UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-K
(Mark
One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For
the fiscal year ended December 31, 2014
OR
☐ TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For
the transition period from ______ to ______
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) |
Registrant's
telephone number: (843) 390-2500
Securities
registered under Section 12(b) of the Act: None
Securities
registered under Section 12(g) of the Act:
Common
Stock, par value $0.001
(Title
of class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
|
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
|
Non-accelerated
filer |
☐ |
Smaller reporting
company |
☒ |
|
(Do not check if a smaller reporting company) |
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As
of June 30, 2014, the aggregate fair value of the registrant’s common stock held by non-affiliates was approximately $9,447,000.
As of March 25, 2015, there were 298,309,835
shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this annual report on Form 10-K
incorporates certain information by reference from the registrant's proxy statement for the annual meeting of stockholders scheduled
to be held on May 28, 2015. The proxy statement will be filed with the Securities and Exchange Commission on or before April 29,
2015.
SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Certain information included
in this annual report on Form 10-K and other filings of the registrant under the Securities Act of 1933, as amended (the “Securities
Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated
orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the
Exchange Act. 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 objectives 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”, “anticipate” or other similar words. These forward-looking statements
present our estimates and assumptions only as of the date of this annual report on Form 10-K. Except as may be required under
applicable securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. You should,
however, consult further disclosures we make in future filings of our annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K. Additionally, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995
most likely do not apply to our forward-looking statements because we are considered a penny stock issuer.
INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.
INDEX TO FORM 10-K
PART I |
|
|
|
|
|
Item 1. |
Business |
1 |
|
|
|
Item 1A. |
Risk Factors |
9 |
|
|
|
Item 1B. |
Unresolved Staff Comments |
9 |
|
|
|
Item 2. |
Properties |
10 |
|
|
|
Item 3. |
Legal Proceedings |
10 |
|
|
|
Item 4. |
Mine Safety Disclosures |
10 |
|
|
|
PART II |
|
|
|
|
|
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities |
11 |
|
|
|
Item 6. |
Selected Financial Data |
12 |
|
|
|
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results
of Operations |
13 |
|
|
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
19 |
|
|
|
Item 8. |
Financial Statements and Supplementary Data |
19 |
|
|
|
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
19 |
|
|
|
Item 9A. |
Controls and Procedures |
19 |
|
|
|
Item 9B. |
Other Information |
20 |
|
|
|
PART III |
|
|
|
|
|
Item 10. |
Directors, Executive Officers and Corporate Governance |
21 |
|
|
|
Item 11. |
Executive Compensation |
21 |
|
|
|
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters |
21 |
|
|
|
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
21 |
|
|
|
Item 14. |
Principal Accountant Fees and Services |
21 |
|
|
|
PART IV |
|
|
|
|
|
Item 15. |
Exhibits and Financial Statement Schedules |
22 |
|
|
|
SIGNATURES |
|
23 |
PART I
Item 1. Business
General
Integrated Environmental Technologies, Ltd.
(“IET”) was originally incorporated in Delaware on February 2, 1999 and is currently a Nevada corporation. IET is
headquartered in Little River, South Carolina and operates its business through its wholly-owned subsidiary, I.E.T., Inc., a Nevada
corporation incorporated on January 11, 2002.
IET markets its products
and equipment under the umbrella brand name, EcoTreatments™. IET produces a hypochlorous acid solution (“Anolyte”)
as well as an anti-oxidizing, mildly alkaline solution (“Catholyte”), that provide an environmentally friendly and
effective alternative for cleaning, sanitizing and disinfecting as compared to the hazardous chemicals traditionally prevalent
in commercial use. IET markets and sells Anolyte under the brand name, Excelyte® and markets Catholyte under the brand name,
Catholyte Zero™, although the majority of IET’s sales and marketing efforts are focused on Excelyte®. IET manufactures
proprietary equipment, which it markets under the brand name EcaFlo™, to produce Anolyte and Catholyte for distribution
by IET and, under certain circumstances, such equipment is leased by IET to customers for use at their facilities.
Technology
IET produces Anolyte and
Catholyte with its proprietary EcaFlo™ equipment which utilizes electro-chemical activation (“ECA”) technology.
ECA technology is a process of passing a diluted saline solution and purified 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.
The EcaFlo™
equipment consists of our flow control hardware and system, our proprietary electrolytic cell and
operating software algorithms and a touch-screen/PLC interface. The EcaFlo™ equipment can produce Anolyte and Catholyte
with great accuracy, dependability and reliability throughout a wide range of pH, free available chlorine and salt concentration
variables to meet the needs of various applications. The EcaFlo™ equipment can produce
solutions ranging from disinfectants to sanitizers to cleaners.
Products
We produce Anolyte that
is effective as a disinfectant without leaving a harmful residue. The naturally occurring properties and less-corrosive nature
of Anolyte makes it an excellent replacement for quaternary ammonia, sodium hypochlorite (bleach) and other hazardous chemicals
currently being used as disinfectants and sanitizers. Anolyte contains an active killing agent that is produced with a pH of 6.5
and contains a ratio of free available chlorine of approximately 92% hypochlorous acid to 8% hypochlorite. Anolyte is used in
the oil and gas market as a hydrogen sulfide scavenger/eliminator and biocide. Anolyte kills various pathogens including, but
not limited to, Mycobacterium bovis (Tuberculosis), Salmonella enterica, Pseudomonas aeruginosa, Staphylococcus
aureus, methicillin-resistant Staphylococcus aureus (MRSA) and H1NI influenza virus (swine flu). Anolyte also kills
hospital-acquired pathogens such as Clostridium difficile spores (C. diff) and vancomycin-resistant enterococci
(VRE) as well as a carbapenem-resistant enterobacteriaceae (CRE) known as Klebsiella pneumoniae (NDM-1). Further, the high-risk
blood-borne pathogen human immunodeficiency virus (HIV) and the food-borne pathogens Listeria monocytogenes and Escherichia
coli (E. coli) are killed by Anolyte. We also produce Catholyte, an anti-oxidizing and mild alkaline solution that
is effective as a degreaser and cleaner.
Anolyte is registered with
the U.S. Environmental Protection Agency (the “EPA”) as a tuberculocidal hospital-level surface disinfectant (EPA
Registration No. 82341-1). In addition, Anolyte is registered with the EPA (EPA Registration No. 82341-4) as a disinfectant to
prevent Canine distemper virus, Canine parvovirus and Bordetella bronchiseptica. We intend to market the canine product,
in conjunction with a third-party partner, as Excelyte® VET.
IET will also lease EcaFlo™
equipment to a customer in certain situations if the customer’s business model and required volume of Anolyte or Catholyte
warrants such an arrangement. Under this type of arrangement, we lease our EcaFlo™ equipment and provide service support
for a fixed monthly amount plus royalty payments for the Anolyte and Catholyte produced by the customer. We also license to certain
customers the right to utilize our intellectual property pursuant to which the customer is required to pay us a monthly fee based
on the number of gallons of Anolyte and Catholyte produced by our EcaFlo™ equipment. We currently have no active lease arrangements
and have one active license agreement.
Business Strategy
We seek long-term relationships
and commitments directly with our targeted customers and distributors. Our business model is focused on selling Anolyte and Catholyte
directly to customers. In certain situations, a customer’s business model and required volume of Anolyte and Catholyte may
necessitate that we place the EcaFlo™ equipment at the customer’s facility. In these situations, we would lease the
EcaFlo™ equipment to the customer, maintaining ownership of the EcaFlo™ equipment.
We are primarily focused
on selling Excelyte® in the oil and gas production market and have recently established our oil and gas division to focus
on this market. We are also interested in the healthcare facilities and food production markets, but our emphasis on oil and gas
has required a dedication of a majority of our resources to that market.
Oil and Gas
We currently segment our activities in the
oil and gas business into three main categories:
Well
Maintenance – focuses on using Excelyte® as a hydrogen sulfide scavenger/eliminator and as a biocide to
significantly reduce or essentially eliminate hydrogen sulfide and bacteria in oil and gas
wells and related equipment;
Drilling
and Completions – focuses on using Excelyte® as a biocide to treat water before
it is used in hydraulic fracturing, commonly referred to as “make-up water”, in order to remove bacteria in
the water; and
Water Remediation
– focuses on using Excelyte® as a hydrogen sulfide scavenger/eliminator and as a biocide to treat water after
it is used in hydraulic fracturing, commonly referred to as “produced water”, in order to remove bacteria so that
the water can either be re-used in hydraulic fracturing or disposed.
Hydrogen sulfide is a toxic and corrosive
chemical that frequently appears in oil and gas production. Excelyte® acts as a hydrogen sulfide scavenger and as a biocide
that kills sulfate-reducing bacteria, which are known to produce hydrogen sulfide.
Hydraulic fracturing is a method of drilling
new oil and gas wells. In this process, fracturing fluids – which contain proppants (sand) and vast amounts of water, in
addition to biocides and other chemicals that can be toxic to humans – are pumped into oil and gas wells at high pressure
in order to more completely fracture subterranean rock formations and release the oil and natural gas trapped in those formations.
Millions of gallons of “make-up water” are used in the fracturing process each day. In addition, millions of gallons
of water return to the surface as “produced water” after the fracturing process is completed. Both the make-up water
used in fracturing fluids and the produced water must be treated to control or eliminate the bacteria and other unwanted microorganisms
often present in those waters.
Excelyte® reduces sulfate-reducing bacteria,
which is known to produce hydrogen sulfide, and other bacteria present in production wells. By reducing the amount of hydrogen
sulfide chemical present in the oil and gas wells, we believe that: (1) the work environment at the well site will be safer since
the amount of hydrogen sulfide gas is significantly reduced; (2) the rate of corrosion on the well linings and other equipment
used in the production well will be reduced, thereby reducing the maintenance required on a well; and (3) the quality of the oil
and gas produced will be potentially improved. In addition, we believe that Excelyte® is as effective as other competing chemical
technologies in treating both make-up water and produced water, and more environmentally responsible due to its naturally occurring
properties.
To date, the
majority of our efforts in oil and gas have focused on well maintenance, with a particular emphasis on oil wells. Hydrogen sulfide
is one of the leading threats to oilfield worker safety, claiming lives every year because of its toxicity at very low levels
of concentration. A particular emphasis for oil and gas producers is controlling the level of hydrogen sulfide at or near the
well head. Our well maintenance operations consist of treating oil and gas production wells that test positive for hydrogen sulfide
above a specified level with regularly scheduled applications of Excelyte®. The results of Excelyte® well maintenance
treatments have shown that Excelyte® is effective as a hydrogen sulfide scavenger/eliminator and as a biocide and that Excelyte®
reduces the level of hydrogen sulfide in oil wells faster than competing products, which we believe is due to the ability
of Excelyte® to kill sulfide-producing bacteria rapidly.
In addition, the naturally occurring properties of Excelyte® make it easier to
administer and more environmentally friendly than competing products. We believe that our Excelyte®
treatment protocol can significantly reduce or essentially eliminate hydrogen sulfide from our customers’ oil wells. We
also are currently developing an Excelyte® treatment protocol for gas wells, and expect results similar to the results of
our Excelyte® treatments on oil wells.
Our current business model for our oil and
gas operations is centered on establishing Excelyte® production facilities in strategic locations throughout the various basins
in the United States where oil and gas is produced and where hydrogen sulfide presents a significant problem. We intend to produce
Excelyte® at these locations and have it delivered by third party fluid-trucking companies. Each production facility will
be staffed by appropriate personnel to sell and produce Excelyte® and to service our customers. Our production facilities
will be established in typical flex space and will likely start with four to six EcaFlo™ units per facility. Because of
the stand-alone nature of the production machines, we estimate that up to twenty units can be set up in approximately 3,500 square
feet of space. These manufacturing facilities require power and clean water, but no special sewerage or by-product disposal services.
A facility containing six of our four-cell EcaFlo™ units can produce approximately 7,200 gallons of product daily.
We currently have a production facility in
Myton, Utah, servicing the Uinta Basin and a production facility in Artesia, New Mexico, servicing the New Mexico region of the
Permian Basin. We are currently providing Excelyte® well maintenance treatments on over 100 oil wells in these two areas.
We estimate that there are approximately 5,000 oil wells in the Uinta Basin and approximately 25,000 oil wells in the New Mexico
region of the Permian Basin that would benefit from the regular use of Excelyte® as part of a well maintenance program.
As our business grows, we will look to expand
our oil and gas operations further in the Permian Basin (Texas) and other areas such as the Eagle Ford Shale in the Western Gulf
Basin (Texas), the Williston Basin (North Dakota) and the Piceance Basin (Colorado).
We are currently
focused on generating recurring revenue through the sale of Excelyte® in well maintenance operations,
but as we grow and improve our cash flow, we will look to further expand the sale of Excelyte® into drillings and completions
as well as water remediation. We continue to believe that the three oil and gas market segments noted above potentially represent
a $2.5 billion market opportunity in the United States.
Healthcare Facilities
Our Anolyte is a
tuberculocidal hospital-level disinfectant that can be used safely and effectively anywhere hard surfaces are disinfected for
the purpose of infectious disease control. In addition, our Anolyte qualifies as a Centers for Disease Control and Prevention
(the “CDC”) Intermediate Disinfectant meeting the Occupational Safety and Health Administration’s blood-borne
pathogen standard.
Healthcare facilities
are increasingly facing major problems in controlling bacteria and viruses. Of particular concern is carbapenem-resistant Enterobacteriaceae
(CRE), cited in a CDC Health Advisory dated February 14, 2013. Our Anolyte eliminates one of the most common types of CRE, Klebsiella
pneumoniae (NDM-1).
In addition, our
Anolyte eliminates Clostridium difficile spores (C. diff), a bacterium that can cause symptoms ranging from diarrhea
to life-threatening inflammation of the colon. Illness from C. diff most commonly affects older adults in hospitals or
in long-term care facilities and typically occurs after use of antibiotic medications. In recent years, C. diff infections
have become more frequent, severe and difficult to treat as C. diff has increasingly become more resistant to disinfectants.
The ability of our
Anolyte to eliminate bacteria such as the CRE Klebsiella pneumoniae (NDM-1) and C. diff, as well as other health-related
bacteria and viruses, including, but not limited to, Tuberculosis, VRE and HIV, make our Anolyte a very useful product for healthcare
facilities. The naturally occurring properties and efficacy of our Anolyte make it an ideal product for healthcare providers since
it can be applied in spray format in order to completely cover a facility.
In March 2014, we received approval from the
EPA to market a new Anolyte product called Excelyte® VET – which can be used to prevent Canine distemper. Canine distemper
is highly contagious and is the leading cause of infectious disease deaths in dogs worldwide. The new product registration (EPA
Registration #82341-4) also allows us to market Excelyte® VET to prevent the spread of Canine parvovirus and Bordetella
bronchiseptica. Excelyte® VET is expected to be used to disinfect animal care facilities. We are currently working with
a distribution partner as it prepares for the market launch of Excelyte® VET.
In June 2014, the Carson Tahoe Health Systems,
Carson City, Nevada, published the results of its independent study showing the effectiveness of our Anolyte in reducing the amount
of bacteria present in a hospital setting. The study also highlighted our Anolyte’s naturally occurring properties, which
do not corrode hospital equipment like more commonly used chemicals.
We have undertaken additional testing to show
efficacy with additional species of bacteria, and we are working on new application methods. One of those application methods,
which we are developing with a partner, is now being reviewed by the EPA for use in healthcare settings. If approved, this system
will allow users to apply the product by means other than spraying and wiping, producing a more efficient delivery system to kill
the harmful germs responsible for the increase of hospital-borne pathogen deaths and diseases. We also are in discussions with
a potential partner for distribution into hospitals.
Most
of our resources are currently focused on the oil and gas market. Accordingly, we plan to partner with others who can assist us
in the development, marketing and distribution of Excelyte® in the healthcare facilities market.
Food Production
Our Anolyte is permitted
to be used in commercial plants producing meat, poultry, egg, vegetable and fruit products as a disinfectant and sanitizer under
the U.S. Department of Agriculture’s (the “USDA”) Codes for Federal Regulation and the USDA’s Food Safety
and Inspection Service (“FSIS”). In addition, our Anolyte has been registered by NSF International (“NSF”)
as an antimicrobial agent (D2 category), not requiring rinse after use in food contact surface applications.
We believe that our Anolyte
is more efficient than the bleach solutions traditionally used to mitigate pathogens in food processing, water disinfection, and
fungicidal control. The product quickly destroys microorganisms and pathogens on fruits, vegetables, and processing equipment
without leaving a harmful residue, and is effective for hard-surface disinfection at customer facilities. The naturally occurring
properties and non-corrosive nature of our Anolyte makes it an excellent replacement for quaternary ammonia and other hazardous
chemicals currently in use.
We further believe that
our Anolyte can be utilized to improve the health of dairy cows, cattle, swine and chickens. When introduced to drinking water,
the solution is effective at reducing the bacteria build-up in the piping systems of the irrigation and watering systems, which
could potentially improve the health of the animals that consume the treated water thereby potentially reducing the usage of antibiotics
in these animals.
Most
of our resources are currently focused on the oil and gas market. Accordingly, we plan to partner with others who can assist us
in the development, marketing and distribution of Excelyte® in the food production market.
Research and Development
We are focused on the development of new applications
and uses of Anolyte and Catholyte. We continue to test Anolyte and Catholyte to develop new concentrations, increase shelf-life
and to supplement our label claims with respect to the efficacy of Anolyte in killing additional bacteria and viruses. In addition,
we are developing new generations of our EcaFlo™ equipment with both larger and smaller production capacities. We conduct
our primary research and development activities in-house and use third-party laboratories to conduct independent testing. We also
engage with development partners to perform research and development activities at their expense for specific products and applications
for our Anolyte and Catholyte.
Research conducted between IET and Coastal
Carolina University (“CCU”) was published in Crop Protection in July 2011 in an article titled “Evaluation of
electrolyzed oxidizing water for phytotoxic effects and pre-harvest management of gray mold disease on strawberry plants.”
The research evaluated the ability of Anolyte to inactivate pure fungal cultures of Botrytis cinerea and Monilinia fructicola.
The results from this study indicated that Anolyte can be used as a disinfectant on strawberry plants in the field and in greenhouses,
packing houses and in commercial facilities to prevent or manage fungal infections, providing an alternative to traditional chemical
fungicides.
Research conducted between IET and CCU was
published in Food Microbiology in February 2008 in an article titled “Reduction of bacteria on spinach, lettuce, and surfaces
in food service areas using neutral electrolyzed oxidizing water.” The research evaluated and illustrated the efficacy of
Anolyte in the reduction of Escherichia coli, Salmonella
typhimurium, Staphylococcus aureus, Listeria
monocytogenes, and Enterococcus faecalis on lettuce, spinach
and food contact surfaces.
Research conducted between IET and CCU was
published in International Journal of Food Microbiology in July 2010 in an article titled “Postharvest management of gray
mold and brown rot on surfaces of peaches and grapes.” The research evaluated the ability of Anolyte to inactivate pure
fungal cultures and the use of Anolyte on the surfaces of peaches and grapes. The results indicated that Anolyte is effective
for postharvest sanitizing during and after packaging, thereby extending shelf life in commercial settings.
In April 2011, the Society of Petroleum Engineers
(the “SPE”) performed a case study and prepared a report titled “Case Study: Evaluation of an Oxidative Biocide
During and After a Hydraulic Fracturing Job in the Marcellus Shale” for its SPE International Symposium on Oilfield Chemistry.
This report evaluated the effectiveness of oxidative biocides, such as our Anolyte, and concluded, among other things, that such
oxidative biocides effectively reduce or eliminate bacteria with no re-growth in produced water for up to 81 days, have a faster
kill time than glutaraldehyde, demonstrate negligible corrosion on typical oilfield equipment and do not create well-site hazards
in terms of health, biodegradability and toxicity.
The EPA, through its Office of Research and
Development’s National Homeland Security Research Center (“NHSRC”), funded, directed and managed research with
Battelle Memorial Institute and released a report titled “Evaluating a Decontamination Technology Based on the Electrochemical
Generation of Anolyte Solution against B. anthracis Spores” in December 2011, evaluating Anolyte and our EcaFlo™
equipment. This report documents the results and effectiveness of Anolyte and our EcaFlo™ equipment which can be used to
treat materials contaminated with Anthrax. NHSRC has made this publication available to the response community to prepare for
and recover from disasters involving chemical and/or biological contamination.
Manufacturing and Principal
Suppliers
We currently produce, bottle
and ship Excelyte® and Catholyte Zero™ for distribution to healthcare facilities and food production facilities at our
facility in Little River, South Carolina. We produce, bottle and ship Excelyte® for use by oil and gas producers at our facilities
in Myton, Utah and Artesia, New Mexico. We manufacture our EcaFlo™ equipment at our facility in Little River, South Carolina.
The raw materials used to manufacture our EcaFlo™ equipment include electronic components and the components of our electrolytic
cell, which are available to us through multiple qualified suppliers. We do not deem that we are reliant on any one supplier.
Customers
We principally sell our products directly
to commercial customers in the oil and gas industry and in several other industries. Our oil and gas customers are located in
Utah and New Mexico and our other customers are located in diversified geographical regions throughout the United States. During
the year ended December 31, 2014, four customers accounted for 29%, 15%, 13% and 10%, respectively, of revenues. During the year
ended December 31, 2013, four customers accounted for 22%, 14%, 14% and 11%, respectively, of revenues. No other customer accounted
for more than 10% of our revenues during the year ended December 31, 2014 or 2013.
Distribution, Sales and
Marketing
We currently plan to distribute, sell and
market Excelyte® to the oil and gas market through our own internal resources. This may include the utilization of independent
sales representatives to assist our internal sales personnel. Our current distribution, sales and marketing efforts for oil and
gas are focused on the Mountain West states and the Southwest states.
For the healthcare facility and food production
markets, we intend to outsource a majority of the distribution, sales and marketing requirements. Our current sales and marketing
efforts for healthcare facilities and food production are focused throughout the United States. We currently are working with
two independent sales representatives and two distributors that are currently selling Excelyte®.
Competition
We face competition in every aspect of our
business, and particularly from companies that seek to develop equipment that produces electro-chemically activated water or electrically
activated water.
We also face competition from companies that
produce hydrogen sulfide scavengers and biocides for the oil and gas industry and from companies that sell biologically active
solutions and products designed and developed for the synthesis of washing, disinfecting, and sterilizing. The applications for
this technology are many-fold and include any process requiring disinfection or water treatment.
We have a number of competitors that vary
in size, scope and breadth of products offered. Such competitors include some of the largest global corporations, and many of
our competitors have significantly greater financial resources than we do. We expect to face additional competition from other
competitors in the future.
Important competitive factors for our products
include product quality, consistency, environmental sensitivity, price, ease of use, customer service, and reputation. We believe
that we compete favorably on the factors described above. However, our industry is continuously evolving and is becoming increasingly
competitive. Larger, more established companies than us are increasingly focusing on ECA technology businesses that directly compete
with us.
Patents and Trademarks
We will develop intellectual property rights
to protect and preserve our proprietary technology and our right to capitalize on the results of our research and development
activities when deemed feasible. We currently maintain the trademark registrations to Excelyte® (Reg. No. 4524966) and the
Excelyte® logo (Reg. No. 3588751) and have filed applications with the United States Patent & Trademark Office for the
registration of EcaFlo™. In addition, we currently claim trade names for Catholyte Zero™ and EcoTreatments™.
Government Regulation
We manufacture and sell in the United States
certain disinfecting products that kill or reduce microorganisms (bacteria, viruses, fungi). The manufacture, labeling, handling
and use of these products are regulated by the EPA under the Federal Insecticide, Fungicide, and Rodenticide Act, or FIFRA. Our
Anolyte is currently registered by the EPA under FIFRA as a hospital-level disinfectant and is approved for use on both food contact
surfaces and on non-food contact hard surfaces. EPA product registration requires meeting certain efficacy, toxicity and labeling
requirements and paying ongoing registration fees. Although states do not generally impose substantive requirements different
from those of the EPA, each state in which these products are sold requires registration and payment of a fee.
The use of cleaners and
sanitizers in meat, poultry and egg production facilities is regulated by the USDA and FSIS. Our Anolyte is permitted to be used
in commercial plants producing meat, poultry, egg, vegetable and fruit products as a disinfectant and sanitizer by the USDA and
FSIS. In addition, our Anolyte has been registered by NSF as an antimicrobial agent (D2 category), not requiring rinse after use
in food contact surface applications.
Insurance
We maintain insurance in such amounts and
against such risks as we deem prudent, although no assurance can be given that such insurance will be sufficient under all circumstances
to protect us against significant claims for damages. The occurrence of a significant event not fully-insured could materially
and adversely affect our business, financial condition and results of operations. Moreover, no assurance can be given that we
will be able to maintain adequate insurance in the future at commercially reasonable rates or on acceptable terms.
Employees
We currently employ ten full-time employees.
We have not experienced any work stoppages to date and we believe that our relationship with these employees is good.
Item 1A. Risk Factors
IET is a smaller reporting company and is therefore
not required to provide this information.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We lease the real property identified below.
We believe that we have adequate space for our current needs and that suitable additional space will be available at commercially
reasonable prices for our future needs.
Principal
Properties Leased |
|
Primary
Use |
|
Floor
Space |
|
Lease
Expiration (calendar year) |
|
Renewals |
|
|
|
|
|
|
|
|
|
Little
River, South Carolina |
|
Headquarters,
including research and development, EcaFlo™ equipment assembly and servicing, Excelyte® and Catholyte Zero™
production and bottling, administrative, and warehouse operations |
|
12,000 square
feet |
|
2017 |
|
Two successive
three-year terms |
|
|
|
|
|
|
|
|
|
Myton,
Utah |
|
Excelyte®
production and warehouse operations |
|
3,250 square
feet |
|
2018 |
|
Two successive
three-year terms |
|
|
|
|
|
|
|
|
|
Artesia,
New Mexico |
|
Excelyte®
production and warehouse operations |
|
3,200 square
feet |
|
2017 |
|
None |
Item 3. Legal Proceedings
On June 17, 2014, a civil complaint was filed
against IET and one of its directors, E. Wayne Kinsey, III, in the Court of Common Pleas, County of Horry, State of South Carolina,
by Marion Sofield, IET’s former Executive Vice President - Operations. In her complaint, Ms. Sofield alleges breach of contract
and fraud/fraudulent inducement by IET against her with regard to her employment agreement and the termination of her employment.
Ms. Sofield also alleges IET and Mr. Kinsey engaged in a civil conspiracy and unfair trade practices and that Mr. Kinsey engaged
in tortious interference. Ms. Sofield claims that she is owed additional compensation under her terminated employment agreement,
and is seeking the recovery of such compensation as well as attorney’s fees and punitive damages.
On July 18, 2014, IET filed a motion to dismiss
this state court action due to the binding arbitration clause contained in Ms. Sofield’s employment agreement that applies
to a majority of the allegations in the complaint. On December 8, 2014, the court entered a consent order that: (a) granted IET’s
request to compel binding arbitration of the breach of contract and fraud claims; and (b) stayed the remaining causes of action
in the South Carolina state court until the aforementioned binding arbitration process is complete.
IET does not believe there is any merit to
Ms. Sofield’s allegations and will continue to vigorously defend this action.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for
Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is quoted on the OTC Bulletin
Board under the ticker symbol “IEVM.” Since secondary market activity for shares of our common stock has been limited
and sporadic, such quotations may not actually reflect the price or prices at which purchasers and sellers would currently be
willing to purchase or sell such shares.
The following table shows the range of high
and low closing bid prices for our common stock for the period commencing January 1, 2013 through December 31, 2014 as reported
by the OTC Bulletin Board. These quotations represent prices between dealers, may not include retail markups, markdowns or commissions
and may not necessarily represent actual transactions.
Year Ended December 31, 2014 | |
High | | |
Low | |
First Quarter | |
$ | 0.12 | | |
$ | 0.07 | |
Second Quarter | |
| 0.09 | | |
| 0.05 | |
Third Quarter | |
| 0.10 | | |
| 0.05 | |
Fourth Quarter | |
| 0.10 | | |
| 0.06 | |
| |
| | | |
| | |
Year Ended December 31, 2013 | |
| High | | |
| Low | |
First Quarter | |
$ | 0.05 | | |
$ | 0.03 | |
Second Quarter | |
| 0.07 | | |
| 0.03 | |
Third Quarter | |
| 0.10 | | |
| 0.05 | |
Fourth Quarter | |
| 0.16 | | |
| 0.08 | |
The OTC Bulletin Board is generally considered
to be a less active and efficient market than the NASDAQ Global Select Market, NASDAQ Global Market, the NASDAQ Capital Market
or any other national exchange and will not provide investors with the liquidity that the NASDAQ Global Select Market, NASDAQ
Global Market, the NASDAQ Capital Market or another national exchange would offer. As of March 25, 2015, we had approximately
15 market makers for our common stock, the largest of which were Cantor Fitzgerald & Co., Citadel Securities LLC, Maxim Group
LLC, Wilson-Davis & Co., Inc., Monarch Bay Securities LLC and Stockcross Financial Services, Inc.
Stockholders
As of March 25, 2015, there were 173 registered
holders of our common stock and 298,309,835 shares issued and outstanding. In addition, as of that date, 23,472,061 shares of
common stock were subject to outstanding warrants, 4,296,920 shares of common stock were subject to outstanding stock options
and 4,823,750 shares of common stock were subject to outstanding convertible debentures.
Dividends
We have not paid any cash dividends in the
two most recent fiscal years and it is anticipated that cash dividends will not be declared on our common stock in the foreseeable
future. Our dividend policy is subject to the discretion of our board of directors and depends upon a number of factors, including
operating results, financial condition and general business conditions. Holders of our common stock are entitled to receive dividends
as, if and when declared by our board of directors out of funds legally available therefor. We may pay cash dividends if net income
available to stockholders fully funds the proposed dividends, and the expected rate of earnings retention is consistent with capital
needs, asset quality and overall financial condition.
Sales of Unregistered Securities for the Fiscal Year Ended December
31, 2014
There were no sales of unregistered
securities during the fiscal year ended December 31, 2014, other than those set forth below or otherwise reported on Forms 10-Q
and/or 8-K filed by IET during the year ended December 31, 2014.
On October 10, 2014, IET
sold an aggregate of 5,410,000 shares of its common stock to two individual investors for an aggregate purchase price of $330,010.
IET issued 541,000 shares of common stock to an unaffiliated third party as payment of $33,000 of offering costs in connection
with these transactions. We will use the net proceeds received from these transactions for working capital purposes, including
the continued roll out of our previously disclosed sales and marketing strategy.
On October 10, 2014, IET issued 437,816 shares
of common stock as payment of $38,090 of accrued interest due on a convertible debenture for the period commencing August 21,
2013 through August 20, 2014. The number of shares of IET’s common stock issued as payment of the accrued interest was calculated
based on the market price of IET’s common stock ($0.087 per share) as defined in the convertible debenture.
On November 25, 2014, IET issued 125,000 shares
of common stock to an unaffiliated third party as payment of $8,875 of consulting fees.
On December 31, 2014, IET issued 169,014 shares
of common stock to an unaffiliated third party as payment of $12,000 of consulting fees and issued 119,350 shares of common stock
to an unaffiliated third party as payment of $5,251 of offering costs in connection with certain transactions.
In connection with the issuances
of the Company’s common stock described above, IET relied on the exemption from registration for a private transaction not
involving a public distribution provided by Section 4(a)(2) of the Securities Act.
Repurchases of Securities
We did not repurchase any securities within the fourth quarter
of the fiscal year covered by this annual report on Form 10-K.
Item 6. Selected Financial Data
IET is a smaller reporting company and is therefore
not required to provide this information.
Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operation
We have provided below information about IET’s
financial condition and results of operations for the years ended December 31, 2014 and 2013. This information should be read
in conjunction with IET’s audited consolidated financial statements for the years ended December 31, 2014 and 2013 and the
related notes thereto, which begin on page F-1 of this annual report on Form 10-K.
Background
IET is a Nevada corporation headquartered
in Little River, South Carolina that operates its business through its wholly-owned subsidiary, I.E.T., Inc., which is also a
Nevada corporation. See “Item 1. Business – General.”
IET markets its products
and equipment under the umbrella brand name, EcoTreatments™. IET produces Anolyte and Catholyte, which provide an environmentally
friendly and effective alternative for cleaning, sanitizing and disinfecting as compared to the hazardous chemicals traditionally
prevalent in commercial use. IET markets and sells Anolyte under the brand name, Excelyte® and markets Catholyte under the
brand name, Catholyte Zero™, although the majority of sales and marketing efforts are focused on Excelyte®. IET manufactures
proprietary equipment, which it markets under the brand name EcaFlo™, to produce Anolyte and Catholyte for distribution
by IET and, under certain circumstances, such equipment is leased by IET to customers for use at their facilities. See “Item
1. Business.”
Critical Accounting Policies
The discussion and analysis of our financial
condition is based upon the financial statements contained elsewhere herein, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation of these consolidated financial statements required
us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, income
taxes, contingencies and litigation. We based our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
We believe the following critical accounting
policies affect the more significant judgments and estimates used in preparation of the consolidated financial statements contained
elsewhere herein.
Revenue Recognition
General
Revenue is recognized when persuasive evidence
of an arrangement exists, title and risk of ownership have passed, the sales price is fixed or determinable and collectability
is probable. Generally, these criteria are met at the time the product is shipped. Provisions for estimated returns, rebates and
discounts are provided for at the time the related revenue is recognized. Freight revenue billed to customers is included in sales
and the related shipping expense is included in cost of sales. Service revenue is recognized in the period the service is performed
or ratably over the period of the related service contract.
Leases
When IET leases its equipment, the accounting
involves specific determinations, which often involve complex provisions and significant judgments. The four criteria of the accounting
standard that IET uses in the determination of a sales-type lease or operating-type lease are: (a) a review of the lease term
to determine if it is equal to or greater than 75% of the economic life of the equipment; (b) a review of the minimum lease payments
to determine if they are equal to or greater than 90% of the fair market value of the equipment; (c) a determination of whether
or not the lease transfers ownership to the lessee at the end of the lease term; and (d) a determination of whether or not the
lease contains a bargain purchase option. If the lease transaction meets one of the four criteria, then it is recorded as a sales-type
lease; otherwise, it is recorded as an operating-type lease. Additionally, IET assesses whether collectability of the lease payments
is reasonably assured and whether there are any significant uncertainties related to costs that it has yet to incur with respect
to the lease.
When a customer enters into a sales-type lease
agreement, the sales and cost of sales are recognized at the inception of the lease. The sales-type lease consists of the sum
of the total minimum lease payments less unearned interest income and estimated executory cost. Minimum lease payments are part
of the lease agreement between IET (lessor) and the customer (lessee). The discount rate implicit in the sales-type lease
is used to calculate the present value of minimum lease payments, which IET records as a lease receivable. The minimum lease
payment consists of the gross lease payments net of executory costs and contingencies, if any. Unearned interest income is amortized
over the lease term to produce a constant periodic rate of return on net investment in the lease. While revenue is recognized
at the inception of the lease, the cash flow from the sales-type lease occurs over the course of the lease, which results in interest
income. Sales-type lease revenue consists of the initial sale of the equipment shipped and the interest and license elements of
the lease payments as they are earned.
When a customer enters into an operating-type
lease agreement, equipment lease revenue is recognized on a straight-line basis over the life of the lease, while the cost of
the leased equipment is depreciated over its estimated useful life.
Stock-Based Compensation
IET accounts for stock-based payments to employees
in accordance with Accounting Standards Codification (“ASC”) 718, “Stock Compensation” (“ASC 718”).
Stock-based payments to employees include issuances of stock, grants of stock options and issuances of warrants that are recognized
in the consolidated statement of operations based on their fair values at the date of grant or issuance.
IET accounts for stock-based payments to non-employees
in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees
include issuances of stock and warrants that are recognized in the consolidated statement of operations based on the value of
the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial
reporting date.
IET calculates the fair value of option grants
and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized during a period
is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated
at the time stock options are granted and warrants are issued and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations”
and represents only the unvested portion of the surrendered stock option or warrant. IET estimates forfeiture rates for all unvested
awards when calculating the expense for the period. In estimating the forfeiture rate, IET monitors both stock option and warrant
exercises as well as employee and non-employee termination patterns.
The resulting stock-based compensation expense
for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of
the award.
Accounts Receivable
Accounts receivable consist of trade receivables
recorded at original invoice amount, less any allowance for uncollectible accounts. Trade credit is generally extended on a short-term
basis; thus trade receivables do not bear interest. Trade receivables are periodically evaluated for collectability by considering
a number of factors, including the length of time an invoice is past due, the customer’s creditworthiness and historical
bad debt experience. Changes in the estimated collectability of trade receivables are recorded in the results of operations for
the period in which the estimate is revised. Trade receivables that are deemed uncollectible are offset against the allowance
for uncollectible accounts. IET generally does not require collateral for trade receivables.
Inventory
Inventories are recorded at the lower of cost
or market using the first-in, first-out method. IET determines its reserve for obsolete inventory by considering a number of factors,
including product shelf life, marketability, and obsolescence. IET determines the need to write down inventories by analyzing
product expiration, market conditions, and salability of its products.
Income Taxes
IET accounts for income taxes under ASC 740,
“Income Taxes” (“ASC 740”). ASC 740 requires that we recognize a current tax liability or asset for current
taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of temporary differences
and carryforwards to the extent they are realizable. We record a valuation allowance to reduce our deferred tax assets to the
amount that is more likely than not to be realized. While IET has considered future taxable income and ongoing prudent and feasible
tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would be
able to realize the deferred tax assets in the future in excess of the net recorded amount, an adjustment to the deferred tax
asset would increase income in the period such determination was made. Likewise, deferred tax assets are reduced by a valuation
allowance, when in our opinion, it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Recent Accounting Pronouncements
Applicable to IET
IET does not believe there are any recently
issued, but not yet effective, accounting standards that would have a significant impact on IET’s financial position or
results of operations.
Results of Operations
Revenue. For the year ended December
31, 2014, revenue was $185,577, as compared to $146,366 for the year ended December 31, 2013. The $39,211, or 27%, increase in
revenue for the year ended December 31, 2014 was primarily due to a $52,968 increase in Excelyte® sales primarily to oil and
gas customers and a $12,133 increase in sales of EcaFlo™ equipment parts and related supplies, offset by a $24,000 decrease
in EcaFlo™ equipment leasing revenue.
Cost of Sales. Cost of sales for the
year ended December 31, 2014 was $58,405, as compared to $28,930 for the year ended December 31, 2013. The $29,475, or 102%, increase
in cost of sales for the year ended December 31, 2014 was primarily attributable to the increase in sales of EcaFlo™ equipment
parts with higher costs and the increase in Excelyte® sales to oil and gas customers which are incurring a higher amount of
cost of sales due to initial operating costs associated with producing Excelyte® at our production facilities.
Gross Profit. For the years ended December
31, 2014 and 2013, gross profit margins were 69% and 80%, respectively.
General and Administrative Expenses.
For the year ended December 31, 2014, general and administrative expenses were $1,297,673, as compared to $1,243,196 for the year
ended December 31, 2013. The $54,477, or 4%, increase in general and administrative expenses for the year ended December 31, 2014
was primarily the result of a $122,992 increase in employee payroll and related benefit costs, a $95,240 increase in consulting
fees related to investor and public relations and a $47,112 increase in travel expense related to fundraising and business development
activities, offset by an $86,817 decrease in depreciation expense primarily related to leasehold improvements for our facility
in South Carolina that were fully depreciated as of December 31, 2013, a $46,164 decrease in legal fees primarily related to litigation,
a $29,257 decrease in stock-based compensation expense and a $26,550 decrease in litigation settlement expense.
Sales and Marketing Expenses. For
the year ended December 31, 2014, sales and marketing expenses were $785,155, as compared to $447,832 for the year ended December
31, 2013. The $337,323, or 75%, increase in sales and marketing expenses for the year ended December 31, 2014 was primarily the
result of a $160,753 increase in employee payroll and related benefit costs, a $56,313 increase in travel expenses related to
sales activities, a $53,918 increase in marketing expenses related to the re-design of the Company’s web-site and new product
branding initiatives, a $30,565 increase in office-related costs and a $22,100 increase in consulting fees related to sales activities.
Research and Development Expenses.
For the year ended December 31, 2014, research and development expenses were $266,298, as compared to $211,822 for the year ended
December 31, 2013. The $54,476, or 26%, increase in research and development expenses for the year ended December 31, 2014 was
primarily the result of a $23,931 increase in employee payroll and related benefit costs, a $19,324 increase in consulting fees
primarily related to regulatory and patent consultants and an $11,487 increase in laboratory testing fees.
Loss from Operations.
For the year ended December 31, 2014, the Company’s loss from operations was $2,221,954, as compared to $1,785,414 for the
year ended December 31, 2013. The $436,540, or 24%, increase in the loss from operations for the year ended December 31, 2014
was attributable to a $337,323 increase in sales and marketing expenses, a $54,477 increase in general and administrative expenses,
a $54,476 increase in research and development expenses and a $29,475 increase in cost of sales, offset by a $39,211 increase
in revenue.
Interest and Other Income. For
the year ended December 31, 2014, interest and other income was $36,109, as compared to $74 for the year ended December 31, 2013.
The $36,035 increase in interest and other income for the year ended December 31, 2014 was attributable to a $36,109 gain on the
settlement of a customer deposit.
Interest Expense. For the year
ended December 31, 2014, interest expense was $48,323, as compared to $45,913 for the year ended December 31, 2013. The $2,410,
or 5%, increase in interest expense for the year ended December 31, 2014 was primarily attributable to an increase in interest
expense related to a note payable for an equipment purchase.
Net
Loss. For the year ended December 31, 2014, the Company’s net loss was $2,234,168, as compared to $1,831,253 for the
year ended December 31, 2013. The $402,915, or 22%, increase in the net loss for the year ended December 31, 2014 was primarily
attributable to a $337,323 increase in sales and marketing expenses, a $54,477 increase in
general and administrative expenses, a $54,476 increase in research and development expenses and a $29,475 increase in cost of
sales, offset by a $39,211 increase in revenue and a $36,035 increase in interest and other income.
Liquidity and Capital
Resources
As of December 31, 2014, IET had a working
capital deficiency of $458,298 and cash on hand of $371,292. The $678,107 decrease in cash on hand from December 31, 2013 was
primarily due to $75,513 of principal payments on a note payable and our continuing operating expenses, offset by the receipt
of $1,045,996 of net proceeds from the sale of our common stock.
During the past several
years, IET has generally sustained recurring losses and negative cash flows from operations. We currently do not generate sufficient
revenue from the sale of our products to fund our operations and have funded this shortfall through the sale of our common stock.
During the year ended December
31, 2014, we received $1,045,996 of net proceeds related to the sale of our common stock and issued an aggregate of 786,628 shares
of common stock as payment of $53,125 of accounts payable, 437,816 shares of common stock as payment of $38,090 of accrued interest
due on a convertible debenture and 1,008,711 shares of common stock as payment of $20,000 of consulting fees and $44,252 of offering
costs related to the sale of our common stock.
On February 9, 2015, we received $1,891,700
of net proceeds related to the sale of our common stock and common stock units and we issued an aggregate of 1,055,303 shares
of common stock as payment of $56,000 of offering costs related to these sales of common stock and common stock units.
As of March 25, 2015, our cash
position was approximately $1,798,000. If we are not able to generate profitable operations from the sale of our products or
we are not able to obtain additional financing, we will only be able to continue our operations for approximately ten months
from the filing date of this annual report on Form 10-K. We have no lending relationships with commercial banks and are
dependent on our ability to attain profitable operations and raise additional capital through one or more equity and/or debt
financings in order to continue operations. While we are working toward attaining profitability for our continuing operations
and pursuing potential equity and/or debt investors, there can be no assurance that we will be successful in our efforts.
From time to time, we engage placement agents to assist us in our financing initiatives. Any additional equity financing may
result in substantial dilution to our stockholders. If we are unable to attain profitable operations or secure additional
capital, we will explore strategic alternatives, including, but not limited to, the possible sale of IET. Our independent
registered public accounting firm included an emphasis of a matter paragraph in its report included in this annual report on
Form 10-K, which expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial
statements included herein do not include any adjustments related to this uncertainty.
Inflation and Seasonality
Inflation has had no material effect on the
operations or financial condition of our business. In addition, our operations are not considered seasonal in nature.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk
IET is a smaller reporting company and is therefore
not required to provide this information.
Item 8. Financial Statements and Supplementary
Data
The consolidated financial statements and
supplementary data of IET called for by this item are submitted under a separate section of this annual report on Form 10-K. Reference
is made to the Index of Consolidated Financial Statements contained on page F-1 of this annual report on Form 10-K.
Item 9. Changes In and Disagreements
with Accountants on Accounting and Financial Disclosure
None other than those reported on Form 8-K filed by IET prior to
the filing date of this annual report on Form 10-K.
Item 9A. Controls and Procedures
As required by Rule 13a-15 under the Exchange
Act, as of the end of the period covered by this annual report on Form 10-K, IET carried out an evaluation of the effectiveness
of the design and operation of IET's disclosure controls and procedures. This evaluation was carried out under the supervision
and with the participation of IET's management, including IET's President and Chief Executive Officer and IET’s Executive
Vice President, Chief Financial Officer and Secretary, who concluded that IET's disclosure controls and procedures are effective.
Disclosure controls and procedures are controls
and other procedures that are designed to ensure that information required to be disclosed in IET's reports filed or submitted
under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms
of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be disclosed in IET's reports filed under the Exchange
Act is accumulated and communicated to management, including IET's Chief Executive Officer and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial
Reporting
There has been no change in IET’s internal
control over financial reporting during IET’s last fiscal quarter that has materially affected, or is reasonably likely
to materially affect, IET's internal control over financial reporting.
Management’s Annual Report on Internal
Control Over Financial Reporting
The management of IET is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal
controls over financial reporting include those policies and procedures that: (1) pertain to the maintenance of records that
in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of IET; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America, and that receipts and expenditures of IET are being made only in
accordance with authorizations of management and directors of IET; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of IET’s assets that could have a material effect on
the consolidated financial statements.
Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the
effectiveness of IET’s internal control over financial reporting based on the framework in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management
concluded that IET’s internal control over financial reporting was effective as of December 31, 2014.
Item 9B. Other Information
On March 25, 2015, we issued an aggregate
of 5,683,000 shares of common stock as stock-based compensation to our executive officers as follows: David R. LaVance, President
and Chief Executive Officer – 3,613,250 shares; and Thomas S. Gifford, Executive Vice President and Chief Financial Officer
– 2,069,750 shares.
PART III
Item 10. Directors, Executive
Officers and Corporate Governance
The information required by this Item with
respect to IET's directors and executive officers will be contained in IET's proxy statement for the annual meeting of stockholders
scheduled to be held on May 28, 2015, under the captions “Board of Directors”, “Audit Committee”, “Section
16 Compliance”, “Chief Executive and Senior Financial Officer Code of Ethics” and “Executive Officers”,
or similar captions, and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by this Item with
respect to executive compensation will be contained in IET's proxy statement for the annual meeting of stockholders scheduled
to be held on May 28, 2015, under the captions “Executive Compensation”, “Director Compensation”, “Compensation
Committee” and “Communications Between Stockholders and the Board”, or similar captions, and is incorporated
herein by reference.
Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item will
be contained in IET's proxy statement for the annual meeting of stockholders scheduled to be held on May 28, 2015, under the captions
“Securities Authorized for Issuance under Equity Compensation Plans” and “Principal Stockholders and Security
Ownership of Management”, or similar captions, and is incorporated herein by reference.
Item 13. Certain Relationships and Related
Transactions and Director Independence
The information required by this Item will
be contained in IET's proxy statement for the annual meeting of stockholders scheduled to be held on May 28, 2015, under the captions
“Certain Relationships and Related Party Transactions” and “Board Leadership Structure”, or similar captions,
and is incorporated herein by reference.
Item 14. Principal Accountant Fees and
Services
The information required by this Item will
be contained in IET's proxy statement for the annual meeting of stockholders scheduled to be held on May 28, 2015, under the caption
“Principal Accountant Fees and Services”, or similar caption, and is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement
Schedules
(a)
Exhibits
Reference is made to the Index of Exhibits beginning on page E-1 of this annual report
on Form 10-K.
(b) Financial Statement Schedules
Reference is made to the Index of Consolidated Financial Statements
on page F-1 of this annual report. No schedules are included with the consolidated financial statements because the
required information is inapplicable or is presented in the consolidated financial statements or notes thereto.
SIGNATURES
In accordance with Section 13 or 15(d) of
the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATE: |
INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD. |
|
|
|
March 27, 2015 |
By: |
/s/ David
R. LaVance |
|
|
David R. LaVance |
|
|
Chairman of the Board, President and
Chief Executive Officer |
In accordance with the Exchange Act, this
report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ David
R. LaVance |
|
Chairman
of the Board, |
|
March 27, 2015 |
David
R. LaVance |
|
President
and Chief |
|
|
|
|
Executive
Officer |
|
|
|
|
(Principal
Executive Officer) |
|
|
|
|
|
|
|
/s/
Thomas S. Gifford |
|
Executive
Vice President, |
|
March 27, 2015 |
Thomas
S. Gifford |
|
Chief
Financial Officer |
|
|
|
|
and
Secretary (Principal |
|
|
|
|
Financial
and Accounting Officer) |
|
|
|
|
|
|
|
/s/
Paul S. Clayson |
|
Director |
|
March 27, 2015 |
Paul
S. Clayson |
|
|
|
|
|
|
|
|
|
/s/
Michael D. Donnell |
|
Director |
|
March 27, 2015 |
Michael
D. Donnell |
|
|
|
|
|
|
|
|
|
/s/
Anthony Giordano, III |
|
Director |
|
March 27, 2015 |
Anthony
Giordano, III |
|
|
|
|
|
|
|
|
|
/s/
E. Wayne Kinsey, III |
|
Director |
|
March 27, 2015 |
E.
Wayne Kinsey, III |
|
|
|
|
|
|
|
|
|
/s/
Raymond C. Kubacki |
|
Director |
|
March 27, 2015 |
Raymond
C. Kubacki |
|
|
|
|
|
|
|
|
|
/s/
David N. Harry |
|
Director |
|
March 27, 2015 |
David N. Harry |
|
|
|
|
Integrated Environmental Technologies, Ltd.
Consolidated Financial Statements
Contents
Reports of Independent Registered Public Accounting Firms |
F-2 |
|
|
Consolidated Balance Sheets as of December 31, 2014 and 2013 |
F-4 |
|
|
Consolidated Statements of Operations for the Years Ended December
31, 2014 and 2013 |
F-5 |
|
|
Consolidated Statements of Stockholders’ Equity (Deficiency)
for the Years Ended December 31, 2014 and 2013 |
F-6 |
|
|
Consolidated Statements of Cash Flows for the Years Ended December
31, 2014 and 2013 |
F-7 |
|
|
Notes to the Consolidated Financial Statements |
F-8 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Stockholders of
Integrated Environmental Technologies, Ltd.
We have audited the accompanying consolidated
balance sheet of Integrated Environmental Technologies, Ltd. and subsidiary (the “Company”), as of December 31, 2014
and the related consolidated statement of operations, stockholders’ deficiency and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based upon our audits.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated 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 includes 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 consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated 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, 2014 and the results of its operations and its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial
statements, the Company has incurred significant recurring operating losses, negative cash flows from operations and has a working
capital deficiency. The Company also has no lending relationships with commercial banks and is dependent on the completion of
financings in order to continue operations. These factors 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 Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ RBSM, LLP
Leawood, Kansas
March 27, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Board of Directors and Stockholders of
Integrated Environmental Technologies, Ltd.
We have audited the accompanying consolidated
balance sheet of Integrated Environmental Technologies, Ltd. and subsidiary (the “Company”), as of December 31, 2013
and the related consolidated statement of operations, stockholders’ deficiency and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based upon our audits.
We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated 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 includes 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 consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated 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, 2013 and the results of its operations and its cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial
statements, the Company has incurred significant recurring operating losses, negative cash flows from operations and has a working
capital deficiency. The Company also has no lending relationships with commercial banks and is dependent on the completion of
financings in order to continue operations. These factors 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 Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ L.L. Bradford & Company, LLC
Leawood, Kansas
March 28, 2014
Integrated Environmental
Technologies, Ltd.
Consolidated Balance Sheets
| |
December
31, | | |
December
31, | |
| |
2014 | | |
2013 | |
Assets | |
| | |
| |
Current assets: | |
| | |
| |
Cash | |
$ | 371,292 | | |
$ | 1,049,399 | |
Accounts receivable | |
| 37,098 | | |
| 28,250 | |
Prepaid expenses | |
| 11,780 | | |
| 26,166 | |
Inventory | |
| 117,690 | | |
| 126,952 | |
Other receivable | |
| 111,200 | | |
| -- | |
Total current assets | |
| 649,060 | | |
| 1,230,767 | |
| |
| | | |
| | |
Property and equipment, net | |
| 259,468 | | |
| 344,884 | |
| |
| | | |
| | |
Total assets | |
$ | 908,528 | | |
$ | 1,575,651 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Equity (Deficiency) | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 154,167 | | |
$ | 41,320 | |
Accrued expenses | |
| 403,520 | | |
| 47,954 | |
Customer deposits | |
| 2,000 | | |
| 38,109 | |
Convertible debentures | |
| 501,125 | | |
| 25,000 | |
Note payable | |
| 46,546 | | |
| 75,513 | |
Total current liabilities | |
| 1,107,358 | | |
| 227,896 | |
| |
| | | |
| | |
Convertible debentures | |
| -- | | |
| 476,125 | |
Note payable | |
| -- | | |
| 46,546 | |
Total liabilities | |
| 1,107,358 | | |
| 750,567 | |
| |
| | | |
| | |
Commitments and contingencies | |
| | | |
| | |
Stockholders’ equity (deficiency): | |
| | | |
| | |
Common stock, $.001 par value; 400,000,000
shares authorized; 253,178,774 and 229,971,926 shares issued and outstanding, respectively | |
| 253,179 | | |
| 229,972 | |
Additional paid-in capital | |
| 21,262,811 | | |
| 20,075,764 | |
Accumulated deficit | |
| (21,714,820 | ) | |
| (19,480,652 | ) |
| |
| | | |
| | |
Total stockholders' equity (deficiency) | |
| (198,830 | ) | |
| 825,084 | |
| |
| | | |
| | |
Total liabilities and stockholders'
equity (deficiency) | |
$ | 908,528 | | |
$ | 1,575,651 | |
The accompanying notes are an integral part
of these consolidated financial statements.
Integrated Environmental Technologies, Ltd.
Consolidated Statements of Operations
| |
Years
Ended December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Revenues: | |
| | |
| |
Sales | |
$ | 151,397 | | |
$ | 93,866 | |
Leasing and Licensing Fees | |
| 34,180 | | |
| 52,500 | |
| |
| 185,577 | | |
| 146,366 | |
Cost of sales | |
| 58,405 | | |
| 28,930 | |
| |
| | | |
| | |
Gross profit | |
| 127,172 | | |
| 117,436 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
General and administrative expense | |
| 1,297,673 | | |
| 1,243,196 | |
Sales and marketing expense | |
| 785,155 | | |
| 447,832 | |
Research and development expense | |
| 266,298 | | |
| 211,822 | |
| |
| 2,349,126 | | |
| 1,902,850 | |
| |
| | | |
| | |
Loss from operations | |
| (2,221,954 | ) | |
| (1,785,414 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
Interest and other income | |
| 36,109 | | |
| 74 | |
Interest expense | |
| (48,323 | ) | |
| (45,913 | ) |
Total other income (expense) | |
| (12,214 | ) | |
| (45,839 | ) |
| |
| | | |
| | |
Net loss | |
$ | (2,234,168 | ) | |
$ | (1,831,253 | ) |
| |
| | | |
| | |
Net loss per share, basic and diluted | |
$ | (0.01 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | |
Weighted average shares outstanding, basic and diluted | |
| 238,279,810 | | |
| 187,333,118 | |
The accompanying notes are an integral part of these consolidated
financial statements.
Integrated Environmental
Technologies, Ltd.
Consolidated Statements of Stockholders’
Equity (Deficiency)
For the Years Ended December 31, 2014 and
2013
| |
| | |
| | |
| | |
| |
| |
Common Stock | | |
Additional | | |
Total | | |
Stockholders' | |
| |
Number | | |
$0.001 | | |
Paid-in | | |
Stockholders' | | |
Equity | |
| |
of
Shares | | |
Par
Value | | |
Capital | | |
Deficit | | |
(Deficiency) | |
Balance at December 31, 2012 | |
| 150,368,500 | | |
| 150,369 | | |
| 17,151,303 | | |
| (17,649,399 | ) | |
| (347,727 | ) |
Common stock issued for cash, net of
offering costs | |
| 74,388,766 | | |
| 74,388 | | |
| 2,689,217 | | |
| -- | | |
| 2,763,605 | |
Common stock issued as payment on principal
and interest on convertible debentures | |
| 400,947 | | |
| 401 | | |
| 37,689 | | |
| -- | | |
| 38,090 | |
Common stock issued as payment of accounts
payable | |
| 1,713,839 | | |
| 1,714 | | |
| 68,536 | | |
| -- | | |
| 70,250 | |
Common stock issued as settlement of
litigation | |
| 450,000 | | |
| 450 | | |
| 26,100 | | |
| -- | | |
| 26,550 | |
Stock-based compensation | |
| 2,649,874 | | |
| 2,650 | | |
| 102,919 | | |
| -- | | |
| 105,569 | |
Net loss | |
| | | |
| | | |
| | | |
| (1,831,253 | ) | |
| (1,831,253 | ) |
Balance at December 31, 2013 | |
| 229,971,926 | | |
| 229,972 | | |
| 20,075,764 | | |
| (19,480,652 | ) | |
| 825,084 | |
Common stock issued for cash, net of
offering costs | |
| 20,973,693 | | |
| 20,974 | | |
| 1,025,022 | | |
| -- | | |
| 1,045,996 | |
Common stock issued as payment on principal
and interest on convertible debentures | |
| 437,816 | | |
| 438 | | |
| 37,652 | | |
| -- | | |
| 38,090 | |
Common stock issued as payment of accounts
payable | |
| 786,628 | | |
| 787 | | |
| 52,338 | | |
| -- | | |
| 53,125 | |
Stock-based compensation | |
| 1,008,711 | | |
| 1,008 | | |
| 80,585 | | |
| -- | | |
| 81,593 | |
Stock based compensation accrued for
payment | |
| -- | | |
| -- | | |
| (8,550 | ) | |
| -- | | |
| (8,550 | ) |
Net loss | |
| | | |
| | | |
| | | |
| (2,234,168 | ) | |
| (2,234,168 | ) |
Balance at December 31, 2014 | |
| 253,178,774 | | |
$ | 253,179 | | |
$ | 21,262,811 | | |
$ | (21,714,820 | ) | |
$ | (198,830 | ) |
The accompanying notes are an integral part of these consolidated
financial statements.
Integrated Environmental Technologies, Ltd.
Consolidated Statements of Cash Flows
| |
Years Ended
December 31, | |
| |
2014 | | |
2013 | |
Cash flows from operating activities: | |
| | |
| |
Net loss | |
$ | (2,234,168 | ) | |
$ | (1,831,253 | ) |
Adjustments to reconcile net loss to net cash used in operating
activities: | |
| | | |
| | |
Depreciation | |
| 85,416 | | |
| 172,234 | |
Stock-based compensation expense | |
| 81,593 | | |
| 105,569 | |
Stock issued as settlement of litigation | |
| -- | | |
| 26,550 | |
Write-off of accounts receivable | |
| 920 | | |
| 2,341 | |
Gain on settlement of customer deposit | |
| (36,109 | ) | |
| -- | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (21,367 | ) | |
| (11,879 | ) |
Prepaid expenses | |
| 14,386 | | |
| (10,233 | ) |
Note receivable | |
| -- | | |
| 3,590 | |
Inventory | |
| 9,262 | | |
| (60,015 | ) |
Accounts payable | |
| 153,715 | | |
| (123,232 | ) |
Accrued expenses | |
| 297,762 | | |
| (73,919 | ) |
Customer deposits | |
| -- | | |
| 2,000 | |
Net cash used in operating activities | |
| (1,648,590 | ) | |
| (1,798,247 | ) |
Cash flows from investing activity: | |
| | | |
| | |
Purchase of equipment | |
| -- | | |
| (66,507 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from sale of common stock, net of offering costs | |
| 1,045,996 | | |
| 2,763,605 | |
Repayment of note payable | |
| (75,513 | ) | |
| (29,941 | ) |
Net cash provided by financing activities | |
| 970,483 | | |
| 2,733,664 | |
(Decrease) increase in cash | |
| (678,107 | ) | |
| 868,910 | |
Cash - beginning of year | |
| 1,049,399 | | |
| 180,489 | |
Cash - end of year | |
$ | 371,292 | | |
$ | 1,049,399 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | 7,232 | | |
$ | 5,032 | |
Cash paid for income taxes | |
$ | 700 | | |
$ | -- | |
Noncash operating activities: | |
| | | |
| | |
Issuance of 492,614
and 1,713,839 shares of common stock, respectively, as payment of director fees | |
$ | 32,250 | | |
$ | 70,250 | |
Issuance of 437,816
and 400,947 shares of common stock, respectively, as payment of interest on convertible debenture | |
$ | 38,090 | | |
$ | 38,090 | |
Issuance of 450,000
shares of common stock as settlement of litigation | |
$ | -- | | |
$ | 26,550 | |
Issuance of 294,014
shares of common stock as payment of accounts payable | |
$ | 20,875 | | |
$ | -- | |
Noncash investing activity: | |
| | | |
| | |
Issuance of note
payable as payment for equipment | |
$ | -- | | |
$ | 152,000 | |
Noncash financing activities: | |
| | | |
| | |
Issuance of 758,711
and 1,649,874 shares of common stock, respectively, as payment of offering costs related to private placements | |
$ | 44,252 | | |
$ | 109,100 | |
Issuance of warrant
to purchase 401,567 shares of common stock as payment of offering costs related to private placements | |
$ | -- | | |
$ | 23,188 | |
The accompanying notes are an integral part of these consolidated
financial statements.
Integrated Environmental Technologies, Ltd.
Notes to the Consolidated Financial Statements
1. | Organization and Description of Business |
Integrated Environmental Technologies, Ltd.
(the “Company”) was originally incorporated in Delaware on February 2, 1999 and is currently a Nevada corporation.
The Company is headquartered in Little River, South Carolina and operates its business through its wholly-owned subsidiary, I.E.T.,
Inc., a Nevada corporation incorporated on January 11, 2002.
The Company markets its products
and equipment under the umbrella brand name, EcoTreatments™. The Company produces a hypochlorous acid solution (“Anolyte”)
as well as an anti-oxidizing, mildly alkaline solution (“Catholyte”), that provide an environmentally friendly and
effective alternative for cleaning, sanitizing and disinfecting as compared to the hazardous chemicals traditionally prevalent
in commercial use. The Company markets and sells Anolyte under the brand name, Excelyte® and markets Catholyte under the brand
name, Catholyte Zero™, although the majority of sales and marketing efforts are focused on Excelyte®. The Company manufactures
proprietary equipment, which it markets under the brand name EcaFlo™, to produce Anolyte and Catholyte for distribution
by the Company and, under certain circumstances, such equipment is leased by the Company to customers for use at their facilities.
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant recurring
operating losses and negative cash flows from operations. The Company had a working capital deficiency of $458,298 and an accumulated
deficit of $21,714,820 as of December 31, 2014. The Company also has no lending relationships with commercial banks and is dependent
on the completion of financings involving the private placement of its securities in order to continue operations. These factors
raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
The Company does not anticipate establishing
any lending relationships with commercial banks in the foreseeable future due to its limited operations and assets. The Company
continues to execute its strategy of selling Anolyte and Catholyte solutions and leasing its EcaFlo™ equipment to fund its
operations and is focused on obtaining additional capital through the private placement of its securities. The Company is pursuing
potential equity and/or debt investors and, from time to time, has engaged placement agents to assist it in this initiative. While
the Company is pursuing the opportunities and actions described above, there can be no assurance that it will be successful in
its efforts. If the Company is unable to secure additional capital, it will explore other strategic alternatives, including, but
not limited to, the sale of the Company. Any additional equity financing may result in substantial dilution to the Company’s
stockholders.
3. |
Summary of Significant Accounting Policies |
Principles of Consolidation
The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during
the reporting period.
Although the Company regularly assesses these
estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which
they become known. The Company based its estimates on historical experience and various other assumptions that it believes to
be reasonable under the circumstances. Actual results may differ from management’s estimates if past experience or other
assumptions do not turn out to be substantially accurate. All of these estimates reflect management's best judgment about current
economic and market conditions and their effects based on information available as of the date of these consolidated financial
statements. If such conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments
and estimates could change.
Concentration of Credit Risk
The Company has no significant off-balance
sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements. The Company’s financial
instruments that are exposed to concentration of credit risks consist primarily of cash. The Company maintains its cash in bank
accounts which, at times, exceed federally-insured limits.
The Company principally sells its products
directly to commercial customers in the oil and gas industry and in several other industries. The Company’s oil and gas
customers are located in Utah and in New Mexico and the Company’s other customers are located in diversified geographical
regions throughout the United States. During the year ended December 31, 2014, four customers accounted for 29%, 15%, 13% and
10%, respectively, of revenues. During the year ended December 31, 2013, four customers accounted for 22%, 14%, 14% and 11%, respectively,
of revenues. No other customer accounted for more than 10% of our revenues during the year ended December 31, 2014 or 2013. The
Company regularly evaluates the creditworthiness of its customers.
Accounts Receivable
Accounts receivable consist of trade receivables
recorded at original invoice amount, less any allowance for uncollectible accounts. Trade credit is generally extended on a short-term
basis; thus trade receivables do not bear interest. Trade receivables are periodically evaluated for collectability by considering
a number of factors, including the length of time an invoice is past due, the customer’s creditworthiness and historical
bad debt experience. Changes in the estimated collectability of trade receivables are recorded in the results of operations for
the period in which the estimate is revised. Trade receivables that are deemed uncollectible are offset against the allowance
for uncollectible accounts. The Company generally does not require collateral for trade receivables.
Inventory
Inventory is recorded at the lower of cost
or market using the first-in, first-out method. The Company determines its reserve for obsolete inventory by considering a number
of factors, including product shelf life, marketability, and obsolescence. The Company determines the need to write down inventories
by analyzing product expiration, market conditions, and salability of its products.
Property and Equipment
Property and equipment are recorded
at cost less allowances for depreciation. The straight-line method of depreciation is used for all property and equipment. Repair
and maintenance costs are expensed as incurred. Equipment is depreciated over an estimated useful life ranging from three to seven
years. Leasehold improvements are depreciated over the shorter of the original term of lease or the estimated useful life
of the improvement.
Fair Value of Financial Instruments
The carrying amounts of the Company’s
financial instruments, which include cash, accounts receivable, other receivables, accounts payable and accrued expenses, approximate
their fair values due to their short maturities.
The fair value of notes payable, convertible
debentures and convertible promissory notes approximate fair value since each of these investments are at market rates currently
available to the Company.
Long-Lived Assets
The Company reviews its long-lived assets,
which include property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable in accordance with Accounting Standards Codification (“ASC”) 360-10-35-15, “Property,
Plant and Equipment-Impairment or Disposal of Long-Lived Assets.” Recoverability of these assets is evaluated by comparing
the carrying value of the assets to the undiscounted cash flows estimated to be generated by the assets over their remaining economic
life. If the undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are considered
impaired. The impairment loss is measured by comparing the fair value of the assets to their carrying value. Fair value is determined
by either a quoted market price, if any, or a value determined by a discounted cash flow technique. There were no material impairment
charges related to the Company’s property and equipment during the year ended December 31, 2014 or 2013.
Revenue Recognition
General
Revenue is recognized when persuasive evidence
of an arrangement exists, title and risk of ownership have passed, the sales price is fixed or determinable and collectability
is probable. Generally, these criteria are met at the time the product is shipped. Provisions for estimated returns, rebates and
discounts are provided for at the time the related revenue is recognized. Freight revenue billed to customers is included in sales
and the related shipping expense is included in cost of sales. Service revenue is recognized in the period the service is performed
or ratably over the period of the related service contract.
Leases
When the Company leases its equipment, the
accounting involves specific determinations, which often involve complex provisions and significant judgments. The four criteria
of the accounting standard that the Company uses in the determination of a sales-type lease or operating-type lease are: (a) a
review of the lease term to determine if it is equal to or greater than 75% of the economic life of the equipment; (b) a review
of the minimum lease payments to determine if they are equal to or greater than 90% of the fair market value of the equipment;
(c) a determination of whether or not the lease transfers ownership to the lessee at the end of the lease term; and (d) a determination
of whether or not the lease contains a bargain purchase option. If the lease transaction meets one of the four criteria, then
it is recorded as a sales-type lease; otherwise, it is recorded as an operating-type lease. Additionally, the Company assesses
whether collectability of the lease payments is reasonably assured and whether there are any significant uncertainties related
to costs that it has yet to incur with respect to the lease.
When a customer enters into a sales-type lease
agreement, the sales and cost of sales are recognized at the inception of the lease. The sales-type lease consists of the sum
of the total minimum lease payments less unearned interest income and estimated executory cost. Minimum lease payments are part
of the lease agreement between the Company (lessor) and the customer (lessee). The discount rate implicit in the sales-type
lease is used to calculate the present value of minimum lease payments, which the Company records as a lease receivable.
The minimum lease payment consists of the gross lease payments net of executory costs and contingencies, if any. Unearned interest
income is amortized over the lease term to produce a constant periodic rate of return on net investment in the lease. While
revenue is recognized at the inception of the lease, the cash flow from the sales-type lease occurs over the course of the lease,
which results in interest income. Sales-type lease revenue consists of the initial sale of the equipment shipped and the interest
and license elements of the lease payments as they are earned.
When a customer enters into an operating-type
lease agreement, equipment lease revenue is recognized on a straight-line basis over the life of the lease, while the cost of
the leased equipment is depreciated over its estimated useful life.
Income Taxes
The Company accounts for income taxes under
ASC 740, “Income Taxes” (“ASC 740”). ASC 740 requires that the Company recognize a current tax liability
or asset for current taxes payable or refundable and a deferred tax liability or asset for the estimated future tax effects of
temporary differences and carry-forwards to the extent they are realizable. The Company records a valuation allowance to reduce
its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable
income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event
the Company was to determine that it would be able to realize the deferred tax assets in the future in excess of the net recorded
amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Likewise, deferred
tax assets are reduced by a valuation allowance, when in the Company’s opinion, it is more likely than not that some portion
or all of the deferred tax asset will not be realized.
Research and Development
The Company expenses research and development
costs as incurred.
Stock-Based Compensation
The Company accounts for stock-based payments
to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees
include issuances of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement
of operations based on their fair values at the date of grant or issuance.
The Company accounts for stock-based payments
to non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments to Non-Employees.” Stock-based
payments to non-employees include issuances of stock, grants of stock options and issuances of warrants that are recognized in
the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period
as measured at its then-current fair value as of each financial reporting date.
The Company calculates the fair value of option
grants and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized during
a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures
to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct
from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock
option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period.
In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination
patterns.
The resulting stock-based compensation expense
for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of
the award.
During the years ended December 31, 2014 and
2013, the Company recorded stock-based compensation expense as follows:
| |
Year
Ended December 31, | |
| |
2014 | | |
2013 | |
General and administrative | |
$ | 61,712 | | |
$ | 90,969 | |
Sales and marketing | |
| 15,498 | | |
| 10,220 | |
Research and development | |
| 4,383 | | |
| 4,380 | |
Total | |
$ | 81,593 | | |
$ | 105,569 | |
For the years ended December 31, 2014 and
2013, the Company recorded stock-based compensation expense related to stock options granted to employees and directors of $37,724
and $48,607, respectively. For the years ended December 31, 2014 and 2013, the Company recorded stock-based compensation expense
related to common stock and warrants issued to non-employees of $43,869 and $56,962, respectively.
Net Loss Per Common Share
Basic net loss per share
is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares
issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive.
The dilutive effect of the outstanding stock options and warrants is computed using the treasury stock method.
For the year ended December
31, 2014, diluted net loss per share did not include the effect of 4,846,920 shares of common stock issuable upon the exercise
of outstanding stock options, 28,908,878 shares of common stock issuable upon the exercise of outstanding warrants and 4,823,750
shares of common stock issuable upon the conversion of convertible debentures, as their effect would be anti-dilutive.
For the year ended December
31, 2013, diluted net loss per share did not include the effect of 4,980,254 shares of common stock issuable upon the exercise
of outstanding stock options, 36,844,565 shares of common stock issuable upon the exercise of outstanding warrants and 4,823,750
shares of common stock issuable upon the conversion of convertible debentures, as their effect would be anti-dilutive.
Reclassifications
Certain reclassifications have been made to
prior periods to conform to current presentations.
Recent Accounting Pronouncements Applicable
to the Company
The Company does not believe there are any
recently issued, but not yet effective, accounting standards that would have a significant impact on the Company’s financial
position or results of operations.
As of December 31, 2014 and December 31, 2013,
inventory consisted of parts and materials totaling $117,690 and $126,952, respectively.
During March 2013, the Company reclassified
$17,487 of EcaFlo™ equipment from finished goods inventory to property and equipment. The Company no longer intends to sell
its EcaFlo™ equipment but rather will either utilize the EcaFlo™ equipment to manufacture Anolyte and Catholyte solutions
to be sold by the Company or lease the EcaFlo™ equipment to third parties.
Effective January 1, 2013, the Company entered
into a license agreement (the “License Agreement”) with a third party related to the use by the third party of the
Company’s United States Environmental Protection Agency (the “EPA”) registration for its Anolyte solution (the
“Registration”). Pursuant to the License Agreement, the licensee agreed to indemnify the Company for any costs or
expenses incurred by the Company as it related to the licensee’s use of the Registration. During August 2014, the Company
was notified by the EPA that the licensee was not in compliance with the Registration. As a result of the licensee’s actions,
in February 2015, the Company, as the owner of the Registration, agreed to pay a penalty of $87,344 to the EPA. On March 5, 2015,
the Company received $124,844 from the licensee as indemnification for the costs incurred by the Company related to this matter,
which consisted of the $87,344 penalty plus $37,500 of legal expenses the Company incurred ($23,856 incurred during the year ended
December 31, 2014).
As of December 31, 2014, the Company recorded
a receivable due from the licensee in the amount of $111,200, representing the amount reimbursed by the Licensor for the $87,344
penalty and the $23,856 of legal fees incurred by the Company as of December 31, 2014. In addition, as of December 31, 2014, the
Company recorded an accrued liability of $87,344 to account for the $87,344 penalty (see Note 7).
6. |
Property
and Equipment |
As of December 31, 2014 and 2013, property
and equipment, on a net basis, consisted of the following (see Note 4):
| |
Year
Ended December 31, | |
| |
2014 | | |
2013 | |
Leasehold improvements | |
$ | 328,977 | | |
$ | 328,977 | |
Equipment | |
| 437,504 | | |
| 437,504 | |
| |
| 766,481 | | |
| 766,481 | |
Less: Accumulated depreciation | |
| (507,013 | ) | |
| (421,597 | ) |
| |
$ | 259,468 | | |
$ | 344,884 | |
As of December 31, 2014 and December 31, 2013,
accrued expenses consisted of the following:
| |
Year
Ended December 31, | |
| |
2014 | | |
2013 | |
Accrued compensation | |
$ | 253,305 | | |
$ | -- | |
Accrued penalty (see Note 5) | |
| 87,344 | | |
| -- | |
Accrued interest (see Note 9) | |
| 27,321 | | |
| 24,321 | |
Accrued professional fees | |
| 22,000 | | |
| 22,000 | |
Accrued other expenses | |
| 13,550 | | |
| 1,633 | |
| |
$ | 403,520 | | |
$ | 47,954 | |
On March 29, 2011, the Company issued a credit
to purchase equipment to a consultant in the amount of $36,109 as payment to the consultant for consulting services rendered to
the Company. During the year ended December 31, 2014, the Company determined that this credit would not be utilized by the consultant.
Accordingly, the Company recorded other income of $36,109 related to the gain on the settlement of this customer deposit. As of
December 31, 2014 and 2013, the Company recorded $0 and $36,109, respectively, as a customer deposit.
Pursuant to the terms of the License Agreement,
the Company received a deposit of $2,000.
9. |
Convertible Debentures |
April 2007 Convertible Debenture
On April 26, 2007, in a private placement,
the Company issued a convertible debenture to an individual accredited investor in the principal amount of $25,000. This convertible
debenture matured on January 2, 2009 and remains unpaid. The convertible debenture accrues interest at a rate of 12% per annum
and is convertible at any time into shares of the Company’s common stock at the option of the holder at a conversion price
of $0.40 per share. An aggregate of 62,500 shares of the Company’s common stock can be issued upon the conversion of the
outstanding principal amount due on this convertible debenture at the current conversion price of $0.40 per share.
For the years ended December 31, 2014 and
2013, the Company recorded a total of $3,000 and $2,992, respectively, of interest expense related to this convertible debenture.
As of December 31, 2014 and 2013, the outstanding principal on this convertible debenture was $25,000 and the accrued and unpaid
interest was $13,441 and $10,441, respectively, which is included as a component of accrued expenses (see Note 7).
Zanett Convertible Debentures
On August 21, 2012, the Company issued
to Zanett Opportunity Fund, Ltd. (“Zanett”) an 8% convertible debenture in the amount of $476,125 (the “Zanett
August 2012 Debenture”). In connection with this private placement, the Company refinanced an 8% convertible debenture,
in the principal amount of $376,125, issued to Zanett on July 7, 2011 (the “Zanett July 2011 Debenture”) and refinanced
an 8% convertible secured promissory note, in the principal amount of $100,000, issued to Zanett on September 23, 2011 (the “Zanett
September 2011 Note”). As a result of the issuance of the Zanett August 2012 Debenture, the Zanett July 2011 Debenture and
the Zanett September 2011 Note were cancelled.
The Zanett August 2012 Debenture has
a three-year term maturing on August 21, 2015 and bears interest at a rate of 8% per annum. Interest is payable in annual installments
in cash or, at the option of the Company, in shares of the Company’s common stock. If the Company elects to pay the interest
in shares of its common stock, the number of shares issued as payment will be equal to the quotient of the unpaid interest divided
by the market price of the Company’s common stock, as defined in the Zanett August 2012 Debenture.
The entire principal amount of the
Zanett August 2012 Debenture is convertible at any time into shares of the Company’s common stock at the option of the holder
at a conversion price of $0.10 per share. In addition, at the option of the Company, the entire principal amount of the Zanett
August 2012 Debenture is convertible into shares of the Company’s common stock at $0.10 per share upon the occurrence of
the merger or acquisition of the Company or if the average closing price of the Company’s common stock for any period of
ten consecutive trading days is greater than or equal to $0.15 per share. The quoted market price of the Company’s common
stock on August 21, 2012 was $0.05 per share. An aggregate of 4,761,250 shares of the Company’s common stock can be issued
upon the conversion of the outstanding principal amount due on the Zanett August 2012 Debenture at the current conversion price
of $0.10 per share.
On August 22, 2013, the Company issued
400,947 shares of the Company’s common stock to Zanett as payment of $38,090 of accrued interest due on the Zanett August
2012 Debenture for the period commencing August 21, 2012 through August 20, 2013. The number of shares of the Company’s
common stock issued as payment of the accrued interest was calculated based on the market price of the Company’s common
stock ($0.095 per share) as defined in the Zanett August 2012 Debenture.
On October 10, 2014, the Company issued
437,816 shares of the Company’s common stock to Zanett as payment of $38,090 of accrued interest due on the Zanett August
2012 Debenture for the period commencing August 21, 2013 through August 20, 2014. The number of shares of the Company’s
common stock issued as payment of the accrued interest was calculated based on the market price of the Company’s common
stock ($0.087 per share) as defined in the Zanett August 2012 Debenture.
For each of the years ended December
31, 2014 and 2013, the Company recorded $38,090 of interest expense related to the Zanett August 2012 Debenture. As of December
31, 2014, the outstanding principal on the Zanett August 2012 Debenture was $476,125, which was recorded as a component of current
convertible debentures, and the accrued and unpaid interest was $13,880, which was included as a component of accrued expenses
(see Note 7). As of December 31, 2013, the outstanding principal on the Zanett August 2012 Debenture was $476,125, which was recorded
as a component of non-current convertible debentures, and the accrued and unpaid interest was $13,880, which was included as a
component of accrued expenses (see Note 7).
On June 17, 2013, the Company and Benchmark
Performance Group, Inc. (“Benchmark”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”),
whereby the Company purchased nineteen EcaFlo™ machines owned by Benchmark as well as the rights to the Excelyte® trademark
and certain other intangible assets. The purchase price for the nineteen EcaFlo™ machines, the Excelyte® trademark and
other intangible assets was $190,000.
The Company paid $38,000 in conjunction with
the closing of the Asset Purchase Agreement and issued a promissory note with a principal balance of $152,000 (the “Benchmark
Note”). The Benchmark Note bears interest at a rate of 7% per annum and requires the Company to make twenty-four monthly
payments of $6,805 commencing August 1, 2013. The Benchmark Note is secured by the nineteen EcaFlo™ machines.
For the years ended December 31, 2014
and 2013, the Company recorded $6,152 and $4,086, respectively, of interest expense related to the Benchmark Note. As of December
31, 2014, the outstanding principal on the Benchmark Note was $46,546, which is recorded as a current note payable. As of December
31, 2013, the outstanding principal on the Benchmark Note was $122,059 (current portion: $75,513; long-term portion: $46,546).
The difference between the statutory
federal income tax rate on the Company’s pre-tax loss and the Company’s effective income tax rate is summarized as
follows:
| |
Years Ended | |
| |
December
31,
2014 | | |
December
31,
2013 | |
| |
Amount | | |
Percent | | |
Amount | | |
Percent | |
Income tax provision at federal statutory rate | |
$ | (759,617 | ) | |
| 34 | % | |
$ | (622,626 | ) | |
| 34 | % |
Effect of state taxes, net of federal benefit | |
| (67,025 | ) | |
| 3 | | |
| (54,938 | ) | |
| 3 | |
Change in valuation allowance | |
| 793,408 | | |
| (36 | ) | |
| 679,700 | | |
| (37 | ) |
Other | |
| (33,234 | ) | |
| (1 | ) | |
| (2,136 | ) | |
| -- | |
| |
$ | -- | | |
| -- | % | |
$ | -- | | |
| -- | % |
Significant components of the Company’s
deferred tax assets as of December 31, 2014 and 2013 are shown below. In determining whether the deferred tax assets will be realized,
the Company considers numerous factors, including historical profitability, estimated future taxable income and the industry in
which it operates. As of December 31, 2014 and 2013, a valuation allowance was recorded to fully offset the net deferred tax asset,
as it was determined by management that the realization of the deferred tax asset was not likely to occur in the foreseeable future.
The valuation allowance increased $793,408 during the year ended December 31, 2014, attributable primarily to Company’s
continuing operating losses for the year ended December 31, 2014 and the Company’s belief that its remaining net operating
losses would not be realized.
The tax effects of temporary differences and
net operating loss carry-forwards that give rise to deferred taxes consist of the following:
| |
Years
Ended December 31, | |
| |
2014 | | |
2013 | |
Net operating loss | |
$ | 7,471,805 | | |
$ | 6,710,397 | |
Depreciation and amortization | |
| 65,820 | | |
| 53,604 | |
Stock based compensation | |
| 328,993 | | |
| 309,208 | |
Total gross deferred tax assets | |
| 7,866,618 | | |
| 7,073,209 | |
Valuation allowance | |
| (7,866,618 | ) | |
| (7,073,209 | ) |
Net deferred tax assets | |
$ | -- | | |
$ | -- | |
As of December 31, 2014, the Company had federal
and state operating losses of approximately $19,989,000. Both the federal and state operating losses begin to expire in the years
2021 through 2034.
Utilization of the net operating loss
carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal
Revenue Code of 1986, as amended (the “Internal Revenue Code”), and similar state provisions. The Company has not
performed a detailed analysis to determine whether an ownership change under Section 382 of the Internal Revenue Code occurred.
The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss carry-forwards
attributable to periods before the change.
The Company’s federal and state tax
positions are evaluated based on whether it is more likely than not that a tax position will be sustained upon examination. The
Company has identified no federal or state tax positions taken that it would consider to be a material uncertain tax position.
The Company’s 2011, 2012 and
2013 federal and state income tax returns are open for examination by the applicable governmental authorities.
12. |
Stockholders’ Equity (Deficiency) |
Common Stock
For the year ended December 31, 2013, the
Company sold an aggregate of 74,388,766 shares of its common stock for an aggregate purchase price of $2,827,700 (weighted average
per share price of $0.038). Included in these amounts were 8,333,334 shares of the Company’s common stock that were sold
to E. Wayne Kinsey, III, a member of the Company’s board of directors, in a private placement for an aggregate purchase
price of $250,000, or $0.03 per share, which was the same price that the Company sold shares of its common stock to other non-affiliated
investors in the private placement. The Company paid an aggregate of $64,095 of offering costs in cash and issued 1,649,874 shares
of common stock to non-affiliated third parties as payment of $109,100 of offering costs related to these sales of common stock.
For the year ended December 31, 2013, the
Company issued an aggregate of 1,000,000 shares of common stock to non-affiliated third parties as payment for investor relations
services. The total expense associated with these issuances was $43,550, representing the fair value of the shares of common stock
on the dates of issuance (weighted average per share price of $0.044).
For the year ended December 31, 2013, the
Company issued an aggregate of 1,713,839 shares of common stock as payment of $70,250 of accounts payable due certain members
of the Company’s board of directors for board-related services rendered to the Company. The common stock was issued at per
share prices equal to the Company’s quoted market price on the dates the issuances were either authorized by the Company’s
board of directors (weighted average per share price of $0.041).
For the year ended December 31, 2014, the
Company sold an aggregate of 20,973,693 shares of its common stock for an aggregate purchase price of $1,093,690 (weighted average
per share price of $0.052). The Company paid an aggregate of $47,694 of offering costs in cash and issued 758,711 shares of common
stock to non-affiliated third parties as payment of $44,252 of offering costs related to these sales of common stock.
For the year ended December 31, 2014, the
Company issued 250,000 shares of common stock to a non-affiliated third party as payment for marketing services. The total expense
associated with this issuance was $20,000, representing the fair value of the shares of common stock on the date of issuance (per
share price of $0.08).
For the year ended December 31, 2014, the
Company issued an aggregate of 786,628 shares of common stock as payment of $32,250 of accounts payable due certain members of
the Company’s board of directors for board-related services rendered to the Company and $20,875 of accounts payable due
non-affiliated third parties for investor relations services. The common stock was issued at per share prices equal to the Company’s
quoted market price on the dates the issuances were either authorized by the Company’s board of directors or occurred (weighted
average per share price of $0.068).
Stock Options
The Company currently has two stock option/stock
compensation plans in place: the 2010 Stock Incentive Plan and the 2012 Equity Incentive Plan (collectively, the “Equity
Incentive Plans”).
The 2010 Stock Incentive Plan was approved
by the stockholders in September 2010. The Company had reserved for issuance an aggregate of 10,000,000 shares of common stock
under the 2010 Stock Incentive Plan. As of December 31, 2014, stock options to purchase 3,846,920 shares of the Company’s
common stock were outstanding under the 2010 Stock Incentive Plan and 90,500 shares of the Company’s common stock had been
issued under the 2010 Stock Incentive Plan. As a result of the adoption of the Company’s 2012 Equity Incentive Plan, no
further awards are permitted under the 2010 Stock Incentive Plan.
The 2012 Equity Incentive Plan was approved
by the stockholders in May 2012. The 2012 Equity Incentive Plan is designed to encourage and enable employees and directors of
the Company to acquire or increase their holdings of common stock and other proprietary interests in the Company. The 2012 Equity
Incentive Plan is intended to promote these individuals’ interests in the Company, thereby enhancing the efficiency, soundness,
profitability, growth and stockholder value of the Company. The 2012 Equity Incentive Plan provides for grants and/or awards in
the form of incentive and non-qualified stock option grants, stock appreciation rights, restricted stock awards, performance share
awards, phantom stock awards and dividend equivalent awards.
The original aggregate number of shares of
common stock which could be awarded under the 2012 Equity Incentive Plan was 14,000,000 shares, subject to adjustment as provided
in the 2012 Equity Incentive Plan. As of December 31, 2014, options to purchase 1,000,000 shares of the Company’s common
stock were outstanding under the 2012 Equity Incentive Plan and up to 13,000,000 shares of the Company’s common stock remain
available for awards under the 2012 Equity Incentive Plan. Effective February 25, 2015, as permitted under the 2012 Equity Incentive
Plan, the Company’s board of directors increased the number of shares of common stock that could be awarded under the 2012
Equity Incentive Plan to 37,950,000 shares.
Common stock grants and stock option
awards under the Equity Incentive Plans were granted or issued at prices as determined by the Company’s compensation committee,
but such prices were not less than the fair market value of the Company's common stock on the date of grant or issuance. Stock
options granted and outstanding to date consist of both incentive stock options and non-qualified stock options.
A summary
of stock option transactions under the Equity Incentive Plans during the years ended December 31, 2014 and 2013 is set forth below:
| |
Stock
Option Shares | | |
Weighted
Average Exercise Price Per Common Share | | |
Aggregate
Intrinsic Value | |
Outstanding at December 31, 2012 | |
| 5,813,587 | | |
$ | 0.18 | | |
$ | -- | |
Granted during the period | |
| -- | | |
| -- | | |
| | |
Exercised during the period | |
| -- | | |
| -- | | |
| | |
Terminated during the period | |
| (833,333 | ) | |
$ | 0.20 | | |
| | |
Outstanding at December 31, 2013 | |
| 4,980,254 | | |
$ | 0.18 | | |
$ | 55,605 | |
Granted during the period | |
| 1,000,000 | | |
| 0.09 | | |
| | |
Exercised during the period | |
| -- | | |
| -- | | |
| | |
Terminated during the period | |
| (1,133,334 | ) | |
$ | 0.24 | | |
| | |
Outstanding at December 31, 2014 | |
| 4,846,920 | | |
$ | 0.15 | | |
$ | -- | |
Exercisable at December 31, 2014 | |
| 3,846,920 | | |
$ | 0.16 | | |
$ | -- | |
Exercisable at December 31, 2013 | |
| 3,313,586 | | |
$ | 0.12 | | |
$ | 42,136 | |
The fair value of stock options granted
during the year ended December 31, 2014 was $57,035 and was calculated using the Black-Scholes pricing model with the following
weighted average assumptions:
Exercise price | |
$ | 0.09 | |
Grant date stock price | |
$ | 0.09 | |
Expected volatility | |
| 139 | % |
Risk-free interest rates | |
| 2.39 | % |
Risk of forfeiture | |
| 35 | % |
Expected life (in years) | |
| 10 | |
Dividend yield | |
| 0.00 | % |
The risk-free interest rate is based on a
treasury instrument, the term of which is consistent with the expected life of the stock options at the date of grant. In projecting
expected stock price volatility, the Company used historical stock price volatility of its common stock which the Company believes
is representative of future volatility. The Company estimated the expected life of stock options based on historical experience
using employee exercise and option expiration data.
Information with respect to outstanding
stock options and stock options exercisable as of December 31, 2014 that were granted to employees, directors and service providers
is as follows:
| | |
Stock Options
Outstanding | | |
Stock Options
Exercisable | |
Exercise
Price | | |
Number
of Shares Available Under Outstanding Stock Options | | |
Weighted
Average Exercise Price Per Common Share | | |
Weighted
Average Remaining Contractual Life (Years) | | |
Number
of Shares Available for Purchase Under Outstanding Stock Options | | |
Weighted
Average Exercise Price Per Common Share | | |
Weighted
Average Remaining Contractual Life (Years) | |
$ | 0.09 | | |
| 1,000,000 | | |
$ | 0.09 | | |
| 9.7 | | |
| -- | | |
$ | 0.09 | | |
| -- | |
$ | 0.10 | | |
| 2,180,253 | | |
$ | 0.10 | | |
| 4.2 | | |
| 2,180,253 | | |
$ | 0.10 | | |
| 4.2 | |
$ | 0.20 | | |
| 833,333 | | |
$ | 0.20 | | |
| 7.3 | | |
| 833,333 | | |
$ | 0.20 | | |
| 7.3 | |
$ | 0.30 | | |
| 833,334 | | |
$ | 0.30 | | |
| 7.3 | | |
| 833,334 | | |
$ | 0.30 | | |
| 7.3 | |
| | | |
| 4,846,920 | | |
$ | 0.15 | | |
| 4.4 | | |
| 3,846,920 | | |
$ | 0.16 | | |
| 5.5 | |
A summary of the non-vested shares subject
to options granted under the Equity Incentive Plans as of December 31, 2014 and 2013 is as follows:
| |
Stock
Option Shares | | |
Weighted
Average Grant Date Fair Value Per Share | |
Non-vested at December 31, 2012 | |
| 4,006,794 | | |
$ | 0.05 | |
Granted during the period | |
| -- | | |
| -- | |
Vested during the period | |
| (1,506,793 | ) | |
$ | 0.05 | |
Terminated during the period | |
| (833,333 | ) | |
$ | 0.05 | |
Non-vested at December 31, 2013 | |
| 1,666,668 | | |
$ | 0.05 | |
Granted during the period | |
| 1,000,000 | | |
$ | 0.09 | |
Vested during the period | |
| (833,334 | ) | |
$ | 0.05 | |
Terminated during the period | |
| (833,334 | ) | |
$ | 0.05 | |
Non-vested at December 31, 2014 | |
| 1,000,000 | | |
$ | 0.09 | |
As of December 31, 2014, there was $51,762
of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Equity Incentive
Plans. That cost is expected to be recognized over a weighted average period of forty-four months.
Warrants to Purchase Common Stock
A summary of warrant transactions
during the years ended December 31, 2014 and 2013 is as follows:
| |
Warrant Shares | | |
Weighted
Average Exercise Price Per Common Share | | |
Aggregate
Intrinsic Value | |
Outstanding at December 31, 2012 | |
| 45,852,998 | | |
$ | 0.17 | | |
$ | -- | |
Issued during the period | |
| 1,151,567 | | |
$ | 0.04 | | |
| | |
Exercised during the period | |
| -- | | |
| -- | | |
| | |
Terminated during the period | |
| (10,160,000 | ) | |
$ | 0.33 | | |
| | |
Outstanding at December 31, 2013 | |
| 36,844,565 | | |
$ | 0.12 | | |
$ | 95,584 | |
Issued during the period | |
| 620,000 | | |
$ | 0.06 | | |
| | |
Exercised during the period | |
| -- | | |
| -- | | |
| | |
Terminated during the period | |
| (8,555,687 | ) | |
$ | 0.16 | | |
| | |
Outstanding at December 31, 2014 | |
| 28,908,878 | | |
$ | 0.12 | | |
$ | 42,006 | |
Exercisable at December 31, 2014 | |
| 28,908,878 | | |
$ | 0.12 | | |
$ | 42,006 | |
Exercisable at December 31, 2013 | |
| 36,844,565 | | |
$ | 0.12 | | |
$ | 95,584 | |
Warrants issued by the Company contain exercise
prices as determined by the Company’s board of directors, but such exercise prices were generally not less than the fair
market value of the Company's common stock on the date of issuance. Warrants issued may vest over a period of up to three years
and have a maximum term of ten years from the date of issuance.
The fair value of the warrants issued during
the years ended December 31, 2014 and 2013 was $15,318 and $36,600, respectively, and was calculated using the Black-Scholes pricing
model with the following weighted average assumptions:
| |
Year Ended | |
| |
December
31, 2014 | | |
December
31, 2013 | |
| |
| | |
| |
Exercise price | |
| $0.06 - $0.08 | | |
| $0.035 - $0.04 | |
Issue date stock price | |
| $0.055 - $0.07 | | |
| $0.035 - $0.095 | |
Expected volatility | |
| 134% - 140% | | |
| 123% - 141% | |
Risk-free interest rates | |
| 0.47% - 0.49% | | |
| 0.35% - 1.36% | |
Risk of forfeiture | |
| 35 | % | |
| 35 | % |
Expected life (in years) | |
| 2.0 - 2.4 | | |
| 3.0 - 5.0 | |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
The risk-free interest rate is based on a
treasury instrument, the term of which is consistent with the expected life of the warrants. In projecting expected stock price
volatility, the Company used historical stock price volatility of its common stock which the Company believes is representative
of future volatility. The Company estimated the expected life of warrants based on historical experience using warrant exercise
and warrant expiration data.
Information with respect to outstanding warrants
and warrants exercisable at December 31, 2014 is as follows:
| | |
Warrants
Outstanding | | |
Warrants
Exercisable | |
Range
of Exercise Prices | | |
Number
of Shares Available Under Outstanding Warrants | | |
Weighted
Average Remaining Contractual Life (Years) | | |
Weighted
Average Exercise Price Per Common Share | | |
Number
of Shares Available for Purchase Under Outstanding Warrants | | |
Weighted
Average Exercise Price Per Common Share | | |
Weighted
Average Remaining Contractual Life (Years) | |
$ | 0.03
- 0.04 | | |
| 1,151,567 | | |
| 2.0 | | |
$ | 0.04 | | |
| 1,151,567 | | |
$ | 0.04 | | |
| 2.0 | |
$ | 0.06
- 0.10 | | |
| 20,176,061 | | |
| 3.5 | | |
$ | 0.09 | | |
| 20,176,061 | | |
$ | 0.09 | | |
| 3.5 | |
$ | 0.20 | | |
| 7,581,250 | | |
| 0.5 | | |
$ | 0.20 | | |
| 7,581,250 | | |
$ | 0.20 | | |
| 0.5 | |
| | | |
| 28,908,878 | | |
| 2.7 | | |
$ | 0.12 | | |
| 28,908,878 | | |
$ | 0.12 | | |
| 2.7 | |
As of December 31, 2014 and 2013, there were
no non-vested shares subject to warrants and no unrecognized compensation cost related to warrants.
13. |
Related-Party Transactions |
Except as disclosed below, there has not been
any transaction or series of related transactions to which the Company was a participant during the years ended December 31, 2014
and 2013 involving an amount in excess of $120,000 and in which a related party to the Company had or will have a direct or indirect
material interest.
During the year ended December 31,
2013, the Company sold to E. Wayne Kinsey III, a member of the Company’s board of directors, in a private placement, 8,333,334
shares of the Company’s common stock for an aggregate purchase price of $250,000, or $0.03 per share. The $0.03 per share
price was the same price offered to other non-affiliated investors in the private placement of the Company’s common stock.
See Note 13 – Stockholders’ Equity (Deficiency): Common Stock.
14. |
Commitments and Contingencies |
Operating Leases
The Company conducts its operations in leased
facilities under operating lease agreements that expire through fiscal 2018. Each of the Company’s lease agreements require
the Company to maintain the facilities during the term of the lease and to pay all utilities and other costs associated with those
facilities, with certain exceptions. In each of the Company’s lease agreements the Company is not responsible for the payment
of property taxes or property insurance, but is required to insure the contents of each facility. These lease agreements contain
customary representations and warranties of the Company and subject the Company to certain financial covenants and indemnities.
In the event the Company defaults on a lease, typically the landlord may terminate the lease, accelerate payments and collect
liquidated damages. As of December 31, 2014, the Company was not in default of any covenants contained in its lease agreements.
Certain of the Company’s lease agreements provide for renewal options. Such renewal options are at rates similar to the
current rates under the lease agreements.
Future minimum lease payments under
all of the Company’s operating leases at December 31, 2014 are as follows:
Year
Ending December
31, | |
Amount | |
| |
| |
2015 | |
$ | 134,050 | |
2016 | |
| 137,400 | |
2017 and thereafter | |
| 117,350 | |
| |
$ | 388,800 | |
Rent expense for these locations for the years
ended December 31, 2014 and 2013 was $59,046 and $71,291, respectively.
Litigation with Crystal Enterprises
On January 12, 2012, a civil complaint was
filed against the Company in the United States District Court for the Western District of Washington by Crystal Enterprises, Inc.
In its complaint, Crystal alleged interference with prospective advantage or business expectancy, tortious interference with contract,
breach of fiduciary duty, breach of non-disclosure agreement and breach of contact. Crystal’s allegations centered on discussions
among the Company, Crystal, Pendred, Inc. (an affiliate of Crystal) and Biolize Products, LLC, regarding the establishment of
a business relationship involving the distribution of Anolyte and Catholyte. Crystal sought monetary damages as well as attorney
fees. The Company refuted all claims made by Crystal, including the monetary damages claimed by Crystal.
On June 26, 2013, the Company entered into
a Confidential Settlement Agreement (the “Settlement Agreement”) with Crystal and Pendred, Inc. related to the civil
complaint in order to resolve the dispute and to avoid further litigation costs associated with defending the litigation. Pursuant
to the Settlement Agreement, neither party admitted to any wrongdoing, the parties agreed to unconditional mutual releases regarding,
among other things, all of the claims made by Crystal in the civil complaint and the Company issued 450,000 shares of common stock
to Crystal (see Note 12). The total expense associated with the issuance of these shares was $26,550, representing the fair market
value of the shares of common stock on the date of issuance to Crystal ($0.059 per share).
Litigation with Former Executive Vice President
- Operations
On June 17, 2014, a civil complaint was filed
against the Company and one of its directors, E. Wayne Kinsey, III, in the Court of Common Pleas, County of Horry, State of South
Carolina, by Marion Sofield, the Company’s former Executive Vice President - Operations. In her complaint, Ms. Sofield alleges
breach of contract and fraud/fraudulent inducement by the Company against her with regard to her employment agreement and the
termination of her employment. Ms. Sofield also alleges the Company and Mr. Kinsey engaged in a civil conspiracy and unfair trade
practices and that Mr. Kinsey engaged in tortious interference. Ms. Sofield claims that she is owed additional compensation under
her terminated employment agreement, and is seeking the recovery of such compensation as well as attorney’s fees and punitive
damages.
On July 18, 2014, the Company filed a motion
to dismiss this state court action due to the binding arbitration clause contained in Ms. Sofield’s employment agreement
that applies to a majority of the allegations in the complaint. On December 8, 2014, the court entered a consent order that: (a)
granted the Company’s request to compel binding arbitration of the breach of contract and fraud claims; and (b) stayed the
remaining causes of action in the South Carolina state court until the aforementioned binding arbitration process is complete.
The Company does not believe there is any
merit to Ms. Sofield’s allegations and will continue to vigorously defend this action.
Sale of Common Stock
and Common Stock Units
On February 9, 2015, the Company sold (a)
an aggregate of 36,500,000 shares of the Company’s common stock for an aggregate purchase price of $1,460,000, or $0.04
per share, and (b) common stock units that in aggregate consisted of 7,575,758 shares of its common stock and warrants to purchase
3,787,880 shares of its common stock for an aggregate purchase price of $500,000, or $0.066 per share. The Company paid an aggregate
of $68,300 of offering costs in cash and issued 1,055,303 shares of common stock to non-affiliated third parties as payment of
$56,000 of offering costs related to these sales of common stock and common stock units.
The warrants have a three-year
term, are exercisable at $0.066 per share and were fully vested at the date of issuance. In addition, the warrants are callable
by the Company in the event that the closing price of its common stock for at least fifteen trading days in any consecutive twenty
trading day period is equal to or greater than $0.132, provided that at least six months has lapsed from the issuance date of
the warrants.
Issuance of
Common Stock to Executive Officers
On March 25, 2015, the Company issued
an aggregate of 5,683,000 shares of common stock as stock-based compensation to its executive officers as follows: David R. LaVance,
President and Chief Executive Officer – 3,613,250 shares; and Thomas S. Gifford, Executive Vice President and Chief Financial
Officer – 2,069,750 shares.
INDEX OF EXHIBITS
Exhibit
No. |
|
Description |
3.1 |
|
Amended and Restated Articles
of Incorporation of Integrated Environmental Technologies, Ltd. (the “Company”) (incorporated by reference to
Exhibit 3.1 to the Company’s current report on Form 8-K that was filed with the Securities and Exchange Commission (the
“SEC”) on May 22, 2012). |
|
|
|
3.2 |
|
Amended and Restated Bylaws of the
Company (incorporated by reference to Exhibit 3.2 to the Company’s current report on Form 8-K that was filed with the
SEC on May 22, 2012). |
|
|
|
4.1 |
|
Convertible Debenture Unit Purchase
Agreement between the Company and L.J. Tichacek dated April 26, 2007 (incorporated by reference to Exhibit 4.1 to the Company’s
quarterly report on Form 10-Q for the quarter ended June 30, 2011 that was filed with the SEC on August 22, 2011). |
|
|
|
4.2 |
|
10% Convertible Debenture in the
principal amount of $25,000 issued to L.J. Tichacek dated April 26, 2007 (incorporated by reference to Exhibit 4.2 to the
Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2011 that was filed with the SEC on August 22,
2011). |
|
|
|
4.3 |
|
8% Convertible Debenture, dated
as of August 21, 2012, issued to Zanett Opportunity Fund, Ltd. Agreement (incorporated by reference to Exhibit 4.1 to the
Company’s current report on Form 8-K that was filed with the SEC on August 23, 2012). |
|
|
|
4.4 |
|
7% Secured Promissory Note in the
principal amount of $152,000 issued by I.E.T., Inc. to Benchmark Performance Group, Inc. dated June 17, 2013 (incorporated
by reference to Exhibit 4.1 to the Company’s current report on Form 8-K that was filed with the SEC on June 19, 2013). |
|
|
|
10.1 |
|
Amended and Restated Registration
Rights Agreement between the Company and E. Wayne Kinsey, III and Zanett dated September 23, 2011 (incorporated by reference
to Exhibit 10.4 to the Company’s annual report on Form 10-K for the year ended December 31, 2011 that was filed with
the SEC on March 30, 2012). |
|
|
|
10.2 |
|
2010 Stock Incentive Plan of the
Company (incorporated by reference to Exhibit 10.5 to the Company’s quarterly report on Form 10-Q for the quarter ended
June 30, 2011 that was filed with the SEC on August 22, 2011). |
|
|
|
10.3 |
|
2012 Equity Incentive Plan of the
Company (incorporated by reference to Exhibit 10.3 to the Company’s quarterly report on Form 10-Q for the quarter ended
March 31, 2013 that was filed with the SEC on May 15, 2013). |
|
|
|
10.4* |
|
Form of Warrant, dated April 21,
2011, issued by the Company to each of David R. LaVance (for the purchase of 1,818,182 shares of the Company’s common
stock), Raymond C. Kubacki (for the purchase of 1,818,182 shares of the Company’s common stock) and Valgene L. Dunham
(for the purchase of 969,697 shares of the Company’s common stock) (incorporated by reference to Exhibit 10.12 to the
Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2011 that was filed with the SEC on August 22,
2011). |
Exhibit
No. |
|
Description |
10.5* |
|
Form of Warrant, dated May 23, 2011,
issued by the Company to each of David R. LaVance (for the purchase of 3,100,000 shares of the Company’s common stock)
and Thomas S. Gifford (for the purchase of 3,100,000 shares of the Company’s common stock) (incorporated by reference
to Exhibit 10.13 to the Company’s quarterly report on Form 10-Q for the quarter ended June 30, 2011 that was filed with
the SEC on August 22, 2011). |
|
|
|
10.6 |
|
Building Lease Agreement, dated
September 15, 2014, by and between I.E.T., Inc. and Reece Gibson (incorporated by reference to Exhibit 10.6 to the Company’s
quarterly report on Form 10-Q for the quarter ended September 30, 2014 that was filed with the SEC on November 7, 2014). |
|
|
|
10.7 |
|
Building Lease Agreement, dated
November 1, 2014, by and between I.E.T., Inc. and Culy Hawkins. |
|
|
|
10.8 |
|
Building Lease Agreement, dated
November 14, 2014, by and between I.E.T., Inc. and Duchesne Crossing, LLC. |
|
|
|
10.9* |
|
Form of Incentive Stock Option Agreement,
dated March 27, 2012, issued by the Company to each of David R. LaVance (for the purchase of 3,000,000 shares of the Company’s
common stock) and Thomas S. Gifford (for the purchase of 2,000,000 shares of the Company’s common stock) (incorporated
by reference to Exhibit 10.14 to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2012 that
was filed with the SEC on May 15, 2012). |
|
|
|
10.10* |
|
Form of Non-Qualified Stock Option
Agreement, dated March 27, 2012, issued by the Company to each of: Raymond C. Kubacki (for the purchase of 541,860
shares of the Company’s common stock); David N. Harry (for the purchase of 309,640 shares of the Company’s common
stock); Valgene L. Dunham (for the purchase of 340,600 shares of the Company’s common stock); and E. Wayne Kinsey, III
(for the purchase of 154,820 shares of the Company’s common stock) (incorporated by reference to Exhibit 10.15
to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2012 that was filed with the SEC on May
15, 2012). |
|
|
|
10.11 |
|
Asset Purchase Agreement, dated
as of June 17, 2013, by and between I.E.T., Inc. and Benchmark Performance Group, Inc. (incorporated by reference to Exhibit
10.1 to the Company’s current report on Form 8-K that was filed with the SEC on June 19, 2013). |
|
|
|
31.1 |
|
Section 302 Certification of Principal
Executive Officer. |
|
|
|
31.2 |
|
Section 302 Certification of Principal
Financial Officer. |
|
|
|
32.1 |
|
Certification of Principal Executive
Officer pursuant to 18 U.S.C. Section 1350. |
|
|
|
32.2 |
|
Certification of Principal Financial
Officer pursuant to 18 U.S.C. Section 1350. |
Exhibit
No. |
|
Description |
101** |
|
The following materials from the
Company’s annual report on Form 10-K for the year ended December 31, 2014, formatted in Extensible Business Reporting
Language (XBRL): (i) consolidated balance sheets; (ii) consolidated statements of operations; (iii) consolidated
statements of stockholders’ equity (deficiency); (iv) consolidated statements of cash flows; and (v) notes to the consolidated
financial statements. |
* Constitutes a management contract
** Pursuant to Rule 406T of Regulation
S-T, the interactive data files included as Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus
for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
E-3
EXHIBIT 21.1
SUBSIDIARIES OF
INTEGRATED ENVIRONMENTAL TECHNOLOGIES, LTD.
Name |
|
State
of Incorporation |
|
|
|
I.E.T., Inc. |
|
Nevada |
EXHIBIT 10.7
LEASE AGREEMENT
This Lease Agreement (this “Lease”)
is made as of the first day of November, 2014, by and between Culy Hawkins (hereinafter the “Landlord”) and I.E.T.,
Inc. (hereinafter “Tenant”).
In consideration for the mutual promises
and covenants contain herein, and for the other good and valuable consideration, the parties hereto hereby agree as follows:
| 1. | Premises. The Landlord leases to the Tenant, and the Tenant rents from the Landlord, all
of the premises located at 2609 ½ West Main, Artesia, NM 88210 (hereinafter the “Premises”). |
| | |
| 2. | Term. The term of this Lease shall be for 3 years commencing November 1, 2014 and ending
September 30, 2017 (hereinafter the “Term”). |
| | |
| 3. | Monthly Rent Payment. The Tenant shall pay to the Landlord base rent of $3,300 per month,
which payment shall be made on or before the 10th day of the applicable month. |
| | |
| 4. | Mortgages Affecting the Premises. This Lease shall be subject to all present or future mortgages
affecting the Premises. |
| | |
| 5. | Use. Tenant shall use and occupy the Premises for commercial purposes. |
| | |
| 6. | Alterations, Additions or Improvements. The Tenant shall not make any alterations, additions
or improvements to the Premises without the prior written consent of the Landlord. |
| | |
| 7. | Landlord’s Responsibilities. The Landlord, at his own expense, shall be responsible
for the following: property taxes, any maintenance and repairs to the roof or building foundation and the common area surrounding
the Premises. |
| | |
| 8. | Tenant’s Responsibilities. The Tenant, at its own expense, shall be responsible for
the following: all utilities, maintenance and repairs to the interior of the Premises except those previously stated to be covered
by the Landlord, and personal property taxes. |
| | |
| 9. | Insurance. The Tenant, at its own expense, will at all times during the Term maintain commercial
liability insurance in the amount of not less than $1,000,000 and shall continue same in force and effect throughout the Term of
this Lease. The Landlord, at his expense, will at all times during the Term carry a policy of insurance which insures the building,
including the Premises, against loss or damage by fire or other casualty (namely, the perils against which insurance is afforded
by a standard fire insurance policy); provided, however, that the Landlord will not be responsible for, and will not be obligated
to insure against, any loss of or damage to any personal property or trade fixtures of the Tenant or any alterations which the
Tenant may make to the Premises or any loss suffered by the Tenant due to business interruption. |
| | |
| 10. | Quiet Enjoyment. The Landlord covenants that if, and so long as, the Tenant pays the rent
as required under this Lease, and performs the Tenant’s other covenants under this Lease, the Landlord will do nothing to
affect the Tenant’s right to peaceably and quietly have, hold and enjoy the Premises for the Term. |
| 11. | Compliance with Laws. The Tenant shall comply with all rules, regulations, ordinances codes
and laws of all governmental authorities having jurisdiction over the Premises. |
| | |
| 12. | Lease Termination. At the end of the Term of this Lease, the Tenant shall surrender and
deliver up the Premises in the same condition (subject to any additions, alterations or improvements, if any) as presently exists,
reasonable wear and tear excluded. |
| | |
| 13. | Default by Tenant. Upon default by the Tenant of any term or condition of this Lease, the
Landlord shall have the right to undertake any or all remedies permitted by applicable law; provided, however, that the Landlord
has first notified the Tenant of such default and the Tenant has failed to cure same within fifteen (15) days. |
| | |
| 14. | Binding Agreement. This Lease shall be binding upon, and to the benefit of, the parties,
their heirs, successors, and assigns. |
| | |
| 15. | Notices. Any notice by either party to the other shall be in writing and shall be deemed
to have been duly given only if (a) delivered personally or (b) sent by registered mail or certified mail return receipt requested
in a postage paid envelope or (c) sent by nationally recognized overnight delivery service. Notices shall be sent to the addresses
provided on the signature page hereof or to such other addresses as the Tenant or the Landlord, respectively, may designate in
writing. Notice shall be deemed to have been duly given, if delivered personally, on delivery thereof, if mailed, upon the seventh
(7th) day after the mailing thereof or if sent by overnight delivery service, the next business day. |
| | |
| 16. | Entire Agreement. This Agreement shall constitute the entire agreement between the parties
with respect to the subject matter hereof. No other arrangements or agreements, explicit or implied, are entered into or agreed
to by either of the parties. |
| | |
| 17. | Governing Law. This Lease will be governed by the laws of the State of New Mexico, without
giving effect to its conflict of law principles. |
| | |
| 18. | Broker. The Tenant and the Landlord represent and warrant to the each other that no broker
brought about this transaction, and each agrees to indemnify and hold the other harmless from any and all claims of any broker(s)
arising out of or in connection with the negotiations of or entering into of this Lease by the Tenant and the Landlord. |
| | |
| 19. | Severability. If any of the provisions of this Lease, or the application of such provisions,
will be invalid or unenforceable, the remainder of this Lease will not be affected, and this Lease will be valid and enforceable
to the fullest extent permitted by law. |
| 20. | Counterparts. This Lease may be executed in multiple counterparts, each of which, when assembled
to include an original signature for each party contemplated to sign this Lease, will constitute a complete and fully executed
original. All such fully executed counterparts will collectively constitute a single agreement. The parties expressly agree that
if the signature of the Landlord and/or the Tenant on this Lease is not an original, but is a digital, mechanical or electronic
reproduction (such as, but not limited to, a photocopy, fax, e-mail, PDF, Adobe image, JPEG, telegram, telex or telecopy), then
such digital, mechanical or electronic reproduction shall be as enforceable, valid and binding as, and the legal equivalent to,
an authentic and traditional ink-on-paper original wet signature penned manually by its signatory. |
Tenant’s mailing address: |
Landlord’s mailing address: |
|
|
I.E.T., Inc. |
Culy Hawkins |
4235 Commerce Street |
PO Box 1056 |
Little River, SC 29566 |
Artesia, NM 88210-1056 |
Signed this 25th day of November 2014.
|
Tenant: I.E.T., Inc. |
|
|
|
|
By: |
/s/ Thomas S.
Gifford |
|
Name: |
Thomas S. Gifford |
|
Title: |
Executive Vice President, |
|
|
Chief Financial Officer and Secretary |
|
|
|
|
|
Landlord: |
|
|
|
|
|
/s/ Culy Hawkins |
|
|
Culy Hawkins |
|
3
Exhibit 10.8
COMMERCIAL
LEASE
of
Duchesne
Crossings, LLC
362
West Pierpont Ave.
Salt
Lake City, Utah 84101
This
lease (this “Lease”) is made between Duchesne Crossing, LLC, with an address at 362 West Pierpont Avenue, Salt Lake
City, Utah 84101, herein called Lessor, and I.E.T., Inc., with an address at 4235 Commerce Street, Little River, South Carolina
29566, herein called Lessee. Lessee hereby offers to lease from Lessor the premises situated in the City of Myton, County
of Duchesne, and State of Utah, described as:
Duchesne
Crossings
6141
South 3950 West
Space
#7
Myton,
Utah 84052
(the
“Premises”)
Upon the
following TERMS and CONDITIONS:
1.
Terms and Rent. Lessor demises the above Premises (3,250 gross rentable square feet) for a term of thirty-six (36) months,
commencing five (5) business days after an occupancy permit is obtained with respect to Lessee’s occupation of the Premises
from Duchesne County, and terminating on the anniversary date thirty-six (36) months thereafter (the “Term”). If commencement
begins in the middle of a month, Lessor will prorate the following month’s rent.
Monthly
rent is payable in equal installments, due on or before the 10th of each month, as follows: $3,350 for the first year, subject
to 2% increases for each year thereafter on the anniversary date of the commencement of this Lease.
First month’s
rent of $3,350 is due upon the full execution of this Lease.
A
10% late fee will be assessed to rent received after the 10th day of the month. All payments shall be made to Lessor,
at the address specified above.
2.
Use. Lessee shall use and occupy the Premises for commercial purposes only.
3.
Care and Maintenance of Premises. Lessor represents and warrants to Lessee that the Premises are in good order and repair,
unless otherwise indicated herein. Lessee shall, at its own expense and at all times, maintain the Premises in good and safe condition,
and shall surrender the same, at termination hereof, in as good condition as received, normal wear and tear excepted. Lessee shall
be responsible for all maintenance and repairs required on the interior of the Premises, including, without limitation, the maintenance
of the HVAC, but shall not be responsible for the replacement thereof. Lessor shall be responsible for the roof, exterior walls,
and structural foundations. Lessor shall also maintain in good condition the common areas of the building housing the Premises
and the outside of the Premises, including, without limitations, the sidewalks, lawns and shrubbery.
4.
Alterations. Lessee shall not, without first obtaining the written consent of Lessor, make any material alterations, additions,
or improvements, in, to or about the Premises.
5.
Ordinances and Statutes. Lessee shall comply with all statutes, ordinances and requirements of all municipal, state and federal
authorities now enforce, or which may hereafter be in force, pertaining to the Premises, occasioned by or affecting the use thereof
by Lessee.
6.
Assignment and Subletting. Lessee shall not assign this Lease or sublet any portion of the Premises without prior written
consent of the Lessor, which shall not be unreasonably withheld. Any such assignment or subletting without consent shall be void
and, at the option of the Lessor, may terminate this Lease.
7.
Utilities &Taxes. Power and Gas is separately metered for the Premises, and is to be put in Lessee name and paid by Lessee.
Landlord shall be responsible for all property taxes with respect to the Premises.
8.
Entry and Inspection. Lessee shall permit Lessor or Lessor’s agents to enter upon the Premises at reasonable notice,
for the purpose of inspecting the same, and will permit Lessor at any time within sixty (60) days prior to the expiration of this
Lease, to place upon the Premises any usual “To Let” or “For Lease” signs, and permit persons desiring
to lease the same to inspect the Premises thereafter.
9.
Possession. Lessor shall deliver possession of the Premises to Lessee at commencement of this Lease.
10.
Quiet Enjoyment. Lessor covenants that if, and so long as, Lessee pays the rent as required under this Lease, and performs
Lessee’s other covenants under this Lease, Lessor will do nothing to affect Lessee’s right to peaceably and quietly
have, hold and enjoy the Premises for the Term.
11.
Indemnification of Lessor. Lessor shall not be liable for any damage or injury to Lessee, or any other person, or to the property,
occurring on the demised Premises or any part thereof, unless due to Lessor, or Lessor’s agents, contractors, or employees
negligent acts or omissions for which Lessor shall be liable.
12.
Insurance. Lessee, at its own expense, shall maintain during the Term insurance on its own contents. In addition, during the
Term, Lessee shall maintain commercial liability insurance in the amount of not less than $1,000,000, which will cover bodily
injury and property damage and name the Lessor as an additional insured. Lessee shall provide Lessor with a Certificate of Insurance
showing Lessor as an additional insured. The Certificate of Insurance shall provide for a 30-day written notice to Lessor in the
event of cancellation or material change of coverage. To the maximum extent permitted by the insurance policies which may be owned
by Lessor or Lessee, Lessee and Lessor, for the benefit each other, waive any and all rights of subrogation, which might otherwise
exist.
13.
Eminent Domain. If the Premises or any part thereof or any estate therein, or any other part of the building materially affecting
Lessee’s use of the Premises, shall be taken by eminent domain, this Lease shall terminate on the date when title vests
pursuant to such taking. The rent and any additional rent, shall be apportioned as of the termination date, and any rent paid
for any period beyond that date shall be repaid to Lessee. Lessee shall not be entitled to any part of the award for such taking
or any payment in lieu thereof, but Lessee may file a claim for any taking of fixtures and improvements owned by Lessee, and for
moving expenses.
14.
Destruction of Premises. In the event of a partial destruction of the Premises during the Term, from any cause, Lessor shall
forthwith repair the same, provided that such repairs can be made within sixty (60) days under existing governmental laws and
regulations, but such partial destruction shall not terminate this Lease, except the Lessee shall be entitled to a proportionate
reduction of rent while such repairs are being made, based upon the extent to which the making of such repairs shall interfere
with the business of Lessee on the Premises. If such repairs cannot be made within sixty (60) days, Lessor, at its option, may
make the same within a reasonable time, this Lease continuing in effect with the rent proportionately abated as aforesaid; provided,
however, that if such repairs cannot be made within sixty (60) days, Lessee may, in its sole discretion, elect to terminate this
Lease. In the event that Lessor shall not elect to make such repairs which cannot be made within sixty (60) days, this Lease may
be terminated at the option of either party. In the event that the building in which the demised Premises may be situated is destroyed
to an extent of not less than one-third of the replacement cost thereof, Lessor may elect to terminate this Lease whether the
demised Premises be injured or not. Total destruction of the building in which the Premises may be situated shall terminate this
Lease.
15.
Lessor’s Remedies on Default. If Lessee defaults in the payment of rent, or any additional rent, or defaults in the
performance of any of the other covenants or conditions hereof, Lessor shall give Lessee written notice of such default and if
Lessee does not cure any such default within fifteen (15) days following receipt of said notice (or if such other default is of
such nature that it cannot be completely cured within such period, if Lessee does not commence such curing within such fifteen
(15) days and thereafter proceed with reasonable diligence and in good faith to cure such default), then Lessor may terminate
this Lease on not less than ten (10) days’ written notice to Lessee. On the date specified in such termination notice the
term of this Lease shall terminate, and Lessee shall then quit and surrender the Premises to Lessor, without extinguishing Lessee’s
liability. If this Lease shall have been so terminated by Lessor, Lessor may at any time thereafter resume possession of the Premises
by any lawful means and remove Lessee or other occupants and their property.
16.
Attorney’s Fees. In case suit should be brought for recovery of the Premises or for any sum due hereunder, or because
of any act which may arise out of the possession of the Premises, by either party, the prevailing party shall be entitled to all
costs incurred in connection with such action, including a reasonable attorney’s fee.
17.
Waiver. No failure by Lessor or Lessee to enforce any term hereof shall be deemed to be a waiver.
18.
Notices. Any notice by either party to the other shall be in writing and shall be deemed to have been duly given only if (a)
delivered personally or (b) sent by registered mail or certified mail return receipt requested in a postage paid envelope or (c)
sent by nationally recognized overnight delivery service. Notices shall be sent to the addresses provided on the signature page
hereof or to such other addresses as the Lessee or the Lessor, respectively, may designate in writing. Notice shall be deemed
to have been duly given, if delivered personally, on delivery thereof, if mailed, upon the seventh (7th) day after
the mailing thereof or if sent by overnight delivery service, the next business day.
19.
Heirs, Assigns, Successors. This Lease is binding upon and inures to the benefit of the heirs, assigns and successors in interest
to the parties.
20.
Option to Renew. Provided that Lessee is not in default in the performance of this Lease, Lessee shall have the option to
renew the lease for two additional terms of three (3) years, commencing at the expiration of the initial Term and subsequent extended
terms. All of the terms and conditions of the Lease shall apply during the renewal term. The monthly rent payment shall equal
the last month’s rent, subject to 2% increase each year thereafter commencing on the anniversary date of the commencement
of this Lease. The option shall automatically take effect unless Lessee gives Lessor written notice of Lessee’s decision
not to extend the Term of this Lease at least thirty (30) days prior to the commencement date of the extension period.
21.
Subordination. This Lease is and shall be subordinate to all existing and future liens and encumbrances against the property
provided that Lessee’s right of possession shall not be disturbed so long as Lessee is not in default following applicable
notice and cure periods under this Lease.
22.
Radon Gas Disclosure. As required by law, Landlord makes the following disclosure: “Radon Gas” is a naturally
occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons
who are exposed to it over time. Additional information regarding radon testing may be obtained from your county public unit.
23.
Entire Agreement. The foregoing constitutes the entire agreement between the parties and may be modified only by a writing
signed by both parties.
24.
Contaminations. At the expiration of the Lease, Lessee, at its own expense, shall have all contaminations that it is responsible
for bringing onto the Premises removed from the Premises and restore the Premises to its “preleased” condition.
25.
Governing Law. This Lease will be governed by the laws of the State of Utah, without giving effect to its conflict of law
principles.
26.
Broker. Lessee and Lessor represent and warrant to the each other that no broker brought about this transaction, and each
agrees to indemnify and hold the other harmless from any and all claims of any broker(s) arising out of or in connection with
the negotiations of or entering into of this Lease by Lessee and Lessor.
27.
Severability. If any of the provisions of this Lease, or the application of such provisions, will be invalid or unenforceable,
the remainder of this Lease will not be affected, and this Lease will be valid and enforceable to the fullest extent permitted
by law.
28.
Counterparts. This Lease may be executed in multiple counterparts, each of which, when assembled to include an original signature
for each party contemplated to sign this Lease, will constitute a complete and fully executed original. All such fully executed
counterparts will collectively constitute a single agreement. The parties expressly agree that if the signature of Lessor and/or
Lessee on this Lease is not an original, but is a digital, mechanical or electronic reproduction (such as, but not limited to,
a photocopy, fax, e-mail, PDF, Adobe image, JPEG, telegram, telex or telecopy), then such digital, mechanical or electronic reproduction
shall be as enforceable, valid and binding as, and the legal equivalent to, an authentic and traditional ink-on-paper original
wet signature penned manually by its signatory.
Signed this
14th day of November, 2014
LESSOR |
|
LESSEE |
|
|
|
Duchesne Crossings, LLC |
|
I.E.T., Inc. |
|
|
|
|
|
By: |
/s/ Nathan Brockbank |
|
By: |
/s/ Thomas S. Gifford |
Name: |
Nathan Brockbank |
|
Name: |
Thomas S. Gifford |
Title: |
Manager |
|
Title: |
Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
362 West Pierpont Avenue |
|
|
4235 Commerce Street |
|
Salt Lake City, Utah 84101 |
|
|
Little River, SC 29566 |
|
o: (801) 268-8070 |
|
|
o: (732) 282-1055 |
|
c: (801) 706-5557 |
|
|
e: tgifford@ietltd.net |
|
f: (801) 268-8004 |
|
|
|
5
EXHIBIT 31.1
CERTIFICATION
I, David R. LaVance, certify
that:
1. |
I have reviewed this annual report on Form 10-K of Integrated Environmental Technologies, Ltd.; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
|
|
5. |
The
registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions): |
|
|
|
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 27, 2015 |
By: |
/s/ David R. LaVance |
|
|
David R. LaVance |
|
|
President and Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION |
|
I, Thomas S. Gifford, certify that: |
|
1. |
I have reviewed this annual report on Form 10-K of Integrated Environmental Technologies, Ltd.; |
|
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
|
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
|
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
|
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: March 27, 2015 |
By: |
/s/ Thomas S. Gifford |
|
|
Thomas S. Gifford |
|
|
Executive Vice President, |
|
|
Chief Financial Officer and Secretary |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the
annual report of Integrated Environmental Technologies, Ltd. (the “Company”) on Form 10-K for the year ended December
31, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, David R. LaVance, President and Chief
Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with
the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §78m or 78o(d), and,
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date: March 27, 2015 |
By: |
/s/ David R. LaVance |
|
|
David R. LaVance |
|
|
President and Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the
annual report of Integrated Environmental Technologies, Ltd. (the “Company”) on Form 10-K for the year ended December
31, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas S. Gifford, Executive Vice
President, Chief Financial Officer and Secretary of the Company, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted
pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) the Report fully complies with
the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §78m or 78o(d), and,
(2) the information contained in
the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 27, 2015 |
By: |
/s/ Thomas S. Gifford |
|
|
Thomas S. Gifford |
|
|
Executive Vice President, |
|
|
Chief Financial Officer and Secretary |