Attached files
| file | filename |
|---|---|
| EX-32 - INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD. | v202695_ex32.htm |
| EX-31 - INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD. | v202695_ex31.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the quarterly period ended September 30,
2010
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Commission
file number 000-26309
INTEGRATED ENVIRONMENTAL
TECHNOLOGIES, LTD.
(Exact
name of registrant as specified in its charter)
|
Nevada
|
98-0200471
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
4235
Commerce Street
|
||
|
Little
River, South Carolina
|
29566
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(843)
390-2500
(Registrant’s
telephone number, including area code)
Copies
of Communications to:
Alfred V.
Greco, PLLC
199 Main
Street, Suite 706
White
Plains NY 10601
(914)
682-3030
Fax (914)
682-3030
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ¨ No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
Non-accelerated
filer ¨ (Do not check if
a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No
x
The
number of shares of Common Stock, $0.001 par value, outstanding on October 12,
2010, was 105,329,893 shares.
|
PART
I – FINANCIAL INFORMATION
Item
1. Financial Statements.
Integrated
Environmental Technologies, Ltd.
|
|||||||
|
Condensed
Consolidated Balance Sheets
|
|
September
30,
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December
31,
|
|||||||
|
2010
|
2009
|
|||||||
|
Unaudited
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Audited
|
|||||||
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Assets
|
||||||||
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Current
Assets:
|
||||||||
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Cash
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$ | 68,319 | $ | 819,611 | ||||
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Accounts
receivable
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363,933 | 111,375 | ||||||
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Inventory
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192,480 | 82,910 | ||||||
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Prepaid
expenses
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17,351 | 20,256 | ||||||
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Total
current assets
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642,083 | 1,034,152 | ||||||
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Building
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328,589 | - | ||||||
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Equipment
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28,371 | 20,445 | ||||||
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Accumulated
depreciation
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(15,975 | ) | (11,597 | ) | ||||
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Total
building and equipment
|
340,985 | 8,848 | ||||||
| $ | 983,068 | $ | 1,043,000 | |||||
|
Liabilities
and Shareholders' Equity (Deficit)
|
||||||||
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Current
liabilities:
|
||||||||
|
Accounts
payable
|
$ | 212,446 | $ | 112,057 | ||||
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Accrued
expenses
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93,913 | 189,386 | ||||||
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Notes
payable
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250,000 | 98,300 | ||||||
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Convertible
notes
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383,432 | 489,000 | ||||||
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Total
current liabilities
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939,791 | 888,743 | ||||||
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Shareholders'
Equity (Deficit)
|
||||||||
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Preferred
stock 50,000,000 shares authorized;
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||||||||
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par
value $.001; 0 shares issued and outstanding
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- | - | ||||||
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Common
stock 200,000,000 shares authorized
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||||||||
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par
value $.001, 105,329,893 and 94,533,467 shares issued
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||||||||
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and
outstanding at September 30, 2010 and December 31, 2009
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105,330 | 94,533 | ||||||
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Common
stock bought not issued, 0 and 6,264,329 shares
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||||||||
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at
September 30, 2010 and December 31, 2009
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- | 6,264 | ||||||
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Paid-in
capital
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12,498,011 | 11,384,911 | ||||||
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Retained
earnings (deficit)
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(12,560,064 | ) | (11,331,451 | ) | ||||
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Total
shareholders' equity (deficit)
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43,277 | 154,257 | ||||||
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Total
liabilities and shareholders' equity (deficit)
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$ | 983,068 | $ | 1,043,000 | ||||
See notes
to condensed consolidated financial statements.
1
Integrated
Environmental Technologies, Ltd.
Condensed
Consolidated Statements of Operations
Unaudited
|
For
The Nine Months Ended
September
30,
|
For
The Three Months Ended
September
30,
|
|||||||||||||||
|
2010
|
2009
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2010
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2009
|
|||||||||||||
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Sales
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$ | 812,365 | $ | 107,495 | $ | 172,116 | $ | 71,758 | ||||||||
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Cost
of sales
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262,264 | 42,120 | 52,808 | 24,707 | ||||||||||||
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Gross
profit
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550,101 | 65,375 | 119,308 | 47,051 | ||||||||||||
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Professional
and administrative fees
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523,061 | 265,601 | 198,289 | 103,508 | ||||||||||||
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Salary
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614,719 | 454,988 | 196,162 | 158,126 | ||||||||||||
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Depreciation
and amortization
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4,377 | 867 | 2,030 | (748 | ) | |||||||||||
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Office
& miscellaneous expense
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413,835 | 302,368 | 131,857 | 99,065 | ||||||||||||
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Bad
debt expense
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2,706 | 1,230 | - | 1,200 | ||||||||||||
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Total
operating expenses
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1,558,698 | 1,025,054 | 528,338 | 361,151 | ||||||||||||
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Loss
from operations
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(1,008,597 | ) | (959,679 | ) | (409,030 | ) | (314,100 | ) | ||||||||
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Other
income (expense):
|
||||||||||||||||
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Interest
expense
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(220,016 | ) | (475,466 | ) | (122,620 | ) | (233,534 | ) | ||||||||
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Total
other income (expense)
|
(220,016 | ) | (475,466 | ) | (122,620 | ) | (233,534 | ) | ||||||||
|
Net
loss
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$ | (1,228,613 | ) | $ | (1,435,145 | ) | $ | (531,650 | ) | $ | (547,634 | ) | ||||
|
Weighted
average shares outstanding
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103,799,884 | 81,757,217 | 105,279,141 | 83,198,158 | ||||||||||||
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Net
loss per share basic and diluted
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$ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
See notes
to condensed consolidated financial statements.
2
|
Integrated
Environmental Technologies, Ltd.
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||||||||
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Condensed
Consolidated Statements of Cash Flows
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||||||||
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Unaudited
|
||||||||
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For
The Nine Months Ended September 30,
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||||||||
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2010
|
2009
|
|||||||
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Cash
flows from operating activities:
|
||||||||
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Net
loss
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$ | (1,228,613 | ) | $ | (1,435,145 | ) | ||
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Adjustments
to reconcile net loss to net cash
|
||||||||
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used
in operating activities:
|
||||||||
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Depreciation
and amortization
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4,377 | 867 | ||||||
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Stock
and warrants issued for services and loan costs
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353,517 | 377,219 | ||||||
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Stock
issued to employees and directors for services
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117,000 | - | ||||||
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Accretion
of interest
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21,657 | - | ||||||
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Changes
in operating assets and liabilities:
|
||||||||
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Accounts
receivable
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(252,557 | ) | (50,536 | ) | ||||
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Inventory
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(109,570 | ) | (6,821 | ) | ||||
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Deposits
and prepaids
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2,904 | 29,619 | ||||||
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Accounts
payable
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100,389 | (16,633 | ) | |||||
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Accrued
expenses
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(88,782 | ) | 49,594 | |||||
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Cash
used in operating activities
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(1,079,678 | ) | (1,051,836 | ) | ||||
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Cash
flows from investing activities:
|
||||||||
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Purchase
of building improvements and equipment
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(336,514 | ) | - | |||||
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Cash
used in investing activities
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(336,514 | ) | - | |||||
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Cash
flows from financing activities:
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||||||||
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Proceeds
from the sale of common stock
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63,880 | 515,000 | ||||||
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Proceeds
on notes payable, net
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175,000 | 840,000 | ||||||
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Proceeds
(payments) on convertible debentures
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211,270 | (9,000 | ) | |||||
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Proceeds
from the exercise of warrants and options
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214,750 | - | ||||||
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Cash
provided by financing activities
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664,900 | 1,346,000 | ||||||
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Increase
(decrease) in cash
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(751,292 | ) | 294,166 | |||||
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Cash
beginning of period
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819,611 | 33,357 | ||||||
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Cash
end of period
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$ | 68,319 | $ | 327,523 | ||||
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Supplemental
disclosure of cash flow information:
|
||||||||
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Cash
paid for interest
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$ | 63,242 | $ | 77,545 | ||||
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Cash
paid for income taxes
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$ | - | $ | - | ||||
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Non-cash
financing activities:
|
||||||||
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Stock
and warrants issued for services and loan costs
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$ | 470,517 | $ | 377,219 | ||||
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Notes
and interest converted to stock
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$ | 326,651 | $ | - | ||||
See notes
to condensed consolidated financial statements.
3
Integrated
Environmental Technologies, Ltd.
Notes
to Condensed Consolidated Financial Statements
Note
1 – Basis of presentation
The
unaudited condensed consolidated financial statements have been prepared in
accordance with United States generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and reflect
all adjustments which, in the opinion of management, are necessary for a fair
presentation. All such adjustments are of a normal recurring
nature. The results of operations for the interim period are not
necessarily indicative of the results to be expected for a full
year. Certain amounts in the prior year statements have been
reclassified to conform to the current year presentations. The
statements should be read in conjunction with the financial statements and
footnotes thereto included in our Form 10-K for the year ended December 31,
2009.
The
financial statements include the Company’s wholly-owned
subsidiary. All significant inter-company transactions and balances
have been eliminated.
Note
2 - Going concern
The
accompanying condensed consolidated financial statements have been prepared
assuming that we will continue as a going concern. Our ability to
continue as a going concern is dependent upon attaining profitable
operations. We may consider using borrowings and security sales to
mitigate the effects of our cash position; however, no assurance can be given
that debt or equity financing, if and when required, will be
available. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets and
classification of liabilities that might be necessary should we be unable to
continue in existence.
Note
3 - Notes payable
Notes
payable consisted of the following at September 30, 2010:
|
Note
payable, secured by personal property of the Company, bearing interest at
base margin rate plus 3.25% per annum, due November 1,
2010. The due date was subsequently extended to May 1,
2011. (See Note 9.)
|
$ | 250,000 | ||
| $ | 250,000 |
Note
4 - Convertible notes payable
During
the quarter ended September 30, 2010, a total of $27,000 in convertible
debentures, plus accrued but unpaid interest to date, was converted to shares of
the Company’s common stock at a conversion rate of $0.40 per share.
On
September 10, 2010, we entered into a convertible note and Exchange Agreement
for $167,339 with a Lender that purchased from certain debenture holders a total
of $164,500 in convertible debentures, plus accrued (but unpaid) interest,
thereby correcting our default position on the previous 10%
debentures. This convertible note matures on September 2, 2011, and
will accrue interest at a rate of 10% per annum. The per share
conversion price shall be the lesser of a) $0.40 and b) 80% of the average of
the three lowest daily volume-weighted average sale prices for the Common Stock
(VWAPs) during the twenty consecutive trading days immediately preceding the
date on which the Holder elects to convert all or part of the
Note. We had a beneficial conversion totaling $41,835, which will
accrete into interest of the one-year term of the note. At September
30, 2010, we accreted $2,292 to interest.
4
Integrated
Environmental Technologies, Ltd.
Notes
to Condensed Consolidated Financial Statements
As of
September 30, 2010, we have 10% convertible debentures totaling $25,000, and 8%
convertible debentures totaling $250,000. The 8% notes mature on
April 7, 2011, and have a $0.60 conversion-to-common-stock rate through
maturity. The 8% debentures include a total of 250,000 detachable
warrants and, with respect to such securities, we have allocated the proceeds
received based on the fair market value of each of the
instruments. The discount on the convertible debt totaled $38,730,
and we are accreting interest between the dates of sale of the convertible notes
to maturity. As of September 30, 2010, we had accreted interest of
$19,365, and un-accreted interest of $19,365.
Note
5 – Common stock
First Quarter
2010
In the
quarter ended March 31, 2010, we privately sold a total of 180,000 shares for a
total purchase price of $18,000.
In the
quarter ended March 31, 2010, restricted warrants and options were exercised for
a total purchase price of $16,100, which resulted in 160,000 restricted shares
issued.
In the
quarter ended March 31, 2010, a total of 123,214 restricted shares were issued
through a cashless exercise of 150,000 warrants, thereby using 26,786 warrants
to satisfy the exercise price.
In the
quarter ended March 31, 2010, we authorized the issuance of 425,000 shares of
restricted common stock to certain employees, as contract compensation or as
bonus in lieu of cash compensation, and to directors as compensation for
attendance of board meetings. The total expense was $117,000, which
represented the fair market value of the shares on the date the awards were
made.
In the
quarter ended March 31, 2010, a note and accrued interest totaling $26,685 were
converted into 106,740 shares of restricted common stock at a conversion rate of
$0.25 per share.
In the
quarter ended March 31, 2010, certain note holders converted $272,500 of
principal amounts due under their debenture agreements at a conversion rate of
$0.25 per share for 1,090,000 restricted shares of our common
stock.
Second Quarter
2010
In the
quarter ended June 30, 2010, a total of 68,478 restricted shares were issued by
a cashless exercise of warrants to purchase 150,000 shares for $0.25 per share,
thereby using 81,522 warrants to satisfy the exercise
price. .
In the
quarter ended June 30, 2010, warrants and options were exercised for a total
purchase price of $198,650, which resulted in the issuance of 2,085,000
restricted shares. Of the foregoing, 15,000 options were exercised by Dr.
Valgene Dunham, a Director, at a purchase price of $0.11 per share.
5
Integrated
Environmental Technologies, Ltd.
Notes
to Condensed Consolidated Financial Statements
In the
quarter ended June 30, 2010, we issued 200,000 restricted shares in connection
with a consulting agreement. The value of the shares was $61,800,
which will be expensed over the one-year term of the
agreement.
Third Quarter
2010
In the
quarter ended September 30, 2010, certain holders of our 10% convertible debt
converted $27,466 of principal and interest at a conversion rate of $0.40 per
share for 68,665 restricted shares of our common stock.
On
September 30, 2010, the Board approved the 2010 Stock Incentive Plan, which
includes a total of 10,000,000 shares of common stock, issuable in the form of
incentive options, non-qualified options and restricted common stock to
employees, board members, and service providers.
Note
6 – Options and warrants
A summary
of stock options and warrants is as follows:
|
Options
|
Average
Price
|
Warrants
|
Average
Price
|
|||||||||||||
|
Outstanding 1/1/2010
|
1,075,000 | $ | 0.11 | 17,379,582 | $ | 0.12 | ||||||||||
|
Granted
|
- | - | 2,495,000 | 0.45 | ||||||||||||
|
Cancelled
|
- | - | - | - | ||||||||||||
|
Exercised
|
25,000 | 0.11 | 2,520,000 | .10 | ||||||||||||
|
Outstanding
9/30/2010
|
1,050,000 | $ | 0.11 | 17,354,582 | $ | 0.17 | ||||||||||
First Quarter
2010
In the
quarter ended March 31, 2010, we issued, to a non-affiliate, warrants to
purchase 225,000 restricted shares of common stock at $0.28 per share, issued in
connection with consulting services. The value of the services was
$35,818 which will be expensed over the one-year period of the consulting
agreement. The amount expensed as professional fees in the three and
nine months ended September 30, 2010 was $8,954 and $20,893,
respectively.
6
Integrated
Environmental Technologies, Ltd.
Notes
to Condensed Consolidated Financial Statements
In the
quarter ended March 31, 2010, we granted, to a non-affiliate, warrants to
purchase 300,000 restricted shares of common stock at $0.10 per share, issued in
connection with our borrowings. We expensed as loan costs $52,838 in
the period ended March 31, 2010.
Second Quarter
2010
In the
quarter ended June 30, 2010, we issued warrants to purchase 400,000 restricted
shares of common stock at $0.30 per share, issued to a non-affiliate in
connection with consulting services. The value of the services was
$86,848, which will be expensed over the one-year period of the consulting
agreement. We expensed as professional fees $21,713 and $43,425,
respectively, for the three and nine months ended September 30,
2010.
In the
quarter ended June 30, 2010, we issued warrants to purchase 150,000 restricted
shares of common stock at $0.60 per share through December 31, 2010, or at $1.00
per share from January 1, 2011 through December 31, 2011. These
warrants were issued to a non-affiliate in connection with our
borrowings. The value of the warrants was $29,664, which will be
expensed over one year. For the three and nine months ended September
30, 2010, we expensed $7,416 and $14,832, respectively, as loan
fees.
In the
quarter ended June 30, 2010, we granted, to four non-affiliates, warrants to
purchase a total of 250,000 restricted shares of common stock exercisable at
$0.75 through December 31, 2010, or at $1.20 per share through December 31,
2011. These warrants were issued in connection with the sale of our
8% convertible debentures. We allocated the proceeds we received
using the values of the warrants and convertible notes. The value
assigned to these warrants was $38,730.
In the
quarter ended June 30, 2010, we granted warrants to purchase 100,000
restricted shares of common stock to a non-affiliate in connection with a
consulting agreement. The warrants are exercisable at $1.00 per share
through December 31, 2011. The fair market value of the warrants was
$16,000, which we will expense over the six-month term of the
agreement. For the three and nine months ended September 30, 2010, we
expensed $8,000 and $9,333, respectively.
Third Quarter
2010
In the
quarter ended September 30, 2010, we granted, to three non-affiliates,
warrants to purchase a total of 800,000 restricted shares of common stock in
connection with consulting agreements. A total of 600,000 of the
warrants are exercisable at $0.50 per share and 200,000 warrants are exercisable
for $1.00 per share, all expiring on December 31, 2011. The fair market
value of the warrants was $127,588, which we will expense over the six-month
terms of the agreements. For the quarter ended September 30, 2010, we
expensed $63,794.
In the
quarter ended September 30, 2010, we granted warrants to purchase 270,000
restricted shares of our common stock at $0.10 per share. These
warrants were issued to a non-affiliate in connection with a loan agreement
which was executed in 2009. The warrants expire on December 31,
2011. The fair market value of the warrants was $86,602, which was
expensed in the quarter ended September 30, 2010.
7
Integrated
Environmental Technologies, Ltd.
Notes
to Condensed Consolidated Financial Statements
Note 7 – Related-party transactions
We had a
consulting agreement with a shareholder requiring payments of $3,000 per
month. On March 1, 2010, the term and scope of the agreement were
revised, and compensation was increased to $6,000 per month. On May
19, 2010, we executed an addendum whereby compensation was decreased to $4,500
per month. As of September 30, 2010, we have recorded $39,000 in
consulting fee expense.
We have
employment agreements with two of our executives through March 30, 2012, whereby
we agreed to total annual salaries aggregating $240,000. As of
September 30, 2010, the future minimum payments to the executives are as
follows:
|
Related-party
salary requirements
|
||||
|
2010
|
60,000 | |||
|
2011
|
240,000 | |||
|
Thereafter
|
60,000 | |||
|
Total
|
$ | 360,000 | ||
Note
8 – Commitments and Contingencies
We
entered into a lease agreement for our premises on January 1, 2006 for a
three-year term. In January 2009, we agreed to renew the lease for a
term of five years for $71,291 per year. The renewal term shall be
upon the same covenants, conditions, and provisions as provided in the original
lease.
Note
9 – Subsequent events
We have
evaluated all subsequent events, and have determined that the following events
require disclosure in these financial statements.
On
October 7, 2010, a warrant to purchase 1,000,000 restricted shares at a price of
$0.10 per share, for a total purchase price of $100,000, was
exercised. The 1,000,000 restricted shares were issued on October 18,
2010.
On
October 11, 2010, a portion of the 10% convertible note and accrued interest
totaling $20,170 was converted into 100,950 shares of restricted common stock at
a conversion rate of $0.1998 per share. The shares were issued on
October 14, 2010.
On
October 15, 2010, a portion of the 10% convertible note and accrued interest
totaling $40,383.56 was converted into 207,521 shares of restricted common stock
at a conversion rate of $0.1946 per share. The shares were issued on
October 19, 2010.
8
Integrated
Environmental Technologies, Ltd.
Notes
to Condensed Consolidated Financial Statements
On
October 29, 2010, the Lender associated with our Promissory Note Agreement dated
April 12, 2010 agreed to extend the term of the agreement to May 1,
2011. All other terms and conditions shall remain in full force and
effect during this extension in term.
On
November 4, 2010, the Company entered into a Non-Exclusive Independent Sales
Representative Agreement, whereby we granted to a Representative the authority
to solicit orders within certain specific markets, for compensation of $3,200
per month. The Company agreed to pay a cash commission of 7% of each
sale, whether during the three-month term of the agreement or within one year of
its termination. Further, for each piece of equipment sold, this
agreement authorizes the issuance to the Representative of warrants to purchase
20,000 restricted shares of the Company’s common stock, exercisable at $0.50 per
share and expiring on December 31, 2011.
9
FORWARD-LOOKING
STATEMENTS
This document contains forward-looking
statements. All statements other than statements of historical fact are
“forward-looking statements” for purposes of federal and state securities laws,
including, but not limited to, any projections of earnings, revenue or other
financial items; any statements of the plans, strategies and objections of
management for future operations; any statements concerning proposed new
services or developments; any statements regarding future economic conditions or
performance; any statements of belief; and any statements of assumptions
underlying any of the foregoing.
Forward-looking statements may include
the words “may”, “could”, “estimate”, “intend”, “continue”, “believe”, “expect”
or “anticipate” or other similar words. These forward-looking
statements present our estimates and assumptions only as of the date of this
report. Except for our ongoing securities laws, we do not intend, and
undertake no obligation, to update any forward-looking statement. Additionally,
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995 most likely do not apply to our forward-looking statements as a result of
being a penny stock issuer. You should, however, consult further disclosures we
make in future filing of our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and Current Reports on Form 8-K.
Although we believe that the
expectations reflected in any of our forward-looking statements are reasonable,
actual results could differ materially from those projected or assumed in any of
our forward-looking statements. Our future financial condition and
results of operations, as well as any forward-looking statements, are subject to
change and inherent risks and uncertainties. The factors impacting
these risks and uncertainties include, but are not limited to:
|
o
|
the
unavailability of funds for capital expenditures and/or general working
capital;
|
|
o
|
implementation
of our business plan within the oil and gas industry with our distributor,
Benchmark; and/or within the food processing industry with our dealer,
D2W2; and/or continued entry and subsequent sales into other
markets;
|
|
o
|
increased
competitive pressures from existing competitors and new
entrants;
|
|
o
|
increases
in interest rates or our cost of borrowing or a default under any material
debt agreements;
|
|
o
|
the
fact that our accounting policies and methods are fundamental to how we
report our financial condition and results of operations, and they may
require our management to make estimates about matters that are inherently
uncertain;
|
|
o
|
substantial
dilution to our stockholders as the result of the issuance of our common
stock in exchange for debt and/or equity financing;
|
|
o
|
potential
change in control upon completion of financing agreements, if
any;
|
|
o
|
deterioration
in general or regional economic conditions;
|
|
o
|
adverse
state or federal legislation or regulation that increases the costs of
compliance, or adverse findings by a regulator with respect to existing
operations;
|
|
o
|
changes
in U.S. GAAP or in the legal, regulatory and legislative environments in
the markets in which we operate;
|
|
o
|
loss
of customers or sales weakness;
|
|
o
|
excessive
product failure and related warranty expenses;
|
|
o
|
inability
to achieve future sales levels or other operating results;
and
|
|
o
|
operational
inefficiencies in distribution or other
systems.
|
10
For a detailed description of these and
other factors that could cause actual results to differ materially from those
expressed in any forward-looking statement, please see “Part II, Other
Information, Item 1A, Risk Factors” in this document and in our Annual Report on
Form 10-K for the year ended December 31, 2009.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
The following discussion and analysis
of our financial condition and results of operations should be read in
conjunction with our consolidated financial statements and related notes
included elsewhere in this quarterly report. References in the following
discussion and throughout this quarterly report to “we”, “our”, “us”, “IET”,
“the Company”, and similar terms refer to Integrated Environmental Technologies,
Ltd. and its wholly-owned subsidiary, IET, Inc., unless otherwise expressly
stated or the context otherwise requires.
OVERVIEW
AND OUTLOOK
Integrated
Environmental Technologies, Ltd. is a life sciences-focused technology company
that commercializes innovative technologies which are focused on the enhancement
of the environment and the health, safety, and well-being of current and future
generations. Our wholly-owned subsidiary, IET, Inc., designs,
manufactures, markets, sells, installs, and supports our proprietary EcaFlo®
equipment, featuring electro-chemical activation (“ECA”) technology, in the
United States and throughout the world.
The core
of our business is the commercialization of ECA technology. ECA
technology is a process of passing a diluted saline solution and ordinary water
through an electrolytic cell in order to generate, by electrochemical energy
conversion, environmentally-responsible, highly-active, meta-stable solutions
which possess electron-donor or electron-acceptor properties known as Catholytes
and Anolytes.
Our equipment and the solutions our
equipment produces remain the focus of our revenue strategy. We
produce and sell ECA equipment and related supplies under the EcaFlo® trade
name, including three models of EcaFlo® equipment: C-101, C-102 and
C-104. These pieces of equipment generate varying volumes of the
hospital-level disinfectant trademarked EcaFlo® Anolyte. Our business
model primarily calls for the sale of EcaFlo® equipment, at contract prices, to
existing, reputable, successful industry leaders within different markets
(i.e.: Benchmark – Oil and Gas; D2W2 – Food
Processing). While we profit from sales of EcaFlo® equipment, there
are costs of goods sold and general and administrative costs associated with
these sales. Our plan also calls for technology fees to be paid to us
on the EcaFlo® fluid solutions that are generated by our distributors and sold
to their customers. The fees are at reasonable rates on a
per-gallon-sold basis and have absolutely no cost to us. These
technology fees are a sustaining revenue source and will build as we sell and
install each piece of EcaFlo® equipment. In addition to establishing
a solid distribution network, we occasionally make sales directly to customers,
on a limited basis, in order to effect initial penetration into some lucrative
markets.
11
We have
analyzed our current sales strategies and have maintained a high level of focus
on developing specific commercial interest and substantial market potential for
our EcaFlo® solutions:
|
·
|
EcaFlo®
Anolyte – a strong oxidizing solution formed from naturally occurring
elements that kills unwanted microorganisms and pathogens,
and
|
|
·
|
EcaFlo®
Catholyte – an anti-oxidizing, mildly alkaline solution ideal for use as a
degreaser, cleaner, and detergent.
|
We
continue to work on the final commercialization plan for our products in the oil
and gas industry. Our recently completed manufacturing facility
expansion has been fully tested to determine its readiness to fulfill
anticipated orders; the expansion has allowed us to significantly increase our
production capabilities with a much-improved quality assurance
regime. The combination of the demand for natural gas, rubbing up
against environmental concerns regarding “fracking” fluids permeating
ground-water tables and water supplies, is providing the impetus in our
monetizing this technology. Our oil and gas industry distributor,
Benchmark Energy Products, LLC, is producing EcaFlo® solutions custom-made to
answer the needs of the oil and gas markets through an Exclusive License and
Distribution Agreement. Recently we announced that the EPA-registered
product, Excelyte® (Benchmark’s brand name for EcaFlo® Anolyte), was
successfully utilized in a number of gas well fracturing
treatments. The primary use of Excelyte® is to eliminate oilfield
bacteria in water employed in oil and gas wells. The national “roll
out” of this product is expected to occur within the fourth
quarter.
EcaFlo®
Anolyte, an EPA-registered product, could conceivably replace all applications
for chlorine-related antimicrobials from an efficacy and efficiency
standpoint. Our commercialization of this product is premised upon
the compelling economics, given the low cost to produce Anolyte and the
environmentally friendly nature of the product. The product can be as
much as 100 times more effective than the bleach solutions traditionally used to
mitigate pathogens in food processing, water disinfection, and fungicidal
control. EcaFlo® Anolyte quickly destroys microorganisms and
pathogens on fruits, vegetables, and processing equipment without leaving a
harmful residue.
After
several years of product and market development, we are seeing strong demand for
our current generation equipment from commercial users in multiple industries,
including oil and gas and fresh food packaging. We have explored the
potential need for larger volume equipment to increase capacities of EcaFlo®
solutions for certain in-plant industrial uses and have concluded that, in many
instances, an “industrial EcaFlo® model” is an economic benefit to the
customer. Accordingly, design and development of these units are
underway. A global fresh food packager is moving forward, under
contract with us, in implementing the use of EcaFlo® Anolyte as a hard-surface
disinfectant within its facilities prior to making a major capital investment in
changing the systems currently used for product sanitation in order to integrate
the use of EcaFlo® Anolyte into this process.
We have
incurred losses since inception. For the quarter ended September 30,
2010, we had a net loss of $531,650 and for the year ended December 31, 2009, we
had a net loss of $2,798,404. 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.
12
Management
intends to continue to closely monitor the costs associated with the production
of EcaFlo® devices
in an attempt to manage capital assets, while balancing the need to invest
capital in order to develop new markets. As we continue to expand
operational activities and execute our business plan, we anticipate experiencing
positive cash flows from operations in future quarters. Debt
borrowings may be considered from time to time, if needed.
Currently,
management is focused on:
|
-
|
developing
entry into specific vertical markets with new distribution networks and
personnel (new market facilitation consultants and manufacturers’
representatives);
|
|
-
|
working
closely with a consultant who is assisting us in gaining valuable public
awareness from a world-renowned environmentalist;
|
|
-
|
obtaining
a patent on our “EC” electrolytic cell in order to further secure the
Company’s ability to manufacture the most reliable, high-volume producing,
pH-neutral anolyte product, IET’s EcaFlo® Anolyte;
|
|
-
|
continuing
to make improvements to the Company’s EPA product registration “master
label” to include the addition of certain microorganisms and a change to
“shelf life” verbiage, and working with State environmental regulators to
insure that EcaFlo® is appropriately registered in key areas;
and
|
|
-
|
finalizing
negotiations of contract terms within the two largest market areas served
by IET’s key distributors, Benchmark and
D2W2.
|
Demonstration
of EcaFlo® fluid solutions in an in-plant sanitation system, to “prove positive”
the efficacy and ease of use, is the final step to commercialization in a major
food processing application. Risk of failure in this demonstration
has been mitigated by carefully developed protocols and
implementation. Entry into new markets, through a proven distribution
vehicle, will serve to expand our markets and provide acceptance of EcaFlo®
Anolyte as the preferred “green” disinfectant that replaces traditional,
hazardous disinfectant chemicals. Meetings and contract negotiations
are likely to result in future material events for the Company.
IET
continues to focus on educating consumers and the investing public about the
differences between “cleaning,” “sanitizing” and “disinfecting”, and how those
classifications relate to the development of commercial markets for EcaFlo®
solutions. As we seek and obtain modifications to our EPA product
registration “master label,” we open more doors for the use of EcaFlo® Anolyte
in different areas. In the unlikely event that our proposed changes
are not accepted, our current EPA product registration (EPA Registration No.
82341-1) affords us the ability to continue to serve the oil and gas industry,
as well as food processing, hard-surface disinfection, and many other
applications.
2010
Annual Meeting
Our 2010
Annual Meeting was held September 30, 2010 in Cherry Grove, South
Carolina. At the meeting, the following proposals were considered and
approved by the vote of a quorum of shareholders voting in person or by
proxy:
|
1.
|
Amending
our Amended and Restated Articles of Incorporation and our By-laws to
modify the staggered terms of our Board of Directors;
|
|
2.
|
Electing
five directors of our Company to serve in staggered
terms;
|
|
3.
|
Amending
our Amended and Restated Articles of Incorporation to authorize 50,000,000
shares of blank preferred stock, par value $0.001 per
share;
|
|
4.
|
Approving
our Company’s 2010 Stock Incentive Plan; and
|
|
5.
|
Ratifying
the appointment of Weaver & Martin, LLC as our independent auditors
for the fiscal year ending December 31,
2010.
|
13
Results
of Operations for the Three and Nine Months Ended September 30, 2010 and
2009
The
following table summarizes selected items from the statement of operations at
September 30, 2010 compared to September 30, 2009.
SALES
AND COST OF SALES:
|
Three
Months Ended
September
30,
|
Increase/
(Decrease)
|
Nine
Months
Ended
September
30,
|
Increase/
(Decrease)
|
|||||||||||||||||||||||||||||
|
2010
|
2009
|
$
|
%
|
2010
|
2009
|
$
|
%
|
|||||||||||||||||||||||||
|
Sales
and Licensing Fees
|
$ | 172,116 | $ | 71,758 | $ | 100,358 | 140 | % | $ | 812,365 | $ | 107,495 | $ | 704,870 | 656 | % | ||||||||||||||||
|
Cost
of Sales
|
52,808 | 24,707 | 28,101 | 114 | % | 262,264 | 42,120 | 220,144 | 523 | % | ||||||||||||||||||||||
|
Gross
Profit
|
119,308 | 47,051 | 72,257 | 154 | % | 550,101 | 65,375 | 484,726 | 741 | % | ||||||||||||||||||||||
|
Gross
Profit Percentage
of Sales
|
69 | % | 66 | % | -- | 3 | % | 68 | % | 61 | % | -- | 7 | % | ||||||||||||||||||
Sales
Our sales for the three and nine months
ended September 30, 2010 were $172,116 and $812,365, an increase of $100,358, or
140%, from sales of $71,758 in the three months ended September 30, 2009, and an
increase of $704,870, or 656%, from sales of $107,495 for the nine months ended
September 30, 2009. The increase in sales was as a result of
finalizing conclusive agreements with distributors, and continuing to develop
opportunities in targeted markets.
As of
September 30, 2010, we have approximately $950,000 in potential sales under
negotiation. Economic uncertainty has contributed to delays in
closure on several pending sales.
Cost
of sales / Gross profit percentage of sales
Our cost of sales for the three and
nine months ended September 30, 2010 was $52,808 and $262,264, respectively, an
increase of $28,101, or 114%, from $24,707 for the three months ended September
30, 2009, and an increase of $220,144, or 523%, from $42,120 for the nine months
ended September 30, 2009. The increase in our cost of sales is as a
result of an increase in sales for this period. The cost of sales did
increase less as a percentage of sales, and we anticipate this trend to continue
as sales volumes increase. We are continuing to update and upgrade
our product line and we closely monitor the costs of all of our
products.
As of the
three and nine months ended September 30, 2010, our gross profit margins
increased a total of 3% to 69%, as compared to 66% for the three months ended
September 30, 2009, and increased a total of 7% to 68%, from 61% for the nine
months ended September 30, 2009. We anticipate that this margin will
continue to increase in the future as equipment sales increase.
14
EXPENSES:
|
Three
Months Ended
September
30,
|
Increase/(Decrease)
|
Nine
Months Ended
September
30,
|
Increase/(Decrease)
|
|||||||||||||||||||||||||||||
|
2010
|
2009
|
$
|
%
|
2010
|
2009
|
$
|
%
|
|||||||||||||||||||||||||
|
Expenses:
|
||||||||||||||||||||||||||||||||
|
Professional
and
administrative
fees
|
$ | 198,289 | $ | 103,508 | $ | 94,781 | 92 | % | $ | 523,061 | $ | 265,601 | $ | 257,460 | 97 | % | ||||||||||||||||
|
Salary
|
196,162 | 158,126 | 38,036 | 24 | % | 614,719 | 454,988 | 159,731 | 35 | % | ||||||||||||||||||||||
|
Depreciation
and
Amortization
|
2,030 | (748 | ) | 2,778 | 371 | % | 4,377 | 867 | 3,510 | 405 | % | |||||||||||||||||||||
|
Office
and miscel-
laneous
expense
|
131,857 | 99,065 | 32,792 | 33 | % | 413,835 | 302,368 | 111,467 | 37 | % | ||||||||||||||||||||||
|
Bad
debt expense
|
- | 1,200 | (1,200 | ) | (100 | %) | 2,706 | 1,230 | 1,476 | 120 | % | |||||||||||||||||||||
|
Total
Expenses
|
528,338 | 361,151 | 167,187 | 46 | % | 1,558,698 | 1,025,054 | 533,644 | 52 | % | ||||||||||||||||||||||
|
(Loss)
from operations
|
(409,030 | ) | (314,100 | ) | 94,930 | 30 | % | (1,008,597 | ) | (959,679 | ) | 48,918 | 5 | % | ||||||||||||||||||
|
Other
income
(expense):
|
||||||||||||||||||||||||||||||||
|
Interest
expense
|
(122,620 | ) | (233,534 | ) | (110,914 | ) | (47 | %) | (220,016 | ) | (475,466 | ) | (255,450 | ) | (54 | %) | ||||||||||||||||
|
Total
other
income
(expense)
|
(122,620 | ) | (233,534 | ) | (110,914 | ) | (47 | %) | (220,016 | ) | (475,466 | ) | (255,450 | ) | (54 | %) | ||||||||||||||||
|
Net
loss
|
$ | (531,650 | ) | $ | (547,634 | ) | $ | (15,984 | ) | (3 | %) | $ | (1,228,613 | ) | $ | (1,435,145 | ) | $ | (206,532 | ) | (14 | %) | ||||||||||
Professional
and Administrative Fees
Professional
and administrative fees for the three and nine months ended September 30, 2010
were $198,289 and $523,061, respectively, an increase of $94,781, or 92%, from
$103,508 for the three months ended September 30, 2009 and an increase of
$257,460, or 97%, from $265,601 for the nine months ended September 30,
2009. The increase in professional and administrative fees was the
result of utilizing the services of financial consultants to assist us in
developing plans for financings and for assistance with market awareness of our
company’s progress. Historically, we have endeavored to reduce the
use of outside consultants; however, we recognize that entry into certain
markets will be expedited if we receive some assistance for areas of our
business development. This assistance is best provided by supporters
of IET’s goals who have a relationship with decision-makers within target
markets.
Salary
Expenses
Salary expenses for the three and nine
months ended September 30, 2010 were $196,162 and $614,719, respectively, an
increase of $38,036, or 24%, from $158,126 for the three months ended September
30, 2009 and an increase of $159,731 or 35% from $454,988 for the nine months
ended September 30, 2009. The increase in salary expenses was the
result of the addition of four new members to our production staff and one
administrative employee, as well as the issuance of stock compensation to board
members and certain employees pursuant to the terms of contractual agreements
for 2008 and 2009. We expect salary expense to increase in the future
as the Company grows and as sales volumes increase. We may need to
continue issuing stock and stock options in exchange for services and adequate
personnel compensation.
15
Depreciation
and Amortization Expenses
Depreciation
and amortization expenses for the three and nine months ended September 30, 2010
were $2,030 and $4,377, respectively, an increase
of $2,778 or 371% from ($748) for the three months ended September 30, 2009 and
an increase of $3,510 or 405% from $867 for the nine months ended September 30,
2009. The increase in depreciation expenses was the result of the
purchase of additional depreciable equipment and recent building
improvements.
Office
and Miscellaneous Expenses
Office and miscellaneous expenses for
the three and nine months ended September 30, 2010 were $131,857 and $413,835,
respectively, an increase of $32,792 or 33%, from $99,065 for the three months
ended September 30, 2009 and an increase of $111,467 or 37% from $302,368 for
the nine months ended September 30, 2009. The increase in office and
miscellaneous expenses was primarily the result of an increase in expenses
necessary to meet the demand of our increased sales volume, such as engineering
supplies and freight costs; an increase in travel associated with sales calls,
attendance at conferences, and equipment commissioning; and an increase in
expenses related to licenses and permits, including registrations and
certifications.
Bad
Debt Expenses
Bad debt
expenses for the three and nine months ended September 30, 2010 were $0 and
$2,706, respectively, a decrease of
$1,200 or 100% from the three months ended September 30, 2009, and an increase
of $1,476, or 120%, from $1,230 for the nine months ended September 30,
2009. The only bad debt expense we have incurred this year to date
was as a result of one of our former vendors not delivering a portion of the
services for which we pre-paid. We have historically had limited
write-offs as the result of bad debts. We continually evaluate the
creditworthiness of our customers and typically require a deposit of 50% of the
total purchase price with each EcaFlo® equipment order. We evaluate
the collectability 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.
Loss
from Operations
The loss
from operations for the three and nine months ended September 30, 2010 was
$409,030 and $1,008,597, respectively, an increase of $94,930, or 30%, from
$314,100 for the three months ended September 30, 2009 and an increase of
$48,918 or 5% from $959,679 for the nine months ended September 30,
2009. The increase in the loss from operations was the result of an
increase in expenses during this period, primarily due to the Company’s
utilization of the services of outside consultants and costs associated with
conducting our Annual Meeting of Shareholders.
16
Interest
Expense
Interest expense for the three and nine
months ended September 30, 2010 was $122,620 and $220,016, respectively, a
decrease of $110,914, or 47%, from $233,534 for the three months ended September
30, 2009 and a decrease of $255,450, or 54%, from $475,466 for the nine months
ended September 30, 2009. The decrease in interest expense was as a
result of having paid off a number of our convertible debentures and temporary
working capital loans which were accruing interest in 2009.
Net
Loss
Our net
loss for the three and nine months ended September 30, 2010 was $531,650 and
$1,228,613, respectively, a decrease of $15,984, or 3%, from $547,634 for the
three months ended September 30, 2009 and a decrease of $206,532 or 14% from
$1,435,145 for the nine months ended September 30, 2009. We continue
to have a net loss but believe the loss will be reduced and profitability will
be attained in future quarters as the sales of our products continue to
increase.
Liquidity
and Capital Resources
The
following table summarizes total current assets, total current liabilities and
working capital at September 30, 2010 compared to December 31,
2009.
|
September
30,
|
December
31,
|
Increase
/ (Decrease)
|
||||||||||||||
|
2010
|
2009
|
$
|
%
|
|||||||||||||
|
Current
Assets
|
$ | 642,083 | $ | 1,034,152 | $ | (392,069 | ) | (38 | %) | |||||||
|
Current
Liabilities
|
939,791 | 888,743 | 51,048 | 6 | % | |||||||||||
|
Working
Capital
|
$ | (297,708 | ) | $ | 145,409 | $ | (443,117 | ) | (305 | %) | ||||||
Current assets for the nine months
ended September 30, 2010 were $642,083, a decrease of $392,069, or 38%, from
$1,034,152 at December 31, 2009. Current liabilities for the same
period were $939,791, an increase of $51,048, or 6%, from $888,743 for the year
ended December 31, 2009. The decrease in current assets and increase
in current liabilities were due to an increase in expenses, which resulted in a
decreased cash balance and increase in accounts payable for this
period.
Funding
of our new facility expansion caused a significant decrease in our cash position
for this period, but has allowed us to quadruple our manufacturing production
capacities. We anticipate that this will translate into increased
revenue in future quarters. Additionally, 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.
At
September 30, 2010, our cash balance was $68,319. Coupled with
pending conversions and receipt of funds associated with our accounts
receivable, we believe that our cash on hand will be sufficient to meet our
capital and operating requirements for at least the next quarter. Our
future capital requirements, however, will depend on numerous factors, including
without limitation, potential acquisitions and/or joint ventures, private sales
of our stock and future results of operations.
17
In
addition to sales-generated revenue, we continue to use traditional and/or debt
financing to provide the capital we need to run the business. In the
near future, we plan 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.
As of September 30, 2010, we had
convertible loans totaling $442,339. $250,000 of these convertible
notes are accruing interest at a rate of 8% per annum payable semi-annually, and
are due April 7, 2011. The remaining $192,339 in convertible notes
are accruing interest at a rate of 10% per annum, and are due September 10,
2011.
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. Our ability to continue as a going
concern is dependent on attaining profitable operations. Our 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 our cash position;
however, no assurance can be given that debt or equity financing, if and when
required, will be available. The financial statements do not include
any adjustments relating to the recoverability and classification of recorded
assets and classification of liabilities that might be necessary should we be
unable to continue existence.
Critical
Accounting Policies and Estimates
Our
discussion of financial conditions and results of operations is based upon the
information reported in our financial statements. The preparation of
these statements requires us to make assumptions and estimates that affect the
reported amounts of assets, liabilities, revenues and expenses as well as the
disclosure of contingent assets and liabilities at the date of our 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. In the case where a customer prefers to make its own shipping
arrangements, we consider that the sale has occurred when the equipment is
crated and on our loading dock awaiting pick-up.
Off-Balance
Sheet Arrangements
As of
September 30, 2010, we did not have any off-balance sheet arrangements that had
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to investors.
18
Item
3. Quantitative and Qualitative Disclosures About Market Risk
Concentration
of Credit Risk
We sell products to customers in
diversified industries and geographical regions. During the years
ended December 31, 2009 and 2008, three of our customers represented 26%, 24%,
and 12% and 41%, 16%, and 12% of sales, respectively. We continually
evaluate the creditworthiness of our customers and typically require a deposit
of 50% of the total purchase price with each EcaFlo® equipment
order.
We evaluate the collectability 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, 2009 and 2008, there was no reserve for bad debts.
Item
4T. 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 and in ensuring that information required to be disclosed
by us in the reports that we file or submit under the Act is accumulated and
communicated to our management, including our principal executive and principal
financial officer, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting that occurred
during our most recent fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings.
We are not a party to any material
legal proceedings.
19
Item
1A. Risk Factors.
FACTORS
THAT MAY AFFECT OUR RESULTS OF OPERATIONS
The risk
factors listed on our 2009 Form 10-K on pages 13 to 16, filed with the
Securities Exchange Commission on April 14, 2010, are hereby incorporated herein
by reference.
Amended
Risk Factor: Potential issuance of additional stock could dilute
existing stockholders.
We are
authorized to issue up to 200,000,000 shares of common stock and 50,000,000
shares of preferred stock. To the extent of such authorization, our
board of directors has the ability, without seeking stockholder approval, to
issue additional shares of stock in the future for such consideration as the
board may consider sufficient. We may seek additional equity
financing, which if sought or obtained may result in additional shares of our
stock being issued. The issuance of additional stock in the future
will reduce the proportionate ownership and voting power of the stock held by
our existing stockholders.
Item
2. Recent Sales of Unregistered Securities
Stock
Issuances Pursuant to Convertible Notes and Debenture Agreements
On
September 7, 2010, we issued 68,665 restricted shares of our common stock
to certain debenture holders pursuant to their conversion of $27,000 of
principal amounts plus unpaid interest due under their debenture agreements, at
a conversion rate of $0.40 per share, on August 27, 2010.
We
believe that the issuance of the above shares is exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2) and Regulation D Rule 506. The recipients of the shares
were afforded an opportunity for effective access to files and records of the
Company that contained the relevant information needed to make their investment
decisions, including the financial statements and 34 Act reports. We
reasonably believed that the recipients, immediately prior to their conversion
of the notes, had such knowledge and experience in our financial and business
matters that they were capable of evaluating the merits and risks of their
investments. The recipients had the opportunity to speak with our
management on several occasions prior to their investment
decisions.
Warrant
Issuances
On July
12, 2010, we issued warrants to purchase 400,000 shares of our restricted common
stock for consideration of $0.005 per warrant, pursuant to a consulting
agreement. 200,000 of the warrants are exercisable at $0.50 per share
and the remaining 200,000 warrants are exercisable for $1.00 per share, all
expiring on December 31, 2011.
On July
16, 2010, we issued warrants to purchase 300,000 shares of our restricted common
stock for consideration of $0.005 per warrant, pursuant to a consulting
agreement. The warrants are exercisable at $0.50 per share and expire
on December 31, 2011.
20
On July
23, 2010, we issued warrants to purchase 270,000 restricted shares of our common
stock at $0.10 per share. These warrants were issued pursuant to a
loan agreement which was executed in 2009, and expire on December 31,
2011.
On August
5, 2010, we issued warrants to purchase 100,000 shares of our restricted common
stock for consideration of $0.005 per warrant, pursuant to a consulting
agreement. The warrants are exercisable at $0.50 per share and expire
on December 31, 2011.
We
believe that the issuance of the above warrants is exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2) and Regulation D Rule 506. The recipients of the
warrants were afforded an opportunity for effective access to files and records
of the Company that contained the relevant information needed to make their
investment decisions, including the financial statements and 34 Act
reports. We reasonably believed that the recipients, immediately
prior to the issuance of the warrants, had such knowledge and experience in our
financial and business matters that they were capable of evaluating the merits
and risks of their investments. The recipients had the opportunity to
speak with our management on several occasions prior to their investment
decisions.
Subsequent
Issuances
On
October 7, 2010, a warrant holder, which is an affiliate of the Company,
exercised 1,000,000 restricted warrants at a price of $0.10 per share for a
total purchase price of $100,000, all of which was paid in cash. The
1,000,000 restricted shares were issued on October 18, 2010.
We
believe that the issuance of the above warrants is exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2) and Regulation D Rule 506. The recipient of the warrants
was afforded an opportunity for effective access to files and records of the
Company that contained the relevant information needed to make their investment
decisions, including the financial statements and 34 Act reports. We
reasonably believed that the recipient, immediately prior to the issuance of the
warrants, had such knowledge and experience in our financial and business
matters that they were capable of evaluating the merits and risks of their
investments. A representative of the recipient had the opportunity to
speak with our management 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 quarter ended September 30, 2010.
Item
5. Other Information.
None.
21
Item
6. Exhibits.
Exhibits
|
Exhibit
|
Filed
|
Incorporated
by reference
|
||||||||||
|
number
|
Exhibit
description
|
herewith
|
Form
|
Period
ending
|
Exhibit
No.
|
Filing
date
|
||||||
|
3(i)(h)
|
Articles
of Incorporation of Integrated Environmental Technologies,
Ltd.
|
8-K
|
2/18/08
|
3(i)(h)
|
3/10/08
|
|||||||
|
3(ii)(c)
|
Bylaws
of Integrated Environmental Technologies, Ltd., a Nevada
corporation
|
8-K
|
2/18/08
|
3(ii)(c)
|
3/10/08
|
|||||||
|
3(ii)(d)
|
Amendments
to Amended and Restated Articles of Incorporation and
By-laws
|
8-K
|
9/30/10
|
(d)(i),
(ii), (iii)(iv)
|
10/6/10
|
|||||||
|
31
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act
|
X
|
||||||||||
|
32
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act
|
X
|
||||||||||
22
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
INTEGRATED
ENVIRONMENTAL TECHNOLOGIES, LTD.
(Registrant)
By:
William E. Prince, Chief Executive Officer
and
Principal Financial Officer (on behalf of the
registrant
and as Principal Accounting Officer)
Date: November
15, 2010
23