 2,000,000 shares of common stock under our 2002 Stock Option Plan. This plan is intended to encourage directors, officers, employees and consultants to acquire ownership of common stock. The opportunity so provided is intended to foster in participants a strong incentive to put forth maximum effort for our continued success and growth, to aid in retaining individuals who put forth such efforts, and to assist in attracting the best available individuals to the Company in the future.
Officers (including officers who are members of the board of directors), directors (other than members of the stock option committee to be established to administer the stock option plan) and other employees and consultants and its subsidiaries (if established) will be eligible to receive options under the stock option plan. The committee will administer the stock option plan and will determine those persons to whom options will be granted, the number of options to be granted, the provisions applicable to each grant and the time periods during which the options may be exercised. No options may be granted more than ten years after the date of the adoption of the stock option plan.
Non-qualified stock options will be granted by the committee with an option price equal to the fair market value of the shares of common stock to which the non-qualified stock option relates on the date of grant. The committee may, in its discretion, determine to price the non-qualified option at a different price. In no event may the option price with respect to an incentive stock option granted under the stock option plan be less than the fair market value of such common stock to which the incentive stock option relates on the date the incentive stock option is granted.
Each option granted under the stock option plan will be exercisable for a term of not more than ten years after the date of grant. Certain other restrictions will apply in connection with this plan when some awards may be exercised. In the event of a change of control (as defined in the stock option plan), the date on which all options outstanding under the stock option plan may first be exercised will be accelerated. Generally, all options terminate 90 days after a change of control.
Consultant and Employee Stock Compensation Plan
Effective August 27, 2003, we adopted a Consultant and Employee Stock Compensation Plan. The maximum number of shares that may be issued pursuant to the plan is 2,500,000 shares. As of December 31, 2007, 2,398,000 shares have been granted under this plan.
Consultant and Employee Stock Compensation Plan
Effective January 21, 2004, we adopted another Consultant and Employee Stock Compensation Plan. The maximum number of shares initially available pursuant to the plan was 500,000 shares. On December 27, 2004, we amended the compensation plan to make available an additional 4,000,000 shares of common stock. As of December 31, 2007, 3,855,684 shares have been granted under this plan.
Equity Compensation Plans Information
We currently maintain equity compensation plans to allow the Company to compensate employees, directors, consultants and certain other persons providing bona fide services to the Company or to compensate officers, directors and employees for accrual of salary, through the award of our common stock. The following table sets forth information as of December 31, 2007 regarding outstanding shares granted under the plans, warrants issued to consultants and options reserved for future grant under the plans.
(1)
Includes 925,000 options from the 2002 plan, 102,000 shares from the 2003 plan and 144,316 shares from the 2004 plan, available for issuance.
These plans are intended to encourage directors, officers, employees and consultants to acquire ownership of common stock. The opportunity so provided is intended to foster in participants a strong incentive to put forth maximum effort for its continued success and growth, to aid in retaining individuals who put forth such effort, and to assist in attracting the best available individuals to the Company in the future.
Recent Sales of Unregistered Securities
On November 2, 2007, we issued 5,000,000 shares of common stock to Benchmark Performance Group Inc. pursuant to the Stock Acquisition Agreement dated June 20, 2007, for cash totaling $500,000. 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 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 March 14, 2008, we issued 60,000 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 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.
Issuer Purchases of Equity Securities
The Company did not repurchase any of its equity securities during the fourth quarter ended December 31, 2007.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW AND OUTLOOK
Integrated Environmental Technologies, Ltd. has 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 Coastal Carolina University, Clemson University, and independent laboratories;
•
Developing a relationship and entering into an agreement with Benchmark;
•
Researching market application areas and identifying and establishing distributorship agreements;
•
Continuing to maintain a relationship with Clemson University for research assistance on the agricultural side of the 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.
We have incurred losses since inception. For the year ended December 31, 2007, we had a net loss of $1,950,182 as compared to a net loss of $1,610,310 for the year ended December 31, 2006. 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 the date of this filing, three installments ($1,000,000) 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 solution for use in Oilfield Applications to Benchmark.
Results of Operations for the Fiscal Year Ended December 31, 2007 and 2006
The following table summarizes selected items from the statement of operations at December 31, 2007 compared to December 31, 2006.
SALES AND COST OF GOODS SOLD:
Sales
Our sales for the fiscal year ended December 31, 2007 were $411,179 compared to sales of $434,304 in the fiscal year ended December 31, 2006. This resulted in a decrease in sales of $23,125, or 5%, from the same period a year ago. We believe that our products are gaining recognition in the marketplace which will result in increased sales. Oilfield efforts have shifted because of our agreement with Benchmark. New markets are being developed by Benchmark, and oilfield industry sales should increase in future quarters as a result.
Cost of goods sold / Gross profit percentage of sales
Our cost of goods sold for the fiscal year ended December 31, 2007 was $164,897, a decrease of $68,492, or 29% from $233,389 for the fiscal year ended December 31, 2006. The decrease in our cost of goods sold is as a result of a slight decrease in sales, completion of our FEM-cell replacement program, and experiencing some economies of scale relative to our inventory purchases. We are continuing to update and upgrade our product line and we closely monitor the cost of all of our products. Gross profit margins increased by 30% from the prior fiscal year because of the product mix of our sales and our continuous effort to become more cost-efficient.
EXPENSES:
Professional and Administrative Fees
Professional and administrative fees for the fiscal year ended December 31, 2007 were $581,948, an increase of $28,919, or 5%, from $553,029 for the fiscal year ended December 31, 2006. The increase in professional and administrative fees was the result of reducing costs associated with outside professional services and consultants. Whenever possible, we are trying to reduce outside consultants but we will still need some assistance as we do not have sufficient in-house expertise for some areas of our business.
Salary Expenses
Salary expenses for the fiscal year ended December 31, 2007 was $748,911, an increase of $129,843, or 21%, from $619,068 for the fiscal year ended December 31, 2006. The increase in salary expenses was the result of salary increases, and increased employee benefits. We expect salary expenses to increase in the future as the Company grows and as sales volume increases.
Depreciation and Amortization Expenses
Depreciation and amortization expenses for the fiscal year ended December 31, 2007 was $2,280, a decrease of $63,135, or 97%, from $65,415 for the fiscal year ended December 31, 2006. Depreciation and amortization expenses decreased because we sold our building in 2006.
Office and Miscellaneous
Office and miscellaneous expenses for the fiscal year ended December 31, 2007 was $485,461, a decrease of $52,136, from $537,597 for the fiscal year ended December 31, 2006. The decrease in office and miscellaneous was as a result of having well-stocked our office and the lack of need for one-time equipment purchases during this period of time.
Loss from Operations
The loss from operations for the fiscal year ended December 31, 2007 was $1,572,318, versus a loss from operations of $1,574,194 for the fiscal year ended December 31, 2006, a change in loss from operations of $1,874. The decrease in the loss from operations in 2007 was the result of decreases in depreciation and amortization and office and miscellaneous expenses.
Interest Expense
Interest expense for the fiscal year ended December 31, 2007 were $377,864 as compared to $39,596 for the same period in 2006. Our interest expense in 2007 was high because of temporary high interest working capital loans and the beneficial conversion and interest accretion resulting from the sale of our convertible notes.
Net Loss
Our net loss for the fiscal year ended December 31, 2007 was $1,950,182, an increase of $340,052, or 21%, from $1,610,130 for the fiscal year ended December 31, 2006. 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, and on obtaining regulatory certifications and approvals for specific applications.
Our direct attention continues to be focused on providing our EcaFlo® devices to the markets at-hand: the oil and gas industry, food safety and agricultural applications, storm-water treatment, wastewater treatment, and other hard surface sanitation opportunities.
Liquidity and Capital Resources
The following table summarizes total current assets, total current liabilities and working capital at December 31, 2007 compared to December 31, 2006.
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 and by borrowings. 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; however, if we do not generate sufficient sales revenues, we will continue to finance our operations through equity and/or debt financings with traditional financial or industry “partners.”
As of December 31, 2007, we continue to use equity sales and debt financing 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 the date of this filing we have received $1,000,000 of the $3,500,000 equity investment.
Financing. The Company had a line of credit from Crescent Bank in the amount of $50,250 with interest at prime plus 1%. The bank required that the Company maintain a balance in a restricted account totaling $50,000. On May 17, 2007, the line of credit was paid off and closed.
On June 30, 2006, the Company borrowed $17,500 from Gary Grieco at an interest rate of 6%. On September 29, 2006, the principal balance together with accrued interest was paid in full.
The Company borrowed $50,000 from Defense Technology Systems, Inc. (“DTS”) on August 15, 2006. This note was to mature on September 30, 2006 with
$5,000 interest due at that date and interest at 10% thereafter. However, repeated attempts to contact DTS regarding repayment have been unsuccessful and the loan remains unpaid.
On August 17, 2006, the Company received an unsecured loan of $25,000 from Robert Lucas, at an interest rate of 18% per annum. The note is currently in default. 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 December 31, 2007, we have paid interest of $2,545, and the remaining principal balance of the note is $23,300.
The Company borrowed $50,000 from Michael Burstein on an unsecured 14-day note on September 27, 2006. On November 17, 2006, the Company issued 510,590 restricted shares of common stock as a penalty for default on the loan. On November 2, 2007, the Company paid $70,000 as payment in full on the principal loan amount and interest.
On October 1, 2006, the Company borrowed $25,000 from Red River Capital on an unsecured note. Repeated attempts to contact Red River Capital regarding repayment have been unsuccessful and the loan remains unpaid.
On December 21, 2006, the Company borrowed $75,000 from DaVinci-Franklin-Fund I, LLC. We agreed to repay the principal amount plus interest of $5,000 per month by March 21, 2007. We also agreed to issue 2,500,000 shares of our restricted common stock to DaVinci as collateral (issued on July 12, 2007). Pursuant to the note agreement, the Company issued 250,000 shares of common stock on April 3, 2007 as liquidated damages for the failure to repay the loan within 90 days. On August 22, 2007, the note was paid in full and on August 28, 2007, the 2,500,000 collateral shares were cancelled.
On January 23, 2007, we entered into a promissory note with Edward Marucci for the principal amount of $25,000. Pursuant to the promissory note, we promised to pay Mr. Marucci the principal sum of $25,000 together with interest of 12% per annum on the maturity date of February 6, 2007. We did not repay the note when due; consequently the interest rate increased to eighteen percent (18%) per annum. On July 12, 2007, we issued 537,500 shares of our restricted common stock to Mr. Marucci to satisfy the promissory note in full.
The Company borrowed $40,000 on January 31, 2007 from Sherri Hotton at an interest rate of 12%. On July 12, 2007, the Company issued 1,070,900 shares of common stock as payment in full for the principal and accrued interest.
On February 7, 2007, the Company borrowed $10,000 from Gary Grieco at an interest rate of 18%. The note was repaid on April 30, 2007.
On February 26, 2007 and March 5, 2007, the Company borrowed a total of $2,200 from William Prince, CEO, at an interest rate of 18%, due March 27, 2007. This loan was repaid in full on May 23, 2007. Interest and fees were waived by Mr. Prince.
The Company borrowed $40,000 on March 12, 2007 from 3GC, Ltd. at an interest rate of 30%, due April 12, 2007. A penalty of 200,000 shares was owed if the loan was not repaid. The Company issued 800,000 shares of common stock to be held by a third party to secure a loan 3GC owed to an unaffiliated third party as collateral. This loan was repaid on April 20, 2007. A stop order was placed on the collateral shares, and they will be cancelled when they are returned; however, there is currently a dispute with the person who was issued the shares as to the validity of issuance and the return of the shares.
On January 18, 2008, we entered into a loan agreement with Marion C. Sofield, our Vice President of Operations, for the principal amount of $16,000. Pursuant to the loan agreement, we promised to pay to the order of Ms. Sofield the principal amount of $16,000 plus a flat interest of $1,000. The loan and interest were repaid on January 25, 2008.
Satisfaction of our cash obligations for the next 12 months.
As of December 31, 2007, our cash balance was $72,334. Our plan for satisfying our cash requirements for the next twelve months is primarily from our agreement with Benchmark, through additional sales of our common stock, third-party financing, and/or traditional bank financing. We anticipate sales-generated income during that same period of time, but do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion through 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 anticipate incurring operating losses over the majority 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 revenues, we anticipate continuing to issue stock in exchange for loans and/or equity, which may have a substantial dilutive impact on our existing stockholders.
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 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, utilizing the recently secured “new” 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. Due to securing a new source of electrolytic cells for our EcaFlo® equipment, 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 building on several EcaFlo® models 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 toxicity testing 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 ECA 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 were able to present test results showing potential customers that aliquots of petroleum well “frac” waters that were treated with a 1% EcaFlo® device-generated anolyte solution showed total bacteria kill in less than 10 minutes. Furthering that data, our approach is to point out that these kinds of results eliminate the need for voluminous regulatory compliance paperwork to be submitted, in addition to costing less than the use of traditional biocidal chemicals that are currently put into “frac” water.
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 and Clemson University, as well as 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.
Significant changes in the number of employees.
We currently employ 10 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.
Critical Accounting Policies and Estimates
Our discussion of financial condition 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 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.
Off-Balance Sheet Arrangements.
As of December 31, 2007, 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 is material to investors.
ITEM 7A.
ITEM 7A. 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, we had three customers, which represented 52%, 11%, and 7% and 35%, 16%, and 14% of sales, respectively. We continually evaluate the creditworthiness of its customers and typically requires a deposit of 40% - 50% of the total purchase price with each EcaFlo® equipment order.
We evaluate the collectibility of accounts receivable regularly and it is their 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. As of December 31, 2007 and 2006, there was no reserve for bad debts.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules appearing on page through of this Form 10-K.
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no disagreements with our independent auditors on accounting or financial disclosures.
ITEM 9a
ITEM 9a (T).
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 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.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a- l5(f) under the Exchange Act) and for assessing the effectiveness of our internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements in accordance with United States’ generally accepted accounting principles.
Our internal control over financial reporting is supported by written policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; 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 our management and our board of directors; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this assessment, our management concluded that, as of December 31, 2007, our internal control over financial reporting was effective.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements or fraud. In addition, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.
This annual report does not include an attestation report of the Company’s registered public accounting firm, Weaver & Martin, LLC, regarding internal control
over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
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 reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Since the Annual Stockholder's Meeting on December 21, 2007, we have a classified Board of Directors. The Board of Directors currently consists of five (5) directors: two Class I directors who will hold office for a three-year term, two Class II directors who will hold office for a two-year term, and one Class III director who will hold office for a one-year term.
The officers serve at the pleasure of the Board of Directors.
Information as to our current directors and executive officers is as follows:
Duties, Responsibilities and Experience
William E. Prince has served as Chairman of the Board, Chief Executive Officer, and a Director of the Company since August 27, 2003. Presently, Mr. Prince is also the President of I.E.T., Inc. Mr. Prince served as Executive Director of the Albemarle Economic Development Commission from 1999 to August 2003. Mr. Prince was Branch and Regional Manager of Law/Gibb Group, an employee-owned international environmental engineering consulting firm, from 1996 to 1999. Mr. Prince was Vice President and Branch Manager for Froehling & Robertson, a family-owned
environmental consulting firm from 1994 to 1996. From 1990 to 1994, Mr. Prince served as Vice President for Business Development and was a principal and owner with Ragsdale Consultants, Inc., and DSA Design Group, both privately-held engineering and environmental consulting firms. From 1979 to 1990, Mr. Prince held various management positions with Law Engineering and Environmental Services, an employee-owned international consulting firm. Primary responsibilities were new ventures and company growth.
Marion Sofield has served as Secretary of the Company since April 23, 2004 and has served as a Director of the Company since August 5, 2004. Presently, Ms. Sofield is also Vice President of Operations for I.E.T., Inc. Formerly the Executive Director of Matrix Technology Alliance, Inc. (2003-2004), Ms. Sofield joined our staff to develop and implement operating systems and production capabilities that have moved the Company into a production mode. That responsibility continues as we now move into mass production mode. Ms. Sofield has eight years of experience, from 1993-2002, in economic development management and has owned and operated two successful businesses of her own. From 1983 through 1987, Ms. Sofield served as a Corporate Secretary/Treasurer for Lord-Wood, Larsen Associates, Inc., a civil engineering firm formerly located in West Hartford, Connecticut. Ms. Sofield, a 1983 graduate of Radford University, was honored in Washington, D.C. as the 2003 Business Person of the Year by the United States of America’s Business Advisory Council.
Dr. Valgene L. Dunham has served as a Director of the Company since January 19, 2004. Dr. Dunham recently retired from the position of Vice President for Grants, Contract Administration and Research Planning for Coastal Carolina University in South Carolina, and continues to serve as a liaison between Coastal Carolina University and IET on research programs. In the fall semester of 2002, Dr. Dunham served as the Special Assistant to the President of Coastal Carolina University. In the summer of 2002, Dr. Dunham served as Interim Provost of Coastal Carolina University. From 1995 through 2002, Dr. Dunham served as Dean of the College of Natural & Applied Sciences of Coastal Carolina University. In 1969, Dr. Dunham received his Ph.D. in Botany from Syracuse University in New York. In 1965, Dr. Dunham received his Masters in General Science from Syracuse University in New York.
E. Wayne Kinsey, III has served as a Director of the Company since June 21, 2007. Since 1981, Mr. Kinsey has served as President and CEO of Benchmark Performance Group, Inc. He began his career in the oilfield pumping services industry in 1975 as an equipment operator in Seagraves, Texas. By 1981, Mr. Kinsey had become Distribution Manager for Benchmark’s materials procurement, specialty blending and transportation and distribution facility in Odessa, Texas. More importantly, he had concluded by 1981 that running a successful chemicals management and supply organization - especially one serving the demanding oil and gas service industry - required much more than just an inventory of chemicals. Thus, Chemical Blending Services, Inc. was born. In the ensuing 25 years, Benchmark has grown under Mr. Kinsey's leadership from a simple “service first” chemical supplier into one of the world’s foremost developers and manufacturers of industrial and specialty chemicals,
with an emphasis on chemical products and chemical solutions for the oil well pressure pumping service industry. One thing has remained constant however - a determination and commitment to provide the customer with a level of service and technical support it can find from no other chemical supplier. In 2004, Mr. Kinsey was appointed to the Board of Directors of the Texas Enterprise Fund by Texas Speaker of the House Tom Craddick. In 1993, Mr. Kinsey worked in support of the founding of the Hillcrest School (for children with learning differences) in Midland, Texas, and he served for several years as a member of the School's Board of Directors. In 1997, Mr. Kinsey was appointed by then Governor George W. Bush to the Continuing Advisory Committee for Special Education. In 2001, he was appointed to the Advisory Board of Directors of Houston Achievement Place. A number of the patents held by Benchmark bear Mr. Kinsey’s name as an inventor.
David N. Harry has served as a Director of the Company since June 21, 2007. Mr. Harry is the Executive Vice President and Chief Technical Officer of Benchmark. He received his BS and MS from Stephen F. Austin State University and conducted work toward his doctoral in limnology and hydrology at Texas A&M University. Mr. Harry began his career as an analytical chemist in 1977. After spending two years in testing laboratories, Mr. Harry joined a major oilfield pressure pumping services company, where he served between 1979 and 1982 as a field chemist, District Engineer and then Regional Sales Engineer. After another two years as Technical Manager for an independent pressure pumping services company, Mr. Harry joined Benchmark in 1984 to assist it with its growing dry and liquid chemical blending business. Mr. Harry has been Benchmark's Chief Technical Officer since 1990, and directs all of Benchmark’s quality control, technical support and product development activities. Under his technical leadership, over 35 patents have been issued to Benchmark, nine of which bear his name as inventor. Mr. Harry is a member of the Society of Petroleum Engineers and the American Society of Quality Control.
Election of Directors and Officers.
Directors are elected to serve under a classified board: Class I directors serve 3 years, Class II directors serve two years and Class III directors serve one year. Officers are appointed to serve until the meeting of the Board of Directors following the next annual meeting of stockholders and until their successors have been elected and qualified.
No Executive Officer or Director of the Company has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring suspending or otherwise limiting him from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.
No Executive Officer or Director of the Company has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding which is currently pending.
No Executive Officer or Director of the Company is the subject of any pending legal proceedings.
Involvement in Certain Legal Proceedings
No Executive Officer or Director of the Corporation has been the subject of any Order, Judgment, or Decree of any Court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring suspending or otherwise limiting him/her from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities.
No Executive Officer or Director of the Corporation has been convicted in any criminal proceeding (excluding traffic violations) or is the subject of a criminal proceeding which is currently pending.
Audit Committee and Financial Expert
We do not have an Audit Committee. Our directors perform some of the same functions of an Audit Committee, such as: recommending a firm of independent certified public accountants to audit the annual financial statements; reviewing the independent auditors independence, the financial statements and their audit report; and reviewing management's administration of the system of internal accounting controls. The Company does not currently have a written audit committee charter or similar document.
We have no financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our start-up operations, we believe the services of a financial expert are not warranted.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports of ownership and reports of changes in ownership with the SEC. Executive officers, directors and greater-than-ten-percent beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based upon a review of the copies of such forms furnished to us and written representations from our executive officers and directors, we believe that as of the date of this filing they were all current in their filings.
Code of Ethics
A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote:
(1)
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2)
Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the Commission and in other public communications made by an issuer;
(3)
Compliance with applicable governmental laws, rules and regulations;
(4)
The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
(5)
Accountability for adherence to the code.
We have not adopted a corporate code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.
Our decision to not adopt such a code of ethics results from our having only two officers and five directors operating as the management for the Company. We believe that the limited interaction which occurs having such a small management structure for the Company eliminates the current need for such a code, in that violations of such a code would be reported to the party generating the violation.
Corporate Governance
Nominating Committee
We do not have a Nominating Committee or Nominating Committee Charter. Our Board of Directors performs some of the functions associated with a Nominating Committee. We have elected not to have a Nominating Committee in that we are an initial-stages operating company with limited operations and resources.
Director Nomination Procedures
Generally, nominees for Directors are identified and suggested by the members of the Board or management using their business networks. The Board has not retained any executive search firms or other third parties to identify or evaluate director candidates in the past and does not intend to in the near future. In selecting a nominee for director, the Board or management considers the following criteria:
1.
whether the nominee has the personal attributes for successful service on the Board, such as demonstrated character and integrity; experience at a strategy/policy setting level; managerial experience dealing with complex
problems; an ability to work effectively with others; and sufficient time to devote to the affairs of the Company;
2.
whether the nominee has been the chief executive officer or senior executive of a public company or a leader of a similar organization, including industry groups, universities or governmental organizations;
3.
whether the nominee, by virtue of particular experience, technical expertise or specialized skills or contacts relevant to the Company’s current or future business, will add specific value as a Board member; and
4.
whether there are any other factors related to the ability and willingness of a new nominee to serve, or an existing Board member to continue his service.
The Board or management has not established any specific minimum qualifications that a candidate for director must meet in order to be recommended for Board membership. Rather, the Board or management will evaluate the mix of skills and experience that the candidate offers, consider how a given candidate meets the Board’s current expectations with respect to each such criterion and make a determination regarding whether a candidate should be recommended to the stockholders for election as a Director. During 2007, the Company received no recommendation for Directors from its stockholders.
The Company will consider for inclusion in its nominations of new Board of Directors nominees proposed by stockholders who have held at least 1% of the outstanding voting securities of the Company for at least one year. Board candidates referred by such stockholders will be considered on the same basis as Board candidates referred from other sources. Any stockholder who wishes to recommend for the Company’s consideration a prospective nominee to serve on the Board of Directors may do so by giving the candidate’s name and qualifications in writing to the Company’s Secretary at the following address: 4235 Commerce Street, Little River, South Carolina 29566.
Overview of Compensation Program
The Board of Director’s (the “Board”) has responsibility for establishing, implementing and continually monitoring adherence with IET's compensation philosophy. The Board ensures that the total compensation paid to the Executives is fair, reasonable and competitive. We do not currently have a Compensation Committee.
Compensation Philosophy and Objectives
The Board believes that the most effective executive compensation program is one that is designed to reward the achievement of specific annual, long-term and strategic goals by IET, and which aligns executives’ interests with those of the stockholders by rewarding performance above established goals, with the ultimate objective of improving stockholder value. As a result of the size of IET and only having two executive officers,
the Board evaluates both performance and compensation on an informal basis. Upon hiring additional executives, the Board intends on establishing a Compensation Committee to evaluate both performance and compensation to ensure that IET maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to similarly situated executives of our peer companies. To that end, the Board believes executive compensation packages provided by IET to its executives, including the named executive officers, should include both cash and stock-based compensation that reward performance as measured against established goals.
Role of Executive Officers in Compensation Decisions
The Board makes all compensation decisions for the Executives and approves recommendation regarding equity awards to all elected officers of IET. Decisions regarding the non-equity compensation of other executive officers are made by the Board.
Setting Executive Compensation
Based on the foregoing objectives, the Board has structured IET's annual and long-term incentive-based cash and non-cash executive compensation to motivate executives to achieve the business goals set by IET and reward the executives for achieving such goals.
2007 Executive Compensation Components
For the fiscal year ended December 31, 2007, IET continued to have two executive officers, whose contracts were amended on May 30, 2007. We amended our chief executive officer's, William E. Prince, employment agreement to increase his annual salary from $74,400 to $130,000 and extended the termination date from December 31, 2009 to March 30, 2012. We also amended our executive vice president's, Marion C. Sofield, employment agreement o increase her annual salary from $72,000 to $110,000 and extended the termination date from December 31, 2009 to March 30, 2012.
No other actions too place in 2007 relative to Executive Compensation.
SUMMARY COMPENSATION TABLE
The table below summarizes the total compensation paid or earned by our executive officer William E. Prince for the last three fiscal years ended December 31, 2007, 2006 and 2005 and the total compensation paid or earned by our executive vice president of operations Marion C. Sofield for the last fiscal year ended December 31, 2007.
			SUMMARY COMPENSATION TABLE
Employment Agreements
William E. Prince. On May 30, 2007, we executed an amended employment agreement with our President and CEO, William E. Prince, wherein we extended the termination date from December 31, 2009 to March 30, 2012. Additionally, we increased Mr. Prince’s annual salary from $74,400 to $130,000, which shall be paid in equal, bi-weekly installments retroactive to April 1, 2007.
Marion C. Sofield. On May 30, 2007, we executed an amended employment agreement with our Executive Vice President, Marion C. Sofield, wherein we extended the termination date from December 31, 2009 to March 30, 2012. Additionally, we increased Ms. Sofield’s annual salary from $72,000 to $110,000, which shall be paid in equal, bi-weekly installments retroactive to April 1, 2007.
Termination of Employment
There are no compensatory plans or arrangements, including payments to be received from the Company, with respect to any person named in Cash Consideration set out above which would in any way result in payments to any such person because of his resignation, retirement, or other termination of such person’s employment with the Company or its subsidiaries, or any change in control of the Company, or a change in the person’s responsibilities following a change in control of the Company.
Compensation Committee
We currently do not have a compensation committee of the board of directors. Until a formal committee is established our entire board of directors will review all forms of compensation provided to our executive officers, directors, consultants and employees, including stock compensation.
Option Grants in Last Fiscal Year
During the year ended December 31, 2007, we granted the following options to our officers and directors:
(i)
500,000 options to our chief executive officer and a director, William E. Prince,
(ii)
250,000 options to our secretary and a director, Marion C. Sofield,
(iii)
25,000 options to our director, Dr. Valgene Dunham, and
(iv)
25,000 options to our former director, James C. Pate.
Director Compensation
All directors will be reimbursed for expenses incurred in attending Board or committee, when established, meetings. From time to time, certain directors who are not employees may receive shares of our common stock. No compensation was paid to the board of directors during the fiscal year ended December 31, 2007.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table presents information, to the best of our knowledge, about the beneficial ownership of our common stock on March 24, 2008 relating to the beneficial ownership of our common stock by those persons known to beneficially own more than 5% of our capital stock and by our directors and executive officers. The percentage of beneficial ownership for the following table is based on 68,070,467 shares of common stock outstanding.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and does not necessarily indicate beneficial ownership for any other purpose. Under these rules, beneficial ownership includes those shares of common stock over which the stockholder has sole or shared voting or investment power. It also includes shares of common stock that the stockholder has a right to acquire within 60 days after March 24, 2008 pursuant to options, warrants, conversion privileges or other right. The percentage ownership of the outstanding common stock, however, is based on the assumption, expressly required by the rules of the Securities and Exchange Commission, that only the person or entity whose ownership is being reported has converted options or warrants into shares of our common stock.
Security Ownership of Management
(1)
As used in this table, “beneficial ownership” means the sole or shared power to vote, or to direct the voting of, a security, or the sole or shared investment power with respect to Common Stock (i.e., the power to dispose of, or to direct the disposition of, a security).
(2)
Rounded to the nearest whole percentage.
(3)
Includes 500,000 options to purchase shares of our common stock at $0.12 per share (expire on December 31, 2011).
(4)
Includes 250,000 options to purchase shares of our common stock at $0.12 per share (expire on December 31, 2011).
(5)
Includes 25,000 options to purchase shares of our common stock at $0.11 per share (expire on December 31, 2011).
(6)
Benchmark Performance, Inc. was issued 10,000,000 shares of common stock pursuant to a Stock Acquisition Agreement dated June 20, 2007. Mr. Kinsey is the President and CEO of Benchmark.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPNDENCE
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, which will be paid in seven (7) installments. Of the 35,000,000 shares of common stock, 5,000,000 were issued on June 27, 2007, and 5,000,000 on November 2, 2007. 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 solution for use in Oilfield Applications to Benchmark. E. Wayne Kinsey, III, a current Director of the Company, is the President and CEO of Benchmark and David N. Harry, a current Director of the Company, is Executive Vice President and Chief Technical Officer of Benchmark.
Director Independence
The Board of Directors has not made the determination if any of its Directors are considered independent directors in accordance with the director independence standards of the American Stock Exchange. Therefore, as of the date of this filing, each director should be considered as non-independent.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
(1) AUDIT FEES
The aggregate fees billed for professional services rendered by Weaver & Martin, LLC, for the audit of our annual financial statements and review of the financial statements included in our Form 10-QSB or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for fiscal years 2007 and 2006 were $34,150 and $38,375, respectively.
(2) AUDIT-RELATED FEES
The aggregate fees billed by Weaver & Martin LLC for professional services rendered for audit related fees for fiscal years 2007 and 2006 were $0 and $0.
(3) TAX FEES
The aggregate fee to be billed by Weaver & Martin LLC for professional services to be rendered for tax fees for fiscal year 2007 was $7,650 and for fiscal year 2006 was $7,650, respectively.
(4) ALL OTHER FEES
There were no other fees to be billed by Weaver & Martin LLC for the fiscal years 2007 and 2006 other than the fees described above.
(5) AUDIT COMMITTEE POLICIES AND PROCEDURES
We do not have an audit committee.
(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Not applicable.
ITEM 15.
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
1.
The financial statements listed in the "Index to Consolidated Financial Statements" at page are filed as part of this report.
2.
Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
3.
Exhibits included or incorporated herein: See index to Exhibits.
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
8/23/04
10.8
Amendment to License and Supply Agreement with Electro-Chemical Technologies
10-QSB
9/30/04
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
8/14/06
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
Letter of Andersen, Andersen & Strong, L.C. regarding change in certifying accountant - Dated April 18, 2002
8-K
4/26/02
Certification pursuant to Section 302 of the Sarbanes-Oxley Act
X
Certification pursuant to Section 906 of the Sarbanes-Oxley Act
X
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused the report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.
By: /s/William E. Prince
William E. Prince, President
Date: March 28, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/William 			E. Prince
President, CEO, Chairman,
March 28, 2008
William E. Prince
Chief Accounting Officer
/s/Marion 			C. Sofield
Vice President of Operations,
March 28, 2008
Marion 			C. Sofield
Secretary, Director
			 /s/E. Wayne Kinsey III
Director
March 28, 2008
E. Wayne Kinsey III
/s/David 			N. Harry
Director
March 28, 2008
David N. Harry
/s/Dr. 			Valgene Dunham
Director
March 28, 2008
Dr. Valgene Dunham
Integrated Environmental Technologies, Ltd.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2007 AND 2006
PAGES
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENT OF OPERATIONS
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Integrated Environmental Technologies, Ltd.
We have audited the accompanying consolidated balance sheet of Integrated Environmental Technologies, Ltd. and subsidiary (IET) as of December 31, 2007 and 2006, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for each of the two years in the period December 31, 2007. These financial statements are the responsibility of IET’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Integrated Environmental Technologies, Ltd. and subsidiary as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses and had negative cash flows from operations that raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in the Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/Weaver & Martin LLC
Weaver & Martin LLC
Kansas City, Missouri
March 31, 2008
Integrated Environmental Technologies, Ltd.
and Subsidiary
Consolidated Balance Sheets
See notes to consolidated financial statements
Integrated Environmental Technologies, Ltd.
and Subsidiary
Consolidated Statement of Operations
See notes to consolidated financial statements.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Consolidated Statement of Stockholders’ Equity
See notes to consolidated financial statements.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Consolidated Statement of Cash Flows
See notes to consolidated financial statements.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Description of Business
All of our current operations are conducted through I.E.T., Inc. (IET), a wholly owned subsidiary. I.E.T., Inc. currently designs, manufactures, and sells EcaFlo® equipment, which utilizes the Electro-Chemical Activation (ECA) process to generate environmentally responsible EcaFlo® solutions - anolyte and catholyte - for use in managing and controlling bacteria, fungi, viruses and other unwanted microorganisms in an effective and economically beneficial manner over a variety of commercial and industrial applications.
Principles of Consolidation
The consolidated financial statements include the accounts of our wholly owned subsidiary after elimination of intercompany transactions.
Accounting Estimates
The preparation of these consolidated financial statements requires the use of estimates by management in determining assets, liabilities, revenue, and expenses and related disclosures. Actual results could differ from those estimates.
Fair Value of Financial Instruments
Our financial instruments include cash and cash equivalents, accounts receivable, and notes payable. The fair value of these instruments approximates their carrying value.
Concentration of Credit Risk
We sell products to customers in diversified industries and geographical regions. During the years ended December 31, 2007 and 2006, we had three customers, which represented 52%, 11%, and 7% and 35%, 16% and 14% of sales, respectively. We continually evaluate the creditworthiness of our customers and typically requires a deposit of 40% - 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. As of December 31, 2007 and 2006, there was no reserve for bad debts.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
Cash and Cash Equivalents
For purposes of the statements of cash flows, we define cash equivalents as all highly liquid debt instruments purchased with a maturity of three months or less, plus all certificates of deposit.
Inventories
Inventories are stated at the lower of cost or market using the first-in, first out (FIFO) method. The inventory at December 31, 2007 and 2006 consisted of materials.
Property and Equipment
Property and equipment consisting of improvements, machinery, equipment, computers, furniture, and fixtures are recorded at cost, and are depreciated using the straight-line method over their estimated useful lives. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. A summary of the estimated useful lives is as follows:
Impairment of Long-Lived Assets
We review the carrying value of long-lived assets at each balance sheet date to determine if any impairment exists. Recoverability is assessed using undiscounted cash flows based upon historical results and current projections of earnings before interest and taxes. Potential impairment is measured using discounted cash flows of future operating results based upon a rate that corresponds to our cost of capital. Impairments are recognized in operating results to the extent that carrying value exceeds discounted cash flows of future operations.
Revenue Recognition
We recognize sales revenue when title passes and all significant risks of ownership change, which occurs either upon shipment or upon delivery based on contractual terms.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
Income Taxes
We utilize the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standard No. 109, Accounting for Income Taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using the enacted tax rated in effect in the years in which the differences are expected to reverse. Recognition of deferred tax assets is limited to amounts management considers more likely than not of realization in future periods.
Loss Per Share
Basic and diluted loss per share was computed in accordance with Statement of Financial Accounting Standards No. 128. Basic loss per share is computed by dividing the net loss available to common shareholders (numerator) by the weighted average of common shares outstanding (denominator) during the period and excludes the potentially diluted common shares. Diluted net loss per share gives effect to all potential diluted common shares outstanding during a period. There were no potentially diluted common shares outstanding on December 31, 2007 and 2006.
Research and Development Costs
Research and development costs relating to both future and current products are charged to expense as incurred. These costs aggregated approximately $- and $1,066 in 2007 and 2006, respectively.
Reclassifications
Certain reclassifications have been made to prior periods to conform to current presentations.
Recent Issued Accounting Standards
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159 allows the company to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 is not expected to have a material impact on the Company’s financial position, results of operation, or cash flows.
In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements”. This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling (minority) interest in a subsidiary and for the de-consolidation of a subsidiary. It clarifies that a non-controlling
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
interest in a subsidiary is equity in the consolidated financial statements. SFAS No. 160 is effective for fiscal years and interim periods beginning after December 15, 2008. The adoption of SFAS 160 is not expected to have a material impact on the Company’s financial position, results of operation, or cash flows.
In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations”. SFAS 141 (Revised) establishes principals and requirements for how an acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. This statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective for the fiscal year beginning after December 15, 2008.
NOTE 2 - GOING CONCERN
Our financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon obtaining additional sources of capital or borrowings until we are able to attain future profitable operations. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
NOTE 3 - NOTES PAYABLE
We had a line of credit from Crescent Bank in the amount of $50,250 with interest at prime plus 1%. The bank required that we maintain a balance in a restricted account totaling $50,000. On May 17, 2007, the line of credit was paid off and closed.
On December 22, 2006, we borrowed $75,000 from DaVinci-Franklin-Fund I, LLC at an annual interest rate of 80%. Pursuant to the note agreement, we issued 250,000 shares of common stock on April 3, 2007 as liquidated damages for the failure to repay the loan within 90 days. On August 22, 2007, the note was paid in full.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
We borrowed $50,000 from Defense Technology Systems, Inc. (“DTS”) on August 15, 2006. This note was to mature on September 30, 2006 with $5,000 interest due at that date and interest at 10% thereafter. However, repeated attempts to contact DTS regarding repayment have been unsuccessful and the loan remains unpaid.
On October 1, 2006, we borrowed $25,000 from Red River Capital on an unsecured note. Repeated attempts to contact Red River Capital regarding repayment have been unsuccessful and the loan remains unpaid.
We borrowed $40,000 on January 31, 2007 from an individual at an interest rate of 12%. There was a dispute over the timing of the attempted repayment of this loan. On July 12, 2007, we issued 1,070,900 shares of common stock as payment in full for the principal and accrued interest.
On January 23, 2007, we borrowed $25,000 from an individual at an interest rate of 12%, due on February 6, 2007. On July 5, 2007, we issued 537,500 shares of common stock at a conversion rate of $.05 per share, as payment in full on the principal, and accrued interest.
We borrowed $50,000 from an individual on an unsecured 14-day note on September 27, 2006. On November 17, 2006, we issued 510,590 restricted shares of common stock as a penalty for default on the loan. Interest on the loan was $20,000. On November 2, 2007, we paid $70,000 as payment in full on the principal loan amount and interest.
On August 17, 2006, we borrowed $25,000 from an individual, which, accrued interest at a rate of 18% per annum and is unsecured. The note is currently in default. Pursuant to the note agreement, we agreed to issue 100,000 shares of common stock as a loan fee. On April 3, 2007, the shares were issued and interest expense was recorded in the amount of $6,000. The remaining principal balance of the note was $23,300 and $24,508 as of December 31, 2007 and 2006, respectively.
On June 30, 2006, we borrowed $17,500 from an individual at an interest rate of 6%. On September 29, 2006, the principal balance together with accrued interest was paid in full.
NOTE 4 - CONVERTIBLE NOTES
In 2007, we sold 702 units consisting of 10% Convertible Debentures (conversion price of $0.40 per share, convertible until January 2, 2009), 2,106,000 shares of common stock and 1,404,000 Series “C” Warrants ($0.25 per share, exercisable until December 31, 2008) for a total purchase price of $351,000. We allocated the proceeds from the units between the convertible note, common stock and warrants based on the fair market value of each instrument. The allocation was $124,461 to convertible notes, $168,749 to common stock and $57,790 to warrants.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
On May 29, 2007, we entered into a consulting agreement with John Sanders. The period of the agreement is for one year. The terms of the agreement specified payment to Mr. Sanders by issuing 50 units consisting of 50 10% Convertible Debentures (conversion price of $0.40, convertible until January 2, 2009), 150,000 shares of common stock and 100,000 Series “C” Warrants ($0.25 per share, exercisable until December 31, 2008). These units were issued June 28, 2007. The value assigned to the instruments was based on the fair market value of each and consisted of $8,766 for the convertible notes, $12,097 for the stock and $4,137 for the warrants.
In 2006 we issued $125,000 in convertible notes. We allocated the proceeds from the units between the convertible note, common stock and warrants based on the fair market value of each instrument. The allocation was $27,700 to convertible notes, $75,000 to common stock and $22,300 to warrants. The notes carried a stated interest rate of 10%, a conversion rate of $0.40 per share of common stock, and a maturity date of January 2, 2009.
We will accrete interest between the date of sale of the 2007 and 2006 convertible notes to maturity to reflect the difference between what was received for the notes and what will be paid at maturity. At December 31, 2007 and 2006, we accreted interest to expense totaling $90,739 and $10,810 respectively and the un-accreted interest was $158,180 and $43,240, respectively.
We had a beneficial conversion on the sale of the 2007 convertible notes based on the conversion price and the price of the stock at the date of sale. The expense of the beneficial conversion was $79,830.
NOTE 5 - COMMON STOCK
On July 26, 2006, we issued 540,000 shares of common stock at a conversion price of $.075 per share, to United Capital Group as payment in full for $40,500 of unpaid principal, interest, and fees associated with their loan.
On June 14, 2006, we entered into a consulting agreement with Red River Capital Partners (RRC) to provide financial advisory, capital advisory and investment banking services. The term of the agreement was 270 days, subject to extension. Fees for the services included 396,978 shares of common stock, amended on July 1, 2006 to 510,590 shares (which was issued but not delivered to RRC), monthly cash payments, and fees to be paid only if capital was raised by RRC. The value of the stock was based on the closing market price on June 28, 2006 and July 1, 2006 (the days the stock was earned) and totaled $56,165. We recorded $56,165 of professional fees in the year ended December 31, 2006. On November 30, 2006, we rescinded the 510,590 shares due to non-performance of contracted services; the shares were returned to the stock registrar and cancelled.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
On November 16, 2006, we issued 510,590 shares of restricted common stock to a shareholder that had executed a note agreement with us pursuant to the renewal of that note. A loan fee expense of $51,059 was recorded.
The Board of Directors in 2006 approved the issuance of 712,000 shares of common stock to certain employees and Directors as additional compensation. The market value of the stock on the day the shares were earned was between $0.06 and $0.13. Additional salary expense totaling $84,160 was recorded. At December 31, 2006, 168,000 shares were un-issued and subsequently issued on April 3, 2007.
During the year ended December 31, 2006, we sold 10,350,000 shares of common stock for prices ranging from $0.277 to $0.10 per share. Included in the sales of stock were 5,100,000 shares of restricted common stock to three accredited investors for a total purchase price of $136,000, all of which was paid in cash.
At December 31, 2006, we owed 100,000 shares of stock to an individual in connection with a loan that is in default. The value of the shares was $6,000 and was recorded as interest expense. The shares were issued April 3, 2007.
We issued 2,000,000 shares of common stock to United Capital Group in connection with consulting services on February 1, 2007 and have recorded professional fees in the amount of $100,000, the fair value of the services received.
On March 13, 2007, we issued 600,000 shares of common stock to 3GC, Ltd. in connection with the consulting agreement. As of December 31, 2007, professional fees in the amount of $66,000 were expensed, representing the fair value of the shares on the date of grant.
On March 26, 2007, we authorized the issuance of 130,000 shares of common stock for cash totaling $13,000.
On April 3, 2007, we issued 250,000 shares of restricted common stock to DaVinci-Franklin Fund I, LLC pursuant to its note agreement, as liquidated damages for the failure to repay the loan within 90 days from the December 21, 2006 origination date. Loan interest expense in the amount of $55,000 was recorded. Also pursuant to this note agreement, we issued 2,500,000 shares of restricted common stock to DaVinci as collateral on July 12, 2007. On August 22, 2007, the note was paid in full and on August 28, 2007, the 2,500,000 collateral shares were cancelled.
On April 3, 2007, we issued 268,000 shares of restricted common stock that was un-issued as of December 31, 2007.
During the year ended December 31, 2007, we sold 702 units consisting of 10% Convertible Debentures (conversion price of $0.40, convertible until January 2, 2009),
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
2,106,000 shares of common stock, and 1,404,000 Series “C” Warrants ($0.25 per share, exercisable until December 31, 2008) for a total purchase price of $351,000 (see Note 4).
On May 29, 2007, the Company entered into a consulting agreement with John Sanders. The period of the agreement is for one year. The terms of the agreement specified payment to Mr. Sanders by issuing 50 units consisting of 50 10% Convertible Debentures (conversion price of $0.40, convertible until January 2, 2009), 150,000 shares of common stock and 100,000 Series “C” Warrants ($0.25 per share, exercisable until December 31, 2008). (See Note 4). The services are to be provided over a one year period and for the year ended December 31, 2007 we have recorded $5,816 as professional fee expense and the unamortized cost were $10,418.
We entered into a consulting agreement with Mr. Joel Brownstein and Mr. Peter Gianoukas, which was cancelled by the Company in the second quarter. The Company issued 18,842 shares to each person and recorded a consulting expense of $2,813 based on the fair market value of the shares on the date of the agreement.
On June 20, 2007, we 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, and December 31, 2007 an additional 10,000,000 shares were issued pursuant to the agreement resulting in total proceeds of $1,000,000. The remaining 20,000,000 shares will be issued pursuant to the agreement under the terms as follows: (1) Benchmark will issue three equal payments in the amount of $500,000 every six months beginning on or before April 30, 2008 and continuing through 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, we 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, we 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 our total outstanding equity. Benchmark will be able to purchase these additional shares at any time through October 31, 2009, at an
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
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.
On July 5, 2007, we issued 1,070,900 shares of common stock at a conversion rate of $.04 per share, for a total price of $42,386, as payment in full on a loan from an individual.
On July 5, 2007, we issued 537,500 shares of common stock at a conversion rate of $.05 per share, for a total price of $26,875, as payment in full on a loan from an individual.
On July 31, 2007, we issued 573,000 shares of common stock as payment for accrued professional fees in the amount of $57,300.
On August 9, 2007, we issued 22,058 shares of common stock for services. As of December 31, 2007, we recorded professional fees of $2,426.
On September 7, 2007, we entered into a consulting agreement with CBG Advanced Studies (“CBG”). The term of the agreement is one year,and included payments to CBG of $2,000 per month for the first three months of the agreement. We also agreed to additional compensation of 120,000 shares of restricted common stock, to be issued quarterly in 30,000 share increments. The value of the services was recorded based on the market value of our stock at the date of the agreement and totaled $12,000. At December 31, 2007 we have recorded professional fee expense of $4,000 and have unamortized expense of $8,000.
NOTE 6 - OPTIONS AND WARRANTS
We have reserved for issuance an aggregate of 6,500,000 shares of common stock under our Stock Option Plan. On March 26, 2007, the Board awarded 325,000 options to purchase stock at $.11 per share expiring December 31, 2011, 750,000 options to purchase stock at $.12 per share expiring December 31, 2011. The fair market value of the options based on the Black Scholes model is $116,738 using the following assumptions Strike Price $0.11 and $0.12; Stock Price $0.11; Volatility 226%; Term 4.75 years; Dividend Yield 0%; Interest Rate 4.48%. The cost was included as salary expense.
On May 30, 2007, the Board of Directors authorized an offer to the series “C” warrant holders wherein they would be entitled to exercise up to 3,000,000 series “C” warrants for $0.125 per share with notification of intent to exercise by June 18, 2007. 2,350,000 warrants were exercised. As of December 31, 2007, 5,154,000 series “C” warrants remained issued and unexercised. The series “C” warrants expire on December 31, 2008.
On March 12, 2007, the Board approved 5,000,000 Series “D” Warrants. The series “D” warrants granted the investor the right to purchase shares of common stock at $0.10 per share.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
We issued 1,000,000 Series “D” warrants on March 13, 2007 to 3GC, Ltd. with an exercise price of $0.10 per share for consulting services. The warrants expire on December 31, 2007. The fair market value of the warrants based on the Black-Scholes model is $57,162 using the following assumptions: Strike Price $0.10; Stock Price $0.11; Volatility 151%; Term .75 of a year; Dividend Yield 0%; Interest Rate 4.48%. As of December 31, 2007, we have recorded $57,162 in professional fees.
We issued 1,200,000 Series “D” warrants on March 23, 2007 to Ace Trading and Joel Brownstein with an exercise price of $0.10 per share for consulting services. The warrants expire on December 31, 2007. The fair market value of the warrants based on the Black-Scholes model is $68,594 using the following assumptions Strike Price $0.10; Stock Price $0.11; Volatility 151%; Term .75 of a year; Dividend Yield 0%; Interest Rate 4.48%. As of December 31, 2007, we have recorded professional fees in the amount of $68,594. These warrants were subsequently cancelled May 2, 2007, pursuant to the cancellation of the Agreement.
At December 31, 2007, we had 5,154,000 “C” warrants with an exercise price of $.25 per share expiring December 31, 2008, and 50,000 warrants to purchase stock at $.20 per share expiring December 16, 2008.
A summary of stock options and warrants is as follows:
NOTE 7 - LICENSE AGREEMENTS
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.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
NOTE 8 - RELATED PARTY TRANSACTIONS
We have consulting agreements with a shareholder and a Director with payments of $2,500 a month for each person.
On May 30, 2007, we entered into an amended employment agreement with two executives whereby the original terms were extended from December 9, 2009 to March 30, 2012. Further, the agreement increased each Executive’s annual compensation from $72,000 to $110,000 and $74,400 to $130,000. As of December 31, 2007, the future minimum payments are as follows:
We borrowed $2,200 from William Prince, CEO at an interest rate of 18% due March 27, 2007. This loan was repaid in full as of December 31, 2007. Interest and fees were waived by Mr. Prince.
The Company borrowed $40,000 on March 12, 2007 from 3GC, Ltd., a shareholder at an interest rate of 30% due April 12, 2007. A penalty of 200,000 shares was owed if the loan was not repaid. The Company issued 800,000 shares of common stock to be held by a third party to secure a loan 3GC owed to an unaffiliated third party as collateral. This loan was repaid on April 20, 2007. A stop order was placed on the collateral shares, and they will be cancelled when they are returned; however, there is currently a dispute with the person who was issued the shares as to the validity of issuance and the return of the shares.
NOTE 9 - INCOME TAXES
For the year ended December 31, 2007, we incurred net operating losses and accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2007, we have approximately $6,550,000 of net operating losses that can be used to offset future income tax. The net operating loss carry forwards, if not utilized will begin to expire in 2017-2022.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
The components of our deferred tax asset are as follows:
For financial reporting purposes, we have incurred a loss since inception to December 31, 2007. Based on the available objective evidence, including our history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, we have provided a full valuation allowance against its net deferred tax assets at December 31, 2007. Further, management does not believe it has taken the position in the deductibility of its expenses that creates a more likely than not potential for future liability under the guidance of FIN 48.
A reconciliation between the amount of income tax benefit determined by applying the applicable U.S. and State statutory income tax rate to pre-tax loss is as follows:
NOTE 10 - COMMITMENTS AND CONTINGENCIES
We executed a lease for office and manufacturing facilities in December of 2005. This is a three-year lease with renewal options. Future rent payments on non-cancelable operating leases with an initial or remaining term of greater than one year are as follows- 2008 - $71,291. Rent expense for the years ended December 31, 2007 and 2006 were $71,291 and $73,791, respectively.
NOTE 11 - SUBSEQUENT EVENTS
We borrowed $16,000 on January 18, 2008 from an officer of the company. Interest on the loan was $1,000. The loan and interest was repaid on January 25, 2008.
On February 18, 2008, we authorized the issuance of 30,000 shares of common stock to CBG Advanced Studies, Inc. in connection with a consulting agreement.
Integrated Environmental Technologies, Ltd.
and Subsidiary
Notes to Consolidated Financial Statements
On January 11, 2008, we entered into an Agreement and Plan of Merger and Reincorporation with Integrated Environmental Technologies, Ltd., a newly-formed Nevada corporation ("IET NV"), in order to change the domicile of the Company from Delaware to Nevada. Pursuant to the terms of the Agreement and Plan of Merger and Reincorporation, IET merged with and into IET NV, making IET NV the surviving corporation. The merger for reincorporation was completed on February 18, 2008.
The merger and reincorporation agreement was approved by the unanimous consent of the Board of Directors of IET on December 21, 2007 and by IET NV on January 11, 2008, and by a majority of the stockholders of IET at their annual meeting of stockholders held on December 21, 2007.